TDS Rate Chart FY 2021-22 (AY 2022-23)
Overview : The Financial Year 2021-22 brought a significant addition to the TDS framework with the introduction of Section 194Q (TDS on purchase of goods) effective July 1, 2021. This provision, requiring a 0.1% TDS on purchases exceeding ₹50 lakhs annually by buyers with turnover above ₹10 crore, complemented the existing TCS provision on sales while maintaining the differential rates for technical and professional services under other sections. Understanding TDS and Its Importance for Indian Taxpayers
For the Financial Year 2021-22 (Assessment Year 2022-23), understanding the applicable TDS provisions is essential for both individuals and businesses to maintain compliance with Indian tax regulations. This comprehensive guide covers all TDS rates effective from April 1, 2021, including the introduction of new provisions during the year.
Simplified TDS Rate Chart for FY 2021-22
| Section | Nature of Payment (Simplified) | Rate (%) | Threshold Limit (₹) |
|---|---|---|---|
| 192 | Slab Rate | Basic Exemption Limit | |
| 194A | Interest (Bank/Post Office/Co-op Soc) | 10% | ₹50K (Sr. Cit) / ₹40K (Others) (Annual) |
| 194A | Interest (Others) | 10% | ₹5,000 (Annual) |
| 194C | Contractor Payments | 1% (Ind/HUF), 2% (Others) | Single > ₹30K; Agg. > ₹1L (Annual) |
| 194H | Commission/Brokerage | 5% | ₹15,000 (Annual) |
| 194-I | Rent (Land/Building/Furniture) | 10% | ₹2,40,000 (Annual) |
| 194-I | Rent (Plant & Machinery) | 2% | ₹2,40,000 (Annual) |
| 194-IB | Rent by Ind/HUF (Not under Tax Audit) | 5% | ₹50,000 per month |
| 194J | Professional Fees / Director Fees etc. | 10% | ₹30,000 (Annual, excl. Director fees) |
| 194J | Technical Fees / Royalty (Sale)/ Call Centre | 2% | ₹30,000 (Annual) |
| 194M | Certain Payments by Ind/HUF | 5% | ₹50 Lakhs (Annual) |
| 194Q | Purchase of Goods (from 01-Jul-21) | 0.1% (on amount > 50L) | Agg. Purchase > ₹50L (Annual) |
Comprehensive TDS Rate Chart: FY 2021-22 (Assessment Year 2022-23)
For a detailed understanding of all applicable TDS provisions, the comprehensive chart below outlines all rates and threshold limits under various sections of the Income Tax Act, including the new provisions effective during FY 2021-22:
| Section | Nature of Payment | Rate (%) | Threshold Limit (₹) |
|---|---|---|---|
| 192 | Salary Payments | Applicable Income Tax Slab Rate | Basic Exemption Limit |
| 192A | Premature EPF Withdrawal (if service is less than 5 years) | 10% | 50,000 |
| 193 | Interest on Securities | 10% | 10,000 (General) / 5,000 (Certain Debentures) |
| 194 | Dividend (other than dividend under Section 115-O) | 10% | 5,000 (Ann.) |
| 194A | Interest (Other than Interest on Securities) | 10% | 50K (Sr.Cit-Bank)/40K (Oth-Bank)/5K (Other) |
| 194B | Winnings from Lotteries, Crossword Puzzles, Gambling etc. | 30% | 10,000 (Ann.) |
| 194BB | Winnings from Horse Races | 30% | 10,000 (Ann.) |
| 194C | Payment to Contractors / Sub-contractors | 1% (Ind/HUF Payee), 2% (Other Payees) | Single: 30,000; Annual Aggregate: 1,00,000 |
| 194D | Insurance Commission | 5% (Other Payees), 10% (Co. Payees) | 15,000 (Ann.) |
| 194DA | Payment regarding Life Insurance Policy (Not exempt u/s 10(10D)) | 5% (on income component) | Aggregate Payment during the year is 1,00,000 or more |
| 194EE | Payment regarding NSS Deposit | 10% | 2,500 (Ann.) |
| 194G | Commission, etc., on Sale of Lottery Tickets | 5% | 15,000 (Ann.) |
| 194H | Commission or Brokerage (other than Insurance Commission) | 5% | 15,000 (Ann.) |
| 194-I | Rent of Plant & Machinery | 2% | 2,40,000 (Ann.) |
| 194-I | Rent of Land, Building, Furniture or Fittings | 10% | 2,40,000 (Ann.) |
| 194-IA | Payment on Transfer of Immovable Property (other than Agricultural Land) | 1% (Con./SDV higher) | 50 Lakhs or more |
| 194-IB | Rent by Individual/HUF (not liable to tax audit) | 5% | 50,000 per month |
| 194J | Fees - Prof/Tech/Royalty/Director/Non-Compete | 2%(Tech/Call/Royalty-Film), 10%(Others) | 30,000 per cat./yr (excl. Director) |
| 194K | Income from Units of Mutual Fund/Specified Undertaking/Company | 10% | 5,000 (Ann.) |
| 194LA | Compensation on Acquisition of Immovable Property | 10% | 2,50,000 (Ann.) |
| 194LBB | Income from Investment in Securitisation Trust | 25% (Ind./HUF), 30% (Others) | No Threshold |
| 194M | Contract/Commission/Prof. Fees paid by specified Ind./HUF | 5% | 50 Lakhs (Ann.) |
| 194N | Cash Withdrawal from Bank/Post Office/Co-op Society | 2% (or 5% if ITR non-filer) | >1 Cr / >20L (if ITR is not filed) (Ann.) |
| 194-O | Payment by E-commerce Operator to Participant | 1% (Gross Amount) | 5 Lakhs (Ind/HUF Part. Ann. with PAN/Aadhaar) |
| 194P | TDS by Bank for Specified Senior Citizens (75+) | Applicable Income Tax Slab Rate | Conditions Apply |
| 194Q | TDS on Purchase of Goods by spec. Buyer (from 01-Jul-21) | 0.1% (on purchase > 50L) | Buyer T/O >10Cr & Purch ≥ 50L Ann. |
| 206C(1H) | TCS on Sale of Goods | 0.1% (on amount > 50L) | Seller T/O >10Cr & Sale ≥ 50L Ann. |
Notable TDS Provisions for FY 2021-22
- Introduction of Section 194Q: TDS on Purchase of Goods (from July 1, 2021) :The Finance Act 2021 introduced a new TDS provision through Section 194Q, effective from July 1, 2021. This section requires specified buyers (with turnover exceeding ₹10 crore in the preceding financial year) to deduct tax at the rate of 0.1% on purchases of goods exceeding ₹50 lakhs in a financial year. This provision was introduced to expand the tax collection mechanism to high-value goods transactions, complementing the existing TCS provision on the sale of goods.
- Section 194P: TDS by Specified Banks for Senior Citizens (75+ years) : FY 2021-22 saw the implementation of Section 194P, which introduced a simplified taxation regime for senior citizens aged 75 years or more. Under this provision, specified banks calculate the tax liability of eligible senior citizens (who have only pension and interest income from the same bank) and deduct appropriate TDS, eliminating their need to file income tax returns. This provision aimed to ease compliance for elderly taxpayers with simple income profiles.
- Section 194O: E-commerce Transactions : FY 2021-22 was the first full financial year of implementation for Section 194O, which requires e-commerce operators to deduct TDS at 1% on payments made to e-commerce participants. This provision, introduced in the previous financial year, aimed to bring the growing e-commerce sector within the tax net.
- Differential Rates under Section 194J : The dual-rate structure for TDS under Section 194J continued in FY 2021-22 : 2% rate or Technical services, Royalties relating to the sale, distribution or exhibition of cinematographic films & Call centre services. 10% rate for Professional Services, Director fees, & Non-compete fees. This differentiation recognised the typically lower profit margins in technical services compared to professional services, aiming to address sectoral concerns while maintaining tax compliance.
Conclusion
The financial year 2021-22 marked a significant expansion of India's TDS framework, particularly with the introduction of Section 194Q for purchases of goods. Setindiabiz offers expert compliance solutions tailored to these requirements, ensuring accurate calculations and timely compliance while protecting your business from penalties and optimising your tax position.
Disclaimer : This information is based on the Income Tax Act 1961 and incorporates changes introduced in the Finance Act 2021. While we strive for accuracy, tax laws are complex and subject to interpretation. We recommend consulting with a tax professional for advice specific to your situation.
FAQ's
Businesses with turnover exceeding ₹10 crore in FY 2020-21 must deduct 0.1% TDS when making payments for purchases of goods exceeding ₹50 lakhs in FY 2021-22. The deduction applies to the amount exceeding ₹50 lakhs. For example, if total purchases reach ₹60 lakhs, TDS applies to ₹10 lakhs. This creates additional compliance requirements, including obtaining a TAN, deducting TDS at the time of payment or credit (whichever is earlier), and filing TDS returns.
When both provisions could apply to the same transaction, Section 194Q takes precedence. If the buyer is liable to deduct TDS under Section 194Q, the seller is not required to collect TCS under Section 206C(1H). However, if the buyer fails to deduct TDS for any reason, the seller remains obligated to collect TCS if applicable. This hierarchy prevents double taxation at the same transaction stage.
No, Section 194Q applies only to purchases of "goods" and not services. The term "goods" is not defined in the Income Tax Act but generally follows the definition under the Sale of Goods Act, referring to movable property. It excludes shares, securities, and immovable property (which are covered under other TDS provisions). Additionally, purchases made for personal use rather than business purposes are generally not covered.
Section 194P creates a paperless taxation system for senior citizens aged 75+ who have only pension and interest income from the same bank. The specified bank calculates their tax liability, deducts appropriate TDS, and files a statement as if the senior citizen had filed their return. This eliminates the need for these seniors to file income tax returns, significantly easing their compliance burden, especially for those with limited mobility or technical expertise.
Non-compliance with Section 194Q can result in disallowance of the purchase expense under Section 40(a)(ia), interest charges at 1.5% per month on the unpaid TDS amount, penalty equal to the amount of TDS not deducted, potential scrutiny of tax returns, and higher TDS rates for future transactions if identified as a "specified person" under Section 206AB. These consequences can significantly impact business finances and operations.
TDS under Section 194Q is calculated on a cumulative basis. The ₹50 lakh threshold is considered for the entire financial year. Once cumulative purchases from a seller exceed ₹50 lakhs, TDS must be deducted on the amount exceeding this threshold. For example, if purchases reach ₹48 lakhs by September and an additional ₹10 lakhs purchase is made in October, TDS would apply to ₹8 eight lakhs (the portion exceeding the ₹50 lakhs threshold).
No, the differential rates under Section 194J (2% for technical services versus 10% for professional services) apply only to payments made to residents. Payments for technical or professional services to non-residents are governed by Section 195, where rates are determined based on the nature of income and applicable tax treaty provisions, if any. Non-residents may be eligible for lower rates or exemptions under Double Taxation Avoidance Agreements (DTAAs).
Businesses should maintain detailed records, including purchase invoices and contracts, proof of payment dates, TDS calculation worksheets showing the cumulative purchase threshold application, TDS deduction and deposit challans, quarterly TDS returns and acknowledgements, vendor details, including PAN verification, and correspondence regarding TDS deduction. Such comprehensive documentation helps demonstrate compliance during assessments or tax audits.
Section 206AB imposes higher TDS rates for "specified persons" who have not filed income tax returns for the two preceding years and whose aggregate TDS/TCS exceeded ₹50,000 in each of those years. For such persons, TDS must be deducted at the higher of twice the normal rate, 5%, or the rate under Section 206AA. Deductors must verify the status of payees through the income tax portal's compliance check utility before applying standard rates.
Yes, several thresholds provide relief to small taxpayers. For Section 194Q, buyers with turnover below ₹10 crore are exempt from TDS obligations. For Section 194-O (e-commerce), individual/HUF participants with sales below ₹5 lakhs annually are exempt if they provide PAN/Aadhaar. Additionally, the Finance Act 2021 extended the lower TDS rates for certain payments introduced as COVID-19 relief through part of FY 2021-22, benefiting smaller taxpayers with reduced withholding impact on their cash flows.
Author Bio
Editorial Team | in
Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.