CA Kapil Goel

Tax Deducted at Source (TDS) is one of the modes of collecting income tax in India at the very source of income, governed under the Indian Income Tax Act of 1961. It is controlled by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue in-charge of Indian Revenue Service (IRS).

TDS is simply an indirect method of collection of tax which combines the concepts of “pay as you earn” and “collect as it earned.” Its importance to the government lies in the fact that it prepones the collection of tax, provides a greater reach and wider base for tax. At the same time, it benefits to the tax payer also, it distributes the incidence of tax and provides a simple and convenient mode of payment of taxes.

The concept of TDS requires that the person, on whom responsibility has been cast, is to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The deducted sum is required to be deposited to the credit of the Central Government. The recipient from whose income tax has been deducted at source gets the credit of the amount deducted in his personal assessment on the basis of the certificate issued by the deductor.

In the concept of TDS, Income Tax Act requires specified persons to deduct tax on specified nature of payments being made by them. An Individual or an H.U.F. is not liable to deduct TDS on such payment except where the individual or H.U.F. is carrying on a business/profession where accounts are required to be audited u/s 44AB, in the immediately preceding financial year. A person is liable to get its accounts audited u/s 44AB if during the relevant financial year its gross sales, turnover or gross receipts exceeds Rs. 1 Crore in case of a business, or Rs. 25 lacs (wef A.y 2017-18 this limit has been increased to Rs 50 Lakhs) in case of a profession.

There are also some conditions also where there is no liability of deductor to deduct TDS which are as follows.

  • On declaration furnished by payee on Form 15G or Form 15H as the case may be.
  • On certificate issued by ITO.
  • Payment to Government/RBI/ Corporation established by or under Central Act which  is exempt from income tax by virtue of any law/ Mutual Fund specified under section 10(23D).
  • Exempt Incomes.
  • Interest Payment by Offshore Banking Units.
  • Payment to New Pension System Trust.
  • Notified payment to Notified Institutions / Associations.

Detailed TDS Rate Chart for Financial Year 2016-17, Financial Year 2017-18 and Financial Year 2018-19 can be checked at below links-

TDS Rates and Returns for Assessment Year 2019-20 (Financial Year 2018-19)

TDS Rate on Payment of Salary and Wages:

Section 192 Payment of Salary and Wages
Criterion of Deduction TDS is deducted if the estimated income of the employee is taxable.Employer must not deduct tax on non-taxable allowances like conveyance allowance, rent allowance, medical allowance and deductible investments under sections like  Section 80C, Section 80CCC, Section 80CCD, Section 80D, Section 80DD, Section 80DDB, Section 80E, Section 80G, Section 80 GGA, Section 80TTA. No tax is required to be deducted at source if the estimated total income of the employee is less than the minimum taxable income (Rs. 2,50,000/- in case of Individual, HUF, AOP, BOD and AJP)
TDS Rate As per Income Tax, Surcharge and Education Cess rates applicable on the estimated income of employee for the year.
Section 192A (inserted wef June 2015) Payment of Accumulated Balance Due of Employees’ Provident Fund Scheme,1952 to employees
Criterion of Deduction Tax is to be deducted by the trustees of Employees’ Provident Fund Scheme,1952 or any other person authorised under the scheme to make such accumulated payments to employees and the amount of such payment is Rs 50,000 or more
TDS Rate In case of Resident Payee-10%(no surcharge or health and education cess)

In case of Non-Resident-10%(will be increased by surcharge and health and education cess)

TDS Rates on Payments other than Salary and Wages to Residents/Non-Resident

Section For Payment of On Payments Exceeding Individual / HUF Others
193 Interest on Securities Rs. 5000/-

However the limit is Rs 10,000 for the securities mentioned below:

i) Any security of the central government / state government

ii) 8% savings taxable bond,2003

iii) Wef 1st April,2018 on 7.75% savings (taxable) Bonds, 2018

 

10% 10%
194 Deemed Dividend Rs 2500 10% 10%
194A Interest other than on securities by banks Rs. 10000/-

However this limit has been increased to Rs 50,000 wef 1st April 2018 if the payee is senior citizen.

10% 10%
194A Interest other than on securities by others Rs. 5,000/- 10% 10%
194B Winnings from Lotteries / Puzzle / Game Rs. 10,000/- 30% 30%
194BB Winnings from Horse Race Rs. 10,000/- 30% 30%
194C Payment to Contractors/ Sub-Contractors

 

Rs. 30000/- for single payment Rs. 1,00,000/- for aggregate
payment during Financial Year
1% 2%
194 D Payment of Insurance Commission Rs. 15,000/- 5% 10%
194DA Payment of Life Insurance Policy Rs 100,000 1% 1%
194E Payment to Non- Resident Sportsman/sports association/ entertainer 20% 20%
194 EE Payment of NSS Deposits Rs. 2500/- 10% NA
194 F Repurchase of units by Mutual Funds / UTI 20% 20%
194 G Commission/ Remuneration on Sale of Lottery tickets Rs. 15,000/- 5% 5%
194 H Commission or Brokerage Rs. 15,000/- 5% 5%
194I Rent of Land, Building or Furniture Rs. 180000/- 10% 10%
Rent of Plant & Machinery Rs. 180000/- 2% 2%
194IA Transfer of Immovable Property (w.e.f. 01.06.2013) Rs. 50 lacs or more 1% 1%
194IB

 

Payment made by the individual/ Huf whose books of accounts are not required to be  audit u/s 44AB in the immediately preceding  financial year for rent on land or building to any resident .(w.e.f 1st June 2017) Rs 50,000 per month or part of the month 5% 5%
194IC

 

Any person responsible for paying to a resident any sum by way of consideration (not being in kind)under a joint development agreement.

 

 – 10% 10%
194 J Professional/ technical services, royalty Rs. 30,000/- i)10%

ii) 2% in case the payee is engaged in the business of operation of call centre

1i)10%

ii) 2% in case the payee is engaged in the business of operation of call centre %

194 J (1) Any remuneration / fees / commission paid to a director of a company, other than those on which tax is deductible u/s 192. 10% 10%
194 LA Compensation/ Enhanced compensation on acquisition of certain immovable property. Rs. 2,50,000/- 10% 10%
194 LB Interest to non- resident by infrastructure 5% 5%
194LBA Income from units of business trust. TDS is applicable if a business trust distributes any income referred to in section section 115UA or to its unit holders being in the nature of Section 10(23FC) 10% (for resident) and 5% (for non- resident) 10% (for resident) and 5%  (for non- resident)
  Payment Received u/s 10(23FCA) – Rental Income received by the  real estate distributed to the unit holders 10% (for resident) and 30% (Surcharge + HEC) {for non- resident} 10% (for Indian company) and 40% (Surcharge + HEC) {for foreign company}
194LBB Payment of income in respect of units of Investment Fund 10% (for resident) and 30% (Surcharge + HEC) {for non- resident} 10% (for Indian company)and 40% (Surcharge + HEC) {for foreign company}
194LBC Payment of income in respect of Investment Fund in securitization fund i. 25% ( for resident individual/HU F)

ii. 30% (Surcharge + HEC) for non resident other than foreign company.

 

i. 30-For resident

ii. 40% (Surcharge + HEC) for foreign company

194LC Payment of interest on (approved by C.G) amount borrowed in foreign currency during 01.07.2012 to 01.07.2020) by a specified company or business trust to NON-Resident/Foreign company 5% (surcharge+HEC) 5% (surcharge + HEC)
194LD` Payment of interest To Foreign institutional Investors, qualified foreign investors between 01.06.2013 to 01.07.2020 5% (surcharge + HEC) 5% (surcharge + HEC)

Notes:

1. For the financial year 2018-19 there is no surcharge or health and education cess on amount deductible / collectible at source on payments made to residents {Individuals / HUF / Society / AOP / Firm / Domestic Company) on payment of incomes other than salary or wages. However if the recipient is non resident the rate of TDS will be increased by surcharge or health and education

2.TDS at higher rate of 20% or TDS rate, whichever is higher, has to be deducted if the deductee does not provide PAN to the deductor. (section 206AA)

All persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain Tax Deduction or Tax Collection Account Number (TAN).

Point of Deduction of TDS

Salary: At the time of payment

Other Payments: When income paid or credited including credit to “Payable” or “Suspense” account.

Consequences of Failure to deduct tax  / TDS

Interest – at 1% for every month or part of the month on the amount of such tax from the date on  which such tax was deductible to the date  on which such tax is deducted; and

Penalty – equal to the amount of tax deductible but not deducted u/s 271C

Due Dates for depositing TDS

Quarter Salary Payments Other Payment
April to February 7th of next month 7th of next month
March 30th April 30th April

 Consequences of default in Payment of TDS:

Interest @  one and one-half percent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.  Section 201(A)

Punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine under Section 276(B).

Issue of TDS Certificate

1. Section 192 (TDS on Salary) :

The certificate on Form No. 16 should be issued by the deductor by 15th day of June of the financial year immediately following the financial year in which the income was paid and tax deducted.

2. In all other cases :

The certificate on Form No. 16A should be issued within fifteen days from the due date for furnishing the “statement of TDS” under rule 31A.

Penalty on Failure to Issue TDS Certificate

Rs. 100/- every day for the period failure continues subject to a maximum of TDS amount.

Forms for submitting Quarterly Statements of Tax Deducted at Source (Rule 31A)

(a) Statement of deduction of tax under section 192 in Form No. 24Q

(b) Statement of deduction of tax under sections 193 to 196D in :

1. Form No. 27Q in respect of the deductee who is a non-resident not being a company or a foreign company or resident but not ordinarily resident; and

2. Form no. 26QB for tax deduction u/s 194-IA

3. Form no. 26QC for tax deduction u/s 194-IB

4. Form No. 26Q in respect of all other deductees.

Due Dates for submitting Quarterly Statements of Tax Deducted at Source (Rule 31A)

Date of ending of the quarter of the financial year Due date, if deductor is an office of the Government Due Date for others
30th June 31st July of the financial year 31st July of the financial year
30th September 31st October of the financial year 31st October of the financial year
31st December 31st January of the financial year 31st January of the financial year
31st March 31st  May of the financial year immediately following the financial year in which deduction is made 31st May of the financial year immediately following the financial year in which deduction is made.

However the above due date shall not apply to Form 26QB/26QC as in these cases challan of electronic deposit of TDS is itself considered as return

Penal Provisions for failure / default in submitting TDS returns /statements

Section 272A(2) Failure to submit returns prescribed under Section 200(3) Penalty of Rs. 100/- every day during which the failure continues upto a maximum of TDS amount.
Section 234E Failure to  file TDS return on  time Fine of Rs. 200/- every day during which the failure continues will be levied on deductor as long as the default continues, subject to a maximum of TDS amount.
Section 271H (i) If deductor defaults in  in filing TDS Statement within the prescribed time

(ii) If deductor furnishes incorrect details like PAN, TDS amount, Challan particulars etc.

Penalty of sum which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

No penalty shall be levied for the failure to file TDS/TCS return on time,if the person proves that after paying tax deducted or collected along with the fee and interest, if any, to the credit of the Central Government, he has filed the return before the expiry of a period of one year from the time prescribed for delivering or causing to be delivered such statement.

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(Republished With Amendments)

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30 responses to “TDS – Rate Chart, Provisions, Penalty, Return Due Date”

  1. KISHORE says:

    Sir, GST TDS REGISTRATION COMPLETE. LOCAL AUTHORITIES… MY DDO IS TRANSFER. HOW TO CHANGE NOW

  2. sisir saikia says:

    Sir, Need a clarification on TDS return. I have to move a deductee from QTR 1 18-19 to Qtr 4 in 17-18 and revise my returns accordinglyfor both qtrs . Pl advise me as to how do i go about it. I have got both the conso files. shall be grateful for your help.

  3. D V B Reddy says:

    Due dates for the Month of March . May Pls check ..

  4. deepak kandpal says:

    Dear Sir

    Please suggest me .

    We are supplied our material trough a local vehicle like auto in local market . So how to make a journal entry of this . And what a document are needed for audit .

  5. vswami says:

    IMPROMPTU

    TDS u/s 194 IA, not-so-obvious Implications of Sec 201, And Refund of, TDS /Collection in cases where Excess deducted or collected, partially or wholly, though not warranted by law, need special focus; ideally require to be covered !

    Re. TDS u/s 194 IA, unintended anomalies have been left unplugged , as yet- see for discussion, in detail, the 2 published articles on this webside itself, besides elsewhere .

  6. taufeeq says:

    if tds deducted and deposited after deadline given, will it result in expense disallow. plus intrest and penalty.

  7. Deepanshu Kaushik says:

    Dear Sir, Kindly Update the Revised Rate. Thanks in Advance

  8. JAYRAMA G says:

    I have borrowed from private persons for house construction.For them annual interest is paid thro’.cross cheque.There are four such persons–two with ₹30,000& another two with₹40000/-each.I have taken 15G from them and TDS is not made.W whether I correct and what other compliance has to be meted out by me.

  9. CHANDRA SHEKAR .R says:

    in case of firm filed 4qtr nil ofter six month revised with int.paid is their any penalty for this

  10. U.Adithan says:

    I am in a company and responsible for making payment to contractors.We entered into an agreement to pay an amount on monthly basis to a contractor. As per that agreement I have to keep the first month’s due as security deposit for the entire contract period.
    My question is,
    1. Whether TDS is deductable on the security deposit made?

    2. If payment for the first month is due in December and the same is transferred to SD and TDS not deducted in December, but recovered in January and deposited to Govt. on or before 7th of January, Whether I can include this TDS deduction in Q3 return itself? and whether the TDS so deducted will attract interest?

    Will anyone answer for my query please.

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