Who Is Not Eligible for TDS Deduction in India?
Who Is Not Eligible for TDS Deduction in India?
TDS Exemptions Explained for FY 2024–25 | AY 2025–26
TDS (Tax Deducted at Source) is a system designed to collect tax at the time of income payment. However, not everyone must deduct or be subject to TDS in all scenarios.
So, a common question is:
“Who is not eligible for TDS deduction or not liable to deduct TDS?”
Let’s clarify this by looking at TDS applicability from both payer and payee perspectives.
✅ 1. Who Is Not Liable to Deduct TDS? (Payer-side)
🔹 a. Individual or HUF Not in Business or Audit
• Individuals or Hindu Undivided Families (HUFs) not carrying on business/profession or whose turnover is below the audit limit (₹1 crore for business / ₹50 lakh for profession) are not required to deduct TDS, except under specific sections.
Example:
If you’re a salaried person paying rent > ₹50,000/month → Yes, you must deduct TDS (Sec 194-IB)
But if you're paying a professional ₹40,000 one-time → No TDS is required
🔹 b. Individuals Below the Tax Audit Limit
If your business turnover in the previous year is below:
• ₹1 crore (business)
• ₹50 lakh (profession)
➡️ You're not required to deduct TDS under most provisions like 194C, 194J, etc.
🔹 c. Payments Below Threshold Limits
If the payment amount is below the TDS threshold, no deduction is required.
| Nature of Payment | Threshold Limit |
| Bank FD Interest (non-senior) | ₹40,000/year |
| Rent (land/building) | ₹2,40,000/year |
| Professional Fees | ₹30,000/year |
| Contractor (single payment) | ₹30,000 / ₹1L aggregate |
✅ 2. Who Is Not Subject to TDS Deduction? (Payee-side)
🔹 a. Persons with Income Below Taxable Limit
If you are:
• A senior citizen with total income below ₹3L (or ₹5L/₹7L with rebate)
• A non-senior citizen with an income below ₹ 2.5 L
➡️ You can submit Form 15G or 15H to the payer (like a bank) to avoid TDS deduction
🔹 b. Entities Specifically Exempted from TDS
No TDS is deducted when paying to:
| Entity Type | Exemption Status |
| Reserve Bank of India (RBI) | ✅ Exempt |
| Government Bodies | ✅ Exempt |
| Mutual Funds (under Sec 10(23D)) | ✅ Exempt |
| LIC, UTI, and certain Insurance companies | ✅ Exempt |
| Notified Institutions (as per CBDT) | ✅ Exempt |
🔹 c. PAN Not Available – But Form 15G/H Submitted
Even if PAN is missing, if the person submits a valid 15G/15H with correct details, banks may not deduct TDS—but this is subject to verification.
⚠️ Consequences of Wrong Deduction or No Deduction
• Deductor may face interest (Sec 201), penalties, and disallowance of expense
• Deductee may face delays in getting TDS credit/refund if the PAN is wrong or not linked
Final Words
Not everyone is required to deduct or pay TDS. It depends on:
• Your income level
• Nature and volume of transaction
• Whether audit limits or specific sections apply
• Proper submission of Form 15G/15H (for exemption)
