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  7. TDS Threshold Limit Under Income Tax Act

Threshold Limit for TDS Under Income Tax Act

Updated on: 15 Nov, 2024 12:03 PM

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 in real-time as the income is received. It should be noted that tax at the source is deducted from 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 that are specified in the Income Tax Act on different payments like interest received, salaries, etc.

Contents

What is a threshold limit?

The amount of payment upto which no TDS is required is called the threshold limit. Only if the payment exceeds the prescribed limit, then the TDS provisions will be applicable. For example, as per the provisions of Section 194J, no TDS is required to be deducted if payment of professional fees does 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.

What are the different TDS threshold limits under the Income Tax Act?

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 ) The 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 the 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 a 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 the use of machinery, plant, or equipment) 10% (Land or building or furniture or fitting) 1.5% (on rent paid for the 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 individuals 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 Individuals/ 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, cooperative 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 participants being resident 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 a 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

Frequently Asked Questions

Q- What is the threshold limit for TDS on Interest on Bank Deposits/Post Offices?

According to the proposals of the interim Budget 2019-20, the TDS threshold for post offices and banks has been raised from Rs. 10,000 to 40,000.

Q- What is the limit to deduct TDS u/s 194 C?

The threshold for deduction of the TDS under section 194C is Rs. 1,00,000/- for the aggregate payment of the whole Financial Year and Rs 30,000/- for the single payment.

Q- What is the TDS rate for Salaried individuals aged less than 60 years?

The rate of TDS on salary income is as per the slab rate applicable to 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 sections 80C, 80D, HRA, etc, will not be available under the new tax regime.

Q- What is TDS limit?

The threshold limit is the amount of payment up to which no TDS is required. TDS provisions become applicable only if the payment exceeds this prescribed limit.

Q- Who deducts TDS on cash withdrawals under Section 194N?

TDS on cash withdrawal under Section 194N is deducted by banks (private, public, and co-operative) or post offices when making any cash payment to any person in excess of ₹20 lakh or ₹1 crore, depending on the filing of income tax returns.

Q- What is the rate of TDS on cash withdrawal under Section 194N?

The rate of TDS on cash withdrawal under Section 194N is 2% on cash withdrawals in excess of ₹1 crore if the person has filed income tax returns for any or all three previous assessment years. If the person has not filed income tax returns for any of the preceding three assessment years, TDS will be deducted at 2% on cash withdrawals of more than ₹20 lakh and 5% for withdrawals exceeding ₹1 crore.

Q- Are there any exemptions from TDS on cash withdrawal under Section 194N?

Yes, TDS on cash withdrawal under Section 194N does not apply to withdrawals made by certain entities such as the Central or State Government, private or public sector banks, cooperative banks, post offices, and other specified entities.

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CA Abhishek Soni
CA Abhishek Soni

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.