A Guide to India’s TDS Rates for FY 2025-26

India’s Tax Deducted at Source (TDS) serves as an essential tool to ensure tax collection right at the source of income. For the Financial Year 2025-26 (Assessment Year 2026-27), the applicable TDS rates have been revised according to recent changes introduced through the Finance Act 2025 and remain applicable across a wide range of payment categories.

Tax Deducted at Source (TDS) is a mechanism set up by the Indian Income Tax Department, where a certain percentage of tax is deducted directly by the payer from income such as salaries, rent, or interest before the remaining amount is paid to the recipient. This deducted tax is then submitted to the central government on behalf of the recipient. The applicable TDS rates for the financial year (FY) 2024–25 are determined by the central government.

We give you the updated TDS rates for the FY 2025–26 (Assessment Year 2026–27), including section-wise details, salary-based TDS slabs, and other relevant tax rate charts.

Classification of TDS

India’s TDS can be classified within two broad categories, listed below:

1. In the case of an individual
   • where the individual is resident in India
   • where the individual is not resident in India*
2. In the case of a company
   • where the company is a domestic company
   • where the company is not a domestic company*

TDS chart rate is a detailed table that outlines the tax deduction rates applicable on various types of payments as defined under India’s Income-Tax Act, 1961. The TDS slab rates vary based on the nature of the transaction and the recipient’s category, such as individuals, companies, or non-residents.

TDS changes applicable from April 1, 2025

The Union Budget 2025 brought major revisions to the TDS and Tax Collected at Source (TCS) rules under India’s tax laws. These updates aim to make tax compliance easier for both businesses and individuals.

Key highlights include an increased threshold limit, elimination of TCS on specific transactions, and the implementation of new measures designed to simplify compliance and enhance the overall efficiency of tax procedures.

Increased threshold limits for TDS for individuals and domestic companies

The applicability of TDS comes into effect only when a said transaction is over the prescribed threshold limit. From April 1, 2025, threshold limits for particular sections have been increased.

Interest on securities and dividends 

Mutual funds, digital assets, and e-commerce

Lottery, winnings, and games

Payments to contractors and professionals

Property-related transactions

TDS on rent-related payments for individuals and domestic businesses

The term “rent” under Section 194I of the Income-Tax Act, 1961, refers to payments made under various arrangements such as lease, sub-lease, tenancy, or any similar agreement. These agreements may be for the use of land, buildings (including factory buildings), land associated with buildings (like gardens or parking lots), or assets such as machinery, plants, equipment, furniture, or fittings.

Importantly, an individual receiving the rent does not need to own the property; sub-letting arrangements are also covered under this provision.

Please note that if a landlord collects a refundable security or advance deposit when leasing a building, such a receipt is not treated as income and is therefore not subject to TDS under Section 194I. However, if the advance payment is considered rent rather than a refundable deposit, it becomes taxable and subject to TDS.

When rent is paid to a non-resident Indian (NRI), a TDS of 30 percent plus applicable surcharge and cess (4 percent) must be deducted, regardless of the rent amount, as no minimum threshold applies.

TDS on salary and retirement-related payments for individuals

India’s central government introduced a revised set of income tax slabs under the new tax regime in the Union Budget 2025. These changes effect from April 1, 2025, will apply to income earned during the FY 2025–26.

Under the proposed structure, no tax will be levied on annual income up to INR 400,000 (US$4,683.3).

• Incomes between INR 400,000 (US$4,683.3) and INR 800,000 (US$9,366.6) will be taxed at 5 percent,
• INR 800,000 (US$9,366.6) to INR 1.2 million (US$14,049.9) at 10 percent,
• INR 1.2 million (US$14,049.9) to INR 1.6 million (US$18,733.3) at 15 percent,
• INR 1.6 million (US$18,733.3) to INR 2 million (US$23,416.6) at 20 percent,
• INR 2 million (US$23,416.6) to INR 2.4 million (US$28,099.9) at 25 percent, and
• income above INR 2.4 million (US$28,099.9) will attract a 30 percent tax rate.

In terms of TDS provisions, key deductions include those under Section 192 for salaries, which follow the applicable slab rates based on documentation such as Form 12BB and Form 16. For premature withdrawals from Employees’ Provident Fund (EPF) accounts, Section 192A mandates a 10 percent TDS on amounts exceeding INR 50,000 (US$585.41).

ALSO READ: Guide to Advance Tax Filing in India for FY 2024-25

TDS rates on payments to non-residents and institutions for individuals and businesses

*Section 194E, 194LB and 194LD are only applicable on individuals. However, they are applicable on foreign businesses based in India. 

Miscellaneous TDS rates for businesses and individuals

*Section 194T is only applicable on individuals.

Removed/inactive provisions for businesses

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As of April 1, 2025, several tax provisions have been removed to ease compliance burdens for businesses and streamline the tax deduction and collection process.

Earlier, under Section 206C(1H), sellers were required to collect Tax Collected at Source (TCS) on the sale of goods if the total value exceeded INR 5 million (US$58,541.5), provided certain conditions were met. This often overlapped with Section 194Q, which required buyers to deduct TDS under similar conditions, leading to confusion and compliance challenges. With the removal of Section 206C(1H) from April 1, 2025, sellers are no longer obligated to collect TCS on the sale of goods, eliminating this overlap.

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Additionally, Sections 206AB and 206CCA, which mandated higher rates of TDS and TCS for individuals who had not filed their income tax returns, have also been scrapped. These provisions placed a compliance burden on businesses, as they were required to check the filing status of each party before applying the appropriate tax rate. From the FY 2024-25 onward, this requirement is no longer in effect, making it simpler for businesses to manage tax deductions and collections without having to verify the tax return filing status of each transaction counterpart.

Frequently asked questions

What is TDS and TCS in India?

TDS and TCS are mechanisms under the Indian Income-Tax Act, 1961, used to collect tax at the source of income. TDS is deducted by the payer (such as an employer or buyer) when making certain payments like salaries, rent, or professional fees, while TCS is collected by the seller at the time of sale of specified goods or services. Both aim to ensure timely tax collection and reduce tax evasion.

What are the notable changes to TDS rates in 2025?

One of the key changes was the removal of Section 206C(1H), which previously required sellers to collect TCS on the sale of goods exceeding INR 5 million (US$58,541.5). This provision often overlapped with Section 194Q of the Income-Tax Act, 1961,, leading to confusion and compliance challenges. With its removal effective April 1, 2025, sellers are no longer obligated to collect TCS on the sale of goods, eliminating this overlap.​

Additionally, Sections 206AB and 206CCA, which mandated higher rates of TDS and TCS for individuals who had not filed their income tax returns, were also scrapped. These provisions placed a significant compliance burden on businesses, as they were required to check the filing status of each party before applying the appropriate tax rate. From the financial year 2024-25 onward, this requirement is no longer in effect, making it simpler for businesses to manage tax deductions and collections without having to verify the tax return filing status of each transaction counterpart.​

Additionally, the threshold limits for several provisions have been raised. the threshold for TDS on interest from securities has been increased to INR 10,000 (US$117.08), while the threshold for dividends has also been raised to INR 10,000 (US$117.08), up from INR 5,000 US$58.54).

What are the penalties for non-compliant TDS norms for businesses?

Businesses that fail to comply with TDS norms may face several penalties, including interest on delayed deduction or payment, late filing fees, and fines. Specifically, interest is charged under Section 201, and a late fee of INR200/day (US$2.34) under Section 234E applies until the TDS return is filed. In severe cases, additional penalties and prosecution under Section 271H may also be imposed.

(With inputs from Divyansh Shirvastava.)

(US$1 = INR 85.4)

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