Understanding What is Tax Deducted at Source

TDS stands for Tax Deducted at Source.
The concept of TDS was introduced in the Income Tax Act, 1961.
The methods of collecting Income Tax, which ensures regular flow of revenue to the Government.

Nature of Payment	Section	Rate	Threshold
Salary	192	30%	10,00,000
Interest on securities, debentures	193	7.5%	10,000
Deemed Dividend	2(22)	30%	5,000
Interest other than interest on securities	194A	20%	40,000
Winnings from lottery or crossword puzzles	1194B	30%	10,000
Winnings from horse races	194BB	30%	10,000
Payment to contractors (Advertisement contractors)	194C	2%	1,00,000
Payment to contractors (Other than advertisement)	194C	2%	1,00,000
Payment to sub-contractors	194C	2%	50,000
Payment to non-residents	195	20%	50,000
Payment to non-resident sportsmen or sports association	194E	20%	No exemption Limit
Payment in respect of deposit under NSS	194EE	10%	2,500
Payment on account of re-purchase of units by Mutual Fund or UTI	194F	30%	10,000
Payment in respect of units to an offshore fund	194K	7.5%	5,000
Payment of compensation on acquisition of immovable property	194LA	7.5%	250,000
Insurance commission	194D	3.75%	15,000
Commission etc., on sale of lottery tickets	194G	3.75%	15,000
Rent of land, building or furniture	194I	3.75%	24,000
Rent of plant, machinery, or equipment	194I	2%	50,000
Short-term capital gains U/s 111A	111A	15%	3,00,000
Fees for professional or technical services	194J	7.5%	30,000
Fees for tech. services agreement made on or after June 1,2005	194J	20%	30,000
Income from foreign currency bonds or shares of Indian company	196C	10%	No exemption Limit
Any other interest on securities	194LD	-	5

What is TAN?

TAN is the Tax Deduction & Collection Account Number; it is a 10-digit alphanumeric character issued by the Income Tax Department to all persons deducting tax at source.
Example: TAN BCFD12345A
TAN must be quoted in all relevant challans, tax deduction certificates, TDS returns and other notified documents.
To obtain TAN, the person or organisation is required to apply in Form 49B to the TAN Facilitation Centres of NSDL.

Persons of TDS

Deductor

Any person making the payment to third parties as specified in the scope and applicability section mentioned above are required to deduct tax at source.

Who is Deductee?

A Deductee is a third party that provides services and bills to the buyer (Deductor) and the buyer will then deduct the tax at source at a prescribed rate, before paying the bill amount.
Main Deductee Type:

Deductee Type

Individual: Refers specifically to payments made to individual persons.
HUF (Hindu Undivided Family): Refers to payments made to Hindu Undivided Families.

Deductee Categories:

Deductee Categories

Individual: Refers specifically to payments made to individual persons.
Government: Refers to payments made to government agencies.
Hindu Undivided Family (HUF): Refers to payments made to Hindu Undivided Families.
Association of Persons (AOP): AOP is a type of entity that is not an individual, Hindu Undivided Family (HUF), company, or any other specified entity. The Indian Income Tax Act, 1961, defines AOP (Association of Persons) as an integration of persons for a mutual benefit or a common purpose.
Co-operative society: Co-operative societies are formed by individuals for mutual benefit.
Local Authority: Refers to payments made to local government bodies or authorities.
Partnership firm: Refers to payments made to entities operating as partnership firms.
Domestic company (Indian company): This Deductee Type is applicable when making payments to companies that are incorporated in India.
Foreign company: Refers to payments made to companies that are incorporated outside India.
Artificial Judicial Person: This category typically includes entities that are recognized as artificial judicial persons, such as trusts, societies, or other legal entities.