TDS compliance is one of the most common areas where small businesses make mistakes.
A shopkeeper may pay rent. A startup may pay professional fees. An e-commerce seller may receive platform payments. A company may pay contractor bills, commission, interest or director fees.
In all these cases, the question is simple: Should TDS be deducted? If yes, at what rate and from which amount?
Section 393 of the new Income Tax Act deals with tax to be deducted at source. This guide explains TDS under new Income Tax Act 2025 in simple business language for tax year 2026-27.
This article is especially useful for business owners, accountants, founders, freelancers, professionals and MSME owners who want practical clarity on TDS Section 393, new TDS rules 2026, and basic TDS rate chart 2026-27.
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Table of Contents
Why This Topic Matters
TDS is not just a tax entry in accounts. It affects vendor payments, rent payments, professional fees, property transactions, e-commerce receipts, interest, commission and many other business payments.
Incorrect rate or wrong category may create short deduction or excess deduction.
Vendors may object if deduction is not properly explained or supported.
Incorrect working creates correction work at quarter-end.
Mismatch with books may create questions during audit or assessment.
If TDS is not handled properly, businesses may face wrong deduction, short deduction, excess deduction, mismatch with books, vendor disputes, correction work later, difficulty in TDS return filing, and issues during audit or assessment.
Section 393 gives the broad framework for when tax has to be deducted, who has to deduct it, the rate, the threshold and certain no-deduction cases.
For small businesses in Delhi NCR, this matters because regular payments like rent, contractor bills, professional fees, commission and e-commerce receipts are very common.
Who Needs This Service or Information
This guide is useful for small business owners, shopkeepers, startup founders, e-commerce sellers, freelancers, professionals, companies, LLPs, partnership firms, property buyers, accountants and local businesses.
| Who | Common TDS Concern |
|---|---|
| Small business owners | Vendor payments, contractor bills, rent, commission and professional fees. |
| Startups and companies | Consultant payments, developer fees, director fees, technical services and TDS return filing. |
| E-commerce sellers | Platform TDS, reconciliation of sales, receipts and books. |
| Property buyers | TDS on immovable property where value is ₹50 lakh or more. |
| Local businesses | TDS compliance in Dwarka, Janak Puri, Vikas Puri, Tagore Garden, Uttam Nagar, Delhi, Panipat and Delhi NCR. |
Running accounting in Tally, Busy or Excel?
TDS should be reviewed before payment and before quarterly return filing. Do not wait for mismatch or notice.
Key Points You Should Know About TDS under New Income Tax Act 2025
Many Payment Types
Section 393 covers payments to residents, non-residents and certain payments to any person.
Credit or Payment
For many resident payments, TDS applies at credit or payment, whichever is earlier.
Threshold Check
Some limits are monthly, some are single-payment, and some are aggregate limits.
No-Deduction Cases
Certain payments may not require TDS if prescribed conditions are satisfied.
1. Section 393 covers many different types of payments
Section 393 is not limited to one type of payment. It covers commission, rent, property purchase consideration, interest, contractor payments, professional fees, dividend, life insurance payouts, purchase of goods, business benefits, e-commerce payments, virtual digital asset transfers, winnings, cash withdrawal and partner payments.
2. TDS is generally deducted at credit or payment, whichever is earlier
For many resident payments, Section 393 provides that tax is to be deducted at the time of credit to the payee’s account or at the time of payment by cash, cheque, draft or any other mode, whichever is earlier.
This is important for accounting teams. Even if payment is not yet made, TDS may apply when the expense is credited in books.
3. Thresholds must be checked carefully
Some payments have no threshold. Some have monthly thresholds. Some have single-payment and aggregate thresholds.
- Rent has a threshold of ₹50,000 for a month or part of a month in the cases covered.
- Contractor payments may have both single-payment and aggregate limits.
- Property transfer TDS applies where consideration or stamp duty value is equal to or more than ₹50 lakh.
- Purchase of goods TDS applies on the amount exceeding ₹50 lakh, subject to the conditions in Section 393.
4. “Specified person” and “designated person” need proper checking
Section 393 uses terms like specified person and designated person in several places.
A common mistake is to apply a rate without checking whether the payer falls in the correct category. Before finalising TDS, the nature of payer, payee and transaction should be checked.
5. TDS on suspense account credit also matters
Section 393 provides that credit to any account, whether called “suspense account” or by any other name, shall be treated as credit to the payee’s account. This means merely parking an amount in suspense may not avoid TDS responsibility.
6. No-deduction cases are also part of compliance
Section 393 also lists cases where TDS is not required, subject to conditions. These include certain payments to Government, RBI, specified mutual funds, certain interest, dividend, e-commerce participant cases, virtual digital asset threshold cases, and declaration-based no-deduction cases.
TDS Rate Chart 2026-27: Important Section 393 Rates in Simple Form
A. Payments to Residents
| Nature of Payment | Who Deducts TDS | Rate | Threshold / Important Point |
|---|---|---|---|
| Insurance commission | Any person | Rates in force | ₹20,000 |
| Commission or brokerage, other than insurance commission | Specified person | 2% | ₹20,000 |
| Rent paid by person other than specified person | Person other than specified person | 2% | ₹50,000 for a month or part of a month |
| Rent paid by specified person for machinery, plant or equipment | Specified person | 2% | ₹50,000 for a month or part of a month |
| Rent paid by specified person for land, building, furniture or fittings | Specified person | 10% | ₹50,000 for a month or part of a month |
| Transfer of immovable property, other than agricultural land | Buyer / person responsible | 1% | Higher of consideration or stamp duty value; applies where value is ₹50 lakh or more |
| Certain consideration under agreement referred to in Section 67(14) | Any person | 10% | Nil threshold |
| Compensation or enhanced compensation on compulsory acquisition of immovable property, other than agricultural land | Any person | 10% | ₹5,00,000 |
| Income from specified mutual fund units, specified undertaking or specified company | Any person | 10% | ₹10,000 |
| Distributed income by business trust | Business trust | 10% | Nil threshold |
| Income from investment fund units | Investment fund | 10% | Nil threshold |
| Income from securitisation trust | Securitisation trust | 10% | Nil threshold |
| Interest on securities | Any person | Rates in force | ₹10,000 |
| Interest other than securities by bank, co-operative bank or post office | Bank / co-operative bank / post office | Rates in force | ₹1,00,000 for senior citizen; ₹50,000 for others |
| Other interest by specified person | Specified person | Rates in force | ₹10,000 |
| Contractor payment by designated person | Designated person | 1% if contractor is individual/HUF; 2% for others | ₹30,000 single payment; ₹1,00,000 aggregate |
| Certain payments by individual/HUF for work, professional services, commission or brokerage | Individual/HUF covered by provision | 2% | ₹50 lakh |
| Professional fees, technical fees, royalty, director fee/commission etc. | Specified person | 2% in specified technical/film royalty/call centre cases; 10% in other cases | ₹50,000 for most items; Nil for director fee/commission |
| Dividend | Domestic company | 10% | Nil threshold, subject to no-deduction cases |
| Life insurance policy payout, where covered | Any person | 2% on income component | ₹1,00,000 |
| Purchase of goods exceeding ₹50 lakh | Buyer | 0.1% | On amount exceeding ₹50 lakh, subject to conditions |
| Specified senior citizen income handled by specified bank | Specified bank | Rates in force | As applicable |
| Business benefit or perquisite to resident | Specified person | 10% | ₹20,000 |
| E-commerce operator payment to e-commerce participant | E-commerce operator | 0.1% of gross sale/service amount | Nil threshold, subject to specific no-deduction cases |
| Transfer of virtual digital asset | Any person | 1% | Nil threshold, subject to specific no-deduction cases |
Section 393 also provides special notes for property transactions, purchase of goods, e-commerce payments, benefits in kind, virtual digital assets and contractor invoices where material value is separately shown.
B. Payments to Non-Residents
For payments to non-residents, Section 393 gives a separate table. Some examples include:
| Nature of Payment | Payee | Rate |
|---|---|---|
| Income referred to in Section 211 | Non-resident sportsman, entertainer, sports association or institution | 20% |
| Certain foreign currency borrowing interest | Non-resident / foreign company | 5% |
| Certain rupee-denominated bond interest | Non-resident / foreign company | 5% |
| Certain IFSC listed long-term bond or rupee bond interest | Non-resident / foreign company | 4% or 9%, depending on issue period |
| Interest from infrastructure debt fund | Non-resident / foreign company | 5% |
| Certain distributed income from business trust | Non-resident unitholder / foreign company | 5% or 10%, depending on nature |
| Offshore fund income from units referred to in Section 208 | Offshore fund | 10% |
| Long-term capital gains from transfer of units referred to in Section 208 | Offshore fund | 12.5% |
| Interest or dividend from bonds or Global Depository Receipts referred to in Section 209 | Non-resident | 10% |
| Long-term capital gains from transfer of bonds or GDR referred to in Section 209 | Non-resident | 12.5% |
| Specified fund income from securities | Specified fund | 10% |
| Other interest or other sum chargeable under the Act, not being salary | Non-resident / foreign company | Rates in force |
For some non-resident cases, Section 393 refers to treaty-based lower rates where the relevant agreement and certificate conditions are satisfied. This should be checked carefully before deduction.
C. Payments to Any Person
| Nature of Payment | Who Deducts | Rate | Threshold / Important Point |
|---|---|---|---|
| Lottery, crossword, card game, gambling or betting winnings | Any person | Rates in force | ₹10,000 in a single transaction |
| Online game winnings | Any person | Rates in force | Based on net winnings as per prescribed manner |
| Horse race winnings | Bookmaker / licensed person | Rates in force | ₹10,000 in a single transaction |
| Lottery ticket commission, remuneration or prize | Any person | 2% | ₹20,000 |
| Cash withdrawal from bank/co-operative bank/post office | Bank / co-operative bank / post office | 2% | ₹3 crore for co-operative society; ₹1 crore for others |
| Payment under Section 80CCA(2)(a) of Income-tax Act, 1961 | Any person | 10% | ₹2,500 |
| Salary, remuneration, commission, bonus or interest paid or credited to partner | Firm | 10% | ₹20,000 |
For online games and winnings in kind, Section 393 contains special rules on deduction before releasing the winnings where cash is not sufficient to meet TDS liability.
Non-resident payment or property TDS?
Do not apply resident rates casually. NRI, foreign company, treaty rate, property purchase and certificate cases need careful review.
Documents Required
For practical TDS compliance under Section 393, keep these records ready:
Payment Records
- Expense ledger or payment register
- Vendor invoices and bills
- Contract, work order or service agreement
- Nature of payment clearly marked in books
- Monthly and aggregate payment thresholds
Payee Details
- PAN or Aadhaar details where required
- Residential status of payee
- Contractor declaration and PAN in eligible goods carriage cases
- Declaration for no deduction, where applicable
Special Transactions
- Rent agreement, if rent is paid
- Property agreement, sale deed or payment schedule
- E-commerce sales/service data
- Benefit or perquisite details
- Virtual digital asset transaction details
Working Papers
- Evidence of material value separately shown in contractor invoice
- TDS working sheet prepared before payment or book entry
- Prior TDS records and correction history
- Latest notified form, utility and procedure check
Step-by-Step Process
First check whether you are paying rent, contractor payment, professional fees, commission, property consideration, interest, dividend, e-commerce payment, goods purchase or something else.
Section 393 has different tables for residents and non-residents. For NRI or foreign company payments, do not apply a resident rate casually.
The rate may change depending on whether the payer is any person, specified person, designated person, domestic company, business trust, investment fund, e-commerce operator, bank, post office or firm.
Do not check only one invoice. Check single-payment limits and aggregate limits.
In many cases, TDS applies at credit or payment, whichever is earlier.
For property transfer, Section 393 refers to consideration or stamp duty value, whichever is higher. For purchase of goods, TDS applies on the sum exceeding ₹50 lakh.
Before deducting, check whether the case falls under a no-deduction condition.
Declarations for no deduction must be delivered to the prescribed income-tax authority on or before the seventh day of the month immediately following the end of each quarter in which the declaration is furnished.
The provided Section 393 document refers to declarations in the prescribed form and manner. It does not by itself give a complete practical procedure for Form 141 TDS.
Take professional review where payment involves non-resident payee, property purchase, high-value goods purchase, e-commerce, VDA, director fee, partner remuneration, no-deduction declarations or treaty rates.
Quarter-end TDS filing pressure?
Get your TDS working reviewed payment-wise before return filing to avoid wrong challans, short deduction and correction statements.
Common Mistakes to Avoid
| Mistake | Practical Risk |
|---|---|
| Applying old TDS sections without checking Section 393 mapping | The current section, table, rate and threshold for the relevant tax year may be different. |
| Checking only payment date and ignoring book entry | Booking the bill in accounts can create TDS responsibility. |
| Ignoring aggregate threshold | Some thresholds also apply on aggregate amounts during the tax year. |
| Wrong TDS on rent | Rent for machinery/equipment and land/building/furniture/fittings may have different rates. |
| Ignoring stamp duty value in property purchase | Property TDS refers to consideration or stamp duty value, whichever is higher, where threshold applies. |
| Wrong rate on professional and technical services | Some cases may attract 2%, while other professional/technical/royalty/director-related payments may attract 10%. |
| Missing director fee or commission TDS | For relevant director fee/commission entry, the threshold is nil. |
| Not taking declarations properly | Invalid or improperly maintained declarations may create issues later. |
| Ignoring e-commerce TDS rules | Direct payment by customer to e-commerce participant may still need review under Section 393. |
| Not checking latest prescribed forms | Form 141 TDS, declarations, certificates and filing utilities should be checked against the latest notified procedure. |
How a CA Can Help
A Chartered Accountant can help by reviewing the transaction before payment is made or the entry is booked.
- Identifying the correct TDS category.
- Checking whether Section 393 applies.
- Preparing a payment-wise TDS working.
- Checking rates and thresholds.
- Reviewing rent, contractor, professional fee and commission payments.
- Checking property transaction TDS.
- Reviewing e-commerce and digital transaction cases.
- Advising on no-deduction declarations.
- Supporting TDS return filing and correction work.
- Helping with TDS notices or mismatch issues.
- Reconciling TDS with books before filing.
The main benefit of CA support is not only filing. It is proper review before the mistake happens.
Received TDS notice or mismatch?
Do not reply in a hurry. First reconcile books, TDS return, challan, Form 26AS/AIS and vendor records.
Local Relevance
Businesses in Dwarka, Janak Puri, Vikas Puri, Tagore Garden, Uttam Nagar, Delhi, Panipat and Delhi NCR often deal with regular payments such as rent, contractor bills, commission, professional fees and vendor payments.
Many local businesses maintain accounts in Tally, Busy, Excel or basic billing software. In such cases, TDS mistakes happen because the payment is made first and tax review is done later.
If you are searching for a TDS consultant in Delhi NCR or CA for TDS filing, it is better to get a periodic TDS review instead of waiting for quarter-end pressure.
Frequently Asked Questions
What is TDS under new Income Tax Act 2025?
TDS means tax deducted at source. Section 393 lists various payments where the payer has to deduct tax before or at the time of payment or credit, depending on the nature of transaction.
What is TDS Section 393?
TDS Section 393 deals with tax to be deducted at source. It provides separate tables for payments to residents, non-residents and certain payments to any person.
What is the TDS rate on contractor payment under Section 393?
For contractor payments by a designated person, the rate is 1% if the contractor is an individual or HUF and 2% for others, subject to the specified thresholds.
What is the TDS rate on rent under Section 393?
For rent covered under Section 393, the rate may be 2% or 10% depending on payer category and whether rent is for machinery/equipment or land/building/furniture/fittings.
Is TDS required on purchase of property?
For transfer of immovable property other than agricultural land, Section 393 provides 1% TDS on consideration or stamp duty value, whichever is higher, where the value is ₹50 lakh or more.
Is TDS required on purchase of goods above ₹50 lakh?
Section 393 provides 0.1% TDS on the sum exceeding ₹50 lakh for purchase of goods, subject to the conditions and exceptions mentioned in the section.
Does e-commerce operator have to deduct TDS?
Yes, Section 393 covers payments by e-commerce operator to e-commerce participant at 0.1% of gross amount of sale or services, subject to specific no-deduction cases.
Can TDS be avoided by giving a declaration?
In certain cases, eligible persons may furnish a declaration in the prescribed form and manner that tax on estimated total income is nil. Conditions must be checked carefully.
Is Form 141 TDS mentioned in Section 393?
The provided Section 393 document refers to prescribed forms and manner for declarations. It does not give a full practical Form 141 TDS filing process in the extract. The latest notified form and utility should be verified before use.
When should I contact a CA for TDS?
Contact a CA before payment or book entry if the amount is high, the payee is non-resident, the payment is for property, rent, contractor work, professional fees, e-commerce, benefit/perquisite, VDA, or where you are unsure about the correct rate.
Conclusion
TDS under new Income Tax Act 2025 should be handled with proper review of payment nature, payer category, payee status, rate, threshold and timing of deduction.
Section 393 is detailed. A small mistake in classification can change the TDS rate or create short deduction.
For tax year 2026-27, businesses should maintain proper payment records, review TDS before booking or making payment, and check the latest prescribed forms and procedures before filing.
CA Rakesh Rathore & Associates assists businesses, professionals, shopkeepers, startups, e-commerce sellers and MSMEs with TDS review, GST compliance, income tax return filing, accounting, bookkeeping, company registration, LLP registration and compliance advisory.
Need help with TDS compliance?
For TDS support in Dwarka, Janak Puri, Vikas Puri, Tagore Garden, Uttam Nagar, Delhi, Panipat or Delhi NCR, contact our office for a practical review of your payments and compliance status.
About the Author
CA Rakesh Rathore
CA Rakesh Rathore is a Chartered Accountant qualified in 2014, with practical experience in GST, Income Tax, GST notices, Income Tax notices, GST registration, company formation, and LLP formation. He advises manufacturers, traders, educational institutions, IT businesses, and construction industry clients on taxation, registration, compliance, and business advisory matters.
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