TDS Rates & Provisions
TDS
(Tax Deducted at Source)
is a tax collection mechanism under the Income Tax Act, 1961, where tax is
deducted at the point of income generation by the person making the payment,
and it is remitted to the government on behalf of the recipient of the payment.
The primary purpose of TDS is to reduce tax evasion and ensure a steady flow of
revenue to the government throughout the year.
Key Aspects of TDS
- Purpose and Concepts of TDS:
Ø TDS is based on the principle of "pay as you earn," where a portion of the income is withheld at the source itself.
Ø It applies to various payments such as salaries, interest, rent, dividends, commissions, and professional fees.
Ø The deductor is responsible for deducting and remitting the tax to the government, while the deductee can claim the credit for this deduction when filing their income tax return.
- Applicability of TDS:
Ø Section 192: TDS on salary.
Ø Section 193: TDS on interest on securities.
Ø Section 194A: TDS on interest other than securities (e.g., bank interest).
Ø Section 194C: TDS on payments to contractors.
Ø Section 194I: TDS on rent.
Ø Section194J: TDS on fees for professional or technical services.
- When Should TDS be deducted and by Whom?
Any person making specified payments mentioned under the Income Tax Act is required to deduct TDS at the time of making such specified payment. But no TDS has to be deducted if the person making the payment is an individual or HUF whose sales from business or profession doesn’t exceed Rs.1 crore or Rs.50 lakhs, respectively.
- TDS
Rates: Refer below TDS
Rate Chart.
- Due Date for Depositing the TDS to the
Government: 7th of the subsequent month.
- How to Deposit TDS:
Tax Deducted at Source has to be deposited via Income Tax Portal based on the TAN login. Direct tax payments facility has been migrated from OLTAS 'e-payment: Pay Taxes Online' to e-Pay Tax facility of e-Filing portal. You have to click on 'e-Pay Tax' option of Income Tax Department on https://www.incometax.gov.in/ to make direct tax payments including TDS. - Thresholds
for Deduction:
TDS is deducted only if the payment exceeds a prescribed threshold limit, which varies for different transactions. For exampleØ Under Section 194A, no TDS is deducted on interest payments if the amount is less than ₹40,000 (for general category individuals).
Ø Under Section 194C, TDS is deducted only if the payment exceeds ₹30,000 for a single transaction or ₹1,00,000 annually.
- TDS
Deduction Process:
Ø The deductor must calculate the appropriate TDS based on the applicable rates and deduct it before making the payment.
Ø The deductor is responsible for depositing the TDS to the government by the 7th of the following month.
Ø For March payments, the due date is the 30th of April.
- TDS
Payment to Government:
TDS must be deposited to the credit of the government within the stipulated time through authorized banks using challan ITNS 281. - TDS
Return Filing:
Ø The deductor must file quarterly TDS returns in the prescribed forms, such as:
§ Form 24Q: TDS return for salary payments.
§ Form 26Q: TDS return for non-salary payments.
Ø The due dates for filing TDS returns are:
§ Quarter 1 (April to June): 31st July
§ Quarter 2 (July to September): 31st October
§ Quarter 3 (October to December): 31st January
§ Quarter 4 (January to March): 31st May
- TDS
Certificates:
Ø After filing the TDS return, the deductor must issue a TDS certificate to the deductee, indicating the amount of tax deducted and deposited.
Ø Form 16 is issued for TDS on salary.
Ø Form 16A is issued for TDS on non-salary payments.
- Consequences
of Non-Compliance:
Ø Failure to Deduct TDS: The deductor may face penalties and interest.
Ø Late Filing of TDS Returns: A penalty of ₹200 per day of default is applicable under Section 234E.
Ø Penalty(Sec 271H) Assessing Officer may direct a person who fails to file the statement of TDS/TCS within the due date to pay a minimum penalty of Rs 10,000 which may be extended to Rs 1,00,000. The penalty under this section is in addition to the late filing fee u/s 234E. This section will also cover the cases of incorrect filing of TDS returns.
Ø Interest on Late Deposit: Under Section 201(1A), interest is charged at:
- 1% per month for the period
from the date the tax was deductible until the actual deduction.
- 1.5% per month for the period
from the date of deduction to the date of deposit.
- 1% per month for the period
from the date the tax was deductible until the actual deduction.
- Refund
of Excess TDS: If
excess TDS has been deducted, the deductee can claim the refund while filing
the annual income tax return. After considering all deductions and taxes
already paid, the refund will be processed based on the total tax liability.
- If
a PAN is not provided or PAN is inoperative, especially due to non-linking with
Aadhaar, the key penalty under TDS (Tax Deducted at Source) provisions is that
TDS will be deducted at a higher rate:
Key Points on TDS Penalty:
Ø Higher Rate of TDS: According to Section 206AA of the Income Tax Act, if the deductee (person whose tax is being deducted) does not furnish a valid PAN, TDS will be deducted at the higher of the following rates:
· At the rate specified in the relevant provisions of the Income Tax Act.
· At the rate of 20%.
Ø No Refund for Excess TDS: If TDS is deducted at a higher rate due to the inoperative PAN, the excess TDS deducted cannot be refunded until the PAN is made operative and linked as required. Filing a refund claim would be subject to normal tax filing rules, and the inoperative PAN will restrict this.
Ø Non-Applicability of Basic Exemption Limits: Even if the income is below the basic exemption limit or qualifies for lower TDS rates due to deductions, the 20% TDS will still apply as long as the PAN remains inoperative.
Example:
· If the TDS rate is 10% for a particular transaction, and the PAN is inoperative, the TDS rate will be increased to 20%.
· If an individual earns interest of ₹50,000, instead of ₹5,000 (10% TDS), ₹10,000 (20%) would be deducted as TDS due to the inoperative PAN.
Illustration of TDS Mechanism:
- Suppose a company makes a
payment of ₹2,00,000 for professional services to a consultant.
- Under Section 194J, the
applicable TDS rate is 10%.
- The company deducts ₹20,000 as
TDS before making the payment to the consultant and deposits this amount
with the government.
- The consultant will receive
₹1,80,000 as payment and can claim the ₹20,000 TDS as tax credit while
filing their income tax return.
How to Upload TDS statements
Follow the
below guide for uploading TDS statements on the Income Tax Department website:
·
Visit
Income Tax website. Login with your TAN.
·
Select
e-File > Income Tax Forms > File Income Tax Forms on the dashboard
·
Select
the relevant form and fill in the details
· Validate the return using either DSC or EVC.
How and When to file TDS returns?
TDS
return is to be submitted quarterly and various details need to be furnished
like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. Also,
different forms are prescribed for filing returns depending upon the purpose of
the deduction of TDS. Various types of return forms are as follows:
|
Form No |
Transactions
reported in the return |
Due date |
|
Form 26Q |
TDS on all
payments except salaries |
Q1 – 31st July |
|
Form 24Q |
TDS on Salary |
Q1 – 31st July |
|
Form 27Q |
TDS on all
payments made to non-residents except salaries |
Q1 – 31st July |
|
Form 26QB |
TDS on sale of
property |
30 days from the
end of the month in which TDS is deducted |
|
Form 26QC |
TDS on rent |
30 days from the
end of the month in which TDS is deducted |
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TDS Rate (%) |
TDS Rate (%) |
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Indv / HUF |
Others |
Indv / HUF |
Others |
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Slab Rate |
Slab Rate |
Slab Rate |
Slab Rate |
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10% for residents, 30% for non-residents |
10% for residents, 40% for non-residents |
10% for residents, 30% for non-residents |
10% for residents, 40% for non-residents |
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30% for residents, 40% for non-residents, 25% for individual & HUF |
30%, residents, 40% for non-residents, 25% for individual & HUF |
30% for residents, 40% for non-residents, 25% for individual & HUF |
30%, residents, 40% for non-residents, 25% for individual & HUF |
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1 Crore (Rs. 3
Crores if withdrawl is by Co-operative society) 20 Lakhs (If ITR not filed for previous 3 years) |
2 2 (Rs. 20 Lakh - 1 Crore) 5 (Rs. 1 Crore and above) |
2 5 |
2(Rs. 20 Lakh - 1 Crore) 5 (Rs. 1 Crore and above) |
2 5 |
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Slab Rate |
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Slab Rate |
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(* Refer Point no 14 on Page no. 4)
Disclaimer
The information provided in this handout is intended for general informational purposes only and does not constitute legal, tax, or professional advice. While every effort has been made to ensure the accuracy and completeness of the content, A R MUTHA & Co. Chartered Accountants does not accept any responsibility or liability for any errors, omissions, or inaccuracies. Tax laws and provisions are subject to frequent changes and interpretations, and it is recommended that you consult with a qualified professional before making any tax-related decisions or taking any actions based on the information provided in this handout.
A R MUTHA & Co. Chartered Accountants shall not be held liable for any loss or damages arising from reliance on the information contained herein.
Reach
us
CA
Anand Mutha
(
8275019423/ 7588515468
📧 anandmutha@armutha.in
🌐 www.armutha.in
