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A Brief Guide to TDS

CA Kumar Kedia 
on 07 August 2014

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Govt. of India collects the tax basically by three modes, i.e. Self assessment, Advance Tax and one of them is TDS( i.e Tax deduction at source.

Discussing in brief what exactly the TDS is?

TDS is the tax which is deducted at the source. The person making certain payments as governed by the sections of the Indian Income Tax Act, 1961 to another person deducts tax and same is then remitted to the government account. The Govt. has imposed the duty on the person making payment to the another person to deduct tax in order to minimize the tax evasion and to confirm that the person receiving the payment does not escape from the tax bracket.

After an overview of TDS, it is important to know as to who is liable to deduct  TDS? Every person other than Individual and HUF who are responsible to make payments of the nature covered by various sections relating to TDS shall deduct TDS. The person who deducts the tax is known as Deductor and the person whose tax is deducted is known as Deductee. Apart from this Individual and HUF who are liable to get their accounts audited u/s 44AB are also liable to deduct TDS.  Tax must be deducted at the time of making of payment or at the time of crediting the payee’s account whichever is earlier.

Certain payments other than salary on which TDS is to be deducted are discussed as under:

TDS has to be deducted if the payment exceeds or crosses the cut off limit specified in different sections and it has to be deducted at a fixed percentage as specified in the relevant section. The relevant provisions in this regard are briefly discussed as under:

Sec.

Nature of Payment

If payments Exceeds

Rate of Deduction

194A

Interest other than interest on securities

Banking companies:

10000;

Other: 5000

10%

10%

194B

Winnings from lottery/ puzzle/ game

10000

30%

194BB

Winnings from horse Race

5000

30%

194C

Payments to contractors

Rs. 30000/- for single payment

Rs. 75000/- for aggregate
payment during Financial Year

  • 1% if the payee is Individual or HUF
  • 2% if the payee is other than Individual or HUF

194D

Insurance Commission

20000

10%

194EE

Payment of NSS deposits

2500

20%

194F

Repurchase of Mutual funds/ UTI

1000

20%

194G

Commission on Sale of tickets

1000

10%

194H

Commission or Brokerage

5000

10%

194I

Rent of land, building or furniture

180000

10%

Rent of Plant and Machinery

2%

194IA

Transfer of Immovable Property

5000000

1%

194J

Professional, technical services

30000

10%

194L

Compensation on acquisition on Capital asset

100000

10%

194LA

Compensation on acquisition of certain immovable property

200000

10%

Procedure Regarding payment of TDS and filing of returns :

First of all the deductor has to obtain the Unique Identification Number called TAN (Tax Identification Number) which is a Ten Digit Alpha Numeric Number. This number has to be quoted by the deductor in every correspondence related to TDS.

The next step is to deduct the tax from the payment and then deposit  the same within the specified time limit.

The time limit for payment of TDS for different payers are as under:

Deductor

If TDS is deducted between April to Feb.

If TDS is deducted in last month of the year i.e.  March

Government

Same day if payment is done by book adjustment

Up to 30th April

If payment is made by challan

By 7th of next month

Other person

By 7th of next moth

Up to 30th April

Relaxation from above time limit in special cases:

The Assessing Officer with the permission of Joint Commissioner may relax from the above schedule of payment and may permit for quarterly payment of TDS in respect of the payments mentioned in section 192, 194A,  194D or 194H. [Rule 30(3)]

Mode of Payment

The person who is liable to deposit tax electronically or who can deposit are tabulated as under:

Sno.

Deductor

Mode of Payment

1

If a Company

Electronically

2

Persons other than company, if they are covered by provisions of section 44AB

Electronically

3

Persons (other than company) who are not covered by section 44AB

May deposit manually

Filing of quarterly statements

The last step is filling of quarterly statements within the time specified under Rule 31A of the Rules. The time limit for filling of the quarterly  statements is under:

TDS falling in Quarter

If Deductor is an Office of Government

Due Date

If the Deductor is other than Government Office

April to June

31st  July

15th July

July to September

31st  October

15th October

October to December

31st  January

15th January

January to March

15th May

15th May

Electronic Return/ Paper return

The persons who are required to file TDS return electronically  and who may file paper return are tabulated as under:

Sno.

Category of deductor

Mode of Return

1

Government Office

Electronically

2

Company

Electronically

3

Persons covered by Sectin 44AB

Electronically

4

If number of deductee’s records in any quarter are 20 or more

Electronically

5

In all other cases

May file paper return at his option

Consequences of failure to deduct the tax

Interest

If a person fails to deduct or after deducting fails to deposit the tax, within the specified time, shall be liable to pay interest as under:

a. At the rate of 1% for every month or part of month on the amount of tax from the date on which it was deductible to the date on which it was deducted; and

b. At the rate of 1.5% for every month or part of month on the amount of tax from the date on which tax was deducted to the date on which it was actually paid.

Penalty – if a person makes any default in payment of tax he may invite penalty u/s 221 equal to the amount of tax deductible but not deducted or not paid. However the penalty provisions will not apply If the payee has furnished his return and paid the due taxes and the deductor furnished a certificate of an accountant.

Conclusion: The procedure of timely deducting and depositing the tax and quarterly statements should be followed properly to avoid any of the consequences of default.

At last it is not wrong to say that it is one of the good steps of revenue collection and minimizing  tax evasion although it have  some drawbacks too.

Kumar Kedia

Student of CA


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