Understanding Tax Deducted at Source (TDS) in India
Tax Deducted at Source (TDS) is a mechanism introduced by the Income Tax Department of India to collect tax at the very source of income. Under this system, the person making a payment (deductor) is required to deduct tax at prescribed rates before making the payment to the recipient (deductee). The deducted amount is then deposited with the Central Government. TDS applies to salaries, interest, rent, commission, professional fees, contractor payments, and various other specified transactions.
For FY 2025-26 (Assessment Year 2026-27), TDS remains one of the most significant compliance requirements for businesses, employers, and individuals making specified payments. The deductor must obtain a Tax Deduction and Collection Account Number (TAN), deduct TDS, deposit it by the due date, file quarterly TDS returns, and issue TDS certificates to deductees. Failure to comply results in interest, penalties, and disallowance of expenses.
This calculator covers all major TDS sections with current rates, threshold limits, surcharge applicability, and health & education cess. Whether you are an employer calculating salary TDS, a business paying contractor bills, or a tenant paying rent, this tool provides accurate, instant calculations.
TDS Rate Chart for FY 2025-26 (AY 2026-27)
| Section | Nature of Payment | Rate (PAN) | Threshold Limit |
|---|---|---|---|
| 192 | Salary | Avg. Tax Rate | Basic Exemption |
| 192A | PF Withdrawal | 10% | ₹50,000 |
| 193 | Int. on Securities | 10% | ₹10,000 |
| 194 | Dividend | 10% | ₹5,000 |
| 194A | Int. (Others) | 10% | ₹5,000 |
| 194A | Int. (Banks) | 10% | ₹40k / ₹50k SC |
| 194C | Contractor | 1%/2% | ₹30k / ₹1L FY |
| 194H | Commission | 5% | ₹15,000 |
| 194I | Rent (Machinery) | 2% | ₹2,40,000 |
| 194I | Rent (Building) | 10% | ₹2,40,000 |
| 194IB | Rent (Ind/HUF) | 5% | ₹50k/month |
| 194J | Prof. Fees | 10% | ₹30,000 |
| 194K | MF Income | 10% | ₹5,000 |
| 194O | E-commerce | 1% | ₹5,00,000 |
| 195 | NRI Payment | DTAA / Act | Nil |
* Rates apply to valid PAN holders. No-PAN deduction is 20% (Sec 206AA).
TDS on Salary (Section 192): FY 2025-26
TDS on salary is unique because it is not deducted at a flat rate. Instead, the employer calculates the employee's estimated total income for the financial year, applies the applicable tax slab, and deducts TDS proportionally each month. The employee can choose between the new tax regime (lower rates, no deductions) or the old tax regime (higher rates, with deductions).
New Tax Regime (Default)
Old Tax Regime
Surcharge and Health & Education Cess
For non-salary payments, surcharge and health & education cess are added to the TDS amount when the payment exceeds certain thresholds. This significantly increases the effective TDS rate for high-value payments.
| Recipient Type | Threshold | Surcharge |
|---|---|---|
| Indiv / HUF / NRI | ₹50L – ₹1Cr | 10% |
| Indiv / HUF / NRI | ₹1Cr – ₹2Cr | 15% |
| Indiv / HUF / NRI | ₹2Cr – ₹5Cr | 25% |
| Indiv / HUF / NRI | Above ₹5Cr | 37% |
| Firm / Co. | Above ₹1Cr | 12% |
* A 4% Health and Education Cess is applied on the total of (TDS + Surcharge).
Calculation Examples
Example 1: Professional Fees (194J)
Payment: ₹5,00,000
TDS Rate: 10% (Base ₹50,000)
Cess: ₹2,000 (4% of ₹50k)
Total TDS: ₹52,000
Example 2: Contractor (194C)
Payment: ₹60,00,000 (Individual Contractor)
TDS Rate: 1% (Base ₹60,000)
Surcharge: ₹6,000 (10% as > ₹50L)
Cess: ₹2,640 (4% of ₹66k)
Total TDS: ₹68,640
TDS Compliance Calendar
| Action | Due Date |
|---|---|
| Monthly TDS Deposit | 7th of next month |
| March TDS Deposit | 30th April |
| Quarterly Returns | 31st of month following Qtr |
| Form 16 Issue | 15th June |
Penalties for Non-Compliance
Late Deposit (Sec 201)
1.5% interest per month from date of deduction to date of deposit.
Late Filing (Sec 234E)
₹200 per day until return is filed, capped at the TDS amount.
Incorrect Filing (Sec 271H)
Penalty between ₹10,000 and ₹1,00,000 for wrong data.
Expense Disallowance
30% of expenditure disallowed if TDS not deducted/paid.
Expert FAQ
Can I claim a refund if excess TDS is deducted?
Yes. If the total TDS deducted exceeds your actual tax liability for the year, you can claim a refund by filing your Income Tax Return (ITR). The excess TDS will be refunded to your bank account after processing.
What is Form 26AS and how do I check credits?
Form 26AS is an annual tax credit statement available on the Income Tax e-filing portal. It shows all TDS deducted on your PAN, advance tax paid, and self-assessment tax.
Is TDS applicable on GST component?
No. TDS is not applicable on the GST component if the GST amount is shown separately in the invoice, as per CBDT circulars.
What is the difference between TDS and TCS?
TDS (Tax Deducted at Source) is deducted by the payer before payment. TCS (Tax Collected at Source) is collected by the seller from the buyer at the time of sale (e.g., motor vehicle sales).
Can I get a lower TDS certificate?
Yes. Under Section 197, you can apply to the Assessing Officer (Form 13) for a lower or nil TDS certificate if your actual liability is lower than the prescribed rate.
Methodology
This calculator uses TDS rates prescribed under the Income Tax Act, 1961 as amended by the Finance Act 2025 for FY 2025-26 (AY 2026-27). Section-wise rates are sourced from CBDT notifications and official Income Tax Department publications. Surcharge rates follow Section 2 of the Finance Act. Health and Education Cess is applied at 4% as per Section 115BDD.
For salary TDS (Section 192), the calculator implements both the new tax regime (default) and old tax regime slab structures with standard deductions. The new regime slabs for FY 2025-26 start at ₹4,00,000 with a rebate under Section 87A up to ₹60,000 for income up to ₹12,00,000.
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Verified by FindBest Tools
TDS rates and thresholds sourced from Income Tax Act, 1961 and Finance Act 2025 as amended for FY 2025-26 (AY 2026-27). Surcharge and cess rates reflect current CBDT notifications. Last verified 25 April 2026. Consult a CA for complex matters.
Disclaimer: TDS provisions are subject to frequent amendments by the CBDT. While we strive for absolute accuracy, tax laws depend on individual circumstances. This tool is for informational purposes and does not constitute professional tax advice.