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TDS on Payments to Residents and Non-Residents

TDS Defined

Deduction of tax at source or TDS is a provision within the direct taxation system that enables income tax authorities to recover tax from individuals. Income tax liable on certain payments are reduced from the amount paid at the time of making payment by the persons making it. It is deposited to the credit of the Central Government before the due date and the recipient gets credit for this recovery.

The recipient of the payment is required to add the gross amount (before deduction) to his income for calculating liability and the amount of TDS is adjusted against his final tax liability. The recipient takes credit of the amount already deducted and paid on his behalf. TDS is applied on payments such as rent, commission, professional fees, works contract, salary, interest, etc. The rates applicable to each deduction are specified in the Act and the residential status also comes into account while deciding TDS liability. It is only if the amount to be paid is substantial enough to attract taxability that TDS is deducted on it and hence, limits are quantified for each specific form of payment, below which, no tax shall be deducted.

 

The Pandemic and Its Effect on TDS

The government has provided relief in the TDS rates for the period 14.05.2020 to 31.03.2021, due to the pandemic and the lockdown that ensued as all sectors of the economy have been affected. The relief is limited to the normal TDS rates only and not for the rates where tax needs to be deducted or collected at a higher rate. The benefit of revision applies only to Resident Indians. Hence, Non-Residents cannot claim benefits of the same.

Let us discuss the various TDS Rates applicable to Residents and Non-Residents.

 

TDS Rates Applicable for Resident of India

Section Particulars TDS Rates From
01.04.2020 to 13.05.2020 14.05.2020 to 31.03.2021
Section 192 Payment of salary Normal Slab Rate Normal Slab Rate
Section 192A Premature withdrawal from EPF 10 10
Section 193 Interest on securities. a. Any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act; b. Any debentures issued by a company where such debentures are listed on a recognized stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 and any rules made thereunder; c. Any security of the Central or State Government; d. Interest on any other security 10 7.5
Section 194 Dividend other than the dividend as referred to in Section 115-O 10 7.5
Section 194A Income by way of interest other than “Interest on securities” w.e.f 1st April 2018, interest up to Rs. 50,000 earned by senior citizens on: – deposit with banks – deposit with post offices – fixed deposits schemes – recurring deposit schemes will be exempt from TDS w.e.f 1st April 2019, TDS on the interest income from post offices and bank deposits have increased up to Rs. 40,000 from Rs. 10,000. 10 7.5
Section 194B Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort 30 30
Section 194BB Income by way of winnings from horse races 30 30
Section 194C Payment to contractor/subcontractors. a) HUF/Individuals b) Others 1 2 0.75 1.5
Section 194D Insurance commission 5 3.75
Section 194DA Payment in respect of a life insurance policy 5 3.75
Section 194EE Payment in respect of deposit under National Savings scheme 10 7.5
Section 194F Payment on account of repurchase of a unit by Mutual Fund or Unit Trust of India 20 15
Section 194G Commission, etc., on the sale of lottery tickets 5 3.75
Section 194H Commission or brokerage 5 3.75
Section 194-I Rent on a) Plant & Machinery b) Land or building or furniture or fitting W.e.f 1st April 2019, TDS limit for deduction of tax on rent is increased to Rs. 2,40,000 p.a from Rs.1,80,000 p.a. 2 10 1.5 7.5
Section 194-IA Payment on transfer of certain immovable property other than agricultural land 1 0.75
Section 194 – IB Rent payable by an individual or HUF not covered u/s. 194I (w.e.f from 01.06.2017) 5 3.75
Section 194 – IC Payment under Joint Development Agreements to Individual/HUF (w.e.f. 01.04.2017) 10 7.5
Section 194J Any sum paid by way of: a. Fee for professional services b. Remuneration/fee/commission to a director or c. For not carrying out any activity in relation to any business. d. For not sharing any know-how, patent, copyright etc. 10 7.5
(e) Fee for technical services (d) Royalty towards the sale or distribution or exhibition of cinematographic films. 2 1.5
Section 194 K Payment of any income in respect of (a) units of a mutual fund as per section 10(23D); or (b) the units from the administrator; or (c) units from specified company (w.e.f. 01.04.2020) 10 7.5
Section 194LA Payment of compensation on acquisition of certain immovable property 10 7.5
Section 194LBA Certain income distributed by a business trust to its unit holder 10 7.5
Section 194LBB Certain income paid by an investment fund to its investors 10 7.5
Section 194 LBC Income in respect of investment in securitization fund : 1. Individual and HUF 2. Others 25 30 18.75 22.5
Section 194M Certain payments by Individual/HUF (Limit - 50 Lakhs) 5 3.75
Section 194N Payment of certain amount in cash (Limit 1 Crore) 2 2
First proviso of Section 194N Payment of certain amount in cash if- - The amount is more than Rs.20 lakh but up to Rs. 1 crore - The amount exceeds Rs. 1 crore (Applicable from 01.07.2020) 2 5 2 5
Section 194O Applicable for e-commerce operator for the sale of goods or provision of services facilitated by it through its digital or electronic facility or platform (Applicable from 01.10.2020) - 0.75
  Any Other Income 10 10

TDS Rates Applicable for Non-Resident of India (NRIs)

Section Particulars TDS Rates From
01.04.2020 to 13.05.2020 14.05.2020 to 31.03.2021
Section 192 Payment of Salary Normal Slab Rate Normal Slab Rate
Section 192A Premature withdrawal from EPF 10 10
Section 194B Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort 30 30
Section 194BB Income by way of winnings from horse races 30 30
Section 194E Payment to non-resident sportsmen/sports association 20 20
Section 194EE Payment in respect of deposits under National Savings Scheme 10 10
Section 194F Payment on account of repurchase of a unit by Mutual Fund or Unit Trust of India 20 20
Section 194G Commission, etc., on sale of lottery tickets 5 5
Section 194LB Payment of interest on infrastructure debt fund 5 5
Section 194LBA Income from units of business trust - interest received or receivable from a special purpose vehicle; or - dividend referred to in sub-section (7) of section 115-O 5 10 5 10
Section 194LBC Income in respect of investment in securitization fund 30 30
Section 194LC Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond) 5 5
Section 194LD Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor 5 5
Section 194N Payment of a certain amount in cash (Limit 1 Crore) 2 2
First proviso of Section 194N Payment of certain amount in cash if- - The amount is more than Rs.20 lakh but up to Rs. 1 crore - The amount exceeds Rs. 1 crore (Applicable from 01.07.2020) 2 5 2 5
Section 195 Payment of any other sum to a Non-resident    
  a) Income in respect of investment made by a Non-resident Indian Citizen 20 20
  b) Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen 10 10
  c) Income by way of long-term capital gains referred to in Section 193 (1) (c) (iii) 10 10
  d) Income by way of short-term capital gains referred to in Section 111A 15 15
  e) Any other income by way of long-term capital gains [not being long-term capital gains referred to in clauses (33), (36) and (38) of Section 10] 20 20
  f) Income by way of interest payable by Government or an Indian concern on money borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC 20 20
  g) Income by way of royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of a copyright in any book on a subject referred to in the first proviso to sub-section (1A) of Section 115A of the Income-tax Act, to the Indian concern, or in respect of any computer software referred to in the second proviso to sub-section (1A) of Section 115A of the Income-tax Act, to a person resident in India 10 10
  h) Income by way of royalty [not being royalty of nature referred to in sub-item (b)(i)(F)] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy 10 10
  i) Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy 10 10
  j) Any other income 30 30
Section 196A Income in respect - of units of a Mutual Fund specified under clause (23D) of section 10; or -from the specified company referred to in the Explanation to clause (35) of section 10 20 20
Section 196B Income from units (including long-term capital gain on transfer of such units) to an offshore fund 10 10
Section 196C Income from foreign currency bonds or GDR of an Indian company (including long-term capital gain on transfer of such bonds or GDR) 10 10
Section 196D Income of Foreign Institutional Investors from securities (not being a dividend or capital gain arising from such securities) 20 20

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Category Income Tax, Other Articles by - Ayisha Anis 



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