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:
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 which require TDS:–
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:
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 –
|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|
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|
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:
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.
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.
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.
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.
You are allowed to file a revised return multiple times if you have to make any.
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:
The status of your refund can be verified by: –
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.
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.
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 –
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