TDS Rate Chart for FY 2024-25 (AY 2025-26)

Tax Deducted at Source (TDS) is one of the most important compliance obligations for Indian businesses. Under the Income Tax Act, any person or business making specified payments must deduct tax at source and deposit it with the government by the 7th of the following month (or the 30th of April for March deductions). Failing to deduct or deposit TDS can lead to a 30% disallowance of business expenses under Section 40(a)(ia), plus interest penalties at 1.5% per month and late filing fees under Section 234E.

To maintain compliance, finance teams must keep an accurate, up-to-date record of TDS sections, rates, and exemption thresholds. Below is the comprehensive TDS Rate Chart for FY 2024-25 (Assessment Year 2025-26).

TDS Rate Chart: Key Sections and Thresholds (FY 2024-25)

The table below lists the most commonly applicable TDS sections for businesses in India:

Section 194C: Payments to Contractors — Explained

Section 194C is one of the most commonly encountered TDS sections for businesses. It applies to any payment made to a resident contractor for carrying out any work (including supply of labour). Key points:

• Rate: 1% for payments to individuals or HUFs; 2% for payments to companies, firms, or other entities.
• Threshold: No TDS is required if a single payment does not exceed ₹30,000, or if the total payments to a single contractor in a financial year do not exceed ₹1,00,000.
• Scope: Covers advertising contracts, broadcasting, catering, transport (except covered under 194LBC), manufacturing/supply under a works contract, and event management.
• Exception: If the sub-contractor is merely supplying goods (no service element), TDS under 194Q may apply instead.

Section 194J: Professional and Technical Fees — Key Distinctions

Following an amendment effective April 1, 2020, Section 194J was split into two rates:

• 10% for fees for professional services (doctors, lawyers, architects, chartered accountants, management consultants, engineers).
• 2% for fees for technical services (call centre operations, IT services, software maintenance — where no specific expertise is rendered).
• 2% for payments to film artists and royalties on cinematographic films.

The threshold remains ₹30,000 per annum per payee. Payments to your CA firm, legal counsel, or software consultant will attract 194J TDS.

Section 194Q: TDS on Purchase of Goods

Introduced from July 1, 2021, Section 194Q requires buyers whose Aggregate Annual Turnover (AATO) exceeds ₹10 Crores in the preceding financial year to deduct TDS at 0.1% on purchases exceeding ₹50 Lakhs from a single seller. Note:

• 194Q does not apply if the seller is already collecting TCS under Section 206C(1H).
• If the seller's PAN is not provided, TDS is deducted at 5% (not the standard 20% under 206AA, as clarified by CBDT).
• This section is a major compliance area for wholesale traders, distributors, and manufacturers purchasing raw materials.

Section 206AA: Higher TDS When PAN Is Not Furnished

If the deductee (vendor, contractor, or professional) does not furnish their PAN, Section 206AA mandates deduction at the higher of: the rate specified in the relevant section, the rate in force, or 20%. This is a critical compliance check — always collect and verify vendor PAN before processing payments. In Tally Prime, the system will flag missing PAN details when processing TDS vouchers.

TDS vs. TCS: Key Difference

While TDS is deducted by the buyer/payer at the time of payment, TCS (Tax Collected at Source) is collected by the seller/payee from the buyer at the time of sale. Section 206C(1H) requires sellers with turnover exceeding ₹10 Crores to collect TCS at 0.1% on sales exceeding ₹50 Lakhs to a single buyer — unless the buyer is already deducting TDS under 194Q.

How to Configure TDS Vouchers in Tally Prime

Setting up TDS correctly in Tally Prime involves three steps:

Step 1: Enable TDS in Company Features

Go to Gateway of Tally > F11: Features > Statutory & Taxation. Enable Tax Deducted at Source (TDS) and enter your TAN number.

Step 2: Create TDS Nature of Payment

Go to Gateway of Tally > Create > TDS Nature of Payments. For each section (e.g., 194C), enter the Section code, Nature of Payment name, applicable rate (1% or 2%), and threshold limit (₹1,00,000). Tally will auto-calculate TDS when you cross the threshold.

Step 3: Configure Vendor Ledger

In the vendor's ledger master, under Tax Registration Details, enter the vendor's PAN and link the appropriate TDS Nature of Payment. When you create a purchase voucher above the threshold, Tally automatically suggests the TDS deduction entry.

Example: Payment to ABC Construction (Sec 194C, Company) Debit:  ABC Construction A/c        ₹1,00,000 Credit: Bank A/c                      ₹98,000 Credit: TDS Payable – 194C A/c         ₹2,000 (TDS @ 2% on ₹1,00,000)

Automate Purchase Invoice Processing with TrulyInvoice

TDS compliance requires that every purchase invoice above the threshold is recorded accurately and on time. Delays in entering invoices can cause you to miss TDS deductions — resulting in disallowances under Section 40(a)(ia) and interest penalties.

TrulyInvoice (plans starting at ₹399/month) automates purchase invoice data entry into Tally Prime. It reads vendor invoice PDFs, extracts key fields — vendor name, PAN, invoice amount, and GST details — and creates purchase vouchers instantly. Since TrulyInvoice maps vendor names to existing Tally ledgers (including TDS nature of payment configurations), TDS is computed automatically as soon as the invoice is entered.

For businesses subject to Section 194Q, TrulyInvoice tracks cumulative purchase amounts per vendor and alerts you when you approach the ₹50 Lakh threshold, ensuring you activate TDS deduction at the right time. At month-end, your TDS payable ledger in Tally Prime is accurate, making Form 26Q filing straightforward.