TDS Rates & Rules for FY 2025-26: What You Need to Know
Tax Deducted at Source (TDS) is how the government collects tax at the point of payment rather than waiting for the recipient to file a return. Whether you're earning interest on an FD, receiving rent, or paying a contractor — TDS impacts your cash flow. Here's the complete guide for FY 2025-26.
Quick TDS rate chart (FY 2025-26)
| Section | Payment Type | Rate | Threshold |
|---|---|---|---|
| 194A | Interest (FD, RD, bonds) | 10% | ₹40K (₹1L for senior citizens) |
| 194I | Rent — land/building | 10% | ₹6,00,000/year |
| 194I | Rent — plant & machinery | 2% | ₹6,00,000/year |
| 194C | Contractor — individual/HUF | 1% | ₹30K single / ₹1L aggregate |
| 194C | Contractor — company/firm | 2% | ₹30K single / ₹1L aggregate |
| 194J | Professional fees | 7.5% | ₹50,000/year |
| 194J | Technical services | 2% | ₹50,000/year |
| 194H | Commission/brokerage | 5% | ₹20,000/year |
| 194B | Lottery/gambling/betting | 30% | ₹10,000 |
| 194N | Cash withdrawal (ITR filed) | 2% | Above ₹1 Cr |
| 194N | Cash withdrawal (no ITR) | 5% | Above ₹20L |
Key Budget 2025 changes
- 194A (senior citizens): Threshold doubled from ₹50,000 to ₹1,00,000 — significant relief for senior citizens with FD income
- 194I (rent): Threshold raised from ₹2.4L to ₹6L — small landlords rejoice
- 194J (professional fees): Rate standardized to 7.5% from 10%, threshold raised from ₹30K to ₹50K
- 194H (commission): Threshold raised from ₹15,000 to ₹20,000
The PAN trap: 20% TDS
If the recipient doesn't provide PAN, TDS shoots up to 20% (or the applicable rate, whichever is higher). This is the most common reason for excessive TDS deduction. Always ensure your PAN is linked with your bank, employer, and any entity making payments to you.
Pro tip: Even if you have PAN, verify it's linked to your Aadhaar. Unlinked PANs are treated as "inoperative" — equivalent to not having PAN, meaning 20% TDS applies.
Form 15G and 15H: avoid TDS legally
If your total income is below the basic exemption limit, you can submit these forms to the deductor (typically your bank) to prevent TDS deduction entirely:
- Form 15G: For individuals below 60 years. Total income must be below ₹3 lakh (new regime) or ₹2.5 lakh (old regime)
- Form 15H: For senior citizens (60+). Total income must be below ₹3 lakh
- When to submit: At the start of each financial year (April). Submit to each bank where you have FDs
- Not valid for: Salary TDS (Sec 192) — only your employer can adjust this based on your investment declarations
TDS is not your final tax
TDS is an advance tax payment, not the final word. When you file your ITR, all TDS is adjusted against your actual tax liability. Three scenarios:
- TDS = actual tax: Nothing more to pay, nothing to claim
- TDS > actual tax: You get a refund (typically within 2-4 months of filing)
- TDS < actual tax: You pay the balance as self-assessment tax before filing
Check your TDS credits on Form 26AS (or AIS - Annual Information Statement) on the income tax portal before filing your return.