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About TDS

TDS stands for tax deducted at source. The purpose of Filing TDS Return was to collect the tax at the time payment becomes due or at the time of actual payment whichever is earlier. This was proposed in order to improve the tax collections and it also resulted in early realization of tax receipts by the government. As per the provisions relating to TDS in the income tax act, a person make any specified payment to someone is required to deduct tax at source at a specified rate and deposit the same with the Central Government. The person responsible for deduction of tax is called deductor and the person whose tax is being deducted is called the deductee. The deductor is required to obtain Tax Deduction Account Number (TAN) for the purpose of deduction of tax. However in some cases, only PAN is required for deduction of tax. The deductor is required to remit the amount of tax deducted at source to the Central Government within 7 days of the end of the month in which the tax has been deducted. However tax deducted at source for the month of March can be deposited by 30th April. Any delay in deduction of tax at source or delay in deposit of the tax deducted to the Central Government will make the deductor liable to pay interest on the amount of tax deducted. The deductor is required to file a return depicting details of the tax deducted at source, name and PAN of deductee, amount of payment, date of payment etc. TDS are to be filed on a quarterly basis and the due dates are as follows:

S. No. Quarter Due Date
1. April to June 31st July
2. July to September 31st October
3. October to December 31st January
4. January to March 31st May

Delay in filing of TDS returns will result in levy of late filing fees under section 234E amounting to Rs. 200 per day for each day of default during which the default continues subject to maximum of amount of tax deducted at source.

The details furnished by the deductor in the TDS return will automatically flow into Form 26AS of the deductee which is available on the income tax portal in the deductees’ id. The auto-population of details in deductees’ Form 26AS is very important as it forms the basis for the deductee in order to claim the credit of TDS deducted while filing the Income Tax Return.

The deductor is also required to issue TDS certificate to the deductee in Form 16 and 16A. Issue of TDS certificate downloaded from the TRACES portal is a mandatory requirement on the part of deductor. Form 16 is an annual certificate to be issued to employees where TDS on salaries is involved. Form 16 is required to be issued within 15 days from the due date of filing of TDS return for the 4th quarter. In cases involving TDS other than TDS on salaries, Form 16A is required to be issued. Form 16A is to be issued on a quarterly basis within 15 days from the due date of filing of TDS return of the respective quarter. Failure to issue Form 16 and 16A within the said time limit will attract penalty of Rs. 100 per day for each day of default subject to the maximum of tax deducted at source.

TDS Liability

The following chart gives a snapshot of some of the important payments liable for deduction of TDS and also the rates prescribed for deduction of tax:

Section Type of Payment Threshold limit TDS rate
192 Salary Income N.A. Slab rate
192A Payment of taxable portion of accumulated balance of Provident Fund to employees 50000.00 10%
193 Interest on Securities - 10%
194 Payment of dividend 5000.00 10%
194A Interest other interest on securities where payer is a banking company or post office or co-operative society engaged in carrying on business of banking 40000.00 10%
194A Interest other interest on securities where payer is a banking company or post office or co-operative society engaged in carrying on business of banking and payment is made to a senior citizen 50000.00 10%
194A Interest other than interest on securities- Other than those mentioned above 5000.00 10%
194B Winnings from lottery or crossword puzzle or card game and game of any sort 10000.00 30%
194BB Winnings from horse race 10000.00 30%
194C Payment for a contract or sub-contract where the contractor or sub-contractor is an individual or HUF 30000.00 for a single contract or 100000.00 in aggregate payments in a financial year 1%
194C Payment for a contract or sub-contract where the contractor or sub-contractor is a person other than an individual or HUF 30000.00 for a single contract or 100000.00 in aggregate payments in a financial year 2%
194D Payment of Insurance Commission to
(a) Person other than a company
(b) Domestic Company		 15000.00   (a) 5%
(b) 10%
194DA Payment in respect of life insurance policy which is taxable in the hands of policyholder 100000.00 5%
194G Commission, etc., on sale of lottery tickets 15000.00 5%
194H Payment of Commission or Brokerage 15000.00 5%
194I(a) Rent for use of plant & machinery 240000.00 2%
194I(b) Rent for use of land or building or furniture or fittings 240000.00 10%
194IA Payment for transfer of immovable property other than agricultural land 50 lakhs 1%
194IB Payment of rent by individual or HUF having turnover less than one crore rupees in case of business or fifty lakh rupees in case of profession in the preceding financial year 50000.00 per month 5%
194IC Payment to be done under Joint Development Agreement - 10%
194J Fees for professional or technical services where sum is paid towards fees for technical services or towards royalty in nature of consideration for sale, distribution or exhibition of cinematographic films 30000.00 2%
194J Fees for professional or technical services other than those mentioned above 30000.00 10%
194M Payment of contract fees, commission (other than insurance commission) or brokerage or professional fees by an individual or HUF who are not liable to deduct TDS under section 194C, section 194H or section 194J 50 lakhs 5%
194N Cash withdrawal from one or more accounts held in a banking company or post office or co-operative society engaged in the business of banking where recipient has filed returns of all three assessment years relevant to the three previous years for which time limit for filing of returns has expired 1 crore 2%
194N Cash withdrawal from one or more accounts held in a banking company or post office or co-operative society engaged in the business of banking where recipient has not filed returns of all three assessment years relevant to the three previous years for which time limit for filing of returns has expired 20 lakhs 2% where aggregate of amounts withdrawn exceeds Rs. 20 lakhs and 5% where aggregate of amounts withdrawn exceeds Rs. 1 crore
194O Payment by e-commerce operator to e-commerce participant
(applicable from 01/10/2020)
(No TDS where the e-commerce participant is an individual of HUF who has furnished his PAN or Aadhaar Number to the e-commerce operator and whose sales or services through the e-commerce operator do not exceed Rs. 5 lakhs during the year) 		- 1%
194Q Purchase of goods from any resident of value exceeding Rs. 50 lakhs in a financial year by a buyer whose turnover or gross receipts in immediately preceding financial year exceed Rs. 10 crores
(applicable from 01/07/2020)		 50 lakhs 0.10% on sum exceeding Rs. 50 lakhs
Is there any registration required for the purpose of deducting tax at source?

Ans. The person responsible for deduction of tax at source is required to obtain Tax Deduction Account Number (TAN). In some cases, only PAN is sufficient for deduction of tax at source.

Ans. The person responsible for deduction of tax at source is called the deductor and the person whose tax has been deducted at source is called the deductee.

Ans. The last date for remittance of tax deducted is the 7th day from the end of the month in which tax has been deducted. However for the month of March, last date for remittance of tax is 30th April.

Ans. Form 24Q is used for filing TDS returns where tax has been deducted in case of salary income. Form 26Q is used for income or payments other than salaries.

Ans. TDS returns are required to be furnished on a quarterly basis.

Ans. April to June quarter 31st July
July to September quarter 31st October
October to December quarter 31st January
January to March quarter 31st May

Ans. Late filing of TDS return will attract levy under Section 234E of Rs. 200 per day for the period of default subject to the maximum amount of tax deducted at source.

Ans. On filing of TDS return by the deductor, all the details related to the tax deducted including TAN of the deductor, date and amount of payment, amount of tax deducted etc. get auto-populated in Form 26AS of the deductee. The deductee can download Form 26AS from the income tax portal at any point of time to keep himself updated regarding the tax deducted.

Ans. Issue of TDS certificate downloaded from the TRACES portal is a mandatory requirement on the part of deductor. Form 16 is required to be issued to employees where TDS on salaries is involved. In cases other than TDS on salaries, Form 16A is issued.

Ans. Form 16 is an annual certificate to be issued within 15 days of due date of filing of TDS return for the last quarter. Form 16A is a quarterly certificate to be issued within 15 days of due date of filing of TDS return for the respective quarters.

Ans. Delay in issue of TDS certificate beyond the due date will attract a levy of Rs. 100 per day for each day of default subject to the maximum amount of tax deducted at source.

Ans. In cases where the deductor is an individual or HUF whose turnover in the preceding financial year does not exceed Rs. 1 crore in business or Rs. 50 lakhs in profession, such individual or HUF shall not be required to deduct tax at source barring few exceptions like under Section 194IB, Section 194M etc.

Ans. Tax shall be deducted at source at rate of 20% or applicable rate whichever is higher in cases where PAN has not been furnished by the deductee to the deductor.