TDS stands for 'Tax Deducted at Source'. It was introduced by the Income Tax Department to collect tax at the source from where an individual's income is generated. Tax Deducted at Source (TDS) is a system introduced by Income Tax Department, where person responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment. TDS is applicable on the various incomes such as salaries, interest received, commission received etc. The government uses TDS as a tool to collect tax in order to minimise tax evasion by taxing the income (partially or wholly) at the time it is generated rather than at a later date. TDS is not applicable to all incomes and persons for all transactions. Different rates of TDS have been prescribed by the Income Tax Act for different payments and different categories of recipients. For example, payment of redemption proceeds by a debt mutual fund to a resident individual is not subject to TDS but for a Non-resident Indian is subject to TDS. The person who is making the payment is responsible for deducting the tax and depositing the same with government. This person is known as 'deductor'. On the other hand, the person who receives the payment after the tax deduction is called 'deductee'. Form 26AS is a statement which shows the amount of tax deducted and deposited in a person's name/PAN. An individual can, therefore, view/check the TDS from incomes paid to him by viewing this Form 26AS. Each deductor is also duty bound to issue a TDS certificate certifying how much amount is deducted in the deductee's name and deposited with the government. Nature of payment Relevant Section TDS rate (rate at which tax is to be deducted at source) Salaries 192 15%(Education and higher education cess of 2% and 1% respectively where income exceeds rs. 1 Crore.) Accumulated taxable part of PF 192A 10% Interest on securities 193 10% Deemed Dividend 194 10% Interest other than interest on securities 194A 10% Winnings from lottery, crosswords or any sort of game 194B 30% Winnings from horse race 194BB 30% Payment or credit to a resident contractor/ sub-contractor 194C 1% in cases of individuals and HUF, 2% in cases of persons other than individual or HUF Insurance commission received by an individual 194D 5% Life insurance policies not exempt under section 10(10)D 194DA 1% in case payment in FY exceeds Rs 1 lakh Commission on sale of lottery tickets 194G 10% Commission or brokerage received except for insurance commission 194H 5% in case payment in FY exceeds Rs 15,000 Rent 194-I 2% in cases of rent of plant and machinery 10% on rent of land or building or furniture or fixtures Payment made while purchasing land or property 194IA 1% Payment of rent by individual or HUF exceeding Rs 50,000 per month 194IB 5% Professional fees,technical fees,royalty or remuneration to a director 194J 10% Payment of compensation on acquisition of certain immovable property 194LA 10% TDS is only applicable above a threshold level Different threshold levels are specified by the Income Tax department for different payments such as salaries, interest received etc. For example, there will be no TDS on the total interest received on FD/FDs from from a single bank if it is less than Rs 10,000 in a year from that bank. For more information click here: RULES WHILE FILING FOR INCOME TAX RETURNS 1)FILE RETURNS IF YOUR INCOME EXCEEDS THE BASIC LIMIT 2)VERIFICATION OF TDS DETAILS IN FORM 26AS ITR-1-Income from salary or pension Income from one house property Income from other sources (interest, dividends, etc) ITR-2-Income from salary or pension Income from house property Income from capital gains Income from other sources Income as a partner in firm Foreign assets and income Agricultural income of over Rs 5,000 ITR-3- Are an individual or HUF with income from proprietary business or profession. Have income from house property, salary, pension and other sources 4)INCLUSION INTERESTS AND OTHER INCOMES IN RETURNS 5)MENTION AADHAR IN TAX RETURNS. DO NOT TREAT AADHAR AS AN OPTIONAL REQUIREMENT 6)DO NOT IGNORE INCOME FROM PREVIOUS EMPLOYERS 7)DISCLOSURE OF FORIEGN ASSETS AND INCOMES 8)DISCLOSURE OF ALL ASSETS IF EARNING INTERESTS OVER 50 LAKH 9)FILE BEFORE DEADLINE AND VERIFICATION OF RETURN “A new section 234F inserted in the Income Tax Act has fixed a penalty for delay in filing. It is applicable from the assessment year 2018-19. For now, the penalty is Rs 5,000 if the return is not filed the return before the end of the relevant assessment year,” says Archit Gupta, Founder and CEO, Cleartax.in How to avoid TDS If a person expects that his total income in a financial year will be below the exemption limit, he can ask the payer not to deduct TDS by submitting Form 15G/15H. While receiving payment which is subject to TDS, deductee is required to provide his PAN details to avoid tax deduction at the higher rates. |