TDS sections
TDS section rates, thresholds, and vendor configuration for FY 2025-26
TDS sections
Each TDS section covers a specific type of payment and prescribes its own rate and threshold. You deduct TDS only when a payment exceeds the section's threshold limit for the financial year.
Sections at a glance
Rates and thresholds for FY 2025-26 (updated per Union Budget 2025):
| Section | Nature of payment | Rate (individual/HUF) | Rate (company/firm) | Threshold limit |
|---|---|---|---|---|
| 192 | Salary | Income tax slab rates | — | Basic exemption (₹4,00,000) |
| 194A | Interest (other than securities) | 10% | 10% | ₹50,000 (banks), ₹1,00,000 (senior citizens) |
| 194C | Contractor payments | 1% | 2% | ₹30,000 single / ₹1,00,000 aggregate |
| 194H | Commission or brokerage | 2% | 2% | ₹20,000 |
| 194I | Rent (land & building) | 10% | 10% | ₹50,000 per month |
| 194I | Rent (plant & machinery) | 2% | 2% | ₹50,000 per month |
| 194J | Professional services | 10% | 10% | ₹50,000 |
| 194J | Technical services | 2% | 2% | ₹50,000 |
| 194O | E-commerce operator | 0.1% | 0.1% | ₹5,00,000 |
| 195 | Non-resident payments | Varies by nature & DTAA | Varies | No threshold |
Section 192 — Salary
Section 192 applies to salary payments. Unlike other sections, TDS is not at a flat rate — you calculate tax based on the employee's estimated annual income using income tax slab rates.
Under the new tax regime (default for FY 2025-26):
| Income slab | Tax rate |
|---|---|
| Up to ₹4,00,000 | 0% |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
A standard deduction of ₹75,000 reduces taxable income. Employees with taxable income up to ₹12,00,000 receive a rebate under Section 87A (up to ₹60,000), making their tax liability zero. Add 4% Health & Education Cess on the final tax amount.
See TDS calculation for a worked salary TDS example.
Section 194A — Interest
Applies to interest payments other than interest on securities — bank fixed deposits, recurring deposits, and inter-company interest.
- Rate: 10%
- Threshold (FY 2025-26): ₹50,000 per year from banks, post offices, and co-operative societies. ₹1,00,000 for senior citizens from these institutions. ₹10,000 from all other payers.
Note: Budget 2025 raised these thresholds. The previous limits were ₹40,000 (banks), ₹50,000 (senior citizens), and ₹5,000 (others).
Section 194C — Contractor payments
Applies to payments to contractors and sub-contractors for carrying out any work, including supply of labour.
- Rate: 1% for individuals and HUFs, 2% for companies, firms, and other entities
- Threshold: ₹30,000 for a single payment, or ₹1,00,000 aggregate payments to the same contractor during the financial year
Section 194H — Commission or brokerage
Applies to commission or brokerage payments, excluding insurance commission (covered under Section 194D).
- Rate: 2%
- Threshold (FY 2025-26): ₹20,000 per year
Note: The rate was reduced from 5% to 2% effective October 2024 (Finance Act 2024). Budget 2025 raised the threshold from ₹15,000 to ₹20,000.
Section 194I — Rent
Applies to rent payments for land, building, furniture, fittings, plant, or machinery.
- Rate: 2% for plant and machinery, 10% for land, building, furniture, and fittings
- Threshold (FY 2025-26): ₹50,000 per month (₹6,00,000 per year)
Note: Budget 2025 raised the threshold from ₹2,40,000 per year to ₹6,00,000 per year.
Section 194J — Professional or technical fees
Applies to fees for professional services, technical services, royalty, and directors' remuneration.
- Rate: 10% for professional services and directors' fees. 2% for technical services and call centre operators.
- Threshold (FY 2025-26): ₹50,000 per year
Note: Budget 2025 raised the threshold from ₹30,000 to ₹50,000.
Section 194O — E-commerce operator
Applies when an e-commerce operator facilitates the sale of goods or services and makes payment to the e-commerce participant (seller).
- Rate: 0.1%
- Threshold: ₹5,00,000 per year
Note: The rate was reduced from 1% to 0.1% effective October 2024 (Finance Act 2024).
Section 195 — Payments to non-residents
Applies to any payment to a non-resident or foreign company that is chargeable to tax in India. There is no threshold — TDS applies on every payment.
Rates vary by the nature of income:
| Nature of payment | Rate |
|---|---|
| Interest | 20% |
| Dividend | 20% |
| Royalty | 10% |
| Fees for technical services | 10% |
| Long-term capital gains | 12.5% |
| Other income | 30% |
If a Double Taxation Avoidance Agreement (DTAA) exists between India and the recipient's country, the lower treaty rate applies. Surcharge and cess apply on Finance Act rates but not on DTAA rates.
No PAN — Section 206AA
If a deductee does not provide a valid PAN, you deduct TDS at the highest of:
- The rate specified in the relevant section
- The rate in force under the Finance Act
- 20%
In practice, this means 20% for most sections. Exceptions: for Section 194O the no-PAN rate is 5%, and for Section 194Q it is 5%.
An inoperative PAN (one not linked with Aadhaar) is treated the same as no PAN.
Note: Section 206AB (higher rates for non-filers of income tax returns) was abolished from 1 April 2025. You no longer need to verify the deductee's ITR filing status.
Setting up vendor TDS sections
To configure the default TDS section for a vendor:
- Go to Vendors.
- Select the vendor and click Edit.
- Under TDS Section, choose the applicable section (194C, 194J, 194I, etc.).
- Save the vendor.
When you record a bill for this vendor, the system pre-fills the TDS rate from the selected section. You can override the rate on any individual bill — for example, if the vendor holds a lower deduction certificate under Section 197.
Related articles
- TDS overview — what TDS is and your compliance responsibilities
- TDS calculation — how the system calculates TDS on each payment
- TDS challans — depositing deducted TDS to the government
- TDS returns — quarterly return filing
- Lower deduction certificates — applying reduced rates with Section 197 certificates