TDS Rate Chart: Know Your Tax Deductions at a Glance!

Tax Deducted at Source (TDS) is a vital mechanism used by the Indian government to collect tax at the time of payment itself. This process helps in reducing tax evasion and ensures that taxes are collected consistently and efficiently. As part of the Income Tax Act, various sections are designated for TDS on different types of income. In this blog, we will walk you through the TDS Rate Chart, focusing on the TDS Rate Chart for FY 2024-25 and TDS Rate Chart for AY 2025-26, along with some key TDS provisions and how they impact your tax planning.

What is TDS and How Does it Work?

TDS refers to the tax that is deducted by the payer before making the payment to the payee. The payer then deposits this tax with the government on behalf of the payee. It is applicable to various types of payments, including salary, interest, dividend, and other sources of income. TDS ensures that the tax is collected at the point of income generation, reducing the possibility of tax evasion.

The TDS rates vary depending on the nature of the payment and the status of the payee, whether a resident (R), non-resident (NR), or foreign company (FC). The government sets specific rates under different sections of the Income Tax Act to make the process smoother for both the payer and the payee.

TDS Rate Chart for FY 2024-25 and AY 2025-26

The TDS Rate Chart FY 2024-25 provides the updated rates applicable to various transactions. Here are some key highlights from the chart:

1. TDS on Salary (Section 192)

The TDS Rate on Salary is governed by the applicable income tax slab rates. TDS is deducted based on the individual’s taxable income, and it’s usually deducted monthly. The rates depend on the salary income, and deductions can be claimed under various sections like 80C, 80D, etc.

For FY 2024-25, the basic exemption limit and normal tax slabs for individuals and HUFs are as follows:

• Up to Rs. 2.5 lakh: No tax
• Rs. 2.5 lakh to Rs. 5 lakh: 5%
• Rs. 5 lakh to Rs. 10 lakh: 20%
• Above Rs. 10 lakh: 30%

2. TDS on Payments to Contractors and Sub-Contractors (Section 194C)

If you are making payments to contractors or sub-contractors, the 194C TDS Rate will apply. The TDS rates are as follows:

• For individuals/HUF: 1% on payments exceeding Rs. 30,000 in a single transaction or Rs. 1,00,000 in aggregate.
• For others (companies, firms, etc.): 2%

This section applies to payments made for carrying out work contracts such as construction, manufacturing, or supply of goods.

3. TDS on Professional Services (Section 194J)

If you are paying fees for professional services, 194J TDS Rate is applicable. The TDS rate for fees paid to professionals such as lawyers, accountants, and consultants is generally 10%. However, if the payment is for technical services, the rate may be reduced to 2% under certain circumstances.

4. TDS on Dividend Payments (Section 194)

TDS on dividend payments is applicable at a rate of 10% when the dividend exceeds Rs. 5000 in a financial year. This section is relevant for individuals and corporate entities receiving dividend income.

5. TDS on Interest (Section 194A)

TDS on interest from sources other than securities (like fixed deposits) is deducted at:

• 10% for individuals and HUFs (if interest exceeds Rs. 40,000 or Rs. 50,000 for senior citizens)
• TDS is applicable on interest exceeding Rs. 5000 in a financial year.

6. TDS on Lottery and Gambling Income (Section 194B & 194BB)

Winnings from lottery, card games, horse racing, and other gambling activities are subject to a high TDS rate of 30% under Section 194B and Section 194BB.

Key Sections of the TDS Rate Chart for FY 2024-25

The TDS Rate Chart for AY 2025-26 is quite comprehensive, and it covers a wide range of income categories:

Section 192A

TDS on premature withdrawal from the Employees’ Provident Fund (EPF) at 10% (if withdrawal is above Rs. 50,000).

Section 194LBC

TDS on income from investment in a securitisation fund, applicable at 25% for individuals and HUF, and 30% for domestic companies.

Section 195

TDS for non-residents (NR) and foreign companies (FC), with rates varying from 10% to 40% depending on the type of income (royalty, interest, technical fees, etc.).

TDS Rates for Non-Residents and Foreign Companies

Non-residents and foreign companies are subject to specific TDS rates under various sections:

Section 195

TDS on income earned by non-residents, with a standard rate of 20% (except for capital gains, where rates can differ).

Section 194LB

TDS on interest payment to foreign lenders at 5% for infrastructure debt funds.

The TDS rates for non-residents can be higher due to the non-availability of exemptions under specific sections, making it crucial for foreign entities to understand the applicable rates when doing business in India.

Importance of TDS Rate Charts for Tax Planning

The TDS Rate Chart is an indispensable tool for effective tax planning. By understanding the various TDS rates, individuals and businesses can ensure that they are compliant with the tax laws and avoid any unnecessary tax liabilities. It also helps in determining how much tax needs to be deducted at the time of payment and ensures that there is no delay in the deposit of TDS with the government.

For businesses, the TDS rate chart can help streamline the payment process, ensure that the correct tax is deducted, and avoid penalties. For individuals, it provides clarity on how much tax will be deducted on various types of income, including salaries, interest, and dividends.

In conclusion, navigating the TDS Rate Chart for FY 2024-25 and AY 2025-26 can be complex, but it is essential for ensuring tax compliance. From TDS on salary to TDS on professional fees and contractor payments, understanding the TDS rates and applicable sections will enable you to manage your tax obligations effectively. Whether you are a resident, non-resident, or foreign company, being well-informed about the TDS Rate Chart will help in making more accurate tax-related decisions.

For detailed assistance on TDS deductions, tax planning, and filing, feel free to reach out to TaxSpanner – your trusted partner in managing taxes efficiently.