Tax Deducted at Source (TDS) for Business

Tax Deduction at Source (TDS) is a means through which the government collects tax as and when the income is earned by the taxpayer. Every person making payments exceeding the threshold limit prescribed is required to deduct a certain amount as TDS and deposit the TDS amount with the government. The threshold limits and rates are prescribed in the Income Tax Act 1961. Failure to deduct TDS and deposit it within the specified deadline will result in late fees and penalties. 

In this article, we will discuss the TDS applicability for businesses and a few important TDS sections that everyone business owner must know. 

Points to Keep In Mind While Deducting TDS

The following points have to be kept in mind while deducting TDS:

• The person incurring the expenditure should have a valid PAN and he should also have the PAN of the person receiving the income. In case the PAN is not available, the rate of the TDS increases.
• The TDS rate has to be taken as per the relevant section provided in the Income Tax Act, 1961.
• No TDS is to be deducted from any payment which is made to the Reserve Bank of India, the Indian Government, or any corporation by the central act.

TDS that has already been paid can be checked by downloading Form 26AS from the site of the income tax department.

TDS will only be deducted if the threshold limit for the payment is crossed. For eg: If the interest from any bank doesn’t exceed Rs. 50,000 from a single bank in one year then there is no need to deduct the TDS or the salary of a person below the taxable limit.

Important TDS Section for Businesses

Few of the important TDS sections for businesses are explained in the table below:

For a more detailed TDS sections and rates, refer to our TDS Rate Chart article. 

Due Date for Paying TDS

The due date to pay the TDS is the 7th of every succeeding month and a return has to be filed quarterly by the following dates:

The TDS certificate will be given in the following forms:

Interest, Late Filing Fee and Penalty on Non-Deposit of TDS and Non-Filing of TDS Statements

Persons responsible for deducting tax shall deposit the tax deducted at source within the prescribed due dates. Failing to do so will attract interest under section 201A at the rate of 1.5% per month from the date of deduction till the date of payment. However if not deducted and paid interest under section 201A at the rate of 1% per month from the date on which TDS should have been deducted till the date of actual payment will be levied. 

Further, TDS statements not filed within the due dates as aforesaid, a late fee under Section 234E of Rs.200 per day will be applicable, till the statement is filed but not exceeding the TDS amount. If the statements are not filed within one year from the due date of filing, penalty of a minimum Rs.10,000 which may extend to Rs. 1,00,000 will be levied.