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All about TDS in India

TDS is deducted from the payments made by the individuals as per Income Tax Act. Various types & rates of TDS deduction are present. Focus on pay as you earn.

TDS is a direct tax which is collected from the people at the time of payment like salary, rent, commission, etc. The TDS collected is then transferred to Government Account. The full form of TDS is Tax Deducted at Source. The Central Board of Direct Taxes (CBDT) governs the provisions of TDS under the Income Tax Act, 1961. The deductor is referred to the person deducting the tax, and the deductee is the person from whom tax is deducted. TDS payment is made at a specified rate prescribed. No tax is deducted in case the amount doesn't exceed the specified limit.

Why TDS?

TDS deduction focuses on the idea of paying tax along with earning. TDS payment must be made irrespective of the mode of payment, i.e., cash, cheque or credit.

Advantages of TDS

  • As tax deduction takes place throughout the year, it ensures a continuing flow of revenue to the Government.
  • It is a measure to prevent tax evasion.
  • It helps in increasing the tax reach as it is deducted at the time of payment itself preventing the commitment of fraud.

TDS rates and types (Rates and limits as per Budget 2016)

Section Number Source Payee Type Threshold Limit TDS Rate
192 Salary Payment Individual Basic exemption limits as per the income tax slab rates. Rates of Income Tax in force.
193 Interest on securities Resident - 10%
194 Deemed Dividend Resident Individual Rs. 2500 each Financial year. 10%
194A Interest excluding interest on securities. Resident Rs 10000 if the interest is paid by the following:
  1. Banks;
  2. Co-operative Banks; or
  3. Post Office deposits.
In any other case, Rs. 5000 will be the limit.
194B Winning from games like a crossword puzzle, card, lottery, etc. Any person The amount is exceeding Rs. 10000 30%
194BB Winning from House race Any person The amount is exceeding Rs. 10000 30%
194C Contractor payments Resident contractor - Single payment is exceeding Rs. 30000; or
-Aggregate sums paid in the FY exceeding Rs. 100000.
- Individual/HUF = 1% of the sum paid.
- Any other person = 2% of the sum paid.
194D Insurance Commission Any Resident Rs. 15000 per Financial Year 10%
194DA Amount under LIC Resident Aggregate payment must be less than Rs. 100000 in the FY 1%
194H Brokerage or Commission Resident Rs. 15000 per Financial year 5%
194-I Rent Resident Rs. 180000 per Financial Year - P&M or equipment = 2%
- Land, building, furniture or fixtures = 10%.
194-IA Transfer of immovable property Resident Transferor Consideration of Rs 50lakhs. 1%
194J Royalty, Director Remuneration, Professional or technical service fees, Non-compete fees Resident Rs. 30000 for each income in the FY (Not applicable to payment to the director). 10%
194LA Compensation on acquiring immovable property Resident Rs. 250000 per FY 10%

However, NO TDS is deducted when

  • The amount is paid to Reserve Bank of India, Government or any such body.
  • Finance Corporations of Central or State.
  • Mutual Fund u/s 10(23D).
  • Deductee has non-deduction certificate u/s 192 of Income Tax Act.
  • Interest paid or credited to:

    • Banking Company;
    • Co-operative Society having banking business;
    • LIC, UTI or other insurance company;
    • Body notified for non-deduction of tax;
    • NSC, KVP or Indira Vikas Party;
    • NRE Account;
    • Banks or cooperative society’s recurring deposits or savings account; etc.

TDS Certificate

TDS Certificate is a certificate issued by the deductor specifying the amount of TDS deducted and paid to the bank. This document is used at the time of assessment for adjusting the TDS paid against the tax payable. There are various types of TDS certificate, namely,

  1. For Salary Individual: FORM 16 containing details about tax computation, deduction and payment.
  2. For a Non-salary individual: FORM 16A providing details about tax deduction and payment. Separate certificates for different sections.

TDS Return Due Date

(Note: From June the due dates have become SAME for e-filling or physical.)

TDS Return Due Date for Assessment Year 2017-18 (F.Y. 2016-17):

Quarter Quarter Period Due Date
1st April to June 31st July 2016
2nd July to September 31st October 2016
3rd October to December 31st January 2017
4th January to March 31st May 2017

Procedure for TDS Refund

The deductor can claim excess tax deducted as TDS Refund. The excess amount will stand refundable. The amount of excess payment will be considered higher of the actual amount paid by the deductor or the amount of tax deducted. If there is any tax liability, the excess amount is first adjusted against that and the remaining, if any, is refunded.

Requirement for TAN

The provision of section 203A of the Income Tax Act states that the people who require deducting tax at source have an obligation to acquire a TAN. TAN is referred to Tax Deduction and Collection Account Number. It is mandatory to mention TAN in the TDS return, certificate and payment challan. It is an alpha numeric number of 10 digits. Any failure to follow the provisions of this section will attract a penalty of Rs. 10000.

No. TDS is a significant tax deduction for other people also like a businessman. The tax can be adjusted towards the total tax liability finally ascertained.

For a salaried person, TDS is deducted if the individual is falling under the slabs of income tax. This means that the minimum income from salary must be more than Rs. 250000 or Rs. 300000 accordingly, for TDS deduction.

The TDS certificate issued by the deductor reflects the amount of TDS deducted. It can be by way of Form 16 or Form 16A. It can also be ascertained by signing in to your Income Tax Account and verify Form 26AS.

NO. Only TAN can be utilised. TAN is a separate Tax Deduction Account Number which is required for TDS.

The Deductor will be liable, and interest will also be levied on the due amount as per the Income Tax Act, 1961. The responsibility for a tax deduction and payment lies with the deductor only.