Background

There are 3 general methods of Tax collection:

1. Tax deducted at Source (TDS) / Tax Collected at Source (TCS)

2. Advance Tax

3. Self Assessment Tax

Generally Assessee pays tax at the end of Assessment Year (AY) for the Previous Year (PY), due to this practice collection & revenue income of Government is delayed and it was also found that some people conceal their actual income and no tax on same is paid. Hence TDS and TCS was introduced.

Basic applicability apart that of individual sections of TDS is that It is applicable to those Assessee whose Turnover in PY exceeds 1Cr.

TDS is tax deducted from the expense made time to time by Persons for business purpose. Deductee whose Tax is being deducted receives amount For eg. Rs. 90/- instead of Rs. 100/- after Tax deduction of Rs. 10/- which is thereafter reflected in 26AS of Deductee (Credit of same can be taken).

Below is the synopsis of TDS from section 192 to 196D.

Section 192 – TDS on Salary

  • Deducted by all type of Employer
  • Slab wise
  • Irrespective of number of Employees
  • Deducted of such employees whose Income from Salary after all Deductions & Exemptions exceeds Basic Exemption Limit.

Section 193 – TDS from Interest on Securities

  • Deducted by Central Government, Local Authority, Statutory Corporation, Companies having principal officer of above mentioned department.
  • Deducted when payment of above nature exceeds Rs. 5,000/- by companies who have issued debentures and made payment through account payee cheque to Individual and HUF.
  • In case of NSC monetary limit is > Rs. 10,000/-
  • Rate of deduction is 10% and 20% in case PAN not quoted by deductee.
  • Self declaration for no or short deduction can be made by deductee.

Section 194 – TDS from Dividends

  • Deducted by Domestic Companies.
  • Monetary limit is > Rs. 2,500/- in case of Individual shareholder and where payment is via account payee cheque.
  • Rate of deduction is 10% and 20% in case PAN not quoted by deductee.
  • Not applicable to payment in nature of section 115 – O.

Section 194A – TDS from Interest other than Interest on Securities

  • Deducted by payer of amount of above nature.
  • Monetary limit is > Rs. 10,000/-* in case of payer being Co-operative Society or Banking Company and > Rs. 5,000/- in all other cases.

*Rs. 50,000/- shall be substituted from 01.04.2018 for payments to Senior Citizen.

  • Rate of deduction is 10% and 20% in case PAN not quoted by deductee.
  • Self declaration for short deduction can be made by deductee.

Section 194B – TDS from Winnings from Lottery or Crossword Puzzles

  • Deducted by payer of amount of above nature.
  • Monetary Limit is > Rs. 10,000/-.
  • Rate – 30% (In case of payee being Non Resident 30% + Surcharge and Cess).

Section 194BB – TDS from winnings from Horse Race.

  • Deducted by person who has License under any law for Horse racing & Betting.
  • Monetary Limit is > Rs. 10,000/-.
  • Rate – 30% (In case of payee being Non Resident 30% + Surcharge and Cess).

Section 194C – TDS from payment to Contractors

  • Deducted by payer of amount of above nature.
  • Monetary limit is > Rs. 30,000/- single payment or > Rs. 1,00,000/- yearly payment.
  • Rate – 1% for Individual, HUF and 2% for others, 20% in case PAN not quoted by deductee.
  • Self declaration for no or short deduction can be made by deductee.

Section 194D –  TDS on Insurance Commission

  • Deducted by payer of amount of above nature.
  • Monetary limit is > Rs. 20,000/-.
  • Rate – 10% in case of Companies and 5% for others, 20% in case PAN not quoted by deductee.
  • Self declaration for no or short deduction can be made by deductee.

Section 194DA – TDS from payments in respect of Life Insurance Policy

  • Deducted by payer of amount of above nature.
  • Monetary limit is > Rs. 1,00,000/-.
  • Rate – 2%. 20% in case PAN not quoted by deductee.

Section 194E – TDS from payments to Non resident Sportsmen / entertainer or Sports Associations

  • Deducted by payer of amount of above nature.
  • Rate – 20% + surcharge + cess.

Section 194EE – TDS from payments in respect of deposits under National Saving Schemes, etc.

  • Deducted by payer of amount of above nature.
  • Monetary Limit is > Rs. 2,500/-.
  • Rate – 10% (In case of payee being Non Resident 10% + Surcharge and Cess). 20% in case PAN not quoted by deductee.

Section 194F – TDS from payment on account of Repurchase of units by Mutual Fund or Unit Trust of India

  • Deducted by payer of amount of Equity Linked Saving Scheme.
  • Rate – 20% (In case of payee being Non Resident 20% + Surcharge and Cess)
  • Self declaration for no or short deduction can be made by deductee.

Section 194G – TDS on commission etc., on sale of Lottery Tickets

  • Deducted by payer of amount of above nature.
  • Monetary Limit is > Rs. 15,000/-.
  • Rate – 5% (In case of payee being Non Resident 5% + Surcharge and Cess). 20% in case PAN not quoted by deductee.
  • Self declaration for no or short deduction can be made by deductee.

Section 194H – TDS on Commission & Brokerage

  • Deducted by payer of amount of above nature except those covered by S.194D.
  • Monetary Limit is > Rs. 15,000/-.
  • Rate – 10%. 20% in case PAN not quoted by deductee.
  • Self declaration for no or short deduction can be made by deductee.

Section 194I – TDS from Rent

  • Deducted by payer of amount of above nature i.e Tenant.
  • Monetary Limit is > Rs. 1,80,000/-.
  • Rate – 10% for Land, Building & Furniture and 2% for Plant, equipment & machinery. 20% in case PAN not quoted by deductee.

Section 194IA- TDS on payment on transfer of certain Immovable Property (Except Agricultural Land)

  • Deducted by payer of amount of above nature i.e Purchaser.
  • Monetary Limit is > Rs. 50,00,000/-.
  • Rate – 1%. 20% in case PAN not quoted by deductee.

Section 194IB – TDS on payment of Rent by certain Individual or HUF

  • Deducted by payer of amount of above nature i.e Tenant.
  • Monetary Limit is > Rs. 50,000/-.
  • Rate – 5%. 20% in case PAN not quoted by deductee.

Section 194IC – TDS on payment under specified Agreement

  • Deducted by Builder who has taken Land of Assessee for construction on same.
  • Deducted at the time of payment in Cash or Kind.
  • Rate – 10%.

Section 194J – TDS from fees for Professional or Technical Services or Royalty or Non – Compete Fees

  • Deducted by payer of amount of above nature.
  • Monetary Limit is > Rs. 30,000/-.
  • Rate – 10% & 2% If payee engaged in business of Call centre. 20% in case PAN not quoted by deductee.

Section 194LA – TDS on payment of Compensation on acquisition of certain Immovable Property (other than Agricultural Land)

  • Deducted by payer of amount of above nature.
  • Monetary Limit is > Rs. 2,50,000/-.
  • Rate – 10%. 20% in case PAN not quoted by deductee.
  • Self declaration for no or short deduction can be made by deductee.

Section 194LB – TDS from income by way of interest from Infrastructure Debt Fund to Non resident

  • Deducted by payer of amount of above nature.
  • Rate – 5% + cess & Surcharge.

Section 194LBA – TDS on income from units of Business Trusts

  • Deducted by payer of amount of income u/s 10(23FC) & 10(23FCA).
  • Rate – 5% + surcharge + cess, 10% in other case, 20% in case PAN not quoted by deductee.

Section 194LLB – TDS from income in respect of Units of Investment Funds

  • Deducted by Investee providing income u/s 115UB.
  • Rate – 10% in case of Resident, Rates in force in case of Non Resident, 20% in case PAN not quoted by deductee.
  • Self declaration for no or short deduction can be made by deductee.

Section 194LBC – TDS from Income in respect of Investment in Securitization Trust

  • Deducted by payer of amount of above nature.
  • Rate – Resident:- 25% in case of Individual & HUF, 30% for others. Non Resident:- Rates in force + cess & surcharge.
  • Self declaration for no or short deduction can be made by deductee.

Section 194LC – TDS on income by way of Interest from Indian Company or the Business Trusts to Non Resident  AND

Section 194LD – TDS from Income by way of interest on certain Bonds & Government Securities to Non Resident

  • Deducted by payer of amount of above nature.
  • Rate – 5% + cess & surcharge. 20% in case PAN not quoted by deductee.

Section 195 – Other Sums to Non Resident

  • Deducted by payer of amount of above nature except related to sections above.
  • Rate in Force at the time of credit or payment, whichever earlier. 20% in case PAN not quoted by deductee.

Section 195A – Income payable Net of Tax

Where under any Arrangement or Agreement tax chargeable under this chapter is to be borne by Deductor himself then for compliance of this chapter such taxable amount shall be increased to such amount as after TDS net amount payable shall be as per Agreement or Arrangement.

Section 196- TDS from Interest, Dividend or Other sums payable to Government, Reserve Bank or Certain Corporations

No TDS shall be made for payment of above nature to above mentioned Persons.

Section 196A – TDS from income in respect of units of Non residents

No TDS shall be made for payment of above nature to above mentioned Persons as per S.10(23D).

Section 196B – TDS on Income from Units of Offshore Funds

  • Deducted by payer of amount of above nature.
  • Rate – 10% + cess & surcharge.

Section 196C – TDS from Income from Foreign Currency Bonds or shares of Indian Company to Non Residents

  • Deducted by payer of amount of above nature.
  • Rate – 10% + cess & surcharge.

Section 196D – TDS form income of Foreign Institutional Investors from Securities

  • Deducted by payer of amount of above nature.
  • Rate – 20% + cess & surcharge. 20% in case PAN not quoted by deductee.

-Ruchika.K.Somani

You can reach me at ruchasom@gmail.com

(reviews are highly appreciated)

Checkout the role of Section 44AD : Presumptive taxation here

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3 responses to “Why, What & How Much is TDS.??”

  1. Uday Aggarwal says:

    Hi, very good article. I have a question related to TDS. Consider the following situation.

    I am an employer, I deducted TDS of one of my two employees “Mr A” in December 2012 amounting to Rs 4000 and filed the return on time successfully only to find out later in 2018 that the PAN quoted in the return actually belonged to “Mr B”, the second employee. Meanwhile “Mr A” had already filed his return on time and claimed a refund of the whole amount.

    However “Mr B” wants the mistake to be rectified as the money belongs to him.

    Now the questions are:

    1) If I revise the return today, will the amount of TDS of Rs 4000 show up in Mr B’s 26AS.
    2) If yes, will B be able to claim the same as a refund. Let us say he can, how will he revise his own income tax return assuming the limit of section 154 is exhausted.
    3) What about the amount that Mr A already had claimed as a refund earlier. shall a demand be raised against him?

  2. SATYANARAYAN SARANGI says:

    WHAT WILL BE TDS RATES ON LAB TESTING OF PRODUCTS OF SEA FOOD EXPORT INDUSTRIES.

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