TDS Basic Concept With List of Payment Covered or Not Covered Under TDS

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.

Deductor- The company or person that makes the payment after deducting TDS is called a deductor

Deductee- The company or person receiving the payment is called the deductee

Tds Rates – Normal TDS rates are applicable if recipient provides with PAN details. But if recipient doesn’t provide PAN details to the deductor then tax will be deducted at normal rates or 20%, whichever is higher.

It is the deductor’s responsibility to deduct TDS before making the payment and deposit the same with the government. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PAN of the deductor and deducted.

Payments covered by TDS scheme
Following payments are covered under TDS scheme

A. Salary (to resident/non-resident)

B. Payments other than salary to residents/non residents

1. 193 – Interest on securities

2. 194 – Dividends

3. 194A – Interest other than interest on securities –

• in any Others Case
• 194A -Banks / Co-operative society engaged in business of banking /Post Office
•  194A – Senior citizen

4. 194B – Winning from Lotteries

5. 194BB – Winnings from Horse Race

6. 194C – Payment to Contractors

7. 194IC- Payment under Specified agreement

8. 194D – Insurance Commission

9. 194DA – Payment in respect of life insurance policy (applicable from 01.10.2014)

10. 194E – Payment to Non-Resident Sportsmen or Sports Association

11. 194EE – Payments out of deposits under NSS

12. 194F – Repurchase Units by MFs

13. 194G – Commission – Lottery

14. 194H – Commission / Brokerage

15. 194I-Rent

194I(b)-Land and Building/Furniture/Fittings

194IA – Transfer of certain immovable property other than agriculture land (w.e.f. 1-6-2013)

16. 194J – Fees for Professional/Technical Services

17. 194K – Payment of Dividend by Mutual Funds (Applicable From 01-Apr-2020)

18. 194LA – Immovable Property 194LB – Income by way of interest from infrastructure debt fund (non- resident)

19. 194LBA – Certain income from units of a business trust to Residents 194LBA (a) – Certain Income in the form of interest from units of a business trust to a residential unit holder  194LBA (b) – Certain Income in the form of dividend from units of a business trust to a resident unit holder

194LBA – Certain income from units of a business trust to Non Resident:-

194LBA(1) – Payment of the nature referred to in Section 10(23FC)(a)

194LBA (2) – Payment of the nature referred to in Section 10(23FC)(b)

194LBA (3) – Payment of the nature referred to in section 10(23FCA) by business trust to unit holders

20. 194LBB – Income in respect of units of investment fund.

21. Sec 194LBC – Income in respect of investment in securitisation trust.

22. Sec 194LC – Income by way of interest by an Indian specified company to a non-resident / foreign company on foreign currency approved loan /long-term infrastructure bonds from outside India (applicable from July 1, 2012)

23. 194LD – Interest on certain bonds and govt. Securities(from 01-06-2013)

24. 194N – Payment of certain amounts in cash.

25. 194NF – Payment of certain amounts in cash to non-filers

26. 194O – TDS on e-commerce participants (Applicable From 01-Oct-2020)

27. 194P – TDS in case of Specified Senior Citizen

28. 194Q – TDS on Purchase of Goods exceeding Rs. 50 Lakhs (Applicable From 01- July-2021)

29. Sec 195 – Other Sums

30. Sec 196A – Foreign comp unit holder of MF

31. Sec 196B – Income from units

32. Sec 196C – Income from foreign currency bonds or GDR (including long-term capital gains on transfer of such bonds) (not being dividend)

33. Sec 196D – Income of Foreign Institutional Investors/ Specified Fund :-

34. Sec 196D – Income of foreign institutional investors from securities under sub-section (1)

35. Sec 196DA – Income of specified fund from securities referred to in clause

(a) of sub-section (1) of section 115AD (other than interest income referred to in section 194LD)

Payments not covered under TDS

1) Under sec 196, tax is not deductible in respect of amount payable to the following: –

•  Central Government or State Government.
• RBI
•  A statuary corporation whose income is exempt from income tax
•  A mutual trust

2) Under Sec 197A(1D) Tax is not deductible by off- shore banking unit from interest paid to non-resident or not ordinarily resident.

3) Under Section 197A (1E)- No tax is deductible from any payment to any person for, or on behalf of, the new pension system trust.

4) Under Section 197A(1F) Tax is not deductible from specified payment mentioned below to a notified institution/ association

• Certain payments given by person to a bank
• Payments relating to software, if a few conditions given in notification no.21/2012, dated June 13,2012 are satisfied. (file:///E:/Documents/Downloads/920110000000000195%20(1).htm
• Any income given to investment trust which is exempt under section 10(23FBA)
• Payment of rent to Tirumala Tirupati Devasthanam’s, Tirupati, Andhra Pradesh
• Payments of nature specified in section 10(23DA) to securitization trust.

Some important points :-

1. TAN- Getting tan no by deductor is mandatory for tds deduction

2. Pan no of deductee -because tds rate is depend of status of deductee

3. Every person is required to deduct TDS if during the previous year the turnover or gross receipts is more than Rs. 1 crore in case of assessee caring business or Rs. 50 Lakhs in case of assessee caring profession.

4. Even if you do not carry on a business or profession, or carry on a small business or profession which is not liable to tax audit, there are quite a few obligations to deduct TDS /collect TCS. Following sec covered under this:-

a. Sec 192

b. Sec 194IA

c. Sec 194IC

d. Sec 194M

e. Sec 195

f. Sec 206 (1G)(a) and (b)