Module 4: Section-wise TDS on Payments (Core Module)
Understanding Major TDS Sections Applicable to Businesses & Individuals
Introduction
Once the basics of TDS timing and thresholds are clear, the most important and practical part of TDS compliance is selecting the correct TDS section.
Wrong section = wrong rate = interest, penalties, notices and expense disallowance.
In this Core Module of the TDS Course, we explain the most commonly used TDS sections, their applicability, threshold limits, rates and real-life business use cases. This module is essential for business owners, accountants, HR teams and professionals.
Quick Summary (Module Snapshot)
- Each payment has a specific TDS section
- Wrong section leads to short deduction
- Threshold limits differ section-wise
- PAN non-availability attracts 20% TDS
- Special sections apply to individuals also
Table of Contents
- Section 194C – Contractor & Sub-contractor
- Section 194J – Professional & Technical Fees
- Section 194I – Rent
- Section 194H – Commission & Brokerage
- Section 194A – Interest (Non-Bank)
- Section 194Q – Purchase of Goods
- Section 194R – Benefits & Perquisites
- Section 192 – Salary
- Sections 194IB / 194IA / 194M – Special Individual Cases
- Conclusion
Section 194C – Contractor & Sub-contractor
Applicability
Applicable on payments made to contractors for work contracts, including:
- Manufacturing or job work
- Transport contracts
- Advertising contracts
- Labour contracts
Threshold Limit
- ₹30,000 per contract
- ₹1,00,000 aggregate in a financial year
TDS Rate
- 1% – Individual / HUF contractor
- 2% – Other cases
📌 Transporters with valid PAN are exempt from TDS.
Section 194J – Professional & Technical Fees
Applicability
Payments for:
- Professional services (CA, CS, lawyers, doctors, consultants)
- Technical services
- Royalty
- Director remuneration (non-salary)
Threshold Limit
₹30,000 per year per payee
TDS Rate
- 10% – Professional services
- 2% – Technical services (where applicable)
📌 Most commonly misused section — confusion with 194C is common.
Section 194I – Rent
Applicability
Rent paid for:
- Land or building
- Plant & machinery
- Furniture & fittings
Threshold Limit
₹2,40,000 per year
TDS Rate
- 10% – Land / building / furniture
- 2% – Plant & machinery
📌 Applies even if rent is paid monthly.
Section 194H – Commission & Brokerage
Applicability
Payments for:
- Sales commission
- Brokerage
- Referral income
- Incentives linked to sales
Threshold Limit
₹15,000 per year
TDS Rate
5%
📌 Trade discounts given in invoice are not commission.
Section 194A – Interest (Non-Bank)
Applicability
Interest paid on:
- Loans
- Deposits
- Advances (other than bank interest)
Threshold Limit
- ₹5,000 – Regular cases
- ₹50,000 – Senior citizens
TDS Rate
10%
📌 Bank interest is covered under separate provisions.
Section 194Q – Purchase of Goods
Applicability
Applicable when:
- Buyer turnover exceeds ₹10 crore (previous FY)
- Purchases from a seller exceed ₹50 lakh
TDS Rate
0.1% on amount exceeding ₹50 lakh
📌 Applies at time of credit or payment, whichever is earlier.
📌 Does not apply if TCS under Section 206C(1H) is already collected.
Section 194R – Benefits & Perquisites
Applicability
Non-cash or partly cash benefits given to business associates:
- Gifts
- Foreign trips
- Incentives in kind
- Free products
Threshold Limit
₹20,000 per year
TDS Rate
10%
📌 TDS must be paid before releasing benefit.
Section 192 – Salary
Applicability
Salary paid to employees including:
- Basic salary
- Allowances
- Perquisites
- Bonus
TDS Rate
As per applicable income tax slab
📌 No fixed threshold — depends on taxable income.
📌 Employer must estimate annual income carefully.
Special Sections for Individuals
Section 194IA – Purchase of Property
- TDS @ 1%
- Applicable if property value exceeds ₹50 lakh
- Paid via Form 26QB
- No TAN required
Section 194IB – Rent by Individuals
- Rent exceeding ₹50,000 per month
- TDS @ 5%
- Paid via Form 26QC
Section 194M – Payments by Individuals
- Professional / contractor payments above ₹50 lakh
- TDS @ 5%
- No TAN required
📌 These sections bring individuals into TDS compliance.
Conclusion
Selecting the correct TDS section is the most critical step in TDS compliance. Each section has different applicability, rates, and thresholds. A single mistake can result in short deduction, interest, penalties, and disallowance of expenses.
This module equips you with section-wise clarity, ensuring accurate TDS deduction for both businesses and individuals.
Call to Action
Need help with:
Identifying correct TDS section
Reviewing past deductions
Avoiding short-deduction notices
📞 Contact Verotus Finlegal Solutions LLP
for expert TDS advisory and compliance support.
🌐 Visit: www.verotusllp.com
