The Government of India developed the Pay as You Earn concept and presented the What is TDS (Tax Deduct at Source)- under the Income-tax Act, 1961. It means imposing and collecting the tax from the very source of income.
Here, we will discuss the TDS and its connected provisions of the I-T Act.
Table of Contents
What is Tax Deduct at Source, and why is it imposed?
Tax Deduct at source, also known as TDS, is a part of revenue tax removed by the person while making certain expenses like wages, commission, rent, interest, and professional fees.
Frequently, the person getting income is legally responsible for paying income tax. But the Govt, with the help of TDS requirements, makes sure that income tax is deducted from the payments made earlier. Therefore, it has introduced requirements where the person who makes the payment removes tax at source, while the person who receives such payment also receives the net amount (after reducing TDS).
The receiver is then entitled to a credit of the deduct amount base on Form 26AS or a TDS certificate issued by the tax deductor.
TDS Applicability
Below mention are some of the sources of income/expenses that fall under the preview of TDS:
Salary: Payment from employer to employee under section 192
Interest on securities under section 193
Any other Attention like interest on bank deposits, etc., excluding interest on securities under section 194-A
Prize money from winning games like an acrostic puzzle, card, lottery, etc, under section 194B
Payment to contractors under section 194C
Insurance Commission section 194D
LIC maturity amount section 194DA
Brokerage firm house or commission (section 194H)
Expenses of rent on assets like plant and machinery, land and building, etc.
Payment of Expert and Technical fees (section 194J)
On-line gaming (section-194BA)
Non-residents receiving income from mutual funds in India can give a Tax Residency permit and avail the benefit of the TDS rate given in the agreement instead of 20% according to (section 196-A)
TDS on listed unsecure bonds. (section 193)
TDS on cash drawing by cooperative societies. ( section 194-N)
Virtual digital asset (section 194-S)
Sale of fixed property (section 194-I-A)
Bonuses or aids to any resident for carrying out any business or profession by such tenant (section 194-R)
Payment made by TDS
TDS deduct at source should be place to the credit of the Central Government by the following methods:
Electronic mode
E-payment is compulsory for all corporate units and all persons (other than the company) to whom rules of section 44AB of the I-T Act, 1961 are valid.
Physical Mode:
Furnishing Challan 281 in the legal bank branch.
The due date for deposits of the TDS to the Government
TDS must be put to the Government by the 7th day of the subsequent month. It means that if the deductor may deducte tax from payments in November, he has to pay the TDS on or before December 7.
However, the TDS remove in March will be dropp by April 30.
Filing of TDS returns in Tax Deduct at Source
Filing TDS returns is compulsory for all the persons who have subtract. The return must be submit quarterly, and particulars need to be fit out, like TAN, amount of TDS remove, type of payment, and PAN of the deduct.
Also, TDS forms are agree under the I-T Act for filing returns dependent upon the purpose of the assumption of TDS.
| Form | Type of deduction |
| Form –24Q | Deductions on wage paid by the employer to the worker. |
| Form -26 QB | Deductions made on the Sale of assets |
| Form- 27 Q | Deductions in case of expense to NRIs except for wage |
| Form -26 QC | TDS on rental |
Penalty for Late Filing
Below are the penalties impose by the Income Tax Department for disappointment or avoidance in submitting your TDS return:
Failure to submit your returns:
Under Section 272A (2) of the Act, a challen of Rs.100 will be impose for each day the returns remain unsubmitted, subject to a maximum of the TDS sum.
Failure to file your returns on-time
Under Section 234E of the I-T Act, a price of Rs.200 will be impose for each day the returns remain unfiled, subject to a maximum TDS sum.
Defaults in the filing of TDS declaration
Under Section 271-H of the I-T Act, a forfeit of Rs.10,000 to Rs.1 lakh will be impose in case the deductor avoidances at the time of filing the TDS return within the due-date.
For incorrect details
Under Section 271-H of I-T Act, a consequence of Rs.10,000 to Rs.1 lakh will be charge if the deductor submits incorrect information about PAN, challan particulars, and TDS sum.
Non-payment of TDS
Under Section of 201A of the I-T Act, interest will also be impose along with the penalty if TDS is not paid within the due date. If a part of the tax total or the whole of it is not remove at the source, interest will be appose at 1.5% every month starting from the date the tax was deductible to when the tax is remove.
What is a TDS Certificate?
It is a file issue by the TDS diductors to the amount deduct while the payment is made. The receiver can claim the tax credit deduct by the Payer base on the certificate. Therefore, if the Payer doesn’t have the credential, he can still claim the praise if TDS is reflect in his form (926AS).
Penalty for not issuing TDS certificate
If a diductor fails to subject a TDS certificate within the stated date, he/she will be impose a penalty of Rs 100 per day for each credential. The amount of challan will not exceed the TDS amount for the area.
When to deduct TDS and when not to deduct
TDS is to be deduct when payment gets due or when the actual payment is made, whichever is earlier.
If your income is below the basic exemption limit, you can declare your income lower than the basic exception limit through Form 15G/15H and offer the procedure to the deductor.
Form 15G is for persons, and Form 15H is for senior citizens. You can also apply to the Evaluating Officer of the Income Tax Department through Form-13 and get a certificate appreciating the deduction of lower taxes or nil deduction of taxes.
Final-Note
Therefore the TDS receiver point of view, if your income decreases in the highest tax bracket. The TDS requirements will become applicable. In such a case, the assumption of TDS and receiving net income in pointers will keep the pressure off .The pockets at the end of the year while gainful the income tax because the Financier already pays it. On your behalf will help reduce your tax accountability at the end of the ending year. Thus reducing the probability of delays in tax payments and attracting penalties. It also helps maintain transparency and provides a stable income for the Govt.
From the TDS diductor’s (payer) point of view, you must ensure that the tax provisions are adher .And also that the TDS is deduct and paid to the Government promptly to avoid drawbacks.