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TDS is basically a part of income tax. It has to be deducted by a person for certain payments made by them. In this article, we will discuss in detail about the TDS provisions under the Income Tax Act.

  1. What is TDS?
  2. When should TDS be deducted and by whom?
  3. What is the due date for depositing the TDS to the government?
  4. How to deposit TDS?
  5. How and When to file TDS returns?
  6. What is a TDS certificate?
  7. TDS credits in Form 26AS
  8. SMS Alerts for Higher Transparency
  9. Tax liability in a case where TDS is already deducted from Income

 

1. What is TDS?

TDS or Tax Deducted at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons making such payments.

Usually, the person receiving income is liable to pay income tax. But the government with the help of Tax Deducted at Source provisions makes sure that income tax is deducted in advance from the payments being made by you.

The recipient of income receives the net amount (after reducing TDS). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes credit of the amount already deducted and paid on his behalf.

 

tds

 

For instance:

Shine Pvt Ltd make a payment for office rent of Rs 80,000 per month to the owner of the property.

TDS is required to be deducted at 10%. Shine pvt ltd must deduct TDS of Rs 8000 and pay balance Rs 72,000 to the owner of the property.

Thus the recipient of income i.e. the owner of the property in the above case receives the net amount of Rs 72,000 after deduction of tax at source. He will add gross amount i.e. Rs 80,000 to his income and can take credit of the amount already deducted i.e. Rs 8,000 by shine pvt ltd against his final tax liability.

 

2. When should TDS be deducted and by whom?

Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payment. But no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited.

However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN.

Your employer deducts TDS at the income tax slab rates applicable. Banks deduct TDS @10%. Or they may deduct @ 20% if they do not have your PAN information. For most payments rates of TDS are set in the income tax act and TDS is deducted by payer basis these specified rates.

If you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit – you do not have to pay any tax. And therefore no TDS should be deducted on your income. Similarly, you can submit Form 15G and Form 15H to the bank if your total income is below taxable limit so that they don’t deduct TDS on your interest income.

In case you have not been able to submit proofs to your employer or if your employer or bank has already deducted TDS and your total income is below the taxable limit) – you can file a return and claim a refund of this TDS.

The complete list of Specified Payments eligible for TDS deduction along with the rate of TDS.

3. What is the due date for depositing the TDS to the government?

The Tax Deducted at Source must be deposited to the government by 7th of the subsequent month.

For instance:

TDS deducted in the month of June must be paid to the government by 7th July. However, the TDS deducted in the month of March can be deposited till 30th April.

For TDS deducted on rent and purchase of property, the due date is 30 days from the end of the month in which TDS is deducted.

 

4. How to deposit TDS?

Tax Deducted at Source has to be deposited using Challan ITNS-281 on the government portal.

Read our article for a step by step guide to deposit TDS.

5. How and When to file TDS returns?

Filing Tax Deducted at Source returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. Also, different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows:

Form No Transactions reported in the return Due date
Form 24Q TDS on Salary Q1 – 31st July

Q2 – 31st October

Q3 – 31st January

Q4 – 31st May

Form 26Q TDS on all payments except salaries Q1 – 31st July

Q2 – 31st October

Q3 – 31st January

Q4 – 31st May

Form 27Q TDS on all payments made to non-residents except salaries Q1 – 31st July

Q2 – 31st October

Q3 – 31st January

Q4 – 31st May

Form 26QB TDS on sale of property 30 days from the end of the month in which TDS is deducted
Form 26QC TDS on rent 30 days from the end of the month in which TDS is deducted

 

6. What is a TDS certificate?

Form 16, Form 16A, Form 16 B and Form 16 C  are all TDS certificates. TDS certificates have to be issued by a person deducting TDS to the assessee from whose income TDS was deducted while making payment.

For instance, banks issue Form 16A to the depositor when TDS is deducted on interest from fixed deposits. Form 16 is issued by the employer to the employee.

Form Certificate of Frequency Due date
Form 16 TDS on salary payment Yearly 31st May
Form 16 A TDS on non-salary payments Quarterly 15 days from due date of filing return
Form 16 B TDS on sale of property Every transaction 15 days from due date of filing return
Form 16 C TDS on rent Every transaction 15 days from due date of filing return

 

7. TDS credits in Form 26AS

It is important to understand how TDS is linked to your PAN. TDS deductions are linked to PAN numbers for both the deductor and deductee. If TDS has been deducted from any of your income you must go through the Tax Credit Form 26AS. This form is a consolidated tax statement which is available to all PAN holders. Since all TDS is linked to your PAN, this form lists out the details of TDS deducted on your income by each deductor for all kinds of payments made to you – whether those are salaries or interest income – all TDS linked to your PAN is reported here. This form also has income tax directly paid by you – as advance tax or self assessment tax. Therefore, it becomes important for you to mention your PAN correctly, wherever TDS may be applicable on your income.

You can easily file your TDS returns through ClearTax software i.e. ClearTDS. It is an online TDS software that requires no download or desktop installation or software update. It helps you to prepare regular & correction e-TDS statements online easily with just a few clicks on your computer. It is also compatible with TDS returns of previous financial years for easy import.

Also, you can generate your TDS certificates using ClearTDS.          

8. SMS Alerts for Higher Transparency

The income tax department has been sending SMS to the taxpayers from VK-ITDEFL that mentions the amount of tax deducted at source (TDS) against the PAN (Permanent Account Number) of the taxpayer. The SMS alert will let you know the TDS credited in respect of your income from salary, interest etc., every quarter. The amount of TDS would stand accumulated in your Form 26AS for the respective financial year.

This initiative was implemented by the Finance Ministry to increase transparency and reduce the cases of TDS mismatches at the time of income tax filing. Taxpayers can cross-check the information provided in the SMS with the information on the payslips to make sure that there is no mismatch. TDS mismatch could be a common reason for incorrect income tax return filing.

9. Tax liability in a case where TDS is already deducted from Income

On salary, TDS is deducted based on the income tax slab applicable to you. In the case of other income types, the TDS rates are fixed and vary between 10% and 20%. The tax rates are not based on your total income. Hence, you would suffer a TDS on your receipts in certain cases.

Separately, you would be required to calculate your annual income by aggregating income from all sources. Your actual tax liability would be calculated on the total taxable income.

From the taxes calculated, you can claim credit for TDS deducted on your various receipts. Reduce the tax deducted at source from your actual tax liability to know the balance to be paid to the income tax department. You may have a refund too. In both cases, you have to file an income tax return and pay the tax due or claim a refund.

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  1. There are certain situations where the recipient would not have PAN. In such circumstances, the payer is required to adopt the provisions of Section 206AA.
  2. Organisations or taxpayers that deduct taxes at source can view the filed TDS statement on the income tax e-filing portal.
  3. Sometimes employers delay depositing the TDS from employees’ salary. This may lead to a mismatch in the employees’ tax liability causing a confusion.
  4. Those who deduct tax at source must have a TAN. Use Form 49B to apply for a new TAN. You can also apply online on the NSDL-TIN website.
  5. Union budget 2019 was presented on 5th July 2019. New section 194M was introduced in the Income tax act via finance bill 2019. Read here about section 194M.
  6. The insurance commission received by such agents is subjected to Tax Deducted at Source (TDS) as dictated under Section 194D of the Income Tax Act.
  7. A TDS Refund arises when the taxes paid by way of TDS are greater than the actual tax payable calculated for the Financial Year.
  8. Tax collected at source ( TCS ) is the tax payable by a seller which he collects from the buyer at the time of sale. Let us know everything about TCS .
  9. TAN stands for Tax Deduction and Collection Account Number, but what is it for? How do you apply for a TAN? Read more to know more about the payment details and Pointers for Filling Form 49B
  10. Under Section 194J payments towards fees for professional or technical services have TDS implications. Know more about the section 194J, its rate for deduction of tax, time of deduction, consequences of non-deduction or late deduction here.
  11. Form 16B is a TDS certificate issued by a buyer to a seller of house property for the TDS made. Read on to understand more of Form16B, procedure for filing, due date etc
  12. There are certain circumstances where a taxpayer can pay lower taxes or no tax. In case the person who makes the payment has to deduct tax, then a process must be followed for lower deduction of tax. Form 13 and supporting documents to be submitted are also detailed in the article.
  13. Step by step guide to register in TRACES
  14. How to validate the certificate u/s 197
  15. How to change or edit PAN and deduction details such as TDS amount, Amount paid credit etc.
  16. How to upload the data into ClearTDS by using excel Template
  17. Steps to generate Form-16A in ClearTDS for Non Salaary
  18. Step by step guide to Import Conso file in ClearTDS
  19. In this article, we talk about TDS return on salary payment. Know about form 24Q & its fees, interest, penalties & due dates.
  20. In this article, we talk about TDS return on Non-Salary.
  21. A step by step guide on create NIL Challan
  22. A step by step guide to generate Form-16 by using Clear TDS and it helps to merge already generated files.
  23. A step by step guide to e file the TDS return in Cleartds
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  26. CBDT has clarified that if GST on services has been indicated separately in the invoice, then no TDS on GST component will be deducted.
  27. Find out what is section 194I tds on rent. Check out rates, what payment is covered u/s 194I and who is liable to deduct TDS u/s 194I.
  28. Find out what is section 194h TDS on commission and brokerage. Check out the rates and when is TDS under section 194H needs to be deducted.
  29. A step by step guide with screenshots on how to file TDS on sale of property and to obtain Form 16B (for the seller) or Form 26QB (for the buyer).
  30. Know about Section 194A - TDS on interest other than interest on securities. Find out when is TDS deducted u/s 194a and deducted at NIL rate or lower rate, who is responsible for deducting TDS & what is the time limit for depositing tax deducted at source.
  31. Know about section 194C - TDS on payment to contractor and TDS to Sub-Contractor. Find out what is section 194C and rate of TDS.
  32. Check out the TDS Rate Chart for FY 2016-17 and AY 2017-18. Find out the rates of TDS applicable to resident and non-resident Indians.
  33. Find out the TDS payment due dates and timeline for depositing and filing TDS/TCS return. Check out the late filing fee and interest applicable.
  34. A step-by-step guide on how to upload TDS statements on the Income Tax Department website.
  35. How to view challan status on TRACES using BIN or CIN details
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  38. A Step-by-step guide on paying Tax Deducted at Service ( TDS ) online on the government website.
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  40. Everything you need to know about TDS and how it is calculated
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  42. Guide to online correction: add challan or transfer voucher to TDS return on the TRACES website