Tax Deducted at Source works on direct taxation mechanism which applies to various income. TDS designed for tax collection at a source of income i.e. at the time of income payout. As deduction of TDS done right at the source, it helps in reducing cases of tax evasion and secondly reduces the burden of a taxpayer from paying taxes as a lump sum at the end of the financial year. With the TDS mechanism, the government ensures to receive a steady inflow of revenue round the year.
In the case of Salary Income
- It is mandated for an employer to provide Form 16 to the employee in which specifies the amount of Tax Deducted at Source.
- Form 16 includes details regarding the payment of tax, deduction, and computation.
- Form 16 given within 31st May of every financial year.
For non-salaried cases
- They get Form 16A from the tax deductor with the mentioning of all details of payments, tax computation, and deduction.
- The certificate issued to the deductee within 15 days of the due date of filing the TDS return.
TCS: Tax collecting at Source is a certificate that contains tax deducted and paid in detail which issued in the form of 27D.
Depositing TDS to Central Government
- The deductor needs to deposit the TDS to the Central Government by making payment.
- The payment can be made online through the official portal of NSDL using Challan 281 and by routing the payments through net banking.
- The TDS amount needs to be deposited before filing the TDS return
- The e-payment is compulsory for all assesses who are liable for audit under Section 44AB.
Forms used for filing TDS return
- Form 24 Q: For TDS on salary
- Form 26 Q: For TDS on payments other than salary
- Form 27 Q: TDS deducted for non- residents from interest income, dividend or any other payment
- Form 27 EQ: Quarterly statement for collection of tax at source
Advantages of Tax Deducted at Source
- It helps from evading tax.
- Throughout the financial year, TDS Deductions takes place, it’s an effective mode of revenue inflow to the government.
- It widens the base of the tax collection.
- It is a way of sharing the responsibility of collecting tax between the tax deductor and the government.
Deductors can provide the TDS return either in physical format or in electronic format. It is mandated for below-mentioned employers to file the TDS return in electronic format as per Section 206 of IT Act:
- All Corporate Deductors
- All Government Deductors
- If the deductor is liable for audit under Section 44AB
- If the number of deductee records in a statement for any quarter of the financial year is twenty or more.
Below are some of the pre-requisites for e-filing TDS return:
- Deductors should be registered in e-filing and should also hold valid TAN
- Return Preparation Utility (RPU) and File Validation Utility (FVU) needs to be downloaded from the NSDL website (https://www.tin-nsdl.com/).
- Statement of TDS needs to be prepared using these utilities.
- Register for valid DSC in e-filing site
| Nature of Payment | TDS Rates | Applicable Section |
Salary Payment
| Regular Slab rate
| Section 192 |
Interest earned on securities
| @10%
| Section 193
|
Dividend accrued (apart from the dividend as mentioned in the Section 115-O
| @10% (20%, in case of invalid PAN No.
| Section 194 |
Income earned other than securities.
| @10%
| Section 194A |
| Income earned on the prize of money, lotteries, games or crosswords | @30%
| Section 194B |
Commission payment for insurance agents.
| @ 5% (20%, in case of invalid /no PAN)
| Section 194D |
Premium paid for any Life Insurance policy
| @1%
| Section 194DA |
Rental Income
| For plant and machinery @2% Land, furniture, fitting and furniture @10% | Section 194I |
Payment is done after transfer of any immovable property exclusive of agricultural land.
| @1% | Section 194IA |
Process for E-Filing of TDS Return
- Go to e-filing home page.
- Log in with the user ID and password provided when you are making a registration.
- Go to TDS section and select ‘’upload TDS’’ option
- Select and fill in all details correctly and validate the statement details
- Upload the TDS/TCS statement (prepared using utilities downloaded from NSDL website)
- E-filing requires the digital signature of the deductor. Generate signature file using DSC and attach the signature file.
- Click on the upload button and you will receive the confirmation message.
- Filed TDS status can be viewed online under the “view filed TDS’’ tab.
Important factors to remember while filing the TDS return
- Everyone who is making TDS Deduction needs to have TAN (Tax deduction and Collection Account Number) according to the provisions of Section 203 of the Income Tax Act.
- TAN is an essential requirement for filing TDS return and should be mentioned on the issued TDS certificate.
- TDS deductions are linked to your PAN (Permanent Account Number). It is essential to have PAN details to deduct TDS.
- The deductor needs to quote every deductees PAN.
- Every deductee needs to provide the TDS certificate to adjust the amount of TDS paid against the total tax payable.
- TDS details can be checked through Tax credit Form 26AS which is available to all PAN holders.
This consolidated tax statement gives you the clear details of TDS deducted for various type of payments by each deductor.
What happens to you file late ITR?
If the deductor fails in furnishing TDS return before the due date, then he or she needs to pay a penalty of Rs 200 per day till the date of default. And the total amount of such penalty cannot go beyond the total amount of tax deducted at source.
In case you are not filing an ITR?
If the TDS deductor fails to file TDS return within a year from the due date, he or she will be liable to pay a penalty which ranges from Rs 10,000 to 1 Lakh. The same is applicable for cases in which incorrect details are furnished by the deductor.
TDS is refundable in cases where:
- If the TDS deducted is more than the total amount of tax you are supposed to pay in a year, you are eligible to claim for a TDS refund.
- When your total income falls below the minimum taxable limit, TDS already deducted can be claimed as a refund.
How to place a request for non-deduction of TDS at source if an income falls below the basic exemption limit?
- Do the declaration of annual income below the basic limit for the respective financial year by submitting the Form 15G/15H.
- The declaration holds good only for the particular year only, so it needs to be submitted every year in which your taxable income is below the limit.
- You can place an application for Lower deduction or nil deduction of TDS.
- Duly filled Form 13 must be submitted to Income Tax Officer to do so.
Understand the process of TDS Refund
TDS refund can be claimed via the website of Income Tax. You must file the Income Tax Return and show the refund of TDS. Post filing of the Income Tax Returns, the department of Income Tax Return will process the TDS refund request.
The amount after that may be credited to your account within 6 months. One can easily check the status of the TDS Refund online using your e-filing site login.
