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
Up to Rs 2.5 lakh
TDS Percentage
None
Applicable section under ITA
Section 192
Annual Taxable Incomes
Between Rs 2.5 lakh and Rs 5 lakh
TDS Percentage
5%
Applicable section under ITA
Section 192
Annual Taxable Incomes
Between Rs 5 lakh and Rs 10 lakh
TDS Percentage
20%
Applicable section under ITA
Section 192
Annual Taxable Incomes
More than Rs 10 lakh
TDS Percentage
30%
Applicable section under ITA
Section 192
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
Salaries
Existing TDS Rate
Slabs rates specified above
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
Slabs rates specified above
Applicable section under ITA
Section 192
Type of Payment
Interest you earn on securities
Existing TDS Rate
10%
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
7.5%
Applicable section under ITA
Section 193
Type of Payment
Dividend you earn (apart from the dividend mentioned in section 115-O)
Existing TDS Rate
10% for people with valid PAN 20% for people without valid PAN
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
7.5% for people with valid PAN 20% for people without valid PAN
Applicable section under ITA
Section 194
Type of Payment
Sources of income apart from securities
Existing TDS Rate
10%
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
7.5%%
Applicable section under ITA
Section 194A
Type of Payment
Prize money, games, lotteries
Existing TDS Rate
30%
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
30%
Applicable section under ITA
Section 194B
Type of Payment
Commission for insurance agents
Existing TDS Rate
5%
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
3.75%for people with valid PAN 20% for people without valid PAN
Applicable section under ITA
Section 194D
Type of Payment
Premium you pay for any life insurance policy
Existing TDS Rate
5%
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
3.75%%
Applicable section under ITA
Section 194DA
Type of Payment
Rent received Read about Taxes on rental income made simpler!
Existing TDS Rate
2%
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
1.5% for plant and machinery 10% for land, furniture, fitting and furniture
Applicable section under ITA
Section 194-I(A)
Type of Payment
Payment for transfer of any immovable property apart from agricultural land
Existing TDS Rate
10%
Reduced TDS Rate (valid from 14 May 2020 to 31 March 2021)
7.5%
Applicable section under ITA
Section 194-I(B)
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
Salaries
TDS Percentage
Slab rates mentioned above
Applicable section under ITA
Section 192
Type of Payment
Provident Fund Balance
TDS Percentage
10%
Applicable section under ITA
Section 192A
Type of Payment
Prize money, games, lotteries
TDS Percentage
30%
Applicable section under ITA
Section 194B
Type of Payment
Prize money in horse riding
TDS Percentage
30%
Applicable section under ITA
Section 194BB
Type of Payment
Deposits under National Pension Scheme
TDS Percentage
10%
Applicable section under ITA
Section 194EE
Type of Payment
Investments in mutual funds or bonds
TDS Percentage
20%
Applicable section under ITA
Section 194F
Type of Payment
Commission for selling lottery tickets
TDS Percentage
5%
Applicable section under ITA
Section 194G
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 |
Annual Taxable Incomes
Up to Rs 3 lakh
TDS Percentage
None
Annual Taxable Incomes
Between Rs 3 lakh and Rs 5 lakh
TDS Percentage
5%
Annual Taxable Incomes
Between Rs 5 lakh and Rs 10 lakh
TDS Percentage
20%
Annual Taxable Incomes
More than Rs 10 lakh
TDS Percentage
30%
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% |
Annual Taxable Incomes
Up to Rs 5 lakh
TDS Percentage
None
Annual Taxable Incomes
Between Rs 5 lakh and Rs 10 lakh
TDS Percentage
20%
Annual Taxable Incomes
More than Rs 10 lakh
TDS Percentage
30%
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% |
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.
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.
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