written by Sourish | June 8, 2021

All About Tax Deducted At Source

Tax deducted at source, as the name suggests, is the tax deducted from the source of income. It is a process by which a person(payer) making a payment of some specified nature like rent, interest, salary etc., to another person(payee) has to deduct a certain percentage of tax as specified by the income tax department. The payer must deposit the collected TDS with the central government before the due date. 

You can make a TDS payment irrespective of the mode of the payment: cash or cheque or credit. The payee is eligible to avail the credit of the TDS amount deducted by the payer. The payee can claim it through Form 26 AS or the TDS certificate issued by the deductor. However, the TDS rate ranges from 1% to 30% depending upon the varied nature of incomes and deductees.

Why Was TDS Introduced?

The Central Board of Direct Taxes governs the provisions of TDS under the Income Tax Act,1961. As per the rules of Income Tax, TDS is a direct tax and also an advance tax. The taxpayer must declare and deposit it with the income tax department. The introduced TDS for the following reasons:

  • Reduce the time gap between receiving the income and actual payment of tax 
  • Ensure regular flow of funds to the government.
  • Check on tax evasion by individuals or companies. 
  • Reduce a heavy tax burden on the taxpayer at the end of the year by introducing the concept of paying as you earn any income.
  • Also, reduce the burden of tax collection agencies.

Different Tax Deducted At Source Rates Applicable On Salary And Non-Salary Payments 
 

NATURE OF PAYMENT 

CURRENT TDS RATE

SALARIES                                           

10%

INTEREST RECEIVED ON. SECURITIES             

10%

DIVIDEND RECEIVED FROM MUTUAL FUNDS AND ON COMPANY’S SHARES     

10%

FIXED DEPOSIT INTEREST              

10%

LOTTERY WINNINGS                          

30%

WINNINGS FROM HORSE RACES                

30%

INSURANCE COMMISSION RECEIVED BY INDIVIDUAL

5%

PAYMENT MADE WHILE PURCHASING A PROPERTY      

1%

RENT FOR PLANT AND MACHINERY

2%

RENT FOR IMMOVABLE PROPERTY                

10%

PAYMENT OF RENT BY INDIVIDUAL OR HUF EXCEEDING Rs 50000 PER MONTH

5%

CASH WITHDRAWAL EXCEEDING Rs 20LAKH OR 1 CRORE AS THE CASE MAYBE     

2%

 

Also Read: TDS Challan ITNS 281- Pay TDS Online With E- Payment Tax
 

Who should Deduct TDS

The following are those individuals and class of individuals who should deduct TDS: 

  • Any Individual or HUF who must audit their accounts under the Income Tax Act should deduct TDS at the time of making any such payment.
  • Individuals or HUF making rent payments of more than Rs 50,000 per month must deduct TDS at the rate of 5%. This applies even if their accounts are not audited.
  • Every employer deducts tax at the relevant income tax slab rates for the financial year. But, if you don't provide your PAN number then the banks will deduct TDS at the rate of 20%.
  • Every bank with which you hold an FD(Fixed Deposit) or RD(Recurring Account) account will deduct TDS @10% but only if you furnish your PAN details. However, if no PAN is furnished then banks will deduct TDS at the rate of 20%. 
  • Also if you furnish information to the bank that you are not liable to tax as per the income tax rates then the bank will not deduct TDS on any of your interest income. You can file such information in Form 15G OR 15H.
  • You can always file for a refund if the bank has already deducted TDS and you haven't been able to file an income proof in time with the employer.

What are TDS Certificates?

The government has issued the following Tax Deducted at Source certificates.: Form 16A, 16B,16C. The payer issues these certificates to payees after depositing the TDS.  But, in some cases issuing such a TDS certificate is not necessary. In cases where the payees claim an exemption or some deduction,  then no tax at source applies and hence no TDS certificate. In other cases, it is mandatory to issue a TDS certificate. If the deductor fails to do so then he will be liable to a penalty of Rs 100 per day till he issues it. But, such a penalty will not exceed the TDS amount deducted.

Different kinds of Tax Deducted at Source Certificates are :

  • FORM 16: It's a TDS certificate issued yearly on payment of salaries. The due date for issuing this certificate is 31st May. If any employee's total taxable income is less than Rs 2,50,000, then the employer doesn't deduct TDS.  Hence the employer doesn't issue Form 16 to such an employee.
  • FORM 16A: It is a TDS certificate issued on payments that are not salary.  The payer issues it on a quarterly basis. Payers must issue it within 15 days from the due date of filing the return. Banks issue it on interest earned by the depositors when making fixed deposits with the bank. It is also issued on commission earned on insurance.
  • FORM 16B: The payer issues this TDS certificate on the sale of property with every such sale transaction. Also like form 16A, the payer must issue it within 15 days from the due date of return.
  • FORM 16C: The payer issues Form 16C TDS certificate for deductions on rent payments. Payers need to issue this form within 15 days from the due date of filing the return.

Types of TDS Return Forms

The government requires the filing of different forms to file TDS Returns depending on the types of income and kinds of deductees. Here are four important types of TDS Returns:

  1. Form 24Q: This TDS Return Form is a statement for TDS from salary payments. The deductor must file it quarterly. It includes all information of employee salary and TDS deducted on the same by the employer.
  2. Form 26Q: This TDS return form is a statement for TDS from payments that are other than salaries like dividend securities, interest on securities, professional fees, or directors' remuneration. The deductor must file it quarterly.
  3. Form 27Q: You must file such a TDS return form when there are payments like dividends, bonus, interest or any other payment amounts to foreigners or NRIs. In other words, the payer files this return for payments made to foreigners and non-resident Indians.
  4. Form 27EQ: It is a statement for Tax collected at the source. A tax collected at the source as the name suggests is the tax collected by the seller. The collectors have to submit it every quarter. 

Due Date For Payment Of TDS

  • When you pay the Tax Deducted at Source amount or credit it without challan then you must deposit TDS on the same date as the payment.
  • When you pay the Tax Deducted at Source amount or credit it with Challan then you must deposit TDS before or by the 7th of the next month.

Also Read: TDS Challan ITNS 281- Pay TDS Online With E- Payment Tax

Filing TDS Returns Of Financial Year 2020-21

QUARTER PERIOD 

DUE DATE FOR FILING

APRIL TO  JUNE

31st MARCH

JULY TO SEPTEMBER

31st MARCH

OCTOBER TO DECEMBER

31st DECEMBER

JANUARY TO MARCH

 31st MAY

 

 Who Are Liable To File Returns Electronically?

Following are the assesses for whom it is mandatory to file their Tax Deducted at Source returns  electronically on a quarterly basis:

  • Assessees whose accounts are being audited u/s 44AB
  • Government Employees
  • Companies

Things To Consider While Filing TDS Returns

  • Ensure you have a valid and registered Tax Deduction and Collection Account Number (TAN) for e-filing. You need it to file in Form 27A.
  • Companies and government dedicators are compulsorily required to file their TDS returns electronically. However, any deductor other than the above can file either in physical or electronic form.
  • You need a valid Digital signature to upload your return on the e- filing portal. The e-return needs to be in an electronic format provided by the Income-tax department and the NSDL(National Securities Depository Limited). It is mandatory to follow this format as it provides better efficiency and consistency.
  • Mention the 7 digit Bank Branch code while filing the e-TDS return.
  • Submit Form 27A signed by an authorized signatory. You can use the file validation utility to generate Form 27A. The file validation utility notifies you if it finds any error. You can download the file validation utility on the TIN-NSDL website.
  • Usually, you file the return with the PAN of the deductor and the deductee, amount of tax paid to the government, and Tax Deducted at Source challan details. However, you don’t need to file the bank challan or a copy of the TDS certificate along with the e-TDS return. 
  • When an e-return is not mandatory an assessee can always file TDS returns at various NSDL’s approved TIN-FCs available across the country.
  • While filing the TDS form physically ensure it's a clean form without any overwriting.
  • If a return is being filed electronically then you can directly file at the TIN-NSDL website. In such a case you must file the return with a digital signature.
  • Check that whichever TDS file format is being chosen has “txt” as the filename extension. You need a clean text format be it MS Excel or Tally or the software available at the NSDL website while filing e-return.
  • While submitting returns all information should be double-checked and all necessary documents should be properly uploaded.
  • In cases where the return is not approved the department issues a memo for non-acceptance along with the reasons for rejection.

Penalties For Delay and Non-filing Of TDS Return

  • Delay in filing TDS return 

The delay refers to the non-filing of Tax Deducted at Source return by the due date. The assessee must pay a penalty of Rs 200 per day for every day the default continues. However, such a penalty cannot exceed the amount of TDS.

  • Delay in Deducting TDS by a company   

If a company makes a delay in filing the TDS return then it is liable to an interest of 1% p.m from the date of deduction till the date it deposits the TDS.

  • Incorrect Information while Filing or Non- Filing of TDS return

If the assessee fails to file the Tax Deducted at Source return even after one year from the due date of return filing or furnishes incorrect information then such an assessee shall be liable for penalty. Such penalty is a minimum of Rs 10,000 and a maximum of Rs 1,00,000.

  • Failure to Pay TDS on time

If a company has deducted the TDS but fails to pay it before the due date then interest also applies to the TDS. It is liable to pay an interest of 1.5% p.m from the date they deducted TDS till the date they pay it.

TDS Refund 

Usually when the actual tax liability is more than the tax deducted at the source then the assessee needs to pay the balance amount. But when the actual tax liability is less than the tax deducted at the source then it amounts to a refund of Tax Deducted at Source. The Income Tax department refunds any such excess tax deducted back to the assessee between three to six months. But the time also depends on whether the assessee has filed their income tax return or not. 

An acknowledgement of such a TDS refund is also sent to the registered mail id of the assessee. If the assessee does not receive such an acknowledgment they can always visit the income tax site and use his PAN to file for a refund or assess his refund status. Also if the assessee does not receive the TDS refund within three to six months, the Income Tax department must pay interest of 6%p.a on such refund amount. But, the interest will not be payable if such a refund amount is less than 10% of the actual tax liability. 

Conclusion

Tax Deducted at Source not only benefits the government in generating the revenue but is beneficial for the taxpayers as well. An assessee has to pay the tax one way or another. The introduction of TDS has just made it easier and more convenient for the assessee. 

Also Read: TDS Rate Chart For FY 2021-22

FAQs

Is PAN compulsory for both the deductor and the deductee while filing a TDS return?

Yes, the PAN of both the deductor and deductee is to be mandatorily provided while filing a Tax Deducted at Source return.

Can I do any correction in the TDS Return after filing?

Yes, you can correct TDS return through C1 to C5 forms depending upon the type of corrections or editing needed.

How many times can I file a Revised TDS return?

You can file a revised TDS return multiple times to insert any new changes or corrections or updations. But keep in mind that you can file a revised return only if the original return was accepted.

Can I check the status of our TDS return filed online?

Yes, any person can go to the NSDL Website, and by providing the PAN or the provisional token number they can check the status of their TDS return.

Should I pay any charges while filing e-TDS returns?

Yes, depending on the number of records in your TDS return, you need to pay charges on your e-TDS return. Look at the table below for further details:

No. of deductee records in e-TDS/TCS return

Upload charges (exclusive of GST) * GST as applicable

Returns having up to 100 records

₹42.37

Returns having 101 to 1000 records

₹178.00

Returns having more than 1000 records

₹578.50

* GST as applicable
 

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