The TDS framework under the Income Tax Act, 2025 consolidates the earlier fragmented provisions into two key sections: Section 392 for salary income and Section 393 for all other payments, supported by detailed tables covering resident, non-resident, general payments, and exempt cases. The Act introduces clearer definitions, threshold limits, and rate structures while emphasizing compliance through documentation, valid PAN requirements, and strict penalties. It outlines TDS applicability on diverse payments—rent, interest, professional fees, contractor payments, e-commerce transactions, virtual digital assets, and winnings—along with exemptions, declaration-based non-deduction, and grossing-up rules. The law also mandates TDS at the earlier of credit or payment, including year-end provisions, and imposes interest for non-deduction or late payment. Failure to deduct can result in disallowance of expenses, though relief is available when the payee reports income and provides certification. Special rules apply for salaries paid abroad, reinforcing the Act’s focus on accurate withholding and reporting.
FAQs on TAX DEDCUTED AT SOURCE UNDER INCOME TAX ACT, 2025
(1) Is there any change in the structure of TDS provisions as compared to the Old act, 1961?
Yes, the TDS provisions are structured in two Sections in the New Act.
Section 392 : TDS on Salary
Section 393 : TDS on others
Unlike provisions related to “TDS” structured under different sections in earlier Act, the New Act structured the same in 2 sections (Sec 392 for TDS on Salary and Sec 393 for TDS on all other payments) – under different Tables as given below:
Section 393: TDS on Other Payments
| Table | Particulars |
| Table 1 | Payments to Resident |
| Table 2 | Payments to Non-Resident |
| Table 3 | Payments to any Person |
| Table 4 | No Deduction (Exemptions from TDS) |
| Table 5 | No Deduction, based on declaration |
(2) What the provisions related to TDS on Salary?
Please refer to the Article https://taxguru.in/income-tax/tds-salary-new-income-tax-act-2025.html
(3) What are the important definitions of ‘words / phrases’ applicable to TDS?
| Designated Person / Specified Person | (a) any person, not being an individual or Hindu undivided family; or
(b) an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceeds Rs.1 Crore in case of business or Rs.50 Lakhs in case of profession during the tax year immediately preceding the tax year. |
| Other definitions such as ‘Agricultural Land’, ‘Rent’, ‘immovable property’, ‘professional services’ etc., | Please refer to Section 402 – Interpretation. |
Note: For majority of transactions, Rate of TDS is stipulated in the Section. For few types of transactions (example: Insurance commission), TDS rate is mentioned as “rates in force”. For these types of transactions, generally, the TDS rates are prescribed in the Finance Act. For example, the Finance Act, 2025 prescribes the TDS rates for these types in the First Schedule.
The readers may refer to the respective Finance Acts applicable for a particular year for the TDS rates. Usually, the Finance Bill for every year is tabled in the Parliament, while presenting the Budget by the Finance Minister of India and will become the Finance Act, once the assent of the President of India is given for the Bill and notified in the Gazette of India.
(4) What are the provisions related to TDS on Payments to Resident?
PAYMENTS TO RESIDENTS
[Sec 393 – 1st Table]
| Sl.No | Nature of payment | Person liable to deduct TDS | Threshold Limit | Rate of TDS |
| 1 | Insurance Commission | Any Person | 20,000 | Rates in force |
| 2 | Any other Commission | Specified Person | 20,000 | 2% |
| 3 | Rent | Any Person other than specified person | 50,000 per month | 2% |
| 4 | Rent – for use of any machinery or equipment | Specified Person | 50,000 per month | 2% |
| 5 | Rent – land / building | Specified Person | 50,000 per month | 10% |
| 6 | Purchase of Immovable property – other than Agricultural land | Any Person | 50,00,000
(cumulative consideration in case of multiple transferors or multiple transferees) |
1% |
| 7 | Purchase of land or building under specified agreement for development of real estate project in consideration of a share in land or building or both with payment of cash
(TDS on cash portion) |
Any Person | 5,00,000
(Cash consideration only) |
10% |
| 8 | Compensation for compulsory acquisition of immovable property under any law | Any person | 5,00,000 | 10% |
| 9 | Interest on Securities | Any Person | 10,000 | Rates in force |
| 10 | Interest other than interest on securities | Banks, Cooperative society and Post Office | Senior citizen : Rs.1 Lakh;
Others: 50,000 |
Rates in force |
| 11 | Interest other than interest on securities | Specified Person | 10,000 | Rates in force |
| 12 | Payment to Contractors (including Labour supply contracts) | Designated Person | 30,000 for single transaction;
1 lakh – in a tax year |
1% if the contractor is an Individual or HUF
2% for others |
| [contracts where supply of materials is made by the customer and if invoice for job work specifies material value separately, TDS need not deducted on such material value] | ||||
| 13 | Payment to contractors or payment towards professional services or commission | Individual or HUF | 50 Lakhs | 2% |
| 14 | Fees for Technical services | Specified Person | 50,000 | 2% |
| 15 | Fees for Professional services | Specified Person | 50,000 | 10% |
| 16 | Other Fees / remuneration / commission payable to Directors of a Company [other than salary, for which TDS is deducible u/s.392] | Specified Person | Nil | 10% |
| 17 | Royalty | Specified Person | 50,000 | 2% for cinema films sale /distribution
10% in other cases |
| 18 | Fees paid not to share technical know how etc. specified under sec 26(2)(h) | Specified Person | 50,000 | 10% |
| 19 | Dividend | Domestic Company | Nil | 10% |
| 20 | Any payment by Insurance Companies under a life insurance policy (other those exempted income under Sch.II) | Insurance Companies | 1 Lakh | 2% |
| 21 | Purchase of Goods | Any Person being a Buyer whose total sales, gross receipts or turnover from the business carried on by him exceed Rs.10 crores in the tax year immediately preceding the tax year. | 50 Lakhs | 0.10% |
| 22 | Any benefit or perquisite, arising from business or the exercise of a profession | Specified Person | 20,000 | 10% |
| 23 | Any sum on account of sale of goods or provision of services by an e-commerce
participant, facilitated by an e-commerce operator |
Ecom Operator | Nil | 0.10% |
| 24 | Transfer of virtual digital asset. | Any person | Nil | 1% |
(5) What are the provisions related to TDS on Payments to Non-Resident?
PAYMENTS TO RESIDENTS
[Sec 393 – 2nd Table]
| Sl.No | Nature of Income | Payee | Payer | TDS Rate |
| 1 | Income under Sec 211 – Non‑resident sportsman/entertainer or sports association | Non‑resident sportsman/entertainer / Non‑resident sports association | Any person | 20% |
| 2 | Interest on foreign currency loan/long‑term infra bonds (1 Jul 2012–1 Jul 2023) | Non‑resident (not company) / Foreign company | Indian company or business trust | 5% |
| 3 | Interest – Rupee denominated bonds issued before 1 Jul 2023 | Non‑resident (not company) / Foreign company | Indian company or business trust | 5% |
| 4 | Interest – Long‑term/rupee bonds listed in IFSC | Non‑resident (not company) / Foreign company | Indian company or business trust | 4% (issued 1 Apr 2020–1 Jul 2023) / 9% (issued after 1 Jul 2023) |
| 5 | Interest from Infrastructure Debt Fund | Non‑resident (not company) / Foreign company | Infrastructure Debt Fund | 5% |
| 6 | Distributed income u/s 223 – Schedule V (Sl.No.3) | Non‑resident (not company) / Foreign company unit holder | Business trust | 5% or 10% based on Schedule V |
| 7 | Distributed income u/s 223 – Schedule V (Sl.No.4) | Non‑resident (not company) / Foreign company unit holder | Business trust | Rates in force |
| 8 | Income from units of investment fund u/s 224 (other than exempt part) | Non‑resident (not company) / Foreign company unit holder | Investment fund | Rates in force |
| 9 | Income from investment in securitisation trust u/s 221 | Non‑resident (not company) / Foreign company | Securitisation trust | Rates in force |
| 10 | Income from Mutual Fund units or specified company units | Non‑resident (not company) / Foreign company | Any person | 20% or rate as per DTAA, whichever is lower |
| 11 | Income from units referred in Sec 208 | Offshore fund | Any person | 10% |
| 12 | Long‑term capital gains from units referred in Sec 208 | Offshore fund | Any person | 12.5% |
| 13 | Interest/dividends – Bonds/GDR u/s 209 | Non‑resident | Any person | 10% |
| 14 | LTCG – Bonds/GDR u/s 209 | Non‑resident | Any person | 12.5% |
| 15 | Income from securities u/s 210(1) – FIIs | Foreign Institutional Investor | Any person | 20% or rate as per DTAA, whichever is lower |
| 16 | Income from securities u/s 210(1) – Specified fund | Specified fund | Any person | 10% |
| 17 | Any other interest or sum (not including above or salaries) | Non‑resident (not company) / Foreign company | Any person | Rates in force |
(6) What are the provisions related to TDS on Payments to Non-Resident?
PAYMENTS TO ANY PERSONS
[Sec 393 – 3rd Table]
| Sl.No | Nature of payment | Person liable to deduct TDS | Threshold Limit | Rate of TDS |
| 1 | Winning from Lottery, gambling, betting etc., | Any person | 10,000 per transaction | Rates in Force |
| 2 | Winnings from online game | Any person | NA | Rates in Force |
| 3 | Winning from Horse race | Any person
[bookmaker or a person to whom a licence has been granted for horse racing] |
10,000 per transaction | Rates in Force |
| 4 | Any income, by way of commission, remuneration or prize for distributing, purchasing or selling lottery tickets. | Any person | 20,000 | 2% |
| 5 | Withdrawal cash from Bank / cooperative society engaged in Banking business / Post office | Bank / cooperative society engaged in Banking business / Post office | 3 Crores, if the recipient is a cooperative society
1 Crore, for other persons |
2% |
| 6 | Any amount referred to in section 80CCA(2)(a) of the Income-tax Act, 1961.
[Payment from NSS – National Savings Scheme] |
Any person | 2,500 | 10% |
| 7 | Any sum in the nature of salary, remuneration, commission, bonus or interest paid to a partner of the firm or credited to his account (including capital account). | Firm | 20,000 | 10% |
(7) What are the provisions related to payments exempted from TDS (No need to deduct TDS)?
NO DEDUCTION
[Sec 393 – 4th Table]
| Payment Type (Income Source) | Condition for No Tax Deduction (Exemption) |
| Commission or Brokerage | If the payment is from Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees. |
| Rent (Real Estate) | If the rent is paid to a Real Estate Investment Trust (REIT) that owns the property directly. |
| Compensation for Property Acquisition | If the compensation is for compulsory land acquisition and is exempt from income tax under Section 96 of the relevant Land Acquisition Act. |
| Income from Units of a Business Trust | If the income is a capital gain (profit from selling an asset). |
| Interest on Securities | General Government Securities: Interest on most Central or State Government securities (excluding specific taxable bonds like 8% Savings Bonds, 2003, or Floating Rate Bonds, 2020). |
| Specific Recipients: Interest paid to entities like the Life Insurance Corporation of India (LIC) or General Insurance Corporation of India (GIC). | |
| Other Interest Income | Paid to a banking company, financial corporation, the Unit Trust of India, or an insurance company. |
| Paid by one co-operative society to another, or to a member of a co-operative society (subject to certain turnover limits). | |
| Interest on compensation for motor accidents that does not exceed ₹50,000 in a tax year. | |
| Payments to Contractors | If the contractor owns 10 or fewer goods carriages and provides a valid declaration with their Permanent Account Number (PAN). |
| If the payment is made by an individual or Hindu Undivided Family (HUF) purely for their personal use (not for business). | |
| Fees for Professional/Technical Services | If the payment is made by an individual or HUF purely for their personal use (not for business). |
| Dividend Income | Paid to entities like LIC, GIC, other insurers, or a “business trust”. |
| If paid to an individual in a mode other than cash, and the total annual amount does not exceed ₹10,000. | |
| Payments by E-commerce Operator | If the e-commerce participant is an individual or HUF, their total annual sales do not exceed ₹500,000, and they provide their PAN or Aadhaar number. |
| Payment for Virtual Digital Asset Transfer | If the total value paid in the tax year does not exceed ₹50,000 (if paid by an individual/HUF below a certain business turnover) or ₹10,000 (if paid by any other person). |
| Payments in Cash | Payments made to the Government, a bank, a co-operative society engaged in banking, a post office, or their business correspondents/ATM operators. |
| Payments made to the legal heirs of a deceased assessee. | |
| General Exemption | No tax is deducted on any amount payable to the Government, the Reserve Bank of India, or a corporation fully exempt from income tax by law. |
Other Exemptions:
Subsection (7) and (8):
Deduction of tax shall not be made from the interest paid by an Offshore Banking Unit on borrowing from or deposit made on or after 1st April, 2005, by a non-resident or a person not ordinarily resident in India.
Tax shall not be made from any payment to a person for, or on behalf of, the New Pension System Trust.
(8) What are the provisions related to “no deduction” of TDS, if a declaration is given for such no deduction?
If an Eligible person furnishes a written declaration in duplicate in such form and manner as may be prescribed that the tax on such person’s estimated total income of the tax year in which such income or sum is to be included in computing his total income shall be nil, then the person responsible for making the following payments shall not deduct tax:
Eligible Persons:
An individual being a resident and any other persons, not being a company or a firm.
Amount Eligible for giving ‘No deduction’ Declaration
(a) payment of accumulated balance due to an employee referred to in section 392(7) [Related to Employees’ Provident Fund Scheme]
(b) insurance Commission
(c) rent
(d) income in respect of units
(e) interest
(f) payment in respect of life insurance policy
In addition to the above, a resident Individual may also give “No deduction” declaration for-
(g) dividend
Note:
1. If the amount payable to a person (other than resident individual, who is a senior citizen of age 60 years or more) exceeds the maximum amount not chargeable to tax, then ‘No deduction’ declaration cannot be given.
2. The person who receives the above declaration shall forward one copy of the declaration to the CIT or PCIT or PCCIT on or before 7thof the next month.
3. If the person fails to provide valid PAN in the declaration, the declaration shall become ‘invalid’ [Section 397 (2) (f)].
(9) What are the provisions related ‘Grossing-up’ the amount on which TDS to be deducted9?
Where under an agreement or an arrangement, if the tax chargeable on any income of the recipient is to be borne by the payer, then, for the purposes of TDS, the income shall be increased to an amount, which after deduction of tax becomes equal to the net amount payable under such agreement or arrangement.
For example, X Ltd is entering a contract with Y & Co. for availing their professional services and the bill value is Rs.10,00,000. As per the agreement, the TDS is to be borne by X Ltd. The applicable TDS Rate is 10% [Sl.No.15 in Q.3 above]. How much is the TDS to be deducted by X Ltd?
| TDS Rate | A | 10% |
| Bill Amount | B | 10,00,000 |
| Grossing up of Bill Amount | C = . B .
(1- A) |
11,11,111 |
| TDS Amount | D=C * A | 1,11,111 |
| Net Amount payable to Y & Co | E=C-D | 10,00,000 |
(10) When will the TDS under section be deducted?
TDS will be deducted at the time of credit of such income or sum to the account of the payee or at the time of its payment, whichever is earlier.
The credit of any income or sum to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such income or sum, shall be deemed to be the credit of such income or sum to the account of the payee and the provisions of this Chapter shall apply accordingly.
(11) Whether TDS is applicable for ‘Year-end” provisions made on 31stMarch for accounting the expenses on accrual basis?
Credit to “Provision for Expenses A/c” is deemed credit to the payee. TDS liability arises the moment the assessee credits any account, even suspense/provision. Estimation of expenditure does not automatically absolve TDS liability.
Only if the assessee proves payee is unidentifiable at provision date, TDS may not apply.
[Ref: Biocon Ltd. v. DCIT – ITAT Bangalore; [2023] 152 taxmann.com 55 (Bangalore – Trib.)/[2023] 102 ITR(T) 485]
(12) What are the consequences of failure to deduct Tax [TDS] with respect to levy of penalty?
Section 448 of the Income Tax Act 2025 empowers the Assessing Officer to levy penalty on person who fails to deduct whole or part of the TDS.
The Assessing officer may impose penalty equal to tax which is not deducted.
(13) What is the provision related to levying of interest for non-deduction / late deduction?
Section 398(3) specifies that if any person does not deduct or collect the whole or any part of the tax, he shall be liable to pay simple interest—
- at 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible or collectible to the date on which such tax is deducted or collected.
(14) What is the due date for remitting the TDS amount to the Central Govt.?
Section 397(3) stipulates that TDS will be remitted to the Central Govt. in such time, as may be prescribed*.
*Rules yet to be notified as on 25-11-2025.
(15) What is the provision related to levying of interest for non-payment / late payment of TDS amount to the Central Govt?
As per Section 398(3), if any person, after deducting or collecting fails to pay the tax as required under this Act, he shall be liable to pay simple interest—
- at 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted or collected to the date on which such tax is actually paid.
(16) Is the Deductee required to furnish the PAN to the Deductor?
Yes, as per Section 397(2)(a) every person, entitled to receive any amount on which tax is deductible or, paying any amount on which tax is collectible, shall furnish his valid Permanent Account Number to the person responsible for deducting or collecting tax.
Also, as per 397 (2) (h), the deductee or collectee shall furnish his valid Permanent Account Number to the deductor or collector, as the case may be, and the same shall be indicated in all bills, vouchers, correspondence and other documents which are sent to each other.
(17) What will happen, if the deductee fails to furnish the valid PAN to the deductor?
If the valid PAN is not provided to the deductor, Tax shall be deducted at the higher of the following rates: —
(a) at the rate specified in the relevant provision of this Act; or
(b) at the rate or rates in force; or
(c) (i) at the rate of 5% – applicable to cases where Purchase of any goods exceeding Rs.50 Lakhs & any amount on account of sale of goods / services by e-com participants to be deducted by e-Com Operator;
(ii) or 20% in any other case;
(18) What are the other consequences of non-deduction of TDS?
If a person, including the principal officer of a company does not deduct or pay, or does not collect or pay, or after so deducting or collecting fails to pay, the whole or any part of the tax, as required by or under this Act, then such person shall be deemed to be an assessee in default in respect of such tax in addition to any other consequences which that person may incur under this Act.
(19) A Company S Ltd has failed to deduct TDS, but the payee has filed his Return of Income and offered the amount received from the Company as Income in the said Return. Whether S Ltd still be treated as ‘assessee in default’?
The Company S Ltd shall not be deemed to be an assessee in default in respect of such tax, if the payee has—
- furnished his return of income under section 263;
- taken into account the amount for computing income in that return of income; and
- paid the tax due on the income declared by him in such return of income,
and the person [S Ltd] furnishes a certificate to this effect from an accountant in the form as may be prescribed*.
*Rules yet to be notified as on 25-11-2025.
However, the interest at 1% shall be payable for every month or part of a month on the amount of such tax from the date on which such tax was deductible or collectible to the date of furnishing of return of income by the such payee.
(20) A Company S Ltd has failed to deduct TDS on certain commission payments made to selling agent Mr X . Will there be any disallowance of expenses related to commission in computing the Total Income of S Ltd?
Yes, as per Section 35 (b), 30% of the commission amount shall be disallowed, if the TDS is not deducted.
However, if Mr. X filed his Return of Income and offered the commission in his Total Income, then no disallowance will be made, if S Ltd furnishes a certificate to this effect from an accountant in the form as may be prescribed*.
*Rules yet to be notified as on 25-11-2025.
(21) Z Ltd deducted tax on certain commission payments made to Mr. Y during the Tax year, but failed to make deposit of such TDS. Will there be any disallowance of expenses related to commission in computing the Total Income of Z Ltd?
Yes, as per Section 35 (b), 30% of the commission amount shall be disallowed, if the TDS deducted was not deposited during the Tax year.
However, if the TDS is remitted before the due date of Return, then no disallowance will be made.
(22) If S Ltd or Z Ltd in the above cases complied the provisions related to TDS in the next Tax Year. Whether 30% of amount disallowed in the preceding Tax year can be claimed as deduction in the next Tax year?
Yes, such sum shall be allowed as a deduction in computing the income of the tax year, in which such tax has been paid.
(23) Z Ltd paid salary to its CEO Mr A outside India and assuming tax on the said salary is chargeable in India [Not chargeable in all cases]. Z Limited failed to deduct the TDS. What are the consequences?
As per Section 35 (c), any payment chargeable under the head “Salaries”, payable outside India or to a non-resident on which tax is deductible at source under Chapter XIX-B and such tax has not been deducted or, after deduction, has not been paid, then 100% such salary paid by Z Ltd to Mr A will be disallowed while computing the Total Income of Z Ltd.
Unfortunately, the relaxation in the provisions such as allowing the salary as deductible expenditure in the subsequent Tax year once the deduction and payment of TDS in the next Tax year is not applicable for this case.
At the same time, there is no prohibition either to claim such expenditure once the TDS is remitted in the subsequent year.
If we compare Section 35(b) and (c),
| Section 35 (b) | Section 35 (c) |
| Amount of disallowance:
30% of any sum payable to a resident, on which tax is deductible at source under Chapter XIX-B and during the tax year, such tax has not been deducted or, after deduction, has not been paid…….. |
Amount of disallowance:
Any payment chargeable under the head “Salaries”, payable outside India or to a non-resident on which tax is deductible at source under Chapter XIX-B and such tax has not been deducted or, after deduction, has not been paid. |
In Section 35 (c), the wordings “during the tax year” has been omitted and hence we can interpret that-
- No disallowance is required, if the TDS is remitted before filing the Return.
- If the Assessee / Tax auditor has omitted to disallow the amount in the Return, it cannot be disallowed by the AO, if the TDS is remitted before completion of the Assessment (incl. reassessment).
- If TDS is remitted after filing the Return of Income for the Tax year, the amount can be claimed in the subsequent Tax year.
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Disclaimer: Opinion / Interpretations given in the Article are personal opinion / interpretations of the Author. Readers are advised to refer to the Income-tax Act, 2025 before taking any decision. The Author is not responsible for consequences arising from reliance on these FAQs.
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