TDS stands for ‘Tax Deducted at Source’. The concept of TDS has been brought in order to collect tax at the very source of income. It is a certain way of collecting income tax in India according to the provisions of the Income Tax Act of 1961. TDS is currently under the management of the Central Board for Direct Taxes (CBDT).
TDS is the amount of income tax reduced from the payment of rent, commission, fees, salary, etc. by the people making such payments. A person who receives income is under the liability of paying income tax. The Government makes this easier by ensuring that the income tax is deducted in advance from all the payments made by you. The recipient of the income receives the amount left after the deduction of TDS.
A deductor is the person who deducts the tax and the deductee is the person from whom the tax is being deducted.
Your employer deducts TDS at the applicable income tax slab rates. Banks also deduct TDS at the rate of 10% or at 20% if they do not have your PAN information. Almost every payment has its particular rate of TDS set in the income tax act and the TDS is deducted by the payer on the basis of these.
Employers can calculate TDS by the following method:
Step 1. You need to calculate your gross monthly income.
Step 2. Calculate your exemptions under Section 10 of the Income Tax Act (applicable on allowances such as medical, travel, HRA). Calculate the amount left after deducting your exemptions from the gross monthly income.
Step 3. Multiply the figure obtained in step 2, by 12. This is the yearly taxable income from your salary.
Step 4. If you have any other income source like income from house rent or have incurred losses from paying loan interests and add/subtract the amount obtained from the figure above.
Step 5. Calculate your investments for the year and deducting the amount from the gross income calculated above.
Step 6. Subtract the maximum allowable income tax exemptions on your salary which will be according to the income tax slab 2019-20.
According to the Central GST (CGST) Act, the notified entities need to collect TDS at 1% on payments to goods or services suppliers in excess of INR 2.5 lakh. In addition to that, states will levy 1% TDS under State GST (SGST) law.
The following group of people need to deduct TDS on GST from the payment being if the contact value is more than INR 2.5 lakhs:
There are some particular types of income on which TDS is not collected, which are as follows:
If you wish to maintain a healthy financial record then you must file a TDS Return and in order to do that, you have to visit the Income Tax website, www.incometaxindia.gov.in. You have to sign in using your existing credential or you have to register.
A challan, namely the ITNS 281, is meant for the payment of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source). Alternatively, you can refer the challan ITNS 281 to any bill receipt, invoice or an official summon.
TDS is managed directly by the Central Board of Indirect Taxes with the online version being introduced in 2004, hoping to minimize human intervention and thereby, reducing errors.
You have to visit the NSDL (National Securities Depository Limited) website to make the online payment.
Step 1. Log on to NSDL website for e-payment of taxes.
Step 2. Select the option ‘CHALLAN NO./ITNS 281’ under TDS/TCS section. You will be directed to the e-payment page.
Step 3. You have to fill in the relevant details in the page.
Step 4. After submission of this page, if your TAN is valid, then the full name of the taxpayer will be displayed on the screen.
Step 5. Once the data entered is confirmed, you shall be directed to the net banking website of your chose bank. Make your payment here.
Step 6. After successful payment, a TDS challan counterfoil will be displayed containing the CIN, payment details and the bank name (via which the e-payment has been done). The counterfoil is the proof for the payment. Then, you will have to file your TDS return.
Offline Process:
The taxpayer can make the payment by submitting a challan in person and visiting a bank. This payment can be made in cash or via cheque. After the submission of the challan, bank will issue a counterfoil/ receipt which will be back stamped as a proof of submission.
All the taxpayers who wish to check the status of their Challan online can do so by visiting the nsdl portal. There will be two modes to check the status:
In order to view the status via CIN based mode, you need to enter the following details:
If you want to view the status through TAN based mode, then enter the following details:
Is TDS and Income Tax the same?
The only similarity between the two is that they fall under taxes collected by the government. They have some considerable differences which are as follows:
This is a type of tax levied on all earning professionals by state governments. It does not stay restricted just to the salaried person but to anyone who earns and makes a living through it via any medium. The amount is usually 200 but that is not universal. This comes under the discretion of the state government and differs for every state.
As pee the section 203 of the Income Tax Act, the deductor needs to provide a TDS certificate to the deductee/payee. This with certain other documents works as the proof of tax deduction. This certificate can also be obtained from banks which make deductions in pension payments.
The following table will help in clarifying the procedure of TDS payments:
| Form | To be issued for TDS on: | When | Due date for TDS payment |
| Form 16 | Salary payment | Yearly | 31st May |
| Form 16A | Non-salary payments | Quarterly | 15 days from the date of filing TDS return |
| Form 16B | Sale of property | Every transaction | 15 days from the date of filing TDS return |
| Form 16C | Rent | Every transaction | 15 days from the date of filing TDS return |
| Nature of Payment | % of TDS |
| Section 192 – Payment of salary | Normal slab rate(as per income tax rates) |
| Section 192A – Payment of accrued PF balance, taxable in the hands of the employee | 10% |
| Section 193 – Interest on securities | 10% |
| Section 194 – Dividend excluding those mentioned in section 115-O | 10% |
| Section 194A – Income from interest other than “interest on securities” | 10% |
| Section-194B & 194BB – Income received from winning lotteries, crosswords, games, and horse races. | 30% |
| Section 194C – Payment to contractors / sub-contractors | 1% for payments made to contractors/sub-contractors and 2% for others |
| Section 194D – Insurance commission | 5% |
| Section 194DA – Payment for the life insurance policy | 1% |
| Section 194EE – Payment for depositing money under the National Savings Scheme (NSC) | 1% |
| Section 194F – For repurchase of units by Mutual Fund or Unit Trust of India | 2% |
| Section 194G & 194H – Commission on the sale of lottery tickets or brokerage | 5% |
| Section 194I – Rent | Plant and machinery = 2%, Land / furniture / fitting / furniture = 10% |
| Section 194IA – Transfer of immovable property except agricultural land | 1% |
| Section 194IB – On payment of rent not holding the liability to tax audit | 5% |
| Section 194IC – On financial consideration under the Joint Development Agreements | 1% |
| Section 194J – Any fee paid by way of professional or technical services, as royalty, remuneration/fee/commission to a director, not carrying out any activity in relation to any business, or not sharing any know-how, patent, copyright, etc. | 1% |
| Section 194LA – Payment due to acquisition of a certain immovable property | 1% |
| Section 194LBA (1) – Business trust in order to deduct tax in the process of distribution, any interest received or receivable by it, from an SPV or any income received, from renting or leasing or letting out any real estate asset directly owned by it, to its unit-holders. | 1% |
| Section 194LBB – An investment fund paying an income to a unit-holder (other than income which is exempt under Section 10(23FBB)) | 1% |
| Section 194LBC – Income for the investment made in a securitization trust
| 25% for individual or HUF. 30% for any other person |
Step 1. Visit the link: https://incometaxindiaefiling.gov.in/.
Step 2. Register on the website if you are a first time user else sign in.
Step 3. Click on “My Account”. You will see a drop down menu. Click on “View Form 26AS (Tax Credit)”. Click on “Confirm”.
Step 4. Check the small box in order to agree to the terms of usage of Form 16/ 16A and click on “Proceed”.
Step 5. Now, click on “View Tax Credit (Form 26AS)” for viewing all the returns that still require verification.
Step 6. Under the drop down menu of “Assessment Year”, choose the year for which you wish to view the Form 26AS and then select the file type in the drop down menu of “View As” and choose “View/Download”.
Step 7. Click on “SUBMIT”.
If you fail to file TDS return within the due time, then you are bound to pay a fine of INR 200 per day until the day when the TDS return is filed. Besides, the fee is applicable for each day until your fine amount becomes equal to your total liable TDS amount.
If you are a late depositor of TDS, then the interest is payable under the section 201(1A) at a rate of 1.5% per month from the date when TDS was deducted to the actual date of deposit. In addition to that, if the taxpayer exceeds one year limit to file their TDS return or gives incorrect details of PAN, TDS amount, then they will be required to pay a penalty of at least INR 10,000 to INR 1 lakh under the section 271H.
TDS might be thought of as another troublesome issue. However, in reality, it is an efficient measure and helpful for all the involved parties, namely government, employer and employee.
Following are some of the benefits of TDS are:
If a person is subjected to excess TDS deductions, then the deductor can claim for the refund of this excess amount. The difference between tax deducted and the actual payment made by the deductor, whichever higher, is accepted as the excess amount. This amount shall be refunded only after adjusting against any tax liabilities under the Direct Tax Acts.
Visit the website www.incometaxindiaefiling.gov.in and login or sign up. Now, you need to download the relevant form for the purpose of refund of income tax. Fill this form duly and submit it. You can then, periodically, check your refund status from the same link.
The form 26AS provides you with a detailed account of each and every tax deductions made on your PAN. This is a consolidated tax statement and can be easily accessed from the income tax website by everyone who pays tax and uses their PAN. You could refer to your form 26AS to get to know the details of your income on which taxes have been deducted and also those taxes being paid by the deductor.
TAN is an abbreviation for Tax Deduction Account Number. It is a 10 digit alphanumeric number and is needed to be obtained by anyone who hold the responsibility of collecting or deducting taxes.
This post was last modified on 23/03/2020 11:15 PM
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