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What is TDS Exemption Limit?

The threshold limit refers to the amount of payment on which no TDS is payable. TDS provisions only apply if the transaction exceeds the permissible limit.

  • Jan 31, 2022
  • 5,079 Views

The Government of India established TDS, or Tax Deducted at Source, to levy tax on income at the point of generation in order to reduce revenue evasion and collect tax in real-time as and when the income is received. This tax at source is only deducted on a specific amount of transaction, that is, if the income is beyond a threshold limit (minimum value), only then the tax is deducted. Obviously, the converse is also true, when the amount does not exceed the threshold, no TDS is deducted. One noteworthy fact is that if there is a discrepancy between the amount of tax deducted at the end of the fiscal year and the income tax you are actually supposed to pay for the said year, the government has a provision to claim TDS refund online.

Through this blog, we will explain to our readers the various threshold limitations set forth in the Income Tax Act for various payments such as interest, wages, and so on.

Threshold Limit in TDS

The threshold limit refers to the amount of payment on which no TDS is payable. TDS provisions only apply if the transaction exceeds the permissible limit. For example, if the amount of professional fees does not exceed ₹30,000/-, no TDS is needed to be deducted under Section 194J. So, in this case, the threshold limit is ₹30,000, and TDS must be deducted only if the income surpasses that amount.

TDS Exemption Threshold Chart

ITA Section

Type Of Payment

TDS Rates For
Indian Citizens (in percentage)

TDS Rates For NRI’s In India (in percentage)

TDS Exemption Limit

192

Income from salary

As per given income tax rates

As per given income tax rates

Employers must determine the tax due based on the corresponding slab rates after considering the deductions and exemptions.

194

Income from lotteries, cards, and other games

30

30

Till ₹5000 in a financial year

194BB

Income through horse racing wins

30

30

Till ₹10,000

194EE

Contributions towards NSS deposits

10

10

Till ₹500 in a financial year

194F

Payment for mutual funds or Unit Trust of India

20

20

NIL

194G

Income earned through commission, sales of lottery ticket and other transactions

5

5

Till ₹15,000 In a financial year

194LBB

Investment fund income for the unitholder (apart from exemptions for income under Section 10(23FBB))

10

30

There is no limit to the number of exemptions that can be in the case of a non-resident or foreign company, no TDS deduction should be made in respect of any income that is not taxable under the Act’s provisions.

194LBC

Income from Investment Scrutinisation Funds in accordance with Section 115TCA

25 & 30 for anyone else

30

No Exemption Limit

Tax Exemption Under 80C

Under Section 80C you are entitled to a tax exemption. Section 80C is one of the most well-known sections among taxpayers because it allows them to save taxes by making investments in tax-saving instruments or incurring eligible expenses. It empowers the taxpayers to deduct up to ₹1.5 lakh from their total income each financial year. This tax exemption under 80C is available to both individuals and HUFs. However, corporations, partnership enterprises, and LLPs are not eligible for these deductions. The overall tax exemption that one can avail via this section is the result of the accumulated value defined after considering the different deductions and provisions offered under the different parts of the 80C tax exemption. These sections include:

  • 80CCC
  • 80CCD (1)
  • 80CCD (1b
  • 80CCD (1c). (2).

Saving money all your life and finally deciding on a safe mode of investment to put that money to use can be a daunting task because TDS exemption is a portion of the tax sphere that not everyone is well-versed familiar with. Add to that the technicalities and financial jargons that make it all the more difficult to understand. So, having a clear idea about the same becomes of utmost significance and that is why it is always advisable to get as much information as possible about the threshold limit of your income and the amount of TDS exemption you are eligible for to reap maximum tax benefits.

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