TDS in India 2026 — Rates, Thresholds and the Refund Most People Forget
TDS (Tax Deducted at Source) is not a separate tax — it's a prepayment of your income tax, collected by whoever pays you. When a client pays a freelancer, a tenant pays rent, a bank pays interest or a company pays a contractor, the payer deducts a slice and deposits it against your PAN. You then claim that slice back against your final tax bill when you file your return. The two questions everyone actually has are: "how much TDS should be deducted?" (the deductor's view) and "how much of it comes back to me?" (the receiver's view). This calculator answers both — it applies the correct section rate, checks the threshold below which no TDS is due, bumps the rate to 20% if there's no PAN, and for professional fees shows how much of the 194J deduction is genuinely refundable.
TDS Rate Chart FY 2026-27 (Resident Payments)
| Section | Nature of payment | Rate | No-TDS threshold |
|---|---|---|---|
| 192 | Salary | Average slab rate | Basic exemption |
| 194 | Dividend | 10% | ₹10,000/yr |
| 194A | Interest (other than securities) | 10% | ₹50,000 bank (₹1,00,000 senior); ₹10,000 other |
| 194C | Contractor / sub-contractor | 1% indiv/HUF · 2% others | ₹30,000 single / ₹1,00,000 aggregate |
| 194D | Insurance commission | 2% | ₹20,000/yr |
| 194H | Commission / brokerage | 2% | ₹20,000/yr |
| 194I | Rent — plant & machinery | 2% | ₹50,000/month |
| 194I | Rent — land / building / furniture | 10% | ₹50,000/month |
| 194J | Professional / consultancy fees | 10% | ₹50,000/yr |
| 194J | Technical services / call-centre / film royalty | 2% | ₹50,000/yr |
| 194O | E-commerce participant payout | 0.1% | ₹5,00,000/yr (indiv/HUF) |
| 194Q | Purchase of goods | 0.1% | Above ₹50,00,000/yr |
| 206AA | No PAN furnished | 20% (higher of rate or 20%) | — |
Rates above are for resident payees and reflect the Finance Act 2024/2025 changes. Non-resident payments (section 195) carry their own rates plus surcharge and cess, subject to DTAA relief — not modelled here.
What Budget 2024 & 2025 Changed
- 194H commission cut from 5% → 2% (w.e.f. 1 Oct 2024), and 194D insurance commission 5% → 2%.
- 194-IB rent by individuals cut 5% → 2% (w.e.f. 1 Oct 2024).
- 194O e-commerce cut 1% → 0.1%.
- 194J professional threshold raised ₹30,000 → ₹50,000 (FY 2025-26).
- 194H threshold raised ₹15,000 → ₹20,000; 194 dividend ₹5,000 → ₹10,000; 194I rent moved to ₹50,000/month (from ₹2,40,000/year).
- Section 206AB (higher rate for non-filers) was omitted w.e.f. 1 April 2025 — so from FY 2025-26 only the no-PAN rule (206AA, 20%) raises the rate. Many older calculators still apply 206AB; this one does not.
The No-PAN Trap: Section 206AA
If the payee does not furnish a valid PAN, section 206AA forces TDS at the higher of the section rate or 20%. So a contractor who should face 1% suddenly faces 20%, and a professional's 10% becomes 20%. The deducted amount is still creditable, but if the PAN is wrong it may not show up in the payee's Form 26AS at all — meaning they cannot claim it. Always collect and verify the PAN before making a payment that attracts TDS.
For Freelancers: The 194J 10% Is Almost Never Your Real Tax
This is the single most misunderstood point about TDS, and it's why freelancers feel "over-taxed." Section 194J withholds a flat 10% on your gross receipts. But your income tax is computed on your income, not your gross. If you opt for Section 44ADA presumptive taxation, only 50% of receipts is treated as income — and after the new-regime rebate (nil tax up to ₹12 lakh of income), a large part of the 10% TDS comes straight back.
How to Claim TDS Back
- Check Form 26AS & AIS on the income-tax portal — the TDS must be reflected against your PAN. You can only claim what's there.
- If TDS is missing, ask the deductor to file/correct their quarterly TDS return (Form 26Q). Until they do, you can't claim it.
- File ITR-3 or ITR-4 (presumptive). Total TDS is set off against your computed tax.
- Excess is refunded to your pre-validated bank account, usually within weeks of processing; shortfall is paid as self-assessment tax.
- Avoid the wait next year with a Form 13 lower/nil-deduction certificate if your TDS routinely exceeds your tax.
TDS, Advance Tax and GST Are Three Different Things
Keep them straight: TDS (this page) is tax your payers prepay on your behalf and you reconcile at filing. Advance tax is the rest of your income tax that TDS didn't cover, paid by you in installments through the year — size it with the advance tax calculator. GST is a separate indirect tax on your invoices with its own threshold and export rules — handle it with the GST calculator for freelancers. TDS is income-tax timing; GST is a different tax entirely.
Frequently Asked Questions
What is the TDS rate on professional fees (194J)?
10% on professional/consultancy fees, 2% on technical services and call-centre work, with a ₹50,000/year threshold below which no TDS applies. 20% if no PAN.
What is the 194C contractor TDS rate?
1% for individual/HUF payees, 2% for others. No TDS if a single payment ≤ ₹30,000 and the yearly aggregate ≤ ₹1,00,000.
What rate applies with no PAN?
Section 206AA charges the higher of the section rate or 20% — usually a flat 20%.
Is TDS my final tax?
No. It's a prepayment adjusted against your actual tax when you file; excess is refunded, shortfall is topped up.
What's the rent TDS rate under 194I?
2% on plant/machinery, 10% on land/building/furniture, applicable when monthly rent exceeds ₹50,000.
Did 194H change?
Yes — commission/brokerage TDS dropped from 5% to 2% on 1 October 2024, with the threshold raised to ₹20,000/year.
How do I get excess TDS refunded?
Confirm it's in your Form 26AS/AIS, then file ITR-3/ITR-4 — the excess over your actual tax is refunded to your bank account.