Skip to content

TDS – What Is Tax Deducted at Source – TDS Meaning, Filing, Return & Due Dates

TDS

Introduction

For quick and efficient collection of taxes, the Income-tax Law has incorporated a system of deduction of tax at the point of generation of income. This system is called as “Tax Deducted at Source”, commonly known as TDS. Under this system tax is deducted at the origin of the income. Tax is deducted by the payer and is remitted to the Government by the payer on behalf of the payee.

 

 

TDS Concept

  • TDS stands for Tax Deducted at Source.
  • It refers to income tax that is deducted in advance from certain payments made by individuals or entities.
  • These specified payments include rent, commission, professional fees, salary, interest, and more.
  • The person making the payment (the “payer”) deducts TDS and ensures that income tax is paid upfront.
  • The recipient of income receives the net amount after TDS deduction.
  • The recipient then adds the gross amount to their income and adjusts the TDS against their final tax liability.

Example:

    • Suppose Shine Pvt Ltd pays monthly office rent of Rs 80,000 to the property owner.
    • TDS is required to be deducted at 10%.
    • Shine Pvt Ltd deducts TDS of Rs 8,000 and pays the balance of Rs 72,000 to the owner.
    • The property owner adds the gross amount (Rs 80,000) to their income and takes credit for the TDS already deducted.

 

What are the duties of the deductor 

​Following are the basic duties of the person who is liable to deduct tax at source.
• He shall obtain Tax Deduction Account Number and quote the same in all the documents pertaining to TDS.
• He shall deduct the tax at source at the applicable rate.
• He shall pay the tax deducted by him at source to the credit of the Government (by the due date specified in this regard*).
• He shall file the periodic TDS statements, i.e., TDS return (by the due date specified in this regard*).
• He shall issue the TDS certificate to the payee in respect of tax deducted by him (by the due date specified in this regard*).

 

How can deductee know the quantum of TDS deducted ​​

To know the quantum of the tax deducted by the payer, you can ask the payer to furnish you a TDS certificate in respect of tax deducted by him. You can also check Form 26AS​ from your e-filing account at https://www.incometax.gov.in/iec/foportal
You can also use the “View Your Tax Credit” facility available at www.incometax.gov.in

 

Payments Covered Under The TDS

CATEGORY A – WHEN RECIPIENT IS RESIDENT
Nature of payment TDS (SC : Nil, EC : Nil, SHEC : Nil)
• Sec. ​192 – Payment of salary Normal or Special Tax Rate plus surcharge and education cess.
• Sec. ​192A – Payment of taxable accumulated balance of provident fund 10%
• Sec. 193 – Interest on securities—
 a.  interest on (a) debentures/securities for money issued by or on behalf of any local authority/statutory corporation, (b) listed debentures of a company [not being listed securities in demat form], (c) any security of the Central or State Government [i.e., 8% Savings (taxable) Bonds, 2003 or 7.75% savings (Taxable) Bonds, 2018, but not any other Government security] 10%
 b.  any other interest on securities (including interest on non-listed debentures) 10%
• Sec. 194 – Dividend— 10%
• Sec. 194A – Interest other than interest on securities 10%
• Sec. 194B – Winnings from lottery or crossword puzzle or card game or other game of any sort or from gambling or betting of any form or nature whatsoever. 30%
​• Sec. 194BA – Income by way of winnings from any online game 30%
​​• Sec. 194BB – Winnings from horse races 30%
• Sec. 194C – Payment or credit to a resident contractor/sub-contractor—
 a.  payment/credit to an individual or a Hindu undivided family 1%
 b.  payment/credit to any person other than an individual or a Hindu undivided family 2%
• Sec. 194D – Insurance commission 10%
 –  if recipient is a resident (other than a company) 5%
 –  if recipient is a domestic company 10​%
​• Sec. 194DA – Payment in respect of life insurance policy 1%
• Sec. 194EE – Payment in respect of deposits under National Savings Scheme, 1987 10%
• Sec. 194F – Payment on account of repurchase of units of MF or UTI 20%
• Sec. 194G – Commission on sale of lottery tickets 5%
• Sec. 194H – Commission or brokerage 5%
• Sec. 194-I – Rent—
 a.  rent of plant and machinery 2%
 b.  rent of land or building or furniture or fitting 10%
• Sec. 194-IA – Payment/credit of consideration to a resident transferor for transfer of any immovable property (other than rural agricultural land) 1%
• Sec. 194-IB​ – Payment of rent by an individual or HUF not subjected to tax audit under Section 44AB 5%
• Sec. 194-IC​ – Payment under Joint Development Agreement to a resident individual or HUF who transfers land or building as per such agreement 10%
• Sec. 194J – Fees for professional or technical services.
Note: 2% if payee is engaged in the business of operation of call center
10%
1.  sum paid or payable towards fees for technical services 2%
 ii.  sum paid or payable towards royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films; 2%
iii.  Any other sum 10%
Note: 2% if payee is engaged in the business of operation of call center
• Sec. 194LA – Payment of compensation on acquisition of certain immovable property 10%
• Sec. 194LBA(1) – Payment of the nature referred to in section 10(23FC) or section 10(23FC)(a) or section 10(23FCA) by business trust to resident unit holders 10%
• Sec. 194LBB – Payment in respect of units of investment fund specified in section 115UB 10%
• Sec. 194LBC(1) – Payment in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA (with effect from June 1, 2016)
section 194M – Payment of contractual work, commission (not being insurance commission referred to in section 194D), brokerage or professional fees, by an individual or a HUF not covered under section 194C, section 194H and 194J 5%
section 194N – Payment in cash by banking company or co-op. bank or post office 2%/5%
section 194K – Income in respect of units payable to resident 10%
Section 194P – Deduction of tax by specified bank in case of senior citizen having age of 75 or more Tax on total income as per rate in force
Section 194Q – Payment to resident for purchase of goods of the aggregate value exceeding Rs. 50 lakhs 0.1 % exceeding Rs. 50 lakhs
Section 194R – Deduction of tax in case any benefit or perquisite is provided and aggregate value of such benefit/perquisite exceeds Rs. 20,000Note: Benefit or perquisite should be arising from business or the exercise of a profession by such resident. 10%
Section 194S – Payment on transfer of Virtual Digital Asset 1%

 

Cases where TDS not deducted

​​​​​​​​A payee can approach to the payer for non-deduction of tax at source but for that they have to furnish a declaration in Form No. 15G/15H, as the case may be, to the payer to the effect that the tax on his estimated total income of the previous year after including the income on which tax is to be deducted will be nil.

Form No. 15G is for the individual or a person (other than company or firm)

Form No. 15H is for the senior citizens.

Rate of TDS if deductee do not furnish PAN

​​As per section 206AA​, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax at the higher of the following rates :

  • At the rate specified in the relevant provision of the Act.
  • At the rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.​

Rate of TDS if deductee doesn’t furnish return of income

As per section 206AB, the tax shall be deductible at the higher rates prescribed under this provision if the following conditions are satisfied:

(a) Deductee has not filed the return of income for assessment years relevant to the previous year immediately prior to the previous year in which tax is required to be deducted;

(b) The due date to file such return of income, as prescribed under section 139(1), has expired; and

(c) The aggregate amount of tax deducted and collected at source is Rs. 50,000 or more in said previous years.

 

What are the Consequences a Deductor fails to Deduct TDS

​​​​​​​​​A deductor would face the following consequences if he fails to deduct TDS or after deducting the same fails to deposit  it to the credit of Central Government’s account:-

a) Disallowance of expenditure

 As per section 40(a)(i) of the Income-tax Act, any sum (other than salary) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.

​However, if tax is deducted or deposited in subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.

Similarly, as per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.

However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.

b) Levy of interest

 As per section 201 of the Income-tax Act, if a deductor fails to deduct tax at source or after the deducting the same fails to deposit it to the Government’s account then he shall be deemed to be an assessee-in-default and liable to pay simple interest as follows:-

(i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and

(ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.​

c) Levy of Penalty

​Penalty of an amount equal to tax not deducted or paid could be imposed under section 271C​.

 

Forms for Filing TDS Returns

Form No. Description
Form 24Q Quarterly TDS statement for tax deducted on salary payments.
Form 27Q Quarterly TDS statement for tax deducted while making payment, other than salary, to non-resident (not being a company), and foreign company
Form 26Q Quarterly TDS statement for other cases like TDS deducted on professional fees, interest payments, etc.

However, if tax is deducted at source under Sections 194-IA and 194-IB, the deductor shall furnish a challan-cum-statement in Form 26QB and Form 26QC, respectively. The deductor should provide the challan-cum-statement within 30 days from the end of the month in which TDS is deducted. As an exception, no return is required separately in such cases.

 

TDS Payment Due Dates

The dates for depositing the tax deducted at source and filing of TDS return for the financial year 2023-24 for all the deductors is shown in the below table-

QUARTER ENDING MONTH OF DEDUCTION DUE DATES FOR DEPOSITING TDS
(FY 2023-24)*
TDS RETURN DUE DATE
(FY 2023-24)
30th June 2023 April 2023 7th May 2023 31st July 2023
May 2023 7th June 2023
June 2023 7th July 2023
30th September 2023 July 2023 7th August 2023 31st October 2023
August 2023 7th September 2023
September 2023 7th October 2023
31st December 2023 October 2023 7th November 2023 31st January 2024
November 2023 7th December 2023
December 2023 7th January 2023
31st March 2024 January 2024 7th February 2024 31st May 2024
February 2024 7th March 2024
March 2024 7th April 2024 (for tax deducted by govt. office)
30th April 2024 (for other deductors)

*All sums deducted in accordance with the provisions of Chapter XVII-B by an office of the Government without challan (Treasury Challan) should be deposited on the same day of deduction. Only for tax deducted by the government office during the month of March 2024 should be deposited by 7th April 2024.

Tags:

1 thought on “TDS – What Is Tax Deducted at Source – TDS Meaning, Filing, Return & Due Dates”

  1. Pingback: Top Reasons For Income Tax Notice

Leave a Reply

Your email address will not be published. Required fields are marked *