Table of Contents
- What is TDS?
- Tax Deduction, Deposit and Certification Process
- Applicability of TDS
- Timing of TDS Deduction
- Specified Payments/ Transaction which are Applicable for TDS
- Applicability of TDS on Non Resident Indian (NRI)
- Due date for payment/depositing TDS/return filed
- TDS Certificates and Form 26AS
- Exemptions and Lower TDS Rates
What is TDS?
TDS stands for Tax Deduction At Source. It means that when an Individual/Organization/persons making the specified payment which are mentioned under Income Tax Act, 1961 to another person than that Person (who is making the payment) has to deduct the TDS when the amount of the payment exceeds the threshold limit. Such rates and threshold limits are mentioned under the Income Tax Act,1961.
Tax Deduction, Deposit and Certification Process
A person who deducts the TDS is called Deductor & the person whose TDS is deducted will be known as Deductee. Such deducted amount is required to be deposited by the deductor to Government as Income Tax on behalf of deductee on monthly basis and inform the Income Tax Department about all the deduction and deposit of TDS on quarterly basis by mentioning the name and PAN of deductees and issue a certificate to deductees about the deduction and deposit of TDS so that they can have the evidence of tax paid on their behalf. This TDS is claimed by assessee (Deductee) at the time of payment of his income tax payable by him at the time of filing of income tax return on the basis of such certificate and hence we may understand that this virtually an advance tax for deductees. It is a tool by which Government establishes the various check over the income to ensure the avoidance of tax evasion and also collect some part of income tax revenue on monthly basis which helps it to smooth running of Government machinery.
Applicability of TDS
TDS is applicable on every person who is making the payment which are specified under Income Tax Act,1961 for which detail is given in the chart below. While making payment the deductor has to ensure that if the payment is falling in any of the category below beyond the limit specified in the chart then he has to deduct the TDS as per applicable rate which is mentioned over there.However the TDS is not applicable on individual or HUF whose books are not required to be audited under Income Tax law.
Timing of TDS Deduction
TDS is to be deducted at the time of making the payment or booking of expenses in the books of account of the deduction whichever is earlier.
Specified Payments/ Transaction which are Applicable for TDS
TDS is to be deducted on the specified transaction mentioned under Income tax act. These transactions are given below with their section, limits& rate as per FY 2023-24
| Section | Nature of Payment | Threshold Limit (Rs) | TDS Rate (%) |
| 192 | Payment of salary | Basic exemption limit | Normal Slab Rate |
| 192A | Premature EPF withdrawal | 50,000 | 10% , Without a PAN number is now 20% |
| 193 | Interest on securities | 10,000 | 10% |
| 194 | Payment of any dividend | 5,000 | 10% |
| 194A | Interest other than "Interest on securities" | 40,000 50,000 (For senior citizens) | 10% |
| 194A | Interest other than "Interest on securities" u/s 193 | 5,000 | 10% |
| 194B | Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort | 10,000 | 30% |
| 194BA | Income from online games | NA | 30% |
| 194BB | Income from horse races | 10,000 | 30% |
| 194C | Payment to contractor/sub-contractor (HUF/Individuals) | Single contractor payment 30,000 Aggregate contractor payment 1,00,000 | 1% |
| 194C | Payment to contractor/sub-contractor (Others) | Single contractor payment 30,000 Aggregate contractor payment 1,00,000 | 2% |
| 194D | Insurance commission (Domestic Companies) | 15,000 | 10% |
| Insurance commission (Other than companies) | 15,000 | 5% | |
| 194DA | Payment in respect of life insurance policy | 1,00,000 | 5% |
| 194E | Payment to non-resident sportsmen/sports association | NA | 20% |
| 194EE | Payment in respect of deposit under National Savings scheme | 2,500 | 10% |
| 194F | Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India | NA | 20% |
| 194G | Commission, etc., on sale of lottery tickets | 15,000 | 5% |
| 194H | Commission or brokerage | 15,000 | 5% |
| 194-I | Rent - Plant & Machinery | 2,40,000 | 2% |
| 194-I | Rent - Land or building or furniture or fitting | 2,40,000 | 10% |
| 194-IA | Payment for transfer of immovable property other than agricultural land | 50,00,000 | 1% |
| 194-IB | Payment of rent by individual or HUF not liable to tax audit | 50,000 | 5% |
| 194-IC | Payment that are made under Joint Development Agreement (JDA) to Individual/HUF | NA | 10% |
| 194J | Fees for professional or technical services | ||
| 194J | Amount paid towards fees for technical services | 30,000 | 2% |
| 194J | Amount paid as royalty for sale/distribution/exhibition of cinematographic films | 30,000 | 2% |
| 194J | Amount paid by way of fee for professional services | 30,000 | 10% |
| 194K | Income in respect of units payable to resident person, example- dividends | NA | 10% |
| 194LA | Payment of compensation on acquisition of certain immovable property | 2,50,000 | 10% |
| 194LB | Payment of interest on infrastructure bonds to Non-Resident Indians | NA | 5% |
| 194LC | Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds | NA | 5% or 4% |
| 194LD | Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor | NA | 5% |
| 194LBA(1) | Certain income distributed by a business trust among its unit holder | NA | 10% |
| 194LBB | Investment fund paying an income to a unit holder | NA | 10% , Foreign Company 40% |
| 194LBC | Income in respect of investment made in a securitisation trust | NA | Individual or HUF - 25% , Domestic Company or NRI - 10% , Foreign Company - 40% |
| 194M | Payments by Individual/HUF not liable to deduct TDS under Section 194C, 194H, and 194J | 50,00,000 | 5% |
| 194N | Cash withdrawal exceeding a certain amount | Co-operative society - 3 Crore , Others - 1 crore | 2% |
| 194N | Cash withdrawal for those persons who have not filed ITR for three previous years immediately preceding the previous year | if exceeds Rs. 20 / if exceeds Rs. 1 crore | 2% / 5% |
| 194O | Payment by the e-commerce operator to e-commerce participant | 5,00,000 | 1% , Without PAN 5% |
| 194P | Deduction of tax by specified bank in case of senior citizen having age of 75 or more | Basic exemption limit | Normal tax slab rates |
| 194R | Perquisite or benefit to a business or profession | 20,000 | 10% |
| 194S | Payment on transfer of Virtual Digital Asset | Specified Persons- 50,000 , Others- 10,000 | 1% |
| 195 | Income in respect of investment made by a Non-resident Indian Citizen | NA | 20% |
| 195 | Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen | NA | 10% |
| 195 | Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-Section (1) of Section 112 | NA | 10% |
| 195 | Income by way of long-term capital gains as referred to in Section 112A | NA | 10% |
| 195 | Income by way of short-term capital gains referred to in Section 111A | NA | 15% |
| 195 | Any other income by way of long-term capital gains | NA | 20% |
| 196B | Income from units (including long-term capital gain on transfer of such units) to an offshore fund | NA | 10% |
| 196C | Income from foreign currency bonds or GDR of an Indian company (including long-term capital gain on transfer of such bonds or GDR) | NA | 10% |
| 196D | Income of foreign Institutional Investors from securities | NA | 20% |
Applicability of TDS on Non Resident Indian (NRI)
First of all, In case of NRI, TDS will be deducted only on that incomes which are liable to tax in India or earned at the source in India.
| INCOME TYPE | TDS RATE % |
| Gains arising from the sale of certain assets held for a specified period i.e., Income from long-term capital gains | 10% |
| Gains arising from the transfer of equity shares i.e., Income from short-term capital gains | 15% |
| Income from investments such as interest, dividends, etc i.e.,Income in respect of investment made by NRI | 20% |
| Other income by way of long-term capital gains | 20% |
| Interest payments made to NRIs on money borrowed in foreign currency | 20% |
| Income earned by NRIs through royalties or fees for technical services | 10% |
Due date for payment/depositing TDS/return filed
|
Date of ending of the quarter of FY |
Due date for filling of return |
|
30 June (Apr - Jun) |
31 July of FY |
|
30 September(Jul-Sep) |
31 October of FY |
|
31 December(Oct-Dec) |
31 Jan. of FY |
|
31 march (Jan.-March) |
31 May of FY immediately following FY |
|
Months |
Due date of TDS payment |
|
April |
7th May |
|
May |
7th June |
|
June |
7th July |
|
July |
7th August |
|
August |
7th September |
|
September |
7th October |
|
October |
7th November |
|
November |
7th December |
|
December |
7th January |
|
January |
7th February |
|
February |
7th March |
|
March |
30th April |
In case of any delay in the deposit of TDS or filing the quarterly TDS return beyond the due date then the Interest & penalties are payable as applicable. If the deductor do not deduct the TDS then he will not be entitled to claim the related expenses / payment as the admissible expenses while computing his net taxable income.
TDS Certificates and Form 26AS
TDS certificate shows the amount of tax which has deposited by Deductor. TDS certificate to be generated online by TRACES website which is owned by the Income Tax Department. Deductor are required to issue TDS certificate to Deductee within specified time as per Income Tax Act,1961. TDS certificates are of two type a) Form 16& b) Form 16A.
Form 16 is a certificate issued to salaried individuals from their employer when he deducts tax from the employee salary. It contains details of the amount of tax deducted at source (TDS) on salary by your employer along with the salary breakup for the financial year. This form 16 is a proof of that you are employed. TDS is deducted from your salaries for this. Form 16 is a statement that a company issues to its employees when the year is completed. This letter contains employees Total income, tax deduction, allowance and 80C (tax relief and excitement of savings)Is a complete description of the evidence filed under Section issued by this institution or company only is done when the income of an employee falls under the taxable income. Deducted an amount as tax from income the amount is called TDS. This form shows how much deduction the company has made in the form of tax which is useful when filling tax returns.
Many times people even complain for not getting Form 16 from the company. If this happens then you can lodge the complaint to Income Tax Department because sometimes it happens that companies do not despite the TDS which he has deducted or may be the cases where he has not filed the TDS return irrespective of TDS paid or not. This is a punishable offence. This is main responsibility of the employer to issue Form 16 to its employees. Form 16 is an annual statement while form 16A is will be issued on every quarter. Form 16A is issued under section 203 of the Income Tax Act,1961 which contains the followings:-
1. Name, PAN and TAN of Deductor
2. Name and PAN of Deductee
3. Money, Nature and Date of Payment
4.TDS payment receipt
Form 16A is also a TDS Certificate which is applicable for all types of TDS deducted on income but other than Income from Salary.
Income Tax department also gives a facility to the deductees to check online that who has deducted the TDS, how much he has deducted and when he has deposited to the Government. It also contains the amount of income the deductor has paid or credited. Form 26AS is an annual consolidated credit statement issued under Section 203 AA of the Income-tax Act, 1961. It contains details of various taxes deducted on your income by deductors. To avail this facility, one has to login to this site using his/ her PAN and DOB and then he can download online without any charge. The difference between the form 16 / 16A and 26AS is that form 16A/ 16 is a certificate for transactions with one party whereas the 26AS is summery of tax deducted all the parties.
Exemptions and Lower TDS Rates
Section 197 of the Income Tax Act 1961 allows taxpayers to apply for a lower rate or nil deduction of TDS in certain categories of receipts where TDS is required. This applies to salary income, interest on securities, dividends, interest other than interest on securities, contractors' income, insurance commission, lottery-related payments, commission or brokerage, rent, professional or technical services fees, compensation on property acquisition, income from units of investment funds, income from investment in securitization trust, and income of non-residents.
To apply for a lower TDS rate, the recipient of income needs to submit Form 13 to the Assessing Officer (TDS). This can be done either online or manually. The information required in Form 13 includes:
- Personal details of the taxpayer.
- Explanation of the reasons why the taxpayer believes they are eligible for a lower TDS rate.
- Details of advance tax payments made by the taxpayer.
- Information on TDS already deducted or collected during the current financial year.
- Submission of copies of income tax returns filed for the past three financial years.
- An estimate of the taxpayer's profit and loss for the ongoing financial year.
- Details of the computation of income for the past three years and an estimate for the current year.
- Acknowledgment of electronic TDS returns filed for the two previous financial years.
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