The Definition of TDS

TDS or Tax Deducted at Source is an advanced tax deduction system specially designed and presented by the Income Tax Department of India. The methodology behind this system is to deduct a certain percentage of tax at the source of payment.

As per the Income Tax Act, any individual or registered firm making the payment must deduct a certain percentage of the amount as tax at the source, provided that amount is more than the pre-fixed threshold limits. TDS can only be deducted according to the relevant rates issued by the Income Tax Department. The first party(Individual or firm making the deduction after payment) is the deductor and the second party( The Individual or firm receiving the amount post the deduction) is the deductee. TDS will be deducted regardless of the mode of payment.

Please refer to the sample scenario for a better understanding:

  • Type of payment – Professional Fee
  • Rate of TDS deduction – 10%
  • Deductor - M/S ABCD Ltd. Company
  • Deductee – Ms QWERTY

M/S ABCD Ltd. Company is liable to pay Rs. 50,000/- to Ms Qwerty as her professional fee. In this scenario, the deductor must deduct Rs. 5,000/- (10% of Rs. 50,000/-) and pay the deductee Rs. 45,000. And the amount deducted, i.e. Rs. 5,000/- will be credited to the Government account by the deductor.


Payments entitled to TDS

Payments which require TDS:–

  • TDS at for the Interest generated by Banks.Interest Payment by banking facilities
  • Salaries
  • Rental Payments
  • Commission
  • Professional and Consultations Fees.
  • Contract

What are TDS returns?

The deductor(Second Party) is required to submit the TDS return to the Income Tax Department on Time in the form of a quarterly statement. The requirements are as follows:

  • Permanent Account Number(PAN of the deductor and the deductee.
  • A summary of the tax paid to the government.
  • Challan information of the TDS
  • Various other mandatory documents as per the requirements

Eligibility Criteria for filing TDS?

An employer or firm who possess valid TAN (Tax Collection and Deduction Account Number) can file a TDS return. An individual who makes specialized payouts under the Income Tax Act is supposed to deduct TDS and is supposed to deposit the same within the specified time towards the below-mentioned payments –

  • Payment of remuneration or salary.
  • Payment towards National Saving Schemes and other similar schemes.
  • Payment of the insurance commission
  • Income from horse racing.
  • Income from the Lottery.

Time Schedule to File TDS for the Financial year 2019-2020.

Quarter  Duration of Quarter Due Date for TDS Return
First Quarter April 1st to June 30th  31st August 2019
Second Quarter July 1st to September 30th  31st October 2019
Third Quarter October 1st to December 1st  31st January 2020
Fourth Quarter January 1st to March 31st  31st May 2020

Forms for Filing TDS

There are different types of TDS filing forms, the use of which depends on the purpose of deduction.

Particulars of the payment Form No.
TDS on Salary Form 24Q
TDS when the deductee is an International Firm or   Non-Resident Indian(NRI) Form 27Q
TDS on payment made for transferring any immovable property Form 26QB
TDS for Others Form 26Q

Requirements for Filing TDS

Prior to filing your returns, please make sure you meet the following criteria:
  • You must possess a TAN that is registered for filing TDS online.
  • Prepare the TDS statement using RPU (Return Preparation Utility).
  • Validate the TDS statement using FVU (File Validation Utility).
  • You must have a valid Digital Signature(DSC) which is registered for e-filing.
  • You must provide the Bank Account Details of the Principal Contact.
  • Please ensure that you have linked your Aadhaar card to the PAN card to upload your returns via EVC.

Steps to file TDS Online?

  • Enter the URL http://incometaxindiaefiling.gov.in/ on the address bar and proceed to the Login option(Mentioned as ‘Login Here’).
  • Enter your login credentials and press Enter. (Please note, your TAN would be your user ID.)
  • Once you login to the portal, click the Upload TDS tab under the TDS button.
  • Upon clicking the TDS button, a form will pop-up asking you to enter your details, such as– TAN, FVU Version, Financial Year, Name of the Form, Particulars of the Quarter, and Upload Type. Once complete, press validate.
  • You can validate the form either by using a Digital Signature Certificate (DSC) or an Electronic Verification Code.
  • Once you are done with form validation, submit the form. If you have entered all the information correctly and the form is accepted, you’ll get a provisional/acknowledgement token number. In case, the form is not accepted, you will be provided with a non-acceptance memo along with the reasons.

Points to be Noted

  • Form 27A comprises of a control chart. Ensure that you fill all the columns present. The form will be verified in offline along with the return you filed online.
  • Ensure that all details are entered accurately.

Advantages of TDS?

As a salaried employee TDS will be deducted from the salary, if the desired criteria is met. And, the amount deducted mainly depends on how much you earn. As far as the benefits of tax deductions are concerned, both the taxpayers and the government gets benefitted.

Benefits of TDS:
  • It prevents the taxpayers from avoiding paying taxes.
  • It makes sure that the source of the Government’s revenue remains steady.
  • It widens the base tax collection.
  • The system of TDS is convenient for both the deductee, and the deductor because the tax is deducted automatically.
  • It reduces the burden of paying huge amount of taxes.. By spreading the total amount of tax over months, payment becomes easy.

Conclusion

These are the important key points an individual or firm must know about TDS Returns and why it must be done within the stipulated time period. As a responsible Indian Citizen it is your duty to respect the law and pay your taxes on time.

Frequently Asked Questions

Q- What if the return was not filed within the stipulated time?

As per Section 234E, if the assessee fails to file their TDS return within the stipulated time, then you are liable to pay a late fine of Rs. 200/day until you file the same. Please note, that the total amount for the penalty cannot be more than the TDS amount.


Q- What is the outcome if TDS is not filed?

In case, you have not filed the TDS return within 1-year from the stipulated period, you are liable to pay a penalty. The range of the penalty is between Rs. 10,000/- to Rs. 1,00,000/-. It is also applicable for an assessee who has produced incorrect information during the filing process.


Q- What is the outcome if an error is found in the form post-filing

In case of an error being detected in the form post submission, such as incorrect PAN, no submission of PAN details or an incorrect challan number, then the amount deposited to the credit of the government will not be shown in Form 16, Form 16A, and Form 26AS. In order to confirm and ensure that the amount is credited to the relevant account and is shown in Form 16, Form 16A, and Form 26AS, you must file a revised return.


Q- Steps to File a Revised Return

Possible corrections to be made:
  • C1 – The name and address of the deductor can be revised.
  • C2 –The challan details can be rectified. Such as challan number, tender date of the challan, serial number, BSR code, and others.
  • C3 – You can revise or add the details of the deductee.
  • C4 - You can revise, delete or add the details of the deductee’s remuneration.
  • C5 – The PAN number of the deductee or the employee can be updated/revised.
  • C9 – You can add a new challan and the information of the employee or deductee.

Q- How many times can you file a revised return?

You are allowed to file a revised return multiple times if you have to make any.


Q- Requirements to file a Revised TDS Return

  • You are allowed to file a revised return if your first or original return was accepted by the said authority, i.e., the central system of the TIN. You can confirm the status of your return online. To confirm the status, you are required to provide the following details – PAN, Acknowledgement number on the NSDL website. https://onlineservices.tin.egov-nsdl.com/TIN/JSP/tds/linktoUnAuthorizedInput.jsp,.
  • You need to prepare your revised return using the TDS statement. You can download the same from https://www.tdscpc.gov.in/app/login.xhtml. You must provide the token number or provisional receipt of the original statement to download the consolidated TDS statement.

Q- What is a TDS refund

During the evaluation of the total tax liability at year end, there is a possibility of a difference between the total amount deducted and the actual tax liability. The possible outcomes would be:

  • If the TDS is more than the actual tax liability, you are entitled to get a TDS refund.
  • If TDS is less than the actual tax liability, you need to pay the difference amount.

Q- Steps to Verify TDS refund

The status of your refund can be verified by: –

  • Checking the acknowledgement sent to the inbox of your registered email address.
  • Entering your PAN details at https://incometaxindiaefiling.gov.in/ or calling on the toll-free number - 1800-4250-0025

Q- What is the TDS refund period?

The excess TDS paid by you is refundable. However, the time period of the refund varies from case to case and depends on whether you have filed your IT returns during the stipulated time. If you have filed the return on time, then you can expect a refund to be credited to your account within 3-months to 6-months.


Q- What is the interest rate on the TDS refund?

As per the Income Tax Act, 1961, section 200A, if the IT department of India fails to make the TDS refund within the stipulated time period, you are entitled to get an interest rate of 6% per annum on the refund amount. The interest will be calculated from the financial year’s first month, i.e., April. However, if the amount is less than 10% of the actual tax liability, no interest will be offered.


Q- Do scenarios arise where TDS is not deducted?

Yes, There are certain scenarios where TDS is not deducted. i.e when you pay the Reserve Bank of India (RBI) or the Government of India. It includes the following scenarios –

  • Payments made towards LIC, cooperative societies and other insurance corporations.
  • Payments made towards the institutions that come under no-TDS segment.
  • Interest paid in the NRE account.
  • Payments made towards State or Central Financial Corporations.
  • Interest received in the NSC, Indira Vikas, and KVP schemes.
  • Refunds made by the IT department
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.