Tax Deducted at Source or TDS is a type of advance tax which is deducted from the earnings of an individual or an organization before the money is actually credited into that entity’s account, according to the Indian Taxation Code. The government is able to generate revenues by implementing the provisions of TDS on the earnings of individuals as well as businesses. Rules and regulations regarding TDS are controlled and governed under the Income Tax Act, 1961 by the Central Board of Direct Taxes (CBDT).
As the name suggests, “Tax Deducted at Source” implies that the payee or the employer deducts the tax before making a payment to the receiver. Tax Deducted at Source is applicable on income earned regularly and also on the income earned occasionally or irregularly. Thus, TDS is applicable on various incomes, including, but not limited to Salary, Commission, Rent, Professional Fees and Interest.
Advantages of payment of TDS
TDS is payable on the earnings so it is important to note that the liability to pay TDS is applicable only in the event of earnings actually taking place. TDS is deducted before making payments. Deductions are to be made on payments that are made in cash, cheque or credit. The amount deducted under TDS is further deposited with various government agencies. Payment of TDS has various advantages which are as follows :
- Deducting TDS at source prevents tax evasion.
- Tax collection is done duly and in a timely manner.
- A large number of people come under the tax net.
- Collection of TDS is a steady source of revenue for the government.
TDS Deductors as per Taxation Rules
Following is the list of deductors liable to deduct TDS:
- Hindu Undivided Family
- Limited Companies
- Partnership Firms
- Body of Individuals
- Association of Individuals
- Local Authorities
Rate of TDS deduction
Payments such as salaries, commission, professional fees, interest earned, rent etc. are subject to TDS deduction. Based on the type of income and amount of income earned, TDS is paid at various rates. Thus, different kinds of income has different TDS rates and the tax is paid on the extra amount earned after a certain maximum threshold limit is attained. The rate at which TDS is paid varies from 1 per cent to 30 per cent, depending on the income taxed.
Method of TDS deduction
As commonly known, TDS is deducted on the payments made to the receiver. It means that the payments are done to the receiver after deduction of appropriate tax for the income in question. The amount of TDS that the receiver is liable to pay is deducted from the payment the receiver is liable to receive and the remainder is paid out. It is important to note that the liability to deduct TDS is of the deductor. For instance, in case of employer paying salary to employee, the employer is the deductor and the employee is the TDS deductee.
All About TDS Returns
A TDS Return is a summary of all the transactions related to TDS made during a quarter. TDS Return is a quarterly statement submitted by the deductor to the Income Tax Department. The statement shows a summary of all the entries for TDS collected by the deductor and the TDS paid by the deductor to the Income Tax Authority. The TDS Return statement includes details like the PAN number of the deductor & the deductees, all the detailed particulars of the TDS paid to the government and the TDS Challan information.
Due Dates for filing TDS Returns
The following are the original due dates for filing TDS Returns for financial year 2018-2019 :
|Quarter||Quarter Period||Last Date of Filing TDS Returns|
|1st Quarter||From 1st April 2018 to 30th June 2018||31st July 2018|
|2nd Quarter||From 1st July 2017 to 30th September 2018||31st October 2018|
|3rd Quarter||From 1st October 2018 to 31st December 2018||31st January 2019|
|4th Quarter||From 1st January 2019 to 31st March 2019||31st May 2019|
Late Filing of TDS Returns
As per the new rules, effective from April 1, 2017, one is liable to pay a maximum penalty of Rs. 10,000 for late filing of TDS Return. Also, filing of Form 26Q has been extended to 31st August, 2018 from 31st July, 2018. Details of penalties for late filing of Form 26Q is mentioned in the table below :
|E-Filing Date||Total Income below Rs. 5,00,000||Total Income above Rs. 5,00,000|
|Upto 31st Aug 2018||Rs. 0||Rs. 0|
|Between 1st Sept and 31st Dec 18||Rs. 1000||Rs. 5000|
|Between 1st Jan and 31st March 19||RS. 1000||Rs. 1000|
TDS Return Forms: An Overview
As the deductor is liable to deduct tax and file the TDS Return form as the supporting document, it is important to note that there are various types of TDS Return Forms for different situations. The type of TDS Return Form to be submitted is based on the Nature of Income of the deductee or the type of deductee who pays the TDS.
|Type of TDS Return Forms||Particulars of the TDS Return Forms|
|Form 24Q||Statement for tax deducted at source from salaries|
|Form 26Q||Statement for tax deducted at source on all payments other than salaries.|
|Form 27Q||Statement for tax deduction on income received from interest, dividends, or any other sum payable to non residents.|
|Form 27EQ||Statement of collection of tax at source.|
Let us study in detail the various types of TDS Return Forms.
- It is used for preparing eTDS returns for the TDS deducted on salary under Section 192 of the Income Tax Act, 1961.
- It has to be submitted on a quarterly basis by the deductor.
- It contains details like salaries paid and the TDS deducted of the employees by the employer.
- It contains 2 annexures namely Annexure-I and Annexure II. Annexure-I contains details of the deductor, deductees and challans, while Annexure II contains the salary details of the deductees.
- Annexure-I is to be submitted by the deductor for all the four quarters of the financial year.
- Annexure II need not be submitted in the first three quarters of the financial year, but has to be furnished and submitted in the fourth quarter of the financial year with details of the employees’ salaries of the entire financial year.
- It is to be submitted for tax deduction at source for all the payments received other than the salary.
- It is submitted on a quarterly basis by the deductor and is applicable for tax deducted at source under section 200(3), 193 and 194 of the Income Tax Act of 1961.
- The income on which the tax is deducted at source includes interest on securities, dividend securities, professional fees, directors’ remuneration, etc.
- It is compulsory to furnish PAN by the deductors who are non-government deductors. For government deductors “PANNOTREQD” has to be mentioned on the form.
- It is applicable for payments made to non-resident Indians and foreigners other than salary.
- It has to be filled in for the declaration of Tax Deducted at source for the NRIs and Foreigners.
- It is submitted on a quarterly basis by the deductor and is applicable for tax deducted at source under section 200(3) of the Income Tax Act of 1961.
- The income on which the tax is deducted at source includes interest, bonus, any additional income or any other sum owed to non-resident Indian or foreigner.
- It is compulsory for non-government deductors to furnish PAN. For government deductors the code “PANNOTREQD”has to be mentioned on the form.
- It is a quarterly statement that furnishes the details and information of the tax collected at source as per section 206C of the Income Tax Act of 1961.
- The form 27EQ is submitted on a quarterly basis. In this form it is mandatory to furnish TAN.
- It is the statement to show the Tax Collected at Source (TCS), which is the tax collected by the seller. When a buyer purchases certain goods or commodities, the seller collects the tax from the buyer through the TCS route. This tax is collected on the payment received from the buyer either in cash, credit, cheque, demand draft or from any other mode of payment.
- It is to be furnished by corporate deductors and collectors but not by government deductors and collectors. It is compulsory to furnish PAN by the deductors who are non-government deductors. For government deductors, the code “PANNOTREQD” has to be mentioned on the form.
How to Download TDS Return Forms
TDS Return Form has been sub-divided into four categories. A taxpayer needs to choose the particular category for which he/she has to file TDS Returns accordingly. Here are steps through which a taxpayer can download the TDS return forms:
Step 1: Visit the official website of NSDL at https://www.tin-nsdl.com/
Step 2: Click the “Downloads” tab and choose E-TDS/E-TCS from the drop down list menu
Step 3: Click “Quarterly Returns” and then choose “Regular”
Step 4: You will be redirected to the new page
Step 5: Choose the TDS Return Form as per the requirement mentioned under section “Form”