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TDS or Tax Deducted at Source was introduced by the Government of India for taxing the income at the time it was generated in order to minimize tax evasion and to collect the tax on real time as the income is received. It should be noted that tax at source is deducted on a specified transaction, only when the amount of the payment made is above the specified threshold level. If the value does not cross the threshold limit then no tax at source [TDS] will be deducted. Through this blog we will be explaining to our readers the different threshold limits which are specified in the Income Tax Act on different payments like interest received, salaries etc.
The amount of payment upto which no TDS required is called the threshold limit. Only if the payment exceeds the prescribed limit, then TDS provisions will be applicable. For example, as per the provisions of Section 194J, no TDS required to be deducted if payment of professional fees do not exceed Rs, 30,000/-. So, here the threshold limit is Rs. 30,000 and TDS needs to be deducted only if it exceeds 30,000.
The various TDS threshold limits for FY 2020-21 have been compiled as under:
| S.No. | TDS Section | Nature of Payment | Payer (Deductor) | Payee (Deductee) | Rate of TDS | Rate of TDS from 14 May 2020 to 31st March2021 | Threshold Limit (No TDS to be Deducted upto threshold limit mentioned) |
|---|---|---|---|---|---|---|---|
| 1 | Section 192 | TDS on Salary | Any Person | Employee(Resident or Non Resident) | Applicable Income Tax Slab Rates | Applicable Income Tax Slab Rates | Employers need to calculate the tax liability as per the slab rates applicable after considering the deductions and exemptions. |
| 2 | Section 192A | TDS on Payment of accumulated balance due to an employee. | PF Organization | Employee | 10% (If no PAN then MMR i.e. 30% + applicable Cess and Surcharge ) | 10% (If no PAN then MMR i.e. 30% + applicable SurchaCess and Surcharge )
|
Amount is less than Rs.50,000/- |
| 3 | Section 193 | TDS on Interest on Securities | Any Person | Any Resident Person | 10% | 7.5% | Upto Rs.5,000 in a financial year (FY) for Individual/HUF in the case of Debentures and Rs. 10,000 for Individuals in case of bonds. |
| 4 | Section 194 | TDS on Dividends | Domestic Company | Resident Person | 10% | 7.5% | Upto Rs 5,000/- in a FY |
| 5 | Section 194A | TDS on Interest (Other than Interest on Securities) | Any Person(Other than Individual/HUF not liable to tax audit in last PY) | Resident Person | 10% | 7.5% | Up to Rs.40,000/- (for payments made by banks, cooperative banks, certain specified cooperative societies or on post office deposits) and up to Rs.5000 (for other cases). [In case of a senior citizen, the limit of Rs 40,000/- was increase to Rs. 50,000/- w.e.f. 1.4.2018] |
| 6 | Section 194B | TDS on Winnings from Lotteries or Crossword Puzzles, Card Games etc. | Any Person | Any Person | 30% | 30% | Up to Rs.10,000/- |
| 7 | Section 194BB | TDS on Winnings from Race Horses | Any Person | Any Person | 30% | 30% | Up to Rs.10,000/- |
| 8 | Section 194C | TDS on Payment to Contractors | Any Person(Other than Individual/HUF not liable to tax audit in last PY) | Any Resident Person | 1% (for Individual/HUF) 2% (other person) | 0.75% (for Individual/HUF) 1.5% (other person) | Up to Rs.30,000/- for single payment.
Up to Rs.1,00,000 for aggregate amount during a FY.
Payment to a transporter in course of business where he declares through a PAN that he owns 10 or less goods carriages during the year is also exempt from TDS.
|
| 9 | Section 194D | TDS on Insurance Commission | Insurance Company / Any person | Resident Agent | 5% (for Individual/HUF) 10% (other person) | 3.75% (for Individual/HUF) 10% (other person) | Up to Rs.15,000/- during Financial Year |
| 10 | Section 194DA | TDS on Payment in Respect of Life Insurance Policy | Any Person | Any Resident Person | 5% | 3.75% | Upto Rs.1,00,000/- during FY |
| 11 | Section 194E | TDS on Payments to Non-Resident Sportsmen or Sports Association | Any Person | NR- -Sportsmenwho is not a citizen of India -Sports Association -Entertainer who is not a citizen of India | 20% | 20% | No exemption limit. |
| 12 | Section 194EE | TDS on Payment for Deposit Under NSS (National Saving Scheme) | Any Person | Any Person | 10% | 7.5% for resident or 10% for Non resident | Upto Rs.2,500/- during FY |
| 13 | Section 194G | TDS on Commission on Sale of Lottery Tickets | Any Person | Any Person | 5% | 3.75% for resident or 5% for Non resident. | Upto Rs.15,000/- during FY |
| 14 | Section 194H | TDS on Commission or Brokerage | Any Person(Other than Individual/HUF not liable to tax audit in last PY) | Any Resident Person | 5% | 3.75% | Up to Rs.15,000/- during FY. |
| 15 | Section 194I | TDS on Rent | Any Person(Other than Individual/HUF not liable to tax audit in last PY) | Any Resident Person | 2% (on rent paid for use of machinery, plant or equipment) 10% (Land or building or furniture or fitting) | 1.5% (on rent paid for use of machinery, plant or equipment) 7.5% (Land or building or furniture or fitting) | Up to Rs.2,40,000/-during the FY |
| 16 | Section 194IA | TDS on Payment on Transfer of Immovable Property (Not Being an Agricultural Land) | Any Person (Other than person referred to in section-194LA) | Any Resident Person | 1% | 0.75% | Less than Rs.50,00,000/- |
| 17 | Section 194IB | TDS on Payment of Rent in respect of any land or building. | Individual & HUF(Other than covered u/s 194 I) | Any Resident Person | 5% | 3.75% | Upto Rs.50,000/- per month Rent |
| 18 | Section 194 IC | TDS on Payment Made Under Joint Development Agreements | Any Person | Any Resident Person | 10% at monetary proportion | 7.5% at monetary proportion | No exemption limit |
| 19 | Section 194J | TDS on Fees for Professional or Technical Services, Royalty, for not carrying out any activity in relation to any business,etc. | Any Person(Other than Individual/HUF not liable to tax audit in last PY) | Any Resident Person | 10%
2% in case of fees of technical services (not being a professional service)
2% (in case of payment made to the payee engaged in the business of operating a call centre). |
7.5%
1.5% in case of fees of technical services (not being a professional service)
1.5% (in case of payment made to the payee engaged in the business of operating a call centre). |
Up to Rs.30,000/- during FY (the separate limit for each kind of payment )
|
| 20 | Section 194K | TDS on payment of any Income in respect of Units | Any person | Any resident person | 10% | 7.5% | Upto Rs.5,000 during FY No TDS by Mutual Funds on income in the nature of capital gains i.e., TDS is required only on payment of dividend |
| 21 | Section 194LA | TDS on Payment of Compensation on Acquisition of Certain Immovable Property | Any Person | Any Resident Person | 10% | 7.5% | Upto Rs. 2,50,000/- during FY
|
| 22 | Section 194LB | TDS on Income by way of Interest from Infrastructure Debt Fund | Infrastructure Debt Fund | Non Resident or Foreign Co. | 5% | 5% | No exemption limit |
| 23 | Section 194LBA | TDS on Certain Income from Units of a Business Trust | Business Trust | Unit Holder being Resident or Non resident or Foreign Co. | 10% (for resident) 5%/30% ( for non-resident). 5% /40%(for foreign Co.). | 7.5% (for resident)
5%/30% ( for non-resident).
5% /40% (for foreign Co.).
|
No exemption limit |
| 24 | Section 194LBB | TDS on Income in Respect of Units of Investment Fund | Investment Fund | Unit Holder being Resident or Non resident or foreign Co. | 10% (for resident) 30%(For non-resident) 40%(For Foreign Co.) | 7.5% (for resident) 30%(For non-resident) 40%(For Foreign Co.) | No exemption limit
For Non-resident or Foreign Company, no deduction of TDS shall be made in respect of any income that is not chargeable to tax under the provisions of the Act.
|
| 25 | Section 194LBC | TDS on Income in Respect of Investment in Securitisation Trust | Securitisation Trust | Investor being Resident or Non resident or foreign Co. | 25%(for resident individual or HUF) or 30% (for any other person) or Non-resident) 40%(for foreign Co.) | 18.75%(for resident individual or HUF) or 22.5% (for any other resident person) 30% for Non-resident) 40%(for foreign Co.) | No exemption limit |
| 26 | Section 194LC | TDS on Income by way of Interest from Indian Company | Specified Indian company or Business Trust | Non-resident or Foreign Co. | 5% 4%(For certain specified borrowings on or after 01st April 2020 but before 01st July, 2023) | 5% 4%(For certain specified borrowings on or after01st April 2020 but before 01st July, 2023) | No exemption limit |
| 27 | Section 194LD | TDS on Income by way of Interest on Certain Bonds and Government Securities | Any Person | Foreign Institutional Investor or Qualified Foreign Investor | 5% | 5% | No exemption limit |
| 28 | Section 194M | TDS on payment of certain sums by certain Individuals or HUF | Individual/ HUF who are not liable to deduct TDS u/s 194C, 194H, 194J | Any resident person | 5% | 3.75% | Payment Upto Rs.50 lakhs during FY |
| 29 | Section 194N | TDS on payment of certain amounts in Cash | A banking company, co-operative bank or a post office | Any person | 2% | 2% | Upto Rs.1 crore during FY |
| 30 | Section 194O | TDS on Payment of certain sums by E-commerce Operator to E-commerce participant
|
E-Commerce operator | E-commerce participant being resident | 1% | .75% | Upto Rs.5,00,000/- during FY for sale of goods or provision of services or both in case of Individual or HUF and such e-commerce participant has furnished PAN or Aadhaar |
| 31 | Section 195 | TDS on Other Payments Made to Non Resident (Not Company) or Foreign Company | Any Person | NonResident or Foreign Company | Rate as specified in Act or DTAA | Rate as specified in Act or DTAA | No exemption limit |
| 32 | Section 196A | TDS on Income in respect of units of non-residents | Any person | Non-resident, not being company or a foreign Company | 20% | 20% | No exemption limit |
| 33 | Section 196B | TDS on Income from units (including LTCG on transfer of such units) | Any person | Offshore fund | 10% | 10% | No exemption limit |
| 34 | Section 196C | TDS on payment of Income from foreign currency bonds or GDR of an Indian company(including LTCG on transfer) | Any person | Non-resident | 10% | 10% | No exemption limit |
| 35 | Section 196D | TDS on payment of Income of FII from securities(not being capital gain arising from such securities) | Any person | FII(Foreign Institutional Investor) | 20% | 20% | No exemption limit |
* The rate of TDS shall be increased by applicable surcharge and Health & Education cess wherever applicable.
According to the proposals of interim Budget 2019-20, the TDS threshold for post office and banks has been raised from Rs. 10,000 to 40,000.
The threshold for deduction of the TDS under section 194C is Rs. 1,00,000/- for aggregate payment of the whole Financial Year and Rs 30,000/- for the single payment.
The rate of TDS on salary income is as per the slab rate applicable on the employee.The slab rates for FY 2020-21 are here under:
| OPTION 1 | OPTION 2 | ||
| Existing Income Tax Slab | New Tax Regime | ||
| Upto Rs 2,50,000 | NIL | Upto Rs 2,50,000 | NIL |
| Rs 2,50,001 - Rs 5,00,000 | 5% | Rs 2,50,001 - Rs 5,00,000 | 5% |
| Rs 5,00,001 - Rs 10,00,000 | 20% | Rs 5,00,001 - Rs 7,50,000 | 10% |
| Rs 7,50,001 - Rs 10,00,000 | 15% | ||
| Above Rs 10,00,000 | 30% | Rs 10,00,001 - Rs 12,50,000 | 20% |
| Rs 12,50,001 - Rs 15,00,000 | 25% | ||
| Above Rs 15,00,000 | 30% | ||
| Notes:
1. There is no change introduced in the existing and new tax regime in - Rates of Surcharge - Health & Education Cess @4% - Rebate u/s 87A( no tax will be payable on total income upto Rs.5 lakh in both regimes) 2. Certain income tax exemptions and deductions like section 80C, 80D, HRA etc will not be available under the new tax regime. |
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