Tax deduction at source (TDS) is a tax where the payer is required to deduct or collect tax on a specified percentage at the time of payment to the payee and deposit it to the government. It is a means of collecting taxes on income, distribution of income, sale of assets by the government of India.
Tax deduction at source (TDS) is to be deducted and deposited as per Income Tax Act, 1961. Any payment covered under the provisions of the Income Tax Act, 1961 shall be made after deduction of TDS at the rate specified under the Income Tax Act, 1961. It is managed by the Central Board of Direct Taxes (CBDT) and is a part of revenue managed by the Indian Revenue Service (IRS).
Also Read: GST Portal – India’s Online Tax Office
Table of Contents
In this article, we will be discussing the following:
- Objectives of income tax deducted at source
- Applicability of TDS
- What is TAN in TDS?
- Procedure for application of TAN
- How to make TDS payment online
- Benefits of making TDS Payment Online
- Time Limit for Payment of TDS
- Delay in Payment of TDS
- Due date of filing TDS Return
- Due date of filing TCS Return
- TDS Return Forms
- Late filing of TDS return
Objectives of income tax deducted at source
The income earned by the people and organisations in India are liable to payment of tax at the end of the financial year. It would be very difficult for the government to manage the expenses and run the government if the earnings are taxed only at the year-end. So, to avoid such situations, the Indian government came with the system of tax deduction at source (TDS). The TDS mechanism helps the government of India to:
- Prevent Evasion of taxes: The introduction of the TDS helps the government to receive a part of the tax payable at the point of payment itself without any delay and making sure that people do not hide their total income and also helps to reduce non payment of tax.
- Steady Source of Revenue: TDS is payable by the residents in the month following the end of the month in which payment is due or made, as the case may be. It provides a steady source of revenue to the government throughout the financial year.
- Timely collection of taxes: TDS system helps in timely collection of taxes for the government.
- Simplify the process of filing Tax Return Filing: The taxpayers whose TDS has been deducted and have no other source of income are not required to file his/ her tax return.
- Convenient for the Taxpayers: Payment of the annual tax in a single month can be tough for salaried persons but with TDS deducted from their salary every month, and it reduces their burden to some extent.
Applicability of TDS
TDS is not only applicable to salary income but it can be applied to various other incomes of the assessee. Some of the scenarios where TDS is applicable as mentioned below:
- Interest income on securities
- Interest income received from various sources other than interest income on securities
- Dividend income
- Withdrawal of EPF amount before the specified period or over the specified limit
- Payment to contractors, job workers, etc.
- Payment to professionals for their services
- Winnings from the lottery, horse races, crossword puzzles, etc.
- Payment of brokerage, commissions, etc.
- Sale of immovable property
- Rent, Royalty income, etc.
What is TAN in TDS?
- TAN is the Tax Deduction and Collection Number, issued by the Income Tax Department to the person responsible to deduct tax against the payment made to specified persons.
- It is a ten-digit alphanumeric number that is compulsory to be mentioned in all TDS returns, payments, related documents, and any other communication with the income tax department as per Section 203A of the Income Tax Act, 1961. Failure to mention TAN would attract a penalty of Rs. 10,000.
Important points to note:
- Most of the people assume TAN and PAN as the same document, reasoning that they can be used interchangeably, which is not a correct assumption.
- The taxpayers who are responsible for TDS deduction must have TAN even though they have PAN. Only in case of sale/ purchase of immovable property TAN is not required. One can use his/ her PAN for the payment of TDS.
Procedure For Application of TAN
Application for Tax Deduction and Collection Number (TAN) is simple and can be done online in form 49B on the NSDL website.
- As per the provisions of Section 192 of Income Tax Act, 1961, TDS must be deducted at the time of actual payment of salary and not on an accrual basis.
- If salary is paid in advance, then TDS deduction should be done at the time of payment of salary.
- In all other cases, TDS deduction should be done at the time of credit or payment whichever is earlier.
How to Make TDS Payment Online?
The procedure to make TDS payment online as listed below:
- Step 1– Go to https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp for e- Payment of taxes
- Step 2– Click on Challan No./ ITNS 281 in TDS/ TCS section. It will direct you to the e- payment page.
- Step 3– Enter the following details
- If you are making payment to a company, select ‘Company Deductees’ under ‘Tax Applicable’. If you are making payment to any person other than a company, select ‘Non-Company Deductees’
- Select (200) TDS/ TCS payable by the taxpayer, if TDS/ TCS is a regular transaction. Select (400) TDS/ TCS regular assessment, if payment is made for a demand raised by income tax authorities.
- Select ‘Nature of Payment’ from the dropdown list.
- Select the mode of payment of TDS/ TCS
- Enter TAN and select the assessment year for which payment is made.
- Enter the details such as flat number, district, state, Pin code, email-id, and mobile number.
- Enter Captcha. Then, click on the proceed button.
- Step 4– A screen will be displayed on your desktop for confirmation, submit it. The full name of the assessee will be displayed on the screen if TAN is valid.
- Step 5– On successful confirmation, the site will direct you to the net banking site of your bank
- Step 6– The, login to your bank account using user-id and password and make the payment
- Step 7– After successful payment of tax, a challan counterfoil will appear on your screen containing details such as CIN, bank name. Save this counterfoil on your desktop because it is a proof of the payment
Benefits of making TDS Payment Online
- This facility is available 24X7 for taxpayers. The taxpayer can make a payment anytime, from anywhere.
- It is convenient for the taxpayer to make TDS payments online anytime from anyplace.
- Taxpayers instantly get the acknowledgement of online TDS payment.
- It reduces the paperwork of the taxpayer as acknowledgement can be stored on computer devices
- It is better for the environment as the paper use is minimal.
Time Limit for Payment of TDS
The time limit for the payment of tax deducted at source is given below:
|Month for which TDS payment is to be made||Due date for payment of TDS|
|April to February||7th of succeeding month in which TDS is to be deducted|
|March||30th of April|
Delay in Payment of TDS
- As per Section 201 (1A) of Income Tax Act, 1961, if an assessee fails to deduct TDS on payment being made to the deductee, he shall be liable to pay TDS along with interest @ 1% per month or part of the month.
- Whereas, after TDS deduction, failure to deposit TDS to the government would attract interest @ 1.5% per month or part of the month from the date of actual deduction of TDS.
Due dates of filing TDS Return
- The TDS return is required to be filed every quarter and the due date for filing of TDS return is the 30th of the month following the end of the concerned quarter.
- However, the due date for filing of TDS return for the last quarter i.e, January to March is the 31st of May.
|Quarter||Due date for filing TDS return|
|April to June||30th June|
|July to September||30th October|
|October to December||30th January|
|January to March||30th May|
Due dates of filing TCS Return
- The TDS return is required to be every quarter and the due date for filing of TDS return is the 15th of the month following the end of the concerned quarter.
- However, the due date for filing of TDS return for the last quarter i.e, January to March is the 15th of May.
|Quarter||Due date for filing TCS return|
|April to June||15th June|
|July to September||15th October|
|October to December||15th January|
|January to March||15th May|
TDS Return Forms
- Form 24Q: This form is required to be furnished by the deductor for TDS deduction made from salaries
- Form 26Q: This form must be furnished by the deductor for deductions made from payments other than from salary.
- Form 27Q: This is a form to be furnished by the taxpayer if he has made payment to NRIs after deducting TDS.
- Form 27EQ: This is a quarterly return form that is required to be filed by the taxpayer in case he has collected TCS.
- Form 27A: This form is attached along with quarterly statements while filing TDS/ TCS returns.
Late Filing of TDS Return
- As per Section 234E of Income Tax Act, 1961, if an assessee fails to furnish TDS return within the prescribed time limit, he/she shall be liable to a penalty of Rs. 200 per day till the date failure continues. However, the total amount of penalty shall not exceed the total amount of TDS collected.
- In case of delay in filing TDS return beyond one year from the due date of filing TDS return can attract a penalty of Rs. 10,000 to Rs. 1,00,000.
We hope you have understood the concept of TDS, Objectives of income tax deducted at source, what is TAN in TDS, and how to make TDS payment online, and related details. Making TDS payments online is easy and simple and can be done at the click of a button.
Frequently Asked Questions
Is TAN mandatory for making TDS payments online?
Yes, as per Section 203A of the Income Tax Act, 1961, the taxpayer must mention TAN on all TDS-related documents.
What if I quoted the wrong TAN by mistake while making TDS payment?
The tax department allows for the corrections to be made in Challan as clerical errors are possible while making payment. Corrections in Challan can be done through Traces.
Can I view the TDS paid tax challans online?
Yes, challan status can be checked by visiting TIN- NSDL. A taxpayer can monitor their challan deposits and therefore, can verify the details concerning their taxation-related payment.
How can Nil TDS challan be created?
The deductor needs to enter ‘Zero’ in the amount column and leave the Cheque/DD number field blank.
What is the time limit for depositing TDS online?
TDS is to be deposited by the taxpayer within the 7th of the month following the month of TDS deduction. However, TDS for March is to be deposited by the 30th of April. Moreover, TDS on rent and purchase of immovable property is to be deposited within 30 days from the end of the month in which TDS is deducted.
How can I check my TDS deducted status online?
Login to https://incometaxindiaefiling.gov.in/. Click on view 26AS under the ‘My Account’ tab. Then, select the financial year and PDF format to download the file and click on the proceed button. Open the downloaded file. After opening Form 26 AS you will get all the information regarding the total income on which TDS is deducted and TDS credited to your account.
How can I download 26AS from the traces website?
Login to the e-Filing website. Enter User ID, Password, Date of Birth /Date of Incorporation and then, enter Captcha. Then select “View Form 26AS (Tax Credit)” from the drop-down list under the ‘My Account’ tab.