TAX DEDUCTED AT SOURCE (TDS)

  • What is TDS?

TDS means Tax deducted at source. Tax is deducted by the person while making the payment to any other person. TDS is an effective mechanism by which Government can reach a vast revenue bracket.

Income-tax Act have bifurcated the TDS provisions according to different kind of payments such as Salary, Commission, Rent, Royalty etc.

Let us take a review of how much tax is required to be deducted against various payments.

Nature of Payment Section No. Rate of TDS Cut off Amount
Salary 192 Applicable Slab Rates
Withdrawal from Employees Provident Fund Scheme 192A 10% Rs. 30,000/-
Interest on Securities 193 10% Rs. 5,000/- for interest on debentures
Dividends 194 10%
Interest other than interest on securities 194A 10%
  1. Where the person making the payment is Banks, Co-operative society, Post office – Rs. 10,000/-
  1. Where the person making the payment is any other person – Rs. 5,000/-
Winnings from Lottery or crossword puzzles 194B 30% Rs. 10,000/-
Winnings from horse races 194BB 30% Rs. 5,000/-
Payment to contractors or sub-contractors 194C Where receiver is – a) Individual/ HUF :- 1%

b) Other Persons :- 2%

  1. In case of single payment – Rs. 30,000/-
  2. In case of aggregate payments during the year – Rs. 75,000/-
Insurance commission 194D 10% Rs. 20,000/-
Payment of Life Insurance Policy 194DA 2% Rs. 1,00,000/-
Payment to non-resident sportsman or sports association or entertainer 194E 20%
Payment in respect of National Saving Scheme 194EE 20% Rs. 2,500/-
Commission on lottery tickets 194G 10% Rs. 1,000/-
Commission or brokerage (other than insurance commission or sale of lottery tickets) 194H 10% Rs. 5,000/-
Payment of rent 194-I
  1. Use of plant & machinery – 2%
  2. Use of land & building, furniture – 10%
Rs. 1,80,000/-
Purchase of Immovable property 194-IA 1% Rs. 50,00,000/-
Royalty, fees for technical or professional services 194J 10% Rs. 30,000/-
Compensation for compulsory acquisition of immovable property 194LA 10% Rs. 2,00,000/-
  • Tax Audit in case of Freelance income-
  1. If the Gross receipts of a freelancer exceeds Rs. 25 lakhs during the financial year, then TDS provisions shall become applicable to him for the next financial year.
  2. In this case, Freelancer will be required to deduct the TDS while making certain payments as follows-
Nature of payment Section under which TDS to be deducted
Interest other than interest on securities (Eg. interest paid on unsecured loans etc.) Sec. 194A
Payment to any contractor Sec. 194C
Payment of Brokerage/ commission (other than Lottery commission and insurance commission) Sec. 194H
Payment of rent against the use of plant & machinery or land & building etc. Sec. 194I
Payment of professional or technical fees Sec. 194J

Click here to know about “Taxation of freelancers.”

Summary
Article Name
Tax Deducted at Source (TDS)
Description
TDS means Tax deducted at source. Tax is deducted by the person while making the payment to any other person. TDS is an effective mechanism by which Government can reach a vast revenue bracket.
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Publisher Name
myITreturn
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