Understanding Tax Deducted at Source (TDS) Rates for Financial Year 2025-26
This article outlines the crucial Tax Deducted at Source (TDS) rates and their changes for the Financial Year 2025-26 (Assessment Year 2026-27). It details the system of tax deduction by payers for various payments like salary, interest, and professional fees, emphasizing the importance of adhering to correct rates for compliance. The content also highlights modifications in TDS threshold limits and the introduction of new sections, such as 194T for partner's remuneration.
Tax Deducted at Source (TDS) involves the payer deducting tax before making specific payments such as salaries, interest, rent, or professional fees. The TDS rate chart for FY 2025-26 (AY 2026-27) outlines the percentage of tax to be withheld for each payment category. Adhering to the correct TDS rates is essential for avoiding penalties, defaults, and ensuring timely tax compliance.
Certain significant changes to TDS threshold limits have been introduced, effective from this financial year. While most TDS rates have largely remained consistent, a new TDS section, 194T, will apply to partner's remuneration starting April 1, 2026.
What is a TDS Rate Chart?
TDS, or Tax Deducted at Source, is a mechanism where the payer deducts tax when making certain payments like salaries, interest, rent, or professional fees. A TDS rate chart provides a comprehensive table detailing the applicable TDS rates for various payment types, along with their respective sections and exemption limits. These rates vary based on the recipient's residential status, the nature of the transaction, and the total amount involved during the financial year. This chart helps taxpayers determine the correct tax amount to deduct for each payment, ensuring compliance and preventing penalties. The TDS rate chart presented below reflects updates from Budget 2025 for FY 2025-26.
TDS Rate Chart FY 2025-26
Below are the prevalent TDS rates effective from Financial Year 2025-26:
| Section | Nature of Transaction | Threshold Limit (Rs) | TDS Rate (%) |
|---|---|---|---|
| 192 | Salary | Basic exemption limit of employee | Slab rates |
| 192A | Premature withdrawal from EPF | Rs. 50,000 | 10% |
| 193 | Interest on Securities | Rs. 10,000 | 10% |
| 194 | Dividends | Rs. 10,000 | 10% |
| 194A | Interest on bank/post office deposits | Rs. 50,000 | 10% |
| 194K | Payment of dividend by mutual Funds | Rs. 10,000 | 10% |
| 194B | Lottery, game shows, gambling winnings | Rs. 10,000 | 30% |
| 194BA | Online gaming winnings | - | 30% |
| 194BB | Winnings from horse races | Rs. 10,000 (Aggregate winnings during a financial year not single transaction) | 30% |
| 194C | Payment to contractors or sub-contractors | Rs. 30,000 (Single Transaction) or Rs. 1 lakh (In a FY) | 1% for individuals and HUF, 2% for others |
| 194D | Insurance Commission | Rs. 20,000 | 2% for individuals and HUF, 10% for others |
| 194DA | Payment received – Life insurance Policy | Rs. 1 lakh | 2% |
| 194EE | Payment received – National Savings Scheme (NSS) | Rs. 2,500 | 10% |
| 194G | Lottery Commission | Rs. 20,000 | 2% |
| 194H | Commission/Brokerage | Rs. 20,000 | 2% |
| 194J(a) | Fees – Technical Services, Call Centre, Royalty, Distribution / Exhibition of Cinematography Films, etc. | Rs. 50,000 | 2% |
| 194J(b) | Fees – All other Professional Services | Rs. 50,000 | 10% |
| 194I(a) | Rent for Plant & Machinery | Rs. 50,000 | 2% |
| 194I(b) | Rent of Land Building & Furniture | Rs. 50,000 | 10% |
| 194IA | Transfer of certain immovable property other than agricultural land | Rs. 50 lakh | 1% |
| 194IB | Rent payment by individual / HUF not covered u/s 194I | Rs. 50,000 pm | 2% |
| 194IC | Payment under specified Joint Development Agreement | - | 10% |
| 194LA | Compensation on transfer of certain immovable property other than agricultural land | Rs. 5 lakh | 10% |
| 194LB | Income by way of interest from infrastructure debt fund (non-resident) | - | 5% |
| 194LBA | Certain income from units of a business trust | - | 10% |
| 194LBB | Income in respect of investment of investment fund | - | 10% for residents, 30% for non-residents, 40% for foreign companies |
| 194LBC | Income in respect of investment in securitization trust | - | 10% for residents, 40% for non-residents, 10% for individual & HUF |
| 194M | Payment made for Contracts, Brokerage or Professional Fees etc. by Individual and HUF | Rs. 50 lakh | 2% |
| 194N | Cash withdrawal in excess of 1 crore during the previous year from 1 or more account with a bank or co-operative society | 1 Crore (Rs. 3 Crores, if withdrawal is by co-operative society) | 2% |
| 194O | TDS on e-commerce participants | Rs. 5 lakh | 0.10% |
| 194P | TDS in case of Specified Senior Citizen (above 75 years) having Salary & Interest (ITR not required) | - | Slab Rates |
| 194Q | TDS on Purchase of Goods exceeding Rs. 50 Lakh | Rs. 50 lakh | 0.10% |
| 194R | Benefits or perquisites of business or profession | Rs. 20,000 | 10% |
| 194S | Payment of consideration for transfer of virtual digital asset by persons other than specified person | Rs. 10,000 | 1% |
| 194T | Payments by Partnership Firms to Partners | Rs. 20,000 | 10% |
| 194B | Income by way of lottery winnings, card games, crossword puzzles, and other games of any type (Up to Rs.10,000 per transaction- No TDS needs to be deducted) | Nil | 30% |
| 194E | Payment to non-resident sportsman (including an athlete) or an entertainer (not a citizen of India) or non-resident sports association. | Nil | 20% |
| 194LBA(3) | Interest income received or receivable to a business trust from SPV and distribution to its unitholders. | Nil | 5% |
| 194LC | Payment in the nature of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or against the issue of long-term bonds*. | Nil | 5% |
| 194LD | Payment of interest on the bond (rupee-denominated) to Foreign Institutional Investors or a Qualified Foreign Investor | Nil | 5% |
| 195 | Payment of any other sum, such as-Income by way of LTCG under section 112(1)(c)(iii); | Nil | 12.50% |
| 196B | Income from units of an offshore fund. | Nil | 10% |
| 196C | Income from foreign currency bonds or GDR of an Indian company | Nil | 10% |
| 196D | Income (excluding dividend and capital gain) from Foreign Institutional Investors. | Nil | 20% |
TDS Rate Changes FY 2025-26
Significant changes have been implemented in TDS provisions, effective April 1, 2025.
The government has revised the threshold limits for TDS deduction across various sections. The relaxed threshold limits are detailed below:
| Section | Previous Threshold Limits | Modified Threshold Limits |
|---|---|---|
| 193 - Interest on securities | NIL | 10,000 |
| 194A - Interest other than Interest on securities | (i) 50,000/- for senior citizen; (ii) 40,000/- in case of others when payer is bank, cooperative society and post office (iii) 5,000/- in other cases | (i) 1,00,000/- for senior citizen (ii) 50,000/- in case of others when payer is bank, cooperative society and post office (iii) 10,000/- in other cases |
| 194 – Dividend, for an individual shareholder | 5,000 | 10,000 |
| 194K - Income in respect of units of a mutual fund | 5,000 | 10,000 |
| 194B - Winnings from lottery, crossword puzzle Etc. & 194BB - Winnings from horse race | Aggregate of amounts exceeding 10,000/- during the financial year | 10,000/- in respect of a single transaction |
| 194D - Insurance commission | 15,000 | 20,000 |
| 194G - Income by way of commission, prize etc. on lottery tickets | 15,000 | 20,000 |
| 194H - Commission or brokerage | 15,000 | 20,000 |
| 194-I - Rent | 2,40,000 (in a financial year) | 6,00,000 (in a financial year) |
| 194J - Fee for professional or technical services | 30,000 | 50,000 |
| 194LA - Income by way of enhanced compensation | 2,50,000 | 5,00,000 |
| 206C(1G) – Remittance under LRS and overseas tour program package | 7,00,000 | 10,00,000 |
- Section 206AB, which previously imposed additional compliance burdens for TDS deductors, has been removed.
- The TDS rate for section 194LBC – Income from investments in securitization trusts for residents – has been reduced to 10%.
- Effective April 1, 2025, a new section 194T has been introduced, requiring TDS deduction at 10% on partner's remuneration.
Conclusion
Staying informed about the latest TDS rates is critical for accurate tax deductions. With the threshold limits for TDS deduction being revised for many sections in Budget 2025, it is crucial to remain updated. This helps ensure that TDS is not deducted for transactions falling below the new threshold limits. Effective tax planning today can lead to substantial tax savings in the future.