TDS/TCS Rates
TDS/TCS Rates: Detailed Guide
Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are crucial elements of India’s tax collection system under the Income Tax Act, of 1961. These provisions are designed to ensure that the government receives timely payments of tax at various stages of income generation and commercial transactions. The rates of TDS and TCS are specified by the Income Tax Department and will be determined by the nature of the income or transaction. It is important to know the applicable TDS and TCS rates for businesses, professionals, and individuals who have to fulfill their tax obligations.
We discuss the various TDS and TCS rates prescribed under the income-tax act, the conditions where these rates apply, the specific categories of payments and transactions affected by TDS and TCS, and cover the differences in rates between resident and non-resident taxpayers. Changes or updates to TDS/TCS provisions are also discussed, in case they affect taxpayers.
1. TDS Rates for Salaries
Salaries are the most common source of income for most people. The employer deducts tax at source and then pays the salary amount to the employee. The slab rate of TDS on salary is just like other slab rates as applicable for an individual taxpayer in a financial year. The employer also calculates the tax, considering exemptions, deductions, and rebates from the payable amount while deducting tax according to the applicable tax slab.
Tax slabs for individual taxpayers are categorized differently by age group and change every financial year. For instance, the basic tax slabs for the general category of individuals below 60 years are:
- Up to ₹2.5 lakh: No tax
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
The employer needs to make TDS deductions based on this slab and issue a Form 16 at the end of the fiscal year, which details the salary and the tax deducted.
2. TDS Rates on Other Income
Besides salaries, there are many other kinds of income on which TDS is made applicable. Some of these include interest income, commission, professional fees, rent, and others. As the type of income and the status of the taxpayer-whether he or she is a resident or non-resident-effect TDS rates for a particular income, several major sources of income that are subject to TDS include:
- Interest on FDs: TDS on interest received from fixed deposits is usually 10% if the interest is more than ₹40,000 in a year or ₹50,000 for senior citizens. The TDS rate is 20% if PAN is not furnished.
- Interest on Other Deposits: Interest income from savings accounts, recurring deposits, and other kinds of bank deposits also attracts TDS. However, what is the threshold limit on which TDS is supposed to be deducted varies; when it comes to savings accounts, TDS is deducted if the interest exceeds ₹10,000 in a financial year.
- Rent: TDS on rent paid for property applies when the annual rent is more than ₹2.4 lakh. The rate is mostly 10%; however, if the landlord is a non-resident, the rate is higher.
- Commission and Brokerage: Payments made as commission or brokerage to a resident are subject to TDS at a rate of 5%. In the case of non-residents, the rate of TDS can be higher, depending on the nature of the transaction.
- Professional Fees: If professional fees are paid to a resident, TDS is applicable at a rate of 10%. In the case of non-residents, the rate can be higher and may also be subject to provisions of the Double Taxation Avoidance Agreement (DTAA).
- Dividend: TDS on dividends is applicable at a rate of 10% if the dividend exceeds ₹5,000 in a financial year.
3. TDS Rates for Non-Residents
TDS rates are different for non-resident taxpayers, and the rates are always higher than those for residents. Again, the rates may be subject to modification by the provisions of the Double Taxation Avoidance Agreement DTAA between India and the country of residence of the non-resident taxpayer. For example:
- Interest Payments to Non-Residents: The TDS rate on interest payments to nonresidents is generally 20 percent, but it can be reduced depending on the relevant DTAA provisions.
- Royalty and Technical Fees: Payments for royalty or technical services rendered by way of consultancy to a non-resident are required to be subjected to TDS at the rate of 10 percent, subject to relief available under DTAA.
- Capital Gains Income: TDS is also applicable to capital gains for non-residents. These include capital gains arising on the sale of securities, shares, and other assets. Depending upon the short-term or long-term nature of the gain, and whether the securities are listed or unlisted, the rate of TDS may vary.
- Rental Payments to Non-Residents: Rent paid to a non-resident is liable for TDS at the rate of 30% unless the DTAA provides for a lower rate.
4. TCS Rates
Whereas TDS represents tax deducted at source from income, TCS represents tax collected at source on particular transactions, which are primarily transactions associated with selling goods or services. The person collecting the tax is usually a seller or a service provider and is collected at the time of sale or transaction. Some of the primary categories under which TCS is applicable include:
- Sale of Scrap: TCS is applicable at a rate of 1% on the sale of scrap by any person carrying on business or profession.
- Sale of Goods (Other than Scrap): For certain specified goods, such as minerals and timber, TCS is applicable at varying rates depending on the type of goods sold.
- Sale of Alcoholic Liquor: The TCS rate for the sale of alcoholic liquor is 1%, and it applies to the sale of liquor for human consumption.
- Remittance of Foreign Currency: TCS applies to remittances made for the purchase of foreign exchange under the Liberalized Remittance Scheme. However, the rate in such transactions is usually 5% and may sometimes be different depending on the transaction type and the purpose of remittance.
- Sale of Motor Vehicles: TCS will be levied on the sale of motor vehicles other than two-wheelers, at a rate of 1% if the sale consideration exceeds ₹10 lakh.
5. Changes in TDS/TCS Rate during the Recent Budgets
The TDS and TCS rates are liable to change based on the annual budget put forth by the government. Union Budgets may often provide for variations or imposition of new TDS/TCS rates pertaining to different types of income or transactions. For instance, lately, the government has amended the TDS rates for senior citizens, besides incentivizing foreign investment by amending payments made to non-residents.
The changes in the TDS/TCS rates have more implications for small businesses and individuals who collect or deduct tax at source. Taxpayers need to keep themselves updated on the latest budget announcements and revisions regarding the present tax regulations.
6. Interest for Non-Compliance with TDS/TCS Rates
Failure to comply with the provisions of TDS/TCS attracts interest charges and penalties. If tax is not deducted at source when due, the deductor will be liable for interest under Section 201 of the Income Tax Act. Interest is generally charged at the rate of 1% for every month or part of a month for each delay of deduction or payment of TDS.
Also, if the TCS is not deposited or collected within the due date then, by the Income Tax Act, the collector may be penalized and even additional interest. Preparing and submitting the returns and depositing the deducted or collected tax on time will avoid such penalties as well as interest charges.
7. TDS/TCS Filing and Reporting
Once the TDS or TCS is deducted or collected, the deductor or collector has to file the returns with the Income Tax Department. The returns should include details of tax deducted or collected, details of the names of the payees or purchasers, and remittance of tax so made to the government.
The quarterly return on TDS/TCS is filed. If the return is not filed within time, a penalty arises under Section 234E of the Income Tax Act. In the TDS/TCS returns, it is also essential to provide correct details such as the PAN of the deductee or payee so that the tax credit is correctly transferred to him.
8. TDS/TCS Rates with Exemptions and Reductions
In some cases, the taxpayers are liable to exempt or reduce rates of TDS/TCS. For example, non-residents are allowed to reduce rates under DTAA in case of a tax treaty with India. Further, in certain cases, there are specified classes of taxpayers viz senior citizens or certain government entities, payments towards which may either be exempt from TDS or eligible for a lower rate.
To avail of exemptions or reductions, taxpayers are required to submit the necessary documentation, such as a certificate of exemption from the Income Tax Department, or submit a valid form (e.g., Form 15G, Form 15H) in the case of lower TDS rates for specified individuals.
TDS Rates Chart
TDS Sections List | Nature of Payment | Threshold (INR) | Rates Individual/HUF (%) | Rates Others |
192 | Salary | 2.5 lakhs | Slab rates | Slab rate |
192A | PF withdrawal | 50k | 10 | 10 |
193 | Interest on securities, listed debentures, and other securities | 10k | 10 | 10 |
194 | Dividends by domestic companies | 10k | 10 | 10 |
194A |
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194B | Winnings of lotteries, puzzles or games | 10k in a single transaction | 30 | 30 |
194BA | Winnings from online games | – | 30 | 30 |
194BB | Winnings from horse races | 10k in a single transaction | 30 | 30 |
194C |
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194D |
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194DA | Maturity of a life insurance policy | 1 lakh | 2 | 2 |
194EE | Payment received from NPS | 2500 | 10 | 10 |
194G | Payment from the sale of lottery tickets | 20k | 2 | 2 |
194H | Commission or brokerage fees | 20k | 2 | 2 |
194I |
| 50k in month or 6 lakhs a year |
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194IA | On transfer of immovable property, excluding agricultural land | 50 lakhs | 1 | 1 |
194IB | Rent payment made by an individual or HUF is not covered under section 194I | 50k monthly | 2 | Not applicable |
194IC | Payments under a joint development agreement to an individual or HUF | No limit | 10 | 10 |
194J |
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194K | Income from units of mutual funds, such as dividends | 10k | 10 | 10 |
194LA | Compensation for acquiring certain immovable property | 5 lakhs | 10 | 10 |
194LB | Interest on infrastructure bonds to non-resident Indians | Not applicable | 5 | 5 |
194LBA | Distribution of certain income by a business trust to its unit holders | Not applicable | 10 | 10 |
194LD | Interest payment on rupee-denominated bonds, municipal debt security, and government securities | Not applicable | 5 | 5 |
194M | Payment made for contracts, brokerage, commission, or professional fees exclusive of sections 194C, 194, 194J- Individuals/HUF | 50 lakhs | 2 | 2 |
194N |
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194O | Amount received from the sale of products/services by e-commerce service providers through digital platforms | 5,00,000 | 0.1 | 0.1 |
194P | Senior citizen above 75 years of age with salary and interest income, ITR not filed | Not applicable | Slab rate | Not applicable |
194Q | Payments made on the purchase of goods | 50,00,000 | 0.10 | 0.10 |
194R | Perquisite provided | 20,000 | 10 | 10 |
194T | TDS on payments made by firms to their partners | 50,000 (specified person) 10,000 (others) | 1 | 1 |
206AA | TDS is applicable in case of non-availability of PAN | Not applicable | 20 | 20 |
TCS Rates Chart
Nature of Transaction | Threshold Limit (₹) | TCS Rate |
Sale of Scrap | No threshold | 1% |
Sale of Timber, Minerals, or Coal | No threshold | 1% |
Sale of Alcoholic Liquor | No threshold | 1% |
Remittance of Foreign Currency | ₹7 lakh per annum | 5% |
Sale of Motor Vehicles (Other than Two-Wheelers) | ₹10 lakh per transaction | 1% |
Conclusion
Understanding and being compliant with the prescribed TDS and TCS rates is critical to avoid unnecessary penalties for maintaining tax compliance. Taxpayers must ensure that they correctly deduct or collect tax at the prescribed rates and present their returns.
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Types of income and age groups of the taxpayer majorly determine the TDS/TCS rates. To know the exact rates applicable to your specified case, reach out to TaxDunia. We provide personalized services with optimized plans. It becomes easier to comply with rules and regulations when you have consistent support from Us.
