An amount of TDS or Tax Deduction at source is deducted for various incomes under the Income Tax Act 1961. But, do you know the rates at which such deduction is required to be made? Is it required to be done at one single rate or different rates?? The rates are prescribed in the law depending upon the nature of income like
Income from Salary
Interest Income
Receiving Professional Fee
Getting a prize or Lottery
etc
Find below detailed understanding on the sections, nature of payment, who needs to deduct TDS, and the TDS rates in all cases.
194A – TDS on Interest Income other than on securities
No TDS is required to be deducted if
Interest paid by bank/ co-operative bank/ post office up to 10000
Interim Budget 2019 has extended the limit of 10,000 to Rs 40,000 with effect from F.Y. 2019-20 (AY 2020-21)
In other cases its upto Rs. 5000
Interest paid by firm to partner
Interest on income tax
Interest on bank saving A/C
Interest paid to any bank or LIC or UTI or Any insurer etc.
Interest paid by co-op society to its member or to any other co-op society
Interest paid in respect of certain scheme of past office , Kisan vikas patra, india vikas patra, national saving certificate, P.O. monthly income A/c, P.O. Recurring deposits.
Aggregate of payment in P.Y. in upto Rs. Rs. 1,00,000 OR
If contract is for personal purpose of individual/ HUF OR
No TDS if payment made to transporter & he does not own more than 10 vehicles at any time during the p.y. & he furnish a declaration AND
The Contract also include sub contract in all cases
Payment made by TV CHANNEL/ Newspaper Co. to advertising company for booking/ procuring/ canvassing for advertising is treated as discount not commission so TDS provision not applicable.
In case of Job work, the TDS shall be deducted on
:- the invoice value excluding the value of material if material value mentioned separately in invoice
:- The whole of the invoice value , if value of material is not mentioned separately in the invoice value
No TDS on Commission or Brokerage is required to be deducted if
Commission is upto Rs. 15000
Commission or Brokerage amount relating to securities like commission to underwriters, Brokerage on public issue, Brokerage on stock exchange transaction etc
This provision has been inserted recently from Budget 2017 and the objective was to bring under scope Joint Development Agreements. So let's understand this section in detail:
TDS Payments under Development Agreement shall be done for
Any person who pays to a resident some consideration (not in kind) under a Joint Development Agreement, has to deduct TDS u/s 194 IC.
Joint Development Agreement is an agreement between the owner of an asset (being land or building or both) who agrees to allow another person to build a real estate project on such asset, in return for share and/or payment in cash.
The rate of the tax deduction is 10% and if the PAN of the receiver is not available then the rate is 20%.
Time of deducting tax is earlier of, the credit of income to the account of the payee (receiver) or actual payment (in cash, cheque, draft or other modes).
Also, there is no threshold limit (exemption limit) under this section.
TDS on salary income is deducted either in monthly equal installments or in lump sum during the months of February or March of the Financial Year. The TDS amount to be deducted is calculated on the basis of total income tax payable by the individual on his income. Which means in this case first income tax calculation is done and then it is divided accordingly into the installments and such computed amount is reduced from the in hand salary of the said month.
Q- What is the TDS rate on commission?
TDS rate on Commission or Brokerage is given under the section 194H of the income tax act 1961. The rate of TDS has been specified at 5%.
Q- What is the TDS rate on consultancy charges?
Section 194J of the income tax act 1961 provides TDS rate of 10% for professional and technical consultancy services provided.
Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.
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