Tax Deducted at Source (TDS) plays a pivotal role in India’s taxation system, ensuring timely tax collection and compliance. With each financial year, updates to the TDS rate chart impact individuals, businesses, and organisations. As we step into FY 2025-26 (AY 2026-27), understanding the revised TDS rates is essential to avoid penalties and ensure smooth tax filings. This article provides a detailed overview of the TDS rate chart, key changes introduced in Budget 2025, and compliance guidelines to help taxpayers navigate the upcoming fiscal year seamlessly.
What is TDS?
Tax Deducted at Source (TDS) is a mechanism under the Income Tax Act, 1961, where tax is deducted at the source of income. It ensures that the government collects taxes in advance, reducing the burden on taxpayers during annual filings.
The primary purpose of TDS is to curb tax evasion and maintain a steady flow of revenue for the government. For instance, when an employer pays salaries or a business makes payments for professional services, a portion of the amount is deducted as tax and remitted to the government. This deduction ensures compliance and helps individuals and businesses fulfil their tax obligations.
What is TDS rate chart?
A TDS rate chart is a tabular representation of the applicable tax deduction rates across various income categories, as prescribed by the Income Tax Act, 1961. It serves as a guide for taxpayers, detailing the percentage of tax to be deducted for payments such as salaries, rent, professional fees, and dividends.
The chart is crucial for individuals, partnerships, and companies to ensure accurate deductions and timely compliance. By referring to the TDS rate chart, taxpayers can avoid under-deductions, over-deductions, and penalties associated with incorrect filings.
Budget 2025: Key TDS changes effective from April 1, 2025
The Union Budget 2025 introduced several reforms to streamline tax compliance and address evolving economic needs. Key changes in TDS rates and regulations effective from April 1, 2025, include:
- Revision in TDS slab rates: Certain income categories, such as professional fees and rent, witnessed adjustments to the applicable TDS rates.
- Enhanced exemptions: Higher thresholds for exemptions were introduced to benefit small taxpayers.
- Digital compliance measures: Emphasis on e-filing and digital payments to simplify the TDS deduction and filing process.
These changes aim to make tax compliance more transparent and accessible for taxpayers across various income groups.
Current TDS rate chart for FY 2025-26 (AY 2026-27)
Below is the updated TDS rate chart for FY 2025-26, categorised by payment types:
| Payment Type | Threshold Limit (Rs.) | TDS Rate (%) |
|---|---|---|
| Salaries | As per income slab | As per slab rate |
| Interest (other than securities) | Rs. 40,000 (Rs. 50,000 for senior citizens) | 10% |
| Rent (Residential Property) | Rs. 2,40,000 | 10% |
| Rent (Commercial Property) | Rs. 2,40,000 | 10% |
| Professional Fees | Rs. 30,000 | 10% |
| Commission/Brokerage | Rs. 15,000 | 5% |
| Contract Payments | Rs. 30,000 | 2% |
This chart provides clarity on the rates applicable to various income categories, ensuring taxpayers can deduct TDS accurately.
TDS rate chart - For residents
For resident taxpayers, TDS rates vary based on income type. Below is the TDS rate chart applicable to residents for FY 2025-26:
| Payment Type | Threshold Limit (Rs.) | TDS Rate (%) |
|---|---|---|
| Salaries | As per income slab | As per slab rate |
| Rent | Rs. 2,40,000 | 10% |
| Professional Fees | Rs. 30,000 | 10% |
| Dividend Income | Rs. 5,000 | 10% |
These rates ensure compliance while providing exemptions for smaller income thresholds.
TDS rate chart - For non-residents (other than a company)
Non-residents are subject to distinct TDS rates, often higher than those for residents. Below are the applicable rates for FY 2025-26:
| Payment Type | Threshold Limit (Rs.) | TDS Rate (%) |
|---|---|---|
| Royalty Income | No threshold | 20% |
| Technical Services Fees | No threshold | 20% |
| Dividend Income | No threshold | 20% |
TDS rate chart - For domestic company
Domestic companies must adhere to specific TDS rates for payments made or received. The updated rates for FY 2025-26 include:
| Payment Type | Threshold Limit (Rs.) | TDS Rate (%) |
|---|---|---|
| Interest Payments | Rs. 10,000 | 10% |
| Rent | Rs. 2,40,000 | 10% |
| Professional Fees | Rs. 30,000 | 10% |
TDS rate chart - For foreign companies
Foreign companies operating in India are subject to TDS on specific income types. Below are the rates for FY 2025-26:
| Payment Type | Threshold Limit (Rs.) | TDS Rate (%) |
|---|---|---|
| Royalty Income | No threshold | 20% |
| Technical Services Fees | No threshold | 20% |
| Dividend Income | No threshold | 20% |
TDS payment and returns
Timely payment and filing of TDS returns are critical for compliance. Here is a step-by-step guide for TDS payments and returns:
- Payment of TDS:
- Visit the Income Tax Portal and log in using your credentials.
- Select the TDS payment option and fill in the required details.
- Make the payment online and save the receipt for future reference.
- Filing TDS returns:
- File quarterly TDS returns using relevant forms (e.g., Form 26Q for domestic payments, Form 27Q for non-resident payments).
- Ensure accuracy in deductions to avoid penalties.
- Submit returns before the deadline to prevent late filing charges.
Conclusion
The updated TDS rate chart for FY 2025-26 (AY 2026-27) is a vital resource for taxpayers to ensure compliance and avoid penalties. Staying informed about TDS changes introduced in Budget 2025 and adhering to payment and return guidelines can simplify tax filings significantly.
For seamless compliance, use tools like the TDS Calculator or Income Tax E-filing Portal to compute deductions and file returns accurately. Stay ahead of your tax obligations and avoid penalties by leveraging these resources today.
