What is Tax deducted at source (TDS)? Sources of income allows TDS

What is Tax deducted at source (TDS)?

Tax deducted at source (TDS) is a system introduced by income tax department, where person responsible for making specified payments such as salary, commission, professional fees, interest rent etc, is liable to deduct a certain percentage of tax before making payment. It is a process of charging and collecting tax at the source of income.

The specified cases of income where tax is deductible at source are normally those cases where the income can be calculated in advance. Generally in these cases assessees income, may be more or less, is known. Section 192 to 206 deal with the deduction of tax at source.

Tax deducted at source (TDS), as the very name implies aims at collection of revenue at the very source of income. It is essentially an indirect method of collecting tax which combines the concepts of “pay as you earn” and “collect as it is being earned.” Its significance to the government lies in the fact that it prepones the collection of tax, ensures a regular source of revenue, provides for a greater reach and wider base for tax. At the same time, to the tax payer, it distributes the incidence of tax and provides for a simple and convenient mode of payment.

The concept of TDS requires that the person on whom responsibility has been cast, is to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The deducted sum is required to be deposited to the credit of the Central Government. The recipient from whose income tax has been deducted at source, gets the credit of the amount deducted in his personal assessment on the basis of the certificate issued by the deductor.

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Who is liable to deduct TDS?

The following are the specified person who are liable to deduct TDS. An individual or an HUF is not liable to deduct TDS on such payment except where the individual or HUF is carrying on a business/ profession where accounts are required to be audited u/s 44AB, in the immediately preceding financial year.

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What percentage of TDS is deducted?

TDS will not be deducted if your total income is ₹2,50,000.00. This amount is applicable for men and women below the age of 60 years. Normally, TDS deduction rate on salary ranges from 5% to 30%.

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Who shall deduct tax at source?

Section 51 of CGST act provides for deduction of TDS in certain circumstances. As of now, only 3 specified and 1 notified recipient is liable to deduct TDS. In this situation, supply recipient is liable to deduct TDS from the payment made or credited to the supplier where the total value of such supply under a contract exceeds ` 2.5 lakh. TDS deductor has to compulsorily register in GST without any threshold limit.

Every person responsible for making payment of nature covered by TDS provisions of Income Tax Act shall be responsible to deduct tax.

However in case of payments made under sec. 194A, 194C, 194H, 1941 and 194 J in respect of individual and HUF, only if the turnover or professional receipt exceeds sum of ₹40 lakh or ₹10 lakh respectively (the limits will be ₹60 Lakh or ₹15 Lakh respectively w.e.f. 01.07.2010) in previous year, he is required to deduct tax at source.

These persons are mainly:

• Principal Officer of a company for TDS purpose including the employer in case of private employment or an employee making payment on behalf of the employer.
  
  
• DDO (Drawing & Disbursing Officer), in case of Govt. Office any officer, designated as such.
  
  
• In the case of “interest on securities” other than payments made by or on behalf of the Central Govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof.

Such person is called Deductor while the person from whom the tax is deducted is called Deductee.

Tax must be deducted at the time of payment in cash or cheque or credit to the payee’s account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee’s account and TDS must be made at the time of such credit.

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Sources of income allows TDS

Salaries (Section 192)

U/s 192 (1) any person responsible for paying any income chargeable under the head ‘Salaries’ (Sec. 15) shall at the time of payment, deduct income tax on the amount payable at the average rate of income-tax computed on the basis of rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year. It means deduction should be made where an amount is paid and it should be calculated at the rate prescribed for the year in which the payment to the employee is made. C.I.T. vs. Srinivasan 83 I.T.R. 346 (S.C.)

The following are the important provisions in case of salaried employees:

• Employment under more than one employer during relevant previous year: The assessee must furnish details of his salary received from previous employer to the present employer for deduction of tax at source [u/s 192 (2)].
  
  
• Relief u/s 89 (1): In case any arrears are paid to an employee working in any Government organisation or company, co-operative society, local authority, University, institution, association or body, and he is entitled to relief u/s 89 (1), he may apply to his employer and employer can allow relief u/s 89 (1) [ u/s 192 (2A)].
  
  
• Income from any other head: A salaried employee can furnish details of his other incomes to his employer and employer can deduct tax at source for such incomes also. But assessee has the right to claim the set off of any loss under the head income from house property [Section 192(2B)].
  
  
• Statement of perquisites or Profit in lieu of Salary to employee: A person responsible for paying any income chargeable to tax under the head “Salaries” shall furnish to the person to whom salary is paid a statement giving full and correct particulars of perquisites and profits in lieu of salary provided to him [Section 192 (2C)].
  
  
• Allowability of deduction under chapter VI-A [Le. u/s 80]:
  • All deductions under section 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80G, 80GG and 80U may be allowed while calculating estimated total income of employee.
    
    
  • Generally, deduction u/s 80G shall not be allowed by the employer from the salary income. However, the following donations made by the employee through employer shall be allowed while calculating estimated total income of employee:
    • Prime Minister’s National Relief Fund
      
    • Chief Minister’s Relief Fund
      
    • Lieutenant Governor’s Relief Fund
      
      
• Tax on perks paid by employer: The employer has been given an option to pay tax on income by way of perquisites (not provided by way of monetary payments) and such amount paid by employer shall be deemed to have been paid by the assessee.
  
  
• Rates of Tax to be Deducted at Source: The schedule containing rates of tax to be deducted at source is given in 5.3. The tax under this section shall be calculated at Average Rate of tax on income chargeable to tax under the head salaries including the value of perks as referred above.
  
  
• Employer to obtain evidence from employee in respect of prescribed claims in prescribed manner [Insertion of Section 192(2D)] [w.e.f. 1-06-2015]: The person responsible for making the payment referred to in section 192(1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.

TDS on payment of accumulated balance of Recognised Provident Fund to an employee if it is taxable for employee [insertion of Section 192A] [w.e.f. 1-06-2015]

• Assessee liable:
  • The trustees of the Employees’ Provident Fund Scheme, 1952 framed under section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, or
    
    
  • any person authorised under the scheme to make payment of accumulated balance due to employees.
    
    
• Conditions:
  • The fund from which payment is to be made must be a recognized provident fund.
    
    
  • The accumulated balance due to employee is includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable.
    
    
  • The aggregate amount of such payment to the payee is Rs.50,000 or more.
    
    
• Timing of TDS: At the time of payment of accumulated balance due to the employee.
  
  
• TDS at higher rate: Tax shall be deducted at the maximum marginal rate if any person, entitled to receive any amount on which tax is deductible under this section, shall not furnish his Permanent Account Number to the person responsible for deducting such tax. (Second proviso to Section 192A).

Interest on securities [Section 193]

Section 193 deals with deduction of tax at source from income chargeable by way of “Interest on Securities”. The person responsible for paying interest on securities to a resident is liable to deduct income-tax at the time of paying the interest. Here again, tax shall be deducted according to the rates specified by the Finance Act of the year.

Tax at source shall not be deducted in the case of following securities:

• 4.25% National Defence Bonds, 1972, where the Bonds are held by a resident individual;
  
  
• 4.5% National Defence Loan, 1968 or 4.75% National Defence Loan 1972 ;
  
• National Development Bonds ; (iv) Seven-year National Saving Certificates, Fourth Issue;
  
  
• Debentures issued by any co-operative society or any other approved institution or authority or public sector company, so notified;
  
  
• 6 ½ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, where the bonds are held by a resident individual. However, the total nominal value of 6 ½ per cent Gold Bonds, 1977, or the 7 per cent Gold Bonds, 1980 should not exceed ₹10,000 ; and
  
  
• No tax will be deducted at source on any interest payable on any security of Central Government or a State Government ; Provided that nothing contained in the clause shall apply to the interest exceeding ₹10,000 payable on 8% Savings (Taxable) Bonds 2003 during the financial year. This means the provisions of TDS shall apply if interest exceeds ₹10,000 in any year.
  
  
• Interest on debentures issued by a public sector company. In case of any other company, tax on interest on debentures shall not be deducted provided:
  
  • The interest is paid by a public limited company ; (b) The debentures are listed on a recognised stock exchange;
    
    
  • The interest is paid to an individual; (d) It is paid by an account payee cheque; and
    
    
  • The amount of such interest or aggregate of the amounts of such interest paid or likely to be paid does not exceed ₹5,000 in a previous year.
    
    
• The interest payable to Life Insurance Corporation of India in respect of securities held by it or in which it holds beneficial interest.
  
  
• The interest payable to General Insurance Corporation of India or four insurance companies working under it in respect of securities held by them or in which they hold beneficial interest.
  
  
• The interest payable to any other insurer in respect of securities owned by it or in which it holds beneficial interest. (xii) Any interest payable on any security issued by a company where such security is in dematerialised form and is listed on a Recognised Stock Exchange in India in accordance with the Securities Contracts (Regulation) Act and the rules made there under.

Rate of TDS: 10% [No surcharge and No Education cess/SHEC] However, if the security holder does not quote his/her/its PAN, the rate of TDS shall be 20%.

Dividends [Section 194]

Section 194 deals with deduction of tax at source from dividend of the nature referred to in section 2(22)(e) paid by an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India to a shareholder who is resident in India.

Rule 30A provides for giving credit in respect of tax deducted at source to a person other than the registered shareholder in certain circumstances.

It is further provided that in case an individual shareholder proves through a certificate provided by the Assessing Officer that his income including dividend income is less than minimum liable to income-tax, tax at source shall not be deducted from the dividend paid to such individual shareholder.

No deduction of Tax at Source: No tax will be deducted at source by the authority paying dividend if following conditions are fulfilled:

• Dividend is paid to an individual;
  
  
• Shares are listed on a recognised stock exchange in India;
  
  
• Shares are issued by a company in which public are substantially interested;
  
  
• The dividend or interest must be paid in account payee cheque;
  
  
• The dividend payable to Life Insurance Corporation of India in respect of shares held by it or in which it holds beneficial interest ;
  
  
• The dividend payable to General Insurance Corporation of India or four insurance companies working under it in respect of shares held by them or in which they hold beneficial interest;
  
  
• The dividend payable to any other insurer in respect of shares held by it or in which it holds beneficial interest.

No tax shall be deducted at source is respect of dividends declared or distributed by an Indian Company i.e., which is referred to in section 115O.

Interest (Other than Interest on Securities) [Section 194A]

Section 194-A enjoins deduction of tax at source from interest other than that which is not chargeable by way of ‘Interest on Securities’.

Under Section 194-A (1) any person, not being an individual or a H.U.F. (other than those which are covered u/s 44AB) who is responsible for paying to a resident any income by way of interest other than income chargeable as ‘Interest on Securities’ shall at the time of credit of such income to the account of payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is there, deduct income-tax thereon at rates in force in that assessment year.

Tax at source shall not be deducted from the amount of interest payable to a person (not being a company or a registered firm) in case such person furnishes:

(a) affidavit, or (b) a statement in writing declaring that his estimated total income assessable for the assessment year next following the financial year in which the income is credited or paid will be less than the minimum liable to income-tax.

Winnings from lottery or crossword puzzle [Section 194B]

Section 194B says that income-tax will have to be deducted at source from any income by way of winning from any lottery or crossword puzzle or card game and other game of any sort in case the amount exceeds ₹10,000.

In case winnings are wholly in kind, or partly in cash and partly in kind, and amount of cash winnings is not sufficient to meet the TDS liability, the person responsible for making such payment before releasing the winnings must ensure that full tax has been paid in respect of winnings.

Rate of TDS: 30% [No Surcharge and No Education cess/SHEC]

Winning from horse races [Section 194BB]

Any person who is responsible for paying to any person any income by way of winning from any horse race an amount exceeding Rs.10,000 shall, at the time of payment deduct tax at the rate prescribed for such year.

Rate of TDS: 30% [No Surcharge and No Education cess/SHEC]

Payments to contractors [Section 194C]—[Applicable w.e.f. 1-10-2009]

• Any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—
  
  • one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;
    
    
  • two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein.
    
    
• Where any sum referred to in sub-section (1) is credited to any account, whether called “Suspense Account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
  
  
• Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source—
  
  
  • on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or
    
    
  • on the whole of the invoice value, if the value of material is not mentioned separately in the invoice.
    
    
• No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.
  
  
• No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if a single payment to a contractor does not exceed thirty thousand rupees. Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds ` 1,00,000, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section.
  
  
• Where a contractor owns ten or less than ten goods carriages at any time during the previous year, no TDS shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing a declaration to that effect alongwith his Permanent Account Number, to the person paying or crediting such sum.
  
  
• The person responsible for paying or crediting any sum to the person referred to in sub- section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed.

Insurance commission [Section 194D]

The Finance Act, 1973, introduced Section 194-D whereby tax at source will be deducted by any person responsible for paying to a resident, any income by way of remuneration or reward, whether by way of commission or otherwise or soliciting or procuring insurance business. It must exceed ₹15,000 [w.e.f. 1-6-20161 [upto 31-5-2016, this limit was ₹20,000].

Rate of TDS. 10% [No Surcharge and No Education cess/SHEC]

However, if the recipient has not quoted his PAN, then the rate of TDS will be 20%.

Payment under a life insurance policy [Section 194DA] [Inserted by the Finance Act, 2014 w.e.f. 1-10-2014]

• Assessee liable: Any person responsible for paying any sum under a life insurance policy.
  
  
• Conditions:
  • The payee (i.e. recipient) of sum must be a resident of India.
    
    
  • The payment must be under a life insurence policy including the sum allocated by way of bonus on such policy.
    
    
  • Such sum shall not be exempt in the hands of recipient u/s 10(10D). (d) The amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is ₹1,00,000 or more. In other words, no TDS if such payment or aggregate amount of such payments is less than ₹1,00,000.
    
    
• Timing of payment: At the time of making such payment.
  
  
• Rate of TDS: 1% of such payment [w.e.f. 1-6-2016] [upto 31-5-2016, the rate was 2%]

Payments to Non-Resident sportsmen or sports associations [Section 194E]

With effect from 1st November 1989, where any income as referred u/s 115 BBA is payable to a non-resident sportsman (including an athlete) who is not resident of India or a non-resident sports association or institution, the person making such payment or crediting it to the account of payee shall deduct tax @20%. However, if PAN is not quoted by the recipient, the rate of TDS shall be 20%.

Payment in respect of deposits under national savings scheme [Section 194 EE]

The person responsible for making payment of any amount to any person, who has deposited any amount in National Saving scheme and has claimed deduction u/s 80 CCA, shall deduct income-tax at the rate of 10% [w.e.f. 1-6-2016] [20% upto 31-5-2016] provided such payment or aggregate amount of payments made during the financial year is ₹2,500 or more. This provision shall not be applicable in case of payment of said amount to the heirs of assessee.

Repayment of units of mutual fund covered u/s 80 CCB [194 F]

At the time of repayment of Units of UTI or Mutual Funds on which a deduction u/s 80 CCB was claimed, a tax @20% shall be deducted at source.

Commission etc. on sale of lottery tickets [Section 194 G]

Any person who is responsible for paying any income by way of commission, remuneration or Prize (by whatever name called) to a person who has been stocking, distributing, purchasing or selling lottery tickets, shall deduct tax @5% [w.e.f. 1-6-2016] [10% upto 31-5-2016], [20% if PAN is not quoted by the recipient] while making payment of such income in cash or in cheque or bank draft or by any other mode.

No tax shall be deducted at source if such income does not exceed ₹15,000 [w.e.f. 1-6-2016] ₹1,000 upto 31-5-2016] at any time. The tax will be deducted at source even if income is credited to the account of the assessee or it is credited to the suspense account. This provision came into effect from 1-10-91.

TDS on commission or brokerage [Section 194H]

Tax @ 5% [w.e.f. 1-6-2016] [10% upto 31-5-2016] [20% if PAN is not quoted by the recipient] will be deducted at source when any payment is made by a person who is not an individual or HUF (other than those covered u/s 44AB) to a resident assessee by way of commission [not insurance commission] or brokerage provided such payment exceeds ₹15,000 [w.e.f. 1-6-2016] ₹5,000 upto 31-5-2016]. Such commission should not be for professional services rendered.

BSNL and MTNL shall not be required to deduct TDS on any commission or brokerage paid or payable to their public call office franchisees.

Income from rent [Section 194-1]

In case any amount of rent is paid by a person other than individual or H.U.F. (other than those covered u/s 44AB) the person responsible for making payment or crediting the amount to the account of payee who is resident, shall deduct income-tax:

This provision will not be applicable if the total amount of rent credited or likely to be credited during the previous year does not exceed ₹1,80,000. The rent means any payment under any lease, sub-lease, tenancy or other arrangement for the use of land, building, factory building, with or without furniture or fittings, whether such building is owned or not.

No TDS on rent shall be made where the income of rent is credited or paid to a business trust, being a real estate investment trust in respect to any real estate asset owned directly by such trust [w.e.f. 1-6-2015].

Rates of T.D.S. w.e.f. 1-10-2009 [Inserted by the Finance Act, 2009]

• 2% for the use of any machinery or plant or equipment; and
  
  
• 10% for the use of any land and building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings.

TDS by buyer on purchase of immovable property [Section 194IA] [w.e.f. 1-6-2013]

• Assessee liable: Every buyer of immovable property (other than agricultural land) i.e. Individual, HUF, Firm, company etc.
  
  
• Conditions: (a) The total amount of consideration for the transfer of immovable property is ₹50 lakh or more, (b) The transferor must be a resident of India.
  
  
• Timing of TDS: At the time of making payment or crediting of any sum as consideration for such transfer, whichever is earlier.
  
  
• Rate of TDS: 1% of such sum.

Fee for professional or technical services [Section 194J]

• This provision is applicable on all those persons except individuals and Hindu undivided families, (other than those covered u/s 44AB) who make any payment by way of
  
  
  • fees for professional services ; or
  • fees for technical services ; or 2. 3. 4.
  • royalty ; or
  • any sum referred to in clause (va) of section 28.
    
    
• It provides for deduction of tax at source at the rate of 10% [20%, if PAN is not quoted by the recipient] at the time such payment is made or credited to the account of a person. Payment may be made in cash, cheque or draft.
  
  
• No tax shall be deducted at source in following cases:
  
  • any amount credited or paid before 1-7-1995.
    
  • any amount credited or paid if such amount does not exceed Rs.30,000.
    
    
• An individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section.
  
  
  No individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.
  
  
• The term professional services means services rendered by a person in the course of carrying on legal, medical, engineering, architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board. The term technical services shall have the same meaning as is assigned to it in explanation 2 to clause (vii) of sub section (1) of section 9.

Payment of compensation on acquisition of certain immovable property

Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent (20%, if PAN is not quoted by the recepient) of such sum as Income- tax thereon:

No deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed ₹2,50,000 [w.e.f. 1-6-2016] ₹2,00,000 upto 31-5-2016].

Income by way of Interest from Infrastructure debt fund [Section 194LB]

Where, any income by way of interest is payable to a non-resident, not being a company, or to a foreign company, by an infrastructure debt fund referred to in Section 10(47), the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax @5% (+ S.C. + E.C.).

Distributed income of the business trust [Section 194LBA]

• Assessee liable. A business trust.
  
  
• Conditions:
  • The payment by business trust must be by way of distributed income.
    
    
  • Such payment must be made to a unit holder of business trust.
    
    
  • Such distributed income must be taxable in the hands of payee/recipient.
    
    
  • The payee (i.e. unit holder) may be resident or non resident of India.
    
    
• Timing of payment. At the time of making such payment.
  
  
• Rate of TDS: I. If distributed income is of the nature referred to in section 10(23FC).
  
  
  • Payment to a resident unit holder—10%.
  • Payment to a nonresident unit holder—5%.
    
    Rate of TDS shall be 20% of the recepient does not provide PAN.

Income in respect of investment in securitization trust. [Section 194LBC]

• Where any income is payable to an investor, being a resident, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income- tax thereon, at the rate of—
  
  
  • 25%, if the payee is an individual or a Hindu undivided family;
    
    
  • 30%, if the payee is any other person.
    
    
• Where any income is payable to an investor, being a non-resident (not being a company) or a foreign company, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon, at the rates in force.

Income by way of interest on certain bonds, government securities [Section 194LD]

• Assessee liable: Any person responsible for paying interest to a person being a ‘Foreign Institutional Investor’ or a ‘Qualified Foreign Investor’,
  
  
• Date of payment: Interest payable at any time on or after 01-06-2013 but before 01-07-2017.
  
  
• Nature of investment: Payee must have made the investment in (a) a rupee denominated bond of an Indian company or (b) a government security.
  
  
• Timing of TDS: At the time of making payment or crediting the amount to payee A/c.
  
  
• Rate of TDS: 5% (plus surcharge and education cess). Rate shall be 20% if the recipient does not provide PAN.

Any other sums paid to Non-residents [Section 195]

It provides that any person responsible for paying to a non-resident not being a company or to a foreign company, any interest, not being ‘Interest on Securities’ or any other sum except salaries, chargeable to tax shall at the time of payment (unless he himself is liable to pay any income-tax thereon as an agent) deduct income-tax at the prescribed rates for that year.

No tax shall be deducted at source in case the assessee furnishes a prescribed certificate granted by the Assessing Officer in this respect.