Tax Deducted at Source (TDS) is not just another tax term—it’s how the government ensures taxes are collected right when income is generated. If you’re receiving a salary, earning interest on FDs, or paying rent, chances are TDS is involved.
It helps reduce tax evasion and eases the filing process by spreading out tax payments across the year. But understanding the different sections and rates is essential to avoid surprise deductions or compliance issues.
Key TDS Sections You Should Know
Section 192 – TDS on Salary
Employers deduct TDS based on the employee's income tax slab rates after considering declarations.
Section 194C – TDS on Contractor Payments
Applicable when businesses make payments to contractors or sub-contractors.
- 1% TDS for individuals
- 2% TDS for other entitiesDeduction applies if payments exceed the prescribed limits.
Section 194I – TDS on Rent
If rent paid exceeds Rs. 2.4 lakh in a year, TDS applies:
- 10% for land/building
- 2% for plant/machineryThis applies to individuals and HUFs under tax audit as well.
Section 194A – TDS on Interest Income
One of the most common deductions for depositors.
- Rs. 50,000 threshold for regular citizens
- Rs. 1,00,000 for senior citizensTDS is not applicable on savings account interest but applies to FDs and other deposits.
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Section 194J – TDS on Professional Fees
If you’re paying consultants, doctors, architects, or engineers, and the fees cross Rs. 30,000 in a year, a 10% TDS applies.
Section 194H – TDS on Commission and Brokerage
TDS at 5% is deducted if payments exceed Rs. 15,000. Applies to sales commission, referral incentives, and similar payouts.
Section 194 – TDS on Dividends
10% TDS if dividend income from an Indian company (other than income in the nature of sub-clause (e) of clause (22) of section 2) exceeds Rs. 5,000 in a financial year paid to a resident.
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Section 195 – TDS on Payments to Non-Residents
Cross-border transactions attract TDS based on Double Taxation Avoidance Agreements (DTAA) rates. This section covers interest, royalty, and other payments made to non-residents.
Section 194B – TDS on Lottery & Prize Winnings
Won a game show or lottery above Rs. 10,000? 30% TDS is deducted before you even see the prize.
Section 192A – TDS on EPF Withdrawals
10% TDS on premature EPF withdrawals (before 5 years of continuous service) if the amount exceeds Rs. 50,000. If PAN is not provided, the rate can be higher (maximum marginal rate). Submission of Form 15G/15H can avoid TDS if eligible.
Also Read: TDS on EPF Withdrawals
List Recap: Top 10 TDS Sections for Quick Reference
- Section 192 – Salary
- Section 194C – Contractor Payments
- Section 194I – Rent
- Section 194A – Interest
- Section 194J – Professional Fees
- Section 194H – Commission/Brokerage
- Section 194 – Dividend
- Section 195 – Payments to Non-Residents
- Section 194B – Lottery/Prizes
- Section 192A – PF Withdrawals
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Conclusion
Understanding how TDS applies to different income streams helps you stay tax-compliant and avoid unnecessary deductions. Whether it’s salary, rent, interest, or professional fees—being aware of applicable TDS sections empowers you to plan better and file smoother returns. For those seeking tax-efficient investment options, Fixed Deposits stand out as a stable, secure choice—especially when backed by smart planning and timely declarations.
Also Read: What is TDS?
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