Nature of payments attracting TDS and rates thereon:

Salary

DDOs must calculate the tax payable by an employee for the year and start deducting tax at average rate. The term salary includes wages, any annuity or pension, gratuity, any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages. (These payments are covered under sec. 192 of the Income Tax Act 1961). The income from salaries is required to be computed on estimated basis  at the beginning of each financial year, taking into account salaries or remuneration paid or allowed. Income Tax payable on the basis of such estimated salary income should be deducted at the rate applicable to the corresponding slab of income every month in equal instalments subject to adjustments depending upon tax saving investments made by the deductee.

When an employee is working with more than one employer simultaneously or has changed employment from one employer to another during the relevant financial year, the employer will deduct tax on considering the aggregate salary from all sources and tax deducted thereon, if any.   

 

Interest on securities/Dividends/Interest/Insurance commission-

The tax has to be deducted @ 20% for domestic companies and 10% for others with some basic exemption limits, in the case of interest if the amount of interest is up to Rs. 5000/- during a financial year. however, in the case of interest paid by a banking company, Co-operative society engaged in the business of banking and a public company engaged in the financing or construction of residential houses in India, this limit is Rs. 10000/-.

(These payments are covered under sec. 193, 194, 194A& 194D of the Income Tax Act 1961 resp.).

 

Winning from lottery, puzzle or games of any sort-

The DDO/deductor must deduct tax @ 30% on any payment above Rs. 5000/-.

(However from 1st July 2010,the DDO/deductor must deduct tax @ 30% on any payment above Rs. 10000/-)

(These payments are covered under sec. 194B of the Income Tax Act 1961).

 

Winning from horse races-

The DDO/deductor must deduct tax @ 30% on any payment above Rs. 2500/-.

(However from 1st July 2010,the DDO/deductor must deduct tax @ 30% on any payment above Rs. 5000/-).

(These payments are covered under sec. 194BB of the Income Tax Act 1961).

 

Contracts (including work land labour contract)  -

The tax has to be deducted @ 2% on contract payments and 1% for subcontract and advertisement contract payments. The tax is required to be deducted if a single payment exceeds Rs. 20000/- or if the aggregate payments exceed Rs. 50000/- per annum.

(However from 1st July 2010, Rate of deduction is @ 2% on all contract payments including subcontract and advertisement contract payments. The tax is required to be deducted if a single payment exceeds Rs. 30000/- or if the aggregate payments exceed Rs. 75000/- per annum).

(These payments are covered under sec. 194C of the Income Tax Act 1961).

 

Insurance commission-

Any person responsible for paying to a resident any remuneration or reward whether by way of commission or otherwise, for procuring insurance business is required to deduct tax @ 20% for companies and 10% for other person if the amount credited or paid is more than Rs. 5000/- in a financial year.

(However from 1st July 2010, any person responsible for paying to a resident any remuneration or reward whether by way of commission or otherwise, for procuring insurance business is required to deduct tax @ 20% for companies and 10% for other person if the amount credited or paid is more than Rs. 20000/- in a financial year).

 

Payments to Non residents sportsmen or sport association.-

The tax has to be deducted @10% on making any payment.

(These payments are covered under sec. 194E of the Income Tax Act 1961).

 

Commission on sale of lottery tickets and on brokerage-.

The tax has to be deducted @10% with some basic exemption.

(These payments are covered under sec. 194G & 194H of the Income Tax Act 1961).

 

Rent-

Any amount paid as rent above Rs. 120000/- per year will attract TDS provisions @ 10% for Individual & HUF and 20% for others. (TDS will be 2% for the use of any machinery or plant or equipment).

(However from 1st July 2010, any amount paid as rent above Rs. 180000/- per year will attract TDS provisions @ 10% for Individual & HUF and 20% for others).

(These payments are covered under sec. 194I of the Income Tax Act 1961).

 

Fees for professional or technical services/royalty/Income on units of mutual funds/compensation on acquisition of certain immovable assets-

The tax has to be deducted @10% with some basic exemption limits.

(These payments are covered under sec. 194J, 194K & 194LA of the Income Tax Act 1961).

 

Payment on Acquisition of certain immovable property-

Any amount above Rs. 100000/- paid as compensation or enhanced compensation on account of compulsory acquisition under any law in force, of any immovable property other than agricultural land will attract TDS provisions @ 10%.

The rates of TDS for representative purpose (in effect till 30.06.2010):

For Salaries:

TDS Salary Rates old.png

For other payments:

TDS old R1.png

 

Following changes shall be applicable w.e.f. 01.07.2010 till 31.03.2011:

For Salaries:

TDS Salary Rates New.png

 

For other payments:

 

TDS Rates2.png