Tax Deducted at Source (TDS)

Due Date for Depositing TDS

Income Sources Subject to TDS Deduction

1. Salary

1. Commission earned

1. Rent

1. Interest payments by banks

1. Professional or consultant fees

1. Contractor payments

1. Amounts under LIC

1. Compensation for acquiring immovable property

1. Brokerage or commission

1. Insurance commission

1. Interest on securities

1. Remuneration paid to company directors

1. Winnings from games like crossword puzzles, cards, lotteries, etc.

1. Interest (apart from interest on securities)

1. Deemed dividends

1. Transfer of immovable property

When should TDS be Deducted and Who is Liable to Deduct?

1. If you are making any sort of payment specified under the Income Tax Act, then TDS will be deducted at the time of these payments. However, no TDS will be deducted if you are an individual or Hindu Undivided Family (HUF), and your books are not required to be audited.
2. In case of rent payment by an individual or HUF member, where the amount payable exceeds Rs.50,000, then a TDS at 5% will be deducted even if your books are not liable for a tax audit. You will not be required to apply for a Tax Deduction Account Number (TAN) if you are liable to have TDS deducted at 5%.
3. If you are a working professional then your employer will deduct TDS as per the applicable income tax slab rates. The bank with whom you hold a working account will deduct TDS at 10%. However, if they do not have your PAN details, then TDS at 20% will be deducted. For the majority of payments, TDS rates are set in the Income Tax Act the payer deducts TDS as per the rates applicable.
4. You will not be required to pay any tax if you submit your investment proofs to your employer and your total income that can be taxed is below the total taxable threshold. Thus, no TDS will be deducted in this case. You can also submit Form 15G and Form 15H to the bank if the total taxable income is below the total taxable limit. The bank in this case will not deduct any TDS on your interest income.
5. In case you failed to submit the investment proof to your employer and the bank deducted the TDS, you can file a return and claim a refund of it, provided your total taxable income is below the total taxable limit.

TDS Return and Associated Forms

A TDS return is a statement issued after successful payment of taxes. It details all transactions related to TDS deductions during a quarter. This statement, prepared by the payer and submitted to the Income Tax Department, includes the following:

1. TDS deduction details

1. PAN (Permanent Account Number) of both payer and payee

1. Payment details made to the Government

1. TDS challan information

Below is a table summarizing the forms associated with TDS returns:

TDS Return Acknowledgment Form 27A

The person deducting TDS is required to provide an acknowledgment certificate to the taxpayer. This certificate acts as proof that taxes have been deducted and deposited with the Government. It includes:

1. Payment particulars

1. Payee and payer details

1. Tax deduction date

1. Tax credit submission date

TDS Certificate Types & Usage

Different certificates are issued based on the respective TDS forms. These certificates are essential for claiming tax credits or refunds while filing an Income Tax Return.

These forms and certificates ensure compliance with TDS provisions and facilitate a smooth tax filing and refund process.

What are the TDS Rates on Salary?

TDS rates on salary are the same as the tax slab rates applicable to individuals. If you are less than 60 years of age, your TDS liability will be nil in case your income is less than Rs.2.5 lakh.

Individuals who earn between Rs.2.5 lakh and Rs.5 lakh will be subject to TDS at 5%, while those who earn between Rs.5 lakh and Rs.10 lakh will have a TDS liability of 20%, and those who earn more than Rs.10 lakh will be subject to a TDS rate of 30%.

Under the new tax regime, no TDS will need to be paid for an annual income of up to Rs.2.5 lakh. In case the annual income is between Rs.2.5 lakh and Rs.5 lakh, the TDS liability is 5%. In case the annual income is between Rs.5 lakh and Rs.7.5 lakh, the TDS liability is 10%.

In case the annual income is between Rs.7.5 lakh and Rs.10 lakh, the TDS liability is 15%. In case the annual income is between Rs.10 lakh and Rs.12.5 lakh, the TDS liability is 20%. In case the annual income is between Rs.12.5 lakh and Rs.15 lakh, the TDS liability is 25%. In case the annual income is above Rs.15 lakh, the TDS liability is 30%.

How to File TDS Return Online?

In order to file your TDS return, there are few things you must ensure. They are as follows:

1. You must have a valid Tax Deduction and Collection Account Number (TAN) and make sure it is registered for e-filing
2. Prepare your TDS statements using Return Preparation Utility before validating the same using File Validation Utility
3. You must have a valid Digital Signature Certificate that is registered for e-Filing in case you want to upload your returns using DSC
4. Provide the demat account or bank account details of your principal contact, or ensure that his/her PAN is linked with his/her Aadhaar in case you want to upload your returns using Electronic Verification Code.

Steps to Upload TDS Statements

Here is a simple guide to upload your TDS statements on the official website of the Income Tax Department :

1. Visit Income Tax Official Portal. On the right side of the page, you will see 'Registered User?' followed by the 'Login Here' option.
2. Click on the aforementioned option and fill in your login information before clicking on 'Login'. Your TAN will be your user ID.
3. After you have logged in, locate the 'TDS' drop-down menu where you will have to select 'Upload TDS'.
4. A form will appear, and you will have to choose the right details before clicking on 'Validate'.
5. You will then have to validate your returns using either DSC or EVC.

Challan for TDS Payment

Challan ITNS 281 is the Challan form for online payment of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source). Challan No. 281 is applicable for Tax Deducted at Source / Tax Collected at Source (TDS/TCS) from corporates and non-corporates. TDS exception is essentially a mechanism developed by the Indian Government where in there is a tax deduction at the source of an income, calculated at a specific rate and thereby becomes payable to the department of Income Tax.

Penalty for Late Filing TDS Return

Here are the penalties levied by the Income Tax Department for the failure to submit or defaults in submitting your TDS return/statements:

1. Failure to submit your returns: Under Section 272A (2) of the Income Tax Act, a penalty of Rs.100 will be levied for each day that the returns remain unsubmitted, subject to a maximum of the TDS amount.
2. Failure to file your returns on time: Under Section 234E of the Income Tax Act, a penalty of Rs.200 will be levied for each day that the returns remain unfiled, subject to a maximum of the TDS amount.
3. For defaults in the filing of TDS statement: Under Section 271H of the Income Tax Act, a penalty of Rs.10,000 to Rs.1 lakh will be levied in case the deductor defaults at the time of filing TDS return within the due date.
4. For incorrect details: Under Section 271H of the Income Tax Act, a penalty of Rs.10,000 to Rs.1 lakh will be charged in case the deductor submits incorrect information pertaining to PAN, challan particulars, TDS amount, etc.
5. For non-payment of TDS: Under Section 201A of the Income Tax Act, interest will also be levied along with the penalty in case TDS is not paid within the due date. In case a part of the tax amount or the whole of it is not deducted at source, interest will be charged at 1.5% every month starting from the date on which the tax was deductible to the date on which the tax is actually deducted.

Steps to Check TDS Deduction Status

One needs to follow the steps mentioned below to check their status of TDS

Step 1: Visit the official website of the Income Tax Department.

Step 2: Provide your details and login to the portal.

Step 3: Under the 'My Accounts' tab, click on 'view Form 26AS (Tax Credit)'.

Step 4: Select the year and PDF format to download the file.

Step 5: Your downloaded PDF file is password protected. The password here will be the date of birth mentioned on your PAN. For example, if your date of birth is 5 March 2000 then the password will be 05032000.

Step 6: You can then view all the details related to the TDS deduction.

Step 7: You can use your bank's net banking facility to check whether your TDS has been deducted provided your PAN is linked to it.

How to Claim TDS Refund?

Individuals can claim TDS refund on the Income Tax website. However, the Income Tax Returns must be filed, and the TDS refund must be shown. Once the ITR is filed, the TDS refund will be processed by the Income Tax Department. The refund might be credited to the bank account within 6 months. Individuals can also check the status of the refund on the official website of the Income Tax Department.

What is a TDS Certificate?

TDS Certificates are of two types: Form 16 and Form 16A. Under Section 203 of the Income Tax Act, 1961, a certificate must be provided to the deductee showing the amount that has been subtracted as tax. The deductor is liable to provide this form to the deductee.

1. For salaried class: In case of salaried employees, employers are required to provide them with Form 16 with a mention of the amount that has been deducted as TDS. Form 16 contains a host of details such as the computation of tax, the deduction of tax, and the payment of TDS. Employers must issue this form to their employees before May 31 of the following financial year.
2. For non-salaried class: The deductor provides the deductee with Form 16A, and it contains all the details regarding the computation of tax, the deduction of TDS, and payments.

Advantages of TDS

Some of the advantages of TDS are:

1. It ensures that people do not evade payment of taxes.
2. TDS acts as a steady source of revenue for the Government.
3. It is much more convenient for the deductee as the tax amount payable is automatically deducted.
4. The burden on Tax Collection Agencies to collect tax significantly reduces.