Question 1

What is the TDS rate for contractor payments under Section 194C?

Accepted Answer

TDS under Section 194C is 1% for payments to individuals and HUFs, and 2% for payments to others (firms, companies, etc.). The threshold is ₹30,000 per single payment or ₹1,00,000 aggregate in a financial year. If the contractor does not furnish PAN, TDS is deducted at 20% under Section 206AA.

Question 2

What TDS rate applies on interest from banks under Section 194A?

Accepted Answer

TDS on bank interest under Section 194A is 10% where PAN is furnished. The threshold is ₹50,000 per year for senior citizens (60+) and ₹40,000 per year for others from FY 2025-26. If PAN is not furnished, TDS applies at 20%. Interest from recurring deposits and fixed deposits across all branches of the same bank is aggregated for threshold purposes.

Question 3

How is TDS interest calculated under Section 201(1A)?

Accepted Answer

Interest for late TDS deduction under Section 201(1A)(i) is 1% per month or part thereof from the date TDS was deductible to the date of actual deduction. Interest for late TDS deposit under Section 201(1A)(ii) is 1.5% per month or part thereof from the date of deduction to the date of actual payment to the government. Both are calculated on a calendar-month basis — even a single day in a month counts as a full month.

Question 4

What is the late fee under Section 234E for delayed TDS return filing?

Accepted Answer

Section 234E levies a late fee of ₹200 per day for each day the TDS return is filed after the due date. The total late fee cannot exceed the TDS amount for that quarter. For example, if TDS deducted is ₹5,000 and the return is filed 30 days late, the late fee is ₹200 × 30 = ₹6,000 — but it is capped at ₹5,000 (the TDS amount). This calculator computes the exact 234E late fee.

Question 5

What is Section 206AB and when does higher TDS apply?

Accepted Answer

Section 206AB requires TDS at twice the normal rate (or 5%, whichever is higher) on payments to 'specified persons' — those who have not filed their income tax return for the two preceding financial years and whose TDS/TCS exceeded ₹50,000 in each of those years. This applies from FY 2021-22. The deductor must verify the payee's filing status on the Income Tax portal's compliance check facility before making payment.

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