TDS Deduction Rules in India

TDS or Tax Deducted at Source is income tax deducted at the source of income i.e. by the person or organization making the payment. Following are the rules regarding deduction of TDS applicable in India

TDS u/s 192 on salary paid by employer to employee-

For salary under this section the main condition is that there should be employer and employee relation otherwise the liability does not apply. Salary for the purpose for TDS liability includes income chargeable under Head Income from Salary. While calculating salary employer can consider loss from house property but other loss cannot be consider. Any person responsible to deduct TDS on paid by to any person and which is chargeable under head income from salary to the receiving amount. It doesn’t alter if payment made to a non- resident employee or a tax free salary paid to anyone but if employee provides certain proofs of savings made by him.

Rate of TDS to be deducted: Average rate of tax payable for financial year.

TDS u/s 193 on interest on securities-

Exemption from provisions NDDB, NSC, Gold, Bond, Government securities.

Limit

On debentures- Rs 5,000/-

On others- Rs 10,000/-

Rate of TDS to be deducted: 10%

TDS u/s 194C on payment made to contractor for work assigned to him-

It is applicable for payments made by one person to another for contract of some work assigned to him to complete within certain time. It doesn’t make a difference either payment made in cash or by cheque or demand draft or any other mode.

It includes-

1. Advertising.

2. Broadcasting and telecasting including production of programmers for broadcasting or telecasting.

3. Carriage of goods or passengers by any mode transport excluding by railways Catering.

4. Manufacturing or supply a product accordingly to the requirement of particular customer by using material purchased from itself only.

5. Any other type of work which have contractual nature.

Rate of TDS to be deducted:

1% for payment made to individual or HUF

2% for payment made to other than individual or HUF

TDS u/s 194I on rent paid by person to another person-

It is applicable to all other than individuals and HUF paying rent to any one in mode either cash or crossed cheque or demand draft or any other mode for use of land and building and machinery.

When rent is paid to government or specifies entities where aggregate value of rent paid during year does not exceeds Rs. 1,80,000.

Rent includes-

1. Land and building including factory building

2. Plant and machinery

3. Furniture and fixture

4. Motor vehicle

Rate of TDS to be deducted:

2 % for plant and machinery

10 % for others

TDS u/s 194J on payment of fee for professional or technological services

It is applicable to all other individual or HUF paying fee to one in mode either cash or crossed cheque or demand draft or any other mode for the professional or technical service provided for royalty.

Professional service includes-

Service rendered by a person in the course of carrying on

1. Accounting

 2. Financial

 3. Legal

 4. Medical

 5. Engineering

 6. Architectural profession

Technical service includes –

Service rendered by a person in course of

1. Technical

2. Managerial

3. Consultation

Royalty-

Lump sum consideration received for person having

1. Copyright

2. Patent

3. Trademark

Rate of TDS to be deducted:

10%

TDS u/s 195 payment to non-resident

Any person responsible for payment to a non-resident, not being a company or to a foreign company, any interest or ant sum chargeable to tax other than salary. If payment made is the nature of salary, then TDS to be deducted u/s 192 and not under this section.

TDS Certificate

It is difficult to keep a track on deduction by an individual.  So as per section 203 of Income Tax Act, deductor has to furnish a certificate of TDS payment to payee. This is also offered by bank making deduction on pension payments etc.

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