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.

What is TDS (Tax Deducted at Source) TDS File, TDS Return & TDS Rates

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
  • Same day – when tax is paid without challan
  • Within 7 days of the next month – in any other case
Amount deducted by any other deductor
  • Within 30th April – for amount credited/ paid in the month of March
  • Within 7 days of the next month – in any other case

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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