Introduction:

TDS or Tax Deducted at Source is a process instituted by the Indian Income Tax Department in which the individual responsible for making predefined payments like wage, commission, professional expenses, interest, rent, and so on is required to subtract a definite proportion of tax before initiating the full payment transaction to the payment receiver.

This article will provide details about everything you need to know about TDS.

When does TDS need to be deducted?

TDS is founded on a basic concept: tax needs to be subtracted at the moment of payment becoming due or at the moment of the actual transaction, whichever comes first.

Who needs to deduct TDS?

Any individual making certain payments as defined in the Indian Income Tax Act is obligated to deduct TDS before the full payment is made. However, no TDS must be subtracted if the payer is an entity or Hindi Undivided Family whose records are not needed to be audited in any way.

People and Hindi Undivided Families are obliged to deduct TDS at a rate of 5% on rent payments over 50,000 INR per month, even if the person or Hindi Undivided Family are not subject to an audit. People and HUFs who are required to deduct TDS at the rate of 5% do not have to register for TAN. Your company deducts TDS amounts at the relevant income tax bracket rate. TDS is deducted at a rate of 10% by banking institutions. However, if you have not provided your PAN details to them, they may deduct TDS at a rate of 20%.

What are the types of TDS?

The following are among the revenue streams that are eligible for TDS:

  1. Salary
  2. The amount covered by LIC
  3. Bank Profits
  4. Commission or Brokerage
  5. Payment of commissions
  6. Compensation for the acquisition of immovable property
  7. Payments to contractors
  8. Dividend Considered
  9. Commission for Insurance
  10. Interest received
  11. Rent Payment
  12. Remuneration provided to a company’s director
  13. Immovable property transfer
  14. Winning at games such as a crossword riddle, card game, lottery, and so on.

How much TDS is charged on salary?

TDS charges on salaries are equivalent to income tax bracket rates for people. If you are under the age of 60 years, your TDS obligation will be zero if your annual income is below the limit of 2,50,000 INR. Individuals earning between 2,50,000 INR and 5,00,000 INR would be liable to TDS at a rate of 5%. People earning between 5,00,000 INR and 10,00,000 INR will be liable to TDS at a rate of 20%, and individuals earning more than 10,00,000 INR will be liable to TDS at a rate of 30%.

For a yearly income of 2,50,000 INR or less, no TDS deduction will be required under the updated new tax system. The TDS obligation is 5% if the yearly income is from 2,50,000 INR to 5,00,000 INR. The TDS obligation is 10% if the yearly income is from 5,00,000 INR to 7,50,000 INR. The TDS obligation is 15% if the yearly income is from 7,50,000 INR to 10,00,000 INR. The TDS obligation is 20% if the yearly income is from 10,00,000 INR to 12,50,000 INR. The TDS obligation is 25% if the yearly income is from 12,50,000 to 15,00,000 INR. If the yearly income exceeds the limit of 15,00,000 INR, the TDS duty is at the rate of 30%.

Under Old Tax Regime

Income Range

TDS Obligation

<2,50,000 INR

0% of annual income value

2,50,000 INR to 5,00,000 INR

5% of annual income value

5,00,000 INR to 10,00,000 INR

20% of annual income value

>10,00,000 INR

30% of annual income value

Under New Tax Regime

Income Range

TDS Obligation

<= 2,50,000 INR

0% of annual income value

2,50,000 INR to 5,00,000 INR

5% of annual income value

5,00,000 INR to 7,50,000 INR

10% of annual income value

7,50,000 INR to 10,00,000 INR

15% of annual income value

10,00,000 INR to 12,50,000 INR

20% of annual income value

12,50,000 INR to 15,00,000 INR

25% of annual income value

>15,00,000 INR

30% of annual income value

When is the TDS return filing due date?

The following are the deadlines for filing TDS returns.

Quarter

Months

Deadline

First Quarter

April to June

31st March

Second Quarter

July to September

31st March

Third Quarter

October to December

31st January

Fourth Quarter

January to March

30th June

What are the consequences of late TDS filing?

The following are the penalties imposed by the Indian Income Tax Department for failing to file or failing to submit your TDS returns on time:

  1. If you do not file your returns, you will face the following consequences:

    A fine of 100 INR would be charged under IT Act Section 272A (2) for each day until you file your returns. This charge is subject to the limit of your actual TDS amount.

  2. If you do not file your taxes on time, you will face the following penalties:

    IT Act Section 234E imposes a fine of 200 INR every day that the tax returns are not submitted, up to a limit of the overall TDS sum.

  3. For failures to file a TDS statement:

    If the deductor fails to file the TDS statement by the required date, a fine of 10,000 INR to 1,00,000 INR would be charged under IT Act Section 271H.

  4. For inaccurate information:

    A fine of 10,000 INR to 1,00,000 INR would be levied under IT Act Section 271H if the deductor provides erroneous information regarding PAN, challan specifics, TDS value, and so on.

  5. For failure to pay TDS:

    If TDS payment is not made by the deadline, interest will be charged in addition to the fine under IT Act Section 201A. If a portion of the entire tax value is not taken at the source, 1.5% interest will be imposed every month from the day the tax amount was deductible until the date the tax amount is deducted.

How to check the status of the TDS deduction?

  1. Visit the IT Department’s official website.
  2. Fill up your information and sign in to the site.
  3. Select ‘view Form 26AS (Tax Credit)’ under the tab ‘My Accounts’.
  4. To get the material, choose the year and select the PDF format.
  5. The PDF document you downloaded will be passcode-protected. The passcode will be the birthdate from your PAN Card.
  6. You may then see all of the information about the TDS deduction.

If your PAN Card is connected to your bank’s online banking service, you can utilize it to verify whether your TDS amount has been deducted or not.

TDS Return:

TDS Return can be defined as a quarterly statement provided to the Income Tax Division by the TDS deductor. The document contains a breakdown of all the data for TDS received by the deductor as well as TDS amounts paid to the Tax Department by the deductor.

TDS Certificates:

TDS Certificates are classified into two kinds: 

  • Form 16 (for salaried individuals)
  • Form 16A (for non-salaried individuals)

According to IT Act Section 203, a certificate indicating the amount deducted as tax must be issued to the deductee. This document must be sent to the deductee by the deductor.

What are the benefits of TDS?

TDS has the following benefits:

  1. It guarantees that individuals do not avoid paying their taxes.
  2. TDS provides the government with a consistent stream of money.
  3. It is significantly more straightforward for the deductee because the tax is immediately deducted.
  4. The tax collection load on the Tax Collection Agencies is greatly reduced.

Conclusion:

TDS also ensures that government receives the tax it deserves on income earned by individuals as well as companies. For both companies and individuals, not paying TDS (tax deducted at source) can have serious consequences ranging from tax fines to imprisonment.


FAQ’s

Yes, your PAN Card is required for TDS payment.


TDS challans are primarily used to deposit TDS to the government.


A fine of between 10,000 INR and 1,00,000 INR would be imposed on your employer under IT Act Section 271H.