What is Tax Deduction at source(TDS)?

Table of Content

TDS stands for ‘Tax Deducted at Source’. It was introduced to collect tax at the source from where an individual’s income is generated.

Concept of TDS-

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person called deductor who is liable to make payment of specified nature to any other person called deductee shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.

Rates for TDS

Taxes shall be deducted at the rates specified in the relevant provisions of the Act or the First Schedule to the Finance Act.

Section Nature of Payment TDS Rate for Individual/ HUF (Indian Resident)(in %)
192 Salary payment As per the income tax category
193 Interest on securities

a) Any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act;
b) any debentures issued by a company where such debentures are listed on a recognized stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made there under
c) any security of the Central or State Government
d) interest on any other security

10
194A Income by way of interest other than “Interest on securities 10
194B a) any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act; 30
194BB b) any debentures issued by a company where such debentures are listed on a recognized stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made there under; 30
194D Insurance commission 5
194EE Payment in respect of deposit under National Savings scheme (NSS) 10
194G Commission, etc., on sale of lottery tickets 5
194H Commission or brokerage 5
194I Rent

a) Plant & Machinery
b) Land or building or furniture or fitting

2

10

194IA Payment on transfer of certain immovable property other than agricultural land 1
194IB Payment of rent by individual or HUF not liable to tax audit

Note: This provision is applicable from June 1, 2017

5
194J Any sum paid by way of

a) Fee for professional services,
b) Fee for technical services
c) Royalty,
d) Remuneration/fee/commission to a director or
e) For not carrying out any activity in relation to any business
f)  For not sharing any know-how, patent, copyright etc.

10
194M Payment made to professional or commission or brokerage of Rs 50lakh and above 5
194N Cash withdrawal exceeding Rs 1crore 2

Due Dates of Payment

The due date for each TDS payment is the 7th of the month following the month in which you have made the deduction. After making payment, you have to file a TDS return. The due date for each TDS return is the last day of the month following the quarter in which TDS has been paid (except for the Jan-March quarter). Have a look at the table below.

Quarter TDS payment date TDS Return date
Jan-March 7th Feb, 7th March, 30th April 31st May
April-June 7th May, 7th June, 7th July 31st July
July-September 7th August, 7th, September, 7th October 31st October
October – December 7th November, 7th December, 7th January 31st January

 

How to pay Tax Deducted/Collected at source?

Tax deducted or collected at source shall be deposited to the credit of the Central Government by following modes:

  1. Electronic mode: E-Payment is mandatory for:
  1. Physical Mode: By furnishing the Challan 281 in the authorized bank branch

How to avoid TDS

If a person believes that his total income in a financial year will be below the exemption limit, he can ask the payer not to deduct TDS by submitting Form 15G/15H.

While receiving payment which is subject to TDS, deductee is required to provide his PAN details to avoid tax deduction at the higher rates.

How to check if TDS is deposited with the government

Once the TDS is deposited with the government by the deductor, then the TDS amount deposited will be reflected in your Form 26AS. Further, the deductor is required to issue you a TDS certificate.

What will happen when the deductor fails to deposit the TDS with the IT department?

When your employer has not paid the TDS to the income tax department, the TDS would not be available against your PAN in your Form 26AS. You cannot take a tax credit of the TDS while filing your income tax return.

Penalty for non deposit of TDS

Case I: Under section 234E

Deductor will be liable to pay the way of fee Rs.200 per day till the failure to pay TDS continues. However, the penalty should not exceed the amount of TDS for which statement was required to be filed.

Case II: Under section 271H

Assessing officer may direct a person who fails to file the statement of TDS within due date to pay penalty minimum of Rs.10000 which may be extended to Rs.100000.

NOTE: Penalty under section 271H is in addition to Penalty under section 234E  This section will also cover the cases of incorrect filing of TDS return.

Penalty on companies for not depositing or not deducting TDS on time

Default under section Nature of Default Interest on such default Period of interest payment
201A Non-deduction of TDS, either in whole or part 1% Per month From the date on which the tax was to be deducted to the actual date of deduction
Non-payment of TDS (after deduction) 1.5% Per month From the date of deduction to date of actual payment

Penalty for companies that delay TDS returns

TDS returns must be filed once every quarter to the department. The due date to file such returns is one month from the end of a quarter. However, the due date for the quarter ending on 31 March is 31 May. So, you can check Form 26AS regularly from the due date so that the latest transaction will be updated on records..

If you have solid proof about your employer not depositing the taxes deducted, it is best to bring this to your employer’s notice before taking further steps. If your employer does not respond even after repeated requests, you can take action by filing a written complaint to your assessing officer.

TDS Refund

If excess tax is deducted, you will have to claim a refund in your income tax return. For most individuals the return.

Scroll to Top