TDS – Tax Deducted at Source and TDS Rates

• 11th Oct 2019
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What is TDS?

Tax Deducted at Source (TDS) is a tax deduction made by an individual or a company when they are making any payment. The TDS is to be deducted if the payable amount exceeds a certain limit. The deduction is mandated by the Income Tax Act, 1961. The return from fixed deposits, your salary, income from services provided to your customers, and many other sources of income are paid after tax deduction. The payer deducts the tax and pays it to the Income Tax Department for the payee. This is the answer to what is tax deducted at source. However, there is plenty more you should know about TDS.

The payer, who deducts the TDS, is known as a deductor, and the payee is known as the deductee. This income tax deduction deduction is applicable on any mode of payment. Knowing the TDS deduction rules is very important for both parties. It helps them to understand how much tax is to be deducted, how to submit it to the government, and how it can be refunded. From paying salary to an employer and buying property to paying rent, the rules of TDS are applicable to all transactions.

What is a TDS certificate?

A TDS certificate is issued by the deductor and given to the deductee while making a payment. Here are some examples of TDS certificates.

• Form 16 is given in case of salary payments.
• Form 16A is given in case of non-salary payments.
• Form 16B is given in case of sale of the property.
• Form 16C is issued for rent payments.

When should TDS be deducted and by whom?

TDS is deducted when a payment is due or when it is made under the Income Tax Act. TDS can be deducted by

- Employers in the case of private employment
- Employees if they are making the payment on behalf of the employer
- Local authorities or companies if there is any interest on securities
- Drawing and disbursing officers in the case of government employment

If the person making the payment is an individual or Hindu Undivided Family (HUF), and is not obliged to have their books audited, then there is no TDS deducted.

Here is an example to help you understand this concept better:

Imagine that you own a company and have to make a payment of INR 60,000 to a service provider. The applicable TDS income tax is 10% on that amount, which sets the deductible at INR 6,000. However, if you are buying a house for INR 80 lakh, then the TDS applicable on the amount is charged at 1%, which comes to INR 80,000. You have to pay that money directly to the Income Tax Department and not to the seller of the house.

As you can see, different types of payments demand different rates of TDS to be deducted. A TDS rate chart will help you understand this better.

TDS rate chart (TDS on salary)

The TDS on salary is deducted based on the income tax slabs. The slabs for the Assessment Year 2019-20 are given below.

For individuals below 60 years of age:

For senior citizens (aged between 60 and 80 years):

For super senior citizens (aged over 80 years):

TDS rate chart for the other types of income is

Calculate Term Insurance Premium and Save Tax

TDS Rate Chart for FY 2020-21

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TDS refund

You can claim a TDS refund if excess tax is deducted on payments made to you by an individual or a company. If you notice that your employer has deducted more tax than payable, this can be corrected when you fill your income tax return. You need to provide your bank details when filing the return so that the Income Tax Department can refund the amount of extra tax paid.

Another important thing to remember is that your bank pays your benefits from a fixed deposit account with the applied TDS. If your total annual income puts you under the non-taxable income slab, you can apply for the refund when filing your tax returns. The amount will be credited to your bank account. If you are a senior citizen, you can submit form 15H to ensure that your bank does not deduct TDS on fixed deposit earnings. These earnings are exempt from tax for senior citizens.

How and when to file TDS returns?

Anybody who has deducted TDS must file a TDS return. While filing the TDS return, you need details of the TAN of the deductor, the total amount of TDS, the PAN of the deductee, etc.

Depending on the type and reason of the TDS, you can file TDS returns using one of the following forms:

• TDS on salary: Form 24Q
• TDS on rent: Form 26QC
• TDS on the sale of property: Form 26QB
• TDS on payments made to non-resident Indians excluding salaries: Form 27Q

TDS on sale on property and rent must be filed within 30 days from the end of the month in which the TDS was charged. TDS on salary and other payments is charged quarterly. The due date for each quarter is as follows:

• Quarter 1: 31st July
• Quarter 2: 31st October
• Quarter 3: 31st January
• Quarter 4: 31st May

TDS credits in Form 26AS

• All information pertaining to TDS is available in Form 26AS. All PAN holders can access this form to get details of the TDS deducted by each deductee. Along with the TDS, Form 26AS also contains information on Advance Tax or Self-Assessment Tax.
• You can download Form 26AS from the government’s income tax website.

The Ministry of Finance has recently extended the deadline for filing tax returns for individuals from July 31^st, 2019 to August 31^st, 2019.

TDS payment online

To make the TDS payment online, you must follow the below steps:

1. Login to NSDL tax payment portal

2. Select Challan no/ITNS 281

3. Select the deductee type as applicable, that is, company on non-company

4. Provide information regarding the assessment year and Tax Deduction and Collection Account Number (TAN) to which the payment relates

5. Select if the payment is made by the taxpayer for regular assessment

6. Enter the nature and mode of payment, and press the ‘Submit’ button

7. Make sure that the confirmation screen displays the taxpayer’s name correctly, which happens only if a valid TAN is provided

8. Confirm the data so that you are taken to the net-banking payment page

9. Select your preferred payment mode and complete the online payment process

10. Save the challan generated once the payment is successfully made

Now that you know what is tax deducted at source and what TDS means, you must make sure that TDS on any payment you have made or received in the previous financial year is in order. This way, you can prevent making losses that are easily avoided.

Tax liability in a case where TDS is already deducted from Income
When you file your income tax return (ITR), you may receive a refund or have to pay the tax due depending on your investments and the total income charged for the year. TDS is not deducted as per your total income in a year. Therefore there may be instances of lower or higher tax deducted at times. Hence, it is crucial to file an ITR.
SMS Alerts for Higher Transparency
In order to create a higher level of transparency, the income tax department sends an SMS to all taxpayers to inform them of the TDS linked to their PAN. The SMS is sent from VK-ITDEFL every quarter. You can compare the amount mentioned in the SMS with the one mentioned on the Form 26AS to check for any discrepancies.

FAQs

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

The TDS deducted in the present month must be reported to the government by the 7th of the next month. In case of rent, the TDS must be deposited within 30 days from the end of the month when the TDS was deducted.

2. How to deposit TDS?

In order to deposit TDS, the Challan ITNS-281 has to be filled. This challan can be found on the government’s income tax website.

Read Here for More Related Articles:

• Income Tax Slabs in India
• Tax Saving Guide for 2019-20
• Tax Saving Option for Salaried Individuals