Quick Answer: How is TDS Calculated?
TDS (Tax Deducted at Source) is calculated by multiplying the gross payment amount by the prescribed statutory section rate (e.g., 10% for professional fees under 194J, 10%/2% for rent under 194-I, 1%/2% for contractors under 194C, 1% for property under 194-IA), provided total payments equal or exceed statutory threshold limits. If the payee does not provide a valid PAN, Section 206AA mandates a flat 20% penalty deduction.
What is a TDS Calculator & How Does Tax Deducted at Source Work?
Tax Deducted at Source (TDS) is a fundamental tax collection mechanism implemented by the Indian Income Tax Department to collect direct tax at the very point of revenue generation. Under this framework, any person or entity (payer) making specified payments such as salary, rent, professional fees, contractor payments, commission, or property purchase consideration is legally required to deduct a pre-determined percentage of tax before disbursing the net balance to the payee. The deducted tax is subsequently deposited directly into the Central Government's account on behalf of the payee.
TDS prevents tax evasion, ensures continuous revenue flow for the government throughout the financial year, and simplifies tax compliance for individual payees. The payee receives credit for all tax deducted against their PAN card, which is reflected in their Form 26AS and Annual Information Statement (AIS).
TDS Rate Comparison across Statutory Sections (FY 2025-26)
Comparative standard percentage rates for common payment types under the Income Tax Act
Verified TDS Calculator Rates & TDS Calculator on FD Threshold Chart
Below is the complete statutory rate chart detailing payment sections, nature of transaction, standard TDS rates, exemption thresholds, and threshold periods under the Income Tax Act for FY 2025-26:
| Section | Nature of Payment | TDS Rate (PAN) | TDS Rate (No PAN) | Exemption Threshold |
|---|---|---|---|---|
| 194J (Prof) | Professional Fees / Legal Fees | 10% | 20% | ₹50,000 / year |
| 194J (Tech) | Technical Services / Software Royalty | 2% | 20% | ₹50,000 / year |
| 194-I (Land) | Rent on Land, Building, Furniture | 10% | 20% | ₹50,000 / month (or ₹2.4L/yr) |
| 194-I (Mach) | Rent on Plant, Machinery, Equipment | 2% | 20% | ₹50,000 / month (or ₹2.4L/yr) |
| 194-IB | Rent paid by Individual/HUF (Non-audit) | 2% | 20% | ₹50,000 / month |
| 194C (Ind) | Contractor Payment — Individual/HUF | 1% | 20% | ₹30k (single) / ₹1L (aggregate) |
| 194C (Others) | Contractor Payment — Company/Firm | 2% | 20% | ₹30k (single) / ₹1L (aggregate) |
| 194H | Commission or Brokerage | 2% | 20% | ₹20,000 / year |
| 194-IA | Purchase of Immovable Property | 1% | 20% | ₹50,00,000 (Consideration) |
| 192 | Salary Income | Slab Rates | 20% / Slabs | Standard Tax Slabs |
Gross Payment vs Net Payout & TDS Component (₹1,00,000 Payment)
Illustrative payout distribution across professional fees (10%), contractor payments (2%), and property purchase (1%)
TDS Calculator on Salary for FY 2025-26 & Section-by-Section Rules
194-I TDS on Rent (Land, Building & Plant)
Section 194-I mandates commercial tenants and business entities to deduct 10% TDS on rent paid for land, building, or furniture, and 2% on rent paid for plant, machinery, or equipment. The threshold limit is ₹50,000/month or ₹2,40,000 annually per landlord.
194-IB TDS on Rent by Individual / HUF Tenants
Designed for salaried or non-audited individuals renting residential or commercial spaces, Section 194-IB mandates a 2% TDS deduction when monthly rent exceeds ₹50,000. Unlike corporate TDS, deduction occurs only once per year in the final month of tenancy.
194J Professional & Technical Fees
Section 194J applies to legal, medical, engineering, architectural, accounting, and consultancy fees at 10%, while technical services and software royalties are taxed at 2%. The annual threshold per payee stands at ₹50,000 for FY 2025-26.
194C Payments to Contractors & Sub-Contractors
Section 194C covers payments for advertising, catering, manufacturing, freight, and service contracts. TDS is 1% for individual/HUF contractors and 2% for companies/firms. Triggered if a single invoice exceeds ₹30,000 or aggregate invoices exceed ₹1,00,000 in a year.
194-IA Property Purchase TDS (Form 26QB)
Buyers purchasing property worth ₹50 Lakhs or more must deduct 1% TDS on the total consideration or stamp duty value. The buyer does not need a TAN card and can deposit TDS using Form 26QB with their PAN card.
194H Commission & Brokerage Payments
Section 194H covers payments made for sales agency, real estate brokerage, or commercial commission. A 2% TDS deduction is enforced whenever total commission paid to a recipient exceeds ₹20,000 in a financial year.
What Happens if Payee Does Not Furnish PAN? (Section 206AA)
Section 206AA of the Income Tax Act acts as a strict compliance enforcement measure. If a payee or vendor fails to furnish a valid Permanent Account Number (PAN) or Aadhaar to the deductee, tax must be deducted at higher of the following rates:
- At the rate specified in the relevant provision of the Income Tax Act.
- At the rate or rates in force.
- At the flat statutory rate of 20% (or 5% for specified micro-contractors).
Additionally, if the PAN furnished is invalid or inoperative due to non-linking with Aadhaar, Section 206AA automatically treats the payee as a "No PAN" case, requiring payers to deduct 20% flat TDS.
How to Deposit TDS & Interest on TDS Calculator Late Deposit Rules
Once TDS is deducted from a payment, the deductor must deposit the tax with the Central Government within statutory timelines:
Standard Business TDS (Challan ITNS 281)
TDS deducted under Sections 194C, 194J, 194-I, and 194H must be deposited electronically via Challan ITNS 281 by the 7th of the following month (except for March deductions, which can be deposited by April 30th).
Property Purchase TDS (Form 26QB)
TDS deducted on property purchase under Section 194-IA must be deposited via Form 26QB within 30 days from the end of the month in which the tax was deducted.
How to Claim TDS Refund via Form 26AS, AIS & ITR
If total TDS deducted from your income exceeds your actual income tax liability for the financial year (for example, if your total taxable income falls below basic exemption limits or eligible for rebates), you are entitled to a full tax refund:
- Log in to the Income Tax e-filing portal (incometax.gov.in).
- Verify all TDS credits reported by deductors in your Form 26AS and Annual Information Statement (AIS).
- File your annual Income Tax Return (ITR-1, ITR-2, or ITR-4) reporting your total income and total TDS credits.
- The Income Tax Department processes the return under Section 143(1) and directly credits the excess TDS refund amount to your pre-validated bank account with applicable interest.