Most Commonly Used TDS and TCS Sections and their Importance

Posted by CA Pankaj Kumar Vats
In: Taxation
On 16 Jan 2023

TDS deduction is really important for Everyone.
One should check it always before making the payment that, if is there any requirement to deduct the TDS
Non Deduction of TDS may lead to Income Tax Notices and Tax Litigations 

Out of all section listed below, there are a few sections, which applies to all, even if the person is in business or not and the are – Section 194IB, Section 194IA and Section 194M  

Section 194A
Interest Expenses
Threshold limit – 5,000/-
Rate of TDS 10%

Section 194C
Contractual Payments
Threshold limit – 30,000/- for single payment or Transaction
Threshold limit – 1,00,000/- in case aggregate of payments or transactions during the year
Rate of TDS 1% for Individuals and HUF
Rate of TDS 2% for Others
Examples – Advertisement Expenses
Transportation Expenses
Catering Expenses
Event Expenses
Outsourcing Expenses

Section 194H
Commission or Brokerage
Threshold limit – 15,000/-
Rate of TDS 5%
Examples:- Commission Expenses of Online Aggregators such as Amazon, Flipkart, and others
Commission for Deals

Section 194I
Rent
Threshold limit – 2,40,000/-
Rate of TDS 10% – Land or Building
Rate of TDS 2% – For Plant, Machinery or Equipment
Examples:- Office Rent
Equipments Rental

Section 194IB
Rent – Payment by an Individual or HUF, not in the Business
Generally, this section of TDS is relevant in case a person is in employment
Threshold limit – 50,000/- for a month
Rate of TDS 5%

Section 194IA
Purchase of Immovable Property
This section is also applicable to everyone, even if the person is not in business
Threshold limit – 50,00,000/-
Rate of TDS 1%

Section 194J
TDS On Professional or Technical Services
Threshold limit – 30,000/-
Rate of TDS 2% in case it is a Technical Service
Rate of TDS 10% in case it is a Professional Service
Examples:-
Fee Payment to Advocates
Technical Service payment to IT Service Providers

Section 194M
Other Amount
Individual or HUF, not covered by Tax Audit
Threshold limit – 50,00,000/-
Rate of TDS 5%
Examples:-
In case a person, who has salary income, he gets his house constructed on contract basis, and the total payment to the contractor is above 50,00,000/- He is required to deduct TDS @ 5%

Section 194O
Payment by E-commerce Operator to E-commerce participants
Threshold limit – na
Rate of TDS 1%

Section 194Q
TDS on Purchases of Goods
Threshold limit – 50,00,000/-
Rate of TDS 0.1%
Condition: The turnover of the business should be in excess of 10 crore

Section 206C(1H)
TCS on sales of Goods
Threshold limit – 50,00,000/-
Rate of TDS 0.1%
Condition: The turnover of the business should be in excess of 10 crore

Section 194R
TDS on Prerequisites and Benefits
Threshold limit – 20,000/-
Rate of TDS 10%
Examples:-
Travel Package for achieving some target

For more details, please refer TDS on Prerequisites or Benefits in Business (Sec 194 R)

Conclusion: The above-listed TDS sections are the most commonly used TDS Sections. However there are other Expenses and Payments are there, which also attract the TDS. So it is always recommended to ensure with Tax Professional about TDS, before initiating the payments to the vendors

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