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What I need to know about TDS

What is TDS?

While filing your Income tax return, TDS is a term you will come across quite often, TDS stands for Tax Deducted at Source. According to the Income Tax Act, any company or individual making a payment is required to deduct tax at source, if payment exceeds certain limits. TDS must be deducted at the rates decided by the Income Tax Department.

The company or individual who deducts TDS and makes payments is called a deductor and the person whose TDS is deducted is the deductee. It is the deductor’s job to deduct TDS and then make payments. The deductor must pay the TDS from the deductee’s earnings to the government. Payment may be made by any mode such as cash, credit or cheque, TDS is deducted irrespective of the mode of payment and it is linked to the PAN of the deductor and deductee. TDS must be calculated and deposited before the due date.

Why TDS?

TDS was introduced with the agenda of collecting tax from the very source of income. An individual who is liable to pay another individual, must deduct tax and send the amount into the account of Central Government. The deductee, whose income tax has been deducted is entitled for the credit of the amount deducted by the deductor as per Form 26AS or the TDS certificate provided to him/her by the deductor.

Sections and rates related to TDS

The Government has set a threshold limit, in which TDS will be deducted if a person’s income exceeds this particular limit. Depending on various Income Tax Sections the threshold limit varies in the range of 1% to 30% of the actual payable amount.

Section Number Source Payee type Threshold Limit TDS Rates
192 Salary Payment Individual Basic exemption limits based on the income tax slab rates. Rates of Income Tax in force.
193 Interest on securities Resident Basic exemption limits based on the income tax slab rates. 10%
194 Deemed Dividend Resident & Individual Rs. 2,500/- each Financial Year 10%
194A Interest excluding interest on securities Resident Rs. 10,000/- if the interest is paid by the following Banks –
  • Co-operative Banks
  • Post Office deposits.

In any other case, Rs. 5,000/- will be the limit.

194B Income won from games like a crossword puzzle, card, lottery, etc. Any person The amount is exceeding Rs. 10,000/- 30%
194BB Income won from House race Any person The amount is exceeding Rs. 10,000/- 30%
194C Contractor payments Resident & contractor One of the following –
  • If the single payment is exceeding Rs. 30,000/-
  • If the Aggregate sums paid in the FY exceeding Rs. 1,00,000/-
  • Individual/HUF = 1% of the sum paid.
  • Any other person = 2% of the sum paid.
194D Insurance Commission Any Resident Rs. 15,000/- per Financial Year 10%
194DA Amount under LIC Resident Aggregate payment should be less than Rs. 1,00,000/- in the FY 1%
194H Brokerage or Commission Resident Rs. 15,000/- per Financial year 5%
194-I Rent Resident Rs. 1,80,000/- per Financial Year
  • P&M or equipment = 2%
  • Land, building, furniture or fixtures = 10%.
194-IA Transfer of immovable property Resident & Transferor Consideration of Rs 50lakhs. 1%
194J Royalty, Director Remuneration, Professional or technical service fees, Non-compete fees Resident Rs. 30000 for each income in the FY (Not applicable to payment to the director). 10%
194LA Compensation on acquiring immovable property Resident Rs. 2,50,000 per FY 10%

TDS Exemptions

TDS is not deducted in the following situations:
  • If the amount payment is made to Reserved Bank of India, Government or any such body.
  • Mutual Fund under Section 10(23D)
  • Finance Corporations of State or Central government
  • If the deductee has non-deduction certificate under Section 192 of ITA.
  • Credit to or interest paid to:
    • Banking company.
    • Co-operative society with banking business.
    • LIC, UTI or other insurance company.
    • NSC, KVP, or Indira Vikas Patra.
    • Body notified for non-deduction of tax.
    • Banks or cooperative society’s recurring deposits or saving accounts.
    • NRE Accounts.

Due Date for TDS deposit

Here’s the TDS return dates, for the Financial Year 2017-18, that is the assessment year. You need to file your TDS returns quarterly.

Quarter Quarter Period Due Date
1st April to June 31st July 2016
2nd July to September 31st October 2016
3rd October to December 31st January 2017
4th January to March 31st May 2017

By when can I pay TDS?

This tax may be deducted by the government or other deductors according to the following schedule:

When tax is deducted by a Government Office:
S.No. Particulars Due Date
1. TDS deposited without Challan Same Day
2. TDS deposited with Challan 7th of next month
3. TDS on perquisites opted to be deposited by the employer 7th of next month

Note: The above-mentioned challan is challan 280

In other Cases
S.No. Particulars Due Date
1. Tax Deductible in March 30th April of next year
2. Other Months and TDS which is to be deposited by the employer 7th of next month

Due date for issuing TDS Certificate and Form 16A

Anyone who furnishes a TDS statement, must receive Form 16A within 15days from the date of furnishing TDS statement.

Quarter Quarter Period TDS Return Due Date FORM 16A Due Date
1st Quarter 1st April to 30th June 31st July, 2017 15th Aug, 2017
2nd Quarter 1st July to 30th September 31st Oct, 2017 15th Nov, 2017
3rd Quarter 1st October to 31st December 31st Jan, 2018 15th Feb, 2018
4th Quarter 1st January to 31st March 31st May, 2018 15th June, 2018

Interest on late payment of TDS

If you don’t pay TDS by the due date for every quarter, you will have to pay some interest, here is the interest list, in case of late payment of TDS: -

Section Nature of Default Interest subject to TDS amount Period for which interest is to be paid
201A Non-deduction of TDS, either in whole or in part 1% per month From the date on which tax was deductible, till the date on which tax is actually deducted
After deduction of tax, non-payment of tax either in whole or in part 1.5% per month From the date of deduction to the date of payment
  • The above-mentioned interests must be paid before filing of TDS returns.
  • According to section 201(1A) you will have to pay interest for late deposit of TDS after TDS deduction. The interest is at the rate of 1.5% per month, from the date on which TDS was deducted to the date it was deposited. This interest is added monthly. Here, a part of a month is considered as a full month. A month is not defined in the Income Tax Act, but according to High court precedent, a month is considered as a period of 30 days and not as the month in the English calendar.

If you file your TDS returns late, then you are liable to pay a penalty, let’s find out what these penalties are: -

  • Penalty under section 234E: Under this section, the deductor will have to pay a penalty of Rs. 200 per day till the time he/ she fails to pay TDS. You must know that, the penalty amount should not exceed the TDS amount.
  • Penalty under section 271H: Under this section, the assessing officer must direct the individual who fails to file the TDS statement within the due to date to pay penalty of minimum Rs. 10,000, this amount may go up to Rs. 1,00,000.

Frequently Asked Questions

Q. What is the difference between TDS and Income Tax?

The difference between TDS and Income Tax is as follows –

TDS Income Tax
  1. A small amount deducted monthly, annually, periodically or occasionally from an individual or business income
  2. It is not limited to salary, it includes interest, commission, fee etc.
  3. The earned income can be regular or irregular.
  1. It is levied on the total income of an employee or business
  2. It is limited to salary/ annual income
  3. It is levied on regular income
Q. How can I claim TDS refund?
Generally, people misunderstand that TDS refund is different from Income Tax refund. There is only one refund which a taxpayer can claim while filing their income tax return. If you had paid more tax than your liable tax, then income tax refund will arise that can be claimed upon the filing of your annual Income Tax Return.
Q. Is there any penalty for non-deduction of TDS?

The following are levied on non-compliance of TDS provisions –

  • Non-deduction of TDS: If an individual who is responsible for deducting TDS do not deduct the same then the AO (Assessing Officer) may disallow whole of such expenditure for ascertaining taxable profits.
  • Late-deduction of TDS: An interest at the rate of 1% per month of the TDS amount subject to maximum amount of TDS will be levied for late deduction of TDS. Here, A single day extension is also counted as a month to calculate the interest.
  • Late-payment of TDS: The deducted TDS by the payer should be credited to the government on every 7th day of the succeeding month in which the tax has been deducted. If the deductor fails to do so, an interest at the rate of 1.5% per month of the TDS amount subject to maximum amount of TDS will be levied.
  • Late Filing of TDS Return: Under Section 234E of ITA, a fee of Rs. 200/- per day subjected to maximum amount of TDS until the return is filed, will be levied if you fail to file your TDS return by the end of the month of the following quarters:
    • 31st July,
    • 31st October,
    • 31st January and
    • In the case of March, it is 31st May.
  • Penalty of Late filing TDS return: If you fail to file TDS return according to the due date, the AO may direct you to pay a penalty of Rs. 10,000/- which may extend to Rs.1,00,000/-. It is in addition to the penalty under section 234E. It also covers incorrect filing of TDS return.
Q. What is TCS?
Under Section 206C of Income Tax Act, 1961, the income Tax collected by the seller in India from payer on selling of certain items is called Tax Collected at Source (TCS).
Q. What is TAN?
Tax Collected Account Number or Tax Deduction Account Number is an alphanumeric 10-digit number issued by the IT department to the individual who is responsible for deducting TDS or who is required to collect TCS.
Q. Can I use PAN for TDS payment?
No, you cannot use PAN for TDS payment. It can be utilised for TAN.
Q. What is the minimum income of an employee to fall under the ambit of TDS?
If an employee falls under the income tax slab then he/she is liable of TDS deduction. The minimum annual income (salary) must be more than Rs. 2,50,000/- or Rs. 3,00,000/- accordingly

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