TDS can be levied on all income sources, including those that generate commissions, incentives and salaries as well as dividends and payments. The rate of TDS levied on salary and other income sources can vary depending on the income source. It may be between 1% and 30%. The Central Board of Taxes regulates the TDS Rates as well as its collection. This article will cover all aspects of TDS, including TDS Rates.
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What is TDS?
TDS, or Tax Deducted At Source, is something you may have heard of. This is basically a tax that is deducted from your income source.
TDS can be applied to any income or overheads, including:
- Incentive programs (above and beyond your salary)
- Fixed deposits (bank FDs) are subject to interest
- Dividends and bonds
- Commission Payments
- Rent payment for any immovable property
TDS is deducted under these headings at a fixed TDS rate. The tax liability is then deducted before the payment is made. The source of TDS deduction is called the ‘Deductor’ and the recipient is the ‘Deductee.
Thus, a ‘Deductor’ is your employer/organisation that pays a salary or incentive to you, while you would be a ‘Deductee.’ Moreover, if the Deductor takes more than the required amount as tax, you will be eligible to claim a TDS Refund if you file your TDS Return.
What are the different TDS Deduction Exemptions?
There are very few cases where the TDS exemption can be granted. TDS is not levied upon payments made to RBI (Reserve bank of India) or on any recompense towards the central government.
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TDS exemptions can also be used to pay interest starting at:
- Finance Bill Financial corporations are formed
- Income Tax Refunds
- Interest payments on direct taxes
- Investments in LIC, UTI (Union Trust of India), and co-operative society
- Interests earned on savings or recurring deposits accounts with co-operative societies and commercial banks
- Interest earned on NSC, Indira Vikas Patra IVP or KVP (Kisan Vikas Patra).
- Interest earned from NRE (Non Resident External Rupee account)
- All institutions that are designated as Nil TDS organisations
- Interest on the Motor Vehicles Claims Tribunal compensation
What are the TDS rates for Fixed Deposits?
- TDS Rates applicable to interest earned on fixed deposits (FDs) are applied above a limit of Rs. 40,000 (from FY 2019-20 onwards).
- The limit for earlier years was Rs. 10,000 for a financial year
- If you earn more than the limit for fixed deposit interest (either single interest or consolidated interest for multiple PAN numbers), the TDS rate applicable will be 10% of maturity proceeds or interest payout. TDS Rates only apply when you (as payee) have received the accrued interest Rs. 10,000 per financial year
- The TDS rate applicable to interest earned if you have provided a PAN (Permanent account Number), will be 10%
- The TDS Rates for those who do not furnish the PAN information are 20%
- Senior Citizens (age 60+) are exempted from TDS up to Rs50,000 (earlier, the limit was Rs. 10,000)
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What are the TDS rates for the sale of immovable property?
- The TDS Rates for the sale of immovable property are at 1% according to Section 194-IA under the Income Tax Act.
- If you, as a buyer, are unable or unwilling to provide your PAN details, the TDS deduction rate could increase to a maximum of 20%
- Any residential or commercial plots, except the land notified for agricultural purposes, may be considered immovable property.
- Transactions must be done by cheque, cash or draft by Seller (or Transferee).
What are the TDS Rates for Rent of Immovable Property?
- If you pay rent for immovable property to a resident individual other than a HUF member, you are responsible for withholding TDS
- In cases where the annual rent amount exceeds Rs.2.4 million, the TDS deduction rate would be 10%
- Rent payable could include rent payments in the form a sublease, lease rental or other valid agreements for the use of the building, land or furniture
- Each rent payment must be accompanied by a valid rent receipt from the property owner. This is to ensure that TDS deductions are properly noted.
- At the end of each financial calendar, you (residential) must submit Form 16 (TDS Certificate) to your landlord
- Rent payments can be made by cheques, cash, and drafts
What are the TDS rates for purchasing immovable property?
- You are responsible for paying 1% TDS deduct rate on the purchase of any property
- No consideration will be given to land notified for agriculture under this TDS provision
- The transaction must be made in cash, draft, cheque or other agreed payment method
What are the TDS Rates for Immovable Property for NRIs?
- Non-Resident Indians (NRI) buyers are liable for TDS on immovable property according to Section 195 Income Tax Act
- If you (buyer), make a payment to NRI, you are responsible for deducting tax at the applicable TDS deduction rate
- Capital gains received after the sale of immovable property by NRI are subject to income tax
- A transfer of an immovable property can take place by a draft, cheque, or cash.
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What are the TDS Rates for Withdrawal of EPF?
If you (employee), make withdrawals in excess of Rs. You are subject to the following TDS rates if you withdraw Rs. 50,000 or more from your EPF account within five years of continuous service 10% – Once you submit your PAN details, but not Form-15G/15H