Introduction

TDS abbreviates Tax Deducted at Source is a means of indirect tax collection by the concept of pay as you earn” and “collect as it is being earned” by Indian authorities according to the Income Tax Act, 1961 and it is managed by the Central Board of Direct Taxes (CBDT), which comes under the Indian Revenue Services (IRS).

What is TDS?

Tax Deducted at Source is an indirect system of deduction of Tax by Indian authorities according to the Income Tax Act, 1961 at the point of generation of income tax. Tax is deducted by the payer and is remitted to the government by the payer, on behalf of the payee. TDS Return is a statement which the taxpayers have to file quarterly in a year and submitted to Income Tax Department. It is mandatory to submit TDS return if you are a deductor.

The deducted sum is required to be submitted to the credit of the Central Government. The recipient income tax has been deducted at source gets the credit of the amount deducted in his personal assessment on the basis of the certificate issued by the deductor.

How TDS Deducted?

It is a percentage of the overall payment is withdrawn from the source (a person or an organization) that is making payments. The source is known as the Deductor and the person whose payment is getting deducted is called the Deductee. For instance, a deductor is an employer paying salary to an employee (the deductee).

Rates of TDS deducted

1- In the case of a person other than a company

1.1 Where the person is resident in India

SectionParticularsTDS Rates in %Threshold limits
192SalaryAs per the rates of Income SlabAs per the rates of Income Slab
192APayment of accumulated balance of provident fund which is taxable in the hands of an employee10
193Interest on securities
a) Interest on Securities10Nil
b) Interest on Debentures;10Nil
194Dividend
(other than the listed companies)
10Nil
194AIncome by way of interest other than interest on securities10Rs. 5,000
194BWinnings from lotteries/ puzzles/card games.30Rs. 10,000
194BBIncome by way of Winnings from horse races30Rs. 5,000
194CPayment to contractor/sub- contractor

a) HUF/Individuals

b) Others

 

1

2

Rs. 30,000
194DInsurance commission5Rs. 20,000
194DAPayment in respect of life insurance policy1
194EEPayment of NSS Deposits10Rs. 2,500
194FPayment on account of repurchase of unit by Mutual Fund or Unit trust of India20Nil
194GCommission on sale of lottery tickets5Rs. 1,000
194HCommission or brokerage5Rs. 5,000
194-IRent
a) Plant & Machineryb) Land or building or furniture or fitting
2

10

Rs. 1.8 lakhs
194-IAPayment on transfer of certain immovable property other than agricultural land1
194-IBPayment of rent by individual or HUF not liable to tax audit5
194-ICPayment of monetary consideration under Joint Development Agreements10
194JAny sum paid by way of

  1. Fee for professional services
  2. Fee for technical services
  3. Royalty,
  4. Remuneration/fee/commission to a director or
  5. For not carrying out any activity in relation to any business
  6. For not sharing any know-how, patent, copyright etc.
10Rs. 30,000
194LAPayment of compensation on acquisition of certain immovable property10Rs. 1 lakh
194LBAIncome distribution by a Business Trust u/s 115UA10
194LBBIncome distribution by a Investment Fund u/s 115UB10
194LBCIncome distribution by a Securitisation Trust u/s 115TCA25% in case of Individual or HUF 30% in case of other individual
Any other Income10

Procedure to file TDS returns

Challan for TDS Payment

Challan No. 281 is used for depositing TDS and TCS by corporate as well as non-corporate entities. TDS is a mechanism introduced by the Government in which the person (deductor) before making the payment of specified nature (such as salary, rent, etc.) to the payee (deducted) shall deduct tax at a specified percentage of such amount payable and deposit it to the Income Tax Department. TCS or Tax Collected at Source is the tax collected by the seller from the buyer at the time of sale of specified goods.

The due date for  Non-government assessee:

  • Tax is to be deposited for months other than March – 7th of the next month. For example, if the TDS is to be deposited for the month of August 2016, the due date shall be September 7, 2016.
  • Tax is to be deposited for the month of March – 30th April. For example, if the TDS is to be deposited for the month of March 2017, the due date shall be April 30, 2017.

The due date for Government assessee:

Tax Deposited without challan – Same day

Tax deposited with challan – 7th of the next month. For example, if the TDS is to be deposited for the month of May 2017, the due date shall be June 7, 2017

Unlike for non-government assesses, in the case of government assesses, for the month of March also, the payment is to be made by 7th of the next month. Hence if the TDS is to be deposited for the month of March 2017, the due date shall be April 7, 2017.

How to file your e-TDS Returns

There are different Tax Deducted at Source Forms have been set depending on the reason of deduction. The various TDS forms are as follows:-

Form No.Particulars
Form 24QStatement for TDS from salaries
Form 26QStatement for tax deducted at source on all payments except salaries
Form 27QStatement for deduction of tax payable to NRI
Form 27EQStatement of collection of tax at source

TDS Return Due Date

QuarterQuarter PeriodTDS Return Due Date
1st Quarter1st April to 30th June31st July, 2017
2nd Quarter1st July to 30th September31st Oct, 2017
3rd Quarter1st October to 31st December31st Jan, 2018
4th Quarter1st January to 31st March31st May, 2018

Interest on late payment of TDS

SectionNature of DefaultInterest subject to TDS/TCS amountPeriod for which interest is to be paid

201A

Non-deduction of tax at source, either in whole or in part

1% per month

From the date on which tax deductible to the date on which tax is actually deducted

 

After deduction of tax, non-payment of tax either in

After deduction of tax, non-payment of tax either in

From the date of deduction to the date of payment

Applicability Of TDS

Salary income

The employer deducts Tax Deducted at Source on total income; including income other than salary after taking into account all deductions and exemptions.

TDS rate: It is applicable to an individual based on his income and deductions.

Interest income

TDS is deducted by banks on FDs and RDs if the interest exceeds Rs 10,000 a year. TDS does not end tax liability. Someone in a higher tax slab will need to pay additional tax. Those individuals which come under lower income bracket can seek a tax refund.
TDS rate: TDS is 10% of income If PAN has been provided, Otherwise it is 20% of income.

EPF withdrawals

EPF means Employee Provident Fund and if any employee withdraws before five years of service then TDS should be deducted. However, no TDS on EPF deducted on withdrawals of less than Rs 50,000 Earlier limit was Rs.30,000. After 5 Yrs. No TDS will deduct on EPF withdrawals.
TDS rate: If PAN has been provided, TDS is 10% of the withdrawal. Otherwise, it is 30% of the amount.
On NRIs

It is not permitted to submit Form 15G and Form 15H  for NRIs and TDS is mandatory on all incomes. In a case of resident Indians, TDS strikes only if interest exceeds Rs 10,000 a year.

Non – Applicability

TDS can be avoided by submitting Form 15G or 15H. Form 15H is for senior citizens and they can submit if there is no tax on total income. Form 15G is for everybody else and they can file if the tax on total income is nil and total interest income is less than the basic exemption limit except NRIs.

TDS Certificates

Form 16

Form 16 is your salary TDS certificate issued by the employer deducting the tax while making payment to an employee. If an employer deducts Tax Deducted at Source on salary as per the Income tax rules of India then he must issue Form 16.

Form 16A

Form 16A is a TDS Certificate which certifies TDS amount deducted and deposited on all other payments except salary.

Tax Deducted at Source on salaries is deducted at the average rate of estimated income (as per the Slab rates ), TDS  on interest, Rent etc. is to be deducted at the rates specified by the government.

All details that are there in Form 16A are available on Form 26AS. This can be used to file your return. But the same is not in the case of Form 16. All the Details of Form 16 that are available in Form 26AS is only deducted by the employer.

Form 26AS

It is a consolidated tax credit statement issued under Rule 31-AB of Income Tax Rules to PAN holders.

This statement with respect to a financial year will include details of:

a) All financial transactions involving TDS/TCS

c) Advance tax/self assessment tax/regular assessment tax etc

d) Verification of Refunds details, if the refunds issued by the Income Tax Department.

e) Details of Annual Information Report Transactions.

f) TDS on sale of immovable Property (both for buyer & seller)

g) Verification of Corporate Identity Number in Non-TDS payments

Requirement of  deducting TDS

Under the Section of 206AA, if PAN No. is not furnished by the taxpayer then the withholding tax rate would be at 20% or at the rates in force or whichever is higher. PAN is not mandatory for the Non-residents where taxes have been deducted.

Penalty for Late Filing of TDS Return

If the deductor/collector does not file the return as per the due dates each quarter then there are monetary penalties for the taxpayer.

Section 234E-Levy of Fees

In this case, if you forget or delay to file your TDS return, then as long as  return is not filed, an amount of fees of Rs. 200 per day will be charged on the deductor,

Before the Tax Deducted at Source filing, such fee should be paid and it will be shown in the TDS return.

Section 271H-Penalty

Deductor has to pay a penalty which has a range from a minimum of Rs. 10,000/- to Rs. 1, 00,000

  • Exceeds one-year time limit to File Tax Deducted at Source Statement by the deductor
  • Wrong details like PAN, TDS Amount, Payment of Challan etc. by the deductor

For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business ReturnBulk Return or Revised Return Filing.