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What Is TDS and Why It Matters
Tax Deducted at Source (TDS) requires the payer of certain specified payments — rent, professional fees, contractor payments, commission, interest, and more — to deduct a prescribed percentage of tax before making the payment, and deposit it with the government on the payee's behalf. This spreads tax collection across the year rather than concentrating it at return-filing time, and gives the tax department visibility into large or recurring payments.
For the payee, TDS deducted is not a separate tax — it is credited against your total tax liability for the year when you file your return. If more TDS was deducted than your actual tax due, you can claim the difference back as a refund.
Landlords & Tenants
Rent above ₹6 lakh/year attracts TDS — both parties should track this threshold carefully.
Freelancers & Consultants
Professional fee payments above ₹50,000/year from audited businesses attract 10% TDS.
Contractors
Works contract payments attract 1% (individual) or 2% (others) TDS above prescribed limits.
Depositors
Bank FD interest above ₹50,000 (₹1 lakh for seniors) attracts 10% TDS automatically.
The Shift to Section 393 — Income Tax Act 2025
Effective 1 April 2026, the Income Tax Act, 2025 replaced the six-decade-old Income Tax Act, 1961. One of the most significant structural changes affects TDS: more than 20 separate sections in the old 194-series (194A, 194C, 194H, 194I, 194J, and others) have been consolidated into a single Section 393 covering all non-salary TDS, with salary TDS now under Section 392.
This calculator uses the familiar old section names (194A, 194C, 194J, etc.) as labels since they remain widely recognised, while reflecting the rates and thresholds applicable for FY 2026-27 under the new law.
TDS Rate Chart — FY 2026-27
| Nature of Payment | Old Section | Rate | Threshold |
|---|---|---|---|
| Interest on bank/company deposits | 194A | 10% | ₹50,000 (₹1,00,000 senior citizens) |
| Dividend | 194 | 10% | ₹10,000 |
| Contractor payment | 194C | 1% (Ind/HUF), 2% (Others) | ₹30,000/payment or ₹1,00,000/year |
| Commission or brokerage | 194H | 5% | ₹15,000 |
| Rent — land, building, furniture | 194I | 10% | ₹6,00,000/year |
| Rent — plant & machinery | 194I | 2% | ₹6,00,000/year |
| Rent by individual/HUF (non-audit) | 194IB | 5% | ₹50,000/month |
| Professional / technical fees | 194J | 10% | ₹50,000/year |
| Insurance commission | 194D | 5% | ₹15,000 |
| Purchase of goods | 194Q | 0.1% | ₹50,00,000/year (buyer turnover >₹10 crore) |
| Sale of immovable property | 194-IA | 1% | ₹50,00,000 |
| Lottery / game show winnings | 194B | 30% | ₹10,000 |
| Online gaming winnings | 194BA | 30% | Nil — every rupee |
| Payment to partners by firm | 194T | 10% | ₹20,000/year |
| Virtual digital assets (crypto/NFT) | 194S | 1% | ₹50,000 (specified) / ₹10,000 (others) |
No-PAN Penalty Rate Explained
Under Section 206AA, if a payee does not provide a valid PAN to the deductor, TDS must be deducted at the higher of the applicable prescribed rate or 20% — whichever results in more tax withheld. This is a substantial penalty: a payment that would normally attract 5% or 10% TDS can jump to 20% simply because PAN was not furnished.
Worked Example — Professional Fee Payment
A business pays a freelance consultant ₹80,000 for a project. Since this exceeds the ₹50,000 annual threshold under Section 393 (formerly 194J), TDS applies at 10%:
| Item | Amount |
|---|---|
| Gross payment | ₹80,000 |
| TDS rate | 10% |
| TDS deducted | ₹8,000 |
| Net amount paid to consultant | ₹72,000 |
The consultant later claims credit for this ₹8,000 TDS when filing their income tax return, against their total tax liability for the year.
5 Common TDS Mistakes
Mistake 1 — Not deducting TDS because a single payment is below threshold
Many thresholds have both a single-payment limit and an aggregate annual limit — crossing either one triggers the TDS obligation.
Mistake 2 — Forgetting to deduct TDS on rent above ₹6 lakh
This threshold was raised in a recent Budget — many landlords and tenants are still working from the older ₹2,40,000 figure.
Mistake 3 — Quoting old section numbers on FY 2026-27 returns
Returns using old section codes for post-April-2026 transactions are rejected at filing and require a correction statement.
Mistake 4 — Not collecting PAN before making payment
Once TDS is deducted at 20% due to missing PAN, the payee can only recover the excess by filing a return — not by a later correction.
Mistake 5 — Treating TDS as a final tax rather than an advance credit
TDS deducted at a flat rate rarely matches your exact final tax liability — filing a return is the only way to settle the difference, in either direction.
Frequently Asked Questions
TDS (Tax Deducted at Source) is a mechanism where the payer deducts a prescribed percentage of tax before making certain payments — such as rent, professional fees, contractor payments, or interest — and deposits it directly with the government on the payee's behalf. It ensures tax is collected as income is earned rather than only at year-end filing, and the deducted amount is later credited against the payee's total tax liability.
From 1 April 2026, the Income Tax Act, 2025 replaced the Income Tax Act, 1961. TDS provisions that were spread across more than 20 separate sections (194A, 194C, 194H, 194I, 194J and others) are now consolidated under a single Section 393 for non-salary payments, with salary TDS under Section 392. This is primarily a structural and referencing change — the underlying rates and thresholds are largely unchanged, but returns filed using old section numbers for FY 2026-27 transactions are rejected, so deductors must reference the new Section 393 table entries.
Under Section 206AA, if the payee does not furnish a valid PAN, TDS must be deducted at the higher of the applicable prescribed rate or 20%. This is a significant penalty for not providing PAN — for a payment that would normally attract 5% or 10% TDS, the absence of PAN can double or quadruple the deduction. Always provide your PAN to the deductor to avoid this higher rate.
TDS is not final tax — it is an advance collection against your total tax liability for the year. When you file your income tax return, the TDS deducted is credited against your total tax due. If your actual tax liability is lower than the TDS deducted, you can claim a refund of the excess TDS after filing your return.
For rent on land, building or furniture under Section 393(1) (formerly Section 194I), TDS applies once annual rent payments to a single landlord exceed ₹6,00,000 in a financial year — this threshold was raised from ₹2,40,000 in a recent Budget. The rate is 10% for land, building and furniture, and 2% for plant and machinery rent.
If you are a business or professional required to maintain tax audit records making payments to a freelancer, consultant, or professional exceeding ₹50,000 in a financial year, you are generally required to deduct 10% TDS under Section 393(1) (formerly Section 194J) before making the payment. Individuals not subject to audit requirements are typically not required to deduct TDS on personal payments for professional services.
Banks deduct 10% TDS on interest income once it crosses ₹50,000 in a financial year for individuals below 60, or ₹1,00,000 for senior citizens aged 60 and above. If your total income is below the taxable limit, you can submit Form 15G (or Form 15H for senior citizens) to the bank to avoid TDS deduction altogether, provided you meet the eligibility conditions.
For most payments to resident individuals and domestic companies, TDS is deducted at the flat prescribed rate without any additional surcharge or cess. Surcharge and cess considerations mainly arise for payments to non-residents and certain high-value transactions — this calculator covers standard resident-payee TDS rates and does not compute non-resident surcharge, so consult a chartered accountant for cross-border payments.