How is TDS calculated?

Establish the base, check whether the threshold is crossed, then apply the rate. The base is the payment excluding any GST shown separately on the invoice. The threshold test depends on the section and comes in four kinds — a single payment, an annual aggregate, both of those independently, or each calendar month. Only if the test is crossed does the rate apply, and on an aggregate basis it applies to the whole year to date rather than just the current payment.

What happened to Section 194C, 194J and the rest?

They were consolidated. The Income-tax Act, 2025 took effect on 1 April 2026 and replaced the whole 194-series with a single Section 393, structured as a master table addressed by numeric payment codes. Salary TDS moved to Section 392 and TCS to Section 394. Rates and thresholds carried over unchanged, so the substance is the same, but the old section numbers no longer exist as law — and a TDS return quoting one for a period from Q1 FY 2026-27 onwards is rejected.

Why do the thresholds work differently from one section to another?

Because they were written at different times for different purposes, and Parliament has never harmonised them. Section 194C has two tests because a contractor might be paid once substantially or many times in small amounts, and both were thought worth catching. Section 194I moved to a monthly test in 2025 to spare small landlords. Section 194IA tests each property transaction alone because there is normally only one. The practical consequence is that you cannot reason from one section to another — you have to know which basis applies.

If the annual threshold is crossed mid-year, do I deduct on earlier payments too?

Yes, and this is where most people under-deduct. Once the aggregate crosses the limit, the liability attaches to everything paid to that payee in the year, including amounts that fell below the threshold when they were made. A firm crediting a partner ₹12,000 in April and ₹11,000 in May deducts ₹2,300 in May under old Section 194T — ten percent of ₹23,000, not of ₹11,000. Deducting only on the crossing payment leaves the deductor liable for the shortfall under Section 201, with interest.

Is TDS deducted on the GST portion of an invoice?

No, provided the GST is shown separately. Where an invoice separates the value of the supply from the tax on it, TDS applies to the value alone — so a bill of ₹3,54,000 carrying ₹54,000 of GST attracts deduction on ₹3,00,000. Where the invoice shows only a single consolidated figure with no separate tax component, the whole amount becomes the base. This is one of the few places where how the invoice is drafted changes the tax outcome.

What happens if the payee has no PAN?

Section 206AA forces deduction at the higher of the section rate, 20%, or the rate in force. On a 1% contractor payment that is twenty times the deduction; on a 30% lottery payout it changes nothing, since 30% already exceeds 20%. The second consequence is worse than the first: with no PAN, the credit cannot be matched in the payee’s Form 26AS, so they may be unable to claim it against their own liability at all. Collecting the PAN is nearly always cheaper for everyone than deducting without one.

When must TDS be deposited and returned?

Deposit by the 7th of the month following deduction, except for March, which gets until 30 April. Returns are quarterly: Form 26Q for resident payees and Form 27Q where the payee is a non-resident. The certificate goes to the payee within fifteen days of the return due date, and until they have it they cannot properly claim the credit. Late deduction carries interest at 1% a month and late deposit 1.5% a month, running from the date the deduction was due rather than from the date you noticed.

What is the penalty for not deducting TDS?

The expensive one is not the interest, it is the disallowance. Failing to deduct on a payment that required it can disallow 30% of that expense under Section 40(a)(ia), so on a ₹10,00,000 payment the company loses a ₹3,00,000 deduction and pays tax on it — which at 25% is ₹75,000, considerably more than the TDS that was avoided. On top of that sits interest under Section 201, a penalty under 271H for a late or incorrect return, and in serious cases prosecution.

Which TDS thresholds changed recently?

A great many, with effect from 1 April 2025. Interest on bank deposits went from ₹40,000 to ₹50,000, and from ₹50,000 to ₹1,00,000 for senior citizens. Professional fees went from ₹30,000 to ₹50,000. Rent moved from ₹2,40,000 a year to ₹50,000 a month. Dividends went from ₹5,000 to ₹10,000. Commission went from ₹15,000 to ₹20,000, with the rate cut from 5% to 2%. Section 194T on payments by firms to their own partners was introduced from the same date, and is the one most often missed.

Can I avoid TDS if my income is below the taxable limit?

Sometimes, through the right form rather than by asking nicely. Form 15G, or 15H for senior citizens, is a declaration that your total income falls below the taxable limit, and it stops deduction on interest and certain other receipts. For anything else, Section 197 allows an application to the assessing officer for a certificate authorising deduction at a lower rate or none. Neither is available for every section — Section 194T on partner payments notably has no such relief, which is a real cash-flow problem for partners in the nil-tax bracket.

TDS Calculator

Most TDS calculators ask for an amount and a section, multiply the two, and stop. That gets the arithmetic right and the answer wrong, because the hard part of TDS is not the rate. It is deciding whether the threshold has been crossed at all — and the thresholds do not all work the same way. There ...

THE PAYMENT

NATURE OF PAYMENT

Raised from ₹30,000 to ₹50,000 by the Finance Act, 2025. Many charts still show the old figure.

THIS PAYMENT, GROSS (₹)

ALREADY PAID THIS FY (₹)

The invoice shows GST separately

GST AMOUNT (₹)

Where the invoice separates the base and the GST, TDS is deducted on the base alone. Where it is a single lump sum with no split, TDS applies to the whole value — so how the invoice is drafted changes the amount withheld.

TDS TO DEDUCT

₹24,600

10.00% of ₹2,46,000 — the year to date exceeds ₹50,000.

RATE

10.00%

TDS BASE

₹2,46,000

NET PAYABLE

₹2,75,400

For FY 2026-27 (Tax Year 2026-27) the return needs Section 393, payment code 1027, not 194J(b). The Income-tax Act, 2025 folded every non-salary TDS provision into Section 393 and replaced the section numbers with payment codes. Returns filed with the old codes are rejected at processing. Confirm the code against the current CBDT notification before filing — a mismatch causes rejection rather than a warning.

Invoice, gross

₹3,00,000

GST excluded

₹54,000

TDS base, this payment

₹2,46,000

Paid earlier this year

₹0

Cumulative for the year

₹2,46,000

Threshold

₹50,000

Rate applied

10.00%

Amount liable

₹2,46,000

TDS on this payment

₹24,600

Catch-up on earlier

₹0

Total to deduct

₹24,600

Net payable

₹2,75,400

An estimate for a resident payee, not tax advice. No surcharge or cess is added to TDS on resident payments, but payments to non-residents run under a different regime entirely with surcharge, cess and treaty relief in play. Lower or nil deduction certificates under Section 197, and Forms 15G and 15H, override everything here. Rates and thresholds move with each Finance Act — check the current CBDT chart, and speak to a chartered accountant for anything consequential.

THE THRESHOLD

Tested on the cumulative total for the year. Once payments to this payee pass ₹50,000, the whole amount becomes liable — including everything paid earlier on which nothing was withheld. Tracking the running total per payee is the part most people skip.

Live calculation · updates as you type

Created with❤️byeaglecalculator.com

HOW TO USE

1
Pick the financial year, then the nature of the payment. The page shows both the familiar 194-series number and, for FY 2026-27, the Section 393 payment code that the return actually needs.
2
Enter this payment and, separately, what you have already paid this payee during the year. The aggregate tests need both, and leaving the second blank will understate the deduction.
3
Enter the GST shown separately on the invoice, if any. It comes out of the base before the rate is applied, so including it would over-deduct.
4
Set the PAN toggle honestly. Without a PAN, Section 206AA forces the higher of the section rate or 20% — which on a 1% contractor payment is twenty times the deduction.

RATES AND THRESHOLDS

Payment	Legacy	Rate	Threshold	Basis
Contract work or labour	194C	1% / 2%	₹30,000 / ₹1,00,000	single + annual
Professional fees	194J(b)	10%	₹50,000	annual
Technical services	194J(a)	2%	₹50,000	annual
Commission or brokerage	194H	2%	₹20,000	annual
Bank or post office interest	194A	10%	₹50,000	annual
Interest from anyone other than a bank	194A	10%	₹10,000	annual
Dividend	194	10%	₹10,000	annual
Rent — land, building or furniture	194I(b)	10%	₹50,000	per month
Rent — plant and machinery	194I(a)	2%	₹50,000	per month
Rent paid by an individual not under audit	194IB	2%	₹50,000	per month
Purchase of goods	194Q	0.10%	₹50,00,000	annual
Remuneration or interest paid to a partner	194T	10%	₹20,000	annual
Purchase of immovable property	194IA	1%	₹50,00,000	per transaction
Lottery, crossword or game winnings	194B	30%	₹10,000	per transaction
Online gaming winnings	194BA	30%	none	—

Where two rates are shown, the first applies to an individual or HUF payee and the second to a company, firm or other entity. Where two thresholds are shown, either one triggers deduction. No surcharge or cess is added on resident payments. Section 206AA raises the rate to 20% where no PAN is furnished; Section 206AB, which imposed a higher rate on non-filers, was deleted by the Finance Act, 2025.

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Last updated: 30 July 2026 · Rates verified against CBDT material and the Income-tax Act, 2025 · Resident payees only · Estimate, not tax advice.