Understanding TDS Rates for the 2025-26 Assessment Year
The TDS (Tax Deducted at Source) rates for the assessment year 2025-26 have been clearly outlined for various income categories. Understanding these rates is crucial for taxpayers and businesses alike.
Key Changes in TDS Rates
Salary Payments
The TDS on salary payments will follow the normal slab rates. Employers must ensure that deductions align with the employee’s applicable tax slab. This change aims to simplify tax compliance for both employers and employees.
Interest and Dividends
Interest on securities, dividends, and income by way of interest, other than on securities, will attract a TDS rate of 10%. However, winnings from lotteries and online games will face a higher rate of 30%. Therefore, individuals engaged in these activities should be aware of the significant deductions involved.
Detailed Analysis
The changes in TDS rates are significant for several reasons:
- Government Effort: Firstly, they reflect the government’s effort to streamline tax processes.
- Fair Taxation: Additionally, by adjusting the rates for various income types, the government aims to ensure fair taxation across different sectors.
- Reduction in TDS Rates: Moreover, specific adjustments, such as reducing the TDS on certain commissions from 5% to 2%, starting October 1, 2024, highlight an effort to ease the tax burden on certain professionals. This reduction is particularly beneficial for those in the lottery and brokerage industries, where the new rate applies.
Tips for Compliance
To ensure compliance with the new TDS rates:
- Review Official Guidelines: Taxpayers should regularly review the official guidelines.
- Consult Professionals: Furthermore, consulting with tax professionals can provide clarity and assist in making necessary adjustments to financial strategies.
Summary of TDS Rates for 2025-26
| Section | Particulars | TDS Rates (%) |
|---|---|---|
| Section 192 | Payment of salary | Normal Slab Rate |
| Section 192A | Payment of accumulated balance of the provident fund, which is taxable in the hands of an employee. | 10 |
| Section 193 | Interest on securities | 10 |
| Section 194 | Income by way of dividend | 10 |
| Section 194A | Income by way of interest other than “Interest on securities” | 10 |
| Section 194B | Income by way of winnings from lotteries, crossword puzzles, card games, and other games of any sort, or from gambling or betting of any form or nature whatsoever. | 30 |
| Section 194BA | Income by way of winnings from any online game | 30 |
| Section 194BB | Income by way of winnings from horse races | 30 |
| Section 194C | Payment to contractor/sub-contractor a) HUF/Individuals b) Others | 1 2 |
| Section 194D | Insurance commission | 5 |
| Section 194DA | Payment in respect of life insurance policy w.e.f. 1/9/2019, the tax shall be deducted on the amount of income comprised in insurance payout. | 5 |
| Section 194EE | Payment in respect of deposit under National Savings Scheme | 10 |
| Section 194F | Payment on account of repurchase of a unit by Mutual Fund or Unit Trust of India | 20 (Proposed to be Omitted w.e.f. 1st Oct 2024) |
| Section 194G | Commission, etc., on sale of lottery tickets | 5 (2% Applicable w.e.f. 1st Oct 2024) |
| Section 194H | Commission or brokerage | 5 (2% Applicable w.e.f. 1st Oct 2024) |
| Section 194-I | Rent a) Plant & Machinery b) Land or building or furniture or fitting | 2 10 |
| Section 194-IA | Payment on transfer of certain immovable property other than agricultural land | 1 |
| Section 194-IB | Payment of rent by individual or HUF not liable to tax audit | 5 (2% Applicable w.e.f. 1st Oct 2024) |
| Section 194-IC | Payment of monetary consideration under Joint Development Agreements | 10 |
| Section 194J | Fees for professional or technical services: i) sum paid or payable towards fees for technical services ii) sum paid or payable towards royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films; iii) Other sums | 2 2 10 |
| Section 194K | Income in respect of units payable to resident person | 10 |
| Section 194LA | Payment of compensation on acquisition of certain immovable property | 10 |
| Section 194LBA(1) | Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | 10 |
| Section 194LBB | Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] | 10 |
| Section 194LBC | Income in respect of investment made in a securitisation trust (specified in Explanation of section 115TCA) – 25 in case of Individual or HUF – 30 in case of other person | 25 / 30 |
| Section 194M | Payment of commissions (not being insurance commission), brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J. | 5 (2% Applicable w.e.f. 1st Oct 2024) |
Note: Tax shall be deducted under Section 194M with effect from 1/09/2019 when the aggregate of sums credited or paid during a financial year exceeds Rs. 50 lakh.
Summary
- Normal Slab Rate applies to the payment of salary under Section 192.
- 10% TDS is applicable for most payments like dividends, interest on securities, interest other than on securities, and certain other specified payments.
- 30% TDS is applicable for winnings from lotteries, crossword puzzles, and online or offline games, including horse races.
- Reduced TDS rates (from 5% to 2%) are set to be implemented from October 1, 2024, for certain commissions and payments.
- Special rates for immovable property transactions and professional/technical services.
This breakdown should help you understand the applicable TDS rates for various income types and transactions for the assessment year 2025-26. Let me know if there’s anything specific you’d like to know more about!