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Tax Deducted at Source (TDS)

TDS is an abbreviation of Tax Deducted at Source. TDS is an indirect method to collect tax in advance. The provision of TDS in Income Tax Act, is to ensure that tax is collected at the source where income is generated. This concept of tax deducted at source (TDS) necessitate that a person (to be called as deductor) who is liable to make specified payment to any other person (to be called as dedcutee) is supposed to deduct an amount & deposit the same with the government to the credit of deductee. Rules of TDS puts the onus of deducting & depositing tax not on the person whose generates income but on the person that is source of the said income. This check with TDS helps in tax evasion as significant transactions are accounted for record. Collection of TDS in advance also make available early revenue in hand.

TAN Deduction and Collection Account Number commonly known as TAN is a ten-digit alphanumeric number that is allotted on the basis of PAN to supposed deductor. Some specified payments on which TDS is required to be deducted after a threshold amount are salary, interest, dividend, rent, professional fees, consultancy fees, technical fees, commission or brokerage, payment to contract, purchase of property etc.

 

When is Tax Deducted at Source or TDS required to be Deducted & Deposited?

TDS is required to be deducted at the time its credited in books or payment whichever is earlier.

TDS deducted is mandatorily required to be deposited with government on or before 7th of the next month.

For example, if ABC raise consultancy invoice of Rs. 1,00,000/- dated 3rd July, 2018 to XYZ & XYZ acknowledge the same by entering in its books. As per the concept of TDS, XYZ will deduct TDS at the rate of 10% of Rs.1,00,000/- i.e. Rs. 10,000/- on 3rd July, 2018 i.e. at the time of crediting it in books (it’s irrelevant that payment is made later on). And, TDS of Rs. 10,000/- will have to be deposited by XYZ on or before 7th of next month i.e. 7th August 2018 with government to the credit of ABC.

In a second example, let’s say that ABC advances Rs. 50,000/- dated 1st August, 2018 to XYZ and no invoice is raised. Here, XYZ will deduct TDS on 1st August 2018 and deposit the same with government by 7th September 2018 to the credit of XYZ.

In case TDS is not deducted on time or deposited after due date, interest is required to be paid on same.

TDS Return Forms

  • TDS Return contain various details of deductor & deductee including PAN, nature of transaction, date of payment.
  • Form 24Q: TDS Return Form is used to report TDS on salary
  • Form 26Q: TDS Return Form is used to report TDS on all payment except salaries
  • Form 26QB:TDS Return Form is used to report TDS on sale of property
  • Form 26QC: TDS Return Form is used to report TDS on rent

What is due date of filing TDS Return?

TDS Returns are mandatorily required to be filed quarterly by any deductor who has deducted TDS. In case of nil deduction in a quarter, TDS Return filing is not required.

Due date to file TDS return for financial year 2018-19 is shown as below:

QUARTER PERIOD DUE DATE

  • April – June 31st July, 2018
  • July – September 31st October 2018
  • October – December 31st January 2018
  • January – March 31st May 2018

TDS Certificate

TDS certificates are issued by deductor to deductee evidencing details of payment deducted & deposited with government to the credit of deductee. TDS certificates are generated by deductor from TRACES website after filing of TDS Return for a period and are required to be issued within 15 days of last date of TDS Return of quarter.

  • Form 16 is TDS certificate for salary payment
  • Form 16A is TDS certificate for non-salary payment
  • Form 16B is TDS certificate for sale of property
  • Form 16C is TDS certificate for TDS on rent

Under section 203 of Income Tax Act, read with rule 31, it is mandatory to issue TDS Certificate by deductor to deductee and If not done so, section 272(2)(g) of the act, lays down the provision of penalty for not furnishing it on due date which is Rs.100 per day but subject to a maximum of TDS amount.

SubmitTax facilitates filing of TDS Return & issuance of TDS Certificates to deductee on time.

FAQ

What do you mean by TDS ?

TDS stands for Tax deduction at source. As per income tax law, it is a system incorporated of tax deduction at the point of generation of income. The TDS aim to collect tax from various sources of income.This is called as ‘tax deduction at source, commonly known as TDS.

Who is deductor and deductee ?

The person who deducted the tax, who is liable to make payment of specified nature to any other person shall be responsible for deduct tax at source is deductor.
Principal officers of a company, DDO( Drawing and Disbursing Officer) are mainly these persons who deduct tax at source.

The person from whom the tax deducted is called deductee.

What are the rates of TDS ?

The rate of deduction of TDS is 1% for CGST+SGST/UTGST) or 2% for IGST from the payment made or credited to the deductee.

What are the types of TDS ?

There are some sources of income that comes under the ambit of tax deducted at source:

  • Salary
  • Interest on securities
  • Deemed dividend
  • Interest excluding interest on securities
  • Winning amount
  • Contractor payment
  • Insurance commission
  • Amount under LIC
  • Brokerage or commission
  • Transfer of immovable property
  • Compensation on immovable
  • property

  • Payment of rent
  • Bank interest
What is TDS certificate ?

After the deduction of tax deducted by deductor, he is required to provide a certificate to the effect of the amount which is deducted as tax along with other related transactions to the deductee. These certificate is called TDS certificate.

Is PAN is mandatory ?

Yes, PAN is mandatory for deductor.

What are the duties of the person who deduct the taxes?

The deductor duties are:

  • He shall get the tax deduction account number which basically means he should be registered.
  • He shall deduct the tax amount as per the rate applicable.
  • He shall deposit the deducted amount of tax to the credit of the government.
  • He shall issue the TDS certificate to the deductee in which the amount of deducted tax is shown.
Why TDS is deducted ?

TDS stands for tax deducted at source. As per act, any payment is made by a company or a person which exceeds the applicable limits, the payment is required to deduct tax at source.
The amount deducted by the deductor before making the payment and should deposit to the government.