Who is Liable to Deduct Tax Under Income Tax Act 2025

Under the new Income-tax Act, 2025, the government has streamlined the rules regarding who must deduct Tax Deducted at Source (TDS). While Companies and Partnership Firms are almost always required to deduct TDS, the rules for Individuals and Hindu Undivided Families (HUFs) depend entirely on their Turnover or Gross Receipts in the preceding year.

Here is a complete breakdown of the turnover limits that trigger TDS liability under the new law.

1. The General Rule: “Specified Persons” (Business & Profession)

For most standard business payments—such as paying contractors, commission agents, brokers, or rent for business premises—an Individual or HUF is only liable to deduct TDS if they are classified as a “Specified Person”.

You become a “Specified Person” if your turnover in the immediately preceding tax year exceeded the following limits:

• For Business Owners: If total sales, turnover, or gross receipts exceeded ₹ 1 Crore.
• For Professionals: If gross receipts from the profession exceeded ₹ 50 Lakh.

Impact: If you cross these limits, you must deduct TDS under Section 393 for payments like:

• Contractors: For work or labor supply [Table Sl. No. 6].
• Professionals: Fees for technical/professional services [Table Sl. No. 6].
• Commission/Brokerage: [Table Sl. No. 1].
• Rent (Business Use): For machinery, plant, or building [Table Sl. No. 2].

Compliance Form: You must file Form No. 140 (Quarterly TDS Return) for these deductions.

2. The “Big Buyer” Rule: TDS on Purchase of Goods

There is a special, higher turnover threshold for deducting TDS specifically on the purchase of goods (previously Section 194Q, now under Section 393).

• Turnover Limit: You are liable to deduct TDS only if your total sales, gross receipts, or turnover from business exceeded ₹ 10 Crore in the immediately preceding tax year.
• Transaction Threshold: If you meet the ₹10 Cr criteria, you must deduct 0.1% TDS when buying goods worth more than ₹ 50 Lakh from a resident seller.

3. The “No Turnover” Rule: High-Value Personal Payments

The new Act continues to catch high-value transactions by Individuals and HUFs even if they do not have a business or do not meet the audit turnover limits mentioned above.

In these specific cases, Turnover is Irrelevant. You must deduct TDS regardless of your business size:

• Rent for Residence: If you pay rent exceeding ₹ 50,000 per month for your residence. You must deduct 2% TDS.
• Buying Property: If you buy immovable property (house/land) valued over ₹ 50 Lakh. You must deduct 1% TDS.
• Personal Contractors/Professionals: If you pay more than ₹ 50 Lakh in a year to a contractor or professional for personal purposes.

Compliance Form: For these “No Turnover” cases, you do not need a TAN. You simply file Form No. 141 (Challan-cum-statement) using your PAN.

4. Summary Table: Do You Need to Deduct TDS?

Conclusion

If you are a freelancer, small business owner, or salaried individual, check your receipts from the last financial year.

• Did you cross ₹ 50 Lakh (Profession) or ₹ 1 Crore (Business)? If yes, get a TAN and start deducting TDS on your business expenses.
• If not, you are safe from most TDS compliances, unless you are paying high rent (>₹50k/month) or buying a property.

For More :- Refer

What is TDS? Complete Guide on Who Must Deduct Tax Under Income Tax Act 2025

Under the Income-tax Act, 2025, the government has consolidated and renumbered the provisions for Tax Deducted at Source (TDS). While the core concept remains the same—collecting tax at the very source of income generation—the categories of people liable to deduct tax have been streamlined under new sections like Section 392 and Section 393.

Here is a breakdown of what TDS is and who is responsible for deducting it.

What is TDS?

TDS is a system where the person paying an income (the Payer) deducts a specific percentage of tax from the payment and deposits it with the Central Government on behalf of the recipient (the Payee). The recipient then claims this amount as a tax credit when filing their Income Tax Return,.

Who is Required to Deduct TDS?

The liability to deduct TDS depends on the nature of the payment and the status of the payer. Under the new Act, payers are broadly categorized into Employers, Specified Persons (Businesses), and Individuals/HUFs.

1. Employers (TDS on Salary)

• Who Deducts: Any person (individual, company, firm, or government office) responsible for paying income under the head “Salaries”.
• Section: Section 392.
• Rule: The employer must estimate the employee’s total annual income and deduct tax at the average rate of income tax applicable,.

2. “Specified Persons” (Business Payments)

For most business-related payments (like contractors, commission, or professional fees), the liability falls on a “Specified Person”.

• Who is a Specified Person? This typically includes:
  • Companies and Firms.
  • Individuals or HUFs whose business turnover or professional receipts exceed the audit threshold (₹ 1 Crore for business / ₹ 50 Lakh for profession) in the preceding year.
• Payments Covered (Section 393):
  • Contractors: Payments for work/labour supply.
  • Professionals: Fees for technical or professional services.
  • Commission/Brokerage: Payments to agents.
  • Rent (Business): Renting factory, building, or plant for business use.

3. Individuals & HUFs (High-Value Personal Payments)

Even if you are a salaried individual or a small business owner not liable for audit, you are required to deduct TDS in specific personal transactions. No TAN is required for these; you can use your PAN.

• Rent > ₹50,000: If you pay rent for your residence exceeding ₹ 50,000 per month,.
• Property Purchase: Any buyer purchasing immovable property (other than agricultural land) where the value exceeds ₹ 50 Lakh.
• Contractors/Professionals: If you pay more than ₹ 50 Lakh in a year to a contractor or professional for personal purposes.

4. Any Person (Universal Liability)

For certain transactions, “Any Person” paying the amount is liable to deduct tax, regardless of their turnover or status.

• Virtual Digital Assets (Crypto): Any person paying consideration for the transfer of a VDA (Crypto/NFTs) must deduct 1% TDS,.
• Winnings: Any person paying winnings from lotteries, crossword puzzles, or online games must deduct tax on the net winnings,.
• Interest on Securities: Any person paying interest on securities.

5. E-Commerce Operators

• Section 393(1) [Table Sl. No. 8(v)]: E-commerce operators must deduct tax at 0.1% on the gross amount of sales or services facilitated through their digital platform.

Summary Checklist: Do You Need to Deduct?

Compliance Note: Most deductors must apply for a Tax Deduction Account Number (TAN) using Form No. 135 (or Form 134 for Govt entities). However, individuals deducting tax on Rent (>50k) or Property Purchase are exempt from obtaining TAN and can file the challan-cum-statement Form No. 141 using just their PAN.

For More :- Refer

Under the new tax framework, the provisions for TDS on Rent have been consolidated under Section 393(1). The rules differ depending on whether the tenant is an ordinary individual or a business entity.

1.TDS on Rent ; For Individuals & HUFs (Non-Business Cases)

This applies to salaried employees or other individuals paying rent for their residence who are not liable for a tax audit.

• When to Deduct: You must deduct TDS only if the rent exceeds ₹ 50,000 per month or part of a month.
• TDS Rate: 2%.
• When to Deduct (Timing): You do not need to deduct tax every month. It is a one-time deduction:
  • At the time of credit/payment for the last month of the tax year (March); or
  • At the time of credit/payment for the last month of tenancy (if you vacate the property during the year).
• How to Pay:
  • You must file Form No. 141 (Challan-cum-statement).
  • Deadline: The tax must be deposited within 30 days from the end of the month in which the deduction is made,.
  • Note: You do not need a TAN (Tax Deduction Account Number) for this. You can use your PAN.

2.TDS on Rent ; For Businesses (“Specified Persons”)

This applies to companies, firms, and individuals whose accounts are audited.

• Threshold Limit: TDS applies if the aggregate rent paid exceeds ₹ 50,000 per month or part of a month.
• TDS Rates:
  • 2% for the use of Machinery, Plant, or Equipment.
  • 10% for the use of Land, Building (including factory), Furniture, or Fittings.
• Compliance:
  • Payment Deadline: Generally by the 7th of the next month (for March, by 30th April).
  • Return Form: File quarterly statement in Form No. 140.

3. Important Safeguards & Rules

• No PAN Penalty: If the landlord does not provide a PAN, the TDS rate increases to 20%. However, for Individuals/HUFs (Case 1 above), the deduction amount cannot exceed the rent payable for the last month. This protects the tenant from paying more tax than the rent due,.
• How Landlords Can Avoid TDS:
  • Landlords can submit Form No. 121 (which replaces Forms 15G/15H) to the tenant to receive rent without TDS.
  • Condition: The landlord’s total income must be below the taxable limit, or (for Senior Citizens) the final tax liability must be Nil,.

Summary Table

This Article Will Help You In Following Quries