TAX DEDUCTION AND COLLECTION AT SOURCE

[Chapter XVII-B and XVII-BB - Sec. 192 to 206CB]

Introduction:
To check evasion of tax and for collecting tax on the income at the time of its accrual or receipts to the
assessee, the government has made provisions to collect tax at source. Under these provisions, the person
responsible for making payment or receipts of incomes covered under the Chapter XVII-B and XVII-BB
respectively, is charged with a liability to deduct or collect tax at source and deposit the same to the
government treasury within the stipulated time.
Surcharge and Cess on TDS Rates prescribed:
Generally, NO surcharge and Cess are added on the TDS rates prescribed.

Where payment is made to Residents [i.e. Resident Payee/deductee]

 NO Surcharge or Health & Education Cess shall be added on the TDS rates prescribed.
 However, for TDS on salary, surcharge will be added –
 @ 10% where the total income exceeds ` 50 lakh but does not exceed ` 1 crore.
 @ 15% where the total income exceeds ` 1 crore but does not exceed ` 2 crore.
 @ 25% where the total income exceeds ` 2 crore but does not exceed ` 5 crore.
 @ 37% where the total income exceeds ` 5 crore. (Applicable only if the deductee opts out of
Sec. 115BAC)

Also, Health & Education Cess is to be added in case of TDS on Salary paid (any amount).

Where payment is made to Non - Residents (other than Foreign Company)

(A) In case of non-resident, being an individual or HUF or AOP (except AOP with all members as
company) or BOI or artificial juridical person –
 Surcharge will be added on rate of TDS as follows –
 @ 10% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 50 lakh but does not exceed ` 1 crore.
 @ 15% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 1 crore but does not exceed ` 2 crore.
 @ 25% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 2 crore but does not exceed ` 5 crore.
 @ 37% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 5 crore. (Applicable only if the deductee opts out of Sec. 115BAC)
(B) In case of non-resident, being an AOP with all members as company –
 Surcharge will be added on rate of TDS as follows –
 @ 10% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 50 lakh but does not exceed ` 1 crore.
 @ 15% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 1 crore.
(C) In case of non-resident, being a co-operative society –

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 Surcharge will be added on rate of TDS as follows –
 @ 7% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 1 crore but does not exceed ` 10 crore.
 @ 12% where the payment made or to be made, subject to tax deduction during the year,
exceeds ` 10 crore.

(D) In case of non-resident, being a firm –

Surcharge @ 12% will be added on rate of TDS where the payment made or to be made, subject to tax
deduction during the year exceeds ` 1 crore.
Also, Health & Education Cess is to be added in all cases (i.e. any amount).
Where payment is made to Foreign Company:
Surcharge -
(i) @ 2% will be added on TDS, where the payment made or to be made and subject to tax deduction
during the Financial Year exceeds ` 1 crore but does not exceed ` 10 crore; or
(ii) @ 5% will be added on TDS, where the payment made or to be made and subject to tax deduction
during the Financial Year exceeds ` 10 crore.

Health & Education Cess is to be added in all cases (i.e. any amount).

TDS where income is payable in Foreign currency: [Rule 26]

For the purpose of deduction of tax at source on any income payable in foreign currency, the rate of
exchange for calculating the rupee value of such income shall be the telegraphic transfer buying rate of
such currency as on the date on which the tax is required to be deducted at source under the provisions
of Chapter XVIIB (i.e. Deduction of tax at source) by the person responsible for paying such income.

No TDS on ‘GST on Services Component’ on payments made to Residents:

Wherever in terms of the agreement between the payer and payee, the component of ‘GST on Services’
comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under
Chapter XVII-B on the amount paid/payable without including such ‘GST on Services’ component. GST
for these purposes shall include IGST, CGST, SGST & UTGST.

TDS Provisions
[Chapter XVII-B]

Sec. 192: TDS on Salaries:

Any Employer  Any Employee (Resident or Non-resident)
Time of deduction: At the time of payment, i.e. as and when salary is paid.
Rate of TDS: At the average income-tax rate computed on the basis of rates in force for the financial
year in which payment is made, on the estimated total income of the employee.
Tax is not deductible, if the estimated income of an employee does not exceed basic exemption limit.

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POINTS TO NOTE:
 A deductor, being an employer, has to seek information from each of its employees having income
under section 192 regarding their intended tax regime and deduct tax at source thereon according to
the option exercised.
If intimation is not made by the employee, it would be presumed that the employee continues to be in
the default tax regime u/s 115BAC.
It is also clarified that the intimation would not amount to exercising option u/s 115BAC(6) and the
person shall be required to do so separately in accordance with the provisions of Sec. 115BAC.

 The employee may at his option, furnish statement of his other incomes and any tax deducted thereon
to his employer on a plain paper. In such case, the employer shall deduct tax considering the incomes
from other heads also as verified in the statement filed by the employee, but no losses shall be
considered other than the loss under the head “Income from House Property”.

 Relief u/s 89(1) shall also be considered while deducting tax on a declaration being filed by the
employee in Form 10E.

 Employer should take into consideration amount deductible u/s 80C, 80CCC, 80CCG, 80D, 80DD,
80E, 80GG, 80TTA and 80U. The employer should not give any deduction in respect of donation
given by an employee to a notified public charitable institute u/s 80G. However, where donations /
contributions are made to other funds (e.g., the Prime Minister’s Drought Relief Fund, the National
Children’s Fund, etc.), deduction should be allowed.

The employer shall, for the purposes of estimating income of the assessee or computing tax deductible,
obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for
set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.
 When a person is employed by two or more employers during the financial year, tax will be deducted
by each employer separately. However, the employee is under obligation to declare salary received
(and tax deducted thereon) from other employers to one of the employers in Form no. 12B. The
employer to whom Form No. 12B is submitted shall deduct tax on the aggregate salary of such
employee.
 The employer should also give a statement of perquisites/profits in lieu of salary in Form No. 12BA
(if salary exceeds ` 1,50,000).
 TDS certificate will be given to the employee in Form No. 16 annually on or before 15th June after the
end of financial year.

Furnishing of evidence of claims by employee for deduction of tax under section 192:
New Rule 26C has been inserted in the Income-tax Rules, 1962, with effect from 1st June, 2016, to require
furnishing of evidence of the following claims by an employee to the person responsible for making
payment under section 192(1) in Form No. 12BB for the purpose of estimating his income or computing
the tax deduction of tax at source:
Nature of Claim Evidence or particulars
1. House Rent Allowance Name, address and PAN of the landlord(s) where aggregate
rent paid during the previous year exceeds ` 1 lakh.

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2. Leave Travel Concession or Evidence of expenditure

Assistance
3. Deduction of interest under the Name, address and PAN of the lender
head “Income from house property”
4. Deduction under Chapter VI-A Evidence of investment or expenditure.

Sec. 192A: TDS on Pre-mature withdrawal from accumulated balance of RPF by

the Employee: Rate 10%
Trustees of the Employees’ Provident Fund Scheme, 1952
or Any Person authorized under the scheme  To any employee covered under RPF
Time of Deduction: At the time of payment.
Payment covered: “Taxable pre-mature withdrawal” from the accumulated balance due to an employee
participating in a Recognised Provident Fund (RPF) includible in his total income owing to the non-
applicability of Rule 8 of Part A of the Fourth Schedule. [Refer the ANALYSIS given below]

Tax is not deductible if “taxable pre-mature withdrawal” is less than ` 50,000.

The person entitled to receive such amount shall furnish his PAN, otherwise tax shall be deducted at the
MMR. [Omitted by Finance Act, 2023 w.e.f. 01.04.2023]

ANALYSIS:
Under Rule 8 of Part A of the Fourth Schedule to the Income Tax Act, 1961, the withdrawal of
accumulated balance by an employee from the RPF is exempt from tax. But, for the purpose of
discouraging pre-mature withdrawal and promoting long term savings, if the employee makes withdrawal
before continuous service of 5 years (other than the cases of termination due to ill health, contraction
or discontinuance of business, cessation of employment or any cause beyond the control of employee)
and does not opt for transfer of accumulated balance to new employer, the withdrawal would be subject to
tax. Therefore, section 192A provides for deduction @ 10% on such premature withdrawal of amounts by
the employee.

Sec. 193: TDS on Interest on Securities Rate 10%

Any Person  To Residents holding securities.
Time of Deduction: At the time of credit* or payment, whichever is earlier.
*Where any such interest is credited to any account in the books of account of the person liable to pay such
income, such crediting is deemed to be credit of such income to the account of the payee and the tax has to
be deducted at source. The account to which such interest is credited may be called “Interest Payable
account” or “Suspense account” or by any other name.
No TDS on any INTEREST payable:
a) on National Development Bonds;
b) on 7-year National Savings Certificate (IV Issue);
c) on any debenture issued by a company in which public are substantially interested, provided that
the interest is paid

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- to a resident individual or resident HUF,
- by an account payee cheque; and
- the aggregate amount of such interest paid or likely to be paid to such resident individual or
resident HUF does not exceed ` 5,000 during the financial year;
d) on Central Government or State Government Securities. [But interest exceeding ` 10,000 on 8%
Savings (Taxable) Bonds, 2003 or 7.75% Savings (Taxable) Bonds, 2018 or Floating Rate Savings
Bonds, 2020 (Taxable) shall be subject to TDS];
[Inserted by Finance (No.2) Act, 2024, w.e.f. 1.10.2024]
e) to LIC, GIC or any other insurer, in respect of securities owned by it or held by it as beneficiary;
f) any interest payable to a "business trust", as defined in section 2(13A), in respect of any securities,
by a special purpose vehicle referred to in the Explanation to section 10(23FC);
[Inserted by Finance Act, 2023]
g) on ‘Power Finance Corporation Ltd. 54EC Capital Gains Bond’ issued by Power Finance
Corporation Ltd;
h) on ‘Indian Railway Finance Corporation Ltd. 54EC Capital Gains Bond’ issued by Indian Railway
Finance Corporation Ltd.

Sec. 194: TDS on Dividend Rate 10%

Principal officer of Indian company or
a company which has made prescribed arrangements  To a Resident Shareholder
for declaration and payment of dividends
(including dividends on preference shares) within India
Time of Deduction: At the time of payment.
No TDS in case of a shareholder, being an individual:
 if dividend is paid by any mode other than cash, and
 amount of dividend distributed/paid to the shareholder does not exceed ` 5,000 in a year.
No tax is to be deducted if dividend is receivable by:
 LIC, GIC, its subsidiaries or any other insurer provided that the shares are owned by them, or they
have full beneficial interest in such shares;
 Business Trust;
 Any other person as may be notified by the C.G.

Sec. 194A: TDS on Interest Other than “Interest on Securities” Rate 10%
Any person [But, individual/HUF, only if sales or gross receipts
of his business/profession exceed ` 1 crore in case of business
or ` 50 lakh in case of profession
in the immediately preceding financial year]  To any Resident
Time of Deduction: At the time of credit or payment, whichever is earlier.

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NO TDS on following payments:

(i) Interest paid does not exceed:
 ` 40,000, where the payer is a Banking Company or a Co-operative Bank in respect of time
deposits including recurring deposits or in respect of deposit with Post Office under notified
schemes (i.e. Time Deposits, Recurring Deposits, Monthly Income Scheme, Senior Citizen
Savings Scheme and Mahila Samman Savings Certificate have been notified). However,
where the payee is a senior citizen, the limit shall be ` 50,000 instead of ` 40,000.
 ` 5,000 in any other case.
In case of Banking Company or Co-operative Bank or public company, the aforesaid amount shall be
computed with reference to the income credited or paid by a branch of such Bank or public company
as the case may be.
However the aforesaid amount shall be computed with reference to the income credited or paid by
banking company or the co-operative society or the public company, as the case may be, (i.e. payment
made as a whole and not branch wise) where such banking company or the co-operative society
or the public company has adopted core banking solutions.
(ii) Interest is credited or paid to any Banking company, Co-operative bank, PFI, LIC, UTI, an insurance
company or co-operative society carrying on Insurance business, or notified institutions. India
Infrastructure Finance Limited, Rural Electrification Corporation Limited, National Skill Development
Fund and Housing and Urban Development Corporation Ltd. (HUDCO) have been notified.
(iii) Interest is credited or paid by the firm to its partner.
(iv) Interest is credited or paid by a co-operative society (other than a co-operative bank) to its members or
interest is credited or paid by any co-operative society (including a Co-operative Bank) to any other
Co-operative society.
(v) Interest on deposits with a primary agricultural credit society or a primary credit society or a
co-operative land mortgage bank or a co-operative land development bank.
Provided that a co-operative society referred to in point (iv) or (v) above shall be liable to deduct tax at
source if:
 the total sales, gross receipts or turnover of the co-operative society exceeds ` 50 crore in the
immediately preceding financial year in which interest is credited or paid, and
 the amount of interest credited or paid during the financial year is more than ` 50,000 in case the
payee is senior citizen and ` 40,000 in any other case.
(vi) Interest on Zero Coupon Bond payable by an Infrastructure Capital Company or Infrastructure Capital
Fund or Infrastructure Debt Fund or a Public Sector Company or a Scheduled Bank.
(vii) Interest paid by Government under Income Tax Act or Wealth Tax Act.
(viii) Income credited by way of interest on compensation amount awarded by Motor Accident Claim
Tribunal.
(ix) Income paid by way of interest on compensation amount awarded by Motor Accident Claim
Tribunal, where the aggregate amount of such income paid during the financial year does not
exceed ` 50,000.
(x) Interest is credited or paid in respect of deposits under the schemes of Kisan Vikas Patra, National
Saving Certificates VIII issue and Indira Vikas Patra.

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(xi) Interest on Saving Account with banks or co-operative banks.

POINTS TO NOTE:
Interest on Time Deposit by Bank on daily/monthly basis in Core-branch Banking Solutions (CBS)
software. [Circular No. 3/2010 dated 02.03.2010]
Section 194A will not apply in cases of banks, where credit is made to provisioning account on
daily/monthly basis only for the purpose of macro monitoring by the use of CBS software, since no
constructive credit to the depositor’s/payee’s account takes place while calculating interest on time deposits
on daily or monthly basis in the CBS software used by banks. In such cases, tax shall be deducted at source
on accrual of interest at the end of financial year or at periodic intervals, as per practice of the bank.

Practical Question:
Maya Bank credited ` 73,50,000 towards interest on the deposits in a separate account for macro -monitoring
only by using Core-branch Banking Solutions (CBS) software. No tax was deducted at source in respect of
interest on deposits so credited even where the interest in respect of some deposits exceeded the limit of
` 40,000. The Assessing Officer disallowed the entire interest expenditure where the interest on time d eposits
credited exceeded the limit of ` 40,000 and also levied penalty under section 271C.
Decide the correctness of action of the Assessing Officer.

Solution:
Explanation to Section 194A provides that where any interest income (other than interest on securities) is
credited to any account, whether called 'Interest payable account' or 'Suspense account' or by any other
name, in the books of account of the person liable to pay such income, such crediting s hall be deemed to be
credit of such income to the account of the payee and provisions of section 194A shall apply accordingly.

However, CBDT vide Circular No. 3/2010 dated 02.03.2010 has clarified that Explanation to section 194A
will not apply in cases of banks where credit is made to provisioning account on daily/monthly basis for the
purpose of macro monitoring only by the use of CBS software , since no constructive credit to the depositor's
or payee's account takes place while calculating interest on dai ly or monthly basis in the CBS software used
by banks. In such cases, tax shall be deducted at source on accrual of interest at the end of the financial year
or at periodic intervals as per practice of the bank or as per the depositor's or payee's requireme nt or on
maturity or on encashment of time deposit, whichever event takes place earlier.
In view of above, the action of the A.O. in disallowing the interest expenditure credited in a separate account
for macro monitoring purpose is not valid and consequent penalty proceedings are also not tenable in law.

Sec. 194B: TDS on Winnings from Lottery or Crossword Puzzle, etc. Rate 30%
Any person  To any person
Nature of Payment - Winnings from any lottery, crossword puzzle or card game or other game of any sort
or from gambling or betting of any form or nature (other than winnings from any online game in respect of
which TDS u/s 194BA would be applicable). [Amended by Finance Act, 2023]
Time of deduction: At the time of Payment.
No TDS where amount or aggregate of amounts does not exceed ` 10,000 during a financial year.
[Amended by Finance Act, 2023]

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In case where:
(i) the winnings are wholly in kind; or
(ii) partly in cash and partly in kind and the part in cash is not sufficient to meet the liability of deduction
of tax in respect of whole of the winnings,
the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in
respect of the winnings. (Proviso to Sec. 194B)

Sec. 194BA: TDS on Winnings from Online Games Rate 30%

[Inserted by Finance Act, 2023 w.e.f. 01.04.2023]
Any person  To any person
Time of deduction: At the end of the F.Y. on the net winnings in his user account. In case, there is
withdrawal from user account during the F.Y., tax would be deducted at the time of such withdrawal on net
winnings comprised in such withdrawal. In addition, tax would also be deducted on the remaining amount
of net winnings in the user account as computed in prescribed manner at the end of the F.Y.
In case where:
(i) the net winnings are wholly in kind; or
(ii) partly in cash and partly in kind and the part in cash is not sufficient to meet the liability of
deduction of tax in respect of whole of the net winnings,
the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in
respect of the net winnings. [Sec. 194BA(2)]
Meaning of certain terms:
 "Online game" means a game that is offered on the internet and is accessible by a user through a
computer resource including any telecommunication device.
 "User" means any person who accesses or avails any computer resource of an online gaming
intermediary.
 "User account" means account of a user registered with an online gaming intermediary.
 "Online gaming intermediary" means an intermediary that offers one or more online games.

Guidelines to remove difficulties arising in implementation of the provisions of section 194BA

[Circular No. 5/2023 dated 22.5.2023]
The CBDT has, vide this circular, issued the following guidelines:
Question 1: There are a large number of gamers who play with very insignificant amount and
withdraw also very small amount. Deducting tax at source under section 194BA for each
insignificant withdrawal would increase compliance for tax deductor. Can there be relaxation to ease
compliance?
Answer: Tax may not be deducted on withdrawal on satisfaction of all of the following conditions,
namely:-
(i) net winnings comprised in the amount withdrawn does not exceed ` 100 in a month;
(ii) tax not deducted on account of this concession is deducted at a time when the net winnings comprised
in withdrawal exceeds ` 100 in the same month or subsequent month or if there is no such withdrawal, at
the end of the financial year; and
(iii) the deductor undertakes responsibility of paying the difference if the balance in the user account at the
time of tax deduction under section 194BA is not sufficient to discharge the tax deduction liability.

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Question 2: When the net winnings is in kind how will tax deduction under section 194BA operate?
Answer: At the outset, it may be clarified that where money in user account is used to buy an item in kind
and given to user then it is net winnings in cash only and the deductor is required to deduct tax at source
under section 194BA accordingly.
However, there could be a situation where the winning of the game is a prize in kind. In that situation
provision of section 194BA(2) will operate.
In these situations, the person responsible for paying, shall, before releasing the winnings, ensure that tax
has been paid in respect of the net winnings. In the above situation, the deductor will release the net
winnings in kind after the deductee provides proof of payment of such tax (e.g., Challan details, etc.).
In the alternative, as an option to remove difficulty if any, the deductor may deduct the tax under section
194BA and pay to the Government.
Question 3: How will the valuation of winnings in kind required to be carried out?
Answer: The valuation would be based on fair market value of the winnings in kind except in following
cases:-
(i) The online game intermediary has purchased the winnings before providing it to the user. In that case
the purchase price shall be the value for winnings.
(ii) The online game intermediary manufactures such items given as winnings. In that case, the price that it
charges to its customers for such items shall be the value for such winnings.
It is further clarified that GST will not be included for the purposes of valuation of winnings for TDS
under section 194BA.

Sec. 194BB: TDS on Winning from Horse Race Rate 30%

Any person being the holder of license for the horse racing  To any person
Time of deduction: At the time of Payment.
No TDS where amount or aggregate of amounts does not exceed ` 10,000 during a financial year.
[Amended by Finance Act, 2023]

Sec. 194C: TDS on Payment to Contractors for “Work Contract”:

Any person [But, individual/HUF, only if sales or gross receipts
of his business/profession exceed ` 1 crore in case of business
or ` 50 lakh in case of profession
the immediately preceding financial year]  To any Resident contractor/sub-contractor
Time of Deduction: At the time of credit or payment, whichever is earlier.
Rate of TDS:
1% in case recipient is individual or HUF
2% in case of any other assessee.

No TDS where amount payable does not exceed:

 ` 30,000 in case of a single contract.
 ` 1,00,000 in case of aggregate of contracts during a financial year.

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No Tax is required to be deducted by individual or HUF under a contract for personal purpose, even if
sales or gross receipts of his business/profession exceed ` 1 crore in case of business or ` 50 lakh in case of
profession.

No TDS in case of “Transport Operator” i.e. engaged in the business of plying & hiring of goods carriage
where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a
declaration to that effect along with his PAN.

The definition of “work” shall also include the following:

a. Advertising,
b. Broadcasting, telecasting and production of programmes,
c. Carriage of goods or passengers by any mode; other than railways,
d. Catering,
e. Manufacturing or supplying a product according to the requirement or specification of a customer by
using material purchased from such customer or its associate, being a person placed similarly in
relation to such customer as is the person placed in relation to the assessee under the provisions
contained in Sec. 40A(2)(b). However, it shall not include manufacturing or supplying a product
according to the requirement or specification of a customer by using material purchased from a person,
other than such customer or its associate.
Here, tax shall be deducted on the invoice value excluding the value of material, if such value is
mentioned separately in invoice. However, tax shall be deducted on the whole of the invoice value, if
the value of material is not mentioned separately in the invoice.

Note - The definition of “work” shall not include any sum referred to in Section 194J.
[Amended by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]

Practical Question:
Alap Ltd. has made payments on various dates in financial year 2024-2025 to Vilambit Ltd. towards work done
under different contracts as follows:

Contract Number Date of payment Amount (`)

1 05.05.2024 20,000
2 06.06.2024 22,000
3 08.08.2024 21,000
4 10.12.2024 25,000
5 29.03.2025 24,000

Alap Ltd. claims that it is not liable for deduction of tax at source u/s 194C. Examine the correctness of the
claim made by the company. What would be the position if the value of the contract no. 5 is ` 11,000 only and
there is no other contract during the year.

Solution:
As per section 194C, tax has to be deducted at source where the amount, credited or paid or likely to be
credited or paid to a contractor or sub-contractor, exceeds ` 30,000 in a single payment or ` 1,00,000 in
aggregate during a financial year.

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Therefore, in the given case, even though the value of each individual contract does not exceed ` 30,000, the
aggregate amount of the sums paid exceeds ` 1,00,000. Therefore, Alap Ltd's contention is not correct and
tax is required to be deducted at source on the whole amount of ` 1,12,000 from the last payment of ` 24,000
which made the aggregate payment to exceed ` 1,00,000.
No tax deduction is to be made if the value of the last contract is ` 11,000 as the aggregate amount in such
case would only be ` 99,000, which is below the aggregate monetary limit of ` 1,00,000.

Practical Question:
Grasim Cements Ltd., the assessee, purchases jute bags from Akshay & Co. The latter has to supply the jute
bags with the logo and address of the assessee, printed on it. From 01.08.2024 to 20.02.2025, the value of jute
bags supplied is ` 6,00,000, for which the invoice has been raised on 20.02.2025. While effecting the payment
for the same, is the assessee bound to deduct tax at source, assuming that the value of the printing component
involved is ` 45,000. The assessee has not sold any material to Akshay & Co. and the latter has to
manufacture the jute bags in its plant using raw materials purchased from outsiders.

Solution:
As per the definition u/s 194C ‘work’ shall not include manufacturing or supplying a product according to the
requirement or specification of a customer by using raw material purchased from a person, other than such
customer or its associate, i.e. such a contract would be in the nature of contract for 'sale'. The problem clearly
states that Akshay & Co. have to manufacture the jute bags using raw materials purchased from outsiders and
that the assessee has not sold any material to them. Therefore, in this case, it is a contrac t for sale. Hence,
the provisions of section 194C would not be attracted and no liability to deduct tax at source would arise.

Sec. 194D: TDS on Insurance Commission

Any person  To any resident

Time of Deduction: At the time of credit or payment, whichever is earlier.

Rate of TDS:
In case of Domestic Companies - 10%
Other than companies – 2% (w.e.f. 01.04.2025). Upto 31.03.2025 - 5%

No TDS where amount does not exceed ` 15,000 during a financial year.

Sec.194DA: TDS on Payment in respect of Life Insurance Policy Rate 2% on

amount of income comprised therein
[Amended by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]
Insurance Company  To any Resident
Nature of Payment: Amount of income comprised under Life Insurance Policy (including bonus).
Note: Tax shall be deducted at source @ 2% on the amount of income comprised therein. This means
that tax shall not be deducted on gross amount but on net income (i.e. after deducting insurance premium
from total sum received).

Time of Deduction: At the time of payment.

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Rate of TDS:
Upto 30.09.2024 - 5%
On or after 01.10.2024 – 2%

No TDS where amount does not exceed ` 1,00,000 during a financial year.
No TDS where the payment is exempt in the hands of recipient u/s 10(10D).

Thus, in the following cases TDS u/s 194DA are applicable, as these are not exempt u/s 10(10D):
a. Payment received under a Keyman insurance policy;
b. Payment received u/s 80DD(3);
c. Payment received under insurance policy issued during April 1, 2003 to March 31, 2012, where
annual insurance premium is more than 20% of capital sum assured.
d. Payment received under insurance policy issued after March 31, 2012, where annual insurance
premium is more than 10% of capital sum assured.
e. Payment received under insurance policy issued after March 31, 2013 to a person covered u/s 80U
or 80DDB, where annual insurance premium is more than 15% of capital sum assured.
In cases covered by (c), (d) or (e) above, tax is not deductible if the payment is made on the death of a
person.
Any payment under a policy [not being a Keyman insurance policy or a policy covered u/s 80DD(3)]
issued prior to April 1, 2003, is not subject to TDS provisions of section 194DA.

Sec. 194E: TDS on Payment to Non Resident Sportsmen/Sports Association/

Entertainer Rate 20%
Any Person  To a Non-Resident Sportsman (including an athlete); or
A Non-Resident Sports Association; or
An Entertainer who is not a Citizen of India.
Time of Deduction: At the time of credit or payment, whichever is earlier.

Sec. 194EE: Payments in respect of National Savings Scheme (NSS) Deposits:

Rate 10%
Any Person  To any Person
Time of Deduction: At the time of payment.

No TDS where amount does not exceed ` 2,500 during a financial year.
No TDS on payment of the said amount to the heirs of the assessee.

Sec. 194G: TDS on Commission, etc. on Sale of Lottery Tickets Rate 2%

[Amended by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]
Any Person  To any Person
Time of Deduction: At the time of credit or payment, whichever is earlier.

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 Tax Deduction and Collection at Source

Rate of TDS:
Upto 30.09.2024 - 5%
On or after 01.10.2024 – 2%
No TDS where amount does not exceed ` 15,000 during a financial year.

Sec. 194H: TDS on Commission (other than Insurance Commission) or Brokerage

Rate 2% [Amended by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]

Any Person [But, individual/HUF, only if sales or gross receipts

of his business/profession exceed ` 1 crore in case of business
or ` 50 lakh in case of profession
the immediately preceding financial year]  To any Resident
Time of Deduction: At the time of credit or payment, whichever is earlier.

Rate of TDS:
Upto 30.09.2024 - 5%
On or after 01.10.2024 – 2%

 No TDS where amount does not exceed ` 15,000 during a financial year.
 Commission to employees and employee directors will form part of salary income and is liable to TDS
u/s 192 and not u/s 194H.

Applicability of TDS provisions on payments by Television Channels and Publishing Houses to

Advertisement companies for procuring or canvassing for Advertisements
[Circular No. 05/2016, dated 29-2-2016]
The CBDT noted that there are two types of payments involved in the advertising business:
(i) Payment by client to the advertising agency, and
(ii) Payment by advertising agency to the television channel/newspaper company.

The applicability of TDS on these payments has already been dealt with in Circular No. 715 dated 8-8-
1995, where it has been clarified that while TDS under section 194C (as work contract) will be applicable
on the first type of payment, there will be no TDS under section 194C on the second type of payment e.g.
payment by advertising agency to the media company.

However, another issue has been raised in various cases as to whether the fees/charges taken or retained by
advertising companies from media companies for canvassing/booking advertisements (typically 15% of the
billing) is ‘commission’ or ‘discount’.

Accordingly, the CBDT has clarified that no TDS is attracted on payments made by television
channels/newspaper companies to the advertising agency for booking or procuring of or canvassing for
advertisements.

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Tax Deduction and Collection at Source

Sec. 194-I: TDS on Rent:

Any person [But, individual/HUF, only if sales or gross receipts
of his business/profession exceed ` 1 crore in case of business
or ` 50 lakh in case of profession
the immediately preceding financial year]  To any Resident
Time of Deduction: At the time of credit or payment, whichever is earlier.
Rate of TDS for RENT:
For use of Plant & Machinery – 2%
For use of Land, building, furniture or fitting – 10%

No TDS where amount of rent does not exceed ` 2,40,000 during a financial year.
Where the share of each co-owner in the property is definite and ascertainable, the limit of ` 2,40,000 will
be applicable to each co-owner separately. [CIT v. Senior Manager SBI (2012)(All.)]
No TDS where income by way of rent is credited or paid to a business trust, being a real estate investment
trust, in respect of any real estate asset, referred to in Section 10(23FCA), owned directly by such business
trust.
For the purpose of this section, -
“Rent” means any payment, by whatever name called, under any lease, sublease, tenancy or any other
agreement or arrangement for the use of (either separately or together) any,
a. Land; or
b. Building (including factory building); or
c. Land appurtenant to a building (including factory building); or
d. Machinery; or
e. Plant; or
f. Equipment; or
g. Furniture; or
h. Fittings,
whether or not any or all of the above are owned by the payee.

POINTS TO NOTE:
 No TDS on GST component comprised in Rent payments:
GST paid by the tenant does not partake the nature of income of the landlord. The landlord only
acts as a collecting agency for Government for collection of GST. Therefore, tax deduction at
source u/s 194-I would be required to be made on the amount of rent paid/payable without
including the GST. [CBDT Circular No. 23/2017]

 Tax shall be deducted on advance rent, warehousing charges and non-refundable deposits.

 No tax is required to be deducted on refundable deposits at the time of payment of security deposits.
However, tax has to be deducted when such deposits are adjusted against the rent.

 No TDS on Municipal Taxes borne by the tenant.

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 Tax Deduction and Collection at Source
 Payment of Cooling charges to Cold Storage Owners: The main function of the cold storage is to
preserve perishable goods by means of a mechanical process, and storage of such goods is only
incidental in nature. The customer is also not given any right to use any demarcated space / place or
the machinery of the cold store and thus does not become a tenant. Therefore, the provision of 194-I
is not applicable to the cooling charges paid by the customers of the cold storage.
However, since the arrangement between the customers and cold storage owners are basically
contractual in nature, the provision of Sec. 194C will be applicable to the amount paid as cooling
charges by the customers of the cold storage. [CBDT Circular 1/2008]

 Lump sum lease premium paid for acquisition of long term lease:
Lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic
rent, paid or payable for acquisition of long-term leasehold rights over land or any other property are
not payments in the nature of rent within the meaning of section 194-I. Therefore, such payments are
not liable for TDS under section 194-I. [CBDT Circular 35/2016]

 Passenger Service Fee (PSF) paid by an airline company to Airports Authority of India are NOT
in the nature of rent to attract TDS u/s 194-I.
Practical Question:
ABC Ltd. took on sub-lease a building from J, an individual, with effect from 1.7.2024 on a rent of ` 20,000
p.m. It also took on hire machinery from J with effect from 1.10.2024 on hire charges of ` 15,000 p.m. ABC
Ltd. entered into two separate agreements with J for sub-lease of building and hiring of machinery. The rent of
building and hire charges of machinery for the financial year 2024-2025 amounting to ` 1,80,000 and `
90,000, respectively, were credited by ABC Ltd. to the account of J in i ts books of account on 31.3.2025.
Examine the obligation of ABC Ltd with regard to deduction of tax at source in respect of the rent and hire
charges.

Solution:
Section 194-I dealing with deduction of tax at source from payment of rent, levies TDS @ 2% for machinery
hire charges and 10% for building lease rent. The scope of the section includes within its ambit, rent for
machinery, plant and equipment. Tax is required to be deducted at source from payment of rent, by whatever
name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of, inter
alia, building and machinery, irrespective of whether such assets are owned or not by the payee.
The limit of ` 2,40,000 for tax deduction at source will apply to the aggregate rent of all the assets. Even if
two separate agreements are entered into, one for sub-lease of building and the other for hiring of machinery,
rent and hire charges under the two agreements have to be aggregated for the purpose of application of the
threshold limit of ` 2,40,000. Therefore, ABC Ltd. has to deduct tax at source u/s 194 -I in respect of the rent
and hire charges aggregating to ` 2,70,000 (` 1,80,000 + ` 90,000) credited to the account of J, the payee.

Sec. 194-IA: TDS on Transfer of Immovable Property: Rate 1%

Any person being transferee
[other than the person referred to in section 194LA]  To any Resident transferor
Nature of Payment: Consideration for transfer of any immovable property.

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Tax Deduction and Collection at Source
Time of Deduction: At the time of credit or payment, whichever is earlier.
Rate of TDS: 1% of amount of such consideration or stamp duty value, whichever is higher.
No TDS where the total amount of consideration for the transfer of an immovable property as well as its
stamp duty value, are less than ` 50,00,000.

If there are more than one transferor or transferee in respect of an immovable property, then the
consideration shall be aggregate of amount paid or payable by all the transferees to the transferor or all
the transferors for the transfer of such immovable property.
[Inserted by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]

“Immovable property” means any land (other than rural agricultural land) or any building or part of a
building.
“Consideration for transfer of any immovable property” shall include all charges of the nature of club
membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other
charges of similar nature, which are incidental to transfer of the immovable property.

POINTS TO NOTE:
 In the case of property whose sale price is ` 50 Lakh or more and in the event part payment being made
for the purchase, then such tax would be required to be deducted on every part payment of
consideration and not at the time of final payment.

 It is not necessary that the land or building should be situated in India. If any person is purchasing
property outside India from a person resident in India, he is liable to deduct tax at source on sale
consideration @ 1%.

 If immovable property is purchased from a non-resident person for any value, no tax is required to be
deducted under this section. However, tax shall be deducted u/s 195.
 Deductor is not required to obtain TAN i.e. tax deduction and collection account number.

 Where seller does not have PAN, then instead of 1%, TDS will be applicable @ 20% because of
section 206AA of the Income tax Act, 1961.
 Tax is required to be deducted irrespective of the fact that immovable property is held as capital asset or
stock in trade by the buyer and seller.
 In case, immovable property is compulsorily acquired under any law in force, the provisions of
section 194-LA shall apply and provisions of section 194-IA are not applicable.
Example:
Mr. Nirbhay and Mr. Kartik acquired a building located at Surat jointly. They purchased it from Mr. Sanu f or a total
consideration of ` 80 Lakh. Mr. Nirbhay and Mr. Kartik will pay equal amount of consideration for the building.
The total consideration for transfer of an immovable property exceeds ` 50 Lakh. Therefore, Mr. Nirbhay and Mr.
Kartik are required to deduct TDS @ 1% on the consideration paid by them.

Example:
Mr. Anand and Mr. Bimal are the co-owners of a land situated at Ahmedabad having share in the ratio of 2:3 in
the land. They sold the land to Mr. Akshay on 08.05.2023 for a consideration of ` 70 Lakh.

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 Tax Deduction and Collection at Source

The total consideration for transfer of an immovable property exceeds ` 50 Lakh. Therefore, Mr. Akshay is
required to deduct TDS u/s 194-IA @ 1% on the consideration paid by them.
Example:
BPL Pvt. Ltd. purchased the land situated at Baroda and issued 8,00,000 equity shares having face value of ` 10
each at a premium of ` 20 each in consideration for the land.
BPL Pvt. Ltd. is liable to deduct TDS @ 1% on ` 240 Lakh at the time of issue of shares. If the agreement
between BPL Pvt. Ltd. and the seller specifies that the burden of tax shall be borne by the buyer, then in that
case, grossing up shall be done.

Example:
Miss Dipika, an Indian Resident, owned a house in Rajkot. She sold the house to Mr. Patel, for a consideration of
` 45 Lakh. However, the stamp duty value of the said house property is ` 58 Lakh.
Even though the consideration does not exceed ` 50 Lakh, Mr. Patel shall be required to deduct tax u/s 194-IA
as the stamp duty value is more than ` 50 lakh.

Example:
Mr. Parth, Non-Resident Indian, sold his land located at Gandhinagar to Mr. Sohel for a total consideration of
` 1.5 Crore. Mr. Sohel is required to make the payment to Mr. Parth after deducting TDS @ 20% plus Health &
Education cess (on the LTCG computed) u/s 195. The provisions of section 194-IA do not apply where the
payment is made to a non-resident.

Sec. 194-IB: TDS on Payment of rent, by certain Individual or Hindu Undivided

Family (HUF): Rate 2% [Amended by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]
Any Individual or HUF [other than those Individual or HUF
whose total sales or gross receipts
from the business/profession exceed
` 1 crore in case of business or
` 50 lakh in case of profession in
the immediately preceding financial year]  To any Resident

Time of Deduction: At the time of credit of rent for the last month of the previous year or the last month
of tenancy (if the property is vacated during the year) to the account of payee OR at
the time of payment thereof, whichever is earlier.
Rate of TDS:
Upto 30.09.2024 - 5%
On or after 01.10.2024 – 2%

No TDS where amount does not exceed ` 50,000 per month or part of a month during the previous year.
Points to Note:
 Deductor covered under this section shall not be required to obtain Tax deduction Account Number
(TAN) as per section 203A of the Act.
 Deductor shall be liable to deduct tax only once in the previous year.

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Tax Deduction and Collection at Source
 Where the tax is required to be deducted as per the provisions of section 206AA (i.e. @ 20% on failure
to furnish PAN to deductor) such deduction shall not exceed the amount of rent payable for the last
month of the previous year or the last month of the tenancy, as the case may be.
For the purpose of this section, “rent” means any payment, by whatever name called, under any lease, sub-
lease, tenancy or any other agreement for the use of any land or building or both.

Practical Question:
Mr. Alpesh owns a building at C. G. Road, Ahmedabad. It is given on rent to Mr. Rizwan at a rent of ` 80,000 p.m.
from 1st October, 2024. Discuss whether TDS provisions are applicable for the previous year 2024-2025 in following
situations:
1. Mr. Rizwan is a businessman and his annual turnover for the financial year 2023-2024 is ` 85 lakh.
2. Mr. Rizwan is a salaried employee. He gets house rent allowance from the employer. On the basis of rent paid to
Mr. Alpesh, he claims exemption under section 10(13A) pertaining to house rent allowance.

Solution:
In both the above situations, section 194-I is not applicable.
However, Mr. Rizwan is required to deduct tax under section 194-IB at the rate of 2% during the F.Y. 2024-2025.
Suppose rent of March is paid on March 5, 2025, then tax is deductible on March 5, 2025.
Amount of TDS = ` 9,600 (2% of ` 80,000 x 6 months).

Practical Question:
Mr. A, a salaried individual, pays rent of ` 60,000 per month to Mr. B during the whole of F.Y. 2024-2025. Is he
required to deduct tax at source? If so, what will be the time and amount of deduction?
Would your answer be different if Mr. A vacated the premises on 31 st January, 2025?
Also, what would be your answer (in both the above situations) if Mr. B does not provide his PAN to Mr. A?

Solution:
Since, Mr. A pays rent exceeding ` 50,000 per month in the F.Y. 2024-25, he is liable to deduct tax at source u/s 194-
IB @ 2% from 01.04.2024 to 31.03.2025 i.e. ` 14,400 (` 60,000 x 12 months x 2%) from rent payable for March, 2025.
If Mr. A vacated the premises in January, 2025, then tax of ` 12,000 [` 60,000 x 10 months x 2%] has to be deducted
from rent payable for January, 2025.
In case Mr. B does not provide his PAN to Mr. A, tax would be deductible @ 20%, instead of 2%.
In case 1 above, this would amount to ` 1,44,000 [` 60,000 x 20% x 12] but the same has to be restricted to ` 60,000,
being rent for March, 2025.
In case 2 above, this would amount to ` 1,20,000 [` 60,000 x 20% x 10] but the same has to be restricted to ` 60,000,
being rent for January, 2025.

Sec. 194-IC: TDS on Payment under specified agreement [i.e. Joint Development
Agreement, referred in section 45(5A)]: Rate 10%
Any Person  Resident Individual or HUF
Time of Deduction: At the time of credit or payment, whichever is earlier.

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 Tax Deduction and Collection at Source
Payment Covered: The person is required to deduct tax at source under this section only when the
consideration is paid in money (i.e. not in kind), on transfer of immovable property being land or building
or both under Joint Development Agreement referred to in section 45(5A).

Points to Note:
 This section shall be applicable notwithstanding anything contained in section 194-IA. Therefore, the
provisions of section 194-IA shall not be applicable if any monetary consideration is payable on
transfer of immovable property being land or building or both under specified agreement.
 If the advance payment of consideration is made or token money is given prior to the specified
agreement, tax is required to be deducted only on the date of execution of agreement or adjustment of
advance/token and not when the advance money is paid.

Sec. 194J: TDS on Fees for Professional Services (FPS), or

Fees for Technical Service (FTS), or
Royalty, or
Director’s Fees, or
Any sum referred in clause (va) of Sec. 28 i.e., non-compete fees:
Rate 10%
Any person [But, individual/HUF, only if sales or gross receipts
of his business/profession exceed ` 1 crore in case of business
or ` 50 lakh in case of profession
the immediately preceding financial year]  To any Resident

Time of Deduction: At the time of credit or payment, whichever is earlier.

No TDS where amount does not exceed ` 30,000 during a Financial Year for each type of payment.

However, there is NO threshold limit for director’s fees.

Rate of Deduction at 2%:
In the following cases, tax shall be deducted @ 2% instead of 10%:
 Fees for technical services (not being a professional services).
 Royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of
cinematographic films.
 Payment is made to a person engaged only in the business of operation of a call centre.

POINTS TO NOTE:
 No tax is required to be deducted by individual or HUF for professional fees paid for personal
purpose, even if sales or gross receipts of his business/profession exceed ` 1 crore in case of business
or ` 50 lakh in case of profession.

 “Professional services” means services rendered by a person in the course of carrying on legal,
medical, engineering or architectural profession or the profession of accountancy or technical
consultancy or interior decoration or advertising or such other profession as is notified by the CBDT
for the purposes of Sec. 44AA or of this section.

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Tax Deduction and Collection at Source
Other notified professions are:
(a) Profession of “authorised representatives”;
(b) Profession of “film artist”;
(c) Profession of “company secretary”.
 CBDT has notified the services rendered by following persons in relation to the sports activities as
“Professional Services” for the purpose of the sec. 194J, namely - Sports Persons, Umpires and
Referees, Coaches and Trainers, Team Physicians and Physiotherapists, Event Managers,
Commentators, Anchors and Sports Columnists.
The profession is defined exhaustively under this section and therefore, any profession not covered
under this section will be outside the scope of this section. For example, this section will not apply to
professions of singing, dancing, teaching, painting etc.
 Remuneration paid to directors will be liable for TDS u/s 192 and not under 194J. Only amount
paid as fees to directors will be liable for TDS u/s 194J.
 Payment to hospital by Third Party Administrators (TPAs): TPAs who are making payment on
behalf of insurance companies to hospital for settlement of medical/insurance claims, etc., under
various schemes including cashless schemes, are liable to deduct tax at source u/s 194J.
For invoking provisions of section 194J, there is no stipulation that the professional services
have to be necessarily rendered to the person who makes payment to hospital. Therefore, TPAs
who are making payment on behalf of insurance companies to hospitals for settlement of
medical/insurance claims etc. under various schemes including Cashless Schemes are liable to
deduct tax at source u/s 194J on all such payments to hospitals etc.
[Circular No. 8/2009 dated 24/11/2009]
 Consideration for use or right to use of computer software is royalty.

Sec. 194K: TDS on Income in respect of Units: Rate 10%

Any person  To any resident
Nature of Payment: Any income in respect of:
(i) units of a Mutual Fund specified u/s 10(23D), or
(ii) units from the Administrator of the specified undertaking, or
(iii) units from the specified company.

Time of Deduction: At the time of credit or payment, whichever is earlier.

No tax shall be deducted at source in the following cases:

 Where income credited or paid during the financial year does not exceed ` 5,000.
 Where income is in the nature of capital gains.

Sec. 194LA: Payment of Compensation on Compulsory Acquisition of any

Immovable Property (Other than Agricultural land) Rate 10%
Any Person  To Any Resident
Time of Deduction: At the time of payment.
No TDS where amount does not exceed ` 2,50,000 during a financial year.

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 Tax Deduction and Collection at Source
No tax shall be deducted where such payment is made in respect of any award or agreement which has
been exempted from levy of tax u/s 96 of “Right to Fair Compensation and Transparency in Land
Acquisition, Rehabilitation and Resettlement Act, 2013” (RFCTLARR Act, 2013).

Sec. 194M: Payment for Contract Work, Commission or Brokerage or Fees for
Professional services by certain individuals or HUF: Rate 2%
[Amended by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]
Individual/HUF [other than those who are required
to deduct tax u/s 194C, 194H or 194J]  To any Resident.
Nature of Payment:
(i) Payment for carrying out any work (including supply of labour for carrying out any work) in pursuance
of a contract or
(ii) commission (other than insurance commission referred to in Sec. 194D) or brokerage or
(iii) fees for professional services for carrying out any work (including supply of labour for carrying out
any work) in pursuance of a contract.
Time of Deduction: At the time of credit or payment, whichever is earlier.
Rate of TDS:
Upto 30.09.2024 - 5%
On or after 01.10.2024 – 2%

No TDS if such sum or aggregate of such sums does not exceed ` 50,00,000 during a financial year.
Deductor covered under this section shall not be required to obtain Tax deduction Account Number (TAN)
as per section 203A of the Act.
For the meaning of the terms “Work”, “Professional services” and “Commission and brokerage”, refer Sec.
194C, 194J and 194H respectively.
Example:
Examine whether TDS provisions would be attracted in the following cases, and if so, under which section. Also
specify the rate of TDS applicable in each case. Assume that all payments are made to residents.
Particulars of Nature of payment Aggregate of Whether TDS provisions are attracted?
the payer payments made in
the F.Y. 2024-2025
1 Mr. Karan, an Contract Payment ` 5 lakh No. TDS u/s 194C shall not be attracted
individual, for repair of since the payment is for personal purpose
engaged in retail residential house and TDS shall not be attracted u/s 194M as
business with the aggregate of contract payment to the
turnover of payee in the P.Y. 2024-2025 does not
` 2.42 crore in exceed ` 50 lakh.
the P.Y. 2023- Payment of ` 80,000 Yes, u/s 194H, since the payment exceeds
2024 commission to Mr. ` 15,000, and Mr. Karan’s turnover exceeds
Mathur for business ` 1 crore in the P.Y. 2023-2024.
purposes

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Tax Deduction and Collection at Source

2 Mr. Dharmesh, a Contract Payment ` 55 lakh Although, Mr. Dharmesh has a turnover of `
wholesale trader for reconstruction of 120 lakh in the P.Y. 2023-2024 and it is a
has a turnover of residential house payment for work, TDS provisions u/s 194C
` 120 lakh are not attracted since it is a contract for
during P.Y. personal purpose. However, TDS shall be
2023-2024 attracted u/s 194M, since the aggregate of
payments (i.e. ` 55 lakh) exceed ` 50 lakh.
3 Mr. Nikunj, a Payment of ` 51 lakh Since Mr. Nikunj is a salaried individual,
salaried brokerage for Sec. 194H is not applicable, But, Sec. 194M
individual buying a residential shall be applicable, since the payment of
house ` 51 lakh exceeds the threshold of ` 50
lakh.
4 Mr. Anirudh, a Contract payment ` 48 lakh TDS provisions u/s 194C are not attracted
pensioner for reconstruction of since Mr. Anirudh is a pensioner. TDS
residential house provisions u/s 194M are also not applicable,
since the payment of ` 48 lakh does not
exceed the threshold of ` 50 lakh.

Sec. 194N: Payment of certain amounts in cash: Rate 2%

Banking company or
co-operative bank or post office  To any person (herein referred to as the recipient).

Nature of Payment: Payment of any sum or aggregate of sums, in cash, in excess of ` 1 crore (` 3 crore in
case of a co-operative society) during the previous year, from one or more accounts maintained by the
recipient. [Inserted by Finance Act, 2023]
Note: Tax shall be deducted at source @ 2% only on the amount in excess of ` 1 crore/` 3 Crore.
Time of Deduction: At the time of payment.
However in case of a recipient who has not filed ROI for all of the three assessment years relevant to the
three previous years, for which the time limit to file ROI u/s 139(1) has expired, immediately preceding the
previous year in which the payment of the sum is made to him, the provision of this section shall apply
with the modification that:
(i) the sum or aggregate of sums, in cash in excess of ` 20 lakh during the previous year; and
(ii) the deduction shall be:
(a) 2% where sum or aggregate of sums, being paid in cash exceeds ` 20 lakh during the previous
year but does not exceed ` 1 crore (` 3 crore in case of a co-operative society); or
(b) 5% where sum or aggregate of sums, being paid in cash exceeds ` 1 crore (` 3 crore in case of a
co-operative society) during the previous year. [Inserted by Finance Act, 2023]
No TDS where the payment is made to:
(i) Government;
(ii) Banking company or co-operative bank or post office;

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 Tax Deduction and Collection at Source

(iii) any business correspondent of a banking company or cooperative society engaged in carrying on
the business of banking, in accordance with the guidelines issued in this regard by the RBI under
the RBI Act, 1934;
(iv) any white label automated teller machine operator of a banking company or co-operative society
engaged in carrying on the business of banking, in accordance with the authorization issued by the
RBI under the Payments and Settlement Systems Act, 2007;
(v) such other person or class of persons, which the Central Government may, by notification in the
official gazette, specify in consultation with the RBI.
Notification No. 68/2019, 70/2019 and 80/2019:
In exercise of the powers given in this section, the Central Government has specified the following cases
where tax shall not be deducted at source:
a. Cash Replenishment Agencies (CRA’s) and franchise agents of White Label Automated Teller
Machine Operators (WLATMO’s).
b. The commission agent or trader, operating under Agriculture Produce Market Committee (APMC),
and registered under any Law relating to Agriculture Produce Market of the concerned State.
c. The authorised dealer and its franchise agent and sub-agent, and Full-Fledged Money Changer
(FFMC) licensed by the RBI and its franchise agent.
Notification No. 123/2024 w.e.f. 01.12.2024:
The Central Government after consultation with the Reserve Bank of India, hereby specifies that the
provisions of section 194N shall not apply to Foreign Representations duly approved by the Ministry of
External Affairs of the Government of India including Diplomatic Missions, agencies of the United
Nations, International Organisations, Consulates and Offices of Honorary Consuls which are exempt
from paying taxes in India as per the Diplomatic Relations (Vienna Convention) Act, 1972 and the United
Nations (Privileges and Immunities) Act 1947.
NOTE: Cash withdrawal made from all the branches of a bank/co-operative bank/post office shall be
aggregated to see the limit of ` 1 crore. However, cash withdrawals from two different banks/co-operative
banks shall not be aggregated.

Sec. 194-O: Payment of certain sums by e-commerce operator to e-commerce

participant: Rate 0.1% [Amended by Finance (No. 2) Act, 2024 w.e.f. 01.10.2024]
E-commerce operator  To Resident E-commerce participant
Nature of Payment: Amount of sale of goods or provision of services where sale of goods or provision of
services of an e-commerce participant is facilitated by an e-commerce operator through its digital or
electronic facility or platform (by whatever name called).
Time of Deduction: At the time of credit or payment, whichever is earlier.
Rate of TDS:
Upto 30.09.2024 - 1% of the gross amount of sales or services or both.
On or after 01.10.2024 – 0.1% of the gross amount of sales or services or both.

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Tax Deduction and Collection at Source
No tax shall be deducted at source in case of e-commerce participant, being an individual or HUF, where
the gross amount of such sale or services or both during the previous year does not exceed ` 5 lakh and
such e-commerce participant has furnished his PAN or Aadhaar number to the e-commerce operator.
Points to Note:
 Where the purchaser of goods or recipient of services has directly made any payment to an e-commerce
participant for the sale of goods or provision of services or both, facilitated by an e-commerce operator,
it shall be deemed to be the amount credited or paid by the e-commerce operator to the e-commerce
participant and shall be included in the gross amount of such sale or services for the purpose of
deduction of tax.
 A transaction in respect of which tax has been deducted under this section, or which is not liable to
deduction (i.e. in case of e-commerce participant, being individual or HUF, where gross amount does
not exceed ` 5 lakh and e-commerce participant has furnished PAN or Aadhaar), shall not be liable to
tax deduction at source under any other provision of this Chapter.
 However tax shall be deducted on any amount received or receivable by an e-commerce operator for
hosting advertisements or providing any other services not in connection with sale or services referred
in this section.
 If the resident e-commerce participant does not furnish his PAN then tax shall be deductible as per
section 206AA at the rate of 5%.
‘Electronic commerce’ means the supply of goods or services or both, including digital products, over
digital or electronic network.
‘E-commerce operator’ means a person who owns, operates or manages digital or electronic facility or
platform for electronic commerce.
‘E-commerce participant’ means a person resident in India selling goods or providing services or both,
including digital products, through digital or electronic facility or platform for electronic commerce.
‘Services’ includes ‘fees for technical services’ and ‘fees for professional services’, as defined in
the Explanation to Sec. 194J.

Sec. 194P: Deduction of tax in case of specified senior citizen:

Specified Bank → Specified senior citizen
The specified bank shall, after considering the deduction allowable under Chapter VI-A and rebate
allowable u/s 87A, compute the total income of specified senior citizen for the relevant assessment year
and deduct tax on such total income on the basis of rates in force.
'Specified senior citizen' means a Resident Individual:
(i) who is of the age of 75 years or more at any time during the previous year;
(ii) who is having pension income and no other income except interest from any account maintained in
the same bank in which he is receiving his pension income; and
(iii) has furnished a declaration to the specified bank in Form No. 12BBA alongwith evidence for
claiming deduction under Chapter VI-A.
The provisions of sec. 139 (i.e. filing of ROI) shall not apply to a specified senior citizen for the relevant
assessment year in which the tax has been deducted under this section.

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 Tax Deduction and Collection at Source
Specified bank means a banking company which is a scheduled bank and has been appointed as agents of
RBI u/s 45 of the RBI Act, 1934.

Sec. 194Q: TDS on payment of certain sum for purchase of goods: Rate 0.1%
Buyer whose total sales or gross receipts
from his business exceed ` 10 crore → Resident seller
in the immediately preceding financial year
Nature of Payment: Any sum for purchase of any goods of the aggregate value exceeding ` 50 lakh in
any previous year.
Time of Deduction: At the time of credit or payment, whichever is earlier.
Rate of TDS: 0.1% of such sum exceeding ` 50 lakh.
No TDS under this section in respect of a transaction on which:
(a) tax is deductible under any of the provisions of this Act; and
(b) tax is collectible under any provisions of Sec. 206C other than a transaction to which Sec. 206C(1H)
applies.
The Central Government has specified that no deduction of tax shall be made under the provisions of
section 194Q by a person, being a buyer, in respect of purchase of goods from a Unit of International
Financial Services Centre, being a seller. The relaxation under this notification shall be available to the
seller only during the previous years relevant to the 10 consecutive assessment years for which deduction
under section 80LA of the said Act is being opted and the buyer shall be liable to deduct tax on payments
made or credited for any other year. [Notification No. 03/2025 w.e.f. 01.01.2025]
Adjustment for GST, purchase returns:
 When tax is deducted at the time of credit and the component of GST is indicated separately, tax
shall be deducted u/s 194Q on the amount credited without including such GST. However, if the
tax is deducted on payment basis because the payment is earlier than the credit, the tax would be
deducted on the whole amount as it is not possible to identity that payment with GST component of
the amount to be invoiced in future. This shall be applicable also for goods not covered under GST
such as petroleum products and are chargeable to various levies like VAT/Sales tax/Excise
duty/CST.
 In respect of purchase return where the money is refunded by the seller, the tax deducted may be
adjusted against the next purchase against the same seller. However, no adjustment is required if
the purchase return is replaced by the goods by the seller as in that case the purchase on which tax
was deducted u/s 194Q has been completed with goods replaced.

Sec. 194R: TDS on benefit or perquisite in respect of business or profession: Rate

10%
Any person [But, individual/HUF, only if sales or gross receipts
of his business/profession exceed ` 1 crore in case of business
or ` 50 lakh in case of profession
the immediately preceding financial year]  To any Resident

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Tax Deduction and Collection at Source
Nature of Payment: Any benefit or perquisite (in cash or in kind or partly in cash and partly in kind),
whether convertible into money or not, arising from business or the exercise of a profession, by such
resident.
The person responsible for providing such benefit or perquisite shall, before providing such benefit or
perquisite, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite @
10% of the value or aggregate of value of such benefit or perquisite.
In case where the benefit or perquisite:
(i) is wholly in kind; or
(ii) partly in cash and partly in kind and the cash part is not sufficient to meet the liability of deduction
of tax in respect of whole of such benefit or perquisite,
the person responsible for providing such benefit or perquisite shall, before releasing the benefit or
perquisite, ensure that tax has been paid in respect of the benefit or perquisite.
No TDS where the aggregate value of the benefit or perquisite provided to such resident during the
financial year does not exceed ` 20,000.

For the purposes of this section, the expression 'person responsible for providing' means the person
providing such benefit or perquisite, or in case of a company, the company itself including the principal
officer thereof.
Note: Only the benefit/perquisite which arises from business/profession is covered u/s 194R. Eg., gifts,
perks or benefits provided on some special occasions like festivals (eg. Diwali sweets), marriage occasions,
etc. may not liable for tax deduction at source u/s 194R, since such benefits/perquisites does not arise out
of business/profession.

Examples for better understanding of provisions of Sec. 194R:

Example 1: Jazz Ltd. provides holiday package of ` 40,000 + GST to Mr. Raj (resident dealer) on
28.05.2024 on achieving target for FY 2023-2024. In this case, Sec. 194R will be applicable and TDS
@ 10% on ` 40,000 will be deducted.
Example 2: If in example 1, holiday package was provided to Mr. Sam, who is a resident employee,
then Sec. 194R shall not be applicable, since it does not arise out of business/profession. It will be
included in salary of employee and TDS u/s 192 will be deducted.

Example 3: Jazz Ltd. provides holiday package of ` 12,000 + GST to Mr. Raj (resident dealer) on
28.05.2024 on achieving target for FY 2023-2024 and gold coins worth ` 18,000 on 15.07.2024. In
this case, Sec. 194R is applicable and tax will be deducted @ 10% on ` 30,000 i.e. ` 3,000.

Example 4: Jazz Ltd. provides holiday package of ` 12,000 + GST to Mr. Raj (resident dealer) on
28.07.2024 on achieving target for FY 2023-2024 and gold coins worth ` 18,000 on 15.08.2024 on his
son's marriage. In this case, Sec. 194R is not applicable, since value of holiday package does not
exceed ` 20,000. Gold coins worth ` 18,000 was given on son's marriage which does not arise out of
business/profession and therefore, it is not covered in Sec. 194R.

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 Tax Deduction and Collection at Source

Example 5: Jazz Ltd. provides Gold coins worth ` 15,000 to Morale Ltd. (resident dealer) on
28.07.2024 on achieving target for FY 2023-2024. Impress with Mr. Rahul (employee of Morale Ltd.)
performance, Jazz Ltd. provides silver coins worth ` 10,000 + GST to Mr. Rahul on 01.08.2024 as
gift. In this case, Sec. 194R is not applicable, since gold coins worth does not exceed ` 20,000. Silver
coins worth ` 10,000 is not in relation to business as Mr. Rahul is not an authorised dealer but
employee of Morale Ltd., moreover silver coins was provided in his personal capacity and not in
capacity as employee of Morale Ltd. and therefore, it is not covered in Sec. 194R.

Sec. 194T: TDS on payment to partners of firms: Rate 10%

[Inserted by Finance (No.2) Act, 2024 w.e.f A.Y. 2025-26]
Any Firm → To any Partner of such Firm
Nature of Payment: Any sum in nature of salary, remuneration, commission, bonus or interest
Time of Deduction: At the time of credit or payment, whichever is earlier.
No TDS where the aggregate of such sums credited or paid to the partner of the firm does not exceed
` 20,000 during the financial year.

Sec. 195A: Income payable “net of tax”:

Where the tax chargeable on any income referred to in section 192 to 195 is to be borne by the payer of
income, then for the purpose of calculating TDS liability under those sections such income shall be
increased to such amount as would after deduction of tax thereon be equal to the net amount payable to the
recipient of income i.e. the amount which is payable without any tax deduction.
In other words, if TDS liability is borne by the payer then the payer’s liability to pay TDS has to be
calculated by grossing up the amount paid to the recipient.

Sec. 196: No TDS on sums payable to Government, RBI, Corporations & MF:
No tax shall be deducted from any sums payable to:
(i) Government,
(ii) Reserve Bank of India,
(iii) Corporation established under any Central Act whose income is exempt from tax or
(iv) Mutual Funds specified u/s 10(23D).

 Notification No. 47/2016 dated 17/06/2016:

The Central Government hereby notifies that no deduction of tax shall be made on the payments of
the nature specified below, in case such payment is made by a person to a bank listed in the Second
Schedule to the Reserve Bank of India Act, 1934, excluding a foreign bank, or to any payment
systems company authorised by the Reserve Bank of India u/s 4(2) of the Payment and Settlement
Systems Act, 2007 (51 of 2007), namely:
 bank guarantee commission;
 cash management service charges;
 depository charges on maintenance of DEMAT accounts;
 charges for warehousing services for commodities;
 underwriting service charges;

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Tax Deduction and Collection at Source
 clearing charges (MICR charges) including interchange fee or any other similar charges, by
whatever name called, charged at the time of settlement or for clearing activities under the
Payment and Settlement Systems Act, 2007;
 credit card or debit card commission for transaction between the merchant establishment and
acquirer banks.

Sec. 197: Certificate for No/Lower Deduction of Tax:

Where in case of any income liable for TDS u/s 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I,
194J, 194K, 194LA, 194M, 194-O, 194Q and 195, the A.O. is satisfied that the total income of the
recipient justifies deduction of TDS at any lower rate or no deduction, the A.O. shall give him such
certificate as may be appropriate i.e. Lower rate of deduction certificate or no deduction certificate.
A.O. shall issue such certificate only on application made by the assessee i.e. not suo motu. The application
has to be made in Form 13 electronically.
In such case, the payer shall deduct income tax as per the rates specified in the certificate till such time the
certificate is cancelled by A.O.
Certificate for the lower deduction u/s 197 shall not be issued if the application does not contain the PAN
of the applicant.

Sec. 197A: Self Declaration for Non-Deduction of Tax:

No tax shall be deduced if the recipient of income referred to in section 192A or 193 or 194 or 194A or
194D or 194DA or 194EE or 194-I or 194K gives a declaration in prescribed form to the payer that the tax
on his current year income shall be NIL.

Points to Note:
1. This declaration cannot be given by a company or a firm.
2. This declaration cannot be given by a person OTHER THAN A SENIOR CITIZEN if the aggregate of
the incomes referred above exceeds the taxable limit even though the tax on his total income is NIL. In
other words, in case of senior citizens this declaration can be given even if the income from the above
sources exceed the taxable limit subject to the condition that the estimated tax on total income (including
such incomes) should be Nil.
3. The application shall be made in Form 15G in case of person other than senior citizens. It shall be
made in Form 15H in case of senior citizens.

Sec. 198: Tax deducted is income received:

All sums deducted as tax in accordance with the above provisions under chapter XVII-B and income tax
paid outside India, by the way of deduction, in respect of which an assessee is allowed a credit against
the tax payable under this Act shall, for the purpose of computing his income of the assessee, be deemed
to be income received by the assessee.
In other words, for the purpose of computing the total income of the payee, the gross amount shall be
considered as income and not the net amount received after TDS.

Sec. 199: Credit for tax deducted:

Any tax deducted as per section 192 to 196D and paid to C.G. shall be treated as payment of tax on behalf
of the person from whose income the deduction was made. Credit shall also be given to the employee for
the tax paid by the employer to C.G. u/s 192(1A) on the non-monetary perquisites of the employee.

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 Tax Deduction and Collection at Source

TDS - PAYMENTS, RETURNS, CERTIFICATES

Sec. 200: TIME LIMIT FOR PAYMENT OF TDS/TCS:

Different Situation Time limit for deposit of tax

When payer is the TDS is deposited without Challan Same day

Government or when
payment is made on behalf Where the income or amount is
of Government. credited or paid in March –
On or before 30th April.
In any other case –
TDS is deposited with Challan
On or before 7 days from the end of
the month in which –
i) the deduction is made; or
ii) income tax is due u/s 192(1A).
Where the income or amount is
On or before 30th April.
credited or paid in March.
When tax is deducted by
On or before 7 days from the end of
any person, other than
the month in which –
Government. In any other case
i) the deduction is made: or
ii) Income – tax is due u/s 192(1A).
NOTE: For the purposes of section 194-IA, 194-IB & 194M tax shall be paid to the credit of Central
Government within a period of 30 days from the end of the month in which the deduction is made.

TIME LIMIT FOR FURNISHING QUARTERLY RETURNS OF TDS:

Sr. For the quarter Due date for submission of the quarterly
No. ending on TDS Returns
1. 30th June 31st July of the financial year
2. 30th September 31st Oct. of the financial year
3. 31st December 31st Jan. of the financial year
4. 31st March 31st May of the financial year immediately following the financial
year in which deduction is made.

Proviso to Sec. 200(3): The person may also deliver to the prescribed authority a correction statement
for rectification of any mistake or to add, delete or update the information furnished in the statement
delivered under this sub-section in such form and verified in such manner as may be specified by the
authority.
However, no correction statement shall be delivered after the expiry of 6 years from the end of the
financial year in which the statement is required to be delivered.
[Inserted by Finance (No. 2) Act, 2024 w.e.f. A.Y. 2025-26]

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Tax Deduction and Collection at Source
NOTE: Provision similar to Proviso to Sec. 200(3) is also there in section 206C providing for filing of
correction or rectification statement in case of a TCS Return.

Sec. 201: Consequences of Failure to Deduct or Pay TDS:

If any person does not deduct the whole or any part of the tax or after deducting fails to pay the tax as
required by or under this Act, he shall be liable to pay simple interest:
(i) @ 1% for every month or part of a month on the amount of such tax from the date on which
such tax was deductible to the date on which such tax is deducted; and
(ii) @ 1.5% for every month or part of a month on the amount of such tax from the date on which
such tax was deducted to the date on which such tax is actually paid, and such interest shall be
paid before furnishing the statement in accordance with the provision of section 200(3).
NOTE: Provision similar to the above said provision of Sec. 201 is also incorporated in Sec. 206C for
failure to collect or pay TCS.

Sec. 203A: Tax Deduction and Collection Account Number:

Every person deducting or collecting tax in accordance of provisions of this chapter and who has not been
allotted such number shall apply to A.O. for allotment such number.
Such number has to be quoted in such manner as prescribed in all challans, returns, certificates, statements
filed or other related documents, submitted in accordance with this chapter.
The provisions of this section shall not apply to such person, as may be notified by the Central Government
in this behalf.

Sec. 206A: Furnishing of statement in respect of payment of any income to

residents without deduction of tax:
Any banking company or co-operative society or public company referred to in the proviso to clause (i) of
sub-section (3) of Sec. 194A [i.e., a public company formed and registered in India with the main object of
carrying on the business of providing long-term finance for construction or purchase of residential houses
in India and which is eligible for deduction under section 36(1)(viii)] responsible for paying to a resident
any income not exceeding ` 40,000, where the payer is a banking company or a co-operative society, and `
5,000 in any other case by way of interest (other than interest on securities), shall prepare such statement in
such form, containing such particulars, for such period, verified in such manner and within such time, as
may be prescribed, and deliver or cause to be delivered the said statement to the prescribed income-tax
authority or to the person authorised by such authority.

Sec. 206AA: TDS at Higher Rate on Failure to furnish PAN:

 Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive
any income or amount, on which tax is deductible, shall furnish his PAN to the person responsible
for deducting such tax (hereafter referred to as deductor), OTHERWISE tax shall be deducted at the
higher of the following rates:
(a) At the rate specified in the relevant provision of this Act; or
(b) At the rate of 20% [5% if tax is required to be deducted u/s 194-O or 194Q]

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 Tax Deduction and Collection at Source
ANALYSIS:
Thus, where the recipient does not furnish his PAN to the deductor, the TDS rate shall be higher of:
 the normal rate of TDS; or
 20%.

 The deductee shall furnish his PAN to the deductor and both shall indicate the same in all the
correspondence, bills, vouchers and other documents which are sent to each other.
 Where the PAN provided to the deductor is invalid or does not belong to the deductee, it shall be
deemed that the deductee has not furnished his PAN to the deductor and the above provisions shall
apply accordingly.

Sec. 206AB: TDS at Higher Rate for Non-filers of ROI

 Notwithstanding anything contained in any other provisions of this Act, where tax is required to be
deducted at source under any section other than Sec. 192, 192A, 194B, 194BA, 194BB, 194-IA, 194-
IB, 194M or 194N on any sum paid or credited to a specified person, the tax shall be deducted at the
higher of the following rates:
(a) At twice the rate specified in the relevant provision of this Act; or
(b) At the rate of 5%.
 Where Sec. 206AA is also applicable to a specified person, in addition to this section, the tax shall be
deducted at higher of the two rates provided in this section and in section 206AA.
 For the purposes of this section, 'specified person' means a person who has not furnished ROI for the
assessment year relevant to the previous year immediately preceding the financial year in which tax is
required to be deducted, for which the time limit of furnishing ROI u/s 139(1) has expired and the
aggregate of tax deducted at source and tax collected at source in his case is ` 50,000 or more in the
said previous year.
However, the specified person shall not include –
(i) a non-resident who does not have PE in India; or
(ii) a person who is not required to furnish the return of income for the assessment year relevant
to the said previous year and is notified by the Central Government in this behalf [RBI has
been notified by CBDT for this purpose]. [Amended by Finance Act, 2023]

TCS Provisions
[Chapter XVII-BB]

Sec. 206C: TAX COLLECTION AT SOURCE

Sec. 206C(1): Tax Collection on Sale of Alcoholic Liquor, Forest Produce, Scrap,
Minerals, etc.
Every person, being a seller shall, -
 at the time of debiting of the amount payable by the buyer to the account of the buyer; or
 at the time of receipt of such amount from the said buyer,
whichever is earlier,
collect a sum equal to the following percentage of the purchase price, as income tax:

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Tax Deduction and Collection at Source

Nature of goods % of Purchase Price

Alcoholic liquor for human consumption 1%
Tendu leaves 5%
Timber obtained under a forest lease 2.5%
Timber obtained by any mode other than under a forest leases 2.5%
Any other forest produce not being timber or tendu leaves 2.5%
Scrap 1%
Minerals; being coal, lignite or iron ore 1%

For Sec. 206C(1)

Seller means any person other than individual or HUF whose sales or gross receipts from his
business/profession does not exceed ` 1 crore in case of business or ` 50 lakh in case of profession in
the immediately preceding financial year.
Buyer shall not include the following:
(i) Public sector company, Central Govt., State Govt.,
(ii) Embassy, High Commission, Consulate, trade representative of a foreign state,
(iii) Club,
(iv) Buyer purchasing in retail trade for personal consumption.

As per Sec. 206C(1A) no tax shall be collected at source in case of a buyer, who is resident in India, if
such buyer furnishes to the seller, a declaration in Form No. 27C in duplicate that the above goods to be
purchased are to be utilized for the purpose of manufacturing, processing or producing any article or
thing or for purpose of generation of power and not for trading purpose.
Sec. 206C(1C): Grant of lease, license or transfer of any right or interest in any
parking lot or toll plaza or mine or quarry: Rate 2%
 Every person who grants lease, license or transfers any right or interest in any parking lot or toll plaza or
mine or quarry
 to any other person, other than a public sector company (hereinafter called as “Licensee or Lessee”)
 for the use of such parking lot, toll plaza, mine or quarry for the purposes of business
shall,
 at the time of debiting of such amount payable by the licensee or lessee to the account of the licensee
or lessee or
 at the time of receipt of such amount from the licensee or lessee,
whichever is earlier,
collect from the licensee or lessee 2% of such amount as income tax.

Sec. 206C(1F): TCS on Sale of Motor Vehicle: Rate 1%

[Amended by Finance (No. 2) Act, 2024 w.e.f. 01.01.2025]
Every person, being a seller, who receives any amount from sale of –
(i) a motor vehicle; or
(ii) any other goods notified by C. G.,

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 Tax Deduction and Collection at Source

of value exceeding ` 10,00,000 shall at the time of receipt of such amount, collect from the buyer 1% of
sale consideration as income tax.
Following goods have been notified by the C. G. for TCS under this section w.e.f. 22.04.2025 –

Sr. No. Nature of goods

1. Any wrist watch
2. Any art piece such as antiques, painting, sculpture
3. Any collectibles such as coin, stamp
4. Any yacht, rowing boat, canoe, helicopter
5. Any pair of sunglasses
6. Any bag such as handbag, purse
7. Any pair of shoes
8. Any sportswear and equipment such as golf kit, ski-wear
9. Any home theatre system
10. Any horse for horse racing in race clubs and horse for polo

Seller means any person other than individual or HUF whose sales or gross receipts from his
business/profession does not exceed ` 1 crore in case of business or ` 50 lakh in case of profession in
the immediately preceding financial year.
Buyer means a person who obtains motor vehicle, but does not include:
(a) the Central Government, a State Government and an embassy, a High Commission, legation,
commission, consulate and trade representation of a foreign state;
(b) a local authority as defined in Explanation to Sec. 10(20);
(c) a public sector company which is engaged in the business of carrying passengers.
“Motor vehicle” includes trucks, buses, rickshaws, two-wheelers and cars.
Clarifications under Circular No. 22/2016 dated 08/06/2016:
 Sec. 206C(IF) is brought to cover all transactions of retail sales and accordingly, it will not apply on
sale of motor vehicles by manufacturers to dealers/distributors.
 Government, institutions notified under United Nations (Privileges and Immunities) Act 1947, and
Embassies, Consulates, High Commission, Legation, Commission and trade representation of a foreign
State shall not be liable to levy of TCS at the rate of 1 % u/s 206C(IF).
 Tax is to be collected at source at the rate of 1% on sale consideration of a motor vehicle exceeding
` 10 lakh. It is applicable to each sale and not to aggregate value of sale made during the year.
 For example, if the value of motor vehicle is ` 20 lakh, out of which ` 5 1akh has been paid in cash and
balance amount by way of cheque, the tax shall be collected at source at the rate of 1% on total sale
consideration of ` 20 lakh only under sub-section (1F) of section 206C of the Act.

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Tax Deduction and Collection at Source

Sec. 206C(1G): TCS on foreign remittance through Liberalised Remittance

Scheme and on selling of overseas tour package: [Amended by Finance Act, 2023]
Every person:
(a) being an authorised dealer, who receives an amount, for remittance from a buyer, being a person
remitting such amount under the Liberalised Remittance Scheme of RBI;
(b) being a seller of an overseas tour program package, who receives any amount from a buyer, being the
person who purchases such package,
shall,
 at the time of debiting the amount payable by the buyer or
 at the time of receipt of such amount from the said buyer,
whichever is earlier,
collect from the buyer TCS at the rates mentioned below.

Nature of payment Rate

Remittance under LRS for education, out of loan obtained from financial Nil upto ` 7 lakh
institution as defined u/s 80E 0.5% above ` 7 lakh
Remittance under LRS for medical treatment or education (other than financed Nil upto ` 7 lakh
by loan) 5% above ` 7 lakh
Remittance under LRS for other purposes Nil upto ` 7 lakh
20% above ` 7 lakh
Purchase of Overseas tour program package 5% till ` 7 lakh
20% thereafter

No TCS in the following cases:

 Authorised dealer shall not collect tax in respect of amount where tax has already been collected by the
seller.
 Where the buyer is liable to deduct tax at source under any other provision of this Act and has deducted
such amount.
 Where the buyer is Central Government, a State Government, an embassy, a High Commission, a
legation, a commission, a consulate, the trade representation of a foreign State, a local authority u/s
10(20) or an individual who is a non-resident and who does not have a permanent establishment
in India.
‘Overseas tour program package’ means any tour package which offers visit to a country or countries or
territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or
any other expenditure of similar nature or in relation thereto.
Circular No. 10/2023 dated 30.06.2023:
Whether payment through overseas credit card would be counted in LRS?
No TCS shall be applicable on expenditure through international credit card while being overseas.
Whether the threshold of ` 7 lakh applies separately for various purposes like education, health
treatment and others?
The threshold of ` 7 lakh for LRS is combined threshold for applicability of the TCS on LRS irrespective
of the purpose of the remittance.
For example, if remittance of ` 7 lakh under LRS is made for education purpose and ` 7 lakh is made for
medical treatment and ` 7 lakh for other purposes, then upto ` 7 lakh remittance under LRS during a
financial year shall not be liable for TCS. However, subsequent ` 14 lakh remittance under LRS shall be
liable for TCS at applicable rate.

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 Tax Deduction and Collection at Source

Whether the threshold of ` 7 lakh applies separately for each remittance through different
authorised dealers? lf not, how will authorised dealer know about the earlier remittances by that
remitter through some other authorised dealer?
It is clarified that the threshold of ` 7 lakh for LRS is qua remitter and not qua authorised dealer.
Since the facility to provide real time update of remittance under LRS by remitter is still under
development, it is clarified that the details of earlier remittances under LRS by the remitter during the
financial year may be taken by the authorised dealer through an undertaking at the time of remittance. If
the authorised dealer correctly collects the tax at source based on information given in this undertaking, he
will not be treated as 'assessee in default'. However, for any false information in the undertaking,
appropriate action may be taken against the remitter. Same methodology of taking undertaking from the
buyer of overseas tour program package may be followed by the seller of such package.
There is threshold of ` 7 lakh for remittance under LRS for TCS to become applicable while there is
another threshold of ` 7 lakh for purchase of overseas tour program package where reduced rate of
5% TCS applies. Whether these two thresholds apply independently?
Yes, these two thresholds apply independently. For LRS, the threshold of ` 7 lakh applies to make TCS
applicable. For purchase of overseas tour program package, the threshold of ` 7 lakh applies to determine
the applicable TCS rate as 5% or 20%.
A resident individual spends ` 3 lakh for purchase of overseas tour program package from a foreign
tour operator and remits money which is classified under LRS. There is no other remittance under
LRS or purchase of overseas tour program during the financial year. Whether TCS is applicable?
In case of purchase of overseas tour program package which is classified under LRS, TCS provision for
purchase of overseas tour program package shall apply and not TCS provisions for remittance under LRS.
Since for purchase of overseas tour program package, the threshold of ` 7 lakh does not apply, TCS is
applicable and tax is required to be collected by the seller. In this case, the tax shall be required to be
collected at 5% since the total amount spent on purchase of overseas tour program package during the
financial year is less than ` 7 lakh.
There are different rates for remittance under LRS for medical treatment/education purposes and
for other purposes. What is the scope of remittance under LRS for medical treatment/education
purposes?
Medical:
As per the clarification by the RBI, remittance for the purposes of medical treatment shall include:
(i) remittance for purchase of tickets of the person to be treated medically overseas (and his attendant) for
commuting between India and the overseas destination;
(ii) his medical expense; and
(iii) other day to day expenses required for such purpose.
Education:
Remittance for purpose of education shall include:
(i) remittance for purchase of tickets of the person undertaking study overseas for commuting between
India and the overseas destination;
(ii) the tuition and other fees to be paid to educational institute; and
(iii) other day to day expenses required for undertaking such study.
Whether purchase of international travel ticket or hotel accommodation on standalone basis is
purchase of overseas tour program package?
Purchase of only international travel ticket or purchase of only hotel accommodation, by in itself is not
covered within the definition of 'overseas tour program package'. To qualify as 'overseas tour program
package', the package should include at least two of the followings:
(i) international travel ticket,
(ii) hotel accommodation (with or without food)/boarding/lodging,
(iii) any other expenditure of similar nature or in relation thereto.

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Tax Deduction and Collection at Source

Sec. 206C(1H): TCS on sale of goods above ` 50 lakh: Rate 0.1%

Every person, being a seller,
 who receives any amount as consideration for sale of any goods
 of the value or aggregate of such value exceeding ` 50 lakh rupees in any previous year,
 other than the goods being exported out of India or goods covered in Sec. 206C(1) or 206C(1F) or
206C(1G)
shall at the time of receipt of such amount, collect from the buyer, 0.1% of the sale consideration exceeding
` 50 lakh as income-tax.

Provided that if the buyer has not provided PAN or Aadhaar number to the seller, then tax shall be
collected as per Sec. 206CC. However, Sec. 206CC shall be read as if for the words ‘5%’, the words ‘1%’
had been substituted.

This section shall not apply where the buyer is liable to deduct tax at source under any other provision of
this Act on the goods purchased by him from the seller and has deducted such amount.
‘Buyer’ means a person who purchases any goods, but does not include:
(a) the Central Government, a State Government, an embassy, a High Commission, legation, commission,
consulate and the trade representation of a foreign State,
(b) a local authority as defined in the Explanation to Sec. 10(20),
(c) a person importing goods into India or any other person as the Central Government may notify.

C. G. has notified that a Unit of International Financial Services Centre shall not be considered as buyer
in respect of purchase of goods from a seller. The relaxation under this notification shall be available to the
buyer only during the previous years relevant to the 10 consecutive assessment years for which deduction
under section 80LA of the said Act is being opted and the seller shall be liable to collect tax on payments
received for any other year. [Notification No. 06/2025 w.e.f. 01.01.2025]

‘Seller’ means a person whose total sales, gross receipts or turnover from the business carried on by him
exceed ` 10 crore during the financial year immediately preceding the financial year in which the sale of
goods is carried out, not being a person as may be notified by the Central Government.
Applicability to sale of motor vehicle:
(i) Receipt of sale consideration from a dealer would be subjected to TCS u/s 206C(1H), if such sales are
not subjected to TCS u/s 206C(1F).
(ii) In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value of ` 10
lakh or less to a buyer would be subjected to TCS u/s 206C(1H), if the receipt of sale consideration for
such vehicles during the previous year exceeds ` 50 lakh.
(iii) In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value
exceeding ` 10 lakh would not be subjected to TCS u/s 206C(1H) if such sales are subjected to TCS u/s
206C(IF).
Adjustment for sale return, discount or indirect taxes
No adjustment on account of sale return or discount or indirect taxes including GST is required to be made
for collection of tax u/s 206C(1H) since the collection is made with reference to receipt of amount of sale
consideration.

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 Tax Deduction and Collection at Source

TIME LIMIT FOR FURNISHING QUARTERLY RETURNS OF TCS:

Sr. For the quarter Due date for submission of the quarterly
No. ending on TCS Returns
1. 30th June 15th July of the financial year
2. 30th September 15th Oct. of the financial year
3. 31st December 15th Jan. of the financial year
4. 31st March 15th May of the financial year immediately following the
financial year in which deduction is made.

Sec. 206CC: Requirement to furnish Permanent Account Number by collectee:

 Notwithstanding anything contained in any other provisions of this Act, any person paying any sum or
amount, on which tax is collectible, shall furnish his PAN to the person responsible for collecting such
tax (hereafter referred to as collector), otherwise tax shall be collected at the higher of the following
rates:
(a) At twice the rate specified in the relevant provision of this Act; or
(b) At the rate of 5% [1% in case of Sec. 206C(1H)].
However, the rate of TCS under this section shall not exceed 20%.
 Where the PAN provided to the collector is invalid or does not belong to the collectee, it shall be
deemed that the collectee has not furnished his PAN to the collector and the above provisions shall
apply accordingly.
 The provisions of this section shall not apply to a non-resident who does not have Permanent
Establishment in India.

Sec. 206CCA: TCS at Higher Rate for Non-filers of ROI

 Notwithstanding anything contained in any other provisions of this Act, where tax is required to be
collected at source under any section on any sum received from a specified person, the tax shall
be collected at the higher of the following rates:
(a) At twice the rate specified in the relevant provision of this Act; or
(b) At the rate of 5%.
However, the rate of TCS under this section shall not exceed 20%.
 Where Sec. 206CC is also applicable to a specified person, in addition to this section, the tax
shall be collected at higher of the two rates provided in this section and in section 206CC.
 For the purposes of this section, 'specified person' means a person who has not furnished ROI for
the assessment year relevant to the previous year immediately preceding the financial year in which
tax is required to be deducted, for which the time limit of furnishing ROI u/s 139(1) has expired and
the aggregate of tax deducted at source and tax collected at source in his case is ` 50,000 or more in
the said previous year.
However, the specified person shall not include –
(i) a non-resident who does not have PE in India; or
(ii) a person who is not required to furnish the return of income for the assessment year relevant
to the said previous year and is notified by the Central Government in this behalf [RBI has
been notified by CBDT for this purpose]. [Amended by Finance Act, 2023].

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Tax Deduction and Collection at Source

SUMMARY of TDS

Income liable to Threshold

Sec. Rate (%) Deductor Deductee
TDS Limit
Employee
Basic Exemption
192 Salary Average Rate Any Employer
Limit (Resident or
Non-resident)
Pre-mature
Any
withdrawal from Trustees of the
employee
192-A accumulated 10 ` 50,000 Employees’ PF
covered under
balance of RPF by Scheme, 1952
RPF
the employee
Interest on ` 5,000 Resident
193 10 Any Person
Securities (Int. on Debenture) holder
` 5,000
(only if payment is
Resident
194 Dividend 10 made other than Domestic Company
shareholder
cash to an
individual)
` 40,000 -
Any person [other
Deductor is Bank
than individual/HUF,
etc. ` 50,000 if the
whose turnover or
payee is a senior
gross receipts from
Interest Other citizen.
business or
194-A than ‘Interest on 10 ` 5,000 - in other Any Resident
profession do not
Securities’ case
exceed ` 1 crore or
` 50,000 - Interest ` 50 lakh,
paid by Motor
respectively, in the
Accident Claim preceding F. Y.]
Tribunal
Winnings from
194-B Lottery, 30 ` 10,000 Any Person Any Person
crossword puzzle
Winnings from
194-BA 30 Nil Any Person Any Person
online games

Winnings from
194-BB 30 ` 10,000 Any Person Any Person
Horse Race
Any person [other
1% - Recipient
` 30,000 - Single than individual/HUF,
Indivi./HUF
Contract whose turnover or
gross receipts from
Payment to
business or
194-C Contractors for ` 1,00,000 - profession do not
Any Resident
‘Work Contract’ 2% - any other aggregate of
exceed ` 1 crore or
assessee contracts during a
` 50 lakh,
financial year
respectively, in the
preceding F. Y.]
In case of
Domestic
Insurance
194-D Companies – ` 15,000 Any Person Any Resident
Commission
10%

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 Tax Deduction and Collection at Source
Other than
Companies –
5%
2% (5% upto
Payment in
30.09.2024) on
194-DA respect of Life ` 1,00,000 Insurance Company Any Resident
the amount of
Insurance Policy
income in LIP
Payment to Non-
Resident
194-E Sportsmen/Sports 20 Nil Any Person Non Resident
Association/Entert
ainer
Payments in
194-EE respect of NSS 10 ` 2,500 Any Person Any Person
Deposits
Commission, etc.
2% (5% upto
194-G on Sale of Lottery ` 15,000 Any Person Any Resident
30.09.2024)
Tickets
Any person [other
than individual/HUF,
whose turnover or
Commission
` 15,000 gross receipts from
(other than
2% (5% upto (No tax to be business or
194-H Insurance- Any Resident
30.09.2024) deducted by BSNL profession do not
Commission) or
or MTNL) exceed ` 1 crore or
Brokerage
` 50 lakh,
respectively, in the
preceding F. Y.]
2% - Plant & Any person [other
Machinery than individual/HUF,
` 2,40,000 whose turnover or
(Aggregate limit gross receipts from
194-I Rent 10% - Land, for plant- business or Any Resident
Building, Machinery and profession do not
Furniture Land-Building ) exceed ` 1 crore or `
50 lakh, in the
preceding F. Y.]
1% of
Transfer of
consideration Any person being
Immovable
or stamp duty transferee (other than Any Resident
194-IA Property (Other ` 50,00,000
value, the person referred in transferor
than Rural
whichever is sec.194LA)
Agricultural land)
higher
Any Individual or
HUF [other than
individual/HUF,
Payment of rent whose turnover or
by certain 2% (5% upto gross receipts from
194-IB ` 50,000 per month Any Resident
Individual or 30.09.2024) business or
HUF profession exceeds `1
crore or `50 lakh,
respectively, in the
preceding F. Y.]
Payment under Resident
194-IC 10 Nil Any Person
specified (Individual or

39
Tax Deduction and Collection at Source
agreement, HUF)
referred in sec.
45(5A)
` 30,000 for each Any person [other
Fees for type of payment than individual/HUF,
professional 10 whose turnover or
services, Royalty, gross receipts from
194-J Directors fees business or Any Resident
(No threshold limit
profession do not
for director's fee)
Fees for Technical 2 exceed ` 1 crore or
Services ` 50 lakh, in the
preceding F.Y.]
Income in respect
194K 10 ` 5,000 Any person Any Resident
of units
Compensation on
Compulsory
Acquisition of any
194-LA Immovable 10 ` 2,50,000 Any Person Any Resident
Property (Other
than Agricultural
land)
Contract Work,
Commission or Individual / HUF
Brokerage, Fees [other than those
2% (5% upto
194M for Professional ` 50,00,000 required to deduct tax Any Resident
30.09.2024)
Services by u/s 194C, 194H or
certain individual 194J]
or HUF
Payments of ` 1,00,00,000 (` 3
Banking Co., Co-Op.
194N certain amounts 2 crore in case of co- Any Person
Bank or Post Office
in cash operative society)
Payment of
certain sums by Gross amount of
e-commerce 0.1% (1% upto sale or services E-commerce
194-O E-commerce operator
operator to 30.09.2024) does not exceed ` 5 participant
e-commerce lakh
participant
Buyer whose total
sales or gross receipts
Payment of Tax to be deducted Resident
194Q 0.1
from his business or
seller
certain sum for on amount exceed-
exceed ` 10 crore in
purchase of goods ing ` 50 lakh
the immediately pre-
ceding financial year
Any person [other
than
Providing individual/HUF,
benefit or whose turnover or
perquisite in gross receipts from Any
194R 10 ` 20,000
respect of business or Resident
business or profession do not
profession exceed ` 1 crore or
` 50 lakh,
respectively, in the
preceding F.Y.]

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 Tax Deduction and Collection at Source

Payment by
Firm to its
Partners in Any
nature of salary, ` 20,000
194T 10 Any Firm Partner of
remuneration, such Firm
commission,
bonus or interest

Sections Time of Deduction

At the time of payment

192, 192A, 194, 194B, 194BB, 194DA, 194EE, 194LA, 194N, 194R
At the time of credit, or payment,
All other sections
whichever is earlier

41