Thresholds first, rate second
Most TDS mistakes are not rate errors. They are threshold errors: deducting on a payment that was below the limit, or missing a deduction because each individual invoice was small while the annual total had already crossed.
Two thresholds often apply at once. Section 194C, for instance, has a per-payment limit and a separate annual aggregate. Cross either one and deduction is due.
The calculation
TDS = Payment × rate
Net paid to party = Payment − TDS
Common sections
| Section | Payment type | Rate | Per-payment threshold |
|---|---|---|---|
| 194C | Contractor — individual or HUF | 1% | ₹30,000 |
| 194C | Contractor — company or firm | 2% | ₹30,000 |
| 194J | Professional fees | 10% | ₹50,000 |
| 194J | Technical services | 2% | ₹50,000 |
| 194H | Commission or brokerage | 2% | ₹20,000 |
| 194I | Rent — land or building | 10% | ₹2,40,000 |
| 194I | Rent — plant or machinery | 2% | ₹2,40,000 |
| 194A | Interest other than securities | 10% | ₹40,000 |
| 194Q | Purchase of goods | 0.1% | ₹50,00,000 |
These reflect the position for FY 2025-26. TDS rates and thresholds move at almost every Budget. Confirm against the current Finance Act, or with your chartered accountant, before you file.
No PAN means a much higher rate
Under section 206AA, if the deductee has not given you a valid PAN, you must deduct at the higher of the applicable rate or 20%. A ₹1,00,000 professional fee that would normally attract ₹10,000 of TDS becomes ₹20,000.
Collect PAN before the first payment, not at the end of the year. Recovering an extra 10% from a vendor after the fact rarely goes well.
Worked example
₹1,00,000 professional fee under 194J
- Payment
- ₹1,00,000
- Threshold
- ₹50,000
- Rate
- 10%
- TDS to deduct
- ₹10,000
- Net paid to the party
- ₹90,000
After you deduct
- Deposit by the 7th of the following month. For March, the deadline is 30 April.
- File the quarterly return — 24Q for salary, 26Q for everything else.
- Issue Form 16A to the deductee within fifteen days of filing.
- Late deposit attracts interest at 1.5% per month, and disallowance of the expense is possible.
Frequently asked questions
What is the TDS rate on professional fees?
10% under section 194J for professional services, or 2% for technical services and call-centre operations, once the ₹50,000 threshold is crossed.
What happens if the vendor has no PAN?
Section 206AA requires deduction at the higher of the normal rate or 20%.
Do I deduct TDS on the GST portion?
No. TDS is deducted on the taxable value, not on the GST, provided the tax is shown separately on the invoice.
When must TDS be deposited?
By the 7th of the following month, except for March deductions which are due by 30 April.