How Much Tax Will the Government Deduct on Salary, Rent, and Income? Know the New TDS Rules
A significant change is coming in income tax laws that will impact tax deductions on salary, rent, mutual funds, and other sources of income. If you fall under the taxable category, it's essential to understand how this change will affect your finances.
What is TDS and Why is it Important?
TDS (Tax Deducted at Source) is a taxation mechanism where the payer deducts tax from your income and deposits it with the government. This system helps prevent tax evasion and ensures timely revenue collection for the government.
TDS applies to various types of income, including:
✔ Salary
✔ Interest and dividends
✔ Rent and commission
✔ Brokerage and contract payments
✔ Earnings from online gaming and lotteries
If the payer is eligible for TDS deduction, they must deposit it into the government’s account.
TDS Rates for Financial Year 2024-25 (Assessment Year 2025-26)
The government has made PAN (Permanent Account Number) mandatory for determining TDS rates. If a PAN is not provided, tax will be deducted at a rate of 20% under Section 206AA.
New TDS Rates for Different Payments
1. Salary and Provident Fund
| Section | Description | TDS Rate (%) |
|---|---|---|
| 192 | Salary Payment | As per applicable tax slab |
| 192A | Withdrawal from Provident Fund (EPF) (taxable) | 10% |
2. TDS on Interest and Dividends
| Section | Description | TDS Rate (%) |
|---|---|---|
| 193 | Interest on securities | 10% |
| 194 | Dividend income | 10% |
| 194A | Interest from other sources | 10% |
3. Earnings from Gaming, Lottery, and Horse Racing
| Section | Description | TDS Rate (%) |
|---|---|---|
| 194B | Lottery, puzzle, card games, and other games | 30% |
| 194BA | Income from online gaming | 30% |
| 194BB | Earnings from horse racing | 30% |
4. Contracts, Commission, and Brokerage
| Section | Description | TDS Rate (%) |
|---|---|---|
| 194C | Payment to contractors/subcontractors (individuals/HUF) | 1% |
| 194C | Payment to contractors/subcontractors (others) | 2% |
| 194D | Insurance commission | 5% |
| 194H | Commission or brokerage | 5% (from 01-10-2024, reduced to 2%) |
5. TDS on Rent and Property Transactions
| Section | Description | TDS Rate (%) |
|---|---|---|
| 194-I | Rent for plant and machinery | 2% |
| 194-I | Rent for land, building, furniture, or fittings | 10% |
| 194-IA | Payment for the transfer of immovable property (except agricultural land) | 1% |
| 194-IB | Rent paid by individuals/HUF | 5% (from 01-10-2024, reduced to 2%) |
6. TDS on Mutual Funds and Other Investments
| Section | Description | TDS Rate (%) |
|---|---|---|
| 194F | Repurchase payments by Mutual Funds/UTI | 20% |
| 194K | Income from mutual fund units | 10% |
7. TDS on Bank Cash Withdrawals
| Section | Description | TDS Rate (%) |
|---|---|---|
| 194N | Cash withdrawal exceeding ₹1 crore from a bank | 2% |
| 194N | Withdrawal exceeding ₹20 lakh (for non-ITR filers) | 5% |
8. TDS on E-commerce and Digital Assets
| Section | Description | TDS Rate (%) |
|---|---|---|
| 194O | Payment by an e-commerce operator | 1% (from 01-10-2024, reduced to 0.1%) |
| 194S | Transfer of virtual digital assets (crypto, etc.) | 1% |
What Happens If You Don't Pay TDS?
✔ If TDS is not deposited, an interest of 1% per month will be charged under Section 201(1A).
✔ The government can deduct tax at a higher rate of 20% if PAN is not provided.
✔ Failure to deposit TDS for a long time may result in penalties and legal actions.
What Should You Do?
✅ Keep your PAN updated to avoid higher tax deductions.
✅ Stay informed about TDS deductions and plan your taxable income accordingly.
✅ Submit Form 15G/15H if your income is tax-exempt.
✅ Consult a CA or tax advisor for proper tax planning.
Final Thoughts
These changes in TDS rules will directly impact your salary, rent, and other sources of income. It's crucial to understand your tax liability and make informed financial decisions accordingly.
(Disclaimer: This information is for general reference only. For accurate tax advice, consult a financial expert.)
