What is TDS (Tax Deducted at Source) Last Updated : 21 Sep 2019

TDS is the amount of tax which is deducted by the employer or deductor of an assessee and is deposited to the Income Tax Department on behalf of him/her. The TDS rates are set on the basis of the age bracket and income of different individuals.
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What is TDS?

TDS - Tax Deducted at Source
TDS

TDS Full Form is Tax is Deducted at Source. According to the Income Tax Act 1961, a specific amount is reduced when a certain payment like salary, commission, rent, interest, professional fees, etc. is made. The person who makes the payment deducts tax at source, and the person who receives a payment/income has the liability to pay tax. It lowers tax evasion because tax will be collected at the time of making a payment

Example of TDS

Let’s assume that a start-up company called ABC Pvt. Ltd. pays Rs.90,000 as rent every month to whoever owns the property. The TDS applicable to the amount is 10%, so the company must subtract Rs.9,000 and pay Rs.81,000 to the property owner. In this case, the owner of the property will receive Rs.81,000 following TDS. The owner can add the gross amount of Rs.90,000 to his income, thereby allowing him to take credit of the Rs.9,000 that has already been deducted by ABC Pvt. Ltd.

Types of TDS

Here are some of the income sources that qualify for TDS:

  • Salary
  • Amount under LIC
  • Bank Interest
  • Brokerage or Commission
  • Commission payments
  • Compensation on acquiring immovable property
  • Contractor payments
  • Deemed Dividend
  • Insurance Commission
  • Interest apart from interest on securities
  • Interest on securities
  • Payment of rent
  • Remuneration paid to director of the company, etc.
  • Transfer of immovable property
  • Winning from games like a crossword puzzle, card, lottery, etc.

How to File TDS Returns?

In order to file your TDS returns, there are few things you must ensure. They are as follows:

  • Have a valid TAN (Tax Deduction and Collection Account Number) and make sure it is registered for e-filing
  • Prepare your TDS statements using Return Preparation Utility before validating the same using File Validation Utility
  • You must have a valid Digital Signature Certificate that is registered for E-Filing in case you want to upload your returns using DSC
  • Provide the demat account or bank account details of your principal contact, or ensure that his/her PAN is linked with his/her Aadhaar in case you want to upload your returns using Electronic Verification Code

Step-by-Step Procedure to Upload TDS statements

Here is a simple guide to upload your TDS statements on the official website of the Income Tax Department:

  1. Visit https://www.incometaxindiaefiling.gov.in/home. On the right side of the page, you will see ‘Registered User?’ followed by the ‘Login Here’ option.
  2. Click on the aforementioned option and fill in your login information before clicking on ‘Login’. Your TAN will be your user ID.
  3. After you have logged in, locate the ‘TDS’ drop-down menu where you will have to select ‘Upload TDS’.
  4. A form will appear and you will have to choose the right details before clicking on Validate’ once the details have been selected.
  5. You will then have to validate your returns using either DSC or EVC.

Challan for TDS Payment

Challan ITNS 281 is the Challan form for online payment of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source). Challan No. 281 is applicable for Tax Deducted at Source / Tax Collected at Source (TDS/TCS) from corporates as well as non-corporates. TDS exception is essentially a mechanism developed by the Indian Government where in there is a tax deduction at the source of an income, calculated at a specific rate and thereby becomes payable to the department of Income Tax.

TDS Payment Due Dates for FY 2019-20

Here are the due dates for TDS Payment filing for FY 2019-20:

Quarter Period Due Date for filing
Quarter 1 1 April 2019 to 30 June 2019 31 July 2019
Quarter 2 1 July 2019 to 30 September 2019 31 October 2019
Quarter 3 1 October 2019 to 31 December 2019 31 January 2020
Quarter 4 1 January 2019 to 31 March 2020 31 May 2020

Penalty for Late Filing TDS Return

Here are the penalties levied by the Income Tax Department for the failure to submit or defaults in submitting your TDS returns/statements:

  • Failure to submit your returns: Under Section 272A(2) of the Income Tax Act, a penalty of Rs.100 will be levied for each day that the returns remain unsubmitted, subject to a maximum of the TDS amount.
  • Failure to file your returns on time: Under Section 234E of the Income Tax Act, a penalty of Rs.200 will be levied for each day that the returns remain unfiled, subject to a maximum of the TDS amount.
  • For defaults in the filing of TDS statement: Under Section 271H of the Income Tax Act, a penalty of Rs.10,000 to Rs.1 lakh will be levied in case the deductor defaults at the time of filing TDS returns within the due date.
  • For incorrect details: Under Section 271H of the Income Tax Act, a penalty of Rs.10,000 to Rs.1 lakh will be charged in case the deductor submits incorrect information pertaining to PAN, challan particulars, TDS amount, etc.
  • For non-payment of TDS: Under Section 201A of the Income Tax Act, interest will also be levied along with the penalty in case TDS is not paid within the due date. In case a part of the tax amount or the whole of it is not deducted at source, interest will be charged at 1.5% every month starting from the date on which the tax was deductible to the date on which the tax is actually deducted.

Refund of TDS

Individuals can claim TDS refund on the Income Tax website. However, the Income Tax Returns must be filed, and the TDS refund must be shown. Once the ITR is filed, the TDS refund will be processed by the Income Tax Department. The refund might be credited to the bank accounts by 6 months. Individuals can also check the status of the refund with the help of the e-filing website login.

What is a TDS Certificate?

TDS Certificates are of two types: Form 16 and Form 16A. Under Section 203 of the Income Tax Act, 1961, a certificate must be provided to the deductee showing the amount that has been subtracted as tax. The deductor is liable to provide this form to the deductee.

  • For salaried class: In case of salaried employees, employers are required to provide them with Form 16 with a mention of the amount that has been deducted as TDS. Form 16 contains a host of details such as the computation of tax, the deduction of tax, and the payment of TDS. Employers must issue this form to their employees before May 31 of the following financial year.
  • For non-salaried class: The deductor provides the deductee with Form 16A, and it contains all the details regarding the computation of tax, the deduction of TDS, and payments.

When is TDS not applicable?

There is no requirement for TDS deduction in case the person who makes the payment is a Hindu Undivided Family or an individual whose books do not require an audit.

That said, HUFs or individuals who make rent payments in excess of Rs.50,000 on a monthly basis must deduct TDS at 5% regardless of whether or not the person is required to have their books audited. The persons who are liable to subtract TDS at 5% have no requirement to apply for TAN.

TDS rates on salary

TDS rates on salary are the same as the tax slab rates applicable to individuals. If you are less than 60 years of age, your TDS liability will be nil in case your income is less than Rs.2.5 lakh. Individuals who earn between Rs.2.5 lakh and Rs.5 lakh will be subject to TDS at 5%, while those who earn between Rs.5 lakh and Rs.10 lakh will have a TDS liability of 20%, and those who earn more than Rs.10 lakh will be subject to a TDS rate of 30%

News About TDS

  • Finance Bill amendment to 2% TDS on cash withdrawal exceeding Rs.1 crore

    Nirmala Sitharaman, the Finance Minister had proposed a 2% TDS on cash withdrawals of more than Rs. 1 crore from an account in a year by a taxpayer. This proposal will be effective from FY2019-20. It was proposed to discourage cash transactions and promote digital transactions in the country.

    In the Financial Bill, the proposal was amended to one or more accounts instead of just one account. The amendment provides that if a taxpayer holds more than one account with the same bank, the bank will combine the withdrawals made from all such accounts to calculate the limit. The amendment also clarifies that the total TDS paid for cash withdrawal exceeding Rs.1 crore will be adjusted against the total tax dues from the taxpayer and will not be constituted as his or her income.

    29 July 2019

  • Financial Bill passed consisting of tax proposal regarding TDS

    Rajya Sabha passed the Finance Bill on 23 July 2019 despite opposition walkout. The bill consists of tax proposals made by the Central Government for FY2019-20, the current fiscal year. Nirmala Sitharaman, the Finance Minister has declined the opposition's demand to withdraw the proposal of 2% TDS on cash withdrawals exceeding Rs.1 crore in a year. She explained that the tax can be adjusted against the liability of the assesses and hence will not prove to be an additional burden on them.

    26 July 2019

  • Income tax filing deadline extended by a month

    The due date for filing tax has been extended from 31 July 2019 to 31 August 2019. The reasons for the extension are many, such as the delay in issuing Form 16 to the taxpayers, technical difficulties with the return forms, and changes in the I-T filing utility. Considering these difficulties faced by the taxpayers and their chartered accountants, the Central Board of Direct Taxes (CBDT) has postponed the ITR filing deadline. There was an extension of the I-T filing due date last year as well. However, this time the announcement was made earlier than the previous year.

    24 July 2019

  • 2% TDS on cash withdrawals to discourage business payments in cash

    The Finance Minister has proposed a 2% TDS on cash withdrawals exceeding Rs.1 crore from banks and such entities in a financial year under Section 194N. As per the proposed rule, which will be effective from 1 September 2019, any cash payment made by a bank, post office, or co-operative society to a person in excess of Rs.1 crore from an account in a year, will be liable to 2% Tax Deducted at Source.

    This proposal was made in an effort to discourage cash transactions in business payments, to widen the tax base, and promote a cashless economy. Further, the central government will notify those persons or entities that are exempted from the 2% TDS on cash withdrawals exceeding Rs.1 crore from a single account in a financial year.

    22 July 2019

  • Union Budget 2019 highlights regarding TDS

    2% TDS to be levied on cash withdrawals exceeding Rs.1 crore: In an effort to discourage cash transactions and to encourage digital payments in India, the Union Budget 2019 has proposed imposition of 2% TDS on cash withdrawals if it crosses Rs.1 crore from a single account at a Post Office, bank, or co-operative bank in a year. This 2019 Union Budget proposal will be effective from 1 September 2019.

    Payments toward vehicle parking charges and club membership fees to attract TDS: Currently, TDS is levied only on payments made for buying property, but payments made for amenities like vehicle parking fees, water and electricity maintenance fees, club membership fees, etc. were not included. However, from 1 September 2019, payments made for property purchase and amenities will attract TDS.

    5% TDS to be levied on payments exceeding Rs.50 lakh to contractors and professionals: Currently, Hindu Undivided Families (HUFs) and individuals do not deduct tax at source on payments made to contractors and other professionals. But, from 1 September 2019, 5% TDS will be applied for payments made to contractors and other professionals if it is more than Rs.50 lakh in a year.

    12 July 2019

  • Revised Form 15H provides senior citizens TDS exemption on bank interest

    The new Form 15H that was issued by the Income Tax Department allows senior citizens who make a taxable income of up to Rs.5 lakh to claim Tax Deducted at Source (TDS) exemptions on any interest that is earned from deposits. The limit for receiving TDS exemption has been increased from Rs.2.5 lakh to Rs.5 lakh.

    A notification was recently issued by the Central Board of Direct Taxes (CBDT), making an amendment in Form 15H as per the budget announcement. Changes have also been made in Section 87A of the Income Tax Act, 1961, so that tax exemptions are provided to residential Indians who have an income of up to Rs.5 lakh. The amount that can be taxed is either Rs.12,500 or the tax that is chargeable, whichever is less. As per the amendments that were made by the CBDT, financial institutions and banks will have to accept Form 15H from individuals who have a nil tax liability. Senior citizens will have to submit the revised Form 15H at the beginning of the financial year to ensure that no TDS is deducted on any income that has been generated due to the interest from deposits that are made in a bank. Apart from helping the taxpayer file the Income Tax Returns (ITR) easily, it also reduces the burden on the Centralized Processing Centre (CPC) to process refunds.

    24 June 2019

  • You Can Use These Tips to Avoid Paying Excess TDS During Tax Filing

    With financial year coming to an end, taxpayers are in a rush to close their accounts. However, it is advised not to rush things at such a crucial time so as to avoid making any mistake or overlook any important income tax section. The Tax Deducted at Source (TDS) is the amount that is deducted by the employer of a taxpayer, and deposited to the Income Tax Department in his or her behalf, making it one of the key components of income tax.

    See the tips below to learn how you can avoid paying excess TDS:

    Taxpayers below 60 years of age can submit Form 15H to avoid paying TDS on interest earned from fixed deposits. Senior citizens can submit the Form 15G for the same.

    Claim your House Rent Allowance (HRA) exemption by submitting the rental agreement or lease of your residential property that states the rent amount along with the name, address, and PAN of the landlord.

    You can submit the copies of the investments made such as NPS, ELSS, PPF, life insurance premiums, home loan EMI to avail tax exemption up to Rs.1.5 lakh for a financial year.

    Individuals can also get tax relief up to Rs.25,000 per year on the health insurance premiums paid. This deduction can be extended up to Rs.30,000 for a financial year if the taxpayer pays premiums of health insurance for his/her senior citizen parents.

    27 March 2019

  • Documents that Reduce your Tax Outgo from Salary

    If you are a salaried individual working in India, you will know the nitty-gritties surrounding Income Tax and filing of income tax returns. People typically commence filing their tax returns from the month of December as the Tax Deducted at Source of TDS is typically deducted from the salaries of January, February, and March. However, these days multiple organisations and companies have started giving their employees more time so that they can make their investments as they had planned. However, March is the last month in which you can submit all the relevant documents as 31 March marks the end of the previous financial year (in this case 2018).

    Mentioned below are a few sections wherein you can make investments in order to reduce the tax outgo from your salary:

    Section 24B: You can avail a tax deduction up to the amount of Rs.2 lakh on the interest that you are paying towards a home loan that you have taken for acquisition. In order to successfully avail this tax deduction, you will be required to submit the certificate from the bank for interest, and documents proving that the property is under your name or has been acquired by you. Along with this, you will also be required to submit a self-declaration which is Form 12C. Section 80C: There are multiple investments that you can make under Section 80C of the Income Tax Act, 1961 which will substantially reduce your tax outgo. Some of these instruments are Life Insurance and ULIP, Tax-saving fixed deposit, ELSS, children’s education, and so on. Section 80D: If you own a health insurance policy, you must be paying premiums towards the same. You can avail a tax deduction up to the amount of Rs.25,000 by submitting a xerox copy of the premium certificate that has been provided to you by the insurer.

    13 March 2019

  • TDS limit on interest from deposits to be hiked to Rs.40,000: Budget 2019

    The Budget for 2019 which was announced on 1 February 2019 has proposed to increase the TDS threshold for interests earned on the deposits with post offices and banks to Rs.40,000. The present TDS limit on the interest from deposits stands at Rs.10,000. In case of senior citizens, the limit is set at Rs.50,000. The interests earned on fixed deposits, savings deposits, along with deposit schemes in post offices and banks are covered under the proposal.

    As per the norms for Tax Deducted at Source (TDS), post offices and banks are allowed a deduction of 10% if the interest earned from a savings account is more than Rs.10,000 in a single financial year. However, the depositor does not receive any relief in terms of tax on income from interest. Taxpayers are still required to furnish the details of this income under the ‘Income from other sources’ and pay TDS for it which can be claimed back ass a deduction from the total gross income under Section 80TTA of the Income Tax Act. The interim Finance Minister Piyush Goyal has also proposed an increase in the TDS threshold for deduction of tax on income from rent to Rs.2.4 lakh from Rs.1.8 lakh. This has been announced for providing relief to small taxpayers. A tax rebate on incomes of up to Rs.5 lakh has been announced along with a raised standard deduction for salaried individuals to Rs.50,000 from Rs.40,000.

    15 February 2019

  • Deepak Kochhar Receives Notice From Income Tax Department

    A notice was issued by the Income Tax Department to NuPower Renewables, the troubled company of Deepak Kochhar, over reported tax evasion with regard to the Videocon loan case. Kochhar received the notice under Section 131 of the Income Tax Act. As such, tax authorities have been conducting enquiries regarding the case. The CEO and founder of NuPower Renewables, Mr Kochhar, has been requested to submit information of his income tax returns along with details of his personal finances for the past few years. Even information regarding his business transactions have been requested by the Income Tax Department. Even individuals associated with Kochhar’s firm have received notices from the Income Tax Department.

    4 April 2018

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