Quick Answer
12 min read|Updated: Apr 1, 2026|Income-tax
Quick Answer
TDS (Tax Deducted at Source) under the Income Tax Act 2025 requires payers to deduct tax at prescribed rates when making specified payments. For AY 2026-27, key rates include: salary at slab rates (Section 192), interest at 10% (Section 193/194A), contractor payments at 1%-2% (Section 194C), professional fees at 2% unified rate (Section 194J), rent at 2% (Section 194I), property purchases at 1% above ₹50 lakh (Section 194IA), and crypto/VDA at 1% (Section 194S).
Section 194IA — Property purchase: Buyers of immovable property (other than agricultural land) where the consideration or stamp duty value exceeds ₹50,00,000 must deduct TDS at 1% on the full amount. The buyer files Form 26QB within 30 days and issues Form 16B to the seller. For capital gains implications, refer to our guide.
Section 194IB — Rent by individuals/HUFs: Individuals and HUFs not covered under Section 194I who pay monthly rent exceeding ₹50,000 must deduct TDS at 2%. This captures the tenant who is not a business entity but pays high rent.
Special TDS Provisions — Crypto, E-Commerce, Cash Withdrawals
Section 194S — VDA/Cryptocurrency: TDS at 1% on consideration for transfer of virtual digital assets. Thresholds differ: ₹50,000 per annum for specified persons (exchanges and brokers) and ₹10,000 for others. The buyer/exchange deducts TDS. For detailed crypto taxation, see our cryptocurrency tax guide.
Section 194O — E-commerce: E-commerce operators deduct TDS at 1% on gross sales facilitated through their platform. Individual/HUF sellers with PAN/Aadhaar and annual sales up to ₹5 lakh are exempt. This covers platforms like Amazon, Flipkart, Swiggy, etc.
Section 194N — Cash withdrawals: Banks deduct TDS at 2% on cash withdrawals exceeding ₹1 crore in a financial year for ITR filers. For non-filers (who have not filed returns for the past 3 years), the threshold is lower at ₹20 lakh and the rate escalates to 5% above ₹1 crore.
Section 194BA — Online gaming: TDS at 30% on net winnings from online gaming, deducted at the time of withdrawal or at the end of the financial year (whichever is earlier). No threshold — applicable on net winnings computed as per prescribed rules.
Section 194R — Business perquisites: TDS at 10% on benefits and perquisites (in kind or cash) arising from business or profession, where the aggregate value exceeds ₹20,000 per annum. Covers gifts, incentive trips, free samples, etc. provided to business associates.
Higher TDS — Non-Filers (Section 206AB) & No PAN (Section 206AA)
Section 206AB — Non-filers of returns: If a payee has not filed income tax returns for the two immediately preceding assessment years and the aggregate TDS/TCS deducted in each of those years exceeded ₹50,000, the deductor must apply TDS at the higher of:
- Twice the rate specified in the relevant provision, or
- 5%
This provision does not apply to Section 192 (salary), Section 192A (EPF), Section 194B/194BA (winnings), Section 194N (cash withdrawal), or where tax is deductible at slab rates. Deductors can verify payee filing status on the Income Tax e-filing portal.
Section 206AA — PAN not furnished: If the payee does not provide PAN, TDS is deducted at the higher of: (a) the rate in the relevant section, (b) the rate in force, or (c) 20%. This effectively means 20% TDS for most payments where PAN is missing.
TDS Return Forms & Due Dates
| Form | Nature | Frequency | Due Dates |
|---|---|---|---|
| 24Q | TDS on salary (Section 192) | Quarterly | Q1: 31 Jul | Q2: 31 Oct | Q3: 31 Jan | Q4: 31 May |
| 26Q | TDS on non-salary payments to residents | Quarterly | Q1: 31 Jul | Q2: 31 Oct | Q3: 31 Jan | Q4: 31 May |
| 27Q | TDS on payments to non-residents (Section 195 etc.) | Quarterly | Q1: 31 Jul | Q2: 31 Oct | Q3: 31 Jan | Q4: 31 May |
| 26QB | TDS on property purchase (Section 194IA) | Per transaction | Within 30 days from end of month of deduction |
| 26QC | TDS on rent by individual/HUF (Section 194IB) | Per transaction | Within 30 days from end of month of deduction |
| 26QD | TDS on payments by individual/HUF (Section 194M) | Per transaction | Within 30 days from end of month of deduction |
| 27EQ | TCS return (all TCS sections) | Quarterly | Q1: 15 Jul | Q2: 15 Oct | Q3: 15 Jan | Q4: 15 May |
TDS Certificates — Form 16, 16A, 16B, 16C
| Certificate | For | Issue Deadline |
|---|---|---|
| Form 16 | Salary TDS (Section 192) — annual certificate with Part A (TDS details) and Part B (salary computation) | 15 June following the financial year |
| Form 16A | Non-salary TDS — quarterly certificate for each deductee | Within 15 days of filing TDS return |
| Form 16B | TDS on property purchase (Section 194IA) | Within 15 days of filing Form 26QB |
| Form 16C | TDS on rent (Section 194IB) | Within 15 days of filing Form 26QC |
| Form 16D | TDS under Section 194M | Within 15 days of filing Form 26QD |
| Form 27D | TCS certificate issued by collector to buyer | Within 15 days of filing Form 27EQ |
Key Changes from Income Tax Act 1961
| Provision | Under 1961 Act (Last Amended) | Under Income Tax Act 2025 |
|---|---|---|
| Section 194A — Interest | 10% | 2% (significant reduction) |
| Section 194J — Professional fees | 2% (technical) / 10% (professional) | 2% unified rate |
| Section 194I — Rent | 2% (land/building) / 2% (plant/machinery) | 2% / 2% (threshold raised to ₹2,40,000) |
| Section numbering | Scattered across 50+ provisions | Consolidated and re-numbered under 2025 Act |
| 206AB non-filer provisions | Added by Finance Act 2021 | Integrated as part of main statute |
| VDA/Crypto TDS (194S) | Added by Finance Act 2022 | Part of main code from inception |
Expert Tip — CA V. Viswanathan
Always verify the payee’s return filing status on the Income Tax e-filing portal before making payments — if they are a non-filer under Section 206AB, you must deduct at the higher rate. Non-compliance attracts disallowance of 30% of the expenditure under Section 40(a)(ia) and interest at 1%-1.5% per month. For penalty implications, see our dedicated guide. Also see our TCS rate guide for the collection side.
Key Takeaways
- Section 194A interest TDS reduced to 2% — a major reduction benefiting depositors and reducing refund claims.
- Section 194J professional fees unified at 2% — no more confusion between technical and professional service rates.
- Section 206AB imposes double TDS (minimum 5%) on payees who have not filed returns for 2 preceding years with TDS/TCS above ₹50,000 each year.
- Crypto/VDA TDS at 1% under Section 194S — exchanges deduct before releasing payment.
- Section 194N on cash withdrawals targets the cash economy — non-filers face 5% TDS above ₹20 lakh.
- Deposit TDS by 7th of the next month; file quarterly returns (24Q/26Q/27Q) by the prescribed due dates.
- Issue Form 16 by 15 June and Form 16A within 15 days of filing the TDS return.
For TDS compliance assistance, filing returns, or obtaining lower deduction certificates, contact Virtual Auditor. For advance tax obligations and ITR filing procedures, see our detailed guides. For professional ITR filing services, visit our services page.
Frequently Asked Questions
What is TDS and who is required to deduct it?
TDS (Tax Deducted at Source) requires the payer to deduct tax at prescribed rates before making specified payments. Companies, firms, and entities subject to tax audit must deduct TDS on all applicable payments. Individuals and HUFs not subject to audit are generally exempt, except for property purchases above ₹50 lakh (194IA), rent above ₹50,000/month (194IB), payments above ₹50 lakh (194M), and crypto transfers (194S).
What is the TDS rate on salary for AY 2026-27?
TDS on salary under Section 192 is deducted at the applicable income tax slab rates. The employer estimates the employee’s annual taxable salary, allows declared deductions, and deducts TDS at the average rate each month. The new regime (default) rates range from nil up to ₹4 lakh to 30% above ₹24 lakh. Section 87A rebate makes income up to ₹12,75,000 (including ₹75,000 standard deduction) tax-free.
What is the TDS rate on professional fees under Section 194J for AY 2026-27?
Section 194J prescribes a unified TDS rate of 2% on fees for professional services, technical services, royalty, and non-compete fees. The threshold is ₹30,000 per annum per payee. This simplification removes the earlier dual-rate structure. TDS is to be deducted by any person (other than individuals/HUFs not subject to audit) making such payments.
What happens if PAN is not provided by the payee?
Under Section 206AA, if the payee fails to furnish PAN, TDS is deducted at the higher of: (a) the rate specified in the relevant section, (b) the rate in force, or (c) 20%. For most payments, this effectively means 20% TDS. The payee can later claim credit and seek a refund by filing their ITR with correct PAN, but it creates significant cash flow issues.
What is Section 206AB — higher TDS for non-filers?
Section 206AB requires higher TDS on persons who have not filed ITR for the 2 preceding years and whose aggregate TDS/TCS exceeded ₹50,000 in each year. The applicable rate is the higher of twice the normal rate or 5%. This does not apply to salary TDS, EPF withdrawals, lottery winnings, or online gaming winnings. Deductors should verify filing status on the e-filing portal before deducting.
What are the due dates for depositing TDS with the government?
TDS deducted during any month (April to February) must be deposited by the 7th of the following month. For March deductions, the due date is 30th April. Government deductors must deposit on the same day. For Sections 194IA, 194IB, and 194M, the due date is within 30 days from the end of the month. Late deposit attracts interest at 1.5% per month from the date of deduction to the date of deposit.
What is the TDS rate on rent for AY 2026-27?
Under Section 194I, TDS on rent is 2% for both categories — land/building/furniture and plant/machinery/equipment. The threshold is ₹2,40,000 per annum. Section 194IB covers individuals/HUFs (non-audit) paying rent above ₹50,000 per month, with TDS at 2%. TDS is deducted on the full rent amount once the threshold is crossed.
Is TDS applicable on cryptocurrency transactions?
Yes. Under Section 194S, TDS at 1% applies on the transfer of virtual digital assets (VDAs) including cryptocurrencies. Specified persons (exchanges, brokers) have a ₹50,000 annual threshold; for all others it is ₹10,000. The exchange or buyer deducts TDS at the time of credit or payment. This is separate from the 30% income tax on VDA gains.
What TDS certificates must be issued and by when?
Form 16 (salary) must be issued annually by 15 June. Form 16A (non-salary) is issued quarterly within 15 days of filing the TDS return. Form 16B (property), Form 16C (rent under 194IB), and Form 16D (payments under 194M) must be issued within 15 days of filing the respective challan-cum-statement. Non-issuance attracts a penalty of ₹100 per day per certificate.
How can I avoid TDS if my income is below the taxable limit?
If your total income is below the basic exemption limit, you can submit Form 15G (for individuals below 60 years) or Form 15H (for senior citizens aged 60+) to the payer requesting non-deduction of TDS. This applies primarily to interest income under Sections 193, 194A, and 194K. You can also apply for a lower/nil deduction certificate under Section 197 from the Assessing Officer if TDS exceeds your actual tax liability.
What is the TDS rate on e-commerce operator payments under Section 194O?
E-commerce operators must deduct TDS at 1% on the gross amount of sales or services facilitated through their platform, credited or paid to e-commerce participants (sellers). Individual/HUF sellers with PAN/Aadhaar and annual platform sales up to ₹5 lakh are exempt. The e-commerce operator is responsible for deduction, deposit, and return filing.
How is TDS on immovable property transactions calculated?
Under Section 194IA, the buyer deducts TDS at 1% on the total consideration or stamp duty value (whichever is higher) if it exceeds ₹50,00,000. TDS is on the entire amount, not just the excess. The buyer files Form 26QB within 30 days of month-end and issues Form 16B within 15 days thereafter. This applies to all buyers including individuals — no audit threshold exemption.
