Section-wise TDS Rate Table for FY 2025-26

Important note: The categories below are presented in a familiar practical format so that finance teams, business owners, and readers can quickly identify the correct payment bucket. Even where older shorthand labels are commonly used in business practice, the current-year legal framework is under the Income-tax Act, 2025.

Salary and Employment

Salary TDS is not a flat-rate deduction. It works on the estimated annual taxable salary, based on applicable slab rates, after considering eligible exemptions, deductions, and declarations as allowed under the applicable regime. That is why salary is always different from ordinary non- salary TDS categories.

For EPF or PF withdrawals, TDS generally applies when the withdrawal exceeds the threshold and does not qualify for non-taxability under the rules. PAN availability also matters in practice.

Interest and Securities

This is one of the most common TDS areas for individuals and businesses alike. Bank interest TDS is often applicable to fixed deposits and other deposit-linked earnings . Senior citizens get a higher threshold for bank interest before TDS becomes applicable.

Interest on securities, dividends, and mutual fund unit income also continue to remain important categories, especially for finance teams, treasury functions, and investors tracking TDS credits in Form 26AS or AIS.

Important FY 2026-27 update: Interest, other than interest on securities, paid to certain co-operative societies engaged in banking is kept outside TDS from 1 April 2026. This is a targeted relief and should be applied carefully after confirming that the recipient and payment category fit the rule.

Winnings and Gaming

These categories are high-rate withholding categories. The tax is deducted at a steep 30%, and the online gaming bucket is especially important because it does not use the same threshold logic as some traditional winnings categories.

Businesses dealing with gaming, prize distribution, promotional activities, or related payment ecosystems should be especially careful in classifying such payments correctly, because the rate is high and the margin for error is small.

Contractor and Professional Payments

This section remains one of the most litigated and practically sensitive parts of TDS compliance. The real issue is often not the rate itself, but the classification:

• Is it a contractor payment or a professional service?
• Is it a technical service or a work contract?
• Is the threshold to be checked per invoice, per contract, or on aggregate basis?
• Is the payee an individual/HUF or another type of entity?

For contractor payments, the usual rates remain 1% for payments to individuals/HUFs and 2% for others, subject to threshold conditions.

For technical services and call centre-related payments, the lower 2% rate applies.

For professional fees , royalty in the relevant bucket, and director fees, 10% continues to be the standard rate.

For certain large payments made by non-audit individuals and HUFs, the special category with 5% TDS remains highly relevant.

Important FY 2026-27 update: Supply of manpower is intended to be treated under the contractor bucket. This matters because many businesses have historically faced classification confusion, in which manpower supply could be misread as a technical or professional service. The clearer approach helps bring many such payments into the 1% or 2% contractor structure.

Insurance and Commission

Commission-related categories often get overlooked in small-business compliance because the payment appears commercial rather than tax-sensitive. But insurance commission, general commission or brokerage, and lottery-related commission all carry their own TDS treatment.

The raised threshold for general commission and brokerage remains important from a practical compliance angle because it reduces the deduction burden on smaller annual payments.

Rent and Property

Rent is one of the most common business expense categories where TDS errors happen. The most common mistakes are:

• Applying annual threshold logic where monthly logic applies
• Using the wrong rate for machinery vs building
• Ignoring the special rule for non-audit individuals or HUFs paying high monthly rent
• Forgetting that property purchase TDS applies on the whole value once threshold is crossed, not only on the excess

For immovable property purchases , 1% TDS remains a key compliance requirement once the transaction value reaches the threshold.

For non-audit individuals and HUFs paying monthly rent above the specified threshold, the special 5% deduction category remains very important.

Important FY 2026-27 update: 

1. A resident individual or HUF buying immovable property from a non-resident gets relief from obtaining a TAN from 1 October 2026 for that transaction. This reduces compliance friction, but TDS itself still applies.

2.  Interest on compensation awarded by the Motor Accidents Claims Tribunal to an individual is treated as outside TDS from 1 April 2026. This is a specific and meaningful carveout.

Cash, Goods, and Digital Transactions

This is one of the most modern and operationally complex areas of TDS.

• Cash withdrawal TDS applies to high-cash businesses and certain non-filer cases.
• E-commerce payment deductions are important for marketplace businesses and online sellers, especially when platform settlements lead to frequent reconciliation questions.
• Purchase of goods TDS remains a major compliance issue for businesses crossing turnover thresholds because it requires system-level tracking of cumulative purchases from each vendor.

Virtual Digital Asset payments remain within the TDS framework, and the distinction between the specified-person threshold and the other threshold should not be ignored.

Other Specified Payments

TDS on Non-Residents

Non-resident payments should never be handled casually. They are often summarised in short tables, but in practice they require much deeper review than resident payments do.

Why? Because for non-residents, the final withholding position can depend on:

• Nature of income
• Domestic law rate
• Rate in force
• DTAA eligibility
• Tax Residency Certificate
• Form 10F
• Beneficial ownership position
• Permanent establishment considerations in some cases
• Characterisation of income

A high-level practical reference view is below:

For example:

• A treaty may reduce the withholding rate
• A payment that looks like a technical fee under domestic law may be characterised differently under a treaty
• Documentation gaps can deny treaty benefits
• Certain capital gains outcomes depend on the nature of the asset and applicable law

Note: Do not finalise the deduction without checking treaty eligibility and documentation.

Higher TDS When PAN Is Not Furnished

Where the deductee does not furnish PAN , TDS is generally required to be deducted at the higher of three rates: the rate specified in the relevant provision, the rate or rates in force, or 20%.
In simple terms, even if a payment normally attracts TDS at a lower rate, non-availability of PAN can significantly increase the deduction amount. That is why collecting and verifying PAN is an important part of TDS compliance, not just a routine documentation step.

Illustrative examples:

This has serious business implications:

• Vendor payments can get blocked or disputed
• Reconciliation becomes messy
• Working capital of the payee gets hit
• Refund dependency increases
• TDS return mismatches become more likely

So from a controls perspective, PAN collection is not a clerical issue. It is a core compliance requirement.

It is also important not to confuse this with the old non-filer-based higher-TDS rule that used to exist separately. That old non-filer compliance burden is no longer part of the current routine TDS practice in the same way.

Penalties and Interest for TDS Default

Knowing the rate is only half the job. A business can know the correct TDS rate and still end up in default if it deducts late, deposits late, or files the return late.

Interest for default

These interest costs can become substantial in recurring or high-value payment situations.

Late return filing fee

• ₹200 per day
• Maximum cap equals the TDS amount for that return period

Even if the tax has been deducted and deposited correctly, late filing of the return can still create a fee burden.

Penalty consequences

Apart from interest and fee, penalty provisions can also come into play in serious or repeated default situations.

Prosecution risk

Where tax is deducted but wilfully not deposited, prosecution exposure can arise in more serious cases. This is why businesses should never treat deducted TDS as a temporary cash-flow buffer.

Quick Reference: Default Cost Summary

TCS Rate Chart for FY 2026-27

Tax Collected at Source (TCS) is different from TDS. In TDS, the payer deducts tax before releasing payment. In TCS, the seller collects tax from the buyer and deposits it with the government.

Domestic TCS

The removal of TCS on sale of goods remains one of the most important simplification measures for businesses that earlier had to track that extra layer of collection compliance on turnover-linked sales.

TCS on Foreign Remittance and Overseas Spend

The foreign remittance and overseas spend area remains one of the most dynamic TCS categories, and this is also where businesses and individuals often rely on incomplete summaries. The broad current direction includes compliance relief and lower collection burden in selected cases.

A practical summary view:

Due Dates for TDS Deposit and Return Filing

Due-date compliance is one of the most important parts of the TDS process because even a correctly deducted amount can create interest and filing consequences if the deposit or return timing is missed.

TDS Deposit Due Dates

These dates should be tracked on a standard compliance calendar, as missing the deadline by even a few days can start the interest clock.

Quarterly TDS Return Due Dates

TDS Return Forms

• Form 24Q - TDS on salary
• Form 26Q - TDS on resident non-salary payments
• Form 27Q - TDS on payments to non-residents
• Form 27EQ - TCS returns

TDS Certificate Deadlines

• Form 16 (salary): 15 June of the following financial year
• Form 16A (non-salary): within 15 days from the due date of the quarterly return

Businesses often focus only on deduction and deposit, but certificate issuance is equally important because the deductee needs the TDS correctly reflected and supported for credit claims.

Surcharge and Health & Education Cess on TDS

A common mistake is to say that surcharge and 4% Health & Education Cess automatically apply in the same way to every TDS line item. That is too broad.

In practice:

• For many routine resident TDS categories, people generally refer to the base TDS rate itself
• Surcharge and cess become especially relevant in contexts such as salary withholding and many non-resident payments
• Effective rate computation can therefore vary based on the nature of payment and recipient profile

Illustrative Surcharge - Individuals

Surcharge - Domestic Companies

Health & Education Cess

• 4% on income tax plus surcharge, where applicable