TIFA EDUCATION PVT LTD.

What is TDS?

In the context of income tax, TDS stands for "Tax

Deducted at Source." It is a mechanism used by
the Indian income tax system to collect taxes
directly at the source of income. TDS is applicable
to various types of payments such as salaries,
interest, commissions, brokerages, professional
fees, and so on.

The process involves the payer deducting tax at the

prescribed rates before making the payment to the
recipient. The rates of TDS are determined by the Income
Tax Act and are subject to change based on the budget
announcements and amendments to the Act.

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 The deducted tax is then deposited with the government
by the payer on behalf of the payee. The payer is
required to issue a TDS certificate (Form 16 for salaries
and Form 16A for other payments) to the payee, which
serves as proof of the tax deducted. This certificate is
important for the payee when filing their income tax
returns, as it allows them to claim credit for the tax
already deducted.

In the context of income tax, the terms "deductor" and

"deductee" are used in relation to the process of Tax Deducted
at Source (TDS).

Deductor: The deductor is the person or entity responsible for

deducting tax at the source. This is typically the payer who
makes certain specified payments to another person (the
deductee). The deductor must ensure that tax is deducted at
the prescribed rates before making the payment. The deductor
is also responsible for depositing the deducted tax with the
government and for issuing a

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 TDS certificate to the deductee. Examples of deductors
include employers who deduct TDS on salaries, companies
that make payments to contractors or freelancers, and
financial institutions that pay interest.

Deductee: The deductee is the person or entity who

receives the payment from which tax has been deducted
at source. The deductee is the recipient of the income on
which tax has been deducted by the deductor. The
deductee can claim credit for the tax deducted while
filing their income tax returns. This ensures that the
deductee does not end up paying tax twice on the same
income – once at the source and again while filing returns.
The deductee receives a TDS certificate from the
deductor, which serves as proof of the tax deducted and
is used to claim this credit.

The TDS system is designed to facilitate the government in

collecting taxes and to ensure that tax liability is accounted
for at the time income is generated or paid, rather than at a
later date when the deductee files their income tax return.

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 The TDS system is designed to facilitate the government
in collecting taxes and to ensure that tax liability is
accounted for at the time income is generated or paid,
rather than at a later date when the deductee files their
income tax return.

The primary purpose of TAN is to track all transactions

made by the deductor or collector, ensuring that the tax
is correctly deducted or collected and deposited with the
government. It is used for filing TDS/TCS returns and
issuing TDS certificates to the deductees or collectees.

The format of a TAN number is usually in the form 'TAN-AAAAA9999', where:

·'TAN' is the prefix.

·'AAAAA' represents five alphabets chosen from a sequence.

'9999' is a unique four-digit number

Entities such as employers, banks, financial institutions, companies, and other

organizations that are responsible for making specified payments to individuals or
other entities must obtain a TAN number. Failure to obtain a TAN or comply with
TDS/TCS regulations can result in penalties and other legal consequences.

TDS Rate Charts for the FY 2023-24 and FY 2024-25

 Deductee* Nature of Threshold Limit
Section TDS Rate
transaction (Rs)

Basic exemption
192 R, NR Payment of salary Normal Slab Rates
limit of employee

10%

Budget 2023: TDS

rate for EPF
Premature
withdrawals without
192A R, NR withdrawal from 50,000
a PAN number is
EPF
now 20%,
from the previous
maximum marginal
rate

Debentures- 10%
5,000 Budget
2023: Exemption of
8% Savings TDS on interest
(Taxable) Bonds from listed
Interest on 2003 or 7.75% debentures has
193 R
securities Savings (Taxable) been removed.
Bonds 2018- Therefore, tax has to
10,000 be deducted on
interest on such
Other securities- specified
No limit securities.

Payment of any
194 R 5,000 10%
dividend

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 Aggregate income from
lottery winnings, card
games,
Income from lottery winnings, card
crossword puzzles etc-
194B R, NR, FC games, crossword 30%
10,000
puzzles, and other games of any type

Online Gamine- Refer

194BA

194BA R, NR, FC Income from online games Nil 30%

10,000
Aggregate winnings during a
194BB R, NR, FC Income from horse race winnings 30%
financial year not single
transaction

a) Individuals/HUF 1%

b) Other than Individuals/HUF 2%

194D R Insurance commission to:

a) Domestic Companies 15,000 10%

b) Other than companies 15,000 5%

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 Income from the insurance pay-out, while
194DA R payment of any 1,00,000 5%
sum in respect of a life insurance policy.

Payment of amount standing to the credit of

194EE R, NR a person under 2,500 194C
National Savings Scheme (NSS)

Payments, commission, etc., on the sale of

194G R, NR, FC 15,000 5%
lottery tickets

194H R Commission or brokerage 15,000 5%

194-I R Rent:

194-I(a) Rent on
2,40,000 2%
plant and machinery

194-I(b) Rent on
2,40,000 10%
land/building/furniture/fitting

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 Payment in consideration of
transfer of certain immovable
194-IA R 50,00,000 1%
property other than agricultural
land.

Rent payment by an individual or

194-IB R HUF not covered u/s. 50,000 per month 5%
194-I

Payment under Joint

Development Agreements (JDA)
194-IC R No limit 10
to
Individual/HUF

Any sum paid by way of fee for

194J R 30,000 10%
professional services

Any sum paid by way of

remuneration/fee/commission to
194J R 30,000 10%
a
director

Certain payments by
Individual/HUF not liable to
194M R deduct 50,00,000 5%
TDS under Section 194C, 194H,
and 194J

2%

Cash withdrawal in case person

- 20 lakh to 1 crore
not filing ITR for last
194N R, NR 5%
three years and the original ITR
-1 crore *If cash is withdrawn by a co-
filing due date expired
operative society the limit shall
be Rs 3 Crore
instead of Rs 1 Crore

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 Payment for the
sale of goods or
provision of
services by
the e-
1%
commerce
194O R 5,00,000 5% in case PAN is not
operator
furnished
through its
digital or
electronic
facility or
platform.

Payment of
Basic
pension or
exemption limit
interest to
194P R of senior citizens Normal tax slab rates
specified senior
or super senior
citizens of age
citizens
75 years or more

Payments for
194Q R the purchase of 50,00,000 0.10%
goods

Payment to
non-filers, i.e.
those who have
not filed their
income tax
return in the last
- 2 times the rate
year
given in the Income Tax
Act or Finance
206AB R Budget 2023: No limit
Act or
Non-filers do
- 5%, whichever is
not include:
higher
- People who
are not required
to file their ITRs
- NRs who do
not have a PE in
India

TDS rate in case

Rates specified above
of Non
206AA R, NR, FC No limit or 20%, whichever is
availability of
higher
PAN

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