We often hear the word “TDS” in our daily lives. The term is often used when we pay our taxes or file tax returns. Although it sounds complex, understanding it is relatively simple and easy. In this blog, we will discuss TDS and its various aspects.
Table of Contents:
- What is TDS?
- When Should TDS Be Deducted and by Whom?
- What is the Due Date for Depositing the TDS With the Government?
- How to Deposit TDS?
- How and When to file TDS returns?
- What Is a TDS Certificate?
- TDS Credits in Form 26AS
- SMS Alerts for Higher Transparency
- Tax Liability in a Case Where TDS Is Already Deducted From Income
1. What is TDS?
TDS stands for ‘Tax Deduction at Source’. As per the Income Tax Act, it is the tax which is deducted from a company or an individual if the income accrued exceeds a certain limit. The tax department has specified fixed rates to deduct the tax. The person making the payment is responsible for deducting the tax and depositing the same with the government.
The person who makes the payment after deduction of taxes is called a deductor and the one who receives the same is called a deductee. TDS is levied on various incomes such as salaries, interest received from banks, commission received, rent received, consultation fees and professional fees. It is an indirect way of deducting tax.
2. When Should TDS Be Deducted and by Whom?
TDS deduction is made for a person or a company whenever they make payments that are mentioned under income tax laws. However, TDS will not be deducted if the payment is being made by an individual or a Hindu Undivided Family (HUF) whose ledger books need to be audited. There are some exceptions for this as well. If the rent being paid by an individual or the HUF exceeds a sum of Rs 50,000, then five percent of TDS will be deducted.
If one is a salaried individual, then TDS will be deducted by the employer as per income tax slab rates. The bank also deducts 10 percent of TDS; in cases of unavailability of the deductor’s PAN details, they will deduct 20 percent of TDS. The deducted TDS is then deposited with the government.
3. What is the Due Date for Depositing the TDS With the Government?
It is the responsibility of the deductor to render TDS payments to the government and this should be done within a stipulated due date. Generally, the due date for the payment of TDS is the 7th day of the next month, with a few exceptions. Only in the month of March, the due date to render TDS payments could be extended up to the 30th of April.
4. How to Deposit TDS?
TDS can be deposited in two ways:
- Physical Mode – For this, the deductor is required to fill challan 281 from an authorised bank branch. There is also the option of rendering e-tax through net-banking or using a debit card issued by the selected bank.
- Electronic Mode – Making TDS payments through electronic mode is mandatory for all corporate assets. It is also mandatory for assets other than the company to which Section 44 AB of the Income Tax Act 1961 is applicable.
5. How and When to file TDS returns?
The TDS returns to tell about the amount,
The TDS returns to tell about the amount, which is paid to the government as TDS and the information of the challan at the end of every quarter. These are quarterly statements that are submitted to the Income Tax Department.
Steps to file TDS returns online are as follows:
Step 1 – Fill the Form 21A. Fill in the deducted amount and the total amount that must be paid.
Step 2 – The TAN number of the organization or company that is filling the form must be mentioned.
Step 3 – Mention the correct challan number, the mode of payment and the tax details.
Step 4 – According to the e-TDS return form, one must enter the 7-digit Bank Branch Code.
Step 5 – After this, the deductor signs the form digitally and submits it to the NSDL Tax Information Network portal.
Step 6 – Once the form is successfully submitted, one receives an acknowledgment receipt containing a token number.
The TDS returns are filed at the end of every quarter.
6. What Is a TDS Certificate?
A TDS certificate is a certificate that is issued upon TDS deductions by the employers. It provides the details of TDS/TCS of transactions between the deductor and deductee. These certificates include Form 16 and Form 16A that is issued to deductees.
Form 16 certificate is issued annually for salaried incomes, while Form 16A is issued quarterly for non-salaried incomes.
7. TDS Credits in Form 26AS
Form 26AS is a crucial document for filing taxes as it includes our tax credit statements. Form 26AS can be downloaded from the TRACES portal. This form has 7 parts; Part A, Part B, Part C, Part D, Part E, Part F and Part G.
This form is crucial as one can check whether the tax collected on their behalf is deposited with the government account on time or not. One can also verify their tax credits with its help.
8. SMS Alerts for Higher Transparency
The income tax department has set up an initiative where they provide an SMS alert service for higher transparency. This SMS is sent from VK-ITDEFL that specifies the amount of tax deducted. This initiative was implemented by the Finance Ministry to bring transparency to the tax deduction process.
9. Tax Liability in a Case Where TDS Is Already Deducted From Income
Along with salaries, TDS deduction is also done on other income types. The TDS on these incomes varies between 10 percent and 20 percent. The actual tax liability is calculated from the total taxable income with the help of tax receipts, where one can calculate the actual tax payable to the government. There is also a facility for a refund, but this requires having to file an income tax return and claim a refund.
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