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Tax Deducted at Source – TDS Meaning, Filing, Return & Due Dates

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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. This article will discuss in depth the TDS requirements of the Income Tax Act.

What is the meaning of TDS?

TDS is the 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 the due deduction of the TDS is made. The total amount is added to the income of the recipients, and the amount of TDS is deducted from his ultimate liability 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 an individual is making certain payments defined by the 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 a 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 taxable limit specified, 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, is required.

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 a tax Deduction 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:

Form 26QTDS shall be used for all payments except salaries. The ending of each quarter on the 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 Rendon the 31st of January,and
  • the fourth quarter, or Q4, will end only on May 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 the 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, which includes 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 the 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 how TDS relates to PAN. TDS deductions are linked to the 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 are 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

Lately, the Department of Income Tax has started sending taxpayers text messages 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 credit with respect to your income from interest, 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 your 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 from your various receipts based on the taxes calculated, which would help reduce 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 the filing of TDS and its due dates.

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