Complete Master Guide to Tax Deducted at Source (TDS) in India (FY 2025-26)
Tax Deducted at Source (TDS) is an indirect collection mechanism introduced by the Government of India under the Income Tax Act, 1961. The objective of TDS is to collect income tax at the very point where income is generated or payments are made, preventing tax evasion, ensuring steady government cash flow, and providing a transparent paper trail in Form 26AS and AIS.
Master TDS Rate Chart & Exemption Thresholds (FY 2025-26 / AY 2026-27)
Below is the complete official statutory rate chart for major TDS sections applicable in India:
| Section | Nature of Payment | Exemption Limit (Threshold) | TDS Rate (With PAN) | Rate (Without PAN) |
|---|---|---|---|---|
| 192 | Salaries to Employees | Basic Exemption Limit (₹3L / ₹2.5L) | Average Slab Rate | 20% |
| 194A | Bank Fixed Deposit (FD) Interest | ₹40,000 (₹50,000 for Senior Citizens) | 10% | 20% |
| 194C | Payments to Contractors / Advertising | ₹30,000 (Single) / ₹1,00,000 (Aggregate) | 1% (Ind/HUF) / 2% (Others) | 20% |
| 194H | Commission or Brokerage | ₹15,000 per financial year | 2% (Reduced from 5%) | 20% |
| 194I | Rent on Land, Building or Furniture | ₹2,40,000 per financial year | 10% | 20% |
| 194I | Rent on Plant, Machinery or Equipment | ₹2,40,000 per financial year | 2% | 20% |
| 194-IB | Rent Paid by Individual/HUF (Not Audited) | ₹50,000 per month (₹6,00,000/yr) | 2% (Budget 2024 revised) | 20% |
| 194J | Professional / Legal / Medical / CA Fees | ₹30,000 per financial year | 10% | 20% |
| 194J | Technical Services, Royalty & Call Center | ₹30,000 per financial year | 2% | 20% |
| 194Q | Purchase of Goods (> ₹50 Lakhs) | ₹50,00,000 per financial year | 0.1% | 5% |
| 194S | Transfer of Virtual Digital Assets (Crypto) | ₹10,000 (₹50,000 for Specified Persons) | 1% | 20% |
Section 206AA: Higher Rate of TDS for Non-Furnishing of PAN
Under Section 206AA of the Income Tax Act, every payee receiving taxable payments must provide their valid Permanent Account Number (PAN) to the deductor. If the payee fails to furnish a valid PAN, TDS is deducted at a mandatory flat 20% penalty rate.
Step-by-Step Practical Calculation Examples
Example 1: Professional Fees under Section 194J
A software company pays ₹1,50,000 to a legal consultant for contract drafting:
TDS Section = 194J (Professional Services @ 10%)
TDS Amount = ₹1,50,000 × 10% = ₹15,000
Net Payment to Consultant = ₹1,50,000 − ₹15,000 = ₹1,35,000
Example 2: Commercial Office Rent under Section 194I
A business pays an annual office rent of ₹4,80,000 (₹40,000/month):
TDS Rate = 10%
Total TDS Deductible = ₹4,80,000 × 10% = ₹48,000 (₹4,000/month)
Net Monthly Rent Paid to Landlord = ₹36,000
TDS Payment Due Dates & Quarterly Return Filing Forms
- Form 24Q: Quarterly return for Salary TDS (Section 192).
- Form 26Q: Quarterly return for all Non-Salary Domestic payments (Rent, Interest, Professional, Contractor).
- Form 27Q: Quarterly return for payments made to Non-Resident Indians (NRIs) and Foreign Companies.
- Form 16 / 16A: Official TDS Certificate issued by deductor to deductee.
