TDS Rate Chart For FY 2025-2026 (AY 2026-2027)
The announcements in Union Budget 2025 highlighted changes in several important areas, such as income tax brackets, nomenclature for taxation years, Tax Deducted at Source (TDS) thresholds, new policy announcements and more. These changes can significantly affect the gains and other incomes of the investors.
In this blog, readers can understand the TDS rate chart, its thresholds and other compliances for effective tax management.
What Is TDS?
In India, direct tax is charged mainly in two ways- at the time of earning the income and during the annual income tax return filing.
In the first case, when the payee deducts a part of income earned by the payee charges a part of the total income as a tax, it is known as Tax Deducted at Source or TDS. This tax, collected by the payer, is later remitted to the government through the TDS challan.
It helps eliminate any scope for tax evasion by the recipient or payer. Therefore, it accounts for a significant part of the income for an individual.
Meaning And Purpose Of TDS
TDS or Tax Deducted at Source is a system where a portion of specific payments is withheld before reaching the recipient. It is collected by the payer and later deposited to the government on the payee’s behalf. TDS percentage represents this deduction part. The income earner cannot escape this tax liability as the payer will deduct it at the time of payment.
One of the main objectives for levying this TDS liability is to avoid tax evasion and reduce the final tax liability to some extent. Another crucial objective is to earn direct tax revenue for the country, which is expected to account for nearly 22% of the total revenue.
Source: Budget 20251
Who Is Liable To Deduct TDS?
Here, the entity, who is responsible to pay the income, deducts this tax before transferring the income to the recipient. The decided TDS percentage is levied above a specific threshold according to the Income Tax Act.
For example, consider a person earning a dividend income of INR15,000 from equity mutual funds. The mutual fund house will deduct the TDS as it pays this dividend income.
When Is TDS Applicable?
The tax is deducted at source from different incomes such as salary, interest, dividends, and more, at the time of their transfer to the recipient. The payer, deducting this TDS, can check its details in their form 26AS2. It is a document recording all the tax-related aspects linked to the Permanent Account Number (PAN) card of the payer.
The recipient can claim this TDS from their total tax liability at the time of filing Income Tax Return. Therefore, even before the recipient earns the income, the tax is deducted on behalf of the government.
TDS Rate Chart FY 2025-26
In the announcement of the Union Budget 2025, certain norms related to TDS were changed, which will be applicable from April 1, 20253. Post these changes, the revised TDS rate chart from the Income Tax department of India for some of the incomes is as follows:
Description | Who Deducts TDS? | TDS Rate |
Salary income | Employee | As per income tax slabs. |
Accumulated balance of provident fund | Employee | 10% |
Interest in securities | Interest payer | 10% |
Interest on any other securities | Interest payer | 10% |
Dividend income | Dividend payer | 10% |
Income from mutual fund units, specified company, or others | Mutual funds house or concerned organisation | 10% |
Winning of Lotteries, crossword, gambling, and other similar incomes | Organising authority | 30% |
Online gaming income | Organising authority | 30% |
Horse race winning income | Organising authority | 30% |
Payment of life insurance policy | Insurance company | 5% (Up to September 30, 2024) 2% (From October 1, 2024) |
Insurance commission | Insurance company | 5% |
Rent Plant & machinery Land, building, furniture & fittings | Rent paying individual |
2% 10% |
Fees for professional and technical services Technical services fees Royalty income | Person paying the fees/royalty |
2% |
Source: TDS Income Tax Website4
TDS Exemptions And Threshold Limits
The TDS rate of the income tax department does not apply to every income. It exempts certain specific incomes and allows payers to be exempt from tax payments.
Who Is Exempt From TDS Deductions?
Some payers deducting TDS before remitting the income to the recipient can claim the TDS exemption based on the type of payer, nature of payment and transaction value:
I. Payees without taxable income can fill out the declaration through the Form 15G or 15H5.
II. Payee who have obtained the TDS certificate from the assessing officer under Section 197 for inability to pay TDS.
Threshold Limits For Different Income Sources
Thresholds or limits are the ceilings set for incomes that can be earned without TDS liability. In Budget 2025, these thresholds were changed for some income heads as follows:
Description | Current Thresholds (in INR) | Proposed Thresholds (in INR) |
Salary income (Less than 60 years) Old regime New regime (If the net taxable income is less than the thresholds) |
2.5 lakhs 3 lakhs |
2.5 lakhs 4 lakhs |
Accumulated balance of provident fund | 50,000 | 50,000 |
Interest in securities | Nil | 10,000 |
Interest on any other securities Senior citizen Other individuals (income from bank, co-operative bank or post office) Others individuals (income from other sources) |
50,000 40,000
5,000 |
1 lakh 50,000
10,000 |
Dividend income | 5,000 | 10,000 |
Income from mutual fund units, specified companies, or other | 5,000 | 10,000 |
Winning lotteries, crossword, gambling, and other similar incomes, Horse race-winning income | Total amount exceeding 10,000 | 10,000 in a single transaction |
Payment of life insurance policy | 1 lakhs per financial year | 1 lakhs per financial year |
Insurance commission | 15,000 | 20,000 |
Rent Plant & machinery Land, building, furniture & fittings | 2.4 lakhs during the financial year | 50,000 per month (6 lakhs per annum) |
Fees for professional and technical services Technical services fees Royalty income Others | 30,000 | 50,000 |
Compensation on the compulsory acquisition of immovable property | 2.5 lakhs | 5 lakhs |
Source: Income Tax Department6 and Budget 20257
Readers can understand the overall TDS calculation based on rates and thresholds with the following hypothetical example:
I. Mr ABC earns a total taxable salary of INR 3.5 lakhs per annum. He is selecting the default regime. Therefore, the TDS on salary will be decided based on his income tax slab of 5%.
II. Ms PQR is a music artist and earns income in royalties. Her income above INR 50,000, earned after April 1, 2025, will be charged a 2% TDS percentage on service. Therefore, if she earns INR 1 lakh, TDS of INR 2000 will be deducted.
Important Due Dates For TDS Compliance
Different income sources or sections are categorised for monthly or quarterly TDS payments as follows:
1. Monthly: TDS return and challan for the previous month is filled in the present month up to the 7th day. For example, TDS collected from the transactions in February is paid up to the 7th of March.
2. Quarterly: The TDS return and challan for a quarter can be filled in the subsequent month up to its last day. For example, the TDS collected in the quarter of April-June, can be paid up to 31st July.
Penalties and Consequences Of TDS Non-Compliance
In case of late deduction of TDS while paying), late remittance as per TDS rates to the Income Tax department, or late (or no) TDS return filing, the penalties are imposed as follows:
Situation | Consequences |
Late Deduction and Late Payment Penalties | The concerned payment may not be allowed for classification as business payment. It can be corrected on the online income tax portal TRACES. The penalty of an amount equal to the TDS liability can also be charged over the actual amount. |
Interest on Late TDS Payments |
|
Consequences of Not Filling TDS Returns |
|
Source: Income Tax Department8
Conclusion
Tax Deducted at Source or TDS is the charge that the payer deducts before paying some specific income. The TDS rate chart on the Income Tax department website lists all such incomes. Understanding this rate applicability, threshold, and other nuances can help individuals plan their tax liabilities effectively.
The tax liabilities may also be managed effectively with investment portfolio diversification. Log in to Grip Invest and explore unique debt instruments like corporate bonds.
Frequently Asked Questions On The TDS Rate Chart
1. How to check the latest TDS rate chart?
The latest TDS rates are officially updated on the website of the Income Tax department under the head of TDS rates. It presents the list of sections, its specifications and TDS rates based on the applicable assessment year. The thresholds for TDS applicability can be checked by clicking the specific concerned section.
2. Can TDS be refundable?
Yes, when the TDS deducted during the year exceeds the actual obligation, the difference is refunded by the Income Tax Department. If the department is late in paying this refund, some penalty may be paid to the payer.
3. How to correct errors in TDS deduction?
The taxpayers can correct errors in their TDS deduction challan through the online website of TRACES. It requires the registration details and the digital signature. After the correction, a 15-digit token number is generated.
References
1. India Budget 2025, accessed from: https://www.indiabudget.gov.in/doc/bh1.pdf
2. Income Tax India, accessed from: https://www.incometax.gov.in/iec/foportal/help/e-filing-manage-tax-credit-mismatch-faq#:~:text=What%20is%20form%2026AS%3F,Tax%20Deducted%20at%20Source%20(TDS)
3. India Budget 2025, accessed from: https://www.indiabudget.gov.in/doc/memo.pdf#page=25
4. Income Tax India, accessed from: https://incometaxindia.gov.in/charts%20%20tables/tds%20rates.htm
5. Income Tax India, accessed from: https://incometaxindia.gov.in/Documents/Tax-Calendar/Due-date-to-file-Form-15G-or-15H.htm
6. Income Tax India, accessed from: https://incometaxindia.gov.in/Documents/Left%20Menu/Threshold_limits_tax_deductor.htm
7. India Budget 2025, accessed from: https://www.indiabudget.gov.in/doc/memo.pdf#page=28
8. Income Tax India, accessed from: https://incometaxindia.gov.in/Pages/tax-services/online-26AS-traces.aspx
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