Meanining of specified person for TDS under Section 393 Income tax Act 2025
Under the Income-tax Act, 2025, the term “specified person” for the purposes of Tax Deducted at Source (TDS) under Section 393 is defined in Section 402(37).
Under the Income-tax Act, 2025, for the purposes of Tax Deducted at Source (TDS) under Section 393, a “specified person” is defined as:
- Any person other than an individual or a Hindu Undivided Family (HUF).
- An individual or a HUF whose total sales, gross receipts, or turnover from the business or profession carried on by them exceeds ₹1 crore in case of a business or ₹50 lakh in case of a profession during the tax year immediately preceding the tax year in which such income or sum is credited or paid.
Example when specified person are liable for TDS under Income tax Act 2025
Under the Income-tax Act, 2025 (effective for Tax Year 2026-27), the liability to deduct Tax Deducted at Source (TDS) depends on the type of entity making the payment and, in the case of Individuals and HUFs, their business turnover.
Here is the breakdown of when Firms, Companies, Individuals, and HUFs are liable to deduct TDS, along with examples:
1. Firms and Companies (Always Liable) Under the new Act, Firms and Companies automatically fall under the definition of a “specified person” for the purposes of TDS. Therefore, they are universally liable to deduct TDS on specified payments (like salary, rent, professional fees, contractor payments, commission, etc.) whenever the payment exceeds the prescribed threshold limit for that category.
- Example: If M/s ABC Pvt. Ltd. (a company) or XYZ & Associates (a firm) pays ₹40,000 to a contractor for repair work, they must deduct 1% or 2% TDS under Section 393(1) [Table: Sl. No. 6(i)] because the payment exceeds the ₹30,000 single-transaction threshold.
2. Individuals and HUFs (Liable based on Turnover) Generally, an Individual or a Hindu Undivided Family (HUF) is only required to deduct regular TDS if they qualify as a “specified person”. They become a “specified person” if, in the immediately preceding tax year, their:
- Total sales, turnover, or gross receipts from a business exceeded ₹1 crore, OR
- Gross receipts from a profession exceeded ₹50 lakh.
- Example: Mr. Sharma runs a trading business that had a turnover of ₹1.5 crores in FY 2025-26. Because he crossed the ₹1 crore threshold, he is a “specified person” for Tax Year 2026-27. If he pays ₹60,000 as professional fees to a consultant for his business, he must deduct 10% TDS under Section 393(1) [Table: Sl. No. 6(iii)].
3. Exceptions for Individuals and HUFs (Liable regardless of Turnover) Even if an Individual or HUF does not meet the turnover thresholds (i.e., they are non-audited, salaried individuals, or small business owners), the new Act mandates that they must still deduct TDS on certain high-value transactions. They do not need a TAN for this and can deposit the tax using their PAN via the unified Form No. 141.
These specific scenarios are:
- High Rent Payments: If an Individual/HUF pays rent exceeding ₹50,000 per month, they must deduct 2% TDS under Section 393(1) [Table: Sl. No. 2(i)] and file Schedule A of Form 141.
- Example: A salaried employee, Mr. Gupta, pays ₹60,000 per month as rent for his residential flat. He must deduct 2% TDS from the landlord’s rent.
- Purchase of Immovable Property: If an Individual/HUF purchases immovable property (other than agricultural land) for a consideration or stamp duty value of ₹50 lakh or more, they must deduct 1% TDS under Section 393(1) [Table: Sl. No. 3(i)] and file Schedule B of Form 141.
- Example: Mrs. Verma buys a house worth ₹80 lakhs. She is required to deduct 1% TDS (₹80,000) before paying the seller.
- High-Value Contract/Professional Payments: If an Individual/HUF pays a resident contractor, professional, or commission agent an aggregate sum exceeding ₹50 lakh in a financial year (often for personal purposes like constructing a home), they must deduct 2% TDS under Section 393(1) [Table: Sl. No. 6(ii)] and file Schedule C of Form 141.
- Example: Mr. Singh hires an architect to design his personal villa and pays him ₹60 lakhs during the year. He must deduct 2% TDS on this payment.
- Transfer of Virtual Digital Assets (VDAs): Any person making a payment for the transfer of crypto/NFTs must deduct 1% TDS under Section 393(1) [Table: Sl. No. 8(vi)] using Schedule D of Form 141.
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