The TDS deduction is to be done if the income exceeds certain prescribed limit. Moreover, this TDS is deducted not just on salary income but also for other incomes. In this blog, we have discussed major deduction for residents in India.
TDS Deduction for person resident in India
Here is the list and explanation of TDS deduction for residents in India:
Payment of Salary TDS Deduction
Firstly, the TDS on salary is to be deducted by employer who pays salary to his employee. The TDS deduction on salary is made if the employee’s income exceeds the prescribed limit. Further, the TDS rates applicable are dependent on the income slab of the employee.
The amount limit from which tax is chargeable is as follows:
| AGE GROUP | OLD TAX REGIME | NEW TAX REGIME |
|---|---|---|
| Individuals below 60 years | ₹2,50,000 | ₹3,00,000 |
| Individuals of age 60 years and above but below 80 years | ₹3,00,000 | ₹3,00,000 |
| Individuals above 80 years | ₹5,00,000 | ₹3,00,000 |
TDS on salary = Estimated Total Tax Liability
____________________________
Period of Employment
Withdrawal of Provident Fund
Secondly, the deduction is to be faced by resident on withdrawal of provident fund. This deduction of TDS is made if the withdrawal is more than Rs. 30000 and the PF account holder has served less than five years in an organization. Consequently, the rate of TDS applicable is 10%.
Also Read: New Rules Related to Employee Provident Fund
Interest on Securities
Secondly, a TDS of 10% is to be deducted for individual and HUF on interest from securities received. This TDS deduction, however is made only if the limit of Rs. 5000 on debentures and 10,000 on others are crossed.
Also Read: How to treat income from transfer of shares?
Other than interest on securities
Thirdly, residents having income from other than interest on securities like fixed deposits, interest on loans etc are subject to TDS of 10%. The threshold limit for TDS deduction on other than interest on securities are as follows:
| Payer | Threshold limit (for non-senior citizens) | Threshold limit (for senior citizens) |
|---|---|---|
| Banking firm (on time deposit) | Rs. 40,000 | Rs. 50,000 |
| Co-operative society conducting banking business (on time deposit) | Rs. 40,000 | Rs. 50,000 |
| Co-operative whose turnover exceeds Rs. 50 crores during the previous fiscal year | Rs. 40,000 | Rs. 50,000 |
| Post Office (on SCSS) | Rs. 40,000 | Rs. 50,000 |
| Any other person | Rs. 5,000 | Rs. 5,000 |
Income by way of Dividend
Fourthly, TDS deduction is applicable to dividends distributed, declared or paid on or after 01-04-2020. Above all, an Indian company shall deduct tax at the rate of 10% from dividend distributed to the resident shareholders, if the aggregate amount of dividend distributed or paid during the financial year to a shareholder exceeds Rs. 5,000.
Also Read: Taxability of dividend income: All you need to know
Winnings from lotteries
Fifthly, the resident may be subject to TDS, if he has winnings from lotteries. Having stated that, all the winnings over and above Rs 10,000 are subject to a TDS of 30%. With cess and surcharge, the effectual rate will be 31.2%. Further, this TDS is deducted by the company or organisation distributing the prize money.
Horse Race Winnings
Similar to the above situation , the resident may also be subject to TDS deduction if he has winnings from horse races. The Rate of TDS on payments of winnings from horse race under Section 194BB of Income Tax Act, 1961 is 30% plus surcharges. In addition to this, if the prize is paid in instalments, the tax deduction will be made at the time of each instalment.
Payment to contractors
The resident, if being a contractor is subject to TDS deduction. The deduction of tax at source is to be made by any “specified person” making payment to such resident contractor. The TDS has to be deducted in case, when the one time payment amount exceeds Rs.30,000 or Rs.1,00,000 in aggregate during the year. To summarise, the deduction rates on payment to resident contractors are as follows:
| Particulars | Rate of TDS (if PAN available) | Rate of TDS (if PAN not available) |
|---|---|---|
| Payment given to resident Individual/HUF | 1% | 20% |
| Payment given to Trust, Company, Firm, Cooperative Society, Registered Society, Government, Local Authority, University, Cooperation | 2% | 20% |
| Contractor in transport business* | Nil | 20% |
| Sub-Contractor in transport business* | Nil | 20% |
Also Read: Section 194C: TDS on payment to contractors
Insurance Commission
In case of insurance commission, the TDS is to be deducted in case any person who pays to resident an income in form of remuneration/reward for generating insurance business. The rate of TDS applicable for insurance commission are as follows:
| Particulars | PAN is furnished | PAN is not furnished |
|---|---|---|
| Persons other than a company | 5% | 20% |
| Domestic company | 10% | 20% |
Professional or technical fees
Residents having income from professional or technical fees are also subject to TDS deduction. The TDS is to be deducted in case the payment exceeds the following threshold limits:
| Nature of Payment | TDS Rate |
|---|---|
| Professional fees or any payment covered under Section 194J | 10% |
| Technical services fees | 2% (w.e.f., 01.04.2020) |
| Payments made to operators of call centres | 2% (w.e.f., 01.04.2017) |
| If PAN is not furnished | 20% |
Commission or brokerage
Lastly, the TDS deduction is to be made by any person on payment of commission or brokerage to a resident person. However, the TDS is to be deducted only if the amount exceeds Rs. 15,000 aggregately in a financial year.
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