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.
What is 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 TDSLet’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 :
- 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.
- Click on the aforementioned option and fill in your login information before clicking on ‘Login’. Your TAN will be your user ID.
- After you have logged in, locate the ‘TDS’ drop-down menu where you will have to select ‘Upload TDS’.
- A form will appear, and you will have to choose the right details before clicking on Validate’ once the details have been selected.
- 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 2020-21
Here are the due dates for TDS Payment filing for FY 2020-21:
| Quarter | Period | Due Date for filing |
|---|---|---|
| Quarter 1 | April 2020 to 30 June 2020 | 31 July 2020 |
| Quarter 2 | July 2020 to September 2020 | 31 October 2020 |
| Quarter 3 | October 2020 to December 2020 | 31 January 2021 |
| Quarter 4 | January 2021 to March 2021 | 31 May 2021 |
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%
Tax Deducted at Source FAQs
- What is TIN?
- Is it mandatory to produce the PAN for deductors and employees or deductees?
- Who is in charge of the administration of e-filing?
- What is File Validation Utility (FVU)?
- What has to be done if the Form 26AS does not reflect the TDS credit?
TIN stands for Tax Information Network. It is an initiative of the Income Tax Department of India (ITD) and is aimed at the betterment of the current system of direct tax collection, processing, and accounting. This network has been established by the NSDL e-Governance Infrastructure Limited and acts as a repository of tax related information across the nation.
PAN is compulsory for all non-Government deductors. Government deductors do not have to provide the PAN. However, it is mandatory for all deductees to produce their PAN.
The CBDT has appointed a Director General of Income Tax (Systems) who acts as the e-filing Administrator in regard to the electronic filing of TDS and TCS statements.
FVU or File Validation Utility is provided by the NSDL for the purpose of verification of e-Return files generated by the deductor as per the prescribed format. The FVU takes the input file and generates a report in the '.FVU' format.
In such cases, you will have to get in touch with the payer of TDS to figure out the actual reason of the TDS not being reflected on Form 26AS. It can be due to a number of reasons including the non-filing of TDS statement by the payer, quotation of wrong PAN of the deductee, and so on. Try to find out the reason behind the same and get it rectified accordingly.
