Budget 2025 Updates
- The threshold for TDS on rent has been increased from Rs.2.4 lakhs per year to Rs.6 lakhs per year.
- The threshold for TDS on senior citizen interest income has been increased from Rs.50,000 to Rs.1,00,000.
These changes will be effective from 1 April 2025 i.e. for FY 2025-26
TDS and TDS Rates
TDS (Tax Deducted at Source) was introduced to ensure tax collection at the very source of income. Under this system, a person (deductor) responsible for making specified payments to another person (deductee) must deduct tax before making the payment and deposit it with the Central Government. The deductee, whose income has been subject to TDS, can claim credit for the deducted amount based on Form 26AS or the TDS certificate issued by the deductor. An example of TDS can be seen when your employer deducts a portion of your salary as tax before crediting the remaining amount to your account. For instance, if your monthly salary is ₹50,000 and the TDS rate is 10%, ₹5,000 will be deducted as TDS, leaving you with ₹45,000.
TDS Rate Chart for FY 2024-25
| Nature of Payment |
TDS Section |
TDS Rate |
| Salaries |
Section 192 |
Normal slab-rate |
| Premature PF withdrawal |
Section 192A |
10% (20% if no PAN card) |
| Interest received on securities |
Section 193 |
10% |
| Dividends received on the company's shares and on mutual funds |
Section 194 and 194K |
10% |
| Interest other than interest on securities (fixed deposit interest) |
Section 194A |
10% |
| Winnings from crosswords, lotteries or any game |
Section 194B |
30% |
| Winnings from horse races |
Section 194BB |
30% |
| Payment of contractors and sub-contractors |
Section 194C |
1% for individuals and HUF
2% for other taxpayers |
| Insurance commission received by domestic companies |
Section 194D |
10% |
| Insurance commission received by other others |
Section 194D |
2% (effective from 1st April 2025) |
| Life insurance policies not exempted under Section 10(10D) |
Section 194DA |
2% (effective from 1st April 2025) |
| Payment in respect of deposits under National Savings Scheme |
194EE |
10% |
| Payments on account of repurchase of units by mutual funds or UTI |
194F |
Proposed to be removed effective from 1st October 2024 |
| Commission, prize etc., on sale of lottery tickets |
Section 194G |
2% (effective from 1st October 2024) |
| Brokerage or Commission |
Section 194H |
2% (effective from 1st October 2024) |
| Payment done while transferring immovable property except for agriculture land |
Section 194IA |
1% |
| Rent payment by HUF or individual exceeding ₹50,000 per month |
Section 194IB |
2% (effective from 1st October 2024) |
| Rent on machinery and plant |
194- I |
2% |
| Rent for property that is immovable |
194-I |
10% |
| Payment of professional fees, etc. |
194J |
2% (technical services, royalties, FTS, call centre)
10% (others) |
| Payment made by HUF/individuals to professional or commission or brokerage of more than ₹50 lakh and above |
194M |
2% (effective from 1st October 2024) |
| Cash withdrawal exceeding a specific amount |
194N |
2% |
| TDS on e-commerce participants (w.e.f. 1.10.2020) |
Section 194-O |
0.1% (effective from 1st October 2024) |
For Complete TDS rates, follow our TDS Rate Chart.
Types Of TDS
- TDS on Salary
- TDS on Interest on Securities
- TDS on Dividend
- TDS on Interest other than Securities
- TDS on Winnings from Lotteries and Games
- TDS on Winnings from Horse Race
- TDS on Payment to Contractors
- TDS on Insurance Commission
- TDS on Commission or Brokerage
- TDS on Rent
- TDS on Fees for Professional and Technical Services
- TDS on Transfer of Immovable Property
The formula to calculate TDS is,
Average Income Tax Rate = Income Tax Payable (computed with slab rates) / Estimated income for the financial year.
Let's break it down with a simplified example to understand how the TDS calculation works.
If Mr. Ramesh earns a salary of ₹1,00,000 in a year (please note that these rates change annually, so they are subject to the applicable financial year's tax rules):
- According to Section 192 of the Income Tax Act, based on the current year's tax slabs, the TDS on his total salary is ₹1,42,500.
- Adding the 4% education and higher education cess, his total payable tax becomes ₹1,48,200.
Now, to calculate the average TDS rate, we divide the total payable tax by the annual salary and multiply it by 100:
Average TDS Rate=(1,48,200/12,00,000)×100=12.35%
This means, each month, the TDS that will be deducted from Mr. Ramesh's salary is 12.35% of ₹1,00,000, which equals ₹12,350.
So, in simpler terms: Mr. Ramesh will have ₹12,350 deducted from his salary each month as TDS.
You can calculate the TDS with ease and quick via Tax2win TDS calculator, check here.
How to calculate TDS on salary U/S 192
TDS Calculation on Salary:
Step 1: Estimate your total taxable income for the particular financial year. This should include your salary, any other income you earn (such as rental or interest income), and any exemptions you are eligible for (House Rent Allowance, Medical Expenses, and investment deductions)
Step 2: Calculate payable Income Tax through applicable tax slabs. Read our guide “Income Tax Slabs for FY 2023-24 (AY 2024-25)”
Step 3: Divide your payable income tax by the number of months of employment to calculate the monthly TDS amount.
For example, if your estimated total taxable income for the current financial year is ₹10,00,000 and you are employed for 12 months, your monthly TDS amount would be ₹10,00,000 X 30% / 12 = ₹25,000.
Note:- This guide will help you with TDS calculation on salary under Section 192. Your Actual TDS may vary depending on the applicable tax slab. It is always advisable to consult with our tax advisor to get personalized advice.
Some additional points to keep in mind when calculating TDS on salary:
- If you do not have a PAN card, your employer will deduct higher TDS at a rate of 20% plus 4% cess on other incomes, such as interest from fixed deposits, dividends, winnings from lottery or games, etc.
- If you have submitted a declaration to your employer opting for the new tax regime, your TDS will be calculated using the new tax slabs and deduction rules.
- You can claim a refund of TDS if you have overpaid tax.
Don’t know how to calculate TDS on salary? Check out our TDS Calculator.
How to calculate TDS for other than Section 192
To calculate TDS under different sections, you need to follow these steps:
Step 1: Identify the nature of income and the relevant section that applies to it.
Step 2: Check the threshold limit for that section. If the income exceeds the threshold limit, then TDS is applicable. Otherwise, no TDS is required.
Step 3: Apply the prescribed TDS rate for that section on the income amount. If there is no PAN of the payee, then apply a higher rate of 20% plus cess.
Tips to Save TDS on Your Salary
Some of the tips to save TDS as follows:
- Claim all the deductions you are eligible for. This includes deductions for HRA, medical expenses, investment deductions, and education expenses. You can claim these deductions by providing the relevant proof to your employer.
- Invest in tax-saving instruments. There are a number of tax-saving instruments available in India, such as the Employee Provident Fund (EPF), Public Provident Fund (PPF), National Pension System (NPS), and Equity Linked Savings Scheme (ELSS). Investing in these instruments will reduce your taxable income and, thereby, your TDS liability.
- Opt for the new tax regime. The new tax regime offers lower tax rates than the old tax regime. However, it also offers fewer tax deductions. If you do not have many deductions to claim, you may be able to save TDS by opting for the new tax regime.
Here are some additional tips for saving TDS:
- Plan your tax savings in advance. This will help you to make the most of the different tax-saving options available.
- Keep track of your income and expenses. This will help you to estimate your taxable income and TDS liability accurately.
- File your income tax return on time. If you file your income tax return on time, you can claim a refund of any excess TDS that has been deducted from your salary.
If you do not file your TDS return on time, you are liable to pay a late fee of ₹200 per day until the return is filed, subject to a maximum amount equal to the TDS deducted. Tax2win’s experts help you maximize tax savings and ensure accurate, timely filing of your tax return. Book a tax expert now!
