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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.

What is a threshold limit?
What are the different TDS threshold limits under the Income Tax Act?
Frequently Asked Questions

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 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%
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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