How to Calculate TDS: Calculation & Formula Explained

What Is TDS Calculated on?

 

Calculating TDS depends on various natures of payments. 

Therefore, individuals wondering how to calculate TDS on salary, bill amount or fixed deposits first need to know the different TDS rates. 

 

In the table given below, you will find the detailed list with the relevant sections and rates of TDS.

Nature of Payment

Relevant Section

TDS rate from 1 April 2021

Salaries

Section 192

At applicable rates of income tax

Receiving accumulated taxable part of PF

Section 192A

10.00%

Interest received on securities

Section 193

10.00%

Dividends received on the company's shares and on mutual funds

Section 194 and 194K

10.00%

Interest other than interest on securities (fixed deposit interest)

Section 194A

10.00%

Winnings from crosswords, lotteries or any game

Section 194B

30.00%

Winnings from horse races

Section 194BB

30.00%

Winnings from horse races

Section 194BB

30.00%

Payment of contractors and sub-contractors

Section 194C

1% (individual/HUF), 2% (others)

Insurance commission received by an individual

Section 194D

5.00%

Life insurance policies not exempt under Section 10(10D)

Section 194DA

5.00%

Payment in respect of deposits under National Savings Scheme

194EE

10.00%

Payments on account of repurchase of units by mutual funds or UTI

194F

20.00%

Commission, prize etc., on sale of lottery tickets

Section 194G

5.00%

Commission received except for Insurance Commission

Section 194H

5.00%

Payment done while purchasing property or land

Section 194IA

1.00%

Rent payment by HUF or individual exceeding ₹50,000 per month

Section 194IB

5.00%

Payment made to professional or commission or brokerage of more than ₹50 lakh and above

194M

5.00%

Cash withdrawal

194N

2.00%

Cash withdrawal

194N

2.00%

Payment of professional fees, etc.

194J

2% (royalties, FTS, call centre), 10% (others)

Rent for machinery and plant

194- I(a)

2.00%

Rent for property that is immovable

194-I(b)

10.00%

TDS on e-commerce participants (w.e.f. 1.10.2020)

Section 194-O

1.00%

TDS Calculation Formula With Example (as Per New Regime)

 

Typically, the employer deducts TDS from his employee’s salary at the ‘average rate’ of his income tax.

The general formula is:

Average Income Tax Rate = Income Tax Payable (computed through slab rates) / Estimated income for the financial year.

 

Let’s say you receive a monthly salary of ₹1,00,000 during the financial year 2019-20.

 

Total income

₹12,00,000

Estimated deduction (under Chapter VI A)

₹1,00,000

Income chargeable to tax

₹11,00,000

 

Under Section 192, TDS on your salary according to the current slab rate will be ₹1,42,500.

 

After adding 4% education and higher education cess (i.e. ₹5,700), your net payable tax becomes ₹1,48,200.

 

So, the average rate of TDS on your salary will equal to ₹1,48,200/12,00,000*100 = 12.35%.

 

Under Section 192, TDS on your salary deducted every month will be 12.35% of ₹1,00,000, i.e., ₹12,350.

 

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Frequently Asked Questions