Understanding TDS in India: FY 2025-26 Preliminary Rate Chart

Tax Deducted at Source (TDS) forms an important part of the Indian taxation framework. It guarantees that taxes are collected progressively throughout the fiscal year as income is earned, instead of waiting until the end of the year. For business owners, professionals, and individuals making certain payments, grasping the relevant TDS rates is essential for regulatory compliance.

This overview offers a comprehensive summary of the TDS rates and thresholds that will be in effect for the Financial Year 2025-26 (from April 1, 2025, to March 31, 2026), related to the Assessment Year 2026-27.

• The TDS rates and threshold limits provided in this article are based on the stipulations of the Income Tax Act, 1961, and the pertinent Finance Acts as recognized up to April 2025.
• The complete Union Budget for 2025-26 is yet to be unveiled (usually anticipated around July 2025). This Budget may enact alterations to TDS rates, thresholds, or associated provisions.
• Thus, the details shared here are preliminary and may be subject to modifications.
• Please consult the official notifications and announcements following the complete Union Budget 2025 for the definitive TDS rates and regulations applicable throughout FY 2025-26.

TDS is a mechanism for collecting income tax where the payer (deductor) of specified income types withholds a certain tax percentage prior to making the payment to the recipient (deductee). The withheld amount is then remitted to the government on behalf of the deductee. The deductee can subsequently claim credit for this amount against their overall tax obligation when submitting their Income Tax Return (ITR).

Below is a recap of TDS rates for typical payment types applicable to residents. Please keep in mind that thresholds and rates are pending final affirmation in the Full Budget 2025.

(This table addresses standard sections; rates applicable to non-residents may vary considerably and typically involve considerations related to DTAA.)

1. Non-Furnishing of PAN/Aadhaar (Section 206AA): If the deductee does not provide their PAN (or Aadhaar where relevant), TDS will be levied at the greater of:
   • The rate outlined in the pertinent TDS section.
   • The applicable rate(s).
   • 20% (or 5% for Sections 194-O and 194Q).
2. Higher TDS for Non-Filers (Section 206AB): Important Note: Various sources indicate that Section 206AB and Section 206CCA (increased TCS), which imposed elevated TDS/TCS rates on specific individuals who had not filed ITRs for prior years, may be abolished starting April 1, 2025, in an effort to lessen compliance burdens. This requires validation in the Full Budget 2025. If it remains, it mandates TDS at the higher of twice the regular rate, twice the current rate, or 5%.
3. Lower/Nil Deduction: Individuals whose total income falls below the taxable threshold can present Form 15G (for those under 60 years) or Form 15H (for those aged 60 and above) to the deductor to request the non-levy of TDS on certain incomes, such as interest. Additionally, one can request a certificate for lower TDS deduction from the Assessing Officer.
4. Surcharge and Cess: The aforementioned TDS rates generally exclude Surcharge or Health & Education Cess. These are usually applied when determining the final tax obligation. However, for Salary (Sec 192), the TDS calculation utilizes slab rates that inherently incorporate cess. For payments to non-residents, surcharge and cess may apply to the TDS rate depending on the payment amount and status.
5. Recent Threshold Adjustments (Effective April 1, 2025): As indicated in the table and validated by various sources based on Budget 2025 proposals/notifications, several threshold limits (the amount above which TDS is applicable) have been raised, particularly for:
   • Interest income (Sec 194A) - Especially advantageous for senior citizens.
   • Dividend & MF income (Sec 194, 194K).
   • Commissions & Brokerage (Sec 194D, 194G, 194H).
   • Rent (Sec 194-I) - Modified to a monthly threshold.
   • Professional/Technical Fees (Sec 194J).
   • Compensation on land acquisition (Sec 194LA).
6. Rate Reduction (Effective April 1, 2025): The TDS rate under Section 194LBC (Income from Securitisation Trust) is proposed to be lowered to 10%.
7. TCS on Sale of Goods (Section 206C(1H)): Sources suggest this provision may be eliminated from April 1, 2025, to minimize overlap and compliance complications with TDS on Purchase of Goods (Sec 194Q). Confirmation is awaited in the Full Budget.

• TDS Deposit: Typically, the tax that has been deducted needs to be submitted to the government by the 7th of the month following deduction (except for March, where the due date is April 30th).
• TDS Return Filing (Quarterly):
  • Quarter 1 (Apr-Jun): Due by July 31st
  • Quarter 2 (Jul-Sep): Due by October 31st
  • Quarter 3 (Oct-Dec): Due by January 31st
  • Quarter 4 (Jan-Mar): Due by May 31st

Keeping informed about TDS rates and thresholds is essential for compliance. Although this guide outlines the current rates and recent updates that will take effect from April 1, 2025, be aware that changes could occur with the Full Union Budget 2025.

Always check official government announcements and the final Budget documents for confirmed rates and regulations applicable during FY 2025-26. If unsure, it is advisable to seek guidance from a  myitronline  to ensure proper TDS compliance.

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