Trusted by 1L+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 1L+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below
Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below
Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Tax Deducted at Source (TDS): Understanding, Filing, and Key Updates
Tax Deducted at Source (TDS): Understanding, Filing, and Key Updates
Aug 2, 2024
10 Minas
Tax Deducted at Source (TDS) plays a crucial role in the Indian taxation system. It ensures that income tax is collected at the point of payment, rather than waiting until the end of the financial year. This approach not only facilitates early revenue collection but also streamlines the tax compliance process for both taxpayers and the government. In this comprehensive guide, we delve into the nuances of TDS, including its meaning, filing requirements, return submissions, and important due dates.
TDS Overview
TDS, an acronym for Tax Deducted at Source, is a mechanism by which income tax is deducted from payments made to individuals or entities. This tax is deducted at the time of making certain payments such as salary, rent, commission, professional fees, and interest. The objective is to ensure that the income tax is collected at the source of the payment, thereby reducing the chances of tax evasion and ensuring a steady flow of revenue for the government.
Recent Updates in TDS Regulations
Budget 2023 Amendments:
Section 194BA: This section introduces TDS on income derived from online gaming. This move is aimed at regulating and taxing the growing online gaming industry.
Section 196A: From April 1, 2023, non-residents receiving income from mutual funds in India can now present a Tax Residency Certificate. This allows them to benefit from TDS rates as per the applicable tax treaty, rather than the standard 20% rate.
Section 192A: The TDS rate on Provident Fund (PF) withdrawals has been reduced from the maximum marginal rate to a flat 20% for employees lacking a Permanent Account Number (PAN).
Section 193: Previously, there was an exemption from TDS on interest from listed debentures. However, now TDS must be deducted on interest from such specified securities.
Section 194N: The TDS threshold for cash withdrawals by cooperative societies has been raised. As of April 1, 2023, TDS will be deducted on cash withdrawals exceeding Rs. 3 crore, up from the previous limit of Rs. 1 crore.
Budget 2022 Amendments:
New Section 194S: This provision mandates a 1% TDS on the transfer of virtual digital assets. This update reflects the government's efforts to bring digital transactions under the tax net.
Section 194-IA: For the sale of immovable property, the TDS amount has been adjusted. The buyer must now deduct 1% TDS based on the sum paid or the stamp duty value of the property, whichever is higher.
New Section 194R: This section requires a 10% TDS on perks or benefits provided to any resident for carrying out business or professional activities, irrespective of whether these benefits are convertible into cash.
Understanding TDS
TDS is an integral part of the income tax system, designed to simplify the collection of taxes and ensure compliance. Under TDS provisions, the person making a payment (the deductor) is responsible for deducting tax at the source and depositing it with the government. The recipient of the income (the deductee) receives the net amount after TDS has been deducted. This approach helps in preemptively collecting taxes and also aids in the government's efforts to monitor financial transactions more effectively.
Example of TDS in Action
Consider a scenario where Shine Pvt Ltd pays Rs 80,000 per month as office rent. The applicable TDS rate is 10%. Shine Pvt Ltd must deduct Rs 8,000 (10% of Rs 80,000) and pay the remaining Rs 72,000 to the property owner. The property owner then receives Rs 72,000 after TDS. For tax purposes, the property owner will include the full amount of Rs 80,000 in their total income and claim a credit for the Rs 8,000 TDS already deducted.
When and Who Should Deduct TDS
TDS must be deducted by any person making specified payments as outlined under the Income Tax Act. Generally, TDS is applicable to payments made for salaries, rent, commissions, and other specified categories. However, individuals or Hindu Undivided Families (HUFs) whose annual sales or receipts do not exceed Rs. 1 crore or Rs. 50 lakhs, respectively, are exempt from deducting TDS, except in cases of rent payments exceeding Rs. 50,000 per month.
For instance, if an individual or HUF makes rent payments above Rs. 50,000 per month, they must deduct TDS at a rate of 5%, even if they are not subject to a tax audit. Additionally, these individuals or HUFs are not required to obtain a Tax Deduction and Collection Account Number (TAN). Employers deduct TDS based on income tax slab rates applicable to their employees, while banks typically deduct TDS at 10%, or 20% if PAN details are not provided.
Depositing TDS to the Government
TDS deducted needs to be deposited with the government by the 7th of the subsequent month. For example, TDS deducted in June must be paid to the government by July 7. However, TDS deducted in March has a deadline of April 30 for deposition. For TDS related to property transactions, the payment due date is 30 days from the end of the month in which the TDS is deducted.
How to Deposit TDS
Depositing TDS is a straightforward process. The payment is made via the Income Tax Portal using the TAN login. The previous OLTAS 'e-payment: Pay Taxes Online' facility has now been integrated into the e-Pay Tax facility of the e-Filing portal. To make TDS payments, navigate to the 'e-Pay Tax' section on the Income Tax Department's website (https://www.incometax.gov.in/).
Filing TDS Returns
Filing TDS returns is mandatory for individuals or entities who have deducted TDS. Returns must be filed quarterly, and various details such as TAN, TDS amount deducted, payment type, and PAN of the deductee need to be provided. Different forms are prescribed based on the type of TDS deduction:
Form 26Q: For TDS on all payments except salaries. Due dates: Q1 – July 31, Q2 – October 31, Q3 – January 31, Q4 – May 31.
Form 24Q: For TDS on salary payments. Due dates: Q1 – July 31, Q2 – October 31, Q3 – January 31, Q4 – May 31.
Form 27Q: For TDS on payments to non-residents except salaries. Due dates: Q1 – July 31, Q2 – October 31, Q3 – January 31, Q4 – May 31.
Form 26QB: For TDS on property sales. Due date: 30 days from the end of the month in which TDS is deducted.
Form 26QC: For TDS on rent. Due date: 30 days from the end of the month in which TDS is deducted.
TDS Certificates
TDS certificates are crucial documents issued by the deductor to the deductee. They provide proof of the TDS deducted and deposited with the government. The key TDS certificates include:
Form 16: Issued by employers for TDS on salary payments. Issued annually by May 31.
Form 16A: Issued for TDS on non-salary payments. Issued quarterly within 15 days of the due date for filing returns.
Form 16B: Issued for TDS on property sales. Issued for each transaction within 15 days of the due date for filing returns.
Form 16C: Issued for TDS on rent. Issued for each transaction within 15 days of the due date for filing returns.
TDS Credits in Form 26AS
Form 26AS is a consolidated tax statement that includes details of all TDS deductions linked to a taxpayer’s PAN. It lists TDS deducted from various sources of income, including salaries and interest. Form 26AS also reflects direct taxes paid by the taxpayer, such as advance tax or self-assessment tax. Accurate reporting in Form 26AS is essential to avoid discrepancies and ensure proper credit of TDS.
Uploading TDS Statements
To upload TDS statements, follow these steps on the Income Tax Department’s website:
Visit the Income Tax website and log in using your TAN.
Navigate to e-File > Income Tax Forms > File Income Tax Forms on the dashboard.
Select the appropriate form and fill in the necessary details.
Validate the return using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).
Types of Income Subject to TDS
Several types of income are subject to TDS, including:
Salary: TDS is deducted based on income tax slab rates applicable to the employee.
Payments to Contractors: TDS is applicable on payments made to contractors.
Commission Payments: TDS is deducted on commission earned by individuals.
Sale of Property: TDS is applicable on the sale of immovable property.
Insurance Commission: TDS is deducted on commission earned from insurance policies.
Interest on Securities: TDS is applicable on interest earned from securities.
Interest Other Than Securities: TDS is deducted on interest income from other sources.
Rent Payments: TDS is deducted on rental payments exceeding specified thresholds.
Professional Fees: TDS is applicable on payments made for professional services.
Online Gaming: TDS is now applicable on income from online gaming.
Winnings from Games: TDS is deducted on winnings from lotteries, crosswords, card games, etc.
SMS Alerts for Transparency
To enhance transparency and minimize TDS mismatches, the Income Tax Department sends SMS alerts from VK-ITDEFL. These alerts inform taxpayers about the TDS deducted against their PAN. This system helps taxpayers verify the TDS details with their payslips, reducing the likelihood of errors in income tax returns.
Tax Liability When TDS is Deducted
TDS is deducted based on specific rates, which may not always reflect the total tax liability. For example, TDS rates on certain payments are fixed and do not consider the overall income tax slab applicable. Consequently, you might need to calculate your total income from all sources to determine your accurate tax liability. You can then adjust the TDS credits against your total tax liability. If the total TDS deducted exceeds your actual tax liability, you may be entitled to a refund.
In summary, TDS is an essential component of the tax collection system, facilitating timely tax collection and ensuring compliance. By understanding the nuances of TDS regulations, including recent updates, due dates, and filing requirements, taxpayers can navigate the tax landscape more effectively and avoid potential pitfalls.
Tax Deducted at Source (TDS) plays a crucial role in the Indian taxation system. It ensures that income tax is collected at the point of payment, rather than waiting until the end of the financial year. This approach not only facilitates early revenue collection but also streamlines the tax compliance process for both taxpayers and the government. In this comprehensive guide, we delve into the nuances of TDS, including its meaning, filing requirements, return submissions, and important due dates.
TDS Overview
TDS, an acronym for Tax Deducted at Source, is a mechanism by which income tax is deducted from payments made to individuals or entities. This tax is deducted at the time of making certain payments such as salary, rent, commission, professional fees, and interest. The objective is to ensure that the income tax is collected at the source of the payment, thereby reducing the chances of tax evasion and ensuring a steady flow of revenue for the government.
Recent Updates in TDS Regulations
Budget 2023 Amendments:
Section 194BA: This section introduces TDS on income derived from online gaming. This move is aimed at regulating and taxing the growing online gaming industry.
Section 196A: From April 1, 2023, non-residents receiving income from mutual funds in India can now present a Tax Residency Certificate. This allows them to benefit from TDS rates as per the applicable tax treaty, rather than the standard 20% rate.
Section 192A: The TDS rate on Provident Fund (PF) withdrawals has been reduced from the maximum marginal rate to a flat 20% for employees lacking a Permanent Account Number (PAN).
Section 193: Previously, there was an exemption from TDS on interest from listed debentures. However, now TDS must be deducted on interest from such specified securities.
Section 194N: The TDS threshold for cash withdrawals by cooperative societies has been raised. As of April 1, 2023, TDS will be deducted on cash withdrawals exceeding Rs. 3 crore, up from the previous limit of Rs. 1 crore.
Budget 2022 Amendments:
New Section 194S: This provision mandates a 1% TDS on the transfer of virtual digital assets. This update reflects the government's efforts to bring digital transactions under the tax net.
Section 194-IA: For the sale of immovable property, the TDS amount has been adjusted. The buyer must now deduct 1% TDS based on the sum paid or the stamp duty value of the property, whichever is higher.
New Section 194R: This section requires a 10% TDS on perks or benefits provided to any resident for carrying out business or professional activities, irrespective of whether these benefits are convertible into cash.
Understanding TDS
TDS is an integral part of the income tax system, designed to simplify the collection of taxes and ensure compliance. Under TDS provisions, the person making a payment (the deductor) is responsible for deducting tax at the source and depositing it with the government. The recipient of the income (the deductee) receives the net amount after TDS has been deducted. This approach helps in preemptively collecting taxes and also aids in the government's efforts to monitor financial transactions more effectively.
Example of TDS in Action
Consider a scenario where Shine Pvt Ltd pays Rs 80,000 per month as office rent. The applicable TDS rate is 10%. Shine Pvt Ltd must deduct Rs 8,000 (10% of Rs 80,000) and pay the remaining Rs 72,000 to the property owner. The property owner then receives Rs 72,000 after TDS. For tax purposes, the property owner will include the full amount of Rs 80,000 in their total income and claim a credit for the Rs 8,000 TDS already deducted.
When and Who Should Deduct TDS
TDS must be deducted by any person making specified payments as outlined under the Income Tax Act. Generally, TDS is applicable to payments made for salaries, rent, commissions, and other specified categories. However, individuals or Hindu Undivided Families (HUFs) whose annual sales or receipts do not exceed Rs. 1 crore or Rs. 50 lakhs, respectively, are exempt from deducting TDS, except in cases of rent payments exceeding Rs. 50,000 per month.
For instance, if an individual or HUF makes rent payments above Rs. 50,000 per month, they must deduct TDS at a rate of 5%, even if they are not subject to a tax audit. Additionally, these individuals or HUFs are not required to obtain a Tax Deduction and Collection Account Number (TAN). Employers deduct TDS based on income tax slab rates applicable to their employees, while banks typically deduct TDS at 10%, or 20% if PAN details are not provided.
Depositing TDS to the Government
TDS deducted needs to be deposited with the government by the 7th of the subsequent month. For example, TDS deducted in June must be paid to the government by July 7. However, TDS deducted in March has a deadline of April 30 for deposition. For TDS related to property transactions, the payment due date is 30 days from the end of the month in which the TDS is deducted.
How to Deposit TDS
Depositing TDS is a straightforward process. The payment is made via the Income Tax Portal using the TAN login. The previous OLTAS 'e-payment: Pay Taxes Online' facility has now been integrated into the e-Pay Tax facility of the e-Filing portal. To make TDS payments, navigate to the 'e-Pay Tax' section on the Income Tax Department's website (https://www.incometax.gov.in/).
Filing TDS Returns
Filing TDS returns is mandatory for individuals or entities who have deducted TDS. Returns must be filed quarterly, and various details such as TAN, TDS amount deducted, payment type, and PAN of the deductee need to be provided. Different forms are prescribed based on the type of TDS deduction:
Form 26Q: For TDS on all payments except salaries. Due dates: Q1 – July 31, Q2 – October 31, Q3 – January 31, Q4 – May 31.
Form 24Q: For TDS on salary payments. Due dates: Q1 – July 31, Q2 – October 31, Q3 – January 31, Q4 – May 31.
Form 27Q: For TDS on payments to non-residents except salaries. Due dates: Q1 – July 31, Q2 – October 31, Q3 – January 31, Q4 – May 31.
Form 26QB: For TDS on property sales. Due date: 30 days from the end of the month in which TDS is deducted.
Form 26QC: For TDS on rent. Due date: 30 days from the end of the month in which TDS is deducted.
TDS Certificates
TDS certificates are crucial documents issued by the deductor to the deductee. They provide proof of the TDS deducted and deposited with the government. The key TDS certificates include:
Form 16: Issued by employers for TDS on salary payments. Issued annually by May 31.
Form 16A: Issued for TDS on non-salary payments. Issued quarterly within 15 days of the due date for filing returns.
Form 16B: Issued for TDS on property sales. Issued for each transaction within 15 days of the due date for filing returns.
Form 16C: Issued for TDS on rent. Issued for each transaction within 15 days of the due date for filing returns.
TDS Credits in Form 26AS
Form 26AS is a consolidated tax statement that includes details of all TDS deductions linked to a taxpayer’s PAN. It lists TDS deducted from various sources of income, including salaries and interest. Form 26AS also reflects direct taxes paid by the taxpayer, such as advance tax or self-assessment tax. Accurate reporting in Form 26AS is essential to avoid discrepancies and ensure proper credit of TDS.
Uploading TDS Statements
To upload TDS statements, follow these steps on the Income Tax Department’s website:
Visit the Income Tax website and log in using your TAN.
Navigate to e-File > Income Tax Forms > File Income Tax Forms on the dashboard.
Select the appropriate form and fill in the necessary details.
Validate the return using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).
Types of Income Subject to TDS
Several types of income are subject to TDS, including:
Salary: TDS is deducted based on income tax slab rates applicable to the employee.
Payments to Contractors: TDS is applicable on payments made to contractors.
Commission Payments: TDS is deducted on commission earned by individuals.
Sale of Property: TDS is applicable on the sale of immovable property.
Insurance Commission: TDS is deducted on commission earned from insurance policies.
Interest on Securities: TDS is applicable on interest earned from securities.
Interest Other Than Securities: TDS is deducted on interest income from other sources.
Rent Payments: TDS is deducted on rental payments exceeding specified thresholds.
Professional Fees: TDS is applicable on payments made for professional services.
Online Gaming: TDS is now applicable on income from online gaming.
Winnings from Games: TDS is deducted on winnings from lotteries, crosswords, card games, etc.
SMS Alerts for Transparency
To enhance transparency and minimize TDS mismatches, the Income Tax Department sends SMS alerts from VK-ITDEFL. These alerts inform taxpayers about the TDS deducted against their PAN. This system helps taxpayers verify the TDS details with their payslips, reducing the likelihood of errors in income tax returns.
Tax Liability When TDS is Deducted
TDS is deducted based on specific rates, which may not always reflect the total tax liability. For example, TDS rates on certain payments are fixed and do not consider the overall income tax slab applicable. Consequently, you might need to calculate your total income from all sources to determine your accurate tax liability. You can then adjust the TDS credits against your total tax liability. If the total TDS deducted exceeds your actual tax liability, you may be entitled to a refund.
In summary, TDS is an essential component of the tax collection system, facilitating timely tax collection and ensuring compliance. By understanding the nuances of TDS regulations, including recent updates, due dates, and filing requirements, taxpayers can navigate the tax landscape more effectively and avoid potential pitfalls.
Author
Pluto Team
Share with your friends
Help you friends in learning more about personal finance by share this blog.
Help you friends in learning
more about personal finance
by share this blog.
Help you friends in learning more about personal
finance by share this blog.
Silimar Blogs
Axis Bank Credit Card Net Banking
Axis Bank Credit Card Net Banking
August 5, 2024
PNB Fixed Deposit (FD) Interest Rates
PNB Fixed Deposit (FD) Interest Rates
August 5, 2024
Linking Aadhaar to Your Punjab National Bank Account
Linking Aadhaar to Your Punjab National Bank Account
August 5, 2024
PNB SIP Calculator
PNB SIP Calculator
August 5, 2024
How to Close a PNB Account Online & Offline?
How to Close a PNB Account Online & Offline?
August 5, 2024
TDS Refund - How to Claim TDS Refund
TDS Refund - How to Claim TDS Refund
August 5, 2024
View More
Download App
Explore More
Managing assets totalling over 1 crore+