Tax deducted at source (TDS)

7 Nov 2022

Tax deducted at source (TDS)

  1. TDS is a mode of income tax recovery from an Assessee in the previous year. These taxes are deductible from total tax due from the Assessee.

  2. TDS is deducted by the payer

  3. TDS is deducted only if the income is taxable in the hands of the receiver.

  4. TDS requirement arise

i) at the time of payment OR

ii) at the time of crediting the account of payee

Whichever is earlier (excluding some exceptions)

5. If the payment is made by the payer without TDS, then the payee shall be responsible to make payment of the tax directly.


1. Salary (Section 192)

  1. Every person paying any income which is chargeable to tax under the head salary is required to deduct TDS u/s 192 at the time of payment.

  2. Rate of tax - Slab Rate

  3. If the employee works with more than one employer or changes his job during the year, then he may furnish the details of salary from other employers and TDS deducted by other employers.

  4. Employers shall consider details of other incomes and deductions of employees if furnished by employee while calculating rate of tax for a relevant previous year.

  5. TIPS paid to waiters shall not be treated as Salary.   


2. Premature withdrawal of Accumulated balance of Provident fund from Employee provident fund (Section 192A)

  1. The trustees of the employees provident fund scheme 1952 or any person authorized under the scheme to make payment to employees are required to deduct TDS u/s 192A at the time of payment.

  2. Rate of tax - 10%. In case a person fails to furnish his PAn to the deductor of TDS, TDS would be deductible at the maximum marginal rate.

  3. No need to deduct TDS if the aggregate amount of payment is less than Rs.50,000.


3. Interest on securities (Section 193)

  1. Every person paying any income by way of interest on securities to a resident is required to deduct TDS u/s 193.

  2. Rate of tax - 10%.

  3. No need to deduct TDS if:

i) Interest on debenture upto Rs.5,000 issued by a public company to individual/HUF.

ii) Interest to LIC,GIC, Other insures. 

iii) Interest on listed D-MAt securities, National development bonds, 7 years national saving certificate, capital gain bonds issued by Power finance corp. Ltd or Indian railway finance corp. LTtd., government bond (other than 8% 7.75% saving (taxable) bond, in interest is more than 10,000 during  the previous year)

iv) Interest to Individual on 4.25% national defense bond, 4.25% or 4.75% national defense loan


4. Dividend (Section 194)

  1. The principal officer of a domestic company is required to deduct TDS on dividend distributed or paid by it to its resident shareholders u/s 194.

  2. Rate of tax - 10%.

  3. No need to deduct TDS if:

i) payment made to individual upto Rs.5,000 in a previous year by any mode other than cash

ii) payment made to LIC, GIC, or any other insurer

iii) payment made to Business trust by SPV


5. Interest other than interest on securities as per section 193 (Section 194A)

  1. Every person other than Individual/HUF paying any income by way of interest other than interest on securities to a resident is required to deduct TDS u/s 194A.

  2. Rate of tax - 10%.

  3. No need to deduct TDS if:

i) Interest on saving bank account.

ii) Interest by bank/post office on time deposit upto Rs.4,000 (Rs.50,000 for resident senor)

iii) Interest by any other person upto Rs.5,000

iv) Interest on Income tax refund.

v) Interest by Firm to partners.

vi) Interest on zero coupon bonds.

vii) Interest to banks, co-operative Banks, financial corporations, LIC, insurance Co., UTI, National skill development fund, Housing and urban development corporation.

viii) Interest by a co-operative society (other than co-operative bank) to another co-operative society or to any of its members.

ix) Interest by a co-operative society being bank to another co-operative society.


6. Winnings from lotteries, crosswords, puzzles etc. (Section 194B)

  1. Every person responsible for paying to any person any income by way of winnings from lottery or crossword puzzle or card game and other game of any sort, is required to deduct TDS.

  2. Rate of tax - 30%.

  3. No need to deduct TDS if the amount of payment is upto Rs.10,000.

  4. Winnings by way of jackpot would also fall within the scope of section 194B

  5. Where the  winnings are wholly/partly in kind but the  part in cash is not sufficient to meet the liability of deduction of tax in respect to total winnings, the person responsible for paying amounts of winnings shall ensure that tax has been paid before releasing the winnings.


7. Winnings from horse races (Section 194BB)

  1. Every person responsible for paying to any person any income by way of winnings from horse races is required to deduct TDS.

  2. Rate of tax - 30%.

  3. No need to deduct TDS if the amount of payment is upto Rs.10,000.

  4. Person responsible for deduction of TDS u/s 194BB:

i) a bookmaker

ii) a person to whom a license has been granted by  the Government -

  1.  for racing of horses in any race course; or

  2.  for arranging wagering or betting in any race course.


8. Payments to contractors and Sub-contractors (Section 194C)

  1. Every person other than Individual/HUF responsible for paying any sum to a resident contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract is required to deduct TDS u/s 194C.



2. No need to deduct TDS if

i) Single contract is upto Rs.30,000 OR aggregate amount of contracts Is upto Rs.1,00,000 in Previous Year.

ii) If contract is for personal purpose of Individual/HUF


9. Insurance Commission (Section 194D)

  1. Every person paying any income by way of Insurance commission to a resident is required to deduct TDS u/s 194D.

  2. Rate of tax - 5%.

  3. No need to deduct TDS if the amount of payment is upto Rs.15,000.


10. Payment of maturity proceeds of Life insurance Policy (Section 194DA)

  1. Every person paying any income by way of Maturity proceeds of Life insurance policy to a resident is required to deduct TDS u/s 194DA at the time of Payment.

  2. Rate of tax - 5%.

  3. No need to deduct TDS if 

i) the maturity amount is less than Rs.15,000 in FY.

ii)  the maturity amount is exempted under section 10(10D)

4. TDS is deductible only on income component i.e. after deducting the amount of premium paid from maturity proceeds.




11. Payment to Non Resident Sportsperson, entertainer or Sports associations (section 194E)

  1. Every person  is required to deduct TDS u/s 194E if paying any income to 

  2. Non Resident Sportsperson not being a citizen of India

i) for participation in game or sports in India or

ii) Advertisement or 

iii) Contribution of article in newspapers, magazines, journals relating to games or sports in India

  1. Non resident entertainer who is not a citizen of India for performing in India.

  2. Non resident Sports Association or institution for any game or sports played in India.

  3. Rate of tax - 20% (Plus surcharge, if applicable, and health and education cess @4%)


12. Payments in respect of deposits under the National Savings Scheme etc. (section 194EE)

  1. Every person paying any amount from the National savings scheme Account is required to deduct TDS u/s 194EE at the time of payment.

  2. Rate of tax - 10%.

  3. No need to deduct TDS if the amount of payment is less than Rs.2,500 in FY.

  4. No need to deduct TDS if payments are made to the heirs of the assessee.




13. Repurchase of units by Mutual Fund or Unit Trust of India (Section 194F)

  1. Every Mutual Fund or Unit Trust of India paying any amount for repurchasing  its units is required to deduct TDS u/s 194F at the time of payment.

  2. Rate of tax - 20%.


14. Commission or remuneration on sale of Lottery Tickets (Section 194G)

  1. Every person stocking, distributing, purchasing or selling lottery tickets paying any income by way of commission, remuneration on sale of lottery tickets is required to deduct TDS u/s 194G

  2. Rate of tax - 5%.

  3. No need to deduct TDS if the amount of payment is less than Rs.15,000 in FY.


15. Commission or Brokerage (Section 194H)

  1. Every person other than Individual/HUF paying any income by way of commission or brokerage to a resident is required to deduct TDS u/s 194H.

  2. Rate of tax -5%

  3. No need to deduct TDS if the amount of payment is upto Rs.15,000 in FY.

  4. If commission or brokerage paid related to securities, then no TDS is deductible.


16. Rent (Section 194I)

  1. Every person other than Individual/HUF paying any income by way of Rent on Plant and Machinery(P&M), Equipments, Land, Building or Furniture to a resident is required to deduct TDS u/s 194I.