Flag “Y” should be selected in the field of ‘Reason for non deduction/ lower deduction/higher deduction/ threshold’ to highlight transactions where TDS is not deducted as the threshold for deducting tax has not exceeded. If threshold flag is provided then rate of deduction should be ‘0.0000’ and tax deducted/ deposited (deductee) amount should be ‘0.00’. Threshold flag is can be quoted only  against the following section codes in corresponding challan details: 193,194, 194A, 194B, 194BB, 194C, 194D, 194EE, 194G, 194H, 194I, 194J, 194LA Example: In case there is no deduction of tax in the first two quarters of a F.Y., where the prescribed rate of deduction as per Income Tax Rules is 10%, the deductor should report those transactions in the respective quarterly TDS statements with zero rate of deduction (‘0.0000’), zero tax deducted/ deposited (‘0.00’) and amount paid in the respective quarters with threshold flag. In the third quarter the threshold limit exceeds, the deductor will mention the prescribed rate of deduction, the amount paid in the third quarter, tax deducted/ deposited (deductee) on the total amount paid till that quarter. The same is represented as follows: PAN Rate of deduction (%) Amount paid (Rs.) Amount deducted (Rs.) Amount deposited (Rs.) Reason for non deduction / lower deduction Q1           PAN1 0.0000 1,00,000.00 0.00 0.00 Threshold flag 'Y' present Q2           PAN1 0.0000 1,00,000.00 0.00 0.00 Threshold flag 'Y' present Q3           PAN1 30.000 1,00,000.00 30,000.00 30,000.00 No flag present

TDS threshold reporting: use threshold flag and zero rate until cumulative payments exceed threshold, then report tax on total paid. Report transactions where payments to a deductee did not exceed the threshold in earlier periods using the 'Y' Threshold flag, a deduction rate of '0.0000' and tax deducted/deposited as '0.00'. The flag applies only to specified TDS section codes. When cumulative payments in a later period exceed the threshold, report the prescribed rate and the tax deducted/deposited on the total amount paid to date and do not apply the threshold flag for that period.