The new Income Tax Act has reorganised the TDS chapter and introduced a consolidated table under **Section 393 – Tax to be deducted at source**. For founders, CFOs and finance teams, this section is now the primary reference point for when and how much TDS to deduct on common business payments.

This guide explains the key **TDS provisions on payments to residents** under Section 393(1), with focus on rates, threshold limits and practical compliance points for Indian businesses.

> Disclaimer: This post is a simplified overview based on the draft/proposed text of Section 393 as available at the time of writing. Always cross-check with the final law, rules and official notifications on https://www.incometax.gov.in before taking decisions.

1. Overview of Section 393 – when TDS is required

Section 393(1) says that when a payer makes certain types of payments (listed in a detailed table) **to a resident**, they must deduct income tax at source if:

the **nature of payment** appears in the Section 393 table, and
the **amount exceeds the specified threshold**, and
no specific exemption or carve-out applies.

TDS must be deducted:

on the **entire amount** once the threshold is crossed (or only on the excess, in specific cases like purchase of goods – see below), and
at the **time of credit** to the payee’s account or **payment**, whichever is earlier.

2. Commission and brokerage

2.1 Insurance commission

**Nature of income**: remuneration or reward (commission or otherwise) for soliciting or procuring insurance business, including renewal/continuance.
**Payer**: *Any person* making the payment.
**Rate**: **rates in force** (to be notified / as per Finance Act).
**Threshold**: **₹20,000** per payee.

If total insurance commission paid to an agent during the tax year exceeds ₹20,000, TDS applies on the **entire amount**.

2.2 Other commission and brokerage

**Nature**: commission or brokerage other than insurance commission.
**Payer**: **specified person** (essentially businesses and certain individuals/HUFs crossing monetary limits – similar to old provisions).
**Rate**: **2%**.
**Threshold**: **₹20,000** per payee.

**Practical point:** Track cumulative commission per agent/broker so you don’t miss TDS once the aggregate crosses ₹20,000.

3. Rent payments

Section 393 consolidates TDS on rent with slightly different treatment for “specified persons”.

3.1 Rent paid by non-specified persons

**Nature**: any income by way of rent.
**Payer**: person **other than specified person** (typically larger businesses / entities already under TDS net).
**Rate**: **2%**.
**Threshold**: **₹50,000 per month or part of a month**.

**Note:** For this clause, TDS is deducted at the time of credit/payment for the **last month of the tax year or last month of tenancy**.

3.2 Rent paid by specified persons

**Nature**: any income by way of rent.
**Payer**: **specified person** (certain individuals/HUFs etc. crossing limits).
**Rate**:
**2%** for use of machinery, plant or equipment.
**10%** for use of land, building (including factory building), land appurtenant to building, furniture or fittings.
**Threshold**: **₹50,000 per month** across both categories.

**Practical point:** If total monthly rent (office, shop, warehouse, etc.) exceeds ₹50,000, you need to deduct TDS even as an individual or HUF carrying on business once you fall in the “specified person” definition.

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

Section 393 retains a 1% TDS style mechanism for property transfers, but organises it more clearly.

4.1 General property purchases

**Nature**: consideration for transfer of immovable property (other than agricultural land).
**Payer**: any person **other than** those required to deduct under the special compulsory-acquisition clause.
**Rate**: **1%** of the **higher of**:
consideration stated in the agreement, or
**stamp duty value**.
**Threshold**: **₹50 lakh** or more.

Threshold is computed by aggregating all amounts paid/payable by all transferees to all transferors for that property.

4.2 Certain agreement consideration (section 67(14))

**Nature**: consideration (other than in kind) under specific agreements referred to in section 67(14).
**Payer**: any person.
**Rate**: **10%**.
**Threshold**: **no threshold** – TDS from first rupee.

4.3 Compulsory acquisition compensation

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

5. Capital market-related income

Key rows in the Section 393 table cover TDS on income from units, business trusts, investment funds and securitisation trusts:

**Mutual fund units / specified undertaking / specified company units**: TDS at **10%** above **₹10,000**.
**Distributed income of business trusts** (certain types defined in Schedule V): **10%**, no threshold.
**Income from units of investment funds (section 224)**: **10%**, no threshold.
**Income from securitisation trusts (section 221)**: **10%**, no threshold.

For most retail investors, TDS is visible in statements from mutual funds/AMCs or intermediaries.

6. Interest income

Section 393 distinguishes interest on securities and other interest, and also provides higher thresholds for senior citizens.

6.1 Interest on securities

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

6.2 Bank/co-operative bank/post office interest

**Nature**: interest other than interest on securities, paid by:
a banking company,
a co-operative society engaged in banking, or
a post office (for specified government-notified schemes).
**Rate**: **rates in force**.
**Threshold**:
**₹1,00,000** for senior citizens.
**₹50,000** for others.

6.3 Other interest payers (specified persons)

**Payer**: specified person (other than the above).
**Rate**: **rates in force**.
**Threshold**: **₹10,000**.

There are also **special rules for branches** that do not have core banking solutions, and for adjusting excess/short deductions across the year.

7. Contractors, professional and technical services, and related payments

Section 393 brings together the familiar TDS provisions on payments to contractors and professionals.

7.1 Payments by “designated persons” to contractors

**Nature**: any sum for carrying out any work (including supply of labour).
**Payer**: **designated person** (similar to old definition for 194C).
**Rate**:
**1%** if contractor is an individual or HUF.
**2%** in other cases.
**Thresholds**:
**₹30,000** per contract; and
**₹1,00,000** aggregate during the year.

Where the contract is covered by section 402(47)(e), tax is deducted on invoice value **excluding materials** if shown separately, else on full value.

7.2 TDS by individuals/HUFs on large payments

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

This is effectively a **high-value safeguard**: once an individual/HUF’s payments for work/professional services/commission cross ₹50 lakh, TDS kicks in.

7.3 Professional/technical services, director fees, royalty etc.

**Nature**: fees for professional or technical services, director remuneration (where not covered elsewhere), royalty, and specified sums under section 26(2)(h).
**Payer**: **specified person**.
**Rate**:
**2%** for technical services (non-professional), certain film royalties and call centre business.
**10%** for all other cases.
**Thresholds**:
**₹50,000** for most items.
**No threshold** for director remuneration/fees/commission.

8. Other key TDS cases businesses must track

8.1 Life insurance payouts

TDS at **2%** on the **income component** (not gross receipt) where total exceeds **₹1,00,000**, subject to exemptions.

8.2 Purchase of goods above ₹50 lakh

**Nature**: purchase of any goods.
**Payer**: any person being a **buyer**.
**Rate**: **0.1%**.
**Threshold**: TDS applies only on the **amount exceeding ₹50 lakh**.

TDS under this row **does not apply** if the transaction is already subject to TDS/TCS under another provision.

8.3 Benefits or perquisites arising from business/profession

**Rate**: **10%**.
**Threshold**: **₹20,000**.
Applies even where benefit is in kind or partly in cash; provider must ensure TDS is paid before releasing the benefit.

8.4 E-commerce transactions

**Rate**: **0.1%** on gross amount of sale of goods or provision of services via the platform.
**Payer**: e-commerce operator.
**Threshold**: **no threshold**.
This TDS has precedence over other TDS provisions for such transactions, with specific exceptions.

8.5 Transfer of virtual digital assets (VDA)

**Rate**: **1%**.
**Threshold**: **no threshold** under the table (but practical monetary limits may be notified separately).

Where consideration is wholly/partly in kind or VDA-for-VDA, the person responsible must ensure TDS is paid before releasing the consideration.

9. Practical compliance checklist for businesses under Section 393

1. **Update your vendor master and payment workflows** to map each payment type to the correct row in the Section 393 table.

2. **Track thresholds per payee and per category** (commission, rent, contractors, professional fees, etc.).

3. **Configure accounting/ERP software** to auto-apply correct TDS rates and flags based on Section 393.

4. **Reconcile TDS monthly and quarterly** with books and Form 26Q, and fix any short/excess deductions quickly.

5. **Train finance and operations teams** on new terminology (e.g. “specified person”, “designated person”, VDA, e-commerce operator).

Section 393 is central to the new Income Tax Act’s TDS mechanism. Once you map your regular payments to the table and set up systems around it, ongoing compliance becomes largely process-driven rather than case-by-case.

Related: New Income Tax Act for small businesses in India – structure, key provisions and compliance (link: /blog/new-income-tax-act-small-businesses-india-overview)

Related: TDS for small businesses in India – practical guide for owners and professionals (link: /blog/tds-small-businesses-india-guide)

New Income Tax Act TDS provisions: practical guide for Indian businesses (Section 393)