Section 393, Income-tax Act 2025: Tax to be deducted at source on payments to residents

Which old TDS sections did Section 393 replace?

Almost all of them, and the money did not move. Section 393 of the Income-tax Act 2025, headed 'Tax to be deducted at source', is one section built around tables. The 1961 Act spread TDS across dozens of provisions numbered from 193 to 194T; Section 393 gathers the non-salary ones into a single place. Salary TDS is next door in Section 392 (the old Section 192), and tax collected at source (TCS) is in Section 394 (the old Section 206C).

The section is organised as three tables, one for each kind of payee. Table 393(1) covers payments to residents and is what this page is about. Table 393(2) covers payments to non-residents, the ground the old Section 195 held. Table 393(3) covers payments to any person regardless of residence, such as cash withdrawals (old 194N) and lottery or online-game winnings (old 194B and 194BA).

So the change a deductor feels is one of address, not amount. A payment that attracted 10% under Section 194J still attracts 10%; it simply sits at a row of Table 393(1) now. The single new mechanic is the payment code, covered in the next section.

The section number (393), the heading 'Tax to be deducted at source' and the three-table structure are cross-checked against published copies of the enacted Act.†

How the payment code replaces the section number

Under the 1961 Act, a deductor identified each deduction by its section: 94C for a contractor, 94J for professional fees, and so on, both on the challan and in the quarterly return. Section 393 keeps the same payments but tags each row of its table with a numeric payment code, and it is the code, not the section, that you now quote.

The codes are four digits. Contractor payments, for example, use 1023 when the contractor is an individual or a Hindu Undivided Family and 1024 for a company, firm or other payee; professional fees use 1027. A return that still carries a bare old-section reference in place of the code is expected to be treated as defective under the draft return schema,† so this is the one change a deductor cannot ignore.

A few of the resident payment codes, so the mechanic is concrete:

• Contractor payment to an individual or HUF: code 1023; to a company or firm: code 1024.
• Professional fees: code 1027. Technical or call-centre fees: code 1026.
• Rent of land or a building: code 1009. Rent of plant or machinery: code 1008.
• Commission or brokerage: code 1006. Dividend: code 1029. Purchase of goods: code 1031.

The four-digit codes come from the TDS return utility rather than the Act's own text; treat the examples here as indicative and confirm the exact code on the filing portal before you file.†

Who must deduct, and who counts as the deductee?

The deductor is whoever makes the payment: a company, a firm, an LLP, a trust, or a business or professional whose accounts were audited in the previous year. Ordinary salaried individuals and small proprietors sit outside most rows, with two big exceptions built into the resident table.

Who the resident table pulls in as a deductor:

• Businesses and professionals liable to tax audit: they deduct on contractor payments, professional and technical fees, rent, commission, interest and the rest.
• Any individual or HUF paying rent above ₹50,000 a month to a resident landlord: the 'specified persons' row (old 194-IB) applies even without a business, at 2%.
• Any buyer of immovable property worth ₹50,00,000 or more: 1% comes off the seller's payment (old 194-IA), whoever the buyer is.
• Any individual or HUF not under audit paying a contractor, commission agent or professional more than ₹50,00,000 in a year (old 194M), at 2%.

The deductee is the resident who receives the payment: the contractor, the landlord, the professional, the shareholder. They do not bear a new tax; TDS is money withheld from what they were owed and parked against their eventual tax bill.

The resident TDS table: rates and thresholds under Section 393(1)

Here are the rows most payers use, with the rate and the point at which TDS starts. All figures are the current ones, after the April 2025 revisions. Rates assume the payee has given a valid PAN; without one, the rate jumps, which the traps section below covers.

Interest on securities (old 193) carries its own ₹10,000 floor and non-bank interest a lower one, so read the specific row before you deduct. GST shown separately on an invoice is usually left out of the base, so TDS is worked on the pre-GST value.

What changed on 1 April 2025

Budget 2025 lifted several TDS thresholds so that small payments stop attracting a deduction. These are amendments to the 1961 Act that took effect for FY 2025-26 and carry straight into Section 393. If you were deducting under the old figures earlier in 2025, this is the catch-up table.

One shift is easy to miss: rent under Section 194-I moved from an annual ₹2,40,000 test to a monthly ₹50,000 one, so a ₹45,000-a-month tenancy that used to cross the yearly line now attracts no TDS at all.

How to work out the TDS to deduct, step by step

Five steps, the same for every row:

• Identify the payment and find its row in Table 393(1). That fixes the rate and the threshold.
• Check the threshold. For a contractor, ask both questions: is this single bill above ₹30,000, or has the year's total to this contractor crossed ₹1,00,000? Either one triggers TDS.
• Confirm the payee's PAN. With a valid PAN you use the table rate; without one, deduct at 20% (or the table rate if it is higher).
• Apply the rate to the amount, usually excluding any GST shown separately. The result is the TDS.
• Pay the payee the balance, deposit the TDS by the due date, and record the payment code so your return matches.

For most rows the base is the amount net of GST, provided the GST is shown as a separate line on the invoice.

Cash withdrawals and winnings are in a different table

A common mix-up: TDS on cash withdrawals from a bank (old Section 194N) is not in the resident table. It sits in Table 393(3), the 'any person' table, because it applies to residents and non-residents alike. The rate is 2% on cash withdrawn above ₹1 crore in a year (₹3 crore for a co-operative society), with a steeper scale for people who have not been filing returns.

Lottery and game-show winnings (old 194B) and online-gaming winnings (old 194BA) live in the same 393(3) table, at the rates in force, with a ₹10,000-per-transaction line for the former. If you came here looking for those, the resident table on this page is the wrong place: the mechanics differ, and so do the codes.

When and how a deductor deposits and reports TDS

First, a TAN. Any regular deductor needs a Tax Deduction and Collection Account Number, quoted on every challan and return; deducting without one is itself a default. The individual rows are the exception: someone paying rent under the old 194-IB, buying property under 194-IA, or paying a contractor or professional under 194M, uses a PAN-based challan-cum-statement and needs no TAN.

For a regular deductor the deducted tax is deposited by the 7th of the month after deduction, with one carve-out: tax deducted in March is due by 30 April. The individual challan-cum-statement rows run to a different clock: the PAN-based challan (old Form 26QB, 26QC or 26QD) is due within 30 days from the end of the month of deduction. Every quarter the deductor files a TDS statement (the old Form 26Q for resident non-salary payments) and, from it, issues each payee a TDS certificate (the old Form 16A). The 2025 Act renumbers these forms, with Form 140 for the statement and Form 131 for the certificate, but the timetable is unchanged.

The new-Act form numbers (Form 140 for the statement, Form 131 for the certificate, Form 141 for the individual PAN-based challan-cum-statement) come from the draft return schema; the familiar Form 26Q, 16A and 26QB/26QC names still describe the same documents.†

How you, the deductee, see and claim the credit

Every rupee deducted against your PAN flows to two places you can check: Form 26AS and the Annual Information Statement (AIS) on the income-tax portal. Both list the deductor, the amount paid, the TDS and the quarter. This is your proof that the tax was withheld, and you set it off against your final bill when you file your return.

Reconcile before you file. If a deductor has deducted but not yet filed its quarterly statement, the credit will be missing from your 26AS, and claiming a credit the department cannot see is a standard trigger for a mismatch notice. Chase the deductor to file or correct its return rather than claiming a figure that is not reflected.

A refund arises whenever the TDS deducted for the year is more than your actual tax, which is common for a pensioner or a small contractor whose slab rate sits below the deduction rate.

Traps: no PAN, the wrong code, and a late deposit

Three defaults cost real money. If the payee has no valid PAN, the rate is 20% instead of the table rate, and no threshold relief applies. Deduct at 1% when you should have used 20% and the shortfall, with interest, lands on you, not the payee.

Deposit late and interest runs at 1% a month from the date the tax was deductible to the date you deducted it, then 1.5% a month from deduction to deposit. Deduct but never deposit and the expense can be disallowed in your own accounts (the old Section 40(a)(ia) route), which disallows 30% of the payment: skip a ₹10,000 deduction on a ₹10,00,000 contractor bill and you can lose the deduction on ₹3,00,000 of otherwise-allowable expense.

One relief that vanished helps small payers: the extra-high TDS on people who had not filed returns (the old Sections 206AB and 206CCA) was withdrawn from 1 April 2025, so you no longer have to screen each payee's filing history before deducting.

The 30% disallowance applies where resident TDS was deductible but not deducted or not deposited by the return due date; deposit the tax later and the disallowed amount is allowed back in that later year.

What deductors and deductees should actually do about Section 393

For a deductor, the highest-value habit is threshold discipline. Section 393's thresholds are per-payee and, for several rows, per-year, so track running totals: a contractor you have already paid ₹95,000 across the year triggers TDS as soon as the year's total crosses ₹1,00,000, which the next mid-size bill will do. Set an alert at ₹1,00,000 per contractor and ₹50,000 per professional, and you will not miss a deduction.

For an individual paying rent, the ₹50,000-a-month line is a real planning number. Rent of ₹50,000 or less a month carries no TDS obligation at all; at ₹50,001 you must deduct 2% for the whole year and file a challan-cum-statement. If your rent sits on the edge, know which side of ₹50,000 you are on before the tenancy starts, because the compliance jump is real even though the tax is small.

For a deductee, the move is defensive: open your AIS in June, before the filing rush, and match every TDS entry to your own records. If your slab rate is below the deduction rate, a pensioner taxed at nil but suffering 10% on bank interest, say, file to claim the refund, or lodge Form 15G or 15H with the bank at the start of the year so nothing is deducted in the first place.

Worked examples

Section 393 FAQs