TDS Rates Chart 2026: Every Section You Need to Know

TDS (Tax Deducted at Source) is one of the most error-prone areas of Indian SME compliance. Miss a deduction, apply the wrong rate, or deposit late — and you're liable for the tax plus interest plus penalties. This guide covers every section your business needs to know.

When Must You Deduct TDS?

If your business is audited under Section 44AB (turnover above ₹1 crore for goods, ₹50 lakh for services) or is a company, trust, partnership, or LLP — you must deduct TDS on specific payments above prescribed thresholds.

The thresholds vary by section. For example, under 194C (contractor payments), TDS applies if a single invoice exceeds ₹30,000 OR if the total payments to a vendor in the year exceed ₹1 lakh. Cross either threshold — TDS applies to every payment going forward, including earlier ones for that year.

Complete TDS Rate Chart (2026)

• •194C — Contractor (individual/HUF): 1% (2% for companies) — threshold ₹30K single or ₹1L aggregate
• •194J — Professional/technical fees: 10% (2% for technical services) — threshold ₹30K
• •194H — Commission or brokerage: 5% — threshold ₹15K
• •194I — Rent (land/building): 10% — threshold ₹2.4L/year
• •194I — Rent (plant/machinery): 2% — threshold ₹2.4L/year
• •194Q — Purchase of goods: 0.1% — threshold ₹50L
• •194O — E-commerce operator: 1% — no threshold for registered sellers
• •194N — Cash withdrawal: 2% above ₹1 crore (5% if ITR not filed)

How to Calculate TDS (With Example)

Example: You receive a contractor invoice for ₹1,00,000 + 18% GST = ₹1,18,000.

• •TDS is calculated on the base amount (₹1,00,000), NOT on the GST component
• •Apply 2% rate (194C, company contractor): ₹1,00,000 × 2% = ₹2,000
• •Pay the vendor: ₹1,18,000 - ₹2,000 = ₹1,16,000
• •Deposit ₹2,000 to the government by the 7th of next month
• •Issue Form 16A to the vendor by May 31 of next year

5 Mistakes That Cost SMEs Lakhs

1. Not Tracking Threshold Crossings Mid-Year

A vendor's first payment in April is ₹20,000 — below the ₹30K threshold. Second payment in June is ₹25,000. Now the aggregate is ₹45,000, crossing ₹1L is still possible but the single-invoice threshold isn't hit. Third payment in August is ₹40,000 — now you're at ₹85,000 aggregate and must deduct TDS on THIS payment AND retroactively on the first two.

2. Deducting TDS on GST Component

Still seen in 30% of SMEs. Deducting 2% on ₹1,18,000 instead of ₹1,00,000 means you deducted ₹2,360 — ₹360 more than required. Small error × 500 invoices a year = ₹1.8 lakh over-deducted.

3. Wrong Section Classification

Is your freelance designer a 'contractor' (194C, 1-2%) or a 'professional' (194J, 10%)? Classification matters. If you deduct 1% when it should be 10%, the department will demand the shortfall plus interest during audit.

4. Missing Deadline to Deposit

TDS deducted in April must be deposited by May 7. Miss it — and you owe 1.5% interest per month from the date of deduction to the date of deposit. Plus a late fee of ₹200 per day until the return is filed.

5. Not Filing Quarterly TDS Returns

Even if you've deposited on time, you must file Form 26Q quarterly. Late filing = ₹200/day penalty. Non-filing triggers notices from the CPC-TDS cell in Ghaziabad.

TDS Filing Calendar

• •Monthly: Deposit TDS by 7th of next month (30th April for March)
• •Quarterly: Form 26Q by 31 July (Q1), 31 Oct (Q2), 31 Jan (Q3), 31 May (Q4)
• •Annual: Form 16A to vendors by 15 June (for Q4)
• •Reconcile Form 26AS monthly to catch discrepancies early

How ReckOps Auto-Calculates TDS

ReckOps detects the vendor type and payment category, applies the correct section and rate automatically, tracks aggregate thresholds across the year, generates Form 26Q-ready data, and flags any deductions where section classification is ambiguous. Finance teams save 8-10 hours per month on TDS work.

Bookmark this guide. Refer to it every time you onboard a new vendor. And set calendar reminders for the 7th of every month — TDS deposit deadlines are unforgiving.