The Indian Income Tax Act mandates the deduction or collection of tax at source (TDS/TCS) on various payments and receipts to ensure timely tax compliance and curb tax evasion. These provisions require specified persons making payments to deduct tax at prescribed rates before remitting amounts to the payee, thereby facilitating advance tax collection.
For the financial year 2025-26, the Income Tax Department has updated thresholds and rates under multiple sections relevant for resident as well as non-resident recipients. These include TDS provisions on salary, interest, dividends, contract payments, rent, professional fees, and emerging areas such as virtual digital assets. Additionally, new sections such as 194T and 194S have been introduced, broadening the scope of TDS applicability.
Alongside TDS, Tax Collected at Source (TCS) provisions have also been expanded, particularly with the introduction of TCS on sale of goods exceeding specified turnover thresholds and on foreign remittances under the Liberalized Remittance Scheme (LRS).
Understanding these updated TDS and TCS rates, thresholds, and applicability is critical for both deductors and deductees to ensure compliance, avoid penalties, and optimize tax planning. The following tables summarize the key sections, nature of payments, applicable thresholds, and rates for resident and non-resident recipients for the FY 2025-26.
For Resident Recipients
| Section | Nature of Payment | Threshold / Limit | Rate (%) |
|---|---|---|---|
| 192 | Salary | As per income tax slab | As per slab |
| 192A | Provident Fund withdrawals (taxable portion) | ₹50,000 | 10% |
| 193 | Interest on securities (debentures, govt bonds) | ₹10,000 | 10% |
| 194 | Dividend and deemed dividend (including buy-back) | ₹10,000 | 10% |
| 194A | Interest other than on securities | Bank/co-op bank/post office: – Senior citizen: ₹1,00,000 – Others: ₹50,000 Others: ₹10,000 | 10% |
| 194B | Lottery winnings (excluding online games) | ₹10,000 (single transaction) | 30% |
| 194BA | Net winnings from online games | No threshold | 30% |
| 194BB | Winnings from horse races | ₹10,000 (single transaction) | 30% |
| 194C | Payment to contractors | Individual/HUF: ₹30,000 Others: ₹30,000 Transporters under 44AE: NA | 1% / 2% / Nil |
| 194D | Insurance commission | ₹20,000 | 5% |
| 194DA | Income component from LIC (not under 10(10D)) | ₹1,00,000 | 2% |
| 194E | Payments to non-resident sportsmen, entertainers | No threshold | 20% |
| 194EE | Payment of deposits under NSS | ₹2,500 | 10% |
| 194G | Commission on sale of lottery tickets | ₹20,000 | 2% |
| 194H | Commission or brokerage | ₹20,000 | 2% |
| 194I | Rent payments | ₹50,000/month | 2% (machinery) / 10% (others) |
| 194IA | Payment on transfer of immovable property (other than agri land) | ₹50,00,000 | 1% |
| 194IB | Rent payment by individuals/HUF | ₹50,000/month | 2% |
| 194IC | Payment under specified agreement (joint development) | No threshold | 10% |
| 194J | Fees for professional/technical services, director fees, royalty, non-compete fees | ₹50,000 (except director fees and remuneration which have no threshold) | 2%-10% |
| 194K | Dividend income on mutual funds | ₹10,000 | 10% |
| 194LA | Compensation on acquisition of immovable property | ₹5,00,000 | 10% |
| 194M | Payment by individual/HUF for contract, commission, professional fees (excluding 194C/D/J) | ₹50 lakhs | 2% |
| 194N | TDS on cash withdrawal (non-filers and others) | ₹20 lakhs, ₹1 crore, ₹3 crore (Co-op Society) | 2%-5% |
| 194O | Payment by e-commerce operator to e-commerce participant | ₹5 lakhs | 0.1% |
| 194P | TDS for resident senior citizens (75+ years) receiving pension and interest | As per slab | As per slab |
| 194Q | TDS on purchase of goods by specified buyers | ₹50,00,000 | 0.1% |
| 194R | TDS on benefits/perquisites in business or profession | ₹20,000 | 10% |
| 194S | TDS on payment for transfer of Virtual Digital Assets | Specified person: ₹50,000 Others: ₹10,000 | 1% |
| 194T | TDS on payment to partners (salary, commission, bonus, interest) (new from 01.04.2025) | ₹20,000 | 10% |
For Non-Resident Recipients (Individuals/HUF/AOP/BOI/AJP)
| Section | Nature of Payment | Rate (%) |
|---|---|---|
| 192 | Salary | As per slab |
| 192A | Taxable accumulated PF amount | 10% |
| 194B | Lottery and game winnings | 30% |
| 194BA | Online game winnings | 30% |
| 194BB | Winnings from horse races | 30% |
| 194E | Payment to non-resident sportsmen/entertainers | 20% |
| 194EE | Deposits under NSS | 10% |
| 194G | Commission on lottery tickets | 2% |
| 194LB | Interest by infrastructure debt fund | 5% |
| 194LBA (2) | Payment by business trust to unit holders | 10% |
| 194LBA (3) | Payment under section 10(23FCA) | 30% |
| 194LBB | Payment in units of investment fund | 30% |
| 194LBC (2) | Payment in securitisation trust | 30% |
| 194LC | Interest on foreign currency loans / bonds (varies by instrument) | 4% to 9% |
| 194LD | Interest on rupee-denominated bonds / govt securities | 5% |
| 194N | TDS on cash withdrawal (non-filers and others) | 2%-5% |
| 194T | Payment of remuneration/interest by firm to partners | 10% |
| 195 | Payment of other sums to non-residents: (A) Investment income (B) Long-term capital gains (various) (C) Short-term capital gains (D) Interest on borrowed money in foreign currency (E) Royalty and fees for technical services (F) Winnings from lotteries and games (G) Dividend income (H) Other income | 10%-30% (varies by category) |
| 196A | Income from units of foreign/non-resident companies | 20% |
| 196B | Income from units to offshore fund | 10%-12.5% |
| 196C | Interest on foreign currency bonds or GDR | 10%-12.5% |
| 196D | Income of foreign institutional investors | 20% |
TCS (Tax Collected at Source) Rates for FY 2025-26
| Section | Transaction Type | Rate (%) |
|---|---|---|
| 206C | Sale of liquor (other than Indian made) | 1% |
| 206C | Sale of timber (including pulpwood) | 2.5% |
| 206C | Sale of scrap | 1% |
| 206C(1F) | Sale of motor vehicles exceeding ₹10 lakh | 1% |
| 206C(1G) | Overseas tour packages | 5%-20% |
| 206C(1H) | Sale of goods (new provision) | 0.1% on turnover exceeding ₹50 lakh |
| 206C(1) | Foreign remittance under Liberalized Remittance Scheme (LRS) | 20% (general) / 5% (education/medical) |
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Section 194S: 1% TDS on transfer of Virtual Digital Assets.
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Increased TDS thresholds for interest on bank/post office deposits for senior citizens to ₹1,00,000.
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TCS on sale of goods introduced under Section 206C(1H) at 0.1% for turnover exceeding ₹50 lakh.
-
Cash withdrawal TDS (Section 194N) continues with 2%-5% rates depending on ITR filing status and withdrawal amount.
-
TDS on e-commerce operator payments (Section 194O) continues at 0.1%.
