What is TDS?  And on what kind of payments it is deducted?

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TDS is the percentage deducted once paid.  As per the Income Tax Act, any company or person making the payment is required to deduct tax at source if the payment exceeds a certain limit.

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1. TDS on Purchase of Goods TDS is charged at the rate of 0.1 per cent of the transaction value for goods valued above Rs 50 lakh.  If the deductor fails to furnish his PAN to the deductor, the rate may go up to 5%.

2. TDS on Professional Fees When certain payments are made to a person in medical, architectural, legal, medical, or engineering profession, a TDS of 10% is levied as per norms and regulations of section 194J of the Income Tax Act, 1961..

3. TDS on Contractor If payment is made to an individual or HUF, then the TDS rate of the contractor is 1%.  If the payment is for someone else it is 2%.

4. TDS on cash withdrawal TDS on cash withdrawal of more than Rs 1 crore is 2% if the person withdrawing has filed ITR for all the three previous years.

5. TDS on Interest Any person making eligible interest payment as per section 194A will be required to deduct 10% TDS.  If the person does not provide PAN then TDS will be deducted at the rate of 20%.

6. TDS on Dividend Income If a resident individual shareholder receives dividend of more than ₹ 5,000 in a financial year, TDS is levied which is 10%.

7. Taking TDS on FD interest, the bank calculates your annual interest income taking into account your FD with a particular bank.  If your interest income reaches ₹ 40,000, then 10% TDS will be deducted on you.  ane

8. On TDS on brokerage paid to residents, there is no additional fee or education cess.  TDS will be deducted at the rate of 20% if the recipient has not submitted his PAN.

9. TDS on PF Withdrawal If you deposit EPF balance before five years, TDS is deducted at the rate of 10%.  If you do not submit PAN, TDS will be deducted at the maximum slab rate of 30%.

10. TDS on Savings Bank Interest Interest earned on savings account is taxed under the head 'Income from other sources'.  Further, section 80TTA allows deduction of up to ₹10,000 on such interest income.

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