TDS Rates – Know All About TDS Deduction Details

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  • 07 Feb 2023

The common man is all ears when the Finance Minister gets to the income tax rates and slabs during the annual budget speech. Having heard the terms TDS rates and slabs multiple times, you might wonder what it really means. Let’s clarify:

Tax Deducted at Source (TDS) is a type of direct tax levied by the government. It is applicable to various types of incomes like salary, rent, incentives and interest. If you want to look at the TDS from your salary, you might want to look at your Form 16. You can read up all about Form 16 here.

If you’ve recently had a hike in your salary or the government has revised the TDS rates and slabs, you might want to understand the terms.

TDS is basically like a spot tax, deducted at the source of income. Before you receive any pay-out, a percentage of the total amount is withheld at the source and paid as your income tax. This source can either be an individual or an organisation and is known as the ‘Deductor’. You (the one whose payment is being deducted) are known as the ‘Deductee’.

If you are employed, your employer will have the authority to deduct TDS before your salary is paid to you. But it is only deducted if your total income is taxable under the Income Tax Act. The TDS deduction rates for salaried individuals range from zero to 30%.

The following are the TDS rate slabs for salaried individuals for the financial years 2019–20 and 2020–21

Annual Taxable Incomes TDS Percentage Applicable section under ITA
Up to Rs 2.5 lakh
None
Section 192
Between Rs 2.5 lakh and Rs 5 lakh
5%
Section 192
Between Rs 5 lakh and Rs 10 lakh
20%
Section 192
More than Rs 10 lakh
30%
Section 192
Type of Payment Existing TDS Rate Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021) Applicable section under ITA
Salaries
Slabs rates specified above
Slabs rates specified above
Section 192
Interest you earn on securities
10%
7.5%
Section 193
Dividend you earn (apart from the dividend mentioned in section 115-O)
10% for people with valid PAN 20% for people without valid PAN
7.5% for people with valid PAN 20% for people without valid PAN
Section 194
Sources of income apart from securities
10%
7.5%%
Section 194A
Prize money, games, lotteries
30%
30%
Section 194B
Commission for insurance agents
5%
3.75%for people with valid PAN 20% for people without valid PAN
Section 194D
Premium you pay for any life insurance policy
5%
3.75%%
Section 194DA
Rent received Read about Taxes on rental income made simpler!
2%
1.5% for plant and machinery 10% for land, furniture, fitting and furniture
Section 194-I(A)
Payment for transfer of any immovable property apart from agricultural land
10%
7.5%
Section 194-I(B)
Type of Payment TDS Percentage Applicable section under ITA
Salaries
Slab rates mentioned above
Section 192
Provident Fund Balance
10%
Section 192A
Prize money, games, lotteries
30%
Section 194B
Prize money in horse riding
30%
Section 194BB
Deposits under National Pension Scheme
10%
Section 194EE
Investments in mutual funds or bonds
20%
Section 194F
Commission for selling lottery tickets
5%
Section 194G

Senior Citizens

Annual Taxable Incomes TDS Percentage
Up to Rs 3 lakh
None
Between Rs 3 lakh and Rs 5 lakh
5%
Between Rs 5 lakh and Rs 10 lakh
20%
More than Rs 10 lakh
30%

Super Senior Citizens

Annual Taxable Incomes TDS Percentage
Up to Rs 5 lakh
None
Between Rs 5 lakh and Rs 10 lakh
20%
More than Rs 10 lakh
30%

Explaning TDS Rates For Fixed Deposits

If your interest earnings on your FD exceed Rs 10,000 in a financial year, TDS will be applicable. If you have furnished a PAN card, you are liable to pay 10% TDS. A 20% rate will be levied if a PAN is not furnished.

So, furnishing your PAN can save you from the hassles of claiming a deduction. You can learn more about the art of saving on income tax.

TDS Rates On Contracts

If you are an employer availing a service through contracts, you might have to deduct TDS. Payments you make towards any contractors for work mentioned below attracts TDS under Section 194C.

  • Advertising

  • Telecasting

  • Broadcasting

  • Carriage of passengers and goods

  • Catering

  • Manufacturing and supplying custom-made goods

  • Supply of labour

To calculate your TDS, first you will need to sum up your total gross income from your salary as well as other sources. Also include the returns from your investments. Then total out all your exemptions. Once you have all these numbers, you can find the annual income taxable under various income slabs.

You can read about what you needn’t pay taxes on.

Based on the principle of ‘pay as and when you earn’, the TDS system is a win-win scenario for the government and you, the taxpayer. It is deducted from payments you are bound to get, either through cash, credit or cheque. Then, it is deposited with the central agencies saving you the hassle to pay. Thus, TDS can

  • Share the responsibility of taxes

  • Prevent tax evasion

  • Widen tax collection base

  • Steady source of revenue for the government

  • Ease the entire process of tax paying for taxpayers

While TDS has these advantages, not complying with TDS can have consequences.

Quick Takeways On TDS

Ensures a stable revenue for the government A TDS certificate is issued whenever TDS is collected by the deductor You can request refunds if you notice any discrepancies

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