TDS Multi-Year FAQs
Why did 194I threshold change to monthly in FY 2025-26?
Budget 2025 replaced the ₹2,40,000/year threshold with ₹50,000/month (or ₹6 lakh/year equivalent). Effective 1 April 2025. Rationale: simplify compliance — tenants only need to track monthly rent, not annual. Important: under new rule, TDS applies on ENTIRE rental amount if it exceeds ₹50K in any month, not just the excess.
How does 206AB non-filer penalty work?
If your vendor: (1) didn't file ITR for last 1 year (was 2 years before Budget 2025), AND (2) had ≥ ₹50K TDS+TCS in their PAN previously → you must deduct higher of (2× specified rate / 5%). Example: Normal 194C is 1%, so 206AB rate = max(2%, 5%) = 5%. Verify status via "Compliance Check" tool on Income Tax portal before deducting.
Is GST included in TDS computation?
No. Per CBDT Circular No. 23/2017, TDS is computed on amount EXCLUSIVE of GST (provided GST is shown separately in invoice). Example: Bill ₹1,00,000 + ₹18,000 GST = ₹1,18,000. TDS @ 10% on ₹1,00,000 = ₹10,000 (not on ₹1,18,000). Net payment to vendor: ₹1,18,000 − ₹10,000 = ₹1,08,000. The calculator follows this rule.
What happens under IT Act 2025?
All non-salary TDS provisions consolidate under Section 393 with a master table. So instead of memorizing 194A, 194C, 194I separately, you'll refer to Section 393 entries. Substantive rates and thresholds remain SAME. For salary TDS, old Section 192 becomes Section 392. Effective FY 2026-27. Challans need NEW section codes from 1 April 2026.
When does TDS apply for NRI payments?
Section 195 applies to ANY payment to NRI (interest, royalty, FTS, capital gains, etc.) — no threshold. Standard rates: 20% (interest), 30% (other). If vendor provides DTAA documents (TRC + Form 10F), apply lower DTAA rate (e.g., 15% USA, 10% Singapore). Plus NRI surcharge (10%/15%/25%) if amount > ₹50L/₹1Cr/₹2Cr + 4% cess.
What if I deducted TDS late?
Interest u/s 201(1A): 1% per month from due date to actual deposit. Plus possible disallowance of expense u/s 40(a)(ia) if not deposited before ITR filing — meaning you can't claim the expense for tax purposes that year. Best practice: deposit TDS by 7th of next month (Apr deposits by 30 Apr). File quarterly returns (Form 24Q/26Q/27Q) on time.
Can I get TDS refund if excess deducted?
YES, in two ways: (1) Lower deduction certificate: Apply u/s 197 BEFORE TDS for reduced rate (helpful for NRIs/loss-making businesses). (2) Refund via ITR: Excess TDS reflects in Form 26AS, claim refund in ITR. Govt processes within 2 months, else 0.5%/mo interest u/s 244A.
