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TDS stands for tax deducted at source. As per the Income Tax Act, any company or person making a payment is required to deduct tax at the source if the payment exceeds certain threshold limits.
TDS has to be deducted at the rates prescribed by the tax department. The company or person that makes the payment after deducting TDS is called a deductor, and the company or person receiving the payment is called the deductee.
The deductor is responsible for deducting TDS before making the payment and depositing the same with the government. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PAN of the deductor and deductee.
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TDS is deducted on the following types of payments:
However, individuals are not required to deduct TDS when they make rent payments or pay fees to professionals like lawyers and doctors.
TDS is one kind of advance tax. It is a tax that is to be deposited with the government periodically and the onus of doing the same on time lies with the deductor.
For the deductee, the deducted TDS can be claimed as a tax refund after they file their ITR.
The following table illustrates the withholding tax rates for payments to NRIs:
Type of Payment | Withholding Tax Rate |
Royalty | 10% |
Technical Fees | 10% |
Interest | 20% |
Dividend payments by Indian Companies | NIL |
Individual anonymous services | 30% |
Company’s anonymous services | 40% |
Here are the withholding tax rates for any payment done by resident companies:
Type of Payment | Payment Limit for Withholding Tax | Tax Rate |
Specified types of interest | NIL | 10% |
Commissions and brokerage | Rs.5,000 | 10% |
Non-specified types of interest | Rs.5,000 | 20% |
Professional or technical services | Rs.30,000 | 10% |
Rent of building, or land and furniture | Rs.1,80,000 | 2% |
Royalty / Fees for Technical Services | Rs.30,000 | 10% |
Contractual payments (not for Individuals / HUF) | Rs.30,000 (single payment) or Rs.75,000 (aggregate payment) | 2% |
Contractual payments to Individuals / HUF | Rs.30,000 (single payment) or Rs 75,000 (aggregate payment) | 1% |
Rent of plant, machinery, or equipment | Rs.1,80,000 | 2% |
The taxes witheld must be deposited with the government by seventh day of the next month in which the tax is being deducted. However, only for March, the due date for TDS payments is till 30 April.
A deductor has to deposit the deducted TDS to the government, and the details of the same have to be filed in the form of a TDS return.
A TDS return has to be filed quarterly.
Preparing TDS returns can be done easily using the ClearTDS software. Reach out to us if you need any help with your TDS returns.
Form No. | Description |
Form 24Q | Quarterly TDS statement for tax deducted on salary payments. |
Form 27Q | Quarterly TDS statement for tax deducted while making payment, other than salary, to non-resident (not being a company), and foreign company |
Form 26Q | Quarterly TDS statement for other cases like TDS deducted on professional fees, interest payments, etc. |
An assessee has to file a return for withholding taxes on a quarterly basis. The individual should mention each taxpayer’s name and the amount of tax deducted for that quarter. Refer to the following table to get the details of the due dates for filing withholding tax or TDS returns:
Quarter | TDS Returns | Due Date |
1st Quarter (April – June) | Form 24Q and 26Q, Form 27Q and 27EQ | 15 July |
2nd Quarter (July – September) | Form 24Q and 26Q, Form 27Q and 27EQ | 15 October |
3rd Quarter (October – December) | Form 24Q and 26Q, Form 27Q and 27EQ | 15 January |
4th Quarter (January – March) | Form 24Q and 26Q, Form 27Q and 27EQ | 15 May |
If you are the payer, you need to furnish a withholding tax certificate to the payee in each quarter in Form 16 or Form 16A.
The withholding tax rates vary for NRIs. Additionally, the tax rates for NRIs are different if that foreign country has a DTA agreement with India. Two or more countries sign a DTAA (Double Tax Avoidance Agreement) treaty to prevent taxpayers from paying double taxes on one income.
But how do you determine the status of a Non-Resident Indian? Here are the points which are taken into consideration for determining if the individual is a Resident or Non-Resident Indian:
Or,
Anyone who doesn’t meet the eligibility mentioned above is considered an NRI.
NRIs are liable to taxation if their income in India falls under the following categories: