Check out the Tax Deduction at Source (TDS) meaning, objectives, TDS rates, and TDS sections. You can also download the TDS Rate Chart Applicable for FY 2021-22 or AY 2022-23. So that you can check various Tax Deduction at Source (TDS) rates for various persons and professionals.
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Tax Deduction at Source (TDS) Meaning
Income Tax Act provides for the scope of the total income of a person chargeable to tax on an annual basis. The tax liability is determined as per the provisions of the Income-tax Act and such tax liability is discharged vide any of the following modes:
- Tax Deducted at Source (TDS)
- Tax Collected at Source (TCS)
- Advance Tax
- Self Assessment Tax (SAT)
- Tax on Regular Assessment
Tax Deducted at Source (TDS) is one of the modes or mechanisms of collecting income tax under the Indian Income Tax Act of 1961 i.e. ‘the Act’.
As per the provision of section 191 of the Act, notwithstanding the regular assessment in respect of any income take place in a subsequent year called as assessment year, but in case of certain specified income, tax is deducted at source by the payer at the prescribed rate at the time of accrual or payment of such incomes to the payee.
The tax so deducted is required to be deposited with the government within the specified time limit.
The concept of TDS was introduced with an aim to collect tax from the very source of income as per which, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.
The deductee from whose income, tax has been deducted at source would be entitled to get a credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
Tax deducted at source (TDS) is an indirect mechanism of collecting tax that combines twin concepts of “pay as you earn” and “collect as it is being earned.” Its value lies in the fact that it provides the Government with a continuous flow of funds and at the same time eases the burden on the taxpayer.
It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by the Indian Revenue Service (IRS).
Objectives of TDS
There is the various objective of introducing the Tax Deduction at Source (TDS) provision under the Act. One is also to make sure that tax payment is not avoided by unscrupulous income tax assesses and the government receives its actual share of taxes.
Therefore, to achieve this goal, the responsibility of deduction and deposition of part of the taxes was put on the payer rather than the receiver of payments of different nature.
The basic objective of introducing Tax Deduction at Source provision under the Act are as follows :
- The quicker realization of tax.
- Effective realization of tax.
- The government requires funds throughout the year. The provision of Tax Deduction at Source (TDS) helps the government to get funds throughout the year and run the government smoothly.
- To enable the salaried people to pay the tax as they earn every month. This helps the salaried persons in paying the tax in easy installments and avoids the burden of a lump sum payment.
- To check that tax payment is not avoided by unscrupulous income tax assesses.
Scheme of Tax Deduction at Source
The obligation to deduct/collect tax at source is upon the person responsible for paying the income/amount which is subject to TDS. Therefore such person i.e. the payer is required to follow the procedure for deducting/collecting tax at source mentioned as under :
- Step – 1: The payer has to apply for a tax deduction account number (TAN) in Form No-49B.
- Step – 2: He is to deduct tax from the income/payment mentioned in the various sections i.e. Section 192 to 196D.
- Step – 3: The amount so deducted/collected should be deposited within the requisite stipulated time to the credit of the central government.
- Step – 4: The payer should prepare TDS Return statements for every quarter and file the same with the authority designated by the Income-Tax department (NSDL in this case) in such form and verified in such manner as may be prescribed.
- Step – 5: Lastly, the payee should be issued a certificate of tax deduction/collected at source within the specified date. The TDS certificate to be downloaded from the income tax portal.
RATES OF TDS APPLICABLE FOR FY 2021-22 OR AY 2022-23
The following chart is the Income Tax TDS Rate Chart for the Financial Year (FY) 2021-22 / Assessment Year (AY) 2022-23.
Rates for tax deduction at source – [For Assessment year 2022-23]
|Section||Nature of Payment||Threshold Limit for deduction tax||Rate of TDS applicable for the period or Basic Cut off (Individual / Company and others New Rate %)|
|Indiv-idual||Com-pany||Other||If No Pan or Inv-alid PAN (Rate)|
|192||Salary||As per Slab [Please note that no Change in Slab Rates have been introduced for FY 2021-22]||Slab Rates||Slab Rates||–||30|
|192A||Premature withdrawal from Employee Provident Fund (Payment of accumulated balance of provident fund which is taxable in the hands of an employee)||Rs. 50000.00||10||NA||NA||20|
|193||Interest on securities||Rs. 2500.00||10||10||–||20|
|194||Dividend other than the dividend as referred to in Section 115-O||Rs. 5000.00||10||10||–||20|
|194A||Interest other than interest on securities – Banks Time deposits, Recurring deposit and Deposit in Co-op Banks||· Senior Citizen Rs. 50000.00
· Others Rs. 40000.00
|194B||Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort||Rs. 10000.00||30||30||30|
|194BB||Income by way of winnings from horse races||Rs. 10000.00||30||30||30|
|194 C||Payment to Contractors||· Single payment : Rs. 30,000
· Aggregate payment: Rs. 100000
|194C||Contract – Transporter not covered under 44AE||· Single payment : Rs. 30,000
· Aggregate payment: Rs. 75000
|194 – D||Insurance commission||Rs. 15000.00||5||10||–||20|
|194 -DA||Payment in respect of life insurance policy, the tax shall be deducted on the amount of income comprised in insurance pay -out||Rs. 100000||5||5||–||20|
|194 – E||Payment to non -resident sportsmen/ sports association||20||20||–||20|
|194 -EE||Payment in respect of deposit under National Savings scheme||Rs. 2500.00||10||10||–||20|
|194 -EE||Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India||20||20||–||20|
|194 – G||Commission on sale of lottery tickets||Rs. 15000.00||5||5||–||20|
|194 – H||Commission or brokerage||Rs. 15000.00||5||5||–||20|
|194 – I||RENT|
|194 -I(a) Plant & Machinery||Rs. 240000.00||2||2||–||20|
|194 -I(b) Land or building or furniture or fitting||Rs. 240000.00||10||10||–||20|
|194 -IA||Transfer of certain immovable property other than agriculture land||Rs. 50,00,000.00||1||1||–||20|
|194 -IB||Payment of Rent by Individuals or HUF not liable for Tax Audit||Rs. 50,000 per month||5||–||–||20|
|194 -IC||Payment of monetary consideration under Joint Development Agreements||–||10||10||–||20|
|194 -J||Fees for professional or technical services:||Fees for professional or technical services. If recipient is engaged in business of operation of call Centre If sum is payable towards fees for technical services (other than professional services)||Rs. 30000||2||2||–||20|
|In all other cases||Rs. 30000||10||10||–||20|
|194 – K||Payment of any income in respect of Units of Mutual fund as per section 10(23D) or Units of administrator or from a specified company||–||10||10||–||20|
|194 -LA||TDS on compensation for compulsory acquisition of immovable Property||Rs. 2,50,000.00||10||10||–||20|
|194 – LBA(1)||Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders||–||10||10||–||20|
|194 – LBA(2)||Distribution of, any interest received or receivable from SPV by Business trust||–|
|194 – LBA(3)||Distribution of, any income received from renting or leasing or letting out any real estate asset owned directly by Business trust||–|
|194 -LB||Payment of interest on infrastructure debt fund to Non Resident||–||5||5||–||20|
|194 -LBB||Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)]||10||10||–||30|
|194 -LBC||Income in respect of investment made in a securitization trust (specified in Explanation of section 115TCA)||25||10||–||30|
|194 – M||Payment of commission, brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J.||Rs. 50,00,000.00||5||5||–||20|
|194 – N||Cash withdrawal||20|
|194 – O||Applicable for E -Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform.||Rs.5,00,000.00||1||1||–||20|
|194 – Q||Purchase of goods (applicable w.e.f 01.07.2021)||Rs 50,00,000.00||0.10||0.10||–||–|
|195||Payment of any other sum to a Non -resident|
|194 – P||TDS on Senior Citizen above 75 Years|
|206 -AB||TDS on non -filers of ITR|
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