New Income Tax Act TDS provisions (Section 393): key points for CAs, CS and tax professionals

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New Income Tax Act TDS provisions (Section 393): key points for CAs, CS and tax professionals

The new Income Tax Act consolidates the Tax Deducted at Source (TDS) regime in **Section 393 – Tax to be deducted at source**. For practising CAs, CS and tax professionals, this section is the starting point for advising clients on withholding obligations under the new law.

This post summarises the structure of Section 393(1) for **payments to residents**, focusing on the table of nature of income, payer type, rate and threshold. It is designed as a narrative guide that you can read alongside the bare provision.

> Note: This article is an educational summary based on the text of Section 393 as available at the time of writing. Professionals should always rely on the notified Act, rules and CBDT circulars/press releases for final positions.

1. Structure of Section 393

Section 393 is broadly split into:

  • **Sub-section (1)** – TDS on specified payments to **residents**, based on a detailed **Table for payments to resident**; and
  • **Sub-section (2)** – TDS on specified payments to **non-residents**, again based on a separate table.

This post focuses on sub-section (1), which will cover the bulk of day-to-day domestic withholding questions for clients.

Each row of the resident table sets out:

  • **Nature of income or sum (Column B)**
  • **Payer category (Column C)**
  • **Rate of deduction (Column D)**
  • **Threshold limit (Column D / notes)**

In addition, the section contains **Notes** that override general rules in certain cases (e.g. purchase of goods, e-commerce, VDA, specified senior citizens).

2. Commission and brokerage

2.1 Insurance commission

  • **Nature**: remuneration or reward, by way of commission or otherwise, for soliciting or procuring insurance business including continuance/renewal.
  • **Payer**: any person.
  • **Rate**: *rates in force*.
  • **Threshold**: ₹20,000 per payee.

This broadly corresponds to the present 194D regime, but referenced through the consolidated Section 393 table.

2.2 Other commission or brokerage

  • **Nature**: commission/brokerage other than insurance commission.
  • **Payer**: **specified person**.
  • **Rate**: 2%.
  • **Threshold**: ₹20,000 per payee.

Professionals should review client agreements with marketing, referral and distribution partners to classify correctly between 1(i) and 1(ii).

3. Rent – specified vs non-specified persons

Section 393 distinguishes between “person other than specified person” and “specified person” for rent.

3.1 Rent paid by non-specified persons

  • **Nature**: any income by way of rent.
  • **Payer**: person other than specified person.
  • **Rate**: 2%.
  • **Threshold**: ₹50,000 per month or part thereof.

Note: For 2(i), tax is to be deducted at the time of credit/payment in respect of the **last month of the tax year or tenancy**.

3.2 Rent paid by specified persons

  • **Nature**: rent paid by specified persons.
  • **Payer**: specified person (definition to be read with the Act / Chapter).
  • **Rate**:
  • 2% – machinery, plant or equipment.
  • 10% – land, building (including factory building), land appurtenant, furniture or fittings.
  • **Threshold**: ₹50,000 per month.

For practitioners, the key planning point is whether individual/HUF clients fall into the “specified person” category and therefore need to start withholding on high-value rent.

4. TDS on transfer of immovable property (other than agricultural land)

4.1 General property transactions – 3(i)

  • **Nature**: consideration for transfer of immovable property (other than agricultural land).
  • **Payer**: persons other than those covered under 3(iii).
  • **Rate**: 1% of the **higher** of consideration or stamp duty value.
  • **Threshold**: aggregate consideration ≥ ₹50 lakh.

Note 1 clarifies that the threshold is to be tested on the **aggregate of amounts paid/payable by all transferees to all transferors** for the property.

4.2 Development agreement consideration – 3(ii)

  • **Nature**: consideration (not being in-kind consideration) under agreements referred to in section 67(14).
  • **Payer**: any person.
  • **Rate**: 10%.
  • **Threshold**: Nil.

Where both 3(i) and 3(ii) are attracted, **Note 2** provides that TDS shall be deducted **only under 3(ii)**.

4.3 Compulsory acquisition – 3(iii)

  • **Nature**: compensation / enhanced compensation or consideration / enhanced consideration for compulsory acquisition of immovable property (other than agricultural land).
  • **Payer**: any person.
  • **Rate**: 10%.
  • **Threshold**: ₹5,00,000.

5. Capital market income – mutual funds, business trusts, investment funds and securitisation trusts

The table consolidates multiple present provisions:

  • **Mutual fund / specified undertaking / specified company units** – 10% TDS above ₹10,000.
  • **Business trust distributions (Schedule V 3 & 4)** – 10%, no threshold.
  • **Investment funds (section 224)** – 10%, no threshold.
  • **Securitisation trusts (section 221)** – 10%, no threshold.

Professionals should map client holdings to these categories to anticipate TDS credits in Form 26AS/Annual Information Statement.

6. Interest income

6.1 Interest on securities – 5(i)

  • **Payer**: any person.
  • **Rate**: rates in force.
  • **Threshold**: ₹10,000.

6.2 Bank/co-op bank/post office interest – 5(ii)

  • **Payers**: banking company, co-operative bank, post office (for notified deposit schemes).
  • **Rate**: rates in force.
  • **Thresholds**:
  • ₹1,00,000 for senior citizens.
  • ₹50,000 for others.

6.3 Other interest payers – 5(iii)

  • **Payer**: specified person (other than those in 5(ii)).
  • **Rate**: rates in force.
  • **Threshold**: ₹10,000.

Notes under 5(ii)/(iii) cover branch-level threshold computation where CBS is not adopted, and permit adjustment of excess/deficit deduction during the year.

7. Contractors and professional/technical services

7.1 Payments by designated persons to contractors – 6(i)

  • **Nature**: any sum for carrying out any work, including supply of labour.
  • **Payer**: designated person.
  • **Rates**:
  • 1% – contractor is individual/HUF.
  • 2% – others.
  • **Thresholds**:
  • ₹30,000 per contract; and
  • ₹1,00,000 aggregate in the tax year.

A specific note provides that for work specified in section 402(47)(e), tax is on invoice value **excluding material** where shown separately, else on full value.

7.2 High-value payments by individual/HUF – 6(ii)

  • **Nature**: work contracts, professional services, commission/brokerage (non-insurance).
  • **Payer**: individual/HUF not otherwise required to deduct under 6(i)/(iii) or 1(ii).
  • **Rate**: 2%.
  • **Threshold**: aggregate payments ≥ ₹50 lakh.

This will be important for large professional/consulting mandates structured through individuals/HUFs.

7.3 Professional fees, technical services, director fees, royalty – 6(iii)

  • **Nature**: professional fees, technical services, director remuneration (not otherwise covered), royalty, sums under section 26(2)(h).
  • **Payer**: specified person.
  • **Rates**:
  • 2% – technical services (non-professional), certain film royalties, call centre operations.
  • 10% – all other situations.
  • **Thresholds**:
  • ₹50,000 – for professional/technical services, royalty and section 26(2)(h) cases.
  • Nil – for payments to directors.

8. Other key rows: life insurance, purchase of goods, benefit/perquisite, e-commerce, VDA

8.1 Life insurance payouts – 8(i)

  • **Nature**: sums under life insurance policies (to the extent taxable).
  • **Rate**: 2% on income component.
  • **Threshold**: ₹1,00,000.

8.2 Purchase of goods above ₹50 lakh – 8(ii)

  • **Payer**: buyer.
  • **Rate**: 0.1%.
  • **Threshold**: tax to be deducted on sum **exceeding ₹50 lakh**.

Note 1 clarifies that this row does not apply where tax is already deductible/collectible under another provision.

8.3 Specified senior citizen total income – 8(iii)

  • **Payer**: specified bank.
  • **Rate**: rates in force.
  • **Threshold**: as applicable.

8.4 Business/profession benefit/perquisite – 8(iv)

  • **Nature**: benefit or perquisite arising from business/profession, whether convertible into money or not.
  • **Payer**: specified person.
  • **Rate**: 10% of value/aggregate value.
  • **Threshold**: ₹20,000.

Note 2 mandates that where benefit/perquisite is in kind or partly in kind, provider must ensure tax has been deducted **before** providing it.

8.5 E-commerce operator withholding – 8(v)

  • **Nature**: consideration for sale of goods/provision of services via e-commerce operator.
  • **Payer**: e-commerce operator.
  • **Rate**: 0.1% of gross amount.
  • **Threshold**: Nil.

Note 3 contains precedence rules where this overlaps with other TDS provisions and clarifies treatment of direct payments from customers to participants.

8.6 Virtual Digital Assets (VDA) – 8(vi)

  • **Nature**: consideration for transfer of virtual digital asset.
  • **Payer**: any person.
  • **Rate**: 1%.
  • **Threshold**: Nil (subject to any separate monetary limits notified).

Note 6 provides mechanics for VDA-for-VDA and consideration wholly/partly in kind; payer must ensure TDS is discharged before releasing consideration.

9. Action points for professionals

1. **Prepare internal comparison charts** mapping old Act sections (194C, 194J, 194H, 194I, 194-IA, 194-IB, 194M, 194-O, 194S, etc.) to the new Section 393 rows.

2. **Update engagement letters and client templates** to refer to Section 393 and the concepts of “specified person”, “designated person”, “specified senior citizen” and “e-commerce operator”.

3. **Review client payment processes** (AP, treasury, property deals, e-commerce operations, VDA trades) to ensure correct identification of TDS triggers and thresholds under the new table.

4. **Train teams** – both internal staff and client finance teams – on the new table layout and priority rules (Notes 1–6).

Handled correctly, Section 393 can actually make the TDS landscape easier to explain to clients, because it brings all major withholding categories into a single structured table instead of scattered sections.

Related: New Income Tax Act – overview of structure and transitional issues for professionals (link: /blog/new-income-tax-act-overview-professionals)

Related: Practical checklist for migrating client TDS systems to the new Income Tax Act (link: /blog/new-income-tax-act-tds-migration-checklist)

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