TDS Rate Chart for FY 2023-24

TDS Rate Chart for FY 2023-24 — Complete Reference Updated for FY 2026-27

A clean, annually updated TDS rate chart is the single most-used compliance document in any Indian finance team. The FY 2023-24 chart was a landmark: it was the first to make the new income-tax regime the default for salary TDS under Section 192, and it mainstreamed newer sections such as 194R (business perquisites) and 194S (virtual digital assets). As you operate in FY 2026-27 / Assessment Year 2027-28, those foundations remain — but subsequent Finance Acts have revised thresholds and rates. This guide gives you the current applicable rates, worked Rs. examples, due dates, and a checklist you can act on today.

Why Your TDS Chart Must Be Refreshed Every April

Using an outdated rate chart is not a minor oversight — it is a compliance failure with real, calculable costs:

• Interest under Section 201(1A): 1% per month from the date TDS should have been deducted to the actual deduction date, and 1.5% per month from the deduction date to the deposit date.
• Disallowance under Section 40(a)(ia): 30% of the payment is denied as a deductible expense in the payer's hands where TDS was not deducted or deposited correctly.
• Short credit in Form 26AS / AIS: The deductee cannot claim credit for TDS that doesn't appear in their Annual Information Statement, triggering notices during ITR filing for AY 2027-28.
• Section 234E late filing fees: Rs. 200 per day per return — levied automatically with no discretionary waiver.

The FY 2023-24 chart mattered because it captured three structural changes. First, the new regime became the default for salary deduction, meaning employees now have to actively opt out, reversing the prior logic. Second, Section 194R brought dealer incentive trips, gift schemes, and channel partner benefits squarely into the TDS net. Third, Section 194S created an entirely new compliance obligation for anyone paying for virtual digital assets. By FY 2026-27, these are settled practice — but the rates and thresholds underneath them have shifted through Finance Acts 2024 and 2025, so re-verification every April is non-negotiable.

Complete TDS Rate Chart — FY 2026-27 / AY 2027-28

The table below covers sections most frequently encountered by businesses, LLPs, partnerships, and individuals. Rates shown are for payments to resident deductees with a valid, operative PAN. Where PAN is absent or inoperative, Section 206AA applies (see dedicated section below).

> Verification reminder: Before applying any rate in your accounting system, confirm it against the current CBDT consolidated TDS rate notification and the Income Tax portal's TDS section look-up at incometax.gov.in → Services → TDS on Non-Salary Payments. Rates for certain sections — particularly 194A, 194I, and 194-O — have been amended through Finance Acts 2024 and 2025 and may be subject to further revision under Finance Act 2026.

Section 192 — Salary TDS and the New Regime Default

From FY 2023-24 onwards, the new income-tax regime is the statutory default under Section 115BAC. Unless an employee submits a valid declaration opting for the old regime, the employer must calculate salary TDS on new regime slab rates.

New regime slabs for FY 2025-26 (as revised by Finance Act 2025 — verify for FY 2026-27):

The rebate under Section 87A reduces tax to nil for resident individuals with total income up to Rs. 12,00,000 under the new regime — but this rebate is not available on special rate income such as capital gains under Section 111A.

The most common employer mistake here: Deducting TDS on old-regime slabs because the employee didn't submit a regime declaration in April. The default is the new regime. An employer who applies old-regime rates without a valid declaration and subsequently deducts excess TDS faces a reconciliation problem when issuing Form 16 in June 2027 — and the employee may have incorrectly lower take-home pay for 12 months.

Section 194C — Contractor TDS: The Threshold Trap

Section 194C is triggered on payments to a contractor for carrying out any work — including advertising, broadcasting, carriage of goods, catering, manufacturing where principal supplies material, and labour contracts.

Rates: 1% (individual / HUF contractor) or 2% (company / firm / AOP / BOI contractor).

Threshold: Either (a) a single payment exceeds Rs. 30,000, or (b) the aggregate of payments to the same contractor during the financial year exceeds Rs. 1,00,000.

Worked Example — Section 194C

ABC Pvt Ltd engages LMN Transport Pvt Ltd for freight across Q1 FY 2026-27:

Total Q1 TDS: Rs. 1,800. Deposit by 7 May (for May) and 7 July (for June). The April payment of Rs. 25,000 is below both thresholds and is not retroactively covered — but once the annual aggregate crosses Rs. 1,00,000 mid-year, all subsequent payments attract TDS regardless of per-invoice amount. Build a vendor-wise running TDS register in your ERP to track this automatically.

Section 194J — The 10%/2% Split That Trips Up Every Finance Team

Section 194J is split into two rates depending on the nature of service:

• 10% applies to professional fees (CA, lawyer, doctor, architect, engineer, filmmaker), royalties, and non-executive director fees.
• 2% applies to technical services, call centre fees, and royalties for software (as clarified by the Explanation to Section 9(1)(vi)).

"Technical services" means managerial, technical, or consultancy services. Software AMC (Annual Maintenance Contracts), IT support, and data processing services are routinely classified as technical services at 2%. Legal retainers, audit fees, and medical consultation fees attract 10%.

Worked Example — Section 194J

A manufacturing company makes the following Q1 FY 2026-27 payments:

Applying 10% across all four payments would have deducted Rs. 97,000 — Rs. 46,400 excess TDS that the vendors would have to claim as refund in their ITR. The correct 2% classification on technical and call centre fees protects vendor cash flows and avoids reconciliation disputes. File this in Form 26Q by 31 July for Q1.

Section 194Q — TDS on Purchase of Goods: Who Pays and on What

Section 194Q applies to buyers (not sellers — that's 206C(1H)) where:

1. Buyer's turnover in the preceding financial year exceeded Rs. 10 crore.
2. Purchases from a single seller exceed Rs. 50 lakh in the current financial year.
3. TDS is deductible only on the amount exceeding Rs. 50 lakh.
4. If the seller has already collected TCS under Section 206C(1H) on the same transaction, Section 194Q does not apply to the buyer.

Rate: 0.1% on the amount above Rs. 50 lakh. If seller's PAN is absent or inoperative: 5%.

Worked Example — Section 194Q

Buyer Co. (turnover Rs. 30 crore in FY 2025-26) purchases raw materials from Supplier Ltd totalling Rs. 90 lakh in FY 2026-27.

• Exemption: First Rs. 50 lakh → no TDS
• Taxable purchase: Rs. 40,00,000
• TDS at 0.1% = Rs. 4,000

Now consider the same scenario where Supplier Ltd has an inoperative PAN:

• TDS at 5% = Rs. 2,00,000 — 50 times the normal amount.

This underscores why pre-payment PAN verification is essential. The income-tax portal's bulk PAN verification utility under Services → Know Your TAN/PAN allows you to upload up to 1,000 PANs in CSV format and receive operative/inoperative status in one go. Run this at the start of every financial year and at each quarter-end for your vendor master.

Section 194R — TDS on Business Benefits and Perquisites

Section 194R — inserted by Finance Act 2022 and fully operative from FY 2023-24 — requires any person providing a benefit or perquisite to a resident in the course of business or profession to deduct TDS at 10%, once the aggregate value to that recipient exceeds Rs. 20,000 in the financial year.

This section captures:

• Dealer/distributor incentive trips (domestic or international)
• Gifts of goods, vouchers, or credit notes to channel partners
• Sponsored conferences, hospitality, or sponsored travel for business associates
• Free samples of goods with commercial value above the threshold

Valuation: The benefit must be valued at fair market value (FMV) — purchase price if new, or open market price if second-hand. For services, the invoice value.

Practical challenge for in-kind benefits: If no accompanying cash payment exists from which to deduct TDS, the deductor must either collect the TDS amount separately from the recipient before extending the benefit, or — if unable to collect — deposit the TDS from its own funds and report it accordingly in Form 26Q. CBDT Circular 12/2022 clarifies this procedure.

Section 206AA — Inoperative PAN and the Higher-TDS Trap

Section 206AA mandates TDS at the highest of (a) twice the applicable rate, (b) the rate in force, or (c) 20%.

Since 1 July 2023, PANs not linked to operative Aadhaar are treated as inoperative for TDS purposes — the PAN is not cancelled but it is invalid for TDS credit. A deductee with an inoperative PAN is treated as having no PAN, triggering Section 206AA.

Worked Example — Section 206AA

A company pays Rs. 3,00,000 professional fees to a consultant whose PAN is inoperative.

The extra Rs. 30,000 is deducted from the vendor's payment — not an additional expense for your company — but it severely strains vendor relationships and will hold up invoice approvals. More importantly, if you fail to apply Section 206AA when the PAN is genuinely inoperative, you face a Section 201(1) demand for the shortfall plus Section 201(1A) interest.

Action item: Add a PAN-validation step to your payment-release workflow for all new vendors and re-run bulk validation every quarter.

Quarterly TDS Compliance Calendar for FY 2026-27

> Critical date: TDS deducted in March must be deposited by 30 April — not 7 April. Most payroll software defaults to 7th-of-month logic and will miss this. Set a manual calendar reminder.

Section 234E penalty worked example: You file Form 26Q for Q1 on 20 September 2026 instead of 31 July — a 51-day delay.

• Section 234E fee: Rs. 200 × 51 days = Rs. 10,200
• This is collected automatically at the time of Form 26Q filing on TRACES — you cannot avoid it.
• If the return is not filed within one year of the due date, Section 271H additionally permits a penalty of Rs. 10,000 to Rs. 1,00,000.

Form 26AS, AIS and TDS Mismatches — How to Find and Fix Them

Even correctly deducted and deposited TDS may not appear in the deductee's Form 26AS or AIS. The most frequent causes:

1. Wrong PAN entered for the deductee in Form 24Q or 26Q
2. Section code error — e.g., 194C used when the payment qualifies under 194J, or vice versa
3. Challan mismatch — incorrect BSR code, challan serial number, or deposit date in the return
4. Late filing — TDS return filed after due date; credits process in the next TRACES cycle

Step-by-step quarterly reconciliation:

1. Log in to TRACES (tdscpc.gov.in) and download the Consolidated TDS File (conso file) for the relevant quarter.
2. Compare the conso file's deductee-wise TDS data against your TDS payable ledger in your ERP.
3. Identify rows where TDS deducted in books ≠ TDS in TRACES.
4. File a revised Form 24Q / 26Q using TRACES Correction Statement facility. TRACES allows PAN corrections, section code corrections, and challan corrections.
5. Complete corrections for Q1 and Q2 before the end of December so deductees can factor the correct TDS credit into their Advance Tax computation for Q3 (due 15 December).

The AIS on the income-tax portal gives deductees a granular view of every TDS credit. If a mismatch appears, the deductee can raise a "feedback" against that entry, which triggers an automated query to the deductor. Early reconciliation — not last-minute corrections in May 2027 — is what prevents these from becoming AY 2027-28 assessment disputes.

Common Mistakes and Pitfalls to Avoid

Applying contractor rates to professional fees. A civil contractor renovating your office is Section 194C (2% for company). A consulting architect advising on design specifications is Section 194J (10%). The distinction: contracted work vs. professional judgement. When in doubt, read the engagement letter — if it describes a deliverable based on professional expertise, use 194J.

Ignoring the Rs. 1,00,000 annual aggregate for 194C. Finance teams that only check per-invoice amounts frequently miss the moment the annual aggregate crosses Rs. 1,00,000 for a vendor with no single invoice above Rs. 30,000. Build a running-total field in your vendor master.

Confusing 194Q (buyer) with 206C(1H) (seller). If your seller is collecting TCS under 206C(1H), you must not also deduct 194Q. Document the seller's TCS collection in writing (request their TCS challan reference) so your books are clean.

Missing Section 194M for high-value individual / HUF payments. An individual proprietor who pays more than Rs. 50 lakh to a contractor or professional in a year — and is not subject to a tax audit — must deduct TDS under Section 194M at 5%. Many individual business owners are unaware this obligation exists.

Treating refundable security deposits as rent. A refundable deposit returned without deduction is not income and does not attract Section 194-I. However, a non-refundable advance premium may be treated as rent income to the landlord, triggering TDS.

Depositing March TDS on 7 April instead of 30 April. This is the most expensive one-line mistake in TDS compliance. The deadline for March is specifically extended to 30 April under Rule 30. Depositing on 7 April means the deposit is on time — but most automated systems will apply 7th-of-month logic unless manually overridden.

Key Takeaways

• The FY 2023-24 chart was structural, not incremental — new regime default for salary TDS (Section 192), Section 194R on business perquisites, and Section 194S on virtual digital assets all became live obligations that year, and remain fully operative in FY 2026-27.
• Refresh your rate chart every April: thresholds under Sections 194A, 194H, 194-I, and 194-O have changed across Finance Acts 2024 and 2025 — always apply the version current to the financial year of the payment.
• Section 194J's 10%/2% split is the most common misclassification in non-salary TDS — classify every engagement as professional vs. technical before booking the invoice.
• Section 206AA at 20% is unavoidable if vendor PANs are inoperative — run bulk PAN verification at the start of each financial year and each quarter-end using the income-tax portal utility.
• Section 234E late filing fees of Rs. 200/day are non-waivable — file Form 24Q and 26Q by 31 July, 31 October, 31 January, and 31 May without exception.
• The March TDS deposit deadline is 30 April, not 7 April — set this as a standalone reminder in your compliance calendar; it cannot be automated away.
• Quarterly TRACES reconciliation — comparing the conso file against your TDS ledger — is the only reliable mechanism to catch PAN, challan, and section code errors before they become deductee AIS disputes in AY 2027-28.