Dec 17, 2025
Tax Deducted at Source (TDS) is one of the cornerstones of India’s income tax system.
It ensures that tax is collected at the time income is earned — reducing evasion and making year-end filing smoother.
But incorrect TDS deductions or delayed deposits can lead to penalties, disallowances, and mismatched Form 26AS.
This guide explains how TDS works, key sections, thresholds, rates, and compliance requirements for FY 2024–25.
What is TDS?
TDS is a mechanism where a payer (employer, client, bank, or tenant) deducts a portion of tax before making payment to the recipient.
This deducted amount is later adjusted against the recipient’s total income tax liability.
Common TDS Sections and Rates (FY 2024–25)
Nature of Payment | Section | Threshold | Rate |
|---|---|---|---|
Salary | 192 | Based on slab | Slab rate |
Rent (Land/Building) | 194I | ₹2,40,000 | 10% |
Contractor/Professional Fee | 194C / 194J | ₹30,000 | 1% / 10% |
Commission or Brokerage | 194H | ₹15,000 | 5% |
Bank Interest (TDS by Bank) | 194A | ₹40,000 (₹50,000 for senior citizens) | 10% |
Purchase of Property | 194-IA | ₹50 lakh+ | 1% |
Dividend | 194 | ₹5,000 | 10% |
Who Must Deduct TDS?
✅ Employers, businesses, professionals, and individuals making specified payments.
✅ Even individuals (not businesses) must deduct TDS while purchasing property above ₹50 lakh.
TDS Compliance Requirements
1️⃣ Deduct TDS at the time of payment or credit, whichever earlier.
2️⃣ Deposit TDS by the 7th of the following month.
3️⃣ File TDS returns quarterly using:
Form 24Q (salary)
Form 26Q (non-salary payments)
Form 27Q (foreign payments)
4️⃣ Issue TDS Certificates (Form 16/16A) to deductees.
Penalties for Non-Compliance
Late deposit: 1.5% interest per month.
Non-deduction: 1% per month from due date.
Late filing: ₹200/day under Section 234E.
Prosecution for repeated defaults.
How TDS Reflects in Form 26AS / AIS
All TDS deducted under your PAN appears in Form 26AS and AIS.
Reconcile this before filing ITR to ensure all credits are properly claimed.
Conclusion
TDS isn’t just for large corporations — even small businesses and professionals must stay compliant.
Deduct correctly, deposit on time, and reconcile quarterly to maintain a clean tax record.
Continue reading:
→ How to Respond to an Income Tax Notice Online
→ Common Income Tax Filing Mistakes & How to Avoid Them
→ Advance Tax Explained: Who Should Pay & How to Calculate It
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