TDS Rate Chart & Late Payment Interest Calculations (FY 2025-26)
Tax Deducted at Source (TDS) is a system where the payor deducts a specified tax before making payments to a payee, depositing it directly with the Income Tax Department. Managing TDS requires keeping track of diverse rates and threshold limits for various payment types, as well as strict timelines to avoid penalties.
Here is a comprehensive breakdown of the TDS rates for Financial Year (FY) 2025-26 and the exact calculation rules for late-deduction and late-payment interest.
1. Common TDS Rate Chart (FY 2025-26)
The table below summarizes the most common TDS sections, threshold limits, and rates applicable to resident payees:
| Section | Nature of Payment | Threshold Limit (₹) | Rate for Indv/HUF (%) | Rate for Others (%) |
|---|---|---|---|---|
| 194A | Interest on Securities / Bank Deposits | 10,000 (Senior Citizen: 50,000) | 10% | 10% |
| 194C | Payment to Contractors (Single / Annual) | 30,000 / 1,00,000 | 1% | 2% |
| 194H | Commission or Brokerage | 15,000 | 5% | 5% |
| 194I(a) | Rent on Plant & Machinery | 2,40,000 | 2% | 2% |
| 194I(b) | Rent on Land & Building | 2,40,000 | 10% | 10% |
| 194J | Fees for Professional / Technical Services | 30,000 | 10% (Technical: 2%) | 10% (Technical: 2%) |
| 194Q | Purchase of Goods (Turnover > 10 Cr) | 50,000 on purchases > 50L | 0.1% | 0.1% |
💡 Note: If the payee does not furnish their PAN (Permanent Account Number), tax must be deducted at a flat rate of 20% (except under Section 194Q, where it is capped at 5%) as per Section 206AA.
2. Calculating Interest on TDS Delays
Under Section 201(1A) of the Income Tax Act, if an entity fails to deduct tax or fails to pay deducted tax to the government on time, interest is charged. The calculations are split into two categories depending on the nature of the delay:
A. Late Deduction of TDS
- Interest Rate: 1% per month or part of a month.
- Duration: Calculated from the date on which tax was deductible (invoice or payment date) to the date on which tax was actually deducted.
B. Late Payment of TDS
- Interest Rate: 1.5% per month or part of a month.
- Duration: Calculated from the date on which tax was deducted to the date on which tax was actually paid to the government.
3. The "Part of a Month" Rounding Trap
Interest calculations under Section 201(1A) are highly strict because the law specifies "month or part of a month". In practice:
- A delay of even 1 single day in a calendar month counts as a full month of interest.
- If tax was deducted on June 30 and deposited on July 8 (due date July 7), the delay is just 1 day. However, since the dates span across parts of June and July, the department will charge interest for 2 full months (1.5% × 2 = 3.0%).
Always verify dates and deduct TDS on time to avoid unnecessary interest expenses, which are not allowed as a business deduction under Section 37(1) of the Income Tax Act.