Tax Deducted at Source (TDS) is a mechanism implemented by the Income Tax Department of India to collect tax at the very source of income generation. This ensures a steady inflow of revenue to the government and minimizes tax evasion. As a practicing Chartered Accountant, I aim to provide a detailed overview of TDS, its applicability across various sections, and the updated rates and thresholds for the Financial Year (FY) 2025-26 (Assessment Year 2026-27).
What is TDS?
TDS requires the payer (deductor) to deduct a certain percentage of tax before making specific payments to the payee (deductee). The deducted amount is then remitted to the government. The deductee can claim credit for this tax deducted at source when filing their income tax return.
Recent Changes in TDS Provisions
The Union Budget 2025 introduced several amendments to TDS provisions:
- Increase in Threshold Limits:
- Interest Income for Senior Citizens: The TDS exemption limit on interest income has been raised from ₹50,000 to ₹1,00,000 per annum for senior citizens.
- Rental Income: The threshold for TDS on rental income has been increased from ₹2.4 lakh to ₹6 lakh per annum.
- Introduction of Section 194T: Effective from April 1, 2025, firms and LLPs are required to deduct TDS at 10% on payments exceeding ₹20,000 made to partners, including salary, remuneration, bonus, commission, and interest.
Comprehensive TDS Rate Chart for FY 2025-26 (AY 2026-27)
