Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) continue to serve as essential mechanisms for ensuring tax compliance and revenue collection at the transaction stage. With the commencement of Financial Year 2025-26, understanding the updated TDS and TCS rates is critical for individuals, businesses, and foreign entities to ensure timely and accurate tax planning.
TDS is deducted based on the nature of payment, applicable threshold, and the recipient’s status. Here are key sections to note:
Section 192: Salary – Tax deducted as per income slab rates.
Section 192A: Withdrawal from EPF (above ₹50,000) – 10%.
Section 194A:
₹50,000 for non-senior citizens – 10%.
₹1,00,000 for senior citizens – 10%.
Section 194B: Lottery/crossword winnings (above ₹10,000) – 30%.
Section 194BA: Online game winnings – 30%.
Section 194BB: Horse race winnings (above ₹10,000) – 30%.
Section 194C:
Individual/HUF contractors – 1%.
Others – 2%.
Section 194J:
Professional fees – 10%.
Technical services/call centers – 2%.
Section 194I:
Rent on plant/machinery – 2%.
Other rents – 10%.
Section 194Q: Purchase of goods exceeding ₹50 lakh – 0.1%.
Section 194R: Business perquisites – 10%.
Section 194S: Virtual Digital Asset transactions – 1%.
Section 194T: (New from April 1, 2025) – Payments to partners – 10%.
Section 194N: Cash withdrawals – 2% to 5% (based on return filing status).
Non-resident individuals and entities are subject to higher and fixed TDS rates across various payment categories:
Section 192: Salary – As per slab.
Sections 194B, 194BA, 194BB: Lottery/game/horse race winnings – 30%.
Section 195:
Capital gains – 12.5% or 20%.
Dividend – 10% or 20%.
Interest on loans – 20%.
Royalty & Technical Fees – 20%.
Section 194LB: Interest from infrastructure debt funds – 5%.
Section 194LC:
Foreign currency loans – 5%.
Listed bonds in IFSC – 4%.
Others – 9%.
Section 196D: Income from securities (FIIs) – 20%.
Section 194T: Partner’s remuneration/interest – 10%.
TCS is applicable when the seller collects tax from the buyer at the point of sale for specific goods or services. Here’s a summary:
Alcoholic liquor: 1%
Timber, tendu leaves: 2%–5%
Scrap: 1%
Coal, lignite, iron ore: 1%
Motor vehicles (above ₹10 lakh): 1%
Sale of goods exceeding ₹50 lakh (Sec 206C(1H)) – Not applicable where TDS already applies.
Foreign remittance (general): 20%
Education/medical remittance: 5%
Overseas tour package:
Up to ₹10 lakh – 5%
Above ₹10 lakh – 20%
Introduction of Section 194T: 10% TDS on partner-related payments by the firm.
Revisions to Section 194N: Enhanced compliance based on prior ITR filings.
Clarifications under Section 195: Refined TDS rates based on income types for non-residents.
Staying updated on the applicable TDS and TCS rates helps taxpayers—residents and non-residents alike—comply with statutory obligations and avoid interest or penalties. The above summary provides a practical reference to navigate tax withholding and collection for FY 2025-26.
For personalized assistance on withholding tax obligations or cross-border transactions, consult a professional tax advisor or reach out to Certicom Group of Chartered Accountants.
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