TDS applicability


Specific payments which are covered under TDS provisions in Income tax Act shall be deducted at source i.e. at the time of payment or credit in books of accounts whichever is earlier. However, Individuals and HUFs need not deduct TDS provided they are not liable for compulsory audit of books of accounts as per Section 44AB of the Act. Read more on compulsory audit of accounts U/s.44AB


That means, if an individual or HUF is covered under provisions of Sec.44AB in the preceding Financial year, he shall deduct tax on payments made during the current financial year. As per Sec.206AA, if PAN is not furnished by the Payee (Receiver) then, tax shall be deducted at :

Rate specified in concerned section or at 20%, whichever is higher.

It is to be noted that such deducted amount would not be available for claiming tax by the payee at the time of filing of returns nor it can be refunded to the payee. It goes straight to the Govt’s revenue.


Following payments need not be deducted at source :

  1. On Exempt incomes
  2. On 15G/H declaration furnished by the payee
  3. Payments to Govt / RBI / Statutory Corporation etc.
  4. On certificate bring issued by ITO
  5. Notified payments to notified institutions / associations

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