TDS (TAX DEDUCTED AT SOURCE)

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 

One must remember that TDS on specified transactions is deducted only when the value of payment is above the specified threshold level. No TDS will be deducted if the value does not cross the specified 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

3)CHOOSE RIGHT FORM FOR FILING RETURNS
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. 



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