TDS (Tax Deduction at Source) is a significant compliance requirement for Income Tax Assessees. The numerous TDS rates, nature of payment, and TDS threshold limits are specified in various parts of the Income Tax Law, which have been summarized in this article. If the payment exceeds the threshold limit provided in a given section, then every Deductor is required to deduct TDS at the appropriate rate. Various modifications in respect of TDS/TCS are introduced every year when the FM presents the Budget under Direct Tax Proposals. Further details related to TDS Rate Chart are given below in the article.
Major changes were made in Budget 2021 as well, including the introduction of a new section of TDS and TCS for non-filers of Income Tax Returns (ITR) and TDS on the purchase of goods, which would take effect on July 1, 2021. Read the table below to know about various TDS Rate Chart for FY 2021-2022 (AY 2022-2023), i.e. for the period from 01.04.2021 to 31.03.2022, have been shown in Tabular Form in this article, coupled with an explanation of Budget 2021 TDS Changes.
Sunset Period for Lower TDS Rates Because of COVID-19
Following the emergence of the COVID-19 pandemic, the government enacted the “Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020,” which stipulates lower TDS rates.If the provisions of sections 193, 194, 194A, 194C, 194D 194DA, 194EE, 194F, 194G, 194H, 194-I, 194-IA, 194-IB, 194-IC, 194J, 194K, 194LA, sub-section (1) of section 194LBA, clause (i) of section 194LBB, sub-section (1) of section 194LBC, sections 194M and 194-O require the deduction of tax at source during the period from the 14th of May, 2020, to the 31st of March, 2021, the deduction of tax shall be made at the rate of three-fourths of the rate specified in these sections, notwithstanding anything contained in these sections.
Highlights of TDS Rate Changes FY 2021 – 22 AY 2022 – 23
TDS Rate Chart FY 2021 – 22 AY 2022 – 23 including Budget 2021 Amendments
|Section||Nature of Payment||Threshold||TDS Rate||Remarks|
|192||Salary||Taxable Income liable to Tax||Normal Slab Rate (or) New Tax Regime Slab Rate as opted by the employee||Refer Note 3 & 4 for Old & New Regime Slab Rates OPTION TO CHOOSE BETWEEN NEW AND OLD TAX SLAB REGIME FOR SALARIED EMPLOYEES|
|192A||In the hands of an employee, payment of the accumulated amount of a provident fund is taxable.||50,000||10%||–|
|194||Dividend||5,000||10%||This amendment proposes to add a second proviso to section 194 of the Act, stating that the TDS on dividend provisions of section 194 do not apply to dividend income credited or paid to a business trust by a special purpose entity, or dividend payments to any other person as may be notified.|
|194A||Interest on Bank Deposit/Post Office Deposit/Banking Co-Society Deposit (Interest other than “Interest on securities” )||As a result, no TDS must be deducted from AIF Category III.|
|a) Senior Citizen||50,000||10%||–|
|194A||Interest other than “Interest on securities” (Other than Bank Deposit/Post Office Deposit/Banking Co-Society Deposit)||5,000||10%||–|
|194B||Winnings from crossword puzzles, lotteries, card games and other types of games.||10,000||30%||–|
|194BB||Winnings from horse races||10,000||30%||–|
|194C||Payment to sub-contractor/contractor:||Single Transaction: 30,000 Aggregate of Transactions: 1,00,000||–|
|a) HUF/ Individuals||1%||–|
|194DA||Payment made in respect of a life insurance policy, the tax is deducted from the amount of income that is included in the insurance payout.||1,00,000||5%||–|
|194E||Payment to non-resident sports association/sportsmen||–||20%||The rate of TDS shall be increased by applicable surcharge and Health & Education cess.|
|194EE||Under the National Savings Scheme, Payment in respect of deposit||2,500||10%||–|
|194F||Payment on account of repurchase of unit by Unit Trust of India or Mutual Fund||–||20%||–|
|194G||Commission on sale of lottery tickets||15,000||5%||–|
|194H||Commission or brokerage||15,000||5%||–|
|194-I(a) Plant & Machinery||2,40,000||2%||–|
|194-I(b) Land or building or furniture or fitting||2,40,000||10%||–|
|194-IA||Payment on transfer of certain immovable property other than agricultural land||50 Lakh||1%||–|
|194-IB||Payment of rent by individual or HUF not liable to tax audit||50,000 per month||5%||–|
|194-IC||Payment of monetary consideration under Joint Development Agreements||–||10%||–|
|194J||Fees for technical services or professional:|
|i) sum paid or payable towards fees for technical services||30,000||2%||–|
|ii) sum paid or payable towards royalty in the nature of consideration for distribution, sale, or exhibition of cinematographic films;||30,000||2%||–|
|iii) Any other sum||30,000||10%||–|
|194K||Income in respect of units payable to a resident person||–||10%||–|
|194LA||Payment of compensation on acquisition of certain immovable property||2,50,000||10%||–|
|194LB||Payment of interest on infrastructure debt fund to Non Resident||–||5%||The rate of TDS shall be increased by applicable surcharge and Health & Education cess.|
|194LBA(1)||While distributing any interest received or receivable from an SPV or any income received from renting, leasing, or letting out any real estate asset owned directly by it to its unitholders, the business trust shall deduct tax.||–||10%||–|
|194LBB||Investment fund paying an income to a unitholder [other than income which is exempt under Section 10(23FBB)]||–||10%||–|
|194LBC||Income in respect of investment made in a securitization trust (specified in Explanation of section115TCA)|
|194M||Payment of commission (not being insurance commission), contractual fee, brokerage, the 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.||50 Lakh||5%||–|
|194N||Cash withdrawal during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in the business of banking or a post office:|
|i) in excess of Rs. 1 crore||1 Crore||2%||–|
|ii) in excess of Rs. 20 lakhs (for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired.) The deduction of tax under this situation shall be at the rate of:|
|a) On amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year;||20 Lakh||2%||–|
|b) On amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year;||1 Crore||5%||–|
|194-O||Payment or credit of amount by the e-commerce operator to e-commerce participant||5 Lakh||1%||–|
|194Q||Purchase of goods (applicable w.e.f 01.07.2021)||50 Lakh||0.10%||Budget 2021 Update A new section 194Q is proposed to be included to allow a person responsible for paying any payment to a resident for the purchase of goods to deduct TDS at the rate of 0.1 percent.|
|195||Payment of any other sum to a Non-resident||The rate of TDS shall be increased by applicable surcharge and Health & Education cess.|
|a) Income in respect of investment made by a Non-resident Indian Citizen||–||20%||–|
|b) Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen||–||10%||–|
|c) Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-Section (1) of Section 112||–||10%||–|
|d) Income by way of long-term capital gains as referred to in Section 112A||–||10%||–|
|e) Income by way of short-term capital gains referred to in Section 111A||–||15%||–|
|f) Any other income by way of long-term capital gains [not being long-term capital gains referred to in clauses 10(33), 10(36) and 112A||–||20%||–|
|g) Income by way of interest payable by Government or an Indian concern on money borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC)||–||20%||–|
|h) Any other Income||–||30%||–|
|206AB||TDS on non-filers of ITR at higher rates (applicable w.e.f 01.07.2021)||Refer Note 2||Refer Note 2||Budget 2021 Update Refer Note 1|
|194P||TDS on Senior Citizen above 75 Years||Refer Note 3||Refer Note 3||Budget 2021 Update Refer Note 2|
Detailed Explanations of Budget 2021 Changes in respect of TDS
(Section 194Q – New TDS on purchase of goods [applicable w.e.f. 07.01.2021])
- TDS Rate
A new section 194Q is proposed to be included to allow a person responsible for paying any payment to a resident for the purchase of goods to deduct TDS at a rate of 0.10 percent.
It is proposed that TDS under this section be deducted only by those persons (i.e. buyers) whose total sales, gross receipts, or turnover from their business exceed Rs. 10 crores in the financial year immediately preceding the financial year in which the items are purchased.
If such a person purchases items from a seller for a value or aggregate worth surpassing Rs. 50 lakhs in the preceding year, he is required to deduct tax
- TDS Non-Applicability
It is recommended that the provisions of this section do not apply to: I transactions for which tax is deductible under any provision of the Act; and (ii) transactions for which tax is recoverable under the provisions of section 206C (other than transactions for which section 206C (1H) applies).
- Exemption from TCS (if TDS Paid)
This means that if a TDS or TCS is required under any other provision on a transaction, it will not be subjected to TDS under this section; nevertheless, if TCS requires under section 206C (1H) as well as TDS under this section, only TDS under this section will be carried out on that transaction.
- Exception from TDS applicability
It is proposed that the Central Government be given the authority to exclude a person from this section’s obligations upon the fulfillment of requirements listed in the notification. The Board, with the permission of the Central Government, has been given the authority to publish guidelines in order to make it easier to carry out the provisions of this section.
- Higher Rate of TDS due to non-availability of PAN
In section 206AA(1) of the Act, a consequential change is proposed to insert a second proviso to state that where the tax is needed to be deducted under section 194Q but no PAN is provided, the TDS shall be at the rate of 5%.
Note 1: Insertion of new section 206AB and 206CCA - TDS / TCS on non-filers of ITR at higher rates [applicable w.e.f. 07.01.2021]
It is proposed to add a new section 206AB to the Act, which would provide for a higher TDS rate for non-filers of income tax returns. Similarly, section 206CCA is proposed to be added to the Act as a special provision to provide for a higher TCS rate for non-filers of income tax returns. The proposed section 206AB of the Act would apply to any sum, income, or the amount paid, payable, or credited to a specified person by a person (herein referred to as deductee).
This section does not apply where the tax must be deducted under the Act’s sections 192, 192A, 194B, 194BB, 194LBC, or 194N.
3. TDS Rate
The TDS rate mention in this section is higher than the following rates:
- double the rate established in the applicable Act provision;
- or twice the rate or rates now in effect;
- or the rate of 5%
4. TDS rate in case of Non-Availability of PAN
If, in addition to the provisions of this section, the provisions of section 206AA of the Act apply to a specific person, the tax shall be deducted at the higher of the two rates provided in this section and section 206AA of the Act.
Section 206AA (1) Notwithstanding any other provision of this Act, any person entitled to receive any sum, income, or amount on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) must provide his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely: –
- at the rate specified in the relevant provision of this Act; or
- at the rate of twenty per cent:
- at the rate or rates in force; or
[Provided, however, that if the tax is required to be deducted under section 194-O, the provisions of clause (iii) apply as if the words “twenty percent” had been substituted for the words “five percent.”]
5. TCS Rate
The proposed section 206CCA of the Act would apply to any sum or amount received from a specified person by a person (herein referred to as collected). The TCS rate proposed in this section is higher than the following rates:
- a rate of double the rate provided in the relevant Act ;
- or a rate of 5%
6. TCS Rate in Case of Non-Availability of PAN
If the provision of section 206CC of the Act is applicable to a specific person then apart from the provision of this section, the tax shall be collected at higher of the two rates stipulated in this section and in section 206CC of the Act.
7. Deduct i.e. Specified Person
The term “specified person” suggests that it refers to a specific individual.
- Who has not submitted income tax returns for both of the prior two assessment years that are immediately preceding the previous year in which tax is needed to be deducted or collected, as the case may be.
- In addition, for both of these assessment years, the time limit for filing a tax return under section 139(1) of the Act has passed.
- There is also the need that his TDS and TCS totaled Rs. 50,000 or more in each of the previous two years.
- A non-resident who does not have a permanent establishment in India is not a specified person.
Note 2: Relaxation for senior citizen from filing ITR (Subject to Tax Deduction under Section 194P) [AY 2021-22]
It is proposed to add a new section 194P to the Act, which would exclude elderly persons aged 75 and up from the requirements of section 139 of the Act, which requires them to file an income tax return. If the following conditions are met, a senior citizen aged 75 or older is not needed to file an income tax return –
- The senior citizen is a resident of India who was 75 years old or older during the previous year;
- He receives only pension income and may also receive interest income from the same bank (specified bank – to be notified by the CG) where he receives his pension income;
- He must file a declaration with the specified bank. Such particulars, in such form, must be included in the declaration and verified in such manner, as may be prescribed.
It is proposed to add a new section 194P to the Act, which would exclude elderly persons aged 75 and up from the requirements of section 139 of the Act, which requires them to file an income tax return. If the following conditions are met, a senior citizen aged 75 or older is not needed to file an income tax return.
Once this is completed, the senior citizen will not be required to file a return of income for the current assessment year.
Note 3: New Tax Regime Slab for AY 2022-2023
Tax rates under section 115BAC: From the assessment year 2021-22 onwards, a person or HUF may choose to pay tax on their total income at the following rates if certain conditions are met as set out in section 115BAC:
Total Income (Rs) Rate
- Above 15, 00,000 30 per cent.
- From 12.50,001 to 15, 00,000- 25 per cent.
- From 10, 00,001 to 12, 50,000- 20 per cent.
- 7.50,001 to 10, 00,000- 15 per cent.
- From 5, 00,001 to 7, 50,000- 10 per cent.
- From 2, 50,001 to 5, 00,000 5 per cent.
- Upto 2, 50,000 Nil
Note 4: Basic Slab Rates for AY 2022-2023
- The income-tax rates in the case of every individual (other than those mention in (ii) and (iii) below), HUF, or any association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act (not being a case to which any other paragraph of Part III applies) are as follows:
Total Income (Rs) Rate
- Up to Rs. 2, 50,000 Nil.
- Rs. 2, 50,001 to Rs. 5, 00,000 5 percent.
- Rs. 5, 00,001 to Rs. 10, 00,000 20 percent.
- Above Rs. 10, 00,000 30 percent.
2. In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year, –
Total Income (Rs) Rate
- Up to Rs. 3, 00,000 Nil.
- Rs. 3, 00,001 to Rs. 5, 00,000 5 percent.
- Rs. 5, 00,001 to Rs. 10, 00,000 20 percent.
- Above Rs. 10, 00,000 30 percent.
3. in the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year, –
Total Income (Rs) Rate
- Up to Rs. 5, 00,000 Nil.
- Rs. 5, 00,001 to Rs. 10, 00,000 20 percent.
- Above Rs 10, 00,000 30 percent.
Note 5: Applicability of Surcharge on TDS in Certain Cases
A surcharge will be added to the amount of tax deducted,—
- Any non-resident individual, HUF, association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act, is computed as follows:
- Where the income or aggregation of income (including dividend income or income under the provisions of sections 111A and 112A of the Act) paid or expected to be paid and subject to the deduction exceeds fifty lakh rupees but does not exceed one crore rupees, at a rate of ten percent of such tax;
- At a rate of 15% of such tax, when the income or aggregate of income paid or expected to be paid and subject to the deduction exceeds one crore rupees but does not exceed two crore rupees (including income by way of dividend or income under the provisions of sections 111A and 112A of the Act);
- At a rate of 25% of such tax, if the income or aggregate of income paid or expected to be paid and subject to the deduction exceeds two crore rupees but does not exceed five crore rupees (excluding income by way of dividend or income under the provisions of sections 111A and 112A of the Act);
- When the income or aggregate of income (excluding income by means of dividend or income under the provisions of sections 111A and 112A of the Act) paid or expected to be paid and subject to the deduction exceeds five crore rupees, at the rate of 37 percent of such tax;
- At the rate of 15% of such tax, where the income or total income (including the income by means of dividend or income under the provisions of section 111A and 112A of the Act) paid or expected to be paid and subject to the deduction exceeds two crore rupees, but is not covered under (iii) and (iv) above provided that in case where the total income includes any income by means of dividend of income chargeable under section 111A and section 112A of the Act, the rate of surcharge on the amount of income-tax deducted in respect of that part of income shall not exceed 15%.
- When the income or the aggregate of such earnings paid or expected to be paid and subject to the deduction exceeds one crore rupees, calculated at a rate of 12% of such tax in the case of any co-operative society or firm that is a non-resident;
- Calculated in the case of every company other than a domestic company,—
- where the income or aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees but does not exceed ten crore rupees, at a rate of 2% of such tax;
No surcharge will be levied on deductions in other cases.
Note 6: Applicability of Health & Education Cess on TDS in Certain Cases
In the event of persons not located in India, including companies that are not domestic companies, the Health and Education Cess will continue to be collected at a rate of 4% of income tax, plus surcharges where applicable.