Tax Deducted at Source (TDS) is the cornerstone of India’s direct tax compliance system. For accounts teams, chartered accountants, and business owners, deducting the exact statutory percentage on commercial payments is critical to avoid harsh disallowances under Section 40(a)(ia) and mandatory 1%–1.5% per month interest under Section 201(1A).
Recent union budgets and CBDT notifications have adjusted key thresholds and rationalized multiple TDS provisions—including the reduction of rates for e-commerce operators, professional fees, and mutual fund repurchases.
Explore the complete, updated master TDS rate chart for FY 2025-26 and FY 2026-27.
Quick TDS Section Finder
Need to find the exact rate, threshold, or form for an invoice right now? Use our instant TDS Section Finder or TDS Rate Finder to search by payment nature, payee category, or section code.
Complete TDS Rate Chart (FY 2025-26 & FY 2026-27)
| Section | Nature of Payment | Recipient Type | Threshold Limit (₹) | TDS Rate (with PAN) | Non-PAN Rate (Sec 206AA) |
|---|---|---|---|---|---|
| 192 | Salaries | Any resident employee | Basic Exemption Limit | Average slab rate | Maximum Marginal Rate (30%+) |
| 194A | Interest other than on securities (Banks) | Resident | ₹50,000 (₹1,00,000 for Senior Citizens) | 10% | 20% |
| 194C | Payment to Contractor / Subcontractor | Individual / HUF | ₹30,000 (Single) / ₹1,00,000 (Aggregate) | 1% | 20% |
| 194C | Payment to Contractor / Subcontractor | Companies / Firms / Others | ₹30,000 (Single) / ₹1,00,000 (Aggregate) | 2% | 20% |
| 194H | Commission or Brokerage | Any resident | ₹20,000 | 2% (Rationalized from 5%) | 20% |
| 194I(a) | Rent on Plant, Machinery & Equipment | Any resident | ₹50,000 per month or part of a month | 2% | 20% |
| 194I(b) | Rent on Land, Building or Furniture | Any resident | ₹50,000 per month or part of a month | 10% | 20% |
| 194IB | Rent paid by Individuals/HUF (Not in Tax Audit) | Resident landlord | ₹50,000 per month | 2% (Rationalized from 5%) | 20% (Capped at 1 month rent) |
| 194J(a) | Technical Services (FTS) / Call Centers | Any resident | ₹50,000 per year | 2% | 20% |
| 194J(b) | Professional Services & Royalty | Any resident | ₹50,000 per year | 10% | 20% |
| 194J | Director Sitting Fees / Remuneration | Resident Director | NIL (Any amount) | 10% | 20% |
| 194Q | Purchase of Goods (Turnover > ₹10 Cr) | Resident Seller | ₹50,00,000 aggregate in FY | 0.1% | 5% |
| 194M | Contract/Commission/Professional by Individual | Resident payee | ₹50,00,000 aggregate in FY | 2% (Rationalized from 5%) | 20% |
| 194O | Payment by E-Commerce Operator to Sellers | Resident e-commerce seller | ₹5,00,000 (for Individuals/HUF) | 0.1% (Rationalized from 1%) | 5% |
| 194IA | Transfer of Immovable Property (Real Estate) | Resident transferor | ₹50,00,000 consideration/stamp value | 1% | 20% |
The Danger of Non-PAN: Section 206AA & 206AB
Section 206AA: Higher Rates for Missing PAN
If the vendor or payee fails to furnish a valid PAN, the tax deductor is statutorily mandated to deduct TDS at the highest of:
- The rate specified in the relevant provision of the Act.
- The rates in force.
- 20% (or 5% in specific sections like 194Q/194O).
Section 206AB: Higher Rates for “Specified Persons” (Non-Filers)
Section 206AB was omitted from 1 April 2025 by the Finance Act, 2025. Until then, if a vendor had not filed their Income Tax Return for the previous year and their aggregate TDS/TCS exceeded ₹50,000, TDS had to be deducted at twice the normal rate or 5%, whichever was higher. For payments from FY 2025-26, only the no-PAN rule under Section 206AA applies. Always run a check on the Income Tax Portal’s “Compliance Check for Section 206AB & 206CCA” prior to large disbursements.
TDS Deposit Due Dates and Quarterly Return Deadlines
TDS deducted during any calendar month must be deposited to the central government via Challan ITNS 281 by the 7th of the following month (except for March deductions, which can be deposited up to April 30th).
| Quarter | Period Covered | Form 24Q / 26Q / 27Q Filing Deadline |
|---|---|---|
| Q1 | April 1 to June 30 | July 31 |
| Q2 | July 1 to September 30 | October 31 |
| Q3 | October 1 to December 31 | January 31 |
| Q4 | January 1 to March 31 | May 31 |
Late Filing Fee under Section 234E: Delay in filing TDS returns incurs a mandatory late fee of ₹200 per day of default until the return is furnished, capped at the total TDS amount.
Common Practical Dilemmas
1. Section 194C vs 194J: Contractor vs Technical Service
If a vendor provides customized software development, is it contract work (194C @ 2%) or technical services (194J @ 2% or 10%)?
Courts have ruled that where intellectual property, human expertise, and code creation are predominant, it qualifies under Section 194J(1)(b) as Technical or Professional services. However, pure maintenance contracts (AMCs) without engineering redesign often qualify under Section 194C.
2. Section 194Q vs TCS Section 206C(1H)
Both sections dealt with high-value goods transactions exceeding ₹50 Lakhs.
- Current position: TCS on sale of goods under Section 206C(1H) was omitted from 1 April 2025. Only the buyer’s TDS obligation under Section 194Q remains: if the buyer has turnover above ₹10 Crores in the preceding FY, the buyer must deduct TDS under 194Q.
- Earlier Rule of Priority: Before its omission, Section 194Q (buyer’s obligation to deduct TDS) took precedence over Section 206C(1H) (seller’s obligation to collect TCS), so the seller did NOT collect TCS where the buyer deducted under 194Q.
Frequently Asked Questions (FAQs)
Can I claim refund of excess TDS deducted?
Yes. When you file your annual ITR, all TDS credits shown in Form 26AS / AIS (Annual Information Statement) are adjusted against your net income tax liability. Any excess TDS is automatically refunded directly to your pre-validated bank account with 0.5% monthly interest under Section 244A.
Is TDS applicable on GST component of the invoice?
No. Under CBDT Circular No. 23/2017, if the GST component (CGST, SGST, IGST) is indicated separately on the tax invoice, TDS must be deducted only on the basic value of goods/services, excluding the GST amount.
What is the penalty for failing to deduct TDS?
Failure to deduct TDS attracts equal penalty under Section 271C, 1% per month interest under Section 201(1A), and 30% disallowance of the entire expenditure under Section 40(a)(ia) while computing your business profits.