A brief on the Threshold Limit for TDS Under Income Tax Act and why did the Government of India introduce it. Mention what a threshold limit is. And then talk about the different TDS threshold limits under the Income Tax Act.
There are two types of tax payments in India- direct tax and indirect tax. Direct taxes are non-transferable taxes paid directly to the government by the payer, such as a tax on all assets. However, indirect tax taxes transferable taxes whose liabilities are transferred to others like GST (Goods and Services Tax), TDS (Tax Deducted at Source), etc.
Threshold Limit for TDS Under the Income Tax Act?
TDS is the acronym for Tax Deducted at Source. It is a part of the Income-tax or Indirect tax. TDS is the money paid at the time when making specified payments, such as salaries, rent, commission, professional fees, interests, etc., which are subject to income tax reduction. Before doing that, one should know how many types of Income tax are present. The source making the payments withholds a percentage of the total transaction value when making payments under these categories.
The organisation that deducts the TDS is called the deductor, and the person whose payment is being deducted is called the deductee.
When Is TDS Payment Made?
TDS payments are figured out according to your income. The TDS rates are set in the Income Tax Act, and the deductor deducts the specific amount based on those rates. You do not have to pay any tax if you submit investment proofs (for claiming deductions) to your employer and your taxable income is less than the taxable limit. As a result, there should be no TDS withheld from your earnings.
By the 7th of the next month, the tax deducted at the source must be deposited to the government. The government uses TDS to collect taxes to decrease tax evasion by collecting money (partially or totally) when it is delivered rather than at a later date.
What Is The Income Tax Act 1961?
In 1961, the Income Tax Act of India was established. This Act governs Income tax returns and the different deductions that apply to them. However, the statute has been revised multiple times since 1961 to account for inflation and other socioeconomic factors.
Income tax is a tax that you pay to the government in India based on your earnings (and profit, in the case of companies). The government uses the money obtained through income tax for various objectives, including public services, infrastructure development, military spending, and subsidies, among many others. If you earn more than a certain amount of revenue, you must pay income tax every year. Non-residents can use Non resident Indian Income tax return form for filing taxes.
LLP ITR filing refers to the process of submitting an income tax return for a Limited Liability Partnership to the government, reporting the LLP’s income, profits, and losses during a financial year
Why Was The Income Tax Act Introduced?
The legislature formed the Income Tax Act of 1961 to govern and manage income tax in the country. However, in 1962, the income tax guidelines were established to aid in the enforcement and administration of the legislation. The Income Tax Rules are created within the framework of the Income Tax Act and are not permitted to contradict its requirements.
Threshold Limit for TDS Under Income Tax Act
The amount of payment for which no TDS is due is known as ‘the threshold limit.’ TDS provisions will apply only if the payment exceeds the permissible limit. The TDS will not be deducted if the credit to a contractor under TDS Section 194C falls below the TDS threshold limit of ₹1,00,000 in aggregate in a fiscal year and the single transaction threshold limit of ₹30,000.
How Are TDS Payments Calculated?
For example, the rate on salary is deducted by the amount of payment you get from your employer, which determines your tax slab rate based on the various Income tax slab rates present. The rate for your TDS deduction on salary ranges from 10% to 30%, depending on the tax slab. The employer withholds TDS on salary at the employee’s average rate of income tax, and it will be calculated in the following format:
- Income tax payable (calculated using slab rates) /employee’s expected salary for the fiscal year = the average income tax rate.
Types Of Threshold Limits For TDS Payments Under The Income Tax Act
Following are the threshold limits for TDS payments as stated under the Income Tax Act.
- Section 192: Rate is as per income tax slab rate. The threshold limit is as per the applicable income slab
- Section 193: Rate is 10% of the interests earned on security investments. The threshold limit is ₹5000 for debenture payment
- Section 194: Rate is 10% of proceeds from any deemed dividends, where the threshold limit is ₹2500
- Section 194A: Rate is 10% of proceeds from interests earned on investments other than securities, with a threshold limit of ₹10,000
- Section 194B: Rate is 30% of prize money on lottery or gaming-related winnings, where the threshold limit is ₹10,000
- Section 194BB: Rate is 30% of prize money from horse racing. The threshold limit is ₹10,000
- Section 194C: Rate is 5% of earnings as insurance com Proceeds from any contracts/subcontracts:
- Individuals or HUF at 1%
- Non-Individual/corporate at 2% and threshold limit is ₹30,000 that is for each contract, whereas ₹ 100,000 is per annum
- Section 194D: Rate is 5% of earnings as insurance commissions. The threshold limit is ₹15,000
- Section 194EE: Rate is 20% of expense in National Saving Scheme (NSS) deposits, where the threshold limit is ₹2,500
- Section 194F: Rate is 20% of Mutual Funds (MF) investment. The threshold limit is NIL
- Section 194G: Rate is 5% of the commission money from lottery ticket selling. The threshold limit is ₹15,000
- Section 194H: Rate is 5% of the brokerage earnings. The threshold limit is ₹15,000
- Section 194I: Rate is 2% on the rental amount of plant and machinery/ 10% on the rent of land and building, and the threshold limit is ₹1,80,000
- Section 194J: Rate is 10% on the technical/professional services. The threshold limit is ₹30,000 per annum
- Section 194LA: Rate is 10% on the transfer of money paid to any resident while acquiring an immovable property and the threshold limit is ₹2,50,000.
What are the Different TDS Threshold Limits Under The Income Tax Act?
The Tax Deducted at Source Rate Chart for the financial year 2023-24 provides a comprehensive overview of the applicable rates for various types of transactions.
| TDS Section List | Nature of Payment | Threshold (₹) | For Individual / HUF | For Others |
| 192 | Payment made as salaries | ₹2,50,000 | Slab Rates | Slab Rates |
| 192A | Early withdrawal of EPF (Employee Provident Fund) | ₹50,000 | 10% | 10% |
| 193 | Tax deduction at source on interest earned on securities | ₹10,000 | 10% | 10% |
| 194 | Distribution of dividends | ₹5,000 | 10% | 10% |
| 194A | Interest from banks or post offices on deposits | ₹40,000 ₹50,000 (For senior citizens) |
10% | 10% |
| 194A | Interest from sources other than securities | ₹5,000 | 10% | 10% |
| 194B | Winnings of lotteries, puzzles, or games | Aggregate of ₹10,000 | 30% | 30% |
| 194BA | Winnings from online Games | – | 30% | 30%x` |
| 194BB | Winnings of horse races | ₹10,000 | 30% | 30% |
| 194C | Payments made to contractors or sub-contractors one time | ₹30,000 | 1% | 2% |
| 194C | Payments made to contractors or sub-contractors on an aggregate basis | ₹1,00,000 | 1% | 2% |
| 194D | Commission paid on insurance sales to domestic companies | ₹15,000 | Not Applicable | 10% |
| 194D | Commission paid on insurance sales to non-domestic companies | ₹15,000 | 5% | Not Applicable |
| 194DA | Maturity of life insurance policy | ₹1,00,000 | 5% | 5% |
| 194EE | Payment received from the National Savings Scheme (NSS) by individuals | ₹2500 | 10% | 10% |
| 194F | Repurchase of units by UTI (Unit Trust of India) or any mutual fund | No Limit | 20% | 20% |
| 194G | Payments or commission made on the sale of lottery tickets | ₹15,000 | 5% | 5% |
| 194H | Commission or brokerage fees | ₹15,000 | 5% | 5% |
| 194I | Rent paid for land, building, or furniture | ₹2,40,000 | 10% | 10% |
| 194I | Rent paid for plant and machinery | ₹2,40,000 | 2% | 2% |
| 194IA | Payment for the transfer of immovable property excluding agricultural land | ₹50,00,000 | 1% | 1% |
| 194IB | Rent payment made by an individual or HUF not covered under section 194I | ₹50,000 (per month) | 5% | Not Applicable |
| 194IC | Payments made under a Joint Development Agreement (JDA) to individuals or HUF | No Limit | 10% | 10% |
| 194J | Fees paid for professional and technical services | ₹30,000 | 10% | 10% |
| 194J | Royalty paid for the sale, distribution, or exhibition of cinematographic films | ₹ 30,000 | 2% | 2% |
| 194K | Income received from units of a mutual fund, such as dividends | ₹5,000 | 10% | 10% |
| 194LA | Compensation payment for acquiring certain immovable property | ₹2,50,000 | 10% | 10% |
| 194LB | Interest payment on infrastructure bonds to Non-Resident Indians | Not Applicable | 5% | 5% |
| 194LBA(1) | Distribution of certain income by a business trust to its unit holders | Not Applicable | 10% | 10% |
| 194LD | Interest payment on rupee-denominated bonds, municipal debt security, and government securities | Not Applicable | 5% | 5% |
| 194M | Payments made for contracts, brokerage, commission, or professional fees (excluding sections 194C, 194H, 194J) | ₹50,00,000 | 5% | 5% |
| 194N | Cash withdrawal exceeding a specified amount from the bank, with filed ITR | ₹1,00,00,000 | 2% | 2% |
| 194N | Cash withdrawal from a bank without filing ITR | ₹20,00,000 | 2% | 2% |
| 194O | Amount received for the sale of products/services by e-commerce service providers through digital platforms | ₹5,00,000 | 1% | 1% |
| 194Q | Payments made for the purchase of goods | ₹50,00,000 | 0.10% | 0.10% |
| 194S | TDS on the payment of cryptocurrencies or other virtual assets | Not Applicable | 1% | 1% |
| 206AA | TDS applicable in case of non-availability of PAN | Not Applicable | At a higher rate than: The rate specified by the act 20% The currently applicable rate |
At a higher rate than: The rate specified by the act 20% The currently applicable rate |
| 206AB | TDS on non-filers of Income Tax Return | Not Applicable | The higher of: 5% Twice the rate mentioned in the provision The currently applicable rate | The higher of: 5% Twice the rate mentioned in the provision The currently applicable rate |
How To File For TDS Return?
The Indian government has formulated a wide range of rules and regulations for paying taxes in any form. It is best to familiarise yourself with all the codes and stay well-versed in the requirements to avoid legal hassles. It will also help you avoid uninvited and hefty expenses in the form of penalties. If you are looking for an easy-to-understand set of instructions for filing your TDS return, check out this step-by-step guide.
Frequently Asked Questions
What is TDS 194i threshold limit?
TDS must be deducted if the total rent paid or expected to be paid during the financial year by the mentioned individual to the payee's account surpasses ₹2,40,000.
What is the TDS limit for FY 2023 24?
The annual TDS threshold for commission in the fiscal year 2023-24 is ₹15,000. Any commission exceeding this limit requires TDS deduction.
What is the threshold limit for TDS commission?
The TDS rules outlined in Section 194H come into effect when the total commission or brokerage payment to the payee surpasses ₹15,000 throughout the financial year. If the total payment remains below this threshold, no TDS deduction is required.
What is the contract threshold limit for TDS?
If the payment to the contractor within one contract doesn't surpass ₹30,000, but if the total payments across contracts in a fiscal year go beyond ₹1,00,000, TDS will be deducted.
What is the maximum threshold limit?
The Threshold Limit refers to the maximum benefit amount an Insured can receive within a Benefit Year while still qualifying for the Carryover Benefit, encompassing all claims across Procedure Classes.
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