What is TDS and how is it calculated?
TDS (Tax Deducted at Source) means deducting a part of the tax at the time of making a payment and depositing it with the government. The payer (deductor) deducts the TDS, and the payee (deductee) claims credit for it in their income tax return.
FormulaTDS = Payment × TDS rate ÷ 100 · Net payment = Payment − TDS
TDS does not apply to every payment. Each type of payment has a threshold, and TDS is deducted only when the payment, or the total for the year, crosses it.
TDS rate chart for FY 2026-27
The Income-tax Act, 2025 applies from 1 April 2026. TDS on salary now falls under Section 392 and TDS on all other payments under Section 393. Most rates remain the same.
| Old section | Payment | Threshold | Rate |
|---|---|---|---|
| 194C | Contractor or sub-contractor | ₹30,000 single / ₹1,00,000 a year | 1% individual/HUF, 2% others |
| 194J | Professional fees | ₹50,000 a year | 10% |
| 194J | Technical services, call centre | ₹50,000 a year | 2% |
| 194-I | Rent of land, building or furniture | ₹50,000 a month | 10% |
| 194-I | Rent of plant and machinery | ₹50,000 a month | 2% |
| 194-IB | Rent paid by individual/HUF (no audit) | ₹50,000 a month | 2% |
| 194H | Commission or brokerage | ₹20,000 a year | 2% |
| 194A | Bank interest | ₹50,000 (₹1,00,000 for seniors) | 10% |
| 194A | Other interest | ₹10,000 a year | 10% |
| 194 | Dividend | ₹10,000 a year | 10% |
| 194-IA | Purchase of immovable property | ₹50 lakh or more | 1% |
| 194Q | Purchase of goods | Above ₹50 lakh a year | 0.1% |
| 194B | Lottery and game winnings | ₹10,000 per winning | 30% |
If the payee has no PAN: TDS is deducted at 20% or the normal rate, whichever is higher. For 194Q and 194-O, the no-PAN rate is 5%.
TDS deposit and return due dates
- TDS deducted in a month must be deposited by the 7th of the next month (TDS for March by 30 April).
- TDS returns are filed quarterly: 31 July, 31 October, 31 January and 31 May.
- Late deposit attracts interest, and a late return attracts a fee of ₹200 per day.
Frequently asked questions
How do you calculate TDS?
TDS = Payment × rate ÷ 100. For example, 10% TDS on professional fees of ₹1,00,000 is ₹10,000, so the payee receives ₹90,000.
When does TDS apply on contractor payments?
Under 194C, TDS applies when a single payment exceeds ₹30,000 or the total for the year exceeds ₹1,00,000. The rate is 1% for individuals and HUFs and 2% for others.
What is the TDS threshold for professional fees?
TDS applies when professional or technical fees exceed ₹50,000 in a year — 10% for professional fees and 2% for technical services.
When should TDS be deducted on rent?
When the monthly rent is more than ₹50,000: 10% for land and buildings, and 2% for plant and machinery. Individuals who are not subject to tax audit deduct 2% under 194-IB.
When does TDS apply on bank interest?
When interest exceeds ₹50,000 in a year (₹1,00,000 for senior citizens), at 10%. Eligible depositors can submit Form 15G or 15H to avoid TDS.
What is the TDS rate if the payee has no PAN?
20% or the normal rate, whichever is higher. For 194Q and 194-O, the rate is 5%.
Which section covers TDS under the Income-tax Act, 2025?
TDS on salary is under Section 392, and TDS on all other payments is under Section 393. Returns now use payment codes instead of the old section numbers.
What happens if TDS is deposited late?
Interest of 1% per month applies if TDS is not deducted, and 1.5% per month if it is deducted but deposited late. A late TDS return attracts a fee of ₹200 per day.