What is TDS?
TDS stands for Tax Deduction At Source. It means that when an Individual/Organization/persons making the specified payment which are mentioned under Income Tax Act, 1961 to another person than that Person (who is making the payment) has to deduct the TDS when the amount of the payment exceeds the threshold limit. Such rates and threshold limits are mentioned under the Income Tax Act,1961.
What is covered here
Applicability of TDS
TDS is applicable on every person who is making the payment which are specified under Income Tax Act,1961 for which detail is given in the chart below. While making payment the deductor has to ensure that if the payment is falling in any of the category below beyond the limit specified in the chart then he has to deduct the TDS as per applicable rate which is mentioned over there.However the TDS is not applicable on individual or HUF whose books are not required to be audited under Income Tax law.
Tax Deduction, Deposit and Certification Process
A person who deducts the TDS is called Deductor & the person whose TDS is deducted will be known as Deductee. Such deducted amount is required to be deposited by the deductor to Government as Income Tax on behalf of deductee on monthly basis and inform the Income Tax Department about all the deduction and deposit of TDS on quarterly basis by mentioning the name and PAN of deductees and issue a certificate to deductees about the deduction and deposit of TDS so that they can have the evidence of tax paid on their behalf. This TDS is claimed by assessee (Deductee) at the time of payment of his income tax payable by him at the time of filing of income tax return on the basis of such certificate and hence we may understand that this virtually an advance tax for deductees. It is a tool by which Government establishes the various check over the income to ensure the avoidance of tax evasion and also collect some part of income tax revenue on monthly basis which helps it to smooth running of Government machinery.
Timing of TDS Deduction
TDS is to be deducted at the time of making the payment or booking of expenses in the books of account of the deduction whichever is earlier.
Specified Payments/ Transaction which are Applicable for TDS
TDS is to be deducted on the specified transaction mentioned under Income tax act. These transactions are given below with their section, limits& rate as per FY 2019-20 i.e. AY 2020-21.
| SECTION | INCOME TYPE | LIMIT | INDI./HUF TDS RATE IN % | OTHERS TDS RATE IN % |
| 192 | Salary Income | As per Basic Exemption limit& deduction | Slab rates | _ |
| 192A | EPF premature withdrawal | Rs.50,000 | 10%,if no PAN than 30% | _ |
| 193 | Interest on securities | Rs.10,000 | 10% | 10% |
| 193 | Interest on debenture | Rs.5,000 | 10% | 10% |
| 194 | Dividend other than listed company | NA | 10% | 10% |
| 194A | Interest other than on securities by bank /post | Rs. 40,000(for senior citizen Rs. 50,000) | 10% | 10% |
| 194A | Interest other than on securities by others | Rs. 5,000 | 10% | 10% |
| 194B | Winning from lotteries ,puzzle ,game | Rs. 10,000 | 30% | 30% |
| 194BB | Winning from horses | Rs. 10,000 | 30% | 30% |
| 194D | Payment for insurance commission | Rs. 15,000 | 5% | 10% |
| 194DA | Payment in respect of life insurance policy | Rs. 1,00,000 | 1% | 1% |
| 194EE | Payment of NSS deposits | Rs. 2,500 | 10% | 10% |
| 194G | Commission on sale of lottery tickets | Rs. 15,000 | 5% | 5% |
| 194H | Commission on brokerage | Rs. 15,000 | 5% | 5% |
| 194I | Rent of Land, Building and Furniture | Rs. 2,40,000 | 10% | 10% |
| 194I | Rent of plant & machinery | Rs. 2,40,000 | 2% | 2% |
| 194IB | Rent | Rs. 50,000 per month | 5% | _ |
| 194IA | Transfer of immovable property other than agriculture land | Rs. 50lakh | 1% | 1% |
| 194LB | Interest from infra bonds | NA | 5% | 5% |
| 194LD | Interest on govt. securities and bonds | NA | 5% | 5% |
| 194C | Payment to contractor /subcontractor (single transaction) | Rs. 30,000 | 1% | 2% |
| 194C | Payment to contractor during the year | Rs. 1,00,000 | 1% | 2% |
| 194J | Professional fees/Technical fees etc. | Rs. 30,000 | 10% | 10% |
| 194J | Payment to call centre operator | Rs. 30,000 | 2% | 2% |
| 194IA | Compensation on transfer of certain immovable property other than agriculture land | Rs.2,50,000 | 10% | 10% |
Applicability of TDS on Non Resident Indian (NRI)
First of all, In case of NRI, TDS will be deducted only on that incomes which are liable to tax in India or earned at the source in India.
| NCOME TYPE | TDS RATE % |
| Transfer on immovable property | 20% no exemption limit |
| Int. on bank deposit | 30% no exemption limit |
| Int. on all other investment | 20% |
| STCG sale within 1 year | 15% |
| Rent | 30% |
| All other income earned as NRI are liable tax in India | 30% +10% surcharge(if the income is above 10 lakh)+4% cess. |
Due date for payment/depositing TDS/return filed
| Date of ending of the quarter of FY | Due date for filling of return |
| 30 June (April – June) | 31 july of FY |
| 30 September(july-sept.) | 31 October of FY |
| 31 December(oct.-dec.) | 31 jan. of FY |
| 31 march (jan.-march) | 31 may of FY immediately following FY |
| Months | Due date of TDS payment |
| April | 7th May |
| May | 7th June |
| June | 7th July |
| July | 7th August |
| August | 7th September |
| September | 7th October |
| October | 7th November |
| November | 7th December |
| December | 7th January |
| January | 7th February |
| February | 7th March |
| March | 30th April |
In case of any delay in the deposit of TDS or filing the quarterly TDS return beyond the due date then the Interest & penalties are payable as applicable. If the deductor do not deduct the TDS then he will not be entitled to claim the related expenses / payment as the admissible expenses while computing his net taxable income.
DS Certificates and Form 26AS
TDS certificate shows the amount of tax which has deposited by Deductor.TDS certificate to be generated online by TRACES website which is owned by the Income Tax Department. Deductor are required to issue TDS certificate to Deductee within specified time as per Income Tax Act,1961. TDS certificates are of two type a) Form 16& b) Form 16A.
Form 16 is a certificate issued to salaried individuals from their employer when he deducts tax from the employee salary. It contains details of the amount of tax deducted at source (TDS) on salary by your employer along with the salary breakup for the financial year. This form 16 is a proof of that you are employed. TDS is deducted from your salaries for this. Form 16 is a statement that a company issues to its employees when the year is completed. This letter contains employees Total income, tax deduction, allowance and 80C (tax relief and excitement of savings)Is a complete description of the evidence filed under Section issued by this institution or company only is done when the income of an employee falls under the taxable income. Deducted an amount as tax from income the amount is called TDS. This form shows how much deduction the company has made in the form of tax which is useful when filling tax returns.
Many times people even complain for not getting Form 16 from the company. If this happens then you can lodge the complaint to Income Tax Department because sometimes it happens that companies do not despite the TDS which he has deducted or may be the cases where he has not filed the TDS return irrespective of TDS paid or not. This is a punishable offence. This is main responsibility of the employer to issue Form 16 to its employees. Form 16 is an annual statement while form 16A is will be issued on every quarter. Form 16A is issued under section 203 of the Income Tax Act,1961 which contains the followings:-
1. Name, PAN and TAN of Deductor
2. Name and PAN of Deductee
3. Money, Nature and Date of Payment
4.TDS payment receipt
Form 16A is also a TDS Certificate which is applicable for all types of TDS deducted on income but other than Income from Salary.
Income Tax department also gives a facility to the deductees to check online that who has deducted the TDS, how much he has deducted and when he has deposited to the Government. It also contains the amount of income the deductor has paid or credited. Form 26AS is an annual consolidated credit statement issued under Section 203 AA of the Income-tax Act, 1961. It contains details of various taxes deducted on your income by deductors. To avail this facility, one has to login to this site using his/ her PAN and DOB and then he can download online without any charge. The difference between the form 16 / 16A and 26AS is that form 16A/ 16 is a certificate for transactions with one party whereas the 26AS is summery of tax deducted all the parties.
Disclaimer: Due care has been taken to draft this write-up and is intended to express the Authors understanding and to start an academic discussion on the subject discussed in above write-up. it should not be considered as professional advice. Readers are advised to refer to relevant provisions of law before applying any of the above-mentioned views. The author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the content of this write-up.