Tax Deducted at Source – TDS Meaning, Filing, Return & Due Dates
TDS is a form of tax that is deducted from your salary or paycheck. It must be deducted for certain payments made by a person. The TDS requirements of the Income Tax Act will be discussed in depth in this article.
What is the meaning of TDS?
TDS, or Tax Withheld at Source, is amount of income tax deducted from money received when certain payments are made, such as professional fees, salary, rent, commission, interest, and so on.The person who gets money is typically responsible for paying income tax. The government, on the other hand, ensures that income tax is deducted in advance from your payments by adhering to the Tax Deducted at Source requirements. The net amount is given to the recipient of the income, only after making the due deduction of the TDS. The total amount is added to the income of therecipients, and the amount of TDS is deducted from his ultimate lability of tax arising for the year. The sum already deducted and paid on his behalf is credited to the beneficiary.
When is the TDS to be Deducted and Who should Deduct the Same?
If individual is making certain payments defined by Income Tax Act is required to deduct TDS at the time of making such payment. If the person who is remitting the payment is an individual or a person or an HUF whose accounts are not required to be audited by the concerned authority, then no TDS return must be deducted.
Individuals and HUFs who pay rent in excess of Rs 50,000 per month are obligated to deduct TDS at the rate of 5%, even if the individual or HUF is not subject to a tax audit. Individuals and HUFs who must deduct TDS at a rate of 5% are exempt from applying for TAN. TDS shall be reduced or deducted by your employer at the applicable income tax slab rates provided by the Income Tax Act. TDS is deducted at a rate of 10% by banks. Alternatively, if they do not have your PAN information, they may deduct 20%.
TDS rates are set in the income tax act for most payments, and TDS is deducted by the payer based on these rates. You do not have to pay any tax if you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit. As a result, no TDS should be taken from your earnings.
Similarly, if your total income is below the limit specified for taxable limit, you can submit Form 15G and Form 15H to the bank so that TDS is not deducted from your income earned in the form of interest. If you haven’t been able to provide documentation to your employer, or if your employer or bank has already deducted TDS and your total income is less than the taxable limit, you can file a return and request a refund of the TDS. The complete list of Specified Payments that are subject to TDS deduction, as well as the TDS rate.
Due Date on which TDS Should be Deposited to the Credit of the Government
By the 7th of the next month, the tax deducted at source or the TDS which has been collected must be submitted with the government.
How should the TDS be Deposited?
Tax Deducted at Source or the TDS must be deposited on the government portal by utilizing the Challan ITNS-281.
Filing of TDS Returns
All people who have deducted TDS are required to file Tax Deducted at Source or the TDS returns. TDS returns must be filed on a quarterly basis and should also include information such as the deductee TAN, the type of payment,the amount of TDS deducted, and the deductee PAN details. In addition, depending on the purpose of the TDS deduction, multiple forms for submitting returns are required. The following are examples of several sorts of return forms:
On all payments except salaries, the Form 26QTDS shall be used. And the ending of each quarter on basis of filing TDS return shall be as given below:
- the first quarter or Q1 will end on July 31st,
- the second quarter or Q2 will end on October 31st,
- the third quarter or Q3 would endon the 31st of January,and
- the fourth quarter or Q4 will end only onMay 31st.
|Form||Particulars of Transactions||Due Date for Filing of Return|
|Form 24Q||TDS collected on Salary||· For Q1 it would be 31stJuly
· For Q2 it would be 31stOctober
· For Q3 it would be 31st January, and
· For Q4 it would be 31st May.
|Form 27Q||TDS collected on payments which are made to non-residents except on salary payments||· For Q1 it would be 31stJuly
· For Q2 it would be 31stOctober
· For Q3 it would be 31st January, and
· For Q4 it would be 31st May.
|Form 26QB||TDS collected on sale of property||Within a period of 30 days starting from the date on which such TDS was deducted.|
|Form 26QC||TDS collected on the payment of rent||Within a period of 30 days starting from the date on which such TDS was deducted.|
All About TDS Certificate
TDS certificates are majorly in the following forms:
- Form 16,
- Form 16A,
- Form 16 B, and
- Form 16 C.
TDS certificates must be provided to the taxpayer or person or assessee from whose income TDS was deducted prior to the remittance of the payment by the person deducting TDS. When TDS is deducted on interest from fixed deposits, for example, banks give Form 16A to the depositor. The employee receives Form 16 from the employer including all the details of the deductions made from the salary.
|Form Name||Particulars Included||Frequency of Filing||Due Date|
|Form 16||TDS collected on Salary Payment||Yearly||31st of May|
|Form 16 A||TDS collected on payments which are made to non-residents except on salary payments||Quarterly||Within 15 days from the due date of filing.|
|Form 16 B||TDS collected on sale of property||Every transaction made or conducted||Within 15 days from the due date of filing.|
|Form 16 C||TDS collected on the payment of rent||Every transaction made or conducted||Within 15 days from the due date of filing.|
Crediting of TDS in Form 26AS
It’s critical to understand that how TDS relates to PAN. TDS deductions are linked to deductor and deductee PAN numbers. If you have had TDS deducted from any of your earnings made during the year, you must check and confirm with your Tax Credit Form 26AS. This is a consolidated tax statement that all PAN holders have access to through their Income Tax Portal.
As all TDS deductions made by a payer to the payee is linked to the unique PAN held, this form i.e., Form 26AS details the TDS deducted from such income by each deductor for all types of payments given to the person – despite of the same being based on salary or interest income – all TDS associated with your PAN is reported here. Income tax is also paid directly by you on this form, either as advance tax or self-assessment tax. As a result, it’s critical that you correctly enter your PAN whenever TDS may be due on your earnings.
Transparency through SMS Alerts
The department of Income Tax, lately, has started sending taxpayers with text message or SMS via VK-ITDEFL, which includes the amount of tax deducted at source (TDS) against their PAN (Permanent Account Number). Every quarter, the assessee from whom TDS was deducted would receive an SMS alert informing you of the TDS credited in respect of your income frominterest, salary, and other sources. The TDS amount will be accumulated in your Form 26AS for the relevant financial year.
The Finance Ministry launched this programme in order to promote openness and decrease TDS discrepancies during income tax filing. To ensure that the data provided in the message or text message corresponds to the information on the payslips, taxpayers can cross-check the information provided in the message with the information on the payslips provided to them by the employer. A common cause of improper income tax return filing is TDS mismatch which increases the difficulties.
Tax Liability on Income from which TDS is Deducted
TDS is deducted from your salary based on income tax bracket. TDS rates for other types of income are set and range between 10% and 20%. Your tax rate is not determined by your overall income. As a result, you may be charged a TDS on your receipts in some circumstances. Separately, you’d have to figure out your annual income by combining all of your sources of revenue.
The total taxable income earned by the assessee during a year would be used to compute your real tax liability for such relevant financial year. You can claim credit for TDS deducted on your various receipts based on the taxes calculated which would help in reducing the tax liability payable. To compute the sum due by the assessee, subtract the tax deducted at source from your actual tax liability. You may also receive a refund if the tax liability is lower than what was deducted. In either situation, you must file an income tax return and either pay the tax due or request a refund.
TDS deduction is inevitable and this should be complied with by a taxpayer or TAN holder with respect to any payment made by him or her on which the TDS deduction shall be applicable as per the provisions of the Income Tax Act. This article will provide you with all the required insights about filing of TDS and due dates of the same.
TDS is applicable to various types of income such as salary, interest, commission, rent, etc. The rate of TDS and the due date for depositing the TDS with the government varies depending on the nature of the income and the status of the recipient.
Filing TDS returns is mandatory for all entities that have deducted TDS during the year. The due date for filing TDS returns is 31st July for the first quarter, 31st October for the second quarter, 31st January for the third quarter, and 31st May for the fourth quarter.
Kanakkupillai is a company that provides various financial and legal services such as company registration, GST registration, income tax filing, TDS filing, and other compliance-related services. They can assist businesses and individuals in complying with TDS requirements, including filing TDS returns on time and avoiding penalties.
FAQ on Tax Deducted at Source
TDS deductor are responsible for the following:
- Obtain a Tax Deduction Account Number and include it in any TDS-related papers.
- Subtract the TDS at the appropriate rate as it is applicable.
- Within the stipulated due date, deposit the TDS amount with the government authority.
- TDS returns filings should be done as are due on the given date.
- Within the stated timeframe, provide the TDS certificate to the payee.
If you do not provide your Permanent Account Number or PAN details to the deductor, the deductor will deduct TDS at the highest of the rate prescribed in the relevant provisions of the Act or 20%, according to Section 206AA of the Income Tax Act.
PAN stands basically for Permanent Account Number and TAN for Tax Deduction Account Number.
The person in charge of deducting TDS, i.e., the deductor, should get a TAN. In all TDS-related papers, the deductor must include the TAN.
However, there is an exception, and it is that in the case of TDS on land and construction purchases made under Section 194-IA, the deductor is not needed to get a TAN and can return the TDS using PAN.
TDS on rent, as defined by Section 194-IB, and TDS on payments of specific sums by individuals or HUFs, as defined by Section 194M, can also be remitted using PAN rather than TAN.
The employer deducts TDS on salary at the employee's 'average rate' of income tax. It will be computed as follows: Average Income tax rate = Income tax payable (calculated through slab rates) divided by employee's estimated income for the financial year.
The concept of TDS requires that the person on whom responsibility has been cast, is to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The deducted sum is required to be deposited to the credit of the Central Government.
Under Section 192, TDS is deducted at the time of actual payment of salary and not during the accrual of salary. It means tax will be deducted when your employer pays salary whether in advance or on time or in arrears (late payment).
It is because the salary received from the employer is categorised as income, and the same attracts a TDS based on the average prevailing rates of tax. The ITA makes it mandatory for employers to deduct TDS on salary if they pay a salaried income to their employees.