Introduction

Tax Deducted at Source (TDS) is a system of Indirect Tax Collection by Income Tax Department, where an individual is responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment. As the name suggests, the concept of TDS is to deduct tax at its source and it is an indirect tax collection with the concept of “pay as you earn” and collect as it is being earned”.

Rates of TDS deducted

TDS Rates Applicable for Persons Resident in India

Section Particulars TDS Rates in % Threshold limits

192

Salary

As per the rates of Income Slab

As per the rates of Income Slab
192A Payment of accumulated balance of Provident Fund which is taxable in the hands of an employee 10
193 Interest on securities    
  a) Interest on Securities 10 Nil
  b) Interest on Debentures; 10 Nil
194 Dividend
(other than the listed companies)
10 Nil
194A Income by way of interest other than interest on securities 10 Rs. 5,000
194B Winnings from lotteries/ puzzles/card games 30 Rs. 10,000
194BB Income by way of Winnings from horse races 30 Rs. 5,000
194C Payment to contractor/sub- contractor

a) HUF/Individuals

b) Others

 

1

2

Rs. 30,000
194D Insurance commission 5 Rs. 20000
194DA Payment in respect of life insurance policy 1
194EE Payment of NSS Deposits 10 Rs. 2,500
194F Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India 20 Nil
194G Commission on sale of lottery tickets 5 Rs. 1,000
194H Commission or brokerage 5 Rs. 5,000
194-I Rent
a) Plant & Machineryb) Land or building or furniture or fitting
2

10

Rs.1.8 lakhs

194-IA

Payment on transfer of certain immovable property other than agricultural land 1

194-IB

Payment of rent by individual or HUF not liable to tax audit 5

194-IC

Payment of monetary consideration under Joint Development Agreements 10

194J

Any 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.
10 Rs. 30,000

194LA

Payment of compensation on acquisition of certain immovable property

10

Rs.1 lakh


194LBA

Income distribution by a Business Trust u/s 115UA

10


194LBB

Income distribution by an Investment Fund u/s 115UB

10


194LBC

Income distribution by a Securitisation Trust u/s 115TCA

25% in case of Individual or HUF 30% in case of other individuals

 

Any other Income

10

Procedure to file TDS returns

Challan for TDS Payment

Challan 281 is basically used for depositing Tax Deducted at Source and Tax Collected at Source by corporate as well as non-corporate entities. TDS  is a Procedure introduced by the Government in which the person or a deductor before making the payment of specified nature to the payee shall deduct tax at a specified percentage of such amount payable. TDS amount is deposit to the Income Tax Department.

The due date for Non-government assessee:

  • Tax is to be deposited for months other than March – 7th of the next month.
  • 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.

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 April 2017, the due date shall be May 7, 2017.

How to file your eTDS Returns

There are various TDS Forms have been set depending on the reason of deduction. Different TDS forms as follows:

Form No. Particulars
Form 24Q Statement for Tax Deducted at Source from salaries
Form 26Q Statement for Tax deducted at source on all payments except salaries
Form 27Q Statement for deduction of tax payable to Non-Resident of India
Form 27EQ Statement of collection of tax at source

TDS Return Due Date

Quarter Period TDS Return Due Date
1st 1st April to 30th June July 31st  2017
2nd 1st July to 30th September Oct 31st  2017
3rd 1st October to 31st December Jan 31st  2018
4th 1st January to 31st March May 31st 2018

Interest on late payment of TDS

Section Nature of Default Interest subject to TDS/TCS amount Period 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

On the Salary of the Individual the employer deducts TDS on total income of the individual; including income other than his salary after taking into account all deductions and exemptions.

TDS rate on Salary Income is applicable for an individual income and deductions of his total income.

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.

TDS rate on Interest Income is 10% of the income of the individual if PAN is submitted by the individual to the bank, otherwise 20% of his 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 is 10% of the withdrawal if PAN has been provided. Otherwise, it is 30% of the amount of the employee.

On NRIs

It is not allowed 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 Tax Deducted at Source 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 declares or 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

Form 26AS is a consolidated annual tax credit statement issued under Rule 31AB of Income Tax Rules to PAN holders. This statement with respect to a financial year will include details of:

  1. All financial transactions involving TDS/TCS.
  2.  Tax payment under Challan 280 for
  1. Details of Refunds and interest thereon paid to the assessee by the Income Tax Department.
  2. Details of Annual Information Report Transactions.
  3. TDS deducted on sale of immovable property (both for buyer & seller)
  4. Verification of Corporate Identity Number in Non-TDS payments

Requirement for 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 case if you forget or delay the filing of your TDS return, a penalty of Rs. 200 per day will be charged on the deductor for as long as the return is not filed.

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 of a sum not be less than Rs. 10,000/- which may extend to Rs. 1,00,000/- if

  • Period of non-filing exceeds one-year time limit to File Tax Deducted at Source Statement by the deductor
  • Wrong details like PAN,  Amount of tax, Payment of Challan etc. by the deductor

There are certain provisions of Tax Deduction at Source are as follows:

1- File TDS on salary

When the employer pays salary to the employee, the employer is mandatorily required to deduct the TDS on salary under section 192 and the balance amount after the deduction of Tax Deducted at Source Is payable to the employee. The TDS on salary is always required to be deposited on the basis of the average rate of income tax of the taxpayer for that financial year.

2- File TDS on Rent

The TDS on rent is liable to be deducted from the period making the payment if the total amount which is to be paid during the year exceeds Rs180000 per annum. This limit of Rs 180000 per annum is per the taxpayer. Section 194I of the income tax act, 1961 specifies different rates of deducting the tax at source for different types of assets.

3- File TDS on Professionals

As per section 194J of the Income-tax Act, 1961, TDS on professionals  is to be deducted at the rate of 10% on any amount that is to be paid to any resident as:

  • Fees for professional service
  • Royalty
  • Fees for technical services
  • Any sum referred in section 28

But some of the exceptions to section 194J are that:

Firstly, no tax should be deducted under section 194J if the amount paid or which is likely to be paid during the financial year doesn’t exceed Rs 300000.

Tax Deducted at Source is not liable to be deducted in case of individuals and HUF. But this exception won’t be applicable if the individual /HUF is liable to get his tax audit conducted under section 44AB.

4- File TDS on interest

Section 194A deals with the deduction of TDS on interest other than interest on securities like interest on fixed deposits, interest on loans and advance other than banks. It is only applicable to a resident and is not applicable in a case when the payment of interest is to be made to a non-resident. Under this, TDS is to be deducted when the amount of such interest which is paid or credited or is likely to be paid or credited in a financial year doesn’t exceed:

  • Rs. 10,000 where the pay is
  1. Banking company or any bank or a banking institution
  2. A cooperative society engaged in the business of banking
  3. A post office (on deposit under the scheme framed and notified by the Central Govt )
  • Rs. 5,000 in any other case 

5- File TDS from interest on securities

Section 193 is applicable on interest on certain specific securities from which Tax Deducted at Source is to be deducted at the time of payment or credit to the books of accounts whichever is earlier.

Any person who is responsible for paying the interest on securities to a resident has to deduct TDS at the rate of 10%.

In case you are confused about TDS Return Filing as a deductor, feel free to consult the experts at LegalRaasta. You can get comprehensive assistance with our TDS Return filing software which supports TDS on Salary payments Form 24Q, Rent, Interest, Commission and other Non-salary transactions (Form 26Q), NRI (Form 27Q) and TCS Form27EQ