What are the TDS rates for common business payments in India?

## TDS Rates for Common Business Payments in India (FY 2025-26)

TDS (Tax Deducted at Source) is one of the most critical compliance obligations for Indian businesses. Every payment type has its own Section, threshold, and rate. Missing TDS deduction results in 30% of the payment being disallowed as a deduction in your tax computation.

### Complete TDS Rate Table for Companies

| Payment Type | Section | Threshold | Rate (Resident) | |---|---|---|---| | Salary | 192 | As per slab | Applicable slab rates | | Interest (banks/companies) | 194A | INR 5,000 (FD) / INR 40,000 (bank accounts) | 10% | | Dividends from companies | 194 | INR 5,000 | 10% | | Lottery/game winnings | 194B | INR 10,000 | 30% | | Contractor/sub-contractor payments | 194C | INR 30,000 per contract or INR 1 lakh cumulative/year | 1% (individual), 2% (others) | | Insurance commission | 194D | INR 15,000 | 5% | | Commission/brokerage | 194H | INR 15,000 | 5% | | Rent on land/building/furniture | 194I(b) | INR 2,40,000/year | 10% | | Rent on plant/machinery/equipment | 194I(a) | INR 2,40,000/year | 2% | | Property purchase (Section 194IA) | 194IA | INR 50 lakh | 1% | | Professional/technical/royalty | 194J | INR 30,000 | 10% (professional); 2% (technical services) | | E-commerce participants | 194O | INR 5 lakh | 1% | | Payments to non-residents | 195 | Per DTAA / no threshold | As per rates or DTAA |

### Key Sections in Detail

#### Section 192 — Salary TDS Every employer must deduct TDS on salary income at the applicable income tax slab rates of the employee. The employer estimates the employee's full-year income (including all components — basic, HRA, allowances, perquisites) and divides the annual tax by 12 for equal monthly deductions.

Note: If an employee has other income sources (rental, freelance), they must inform the employer using Form 12BB so the employer can factor it in.

#### Section 194C — Contractors and Sub-contractors Two triggers, either of which triggers TDS obligation: - Single contract payment above INR 30,000 - Cumulative payments to the same contractor in the financial year exceeding INR 1 lakh

Rate: 1% if contractor is an individual/HUF; 2% if a firm, company, or LLP.

Common scenario: An IT company pays a software development firm INR 25,000 per month. No TDS for the first month (below INR 30,000 per contract). By month 5, cumulative = INR 1,25,000 (above INR 1 lakh). TDS at 2% kicks in from month 5 onwards on the cumulative basis — but the previous months' TDS is also due retrospectively.

#### Section 194I — Rent TDS at 10% on rent for land, building, and furniture above INR 2,40,000 per year. TDS at 2% on rent for plant, machinery, and equipment.

If rent is paid monthly, TDS is deducted from each monthly payment once the annual threshold is expected to be crossed.

#### Section 194J — Professional and Technical Services From 1 April 2020: - Professional services: 10% (doctors, lawyers, CAs, engineers, architects, consultants) - Technical services: 2% (software maintenance, IT support, call centre services, BPO) - Royalty: 10%

Threshold: INR 30,000 per year per payee.

### TDS Deposit Deadline

• **Regular month:** Deposit by the 7th of the following month
• **March deductions:** Deposit by 30 April (not 7 April)
• **Property purchase (194IA/194IB):** Within 30 days

### Consequences of Non-Deduction or Non-Deposit

• **30% disallowance:** The payment is disallowed as a deduction in the payer's ITR-6 under Section 40(a)(ia)
• **Interest for non-deduction:** 1% per month from date of payment to date of deduction
• **Interest for non-deposit:** 1.5% per month from date of deduction to date of deposit
• **Penalty under Section 271C:** Up to the amount of TDS not deducted
• **Prosecution under Section 276B:** For wilful failure to deposit (rigorous imprisonment up to 7 years)

### Lower/Nil Deduction Certificate

Payees who expect their overall income tax to be lower than what TDS would deduct can apply to the Assessing Officer for a certificate under Section 197 for lower TDS rate or Section 206AA waiver. Common for businesses with large carried-forward losses or export exemptions.