TDS Guide & Rate Chart (FY 2026-27)

1. What TDS is and why it exists

Tax Deducted at Source (TDS) is the Government's way of collecting income tax at the point of payment, rather than waiting for the recipient to file an ITR a year later. The payer (the deductor) withholds a prescribed percentage from the payment, deposits it to the Government, and issues a certificate to the recipient (the deductee). When the deductee files their ITR, they claim credit for the TDS already paid.

Why TDS exists

• Steady revenue flow — Government doesn't wait for assessment
• Compliance net — captures income that might otherwise go unreported
• Reduces post-year-end disputes — most of the tax is paid by the time the return is filed
• Trail for AIS — every TDS report enriches the Annual Information Statement

TDS provisions sit in Chapter XVII-B of the Income Tax Act (Sections 192 to 206C). Each section defines its own payee, threshold, rate, and timing. For the broader direct-tax context, see our Income Tax guide; for GST-side TDS / TCS (Section 51 / 52 of CGST), see the GST guide.

2. TAN — who needs to register for a Tax Deduction Account Number?

Every TDS deductor must obtain a TAN — a 10-character alphanumeric ID (e.g., PNEC12345A). Apply online via NSDL using Form 49B. TAN is issued by the Income Tax Department within 2–3 working days.

TAN structure

Four letters (first three = city / RTA code, fourth = first letter of name), five digits, one alphabetic check. Quoted on every challan, TDS return, and certificate.

Exceptions — when TAN is not needed

• Section 194-IA (buyer of property) — uses PAN, deposits via 26QB
• Section 194-IB (rent by individual not subject to audit) — uses PAN, deposits via 26QC
• Section 194M (individual/HUF paying contractor/professional above ₹50L) — uses PAN, deposits via 26QD
• Section 194S (VDA / crypto) — uses PAN in some cases

Penalty for not obtaining TAN: ₹10,000 (Section 272BB). Failure to quote TAN on documents: another ₹10,000.

3. TDS rate chart — what are the rates for FY 2026-27?

Rates below assume the deductee has provided a valid PAN. Without PAN (Section 206AA), TDS doubles or goes to 20%, whichever is higher — see §11. The old non-filer loading (Section 206AB) was repealed w.e.f. 1 April 2025.

Add health and education cess of 4% on TDS for payments to non-residents and where surcharge applies. For resident TDS, rates are inclusive — no cess or surcharge added.

4. TDS on salary — how is Section 192 calculated?

Section 192 covers all salary payments. The employer estimates the employee's annual tax liability at the start of the year and deducts TDS in 12 equal monthly instalments (or recomputes if salary changes).

What the employer needs from the employee

• PAN (mandatory)
• Investment declaration at the start of FY (for old regime)
• Proof of investments by January / February for verification
• Form 12BB — declaration of HRA, LTA, deductions
• Election for new vs old regime (default is new regime; employee can opt out)

Multiple employers in the year

If an employee changes jobs mid-year, the new employer considers salary from previous employer using Form 12B (if disclosed). If not disclosed, the new employer computes TDS on its own salary; the employee then pays shortfall via self-assessment tax while filing ITR.

Form 16

Issued by 15 June following the FY. Generated from TRACES after the Q4 return (24Q) is filed. Two parts: Part A is the TDS challan summary, Part B is the salary computation.

5. Contractor (194C) and professional (194J) — what rate applies?

Section 194C — contractor payments

Applies to payments to contractors and sub-contractors for work done — manufacturing, advertising, broadcasting, catering, transport of goods, manpower supply.

• Threshold: ₹30,000 single payment OR ₹1 lakh aggregate to one party in the FY
• Rate: 1% if payee is individual / HUF; 2% otherwise
• Exemption: Personal payments by individual/HUF not subject to audit
• Transporters with PAN and ≤10 vehicles: nil TDS (with declaration)

Section 194J — professional and technical fees

• Professional services (194J-a): 10% — CA, lawyer, doctor, architect, engineer, interior decorator, technical consultant, accountant, company secretary, etc.
• Technical services (194J-b): 2% — services involving technical / managerial skills
• Royalty (general / non-cinematographic): 10%
• Royalty for sale, distribution or exhibition of cinematographic films: 2%
• Director fees / sitting fees: 10% (no threshold)
• Threshold: ₹50,000 per financial year per nature of payment (raised from ₹30,000 by the Finance Act 2025, w.e.f. 1 April 2025)

6. Rent — when is TDS deducted under Sections 194I and 194-IB?

Section 194I — rent paid by businesses

Applies to all entities subject to tax audit. Threshold: ₹50,000 per month or part of a month (raised from ₹2,40,000 per annum w.e.f. 1 April 2025). Rates:

• Rent for plant / machinery / equipment: 2%
• Rent for land / building / furniture / fittings: 10%

Section 194-IB — rent paid by individual / HUF (no audit)

Applies to individuals and HUFs not subject to tax audit paying monthly rent exceeding ₹50,000. Rate: 2%(reduced from 5% with effect from 1 October 2024). Deducted once a year — on the last month's rent of the FY, or on vacating, whichever is earlier.

• No TAN required — uses PAN
• Deposit via Form 26QC within 30 days
• Form 16C (certificate) issued from TRACES

Common miss: many tenants paying ₹50,000+ residential rent to landlords still skip this. The landlord's 26AS shows the gap and triggers questions during their assessment.

7. Property purchase — how to deduct TDS under Section 194-IA?

The buyer of any immovable property (other than agricultural land) deducts 1% TDS when the property value is ₹50 lakh or more. Since 1 October 2024 (Finance Act 2024), the 1% is computed on the higher of the sale consideration or the stamp-duty value — not on the consideration alone. Applies regardless of whether the buyer is an individual / business / company.

Mechanics

1. Buyer obtains seller's PAN.
2. At the time of payment (each tranche, if instalments), deducts 1%.
3. Files Form 26QB within 30 days of the end of the month of deduction. No TAN required.
4. Form 16B downloaded from TRACES and issued to seller.
5. Seller claims credit in ITR via 26AS.

Multiple buyers / sellers

Each buyer files a separate 26QB for their share. Each seller's share of TDS is shown on their PAN. Co-ownership cases require careful allocation — get it wrong and 26AS reconciliation breaks.

Note: If the seller is a non-resident, Section 195 applies instead of 194-IA — rates are higher and TAN is required. Get a tax residency check before the registration.

8. Interest, dividend, commission

Section 194A — interest other than securities

• Bank / post office interest: 10% above ₹50,000 (₹1,00,000 for senior citizens) per FY per branch
• Other interest (loans, NBFC): 10% above ₹10,000
• Form 15G / 15H — declaration by recipient for nil TDS if income below taxable limit

Section 194 — dividend

10% on dividend above ₹5,000 per FY per shareholder. Listed companies deduct via the registrar; mutual funds via Section 194K.

Section 194H — commission and brokerage

2% (reduced from 5% with effect from 1 October 2024) on commission / brokerage above ₹20,000 per FY (threshold raised from ₹15,000 w.e.f. 1 April 2025). Does not apply to insurance commission (see 194D) or brokerage on securities transactions.

9. Partner remuneration / interest — what is the new Section 194T TDS?

Introduced by Finance Act 2024, effective 1 April 2025. Section 194T requires partnership firms and LLPs to deduct 10% TDS on:

• Salary or remuneration paid to a partner
• Commission or bonus paid to a partner
• Interest paid to a partner on capital or loan

Threshold: ₹20,000 per partner per financial year (aggregate of all the above).

Why this is new and material

Until FY 2024-25, no TDS applied between a firm and its partners. Section 194T changes that. Every partnership and LLP now needs a TAN (if it didn't already), must deduct 10% on partner payments, deposit monthly, and file Form 26Q quarterly with partner-wise breakdown.

What firms typically miss

• Interest on partner capital — TDS applies even if it's a book entry, not a cash payment
• Partner with PAN-Aadhaar not linked: TDS at 20% (Section 206AA)
• Working partner remuneration adjusted at year-end: deduct at time of credit, not at year-end

10. Crypto / VDA — how is TDS deducted under Section 194S?

Effective 1 July 2022, Section 194S requires TDS at 1% on transfer of any Virtual Digital Asset (VDA) — cryptocurrency, NFTs, similar tokens.

Thresholds

• Specified persons (individuals / HUFs with business turnover ≤ ₹1 crore or professional receipts ≤ ₹50 lakh, or salaried-only): ₹50,000 per FY
• Others: ₹10,000 per FY

How exchanges handle it

In peer-to-peer trades via an exchange, the exchange deducts 1% TDS from the buyer's payment to the seller and remits it. For direct P2P (no exchange), each party deducts on their own counterparty's payment.

Comes alongside the flat 30% tax on VDA gains under Section 115BBH and the 1% TDS reduces final tax payable.

11. No-PAN higher TDS (206AA) — and the repeal of 206AB

Section 206AA — no PAN (still in force)

If the payee has not furnished a valid PAN, TDS is the higher of: 20%, twice the rate specified in the Act, or the rate in force. This is the live higher-deduction provision — and it still bites. A common trigger today is an inoperative PAN (PAN not linked with Aadhaar), which is treated as PAN not furnished, pushing deduction to 20%.

How to stay clean

Collect and validate every payee's PAN before the first payment, and re-check PAN-Aadhaar linkage status — an unlinked PAN turns a 1% or 2% deduction into 20% and leaves you carrying the gap.

Section 206AB — repealed

Until 31 March 2025, Section 206AB loaded a higher rate on “specified persons” — payees who had not filed their ITR and whose TDS / TCS crossed ₹50,000 in the relevant year. The Finance Act 2025 omitted Section 206AB (and its TCS counterpart 206CCA) with effect from 1 April 2025, because deductors could not reliably verify a payee's filing status at the time of payment. For FY 2026-27 there is no non-filer loading and no Compliance Check (specified-person) verification to run before deducting. Only the no-PAN provision above (206AA) applies.

12. Lower / nil deduction certificate — how to apply under Section 197?

If the deductee's actual tax liability is lower than what would be deducted as TDS, they can apply to the Assessing Officer in Form 13 for a certificate authorising lower or nil deduction.

Typical use cases

• Loss-making business — TDS would result in refund
• Professional with high deductible expenses — net taxable income low
• Exporter under presumptive scheme or with brought-forward losses
• Senior citizens with income below taxable limit and large interest income

Mechanics

1. Apply online via TRACES — Form 13 with computation, projected income, last 3 years' ITRs.
2. AO reviews and may issue certificate within ~30 days.
3. Certificate is for a specific FY and specific deductor (or all).
4. Deductor verifies certificate on TRACES before applying lower rate.

For interest income alone, individuals can submit Form 15G (under 60) or Form 15H (60+) directly to the bank / payer — simpler self-declaration route.

13. Deposit due dates and challans — when to pay TDS?

Monthly deposit — by 7th of next month

TDS deducted in any month must be deposited by the 7th of the following month. Exception: TDS deducted in March can be deposited up to 30 April.

Special challans (no TAN, no monthly cycle)

• Form 26QB — buyer of property (194-IA), within 30 days of end of month of deduction
• Form 26QC — tenant under 194-IB, within 30 days of last month's rent of FY / vacating
• Form 26QD — individual under 194M, within 30 days
• Form 26QE — VDA / crypto under 194S

Challan ITNS 281 — for regular deductors

Used by all TAN holders for non-special TDS deposits. Filed online via Income Tax e-filing portal (or authorised banks). Quote: TAN, AY, nature of payment, period of deduction.

Late deposit interest

1.5% per month from date of deduction to date of deposit (Section 201(1A)). Even one day's delay attracts a full month's interest in practice.

14. Quarterly TDS / TCS returns

Quarterly due dates

Filing mechanics

• Use TDS software (Govt-approved e.g. NSDL utilities, or third-party) to generate the .fvu file
• Upload via Income Tax e-filing portal with DSC or EVC
• Receipt token generated immediately on success
• Status visible on TRACES in ~3 working days

15. Form 16 / 16A / 27D — TDS certificates

All certificates are downloaded from TRACES after the respective return is filed and processed. Manual certificates have no legal validity since 2014.

16. 26AS, AIS and TIS

Form 26AS — tax credit statement

The original consolidated TDS / TCS / tax payment ledger for a taxpayer. Shows:

• All TDS deducted (with deductor TAN, section, amount)
• Advance tax and self-assessment tax paid
• Refunds received
• High-value transactions (Part E)
• SFT reporting (Part E)

AIS — Annual Information Statement

Introduced 2021, broader than 26AS. Pulls reports from banks, mutual funds, registrars, GSTN, employers, foreign remittance authorities. Captures:

• Savings bank interest
• Dividends from listed companies
• Securities transactions (BSE / NSE)
• Mutual fund redemptions
• Foreign remittances under LRS
• Cash deposits over thresholds
• Property purchase / sale
• Credit card spends above ₹2 lakh / year
• GST turnover

TIS — Taxpayer Information Summary

A condensed summary of AIS — gives the taxpayer a single view of total income aggregated by category. Useful for pre-filling ITR.

Reconcile before filing

Match your records to 26AS and AIS before filing. If a TDS entry is missing from 26AS, contact the deductor — the deductee's claim depends on it.

17. TCS — Tax Collected at Source (Section 206C)

TCS reverses the TDS flow — the seller collects extra over the sale price and remits to Government. The buyer claims the credit in their ITR.

Common TCS rates

206C(1H) vs 194Q — who deducts?

When the buyer's turnover exceeds ₹10 crore in the prior FY and the transaction value exceeds ₹50 lakh, both can technically apply. 194Q (buyer deducts TDS) takes precedence — if the buyer is liable to deduct under 194Q, the seller need not collect under 206C(1H). Reconcile declarations at the start of the FY.

TCS return

Form 27EQ — quarterly, same due dates as TDS returns. Form 27D issued to the buyer after filing.

18. Penalties, interest, late fees

Section 201(1A) — interest on late deduction / deposit

• 1% per month — from date deduction should have been made to date of actual deduction
• 1.5% per month — from date of deduction to date of deposit

Section 234E — late filing fee for TDS / TCS returns

₹200 per day of delay, capped at the TDS / TCS amount of the return. Pay this fee before filing — the portal blocks the return otherwise.

Section 271H — incorrect / late return

₹10,000 to ₹1,00,000 penalty. Waived if the return is filed within 1 year of due date and TDS + interest + 234E are paid.

Section 271C — failure to deduct TDS

Penalty equal to the amount of TDS not deducted. In practice, also triggers 30% disallowance of the expense under Section 40(a)(ia).

Section 276B — prosecution

Rigorous imprisonment of 3 months to 7 years plus fine if TDS deducted is not deposited within the prescribed time. Applies in egregious cases — but the section exists.

19. What changed in FY 2026-27

1. Section 194T live — TDS on partner remuneration / interest at 10% above ₹20,000 p.a. effective 1 April 2025. Every firm and LLP now in scope.
2. Section 194H reduced — commission / brokerage from 5% to 2% w.e.f. 1 October 2024.
3. Section 194-IB reduced — rent by individual from 5% to 2% w.e.f. 1 October 2024.
4. Section 194-IA scope clarified — the ₹50 lakh threshold applies to total consideration, not per co-owner. Multiple buyer-seller combinations need careful allocation.
5. 206AB repealed — the higher-TDS-for- non-filers regime (and its TCS twin 206CCA) was omitted by the Finance Act 2025 w.e.f. 1 April 2025. No more Compliance Check lookup before deducting; only the no-PAN loading under 206AA survives.
6. TCS on LRS / overseas tour threshold raised — the ₹7 lakh annual threshold rose to ₹10 lakh w.e.f. 1 April 2025 (20% above it for most purposes, 5% for education / medical). Education funded by a loan from a financial institution under Section 80E: nil TCS.
7. Form 12BAA— employer can consider non- salary TDS / TCS while computing salary TDS, on employee's declaration. Reduces year-end refund situations.

20. Mistakes that get noticed

• Wrong PAN of deductee.Even one wrong digit shifts the credit to a random taxpayer. The deductee's 26AS doesn't show your deduction; they raise the issue at year-end.
• Missing TDS on partner remuneration (194T). The newest rule — many firms still haven't set up the deduction in their books.
• Late deposit. Even one-day delay attracts full-month interest at 1.5% under Section 201(1A).
• Not checking PAN-Aadhaar linkage (206AA). An inoperative PAN is treated as no PAN — TDS jumps to 20%. Deduct at the normal rate against an unlinked PAN and the department asks for the 20%; you carry the gap.
• Wrong section under 194J. Professional fees at 10%, technical fees at 2% — many deductors bunch all 194J at 10% and over-deduct, or vice versa.
• Not deducting on rent under 194-IB. Common with individual tenants paying ₹60K+ monthly residential rent.
• Treating reimbursement as TDS-able. Reimbursement of out-of-pocket expenses (invoiced separately, with supporting bills) is not subject to TDS. But you need clean documentation.
• Not filing a nil return. If you have TAN but no TDS for the quarter, file a nil return anyway — non-filing attracts notices.
• Sub-letting Section 197 certificate. A lower-deduction certificate is deductor-specific. Don't apply one given to vendor A while paying vendor B.

21. Frequently asked questions

22. TDS glossary

TAN

Tax Deduction and Collection Account Number — 10-character ID for deductors.

PAN

Permanent Account Number — 10-character ID for taxpayers.

TDS

Tax Deducted at Source — withholding tax on payments.

TCS

Tax Collected at Source — collected by sellers on top of price.

TRACES

TDS Reconciliation Analysis and Correction Enabling System — the deductor's portal.

Deductor

Person making payment and deducting TDS.

Deductee

Person receiving payment after TDS withheld.

26AS

Tax Credit Statement of a taxpayer.

AIS

Annual Information Statement — broader than 26AS.

TIS

Taxpayer Information Summary — condensed AIS.

24Q

Quarterly TDS return for salary.

26Q

Quarterly TDS return for non-salary resident payments.

27Q

Quarterly TDS return for non-resident payments.

27EQ

Quarterly TCS return.

Form 16 / 16A

TDS certificate — salary (16) / non-salary (16A).

Form 16B/C/D/E

Certificates for special TDS — property / rent / 194M / VDA.

Form 26QB/C/D/E

Challan-cum-statement for special TDS without TAN.

Form 27D

TCS certificate.

Form 13

Application for lower / nil deduction certificate.

Form 15G / 15H

Self-declaration for nil TDS on interest (below taxable income).

206AB

Repealed w.e.f. 1 Apr 2025 — was higher TDS for non-filers of ITR.

206AA

Higher TDS where PAN not furnished (still in force).

DTAA

Double Taxation Avoidance Agreement — for cross-border payments.

TRC

Tax Residency Certificate — required to claim DTAA benefit.