TDS sections, explained.

How TDS sections work

Chapter XVII-B of the Income Tax Act splits TDS into individual sections — one per type of payment. The deductor (the person paying) withholds tax at the prescribed rate, deposits it with the Government, and issues a certificate to the deductee (the person receiving payment), who claims credit for it while filing their ITR.

To deduct correctly you need the payee's PAN — without it, Section 206AA forces a higher rate (20%, or twice the specified rate, whichever is higher). Deposit is due by the 7th of the following month, and most sections are reported on a quarterly TDS return (24Q for salary, 26Q for other resident payments, 27Q for non-residents). Full mechanics, due dates and forms are in our TDS guide; the exact rate for every section is in the TDS rate chart.

TDS rates and thresholds are revised by the Finance Act — verify the current figure before deducting. The rates quoted below are the commonly cited figures for recent financial years; always cross-check against the notification in force on the date of payment, or use our TDS calculator to compute the exact amount.

The common sections explained

Section 194C — Contractor payments

• Who deducts: Any person (other than an individual/HUF not liable to audit) paying a contractor or sub-contractor for work.
• Rate: 1% for Individual/HUF payees, 2% for all other payees (companies, firms, LLPs).
• Threshold: ₹30,000 for a single payment, or ₹1,00,000 in aggregate to that contractor in the FY.
• When it applies: Work contracts — manufacturing to specification with materials supplied by the customer, advertising, broadcasting, catering, transport of goods, manpower supply.
• CA tip: Track cumulative payments per vendor across the year, not just per invoice — many businesses miss TDS because no single bill crossed ₹30,000, but the aggregate quietly crossed ₹1 lakh by Q3.

Section 194J — Professional / technical fees

• Who deducts: Any person (other than an individual/HUF not liable to audit) paying for professional or technical services.
• Rate: 10% for professional services (CA, lawyer, doctor, architect, engineer, consultant); 2% for technical services or call-centre payments.
• Threshold: ₹30,000 per financial year, per nature of payment, per payee.
• When it applies: Retainer fees, consulting invoices, audit fees, legal fees, director sitting fees, technical support contracts.
• CA tip: Professional vs technical is the most commonly confused pair on this list — a CA's audit fee is professional (10%), but a payment for IT infrastructure support is often technical (2%). Get this wrong and either you've under-deducted (interest + penalty) or over-deducted (vendor complaint).

Section 194I — Rent

• Who deducts: Any person subject to tax audit, paying rent to a landlord.
• Rate: 2% for plant/machinery/equipment rent; 10% for land, building or furniture rent.
• Threshold: ₹2,40,000 in the financial year, per landlord.
• When it applies: Office rent, warehouse rent, equipment rental, godown rent.
• CA tip: If you're an individual or HUF not subject to audit, this isn't your section — you fall under 194-IB instead, with its own lower monthly threshold and once-a-year deduction cycle. Don't apply 194I's annual threshold to a 194-IB situation.

Section 194H — Commission / brokerage

• Who deducts: Any person paying commission or brokerage (other than insurance commission, which falls under 194D).
• Rate: 5% (verify — recent Finance Acts have reduced commission-related rates; confirm the figure in force before deducting).
• Threshold: ₹15,000 in the financial year, per payee.
• When it applies: Sales commission, referral fees, agent commission, brokerage on non-securities transactions.
• CA tip: Don't confuse this with insurance commission (194D) or brokerage on securities trades, which sit outside 194H entirely.

Section 194A — Interest (other than securities)

• Who deducts: Any person (other than individuals/HUF not liable to audit) paying interest other than on securities.
• Rate: 10%.
• Threshold: ₹40,000 per FY (₹50,000 for senior citizens) for bank/post office interest; a lower threshold applies for other interest payers (loans, NBFCs, deposits).
• When it applies: Interest on fixed deposits, unsecured loans, inter-corporate deposits.
• CA tip: Recipients below the taxable threshold can submit Form 15G (under 60) or 15H (60+) to the payer to avoid TDS altogether — collect these before the first interest credit each year, not after TDS has already been deducted.

Section 194Q — Purchase of goods

• Who deducts: A buyer whose turnover exceeded ₹10 crore in the preceding financial year.
• Rate: 0.1% on the value exceeding the threshold.
• Threshold: ₹50 lakh aggregate purchase value from a single resident seller in the FY — TDS applies only on the excess over ₹50 lakh.
• When it applies: Bulk purchase of goods (not services) from a resident seller.
• CA tip: Reconcile with your seller at the start of the year on who is deducting/collecting — 194Q (buyer's TDS) overrides the seller's 206C(1H) TCS obligation when both could technically apply, so double compliance on the same invoice is a common, avoidable error.

Section 192 — Salary

• Who deducts: Every employer paying salary.
• Rate: As per the employee's applicable income-tax slab (not a flat percentage).
• Threshold: The basic exemption limit under the employee's chosen regime.
• When it applies: Every salary payment — TDS is spread across monthly instalments, based on the employer's estimate of the employee's annual tax liability.
• CA tip: Recompute the monthly instalment whenever an employee's salary structure, regime choice, or investment declaration changes mid-year — a stale estimate from April often leaves a large shortfall to true-up in Q4.

Full rate chart with every section — including 194-IA, 194-IB, 194T, 195 and more — is on the TDS rate chart page.

Common mistakes

• Not aggregating payments to the same vendor. A ₹25,000 invoice this month and another next month can quietly cross the ₹1,00,000 aggregate threshold under 194C — TDS is then due on the full aggregate, not just the amount above the threshold, and many businesses miss this because no single bill looked large.
• Applying the wrong sub-rate under 194J. Professional fees (10%) and technical/call-centre fees (2%) are both under Section 194J but at different rates — treating a technical services invoice as professional (or vice versa) leads to an under- or over-deduction that surfaces in the deductee's 26AS mismatch.
• Skipping the higher no-PAN rate. Section 206AA applies automatically once a payee's PAN is missing or inoperative (not Aadhaar-linked) — deductors who don't re-check PAN status periodically keep deducting the normal rate and end up short.
• Double compliance under 194Q and 206C(1H). When both a buyer's 194Q obligation and a seller's 206C(1H) TCS obligation could apply to the same purchase, the buyer's 194Q takes precedence — some businesses don't reconcile this with their counterparty and end up either doubly taxed or under-compliant.
• Late deposit interest adding up quietly. Interest under Section 201(1A) accrues at 1% per month for late deduction and 1.5% per month for late deposit — even one day past the 7th of the month counts as a full month's delay in practice, so a habit of depositing "a few days late" compounds fast across a year.
• Confusing 194C (contract for work) with 194J (professional/technical service). A vendor supplying and installing equipment is generally a contractor (194C); a vendor advising on how to design the installation is generally a professional or technical service (194J) — the line matters because the rates and thresholds differ.

Frequently asked questions