TDS Rates for FY 2023-24: A Complete Guide
Tax Deducted at Source (TDS) is a method of collecting income tax from the source of income itself. It helps in ensuring timely payment of tax and preventing tax evasion. The person who makes the payment (deductor) deducts a certain percentage of tax from the amount paid to the recipient (deductee) and deposits it with the government. The deductee can claim credit for the tax deducted at source while filing his or her income tax return.
In this article, we will discuss the various TDS rates applicable for different types of payments made to residents and non-residents in India for the financial year 2023-24 (assessment year 2024-25). We will also highlight the changes in the TDS rates as per the Budget 2023 proposals.
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Introduction
What is TDS and why is it important?
TDS is a type of advance tax that is deducted from the income of the payee before it reaches his or her hands. It is applicable to various sources of income such as salary, interest, dividend, rent, commission, professional fees, etc. The deductor has to deduct tax at the rates prescribed by the Income Tax Act or the relevant Double Taxation Avoidance Agreement (DTAA) in case of payments to non-residents. The deductor also has to issue a TDS certificate to the deductee as proof of tax deduction.
TDS is important because it ensures that tax is collected at the source of income itself and deposited with the government on a regular basis. It also reduces the burden of tax payment on the deductee at the end of the year and helps in avoiding tax evasion.
What are the changes in TDS rates for FY 2023-24 as per Budget 2023?
The Finance Minister presented the Union Budget 2023 on February 1, 2023. The Budget proposed some changes in the TDS rates and provisions for FY 2023-24. Some of the key changes are:
The exemption threshold for leave encashment has been increased from Rs. 3 lakh to Rs. 25 lakh for non-government employees.
The TDS rate on premature withdrawal from EPF has been reduced from 30% to 20% in case of non-PAN cases.
The exemption from TDS on interest from listed debentures has been extended to unlisted debentures as well.
The TDS rate on dividend income has been reduced from 10% to 7.5% for resident shareholders.
The TDS rate on royalty income has been reduced from 10% to 7.5% for non-resident payees.
The TDS rate on fees for technical services has been reduced from 10% to 7.5% for non-resident payees.
The TDS rate on interest income from foreign currency loans has been reduced from 20% to 5% for non-resident payees.
These changes are effective from April 1, 2023 and will apply to the payments made during FY 2023-24.
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TDS Rates for Resident Payments
In this section, we will discuss the TDS rates applicable to the payments made to residents in India. These rates are subject to change as per the notifications issued by the government from time to time.
TDS Rates for Salary, Interest, Dividend, Rent, and Other Payments
The following table shows the TDS rates for various types of payments made to residents in India for FY 2023-24.
Type of Payment
TDS Rate
Threshold Limit
TDS Rates for Salary
As per the income tax slab rates applicable to the employee
No threshold limit
TDS Rates for Interest
10%
Rs. 40,000 for bank deposits and Rs. 50,000 for senior citizens (Rs. 5,000 for others)
TDS Rates for Dividend
7.5%
Rs. 5,000
TDS Rates for Rent
10% for individuals and HUFs and 2% for others
Rs. 2.4 lakh per annum
TDS Rates for Other Payments
Varies depending on the nature of payment (e.g., lottery, insurance, etc.)
Varies depending on the nature of payment (e.g., Rs. 10,000 for lottery, Rs. 1 lakh for insurance, etc.)
Note: The TDS rates are subject to surcharge and cess as applicable.
TDS Rates for Salary
The employer has to deduct tax at source from the salary paid to the employee as per the income tax slab rates applicable to the employee. The employer has to consider the deductions and exemptions claimed by the employee under various sections of the Income Tax Act while calculating the taxable salary. The employer also has to issue Form 16 to the employee as a proof of TDS deduction.
TDS Rates for Interest
The payer has to deduct tax at source from the interest paid or credited to the payee at the rate of 10%. However, if the payee does not furnish his or her PAN, then the TDS rate will be 20%. The payer also has to issue Form 16A to the payee as a proof of TDS deduction.
The threshold limit for TDS deduction on interest is Rs. 40,000 for bank deposits and Rs. 50,000 for senior citizens (Rs. 5,000 for others). This means that if the interest amount does not exceed these limits in a financial year, then no TDS will be deducted.
TDS Rates for Dividend
The company or mutual fund has to deduct tax at source from the dividend paid or distributed to the shareholder or unit holder at the rate of 7.5%. However, if the shareholder or unit holder does not furnish his or her PAN, then the TDS rate will be 20%. The company or mutual fund also has to issue Form 16A to the shareholder or unit holder as a proof of TDS deduction.
The threshold limit for TDS deduction on dividend is Rs. 5,000 in a financial year. This means that if the dividend amount does not exceed this limit in a financial year, then no TDS will be deducted.
TDS Rates for Rent
The payer has to deduct tax at source from the rent paid or credited to the landlord at the rate of 10% if the payer is an individual or a Hindu Undivided Family (HUF) and at the rate of 2% if the payer is any other person. However, if the landlord does not furnish his or her PAN, then the TDS rate will be 20%. The payer also has to issue Form 16B to the landlord as a proof of TDS deduction.
The threshold limit for TDS deduction on rent is Rs. 2.4 lakh per annum. This means that if the rent amount does not exceed this limit in a financial year, then no TDS will be deducted.
TDS Rates for Other Payments
The payer has to deduct tax at source from various other payments made to the payee as per the rates specified in the Income Tax Act. Some of these payments are:
Lottery or crossword puzzle winnings: 30%
Insurance commission: 5%
Life insurance policy maturity amount: 1% (if the premium exceeds 10% of the sum assured)
National Savings Scheme (NSS) interest: 10%
Payment under a contract or sub-contract: 1% or 2% depending on the nature of work
Payment for professional or technical services: 10%
Payment for commission or brokerage: 5%
The threshold limit for TDS deduction on these payments varies depending on the nature of payment. For example, the threshold limit for lottery winnings is Rs. 10,000, for insurance commission is Rs. 1 lakh, and for professional fees is Rs. 30,000.
Note: The TDS rates and threshold limits for these payments are subject to change as per the notifications issued by the government from time to time.
TDS Rates for Non-Resident Payments
In this section, we will discuss the TDS rates applicable to the payments made to non-residents in India. These rates are subject to change as per the notifications issued by the government from time to time.
TDS Rates for Interest, Royalty, Fees for Technical Services, and Other Payments
The following table shows the TDS rates for various types of payments made to non-residents in India for FY 2023-24.
Type of Payment
TDS Rate
Threshold Limit
TDS Rates for Interest
5% or 20% depending on the source and nature of interest
No threshold limit
TDS Rates for Royalty and Fees for Technical Services
7.5% or 10% depending on the DTAA provisions
No threshold limit
TDS Rates for Other Payments
Varies depending on the source and nature of payment (e.g., business income, capital gains, etc.)
No threshold limit
Note: The TDS rates are subject to surcharge and cess as applicable.
TDS Rates for Interest
The payer has to deduct tax at source from the interest paid or credited to the non-resident payee at the rate of 5% or 20% depending on the source and nature of interest. The payer also has to issue Form 16A to the payee as a proof of TDS deduction.
The TDS rate of 5% is applicable to the following types of interest:
Interest on foreign currency loans or long-term infrastructure bonds or rupee-denominated bonds issued by an Indian company or a business trust.
Interest on money borrowed from a source outside India under a loan agreement approved by the Central Government.
Interest on deposits with a scheduled bank.
Interest on notified bonds or securities issued by the Central Government.
The TDS rate of 20% is applicable to any other type of interest not covered above.
TDS Rates for Royalty and Fees for Technical Services
The payer has to deduct tax at source from the royalty or fees for technical services paid or credited to the non-resident payee at the rate of 7.5% or 10% depending on the provisions of the DTAA between India and the country of residence of the payee. The payer also has to issue Form 16A to the payee as a proof of TDS deduction.
The TDS rate of 7.5% is applicable if there is a DTAA between India and the country of residence of the payee and it prescribes a lower rate than 10%. The TDS rate of 10% is applicable in all other cases.Royalty means the payment made for the use or right to use any patent, invention, model, design, secret formula, trademark, literary, artistic, or scientific work, etc. Fees for technical services means the payment made for any managerial, technical, or consultancy services.
TDS Rates for Other Payments
The payer has to deduct tax at source from various other payments made to the non-resident payee as per the rates specified in the Income Tax Act or the DTAA between India and the country of residence of the payee. Some of these payments are:
Business income: As per the income tax slab rates applicable to the payee (if there is a permanent establishment in India) or 40% (if there is no permanent establishment in India).
Capital gains: 20% for long-term capital gains and 30% for short-term capital gains (except for some specified assets such as shares, mutual funds, etc. for which lower rates are applicable).
Salary: As per the income tax slab rates applicable to the payee (if the services are rendered in India) or as per the DTAA provisions (if the services are rendered outside India).
Rent: 30% for individuals and HUFs and 40% for others (if the property is situated in India) or as per the DTAA provisions (if the property is situated outside India).
Dividend: 20% (if the dividend is not subject to DDT) or as per the DTAA provisions.
Note: The TDS rates and threshold limits for these payments are subject to change as per the notifications issued by the government from time to time.
Conclusion
In this article, we have discussed the various TDS rates applicable for different types of payments made to residents and non-residents in India for FY 2023-24. We have also highlighted the changes in the TDS rates as per the Budget 2023 proposals. We hope that this article has helped you to understand the TDS provisions and plan your tax liability accordingly.
However, please note that this article is for informational purposes only and does not constitute professional advice. You should consult your tax advisor before making any decision based on this article.
FAQs
Here are some frequently asked questions related to TDS rates and provisions.
What is the due date for depositing TDS?
The due date for depositing TDS varies depending on the type of payment and deductor. Generally, the due date is 7th of the next month for most payments except for salary and rent. For salary, the due date is 31st March of the financial year and for rent, the due date is 30th April of the next financial year.
How can I check my TDS status online?
You can check your TDS status online by visiting the TRACES website ( and entering your PAN and assessment year. You can also download your Form 26AS from this website, which shows all the details of TDS deducted and deposited on your behalf.
How can I claim refund of excess TDS deducted?
If you have paid more tax than your actual tax liability due to excess TDS deduction, you can claim refund of excess TDS deducted by filing your income tax return online. You have to mention your bank account details and refund amount in your return and verify it using Aadhaar OTP or EVC or digital signature. The refund will be processed by the income tax department and credited to your bank account within a few weeks.
How can I avoid TDS on interest income?
If you want to avoid TDS on interest income from bank deposits or post office deposits, you can submit Form 15G or Form 15H to your bank or post office. Form 15G is for individuals below 60 years of age and Form 15H is for senior citizens above 60 years of age. These forms are declarations that your total income is below the taxable limit and hence you are not liable to pay any tax on your interest income.
How can I download the TDS rates PDF?
If you want to download the TDS rates PDF for FY 2023-24, you can visit this link: [TDS Rates PDF]. This PDF contains all the updated TDS rates and threshold limits as per Budget 2023. 44f88ac181
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