Indian Income Tax Act has provisions for tax collection at source or TCS. In these provisions, certain persons are required to collect a specified percentage of tax from their buyers on exceptional transactions. Most of these transactions are trading or business in nature. It does not affect the common man.
What is Tax Collected at Source (TCS)?
Tax collected at source (TCS) is the tax collected by the seller from the buyer on sale so that it can be deposited with the tax authorities. Section 206C of the Income-tax Act governs the goods on which the seller has to collect tax from the buyers. Such persons must have the Tax Collection Account Number to be able to collect TCS.
Example: If a box of chocolates costs Rs.100, the buyer pays Rs.20 which is the tax collected at the point of sale. The funds are then transferred to a certain approved branch of a bank that has been authorised to accept payments. The seller is only responsible for collecting this tax from the customer and is not liable for paying it himself or herself. The tax is intended to be collected while selling items, conducting transactions, receiving a payment in cash from the buyer, or issuing a cheque or draft, whichever method is paid first.
TCS Rate Chart as applicable for the Financial Year 2023-2024 (Assessment Year 2024-2025) –
Section | Deductee* | Nature of transaction | Threshold Limit (Rs) | TDS Rate |
192 | R, NR | Payment of salary | Basic exemption limit of employee | Normal Slab Rates |
192A | R, NR | Premature withdrawal from EPF | 50,000 | 10% Budget 2023: TDS rate for EPF withdrawals without a PAN number is now 20%, from the previous maximum marginal rate |
193 | R | Interest on securities | Debentures- 5,000 8% Savings (Taxable) Bonds 2003 or 7.75% Savings (Taxable) Bonds 2018- 10,000 Other securities- No limit | 10% |
194 | R | Payment of any dividend | 5,000 | 10% |
194A | R | Interest from other than interest from securities (from deposits with banks/post office/co-operative society) | Senior Citizens- 50,000 Others- 40,000 | 10% |
194A | R | Interest from other than interest on securities u/s 193 and interest from banks/post office/co-operative society. For e.g., interest from friends and relatives | 5,000 | 10% |
194B | R, NR, FC | Income from lottery winnings, card games, crossword puzzles, and other games of any type | Aggregate income from lottery winnings, card games, crossword puzzles etc- 10,000 Online Gamine- Refer 194BA | 30% |
194BA | R, NR, FC | Income from online games | Nil | 30% |
194BB | R, NR, FC | Income from horse race winnings | 10,000 | 30% |
194C | R | Payment to contractor/sub-contractor:- | Single transaction- 30,000 Aggregate transactions- 1,00,000 |
|
|
| a) Individuals/HUF |
| 1% |
|
| b) Other than Individuals/HUF |
| 2% |
194D | R | Insurance commission to: |
|
|
|
| a) Domestic Companies | 15,000 | 10% |
|
| b) Other than companies | 15,000 | 5% Budget 2024 – This rate is reduced to 2% with effect from 1st April 2025 |
194DA | R | Income from the insurance pay-out, while payment of any sum in respect of a life insurance policy. | 1,00,000 | 5% Budget 2024 – This rate is reduced to 2% with effect from 1st October 2024 |
194E | NR, FC | Payment to non-resident sportsmen/sports association | No limit | 20% |
194EE | R, NR | Payment of amount standing to the credit of a person under National Savings Scheme (NSS) | 2,500 | 10% |
194F | R, NR | Payment for the repurchase of the unit by Unit Trust of India (UTI) or a Mutual Fund | No limit | 20% Budget 2024 – This section is proposed to be omitted with effect from 1st October 2024 |
194G | R, NR, FC | Payments, commission, etc., on the sale of lottery tickets | 15,000 | 5% Budget 2024 – This rate is reduced to 2% with effect from 1st October 2024 |
194H | R | Commission or brokerage | 15,000 | 5% Budget 2024 – This rate is reduced to 2% with effect from 1st October 2024 |
194-I | R | Rent: |
|
|
|
| 194-I(a) Rent on | 2,40,000 | 2% |
|
| 194-I(b) Rent on | 2,40,000 | 10%
|
194-IA | R | Payment in consideration of transfer of certain immovable property other than agricultural land. | 50,00,000 | 1% |
194-IB | R | Rent payment by an individual or HUF not covered u/s. 194-I | 50,000 per month | 5% Budget 2024 – This rate is reduced to 2% with effect from 1st October 2024 |
194-IC | R | Payment under Joint Development Agreements (JDA) to Individual/HUF | No limit | 10 |
194J | R | Any sum paid by way of fee for professional services | 30,000 | 10% |
194J | R | Any sum paid by way of remuneration/fee/commission to a director | 30,000 | 10% |
194J | R | Any sum paid for not carrying out any activity concerning any business; | 30,000 | 10% |
194J | R | Any sum paid for not sharing any know-how, patent, copyright, etc. | 30,000 | 10% |
194J | R | Any sum paid as a fee for technical services | 30,000 | 2% |
194J | R | Any sum paid by way of royalty towards the sale or distribution, or exhibition of cinematographic films | 30,000 | 2% |
194J | R | Any sum paid as fees for technical services, but the payee is engaged in the business of operation of the call center. Prior to June 1, 2017, the rate was 10% | 30,000 | 2% |
194K | R | Payment of any income for units of a mutual fund, for example, dividend | No limit | 10% |
194LA | R | Payment in respect of compensation on acquiring certain immovable property | 2,50,000 | 10% |
194LB | NR, FC | Payment of interest on infrastructure debt fund to Non-Resident | No limit | 5% |
194LC | NR, FC | Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or the issue of long-term bonds | No limit | 5% |
194LC | NR, FC | Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against the issue of long-term bonds listed in IFSC | No limit | 4% |
194LD | NR, FC | Payment of interest on bond (rupee-denominated) to FII or a QFI | No limit | 5% |
194LBA(1) | R | Certain income distributed by a business trust to its unitholder | No limit | 10% |
194LBA(2) | NR, FC | Interest income of a business trust from SPV distribution to its unitholders | No limit | 5% |
194LBA(2) | NR, FC | Dividend income of a business trust from SPV, in which it holds the entire share capital exempt the capital held by the government, and distribution to its unitholders | No limit | 10% |
194LBA(3) | NR | Rental income payment of assets owned by the business trust to the unitholders of such business trust | No limit | 30% |
194LBA(3) | FC | Rental income payment of assets owned by the business trust to the unitholders of such business trust | No limit | 40% |
194LBB | R | Certain income paid to a unitholder in respect of units of an investment fund | No limit | 10% |
194LBB | NR | Certain income paid to a unitholder in respect of units of an investment fund | No limit | 30% |
194LBB | FC | Certain income paid to a unitholder in respect of units of an investment fund | No limit | 40% |
194LBC | R | Income from investment in securitisation fund received to an individual and HUF | No limit | 25% |
194LBC | NR | Income from investment in securitisation fund received to a domestic company | No limit | 30% |
194LBC | FC | Income from investment in securitisation fund received to a foreign company | No limit | 40% |
194M | R | Certain payments by Individual/HUF not liable to deduct TDS under Section 194C, 194H, and 194J | 50,00,000 | 5% Budget 2024 – This rate is reduced to 2% with effect from 1st October 2024 |
194N | R, NR | Cash withdrawal exceeding a certain amount | Co-operative society: 3 Crore | 2% |
194N | R, NR | Cash withdrawal in case person not filing ITR for last three years and the original ITR filing due date expired | – 20 lakh to 1 crore -1 crore | 2% 5% |
194O | R | Payment for the sale of goods or provision of services by the e-commerce operator through its digital or electronic facility or platform. | 5,00,000 | 1% Budget 2024 – This rate is reduced to 2% with effect from 1st October 2024 5% in case PAN is not furnished |
194P | R | Payment of pension or interest to specified senior citizens of age 75 years or more | Basic exemption limit of senior citizens or super senior citizens | Normal tax slab rates |
194Q | R | Payments for the purchase of goods | 50,00,000 | 0.10% |
194R | R | Perquisite or benefit to a business or profession | 20,000 | 10% |
194S | R | TDS on the transfer of virtual digital assets Specified persons: Individual or a HUF not having income from business or profession OR Individual or a HUF having sales from business or profession less than | Specified Persons- 50,000 Others- 10,000 | 1% |
195 | NR | Income on investments made by NRI citizen | No limit | 20% |
195 | NR | Income by way of LTCG referred to in section 115E in the case of NRI | No limit | 10% |
195 | NR, FC | Income by way of LTCG under section 112(1)(c)(iii) | No limit | 10% |
195 | NR, FC | Income by way of LTCG under section 112A | No limit | 10% |
195 | NR, FC | Income by way of STCG under section 111A | No limit | 15% |
195 | NR, FC | Any other income by way of LTCG | No limit | 20% |
195 | NR, FC | Interest payable on money borrowed by the government or Indian concern in foreign currency | No limit | 20% |
195 | NR, FC | Income from royalty payable by the Indian concern or the government, for the copyright in a subject referred in the first proviso of section 115A or computer software referred to in the second proviso of section 115A | No limit | 20% |
195 | NR | Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy | No limit | 20% |
195 | FC | Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy If the agreement for such royalty payment is entered in between 31st March 1961 and 1st April 1976 | No limit | 50% |
195 | FC | Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy If the agreement for such royalty payment is entered after 31st March 1976 | No limit | 20% |
195 | NR | Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy | No limit | 20% |
195 | FC | Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy If the agreement for such payment is entered in between 29th February 1964 and 1st April 1976 | No limit | 50% |
195 | FC | Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy If the agreement for such payment is entered after 31st March 1976 | No limit | 20% |
195 | NR | Any other income | No limit | 30% |
195 | FC | Any other income | No limit | 40% |
196B | NR, FC | Income (including LTCG) from units of an offshore fund | No limit | 10% |
196C | NR, FC | Income (including LTCG) from foreign currency bonds or GDR of an Indian company | No limit | 10% |
196D | NR, FC | Income (excluding dividend and capital gain) from Foreign Institutional Investors. | No limit | 20% |
206AB | R | Payment to non-filers, i.e. those who have not filed their income tax return in the last year Budget 2023: | No limit | – 2 times the rate given in the Income Tax Act or Finance Act or |
206AA | R, NR, FC | TDS rate in case of Non availability of PAN | No limit | Rates specified above or 20%, whichever is higher |
*”R” denotes Resident,
“FC” denotes Foreign company, and
“NR” denotes Non-Resident.
Union Budget 2023 New TDS Provisions
Section 194BA – TDS on online gaming
Starting from April 1, 2023, TDS will be deducted on income earned from online gaming. If you win money, the online gaming platform giving you the winnings will deduct 30% TDS on the net winnings. TDS will be deducted when you withdraw the winnings from your account. In case you do not withdraw the winnings by the end of the financial year, then the tax will be deducted on the unwithdrawn amount lying in your account by the end of financial year.
Section 196A – Reduced TDS rate as per tax treaty
When a non-resident earned income from mutual funds in India, the TDS rate was 20%. However, from April 1, 2023, the non-resident can choose to pay a lower tax rate given in the tax treaty by providing a tax residency certificate.
Section 192A – Relaxation for employees without PAN
Starting from April 1, 2023, if an employee does not furnish PAN (Permanent Account Number), they will receive their provident fund balance after a 20% tax deduction. Earlier, tax was deducted at maximum marginal rate (MMR) which would be as high as 42.74%.
Section 193 – Tax deduction on interest from specified securities
Before April 1, 2023, individuals often forgot to report the interest income they earned from specified securities in their income tax returns because TDS was not deducted. Now, starting from April 1, 2023, tax will be deducted from the interest earned on listed securities in dematerialized form. This change will ensure accurate reporting of income in ITR and allow the government to collect appropriate taxes.
Section 194N – Increased TDS threshold for cooperative societies
From April 1, 2023, if a co-operative society withdraws cash, TDS will be applicable when the withdrawal amount exceeds Rs. 3 Crore. This threshold was previously Rs. 1 Crore.
Section 194R – Clarification on TDS deductions for benefits or perquisites
In the 2023 budget, it was clarified that TDS should be deducted on benefits or perquisites, whether they are in cash, in kind, or a combination of both. This rule also applies to Section 28(iv).
New Section 155(20) – Credit of TDS in the year of income reporting
If a taxpayer reports income on an accrual basis in one year but the tax on that income is deducted in the following financial year, it can cause mismatch with tax credits. From October 1, 2023, taxpayers can apply for the tax credit in the financial year in which the income is declared in their tax return. The application must be made within two years of the financial year in which the tax credit is reflected.
Overview of TDS Rate Chart for the FY 2023-24 and FY 2024-25
| Section | Nature of transaction | TDS Rate |
| 192 | Payment of salary | Normal Slab Rates |
| 192A | Premature withdrawal from EPF | With PAN: 10% Without PAN: 20% |
| 193 | Interest on securities | 10% |
| 194 | Payment of any dividend | 10% |
| 194A |
| 10% |
| 194B | Income from lottery winnings, card games, crossword puzzles etc. | 30% |
| 194BA | Income from online games | 30% |
| 194BB | Income from horse race winnings | 30% |
| 194C | Payment to contractor/sub-contractor:- | |
| a) Individuals/HUF | 1% | |
| b) Other than Individuals/HU | 2% | |
| 194D | Insurance commission to: | |
| a) Domestic Companies | 10% | |
| b) Other than companies | 5% | |
| 194DA | Insurance pay-out in respect of a life insurance policy | 5% |
| 194E | Payment to non-resident sportsmen/sports association | 20% + surcharge + 4% cess |
| 194EE | Payment of amount standing to the credit of a person under National Savings Scheme (NSS) | 10% |
| 194F | Payment for the repurchase of the unit by Unit Trust of India (UTI) or a Mutual Fund | 20% |
| 194G | Payments, commission, etc., on the sale of lottery tickets | 5% |
| 194H | Commission or brokerage | 5% |
| 194-I | Rent: | |
| 194-I(a) Rent on plant and machinery | 2% | |
| 194-I(b) Rent on land/building/furniture/fitting | 10% | |
| 194-IA | Payment in consideration of transfer of certain immovable property other than agricultural land. | 1% |
| 194-IB | Rent payment by an individual or HUF not covered u/s. 194-I | 5% |
| 194-IC | Payment under Joint Development Agreements (JDA) to Individual/HUF | 10 |
| 194J | Any sum paid by way of fee for professional services | 10% |
| 194J | Any sum paid by way of remuneration/fee/commission to a director | 10% |
| 194J | Any sum paid for not carrying out any activity concerning any business; | 10% |
| 194J | Any sum paid for not sharing any know-how, patent, copyright, etc. | 10% |
| 194J | Any sum paid as a fee for technical services | 2% |
| 194J | Any sum paid by way of royalty towards the sale or distribution, or exhibition of cinematographic films | 2% |
| 194J | Any sum paid as fees for technical services, but the payee is engaged in the business of operation of the call center. | 2% |
| 194K | Payment of any income for units of a mutual fund, for example, dividend | 10% |
| 194LA | Payment in respect of compensation on acquiring certain immovable property | 10% |
| 194LB | Payment of interest on infrastructure debt fund to Non-Resident | 5% + surcharge + 4% cess |
| 194LC | Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or the issue of long-term bonds | 5% |
| 194LC | Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against the issue of long-term bonds listed in IFSC | 4% |
| 194LD | Payment of interest on bond (rupee-denominated) to FII or a QFI | 5% |
| 194LBA(1) | Certain income distributed by a business trust to its unitholder | 10% |
| 194LBA(2) | Interest income of a business trust from SPV distribution to its unitholders | 5% |
| 194LBA(2) | Dividend income of a business trust from SPV, in which it holds the entire share capital exempt the capital held by the government, and distribution to its unitholders | 10% |
| 194LBA(3) | Rental income payment of assets owned by the business trust to the unitholders of such business trust | 30% |
| 194LBA(3) | Rental income payment of assets owned by the business trust to the unitholders of such business trust | 40% |
| 194LBB | Certain income paid to a unitholder in respect of units of an investment fund | 10% |
| 194LBB | Certain income paid to a unitholder in respect of units of an investment fund | 40% |
| 194LBC | Income from investment in securitisation fund received to an individual and HUF | 25% |
| 194LBC | Income from investment in securitisation fund received to a domestic company | 10% |
| 194LBC | Income from investment in securitisation fund received to a foreign company | 40% |
| 194LBC | Income from investment in securitisation fund received to NRI | 10% |
| 194M | Certain payments by Individual/HUF not liable to deduct TDS under Section 194C, 194H, and 194J | 5% |
| 194N | Cash withdrawal from a banking company, co-operative society engaged in the business of banking or a post office: | 2% |
| Filed ITR during the last three years and cash withdrawal exceeds Rs 3 crore | 2% | |
| In case person has not filed ITR for the last three years – total cash withdrawn is more than ₹20 lacs and up to ₹3 Crore in a FY – total cash withdrawn is more than ₹3 Crore is a financial year | – 2% – 5% | |
| 194O | Payment for the sale of goods or provision of services by the e-commerce operator through its digital or electronic facility or platform. | 1% 5% in case PAN is not furnished |
| 194P | Payment of pension or interest to specified senior citizens of age 75 years or more | Normal tax slab rates |
| 194Q | Payments for the purchase of goods | 0.10% |
| 194R | Perquisite or benefit to a business or profession | 10% |
| 194S | TDS on the transfer of virtual digital assets | 1% |
| 195 | Income on investments made by NRI citizen | 20% |
| 195 | Income by way of LTCG referred to in section 115E in the case of NRI | 10% |
| 195 | Income by way of LTCG under section 112(1)(c)(iii) | 10% |
| 195 | Income by way of LTCG under section 112A | 10% |
| 195 | Income by way of STCG under section 111A | 15% |
| 195 | Any other income by way of LTCG | 20% |
| 195 | Interest payable on money borrowed by the government or Indian concern in foreign currency | 20% |
| 195 | Income from royalty payable by the Indian concern or the government, for the copyright in a subject referred in the first proviso of section 115A or computer software referred to in the second proviso of section 115A | 10% |
| 195 | Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy | 10% |
| 195 | Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy If the agreement for such royalty payment is entered in between 31st March 1961 and 1st April 1976 | 50% |
| 195 | Income from royalty payable by government or Indian concern in pursuance of an agreement on matters included in the industrial policy If the agreement for such royalty payment is entered after 31st March 1976 | 10% |
| 195 | Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy | 10% |
| 195 | Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy If the agreement for such payment is entered in between 29th February 1964 and 1st April 1976 | 50% |
| 195 | Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy If the agreement for such payment is entered after 31st March 1976 | 10% |
| 195 | Any other income | 30% |
| 195 | Any other income | 40% |
| 196B | Income (including LTCG) from units of an offshore fund | 10% |
| 196C | Income (including LTCG) from foreign currency bonds or GDR of an Indian company | 10% |
| 196D | Income (excluding dividend and capital gain) from Foreign Institutional Investors. | 20% |
| 206AB | Payment to non-filers, i.e. those who have not filed their income tax return in the last year Budget 2023: Non filers do not include: – People who are not required to file their ITRs – NRs who do not have a PE in India | – 2 times the rate given in the Income Tax Act or Finance Act or – 5%, whichever is higher |
| 206AA | TDS rate in case of Non availability of PAN | Rates specified above or 20%, whichever is higher |
FAQs
What is Tax Collected at Source (TCS)?
Tax Collected at Source (TCS) is a tax that a seller collects from the buyer at the time of sale of specified goods. The seller is required to collect an additional amount (TCS) over and above the sale price and remit it to the government.
What is the TCS rate for FY 2023-2024?
The TCS rates for FY 2023-2024 (AY 2024-2025) vary depending on the type of goods or services being transacted.