TDS Rates | A.Y 2020-21 | Salary, Rent, Brokerage, Contract, Professional Fees

Income Tax TDS Rates for A.Y 2020-21 on  Salary, Rent, Brokerage, Dividend, Contract, Professional Fees

Article discusses TDS rates for AY 2020-21, TDS on Salary (Section 192), TDS on Deemed Dividends (Section 194), TDS on Commission or Brokerage (Section 194H), TDS on Rent (Section 194I), TDS on Fee for Professional or Technical Service (Section 194J), TDS on Payments to Contractors and Job Workers (Section 194C), TDS on Property Sale (Section 194IA) and  TDS on Interest Othert han Interest on Securities (Section 194A).

TDS on Salary (Section 192)

TDS on salary is the most common type of tax deducted at source. TDS must be deducted by employers while paying salaries to employees. The TDS rate for salary must be on the basis of the rates in force for the financial year in which the payment is made. TDS @30% if no valid PAN.

Calculating TDS on Salary

To calculate the TDS applicable on salary:-

• Determine the Gross Salary of employee.
• Deduct all deductions under Section 16.
• Determine the gross Total Income.
• Allow deduction under Section 80C to Section 80U.
• Compute income tax payable.
• Add surcharge and education cess (if applicable).

Note: 

1. No other loss can be set off from salary income only loss from house property can be set off from salary income in computing amount of TDS.

2. If the total income does not exceed the basic exemption, no need to deduct TDS from Salary.

TDS on Deemed Dividends (Section 194)

TDS must be deducted on deemed dividends paid to residents by an Indian company. Whenever, an Indian company or closely held company(say Private company) provides loan or advance to a shareholder in which shareholder holds at least 10% voting power(equity share cap.), the payment is treated as deemed dividend. Such deemed dividends are taxable in the hands of shareholders and TDS on such dividend deducted @10%. If PAN of recipient is not available then the TDS rate @ 20% should be deducted.

TDS on Commission or Brokerage (Section 194H)

Whenever any person other than an Individual or HUF makes a commission or brokerage payment TDS must be deducted.

• In case of professionals, if sales turnover exceeds Rs. 50L in the previous F.Y TDS must be deducted on commission or brokerage payment.
• In all other cases, if the total turnover exceeds Rs. 1 cr in the previous F.Y TDS must be deducted on commission or brokerage payments.
• Commission or brokerage includes any payment made for services rendered in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing not being securities. TDS @5% (20% if no valid PAN) if payment exceeds 15000/-.

TDS on Rent (Section 194I)

Any person except an individual or HUF is required to deduct TDS on rent paid.

“Rent” means any payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with plant, machinery or equipment, furniture, fittings whether or not such building is owned by the payee. Advance payment of rent is also subject to TDS.

• TDS rate for rent on plant or machinery is 2% (20% if no valid PAN).
• TDS rate for rent for land, building, furniture and other assets is 10% (20% if no valid PAN).

NOTE: TDS on rent is not required for payment of upto Rs.2.40 lakhs of rent to each co-owner. TDS on rent is also not applicable for rental payments made to the Government, RBI or Corporation established under Central Act or local authority.

TDS on Fee for Professional or Technical Service (Section 194J)

Any person except an individual or HUF is required to deduct TDS on any sum paid by way of:

• Fee for professional services,
• Fee for technical services
• Royalty,
• Remuneration/fee/commission to Director or,
• For not carrying out any activity in relation to any business,
• For not sharing any Know-how, Patent , Copyright etc.

NOTE: Professional or Technical Services means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as may be specified.

The TDS rate applicable for fee for professional or technical services is 10% (20% if no valid PAN).

TDS need not be deducted on payment of upto Rs.30,000/- for each type of income separately. Threshold limit do not apply to payment made to director.

TDS on Payments to Contractors and Job Workers (Section 194C)

TDS must be deducted on payments to contractors and job workers except by an Individual or HUF.

In case of any other person or business entity, if they are liable to get their accounts audited under Income Tax Act in the previous year, then they must deduct tax at source. Examples of payments to contractors and job workers include:

• Payments for advertising (Print media, internet, mobile, TV, radio, hoardings, metro, cinema, making of ad films).
• Payments for broadcasting and telecasting including production of programmes for such broadcasting or telecasting.
• Payments for carriage of goods and passengers by any mode of transport other than by railways.
• Payments for catering.
• Payments for job work.

Job work means manufacturing or supplying a product according to requirement or specification of customer by using material of such customer.

The TDS rate for payment to contracts and job workers differs based on the person from whom tax is deducted at source.

• If the payment is made to an individual or HUF, TDS rate of 1% (20% if no valid PAN). is applicable.
• If payment is made to partnership firm or company, TDS rate of 2% (20% if no valid PAN) would be applicable.

Under the following circumstances, TDS is not required to be deducted –

1. The amount paid or credited to the contractor in a single contract doesn’t exceed INR 30,000.

2. The aggregate amount paid or credited during the financial year doesn’t exceed INR 1,00,000.

3. The amount paid / credited to the account of the contractor engaged in the business of hiring, plying or leasing goods carriage, where the contractor doesn’t own more than 10 goods carriage at any time during the previous year. The Contractor is required to furnish the declaration along with the PAN to the Deductor.

4. The amount is paid or credited to the contractor by an individual / HUF for carrying out work in the nature of personal use.

TDS on Property Sale (Section 194IA)

TDS must be deducted by all persons who are involved in purchase of property, not required if the consideration is less than Rs.50 lakhs

(Please note that consideration for transfer of any immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property)

TDS rate for property sale is 1% (20% if no valid PAN). of the payment made.

TDS must be deducted by the buyer at the time of transfer of money to the seller or at the time of payment in cash or by issue of cheque or draft or by any other mode, whichever is earlier.
The TDS deducted must be deposited within 30 days from the end of the month in which deduction is made.

TDS on Interest Otherthan Interest on Securities (Section 194A)

TDS must be deducted on interest paid to residents by all persons and entities other than individuals and HUFs on interest paid other than on securities at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

TDS rate applicable for interest paid is 10% (20% if no valid PAN).

NOTES: No TDS should be deducted if interest does not exceed a specified amount:-

(a) Where the payer is a banking company to which the Banking Regulation Act, 1949 applies – Rs 40,000/-

(b) Where the payer is a co-operative society engaged in carrying on the business of banking – Rs 40,000/-

(c) On any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf – Rs 40,000/-

(d) Any other case – Rs 5,000/-

Read About TDS on Rent here

(Republished with Amendments)