TDS Rates and Thresholds for Tax Year 2026-27: Section 393
- The common TDS items for residents
- Payments where no TDS applies
- Worked examples
- If the payee has no PAN
- Reducing or avoiding TDS
- Year labels
- Where this fits
For tax year 2026-27, TDS on payments to residents is governed by one table in section 393(1) of the Income-tax Act, 2025, which replaces the old sections 193 to 194T. The payments most individuals meet are these:
- Bank FD interest: 10% once interest from a bank exceeds ₹50,000 in the year (₹1,00,000 for senior citizens).
- Rent paid by an individual: 2% where rent exceeds ₹50,000 a month.
- Property purchase: 1% where the price or stamp duty value is ₹50 lakh or more.
- Dividends: 10%, with no TDS on up to ₹10,000 a year paid to an individual other than in cash.
- Professional fees paid by a business: 10% above ₹50,000.
Where the table says “rates in force”, the rate comes from Part II of the First Schedule to the Finance Act, 2026. Once a threshold is crossed, TDS generally applies to the entire amount, not only the excess (section 393(1)(a)).
The common TDS items for residents
| Payment | Section 393(1) Table Sl. No. (earlier section) | Who deducts | Rate | Threshold |
|---|---|---|---|---|
| Interest on bank, co-operative bank or post office deposits | 5(ii) (194A) | The bank or post office | 10% (rate in force) | ₹50,000; ₹1,00,000 for a senior citizen |
| Other interest, such as company deposits | 5(iii) (194A) | Specified person | 10% (rate in force) | ₹10,000 |
| Interest on securities | 5(i) (193) | Any person | 10% (rate in force) | ₹10,000 |
| Dividend | 7 (194) | Domestic company | 10% | Nil; see section 393(4) Sl. No. 10 |
| Income from mutual fund units (IDCW) | 4(i) (194K) | Any person | 10% | ₹10,000; not on capital gains |
| Rent, paid by a person who is not a specified person | 2(i) (194-IB) | Typically a salaried tenant | 2% | ₹50,000 a month |
| Rent, paid by a specified person | 2(ii) (194-I) | Businesses | 2% plant and machinery; 10% land, building, furniture | ₹50,000 a month |
| Purchase of immovable property (not agricultural land) | 3(i) (194-IA) | Buyer | 1% of the higher of price and stamp duty value | ₹50 lakh |
| Contractors | 6(i) (194C) | Designated person (companies, firms, trusts, governments, etc.) | 1% to an individual or HUF; 2% to others | ₹30,000 single; ₹1,00,000 in aggregate |
| Professional fees, technical fees, royalty, director’s fees | 6(iii) (194J) | Specified person | 10%; 2% for technical services, film royalty, call centres | ₹50,000; nil for director’s fees |
| Contract work, professional fees or commission paid by an individual or HUF not otherwise required to deduct | 6(ii) (194M) | Individual or HUF | 2% | ₹50 lakh |
| Insurance commission | 1(i) (194D) | Any person | 2% (rate in force) | ₹20,000 |
| Other commission or brokerage | 1(ii) (194H) | Specified person | 2% | ₹20,000 |
| Life insurance payout (taxable part) | 8(i) (194DA) | Insurer | 2% of the income part | ₹1,00,000 |
| Purchase of goods | 8(ii) (194Q) | Buyer with turnover above ₹10 crore | 0.1% of the amount above ₹50 lakh | ₹50 lakh |
| Business perquisites | 8(iv) (194R) | Specified person | 10% | ₹20,000 |
| E-commerce sales | 8(v) (194-O) | E-commerce operator | 0.1% | Nil |
| Virtual digital assets | 8(vi) (194S) | Buyer | 1% | As applicable |
A specified person (section 402(37)) is anyone other than an individual or HUF. It also includes an individual or HUF whose business turnover exceeded ₹1 crore, or professional receipts exceeded ₹50 lakh, in the previous tax year. A salaried person paying personal bills is therefore not a specified person, which is why the ₹50 lakh rule in Sl. No. 6(ii) exists.
Payments where no TDS applies
Section 393(4) lists exceptions. The ones that matter most to individuals:
- Savings account interest. Interest on deposits other than time deposits with a bank is excluded (Sl. No. 7(c)(iii)).
- Personal payments. Contract payments (Sl. No. 8(b)) and professional fees (Sl. No. 9) paid by an individual or HUF exclusively for personal purposes are excluded from Sl. Nos. 6(i) and 6(iii). They can still fall under the ₹50 lakh rule in Sl. No. 6(ii).
- Small dividends. Dividends paid other than in cash to an individual, up to ₹10,000 in the year (Sl. No. 10(f)).
- Accident claim interest. Interest on compensation awarded by a Motor Accidents Claims Tribunal to an individual is excluded. The Finance Act, 2026 removed the ₹50,000 limit for individuals from 1 April 2026; it now applies only to other persons.
- Co-operative banks. Interest paid to a co-operative bank, as well as to a banking company, is excluded from the same date.
Worked examples
1. Fixed deposit interest. Anjali, aged 45, earns ₹60,000 of FD interest from one bank in tax year 2026-27. It exceeds ₹50,000, so the bank deducts 10% of the whole ₹60,000, which is ₹6,000. Her father, aged 68, earns ₹90,000 from the same bank. That is below his ₹1,00,000 senior citizen threshold, so nothing is deducted. Anjali could stop the deduction with a Form No. 121 declaration only if she meets the conditions in section 393(6).
2. Rent paid by a salaried tenant. Karthik pays ₹55,000 a month in rent from April 2026 to March 2027. Rent exceeds ₹50,000 a month, so he deducts 2% of the year’s ₹6,60,000, which is ₹13,200. Under Note 1 to Sl. No. 2(i), the deduction is made from the rent for the last month of the tax year, or the last month of the tenancy if earlier. He does not need a TAN (section 397(1)(c)).
3. Building a house. Farah, a salaried individual, pays a contractor ₹60 lakh during the year to build her home. As an individual she is not a designated person, so Sl. No. 6(i) does not apply. But her payments exceed ₹50 lakh under Sl. No. 6(ii), so she deducts 2% of ₹60 lakh, which is ₹1,20,000.
4. Buying a flat. Rohit buys a flat for ₹72 lakh whose stamp duty value is ₹75 lakh. TDS is 1% of the higher figure, ₹75,000.
Illustrative figures.
If the payee has no PAN
Section 397(2)(b) requires deduction at the highest of three rates:
- the rate in the provision;
- the rate in force;
- 20%, or 5% for purchase of goods and e-commerce payments.
Giving your PAN to whoever deducts the tax avoids this.
Reducing or avoiding TDS
- Nil-tax declaration. Under section 393(6), a resident individual whose tax on total income will be nil can give Form No. 121 (earlier Form 15G or 15H) for interest, dividends, mutual fund income, insurance commission and certain other payments. See Form 121 declaration.
- Lower deduction certificate. Under section 395(1), you can apply for a certificate for lower or no deduction. The Finance Act, 2026 added section 395(6), which allows such applications to a prescribed authority that can issue certificates after electronic verification.
- Claim the credit. TDS is not a final tax. It is credited against your liability and any excess is refunded after you file your return. Check deductions against your Annual Information Statement; see fixing a TDS mismatch.
Year labels
This table applies to payments made or credited on or after 1 April 2026. Payments in FY 2025-26 were governed by sections 192 to 194T of the Income-tax Act, 1961.
Where this fits
- Estimate a deduction: TDS calculator
- An FD case worked through: TDS on ₹60,000 of FD interest
- A fee case: TDS on a ₹1 lakh professional fee
- TDS on a property sale: capital gains on selling property
Sources. Income-tax Act, 2025, sections 393(1), (4) and (6), 395, 397 and 402, Gazette of India, 21 August 2025. Finance Act, 2026, sections 84, 86 and 87 and First Schedule Part II, Gazette of India, 30 March 2026.