Understand TDS Deduction If person is resident in India

Understand TDS Deduction: If person is resident in India

The TDS deduction is to be done if the income exceeds certain prescribed limit. Moreover, this TDS is deducted not just on salary income but also for other incomes. In this blog, we have discussed major deduction for residents in India.

TDS Deduction for person resident in India

Here is the list and explanation of TDS deduction for residents in India:

Payment of Salary TDS Deduction

Firstly, the TDS on salary is to be deducted by employer who pays salary to his employee. The TDS deduction on salary is made if the employee’s income exceeds the prescribed limit. Further, the TDS rates applicable are dependent on the income slab of the employee.

The amount limit from which tax is chargeable is as follows:

Age Group

Old Tax Regime

New Tax Regime

Age is below 60 years

Rs. 2.5 lacs

Rs. 2.5 lacs

Age is above 60 years but below 80 years

Rs. 3 lacs

Rs. 2.5 lacs

Age is above 80 years

Rs. 5 lacs

Rs. 2.5 lacs

TDS on salary      =        Estimated Total Tax Liability

                                        ____________________________

                                         Period of Employment  

Withdrawal of Provident Fund

Secondly, the deduction is to be faced by resident on withdrawal of provident fund. This deduction of TDS is made if the withdrawal is more than Rs. 30000 and the PF account holder has served less than five years in an organization. Consequently, the rate of TDS applicable is 10%.

Also Read: New Rules Related to Employee Provident Fund

Interest on Securities

Secondly, a TDS of 10% is to be deducted for individual and HUF on interest from securities received. This TDS deduction, however is made only if the limit of Rs. 5000 on debentures and 10,000 on others are crossed.

Also Read: How to treat income from transfer of shares?

Other than interest on securities

Thirdly, residents having income from other than interest on securities like fixed deposits, interest on loans etc are subject to TDS of 10%. The threshold limit for TDS deduction on other than interest on securities are as follows:

Particulars

Threshold Limit

TDS Rates

A banking company or any bank or a banking institution

Rs. 40,000

10%

Co-operative society engaged in the business of banking

Rs. 40,000

10%

Co-operative society engaged in the business of banking

Rs. 40,000

10%

Senior Citizens

Rs. 50,000

10%

Others

Rs. 40,000

10%

Income by way of Dividend

Fourthly, TDS deduction is applicable to dividends distributed, declared or paid on or after 01-04-2020. Above all, an Indian company shall deduct tax at the rate of 10% from dividend distributed to the resident shareholders, if the aggregate amount of dividend distributed or paid during the financial year to a shareholder exceeds Rs. 5,000.

Also Read: Taxability of dividend income: All you need to know

Winnings from lotteries

Fifthly, the resident may be subject to TDS, if he has winnings from lotteries. Having stated that, all the winnings over and above Rs 10,000 are subject to a TDS of 30%. With cess and surcharge, the effectual rate will be 31.2%. Further, this TDS is deducted by the company or organisation distributing the prize money.

Horse Race Winnings

Similar to the above situation , the resident may also be subject to TDS deduction if he has winnings from horse races. The Rate of TDS on payments of winnings from horse race under Section 194BB of Income Tax Act, 1961 is 30% plus surcharges. In addition to this, if the prize is paid in instalments, the tax deduction will be made at the time of each instalment.

Payment to contractors

The resident, if being a contractor is subject to TDS deduction. The deduction of tax at source is to be made by any “specified person” making payment to such resident contractor. The TDS has to be deducted in case, when the one time payment amount exceeds Rs.30,000 or Rs.1,00,000 in aggregate during the year. To summarise, the  deduction rates on payment to resident contractors are as follows:

Particulars

Amount

Single payment of a contract

More than Rs. 30,000

Aggregate payment of a contract

More than Rs. 1,00,000

Also Read: Section 194C: TDS on payment to contractors

Insurance Commission

In case of insurance commission, the TDS is to be deducted in case any person who pays to resident an income in form of remuneration/reward for generating insurance business. The rate of TDS applicable for insurance commission are as follows:

Particulars

PAN is furnished

PAN is not furnished

Persons other than a company

5%

20%

Domestic company

10%

20%

Professional or technical fees

Residents having income from professional or technical fees are also subject to TDS deduction. The TDS is to be deducted in case the payment exceeds the following threshold limits:

Nature of Payment

Amount

Professional fees 

Rs. 30,000

Technical services fees 

Rs. 30,000

Royalty 

Rs. 30,000

Payment in nature of non-compete fees

Rs. 30,000

Remuneration paid to directors

No limit

Commission or brokerage

Lastly, the TDS deduction is to be made by any person on payment of commission or brokerage to a resident person. However, the TDS is to be deducted only if the amount exceeds Rs. 15,000 aggregately in a financial year.

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2 thoughts on “Understand TDS Deduction: If person is resident in India”

    1. Sure sir! We at TaxHelpdesk keeps providing latest updates on our website related to Income Tax, TDS, GST, financial and legal matters. For more details, you can join our group on WhatsApp!

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