Tax deductions at source are a type of direct tax, which gets deducted from the income of the salaried employee. Instead of paying tax later on, in several purchases, this deducts a small amount from the salary given to the employee in the form of tax.
Working process of TDS
Who pays: A person who receives a payment gets an amount after specific deductions (payer)
Who deducts: A company or person who is making a payment (payee)
Where it goes: The deducted amount is then sent to the government
Aligailty criteria for TDS
- Individuals who pay rent of more than INR 50,000 per month (5% TDS)
- The bank will deduct 10% of TDS from the interest, and if the individual earned salary below the minimum exemption then he or she will have to submit Form 15G and 15H to avoid the deductions
- The employer deducts TDS from the employee’s salary that exceeds the minimum exemption limit.
|
Type of Payment |
TDS Deduction Starts When Payment Exceeds |
TDS Rate |
|
Salary |
Based on the tax slab |
As per tax rate |
|
Bank Interest |
₹40,000 (₹50,000 for senior citizens) |
10% |
|
Rent (for properties) |
₹50,000 per month |
5% |
|
Professional Fees |
₹30,000 per year |
10% |
|
Contractor Payments |
₹30,000 per year |
1% (individual), 2% (company) |
|
Commission/Brokerage |
₹15,000 per year |
5% |
Key pointers for TDS
- TDS is collected in advance.
- You can claim a refund if extra TDS is deducted.
- TDS rates vary based on the type of payment an individual makes.
- If you don’t provide a PAN Card, TDS may be deducted at a higher rate.
