Overview of TDS

TDS is one of the modes of collection of taxes, by which a certain percentage of amounts are deducted by a person at the time of making/crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government account. It is similar to “pay as you earn” scheme also known as Withholding Tax in many other countries, one of the countries is USA. The concept of TDS envisages the principle of “pay as you earn”. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. It ensures regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion as well as expands the tax net.

Who shall deduct tax at source?

Every person responsible for making payment of nature covered by TDS provisions of Income Tax Act shall be responsible to deduct tax.

However in case of payments made under sec. 194A, 194C, 194H, 194I and 194J in respect of individual and HUF, only if the turnover or professional receipt exceeds sum of Rs. one crore rupees in case of business or Rs. fifty lakh rupees in case of profession in previous year, he is required to deduct tax at source.

These persons are mainly:

– Principal Officer of a company for TDS purpose including the employer in case of private employment or an employee making payment on behalf of the employer.

– DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such.

– In the case of “interest on securities” other than payments made by or on behalf of the Central govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof.

Such person is called Deductor while the person from whom the tax is deducted is called Deductee.

Tax must be deducted at the time of payment in cash or cheque or credit to the payee’s account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee’s account and TDS must be made at the time of such credit.

What a deductor must do?

1. Obtain TAN

Every deductor is required to obtain a unique identification number called TAN (Tax Deduction Account Number) which is a ten digit alpha numeric number e.g.DELH90468K.

This number has to be quoted by the deductor in every correspondence related to Income Tax matters concerning TDS.

2. He/She should obtain PAN of the deductee.

3. He/She should deduct the tax at correct rate.

4. The tax deducted has to be deposited in the designated banks within specified time. (Govt. deductors shall transfer the tax deducted through book entry in Government account).This is detailed below:

▬ By or on behalf of the Government  : on the same day,

▬ By or on behalf of any other person : before the 7th of the following month.

However, if the amount is credited in the books in the month of March then the tax should be remitted by 30th April.

Note: w.e.f., 01.04.2008 electronic payment of tax has to be done by all corporate assesses and all persons whose cases are auditable under section 44B.

5. Use challan no. 281 for depositing TDS amount.

6. File statements of tax deduction in the prescribed time.

The due dates for filing of TDS/TCS statement are :

31st of July for Quarter 1,

31st of October for Quarter 2,

31st of January for Quarter 3 and

31st May for last Quarter

Note: Kindly note that due to COVID-19 the due dates to file the TDS returns for FY 2019-20 has been extended and the revised dates are as under:

31st of March 2021 for Quarter 1,

31st of March 2021 for Quarter 2,

31st of January 2021 for Quarter 3 and

31st May 2021 for last Quarter

7. Use correct form to file TDS/TCS Returns. They are:

Form 24Q – for salaries

Form 26Q – for non salaries

Form 27Q  – For payment made to NRI

Form 27EQ – for TCS

Form 27A – Control sheet for electronic TDS/TCS

It may be noted that the following persons have to compulsorily file e-TDS /e-TCS statements

  • All government offices/Departments
  • All companies /corporations

Dos & Dont’s for filing TDS Returns

Dos

  • Ensure that TDS return is filed with same TAN against which TDS payment has been made & TDS certificate is issued.
  • Ensure that correct challan particulars including CIN and amount is mentioned.
  • Correct PAN of the deductee is mentioned.
  • Correct section is quoted against each deductee record.
  • Correct rate is quoted against each deductee record.
  • File correction statement as soon as discrepancy is noticed
  • Retain the original FVU file to enable future corrections
  • Make use of free of charge RPU provided through TIN-NSDL.com
  • Download details of challan from challan status enquiry (TAN based view) from TIN-NSDL.com
  • Registration for TAN enables you to avail additional facilities from Tax Information System.
  • Always verify status of TDS returns from Tin NSDL to ascertain the discrepancy, if any, and/or whether your TDS return stands accepted or rejected by the system.

Dont’s

  • Don’t file late returns as it affects deductee tax credit
  • Don’t quote incorrect TAN vis-à-vis TDS payments

 The process of filing of e-TDS /e-TCS returns is available in detail at following websites www.incometaxindia.gov.in or http://tin-nsdl.com.

8. Issue TDS certificates as per existing procedure and within the time prescribed as stated below:

Table

Sl. No. Form No. Periodicity Due date
(1) (2) (3) (4)
1. 16 Annual By 15th of June of the financial year immediately following the financial year in which the income was paid and tax deducted
2. 16A Quarterly Within fifteen days from the due date for furnishing the statement of tax deducted at source under rule 31A.

9. File e-TBAF (In case of Govt. DDO’s where TDS is credited in Central Govt. account through book adjustments)

Procedure to pay TDS

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)

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8 Comments

  1. Jayaprakash says:

    I have a small question regarding filing of TDS returns? Who is responsible for filing form 26AS. If DDO IS NOT FILE the TDS. For the TAN & the employees PAN.
    In case of TDS deposited by way of Book Adjustments for filing e-tds returns Book Adjustment number is mandatory but it is very difficult to obtain a transfer voucher no / book adjustment.Practically the DDO’s have no information regarding these adjustments and they are unable to obtain these details from their Pay and Accounts office who is responsible for filing of form no 24G.
    Because this difficulties the TDS is not properly reflecting in the 26AS statements of the deductees.

  2. RITUPARNA NEOG says:

    Sir/Madam,

    Whether the TDS deducted on Fixed Deposits for ST/SC customer’s of 6th schedule states like Nagaland, Meghalaya, Mizoram should be refund back by the Bank branches under Income Tax Act Section 10(26) or the customer should submit the exemption certificate or 15G/15H with their PAN number. Please guide us about TDS deduction for Fixed Deposits.

    Regards.
    Ritu

  3. neha says:

    please tell me how to file the TDS return where I have not paid the challan and gave a bill to the treasurer who directly make the payment and where no challan is generated..

  4. kk says:

    I have a small question regarding filing of TDS returns?

    In case of TDS deposited by way of Book Adjustments for filing e-tds returns Book Adjustment number is mandatory but it is very difficult to obtain a transfer voucher no / book adjustment no.

    Practically the DDO’s have no information regarding these adjustments and they are unable to obtain these details from their Pay and Accounts office who is responsible for filing of form no 24G.

    Because this difficulties the TDS is not properly reflecting in the 26AS statements of the deductees.

  5. Jay says:

    Overview of TDS – 6th Dec 2011

    Pl ref the above artcle posted in webpage “taxguru.in” on 6 dec 2011. Under the para “What a deductor must do?” the following provision is mentioned in your above artcle.

    1. ” if the amount is credited in the books on 31st March then the tax should be remitted by 31st May.
    This has been amended vide Finance Bill 2010 and vide Notification No. 41/2010 Dated 31/05/2010. The new provisions applicable from 1st April 2010 is as below.

    Deposits of TDS:- In case of salaries and other payments, the tax deducted by the employer/deductor is required to be deposited with the tax authorities on or before seven days from the end of the month in which the tax has been deducted. A relaxation has been provided for the tax deducted at the end of the financial year i.e., in the month of March wherein tax could be deposited on or before 30th April.

    Therefore as per the new provisions- Time limit for deposit of TDS for the entire month of March will be 30th April instead of two separate time limits viz. 7th April for TDS up to 30th March and 31st May for TDS as of 31st March.

    2. Similarly in case of issue of TDS certificates the old provision of monthly certificates is geven, where as the amended poviison of issuing quarterly certificates is not updated

    Pl ensure while posting artcles in the webpage, the latest provisions are updated so that users are guided correctly.

    1. admin says:

      Dear Sir,

      Thanks for your suggestions. We have made the changes as per Notification No.41 .

      Keep Commenting to make us improve further and serve you better.

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