TDS – Tax Deduction at Source
TDS is the abbreviation of Tax Deduction at Source. Basically, it is an income-tax which is deducted from the money paid at the time of making particular payments like salary; interest; rent; commission; professional fees etc. The present article clears up all the basic concepts of TDS.
Person liable to deduct TDS-
Any person responsible for making payment of specified transactions covered within the TDS provisions is liable to deduct TDS. TDS is to be deducted within earlier of the following dates-
- When payment is due; or
- When actual payment is done.
It is important to note that the person is not required to deduct TDS if both the below condition is satisfied-
1. The person is either individual or HUF; and
2. The books of accounts of the person is not liable to be audited.
However, above condition is not applicable in case of rent payment exceeding Rs. 50,000 per month made by individual or HUF.
Rates of TDS-
Rates of TDS are tabulated hereunder-
| Section | Nature of payment | Prescribed threshold limit | Rate of TDS | |
| Normal case | Cases, wherein, there is no PAN or invalid PAN | |||
| 192 | Salary | As per the applicable slab | Slab rates | 30% |
| 192A | Premature withdrawal from EPF | Rs. 50,000 | 10% | 20% |
| 193 | Interest on Securities | Interest on debentures – Rs. 5,000
Interest on 7.75% GOI saving bonds – Rs. 10,000 Others – Rs. 2,500 |
10% | 20% |
| 194 | Dividend (other than referred to under section 115-O) | – | 10% | 20% |
| 194A | Interest other than ‘Interest on Securities’ | In case of senior citizen – Rs. 50,000
In any other case – Rs. 40,000 |
10% | 20% |
| 194B | Prize money from lottery; crossword puzzle; card game and any other games | Rs. 10,000 | 30% | 30% |
| 194BB | Winning from horse race | Rs. 10,000 | 30% | 30% |
| 194C | Payments to contractors | Single payment – Rs. 30,000
Aggregate payment – Rs. 1,00,000 |
Individual – 1%
HUF – 1% Others – 2% |
20% |
| 194D | Insurance commission | Rs. 15,000 | Individual – 5% | 20% |
| 194DA | Payment towards life insurance policy. | Rs. 1,00,000 | 5% | 20% |
| 194EE | Payment with regard to deposit under National Savings Scheme | Rs. 2,500 | 10% | 20% |
| 194F | Payment relating to the repurchase of the unit by Mutual Fund / Unit Trust of India | – | 20% | 20% |
| 194G | Payment of commission on sale of lottery tickets | Rs. 15,000 | 5% | 20% |
| 194H | Commission/ brokerage | Rs. 15,000 | 5% | 20% |
| 194I (a) | Rent – Plant & Machinery | Rs. 2,40,000 | 2% | 20% |
| 194I (b) | Rent – Land or building or fitting or furniture | Rs. 2,40,000 | 10% | 20% |
| 194IA | Sale of certain immovable property (other than agriculture land) | Rs. 50,00,000 | 1% | 20% |
| 194IB | Payment of rent by Individuals/ HUF not liable for tax audit | Rs. 50,000 per month | 5% | 20% |
| 194IC | Payment of monetary consideration under Joint Development Agreements (JDA). | NIL | 10% | 20% |
| 194J | Payment of Royalty, professional or technical services | Rs. 30,000 | 10% | 20% |
| 194K | Dividend income from shares and mutual fund | Rs. 5,000 | 10% | 20% |
| 194LA | Compensation towards compulsory acquisition of immovable property | Rs. 2,50,000 | 10% | 20% |
| 194LB | Interest on infrastructure debt fund to Non-Resident | – | 5% | 20% |
| 194M | Payment of commission; brokerage; professional fee; contractual fee to a resident person either by Individual or HUF (who are not liable to deduct TDS u/s 194C or 194H or 194J | Rs. 50,00,000 | 5% | 20% |
| 194N | Cash withdrawal in excess of Rs. 1 Crore | Rs. 1 Crore | 2% | 20% |
| Cash withdrawal in excess of Rs. 20 Lakhs only when the person has not filed ITR for the preceding three (3) previous years | Amount withdrawn in cash exceeds Rs. 20 Lakhs | 2% | 20% | |
| Amount withdrawn in cash exceeds Rs. 1 Crore | 5% | 20% | ||
| 194O | Payment of sum by an e-commerce operator to an e-commerce participant | Rs. 5,00,000 | 1% | 20% |
| 194Q | Payment of amount to resident person towards purchase of goods | Rs. 50,00,000 | 0.10% | – |
| 195 (payment to non-resident) | Income from investment made by NRI | – | 20.80% | – |
| Income from LTCG as per section 115E for an NRI | – | 10.40% | – | |
| Income from LTCG as per section 112(1)(c)(iii) and section 112A | – | 10.40% | – | |
| Income from STCG as per section 111A | – | 15.60% | – | |
| Any other from LTCG | – | 20.80% | – | |
| Interest income on money borrowed in foreign currency | – | 20.80% | – | |
| Any other source of income | – | 31.20% | – | |
Depositing of TDS to the Government-
As per provisions of section 200(1) of the Income Tax Act read with rule 30 of the Income Tax Rules, the person is liable to deposit the TDS within the following prescribed time limit-
| Particulars | Due date |
| Amount deducted by the Government offices |
|
| Amount deducted by any other deductor |
|
TDS statement/ returns-
As per provisions of section 200(3) of the Income Tax Act read with rule 31A of the Income Tax Rules, Form within which TDS statement/ returns is to be filed is tabulated hereunder-
| Form No. | Particulars |
| Form No. 24Q | Statement of TDS deducted on salary under section 192 and TDS deduction under section 194P. |
| Form No. 27Q | Statement of TDS deduction under section 193 to section 196D (other than 194P) in respect of the deductee being a non-resident (not being company/ foreign company/ resident but not ordinarily resident) |
| Form No. 26Q | Statement of TDS deduction under section 193 to section 196D (other than 194P) in any other case. |
| Form No. 26QB | Statement of TDS deduction under section 194-IA [i.e., TDS on sale of property]. |
| Form No. 26QC | Statement of TDS deduction under section 194-IB [i.e., TDS on rent]. |
| Form No. 26QD | Statement of TDS deduction under section 194M [i.e., TDS on payment of certain sum by an individual and HUF]. |
| Form No. 27Q | Statement of TDS deducted by Non-resident |
Accordingly, time limit for furnishing TDS statement/ returns in above form is tabulated hereunder-
| Quarter | Due date |
| April to June | 31st July |
| July to September | 31st October |
| October to December | 31st January |
| January to March | 31st May |
Notably statement in Form No. 26QB and Form No. 26QC is to be furnished within a period of 30 days from the end of the month in which TDS is deducted.
TDS certificate and time period of issuance thereon-
As per provisions of section 203 of the Income Tax Act read with rule 31 of the Income Tax Rules, there are two types of TDS certificates. The types of TDS certificates and time limit thereon are tabulated hereunder-
| Form No. | Applicability | Periodicity | Due date |
| Form No. 16 | Cases, wherein, TDS is deduction on salary under section 192 and TDS deduction under section 194P | Annual | Within 15th June of the completion of the respective Financial Year. |
| Form No. 16A | Any other case | Quarterly | Within 15 days from the due date of furnishing of TDS statement. |
Late fees-
Late fee is applicable in the following manner-
| Section | Particulars | Late fees payable |
| Section 201(1A) | Non-deduction of TDS (whole or any part) | 1% per month or part of month |
| Section 201(1A) | Non-payment of TDS | 1.5% per month or part of month |
| Section 234E | Non-furnishing of TDS return | Rs. 200 per day |
FAQs-
Q.1 What TDS means?
TDS means ‘Tax Deduction at Source’. Accordingly, any person or company making specified payment is required to deduct TDS.
Q.2 Difference between TDS and TCS?
TDS and TCS are two different concepts. Difference between both is detailed hereunder-
- TDS is a tax deducted on payment when the amount exceeds specified limit. Whereas, TCS is a tax which is collected by the seller.
- TDS is deductible on payments like salary; rent; brokerage; professional fees etc. Whereas, TCS is collectible on sale of goods like scrap; timber; etc.
Q.3 What is TDS and why it is deducted?
TDS i.e., Tax Deduction at Source is specific percentage which is reduced as and when certain specified payments like salary; rent; commission; interest; professional fees etc. is done.
Q.4 Why TDS is being deducted?
TDS is deducted with an aim to collect the tax from the very source of income.
Q.5 Can I get back TDS deducted from salary?
One can get back TDS deducted from the salary in case the taxes deducted by way of TDS is more than actual tax payable for the respective Financial Year.
Q.6 What happens if TDS is not deducted on salary?
The defaulter will be liable to pay late fee @1% per month on the amount of TDS not deducted.
Q.7 What is the TDS rate for salary?
TDS on salary will be deducted as per the applicable slab rate of employee.
Q.8 What is new rule of TDS?
As per the new rule of TDS, the buyer will be liable to deduct TDS @0.1% of the amount exceeding Rs. 50 Lakhs. Further as per section 206AB and section 206CCA, TDS and TCS will be deducted at higher rates for certain specified non-fileRs.
Q.9 Who has to deduct TDS?
TDS is to be deducted at the prescribed rates by the company/ person making specified payment.
Q.10 When should TDS be deducted?
TDS is to be deducted at the time of making payment or at the time of credit in case of specified transaction.
Q.11 What is TDS 194Q?
With effect from 1st July 2021, the buyer of the goods will be liable to deduct TDS under section 194Q if total sales/ receipts/ turnover of the previous Financial Year exceeds Rs. 10 Crores and the purchase from the single supplier exceeds Rs. 50 Lakhs in the current year.
Q.12 Is TDS deducted on purchase of material?
On satisfaction of the conditions, TDS is deductible on purchase of goods as per provisions of section 194Q of the Income Tax Act.
Q.13 What are the different type of TDS returns?
Form 24Q; Form 27Q; Form 26Q; Form 26QB and Form 26QC are the different types of TDS returns.
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