All About The Tax Deduction At Source (TDS)

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All About The Tax Deduction At Source (TDS)

Manish kumar Gupta, CA

What is TDS?

TDS stands for Tax Deduction AtSource. It means that when an Individual/Organization/persons making thespecified paymentwhich are mentioned under Income Tax Act, 1961 to another person than that Person (who is making the payment) has to deduct the TDS whenthe amount of the payment exceeds the threshold limit. Such rates and threshold limits are mentioned under the Income Tax Act,1961.

Tax Deduction, Depositand Certification Process

A person who deducts the TDS is called Deductor & the person whose TDS is deducted will be known as Deductee. Such deducted amount is required to be deposited by the deductor to Government as Income Tax on behalf of deductee on monthly basis and inform the Income Tax Department about all the deduction and deposit of TDS on quarterly basis by mentioning the name and PAN of deductees and issue a certificate to deductees about the deduction and deposit of TDS so that they can have the evidence of tax paid on their behalf. This TDS is claimed by assessee (Deductee) at the time of payment of his income tax payable by him at the time of filing of income tax returnon the basis of such certificate and hence we may understand that this virtually an advance tax for deductees. It is a tool by which Governmentestablishes the various check over the income to ensure the avoidance of tax evasion and also collect some part of income tax revenue on monthly basis which helps it to smooth running of Government machinery.

Applicability of TDS

TDS is applicable on every person who is making the payment which are specified under Income Tax Act,1961 for which detail is given in the chart below. While making payment the deductor has to ensure that if the payment is falling in any of the category below beyond the limit specified in the chart then he has to deduct the TDS as per applicable rate which is mentioned over there.However the TDS is not applicable on individual or HUF whose books are not required to be audited under Income Tax law.

Timing of TDS Deduction

TDS is to be deducted at the time of making the payment or booking of expenses in the books of account of the deduction whichever is earlier.

Specified Payments/ Transaction which are Applicable for TDS

TDS is to be deducted on the specified transaction mentioned under Income tax act. These transactions are given below with their section, limits& rate as per FY 2019-20 i.e. AY 2020-21.



SECTION



INCOME TYPE



LIMIT



INDI./HUF TDS RATE IN %



OTHERS TDS RATE IN %



192



192



As per Basic Exemption limit& deduction



Slab rates



_



192A



EPF premature withdrawal



Rs.50,000



10%,if no PAN than 30%



_



193



Interest on securities



Rs.10,000



10%



10%



193




Interest on debenture




Rs.5,000



10%



10%



194



Dividend other than listed company



NA



10%



10%



194A



Interest other than on securities by bank /post



Rs. 40,000(for senior citizen Rs. 50,000)



10%



10%



194A



Interest other than on securities by others



Rs. 5,000



10%



10%



194B



Winning from lotteries ,puzzle ,game



Rs. 10,000



30%



30%



194BB



Winning from horses


Rs. 10,000


30%



30%



194D



Payment for insurance commission



Rs. 15,000



5%



10%



194DA



Payment in respect of life insurance policy



Rs. 1,00,000



1%



1%



194EE



Payment of NSS deposits



Rs. 2,500



10%



10%



194G



Commission on sale of lottery tickets



Rs. 15,000



5%



5%



194H



Commission on brokerage



Rs. 15,000



5%



5%



194I



Rent of Land, Building and Furniture



Rs. 2,40,000



10%



10%



194I



Rent of plant & machinery



Rs. 2,40,000



2%



2%



194IB



Rent



Rs. 50lakh



1%



1%



194LB



Interest from infra bonds



NA



5%



5%



194LD



Interest on govt. securities and bonds



NA



5%



5%



194C


Payment to contractor /s

Payment to contractor /subcontractor (single transaction)

ubcontractor (single transaction)


Rs. 30,000



1%



2%



194C



Payment to contractor during the year



Rs. 1,00,000



1%



2%



194J



Professional fees/Technical fees etc.



Rs. 30,000



10%



10%



194J



Payment to call centre operator



Rs. 30,000



2%



2%



194IA



Compensation on transfer of certain immovable property other than agriculture land



Rs.2,50,000



10%



10%



Applicability of TDS on Non Resident Indian (NRI)

First of all, In case of NRI, TDS will be deducted only on that incomes which are liable to tax in India or earned at the source in India.



INCOME TYPE



TDS RATE %



Transfer on immovable property



20% no exemption limit



Int. on bank deposit



30% no exemption limit



Int. on all other investment



20%



STCG sale within 1 year



15%



Rent



30%



All other income earned as NRI are liable tax in India



30% +10% surcharge(if the income is above 10 lakh)+4% cess.



5.Due date for payment/depositing TDS/return filed



Date of ending of the quarter of FY



Due date for filling of return



30 June (April - June)



31 july of FY



30 September(july-sept.)



31 October of FY



31 December(oct.-dec.)



31 jan. of FY



31 march (jan.-march)



31 may of FY immediately following FY



Months


Due date of TDS payment


April



7th May



May



7th June



June



7th July



July



7th August



August



7th September



September



7th October



October



7th November


November


7th December



December



7th January



January



7th February



February



7th March



March



30th April




In case of any delay in the deposit of TDS or filing the quarterly TDS returnbeyond the due date then the Interest & penalties are payable as applicable. If the deductor do not deduct the TDS then he will not be entitled to claim the related expenses / payment as the admissible expenses while computing his net taxable income.

TDS Certificates and Form 26AS

TDS certificate shows the amount of tax which has deposited by Deductor.TDS certificate to be generated online by TRACES website which is owned by the Income Tax Department. Deductor are required to issue TDS certificate to Deductee within specified time as per Income Tax Act,1961. TDS certificates are of two type a) Form 16& b) Form 16A.

Form 16 is a certificate issued to salaried individuals from their employer when he deducts tax from the employee salary. It contains details of the amount of tax deducted at source (TDS) on salary by your employer along with the salary breakup for the financial year. This form 16 is a proof of that you are employed.TDS is deducted from your salaries for this.Form 16 is a statement that a company issues to its employees when the year is completed. This letter contains employeesTotal income, tax deduction, allowance and 80C (tax relief and excitement of savings)Is a complete description of the evidence filed under Section issued by this institution or company only is done when the income of an employee falls under the taxable income. Deducted an amount as tax from income the amount is called TDS.This form shows how much deduction the company has made in the form of tax which is useful when filling tax returns.

Many times people even complain for not getting Form 16 from the company.If this happens then you can lodge the complaint to Income Tax Department because sometimes it happens that companies do not despite the TDSwhich he has deducted or may be the cases where he has not filed the TDS return irrespective of TDS paid or not. This is a punishable offence. This is main responsibility of the employer to issue Form 16 to its employees.Form 16 is an annual statement while form 16A is will be issued on every quarter. Form 16A is issued under section 203 of the Income Tax Act,1961 which contains the followings:-

1. Name, PAN and TAN of Deductor

2. Name and PAN of Deductee

3. Money, Nature and Date of Payment

4.TDS payment receipt

Form 16A is also a TDS Certificate which is applicable for all types of TDS deducted on income but other than Income from Salary.

Income Tax department also gives a facility to the deductees to check online that who has deducted the TDS, how much he has deducted and when he has deposited to the Government. It also contains the amount of income the deductor has paid or credited.Form 26AS is an annual consolidated credit statement issued under Section 203AA of the Income-tax Act, 1961. It contains details of various taxes deducted on your income by deductors. To avail this facility, one has to login to this site using his/ her PAN and DOB and then he can download online without any charge. The difference between the form 16 / 16A and 26AS is that form 16A/ 16 is a certificate for transactions with one party whereas the 26AS is summery of tax deducted all the parties.



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