TDS rate chart for Financial Year 2024-25
Taxes – especially TDS (Tax Deducted at Source)-can sometimes feel like a maze. Whether you’re a salaried employee, a freelancer, an investor, or a business owner, understanding how TDS works is crucial for managing your finances efficiently. Don’t worry, we’ve got you covered! In this guide, we’ll break down the various TDS rates applicable for different sources of income and help you navigate the process with ease.
What is TDS (Tax Deducted at Source)?
TDS is a system introduced by the government to collect taxes at the point of income generation. In simple terms, when you earn money, a certain percentage of it is deducted at the source by the person or entity making the payment, and this deducted tax is sent directly to the government on your behalf. This way, the government collects tax gradually throughout the year, rather than waiting for everyone to pay in a lump sum at the end of the year.
What are the TDS rates?
The TDS rates vary depending on the type of income and the recipient. Below are some of the most common sources of income where TDS is applicable, along with their respective rates.
- Salaries
For salaried individuals, TDS is calculated based on the income tax slab applicable to the individual’s total income. The employer will deduct TDS based on your salary, applicable exemptions, and deductions. The rate can range from 5% to 30%, depending on your income bracket.
- Interest on Bank Deposits
Banks deduct TDS on interest income if it exceeds ₹40,000 annually (₹50,000 for senior citizens). The rate is usually 10%, but if you haven’t provided your PAN number to the bank, the rate will be 20%.
- Rental Income
If you are earning rental income, TDS is deducted by the person paying you the rent if the total annual rent exceeds ₹2.4 lakh. The rates are as follows:
- Residential property: 10%
- Commercial property: 20%
If the tenant doesn’t deduct the tax, you as the landlord will need to pay it directly.
- Professional Fees
Freelancers and professionals who earn fees for services (like consulting, legal, medical, or technical services) are subject to TDS. The rate is 10% if the payment exceeds ₹30,000 in a financial year.
- Commission and Brokerage
Individuals earning commission or brokerage for services such as insurance or marketing, must have TDS deducted at 5% if the total commission exceeds ₹15,000 in a year.
- Dividends
If you receive dividends from shares or mutual funds, TDS is deducted at 10% if the total dividend exceeds ₹5,000 in a year. However, if the dividend income is below ₹5,000, no TDS will be deducted.
- Sale of Property
When you sell a property worth more than ₹50 lakh, the buyer is required to deduct 1% TDS on the sale amount and remit it to the government.
- Contractor Payments
For contractors, TDS is deducted at:
- 1% for individual or HUF (Hindu Undivided Family) contractors
- 2% for others (like companies or firms) This applies to payments made for contracts exceeding ₹30,000.
- Interest on Securities
Interest on securities, such as government bonds, debentures, and bonds, is subject to 10% TDS.
- Winnings from Lottery and Game Shows
Winnings from lottery, game shows, or betting are subject to a TDS rate of 30%. This is deducted at the source and applies to amounts exceeding ₹10,000.
- Income from Insurance Policies
If you receive a maturity benefit from an insurance policy (other than the sum assured), TDS is deducted at 5% for life insurance policies, provided the total amount exceeds ₹1,00,000.
- TDS on Payments to Non-Residents
TDS on payments to non-residents (foreigners) varies depending on the type of income:
- Interest income: 20%
- Royalty or technical services: 10%
- Dividend income: 20%
The TDS rate may also be lower if there is a tax treaty between India and the non-resident’s country.
- TDS on Rent for Property
For rent payments exceeding ₹2.4 lakh per year, TDS is deducted at:
- 10% for residential property
- 20% for commercial property
- Payments to Foreign Companies
Payments to foreign companies for services like technical fees, royalties, etc., are subject to TDS at the rate of 10% (unless reduced by a tax treaty).
- Payments for Commission on Sale of Lottery Tickets
If commission is paid for the sale of lottery tickets or betting, the rate of TDS is 5%.
Why is TDS important?
TDS ensures that the government gets a steady flow of tax revenues throughout the year. For individuals, TDS also acts as a safeguard against tax evasion and reduces the burden of paying large lump sums at the end of the year. It also ensures that your tax payments are distributed evenly across the year, which makes financial planning easier.
TDS payments are deducted by the payer and then deposited with the government. As the recipient, you get credit for the TDS deducted when you file your income tax returns. If the amount of TDS deducted is more than your actual tax liability, you can claim a refund.
How does TDS affect you?
When TDS is deducted, it is reflected in your Form 26AS, which you can access online. This form serves as a record of all the TDS deducted on your behalf during the financial year. When you file your tax returns, you can cross-check this amount against your total tax liability, ensuring that everything is in order.
If the TDS deducted is less than your actual tax liability, you’ll need to pay the remaining amount while filing your tax return. If it’s more than your liability, you can claim a refund.
The Importance of PAN for TDS
Your PAN (Permanent Account Number) is critical when it comes to TDS. If you fail to provide your PAN or provide an incorrect one, the TDS rate may increase. For instance, banks and financial institutions will deduct TDS at 20% if you don’t provide your PAN details.
By knowing the TDS rates that apply to different types of income, you can better manage your finances, avoid surprises at the time of tax filing, and ensure that you stay compliant with tax laws. Whether you’re earning a salary, interest, rent, or professional fees, being aware of the applicable TDS rates is key to effective tax planning.
Make sure you keep track of the TDS that has been deducted, verify the deductions on your Form 26AS, and file your income tax returns on time to avoid penalties and claim any refunds due to you.