Tax to be Deducted at Source – Section 393 of Income Tax Act, 2025

Section 393 – Tax to be Deducted at Source (Complete Provision)

Section 393 provides provisions for deduction of tax at source on various payments including payments to residents, non-residents and other specified persons.

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Section 393(1) – Payments to Resident

Tax shall be deducted:

• On entire amount if threshold exceeded
• At prescribed rate
• At time of credit or payment (earlier)
• Subject to sub-sections (4), (5), (6), (8), (9)

TABLE – PAYMENTS TO RESIDENT

1. Commission or Brokerage

• Insurance Commission – Rate: Rates in force | Threshold: ₹20,000
• Other Commission/Brokerage – Rate: 2% | Threshold: ₹20,000

2. Rent

• Non-specified person – Rate: 2% | Threshold: ₹50,000 per month
• Specified person:
  • Machinery/Plant – 2%
  • Land/Building/Furniture – 10%
  • Threshold: ₹50,000 per month

Note: Deduction at last month or tenancy month (credit/payment whichever earlier)

3. Immovable Property

• Sale consideration – 1% of higher of consideration/stamp value | Threshold: ₹50 lakh
• Agreement u/s 67(14) – 10% | No threshold
• Compulsory acquisition – 10% | Threshold: ₹5,00,000

Notes:

• Aggregate value considered for threshold
• If 3(i) & 3(ii) apply → deduct under 3(ii)
• TDS applies where value ≥ ₹50 lakh

4. Capital Market Income

• Mutual Fund/Units – 10% | ₹10,000
• Business Trust – 10% | No limit
• Investment Fund – 10% | No limit
• Securitisation Trust – 10% | No limit

5. Interest Income

• Securities – Rates in force | ₹10,000
• Bank/Post Office:
  • Senior citizen: ₹1,00,000
  • Others: ₹50,000
• Other cases – ₹10,000

Notes:

• Branch-wise threshold if no core banking
• Adjustment for excess/short deduction allowed

6. Contractors & Professional Fees

• Contract – 1% (Individual/HUF), 2% others | ₹30,000 / ₹1,00,000 aggregate
• Individual/HUF payments – 2% | ₹50 lakh
• Professional/Technical/Director/Royalty:
  • 2% (technical/film/call centre)
  • 10% others
  • Threshold: ₹50,000 (except director: Nil)

Note: Material value exclusion if separately mentioned

7. Dividend

• Rate: 10%
• Threshold: Nil
• Deduction before payment

8. Other Cases

• Life Insurance – 2% | ₹1,00,000
• Purchase of Goods – 0.1% | Above ₹50 lakh
• Senior Citizen Income – Rates in force
• Benefit/Perquisite – 10% | ₹20,000
• E-commerce – 0.1% | Nil
• Virtual Digital Asset – 1% | Nil

Important Notes:

• No double deduction for goods purchase
• E-commerce provisions override others
• VDA provisions override e-commerce where both apply
• TDS must be ensured before release in kind transactions

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Section 393(2) – Non-Residents

• Sportsman/Entertainer – 20%
• Foreign loan interest – 5%
• Rupee bond interest – 5%
• IFSC bonds – 4% / 9%
• Infrastructure debt – 5%
• Business trust income – 5% / 10%
• Funds/securities – Rates in force
• GDR/Bonds – 10% / 12.5%
• FII – As per treaty or 20%
• Other income – Rates in force

Notes:

• Rate limited to approved interest
• DTAA benefit available
• TDS applies irrespective of presence in India

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Section 393(3) – Payments to Any Person

• Lottery/Games – Rates in force | ₹10,000
• Online games – As prescribed
• Horse race – ₹10,000
• Lottery commission – 2% | ₹20,000
• Cash withdrawal – 2% | ₹1 Cr / ₹3 Cr
• Section 80CCA – 10% | ₹2,500
• Partner payment – 10% | ₹20,000

Notes:

• TDS on net winnings
• Applicable even for in-kind winnings
• Ensure tax before releasing winnings

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Section 393(4) – No Deduction Cases

• BSNL/MTNL commission
• REIT rent
• Land acquisition exempt awards
• Capital gains on units
• Specified trust income
• Government securities interest
• Interest to banks/LIC/UTI/insurers
• Co-operative societies (conditions apply)
• Contractors with ≤10 vehicles
• Personal payments by individuals
• Dividend to specified entities
• E-commerce small sellers (₹5 lakh)
• VDA small transactions (₹10k/₹50k)
• Cash payments to govt/banks
• NSS payments to heirs

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Section 393(5) – Absolute No TDS

• Government
• Reserve Bank of India
• Exempt Central Act Corporation
• Specified Mutual Fund (interest/dividend/other income)

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Section 393(6) to (11)

• Declaration (Form) – No TDS if income NIL
• Submission – Within 7 days
• Offshore banking – No TDS
• NPS Trust – No TDS
• Grossing up – Tax borne by payer
• Deemed credit – Includes suspense account

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Final Summary

• Comprehensive TDS framework
• Covers residents, non-residents, and all persons
• Detailed rates, thresholds, and notes
• Specific exemptions and overrides
• Strict compliance structure

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Source: Income Tax Act, 2025 – Section 393

Disclaimer: This article may contains error, please refer relevant Section and Act. This is not a professional/legal advice.