Tax Deducted at Source or TDS is a source of collecting tax by Government of India at the time when a transaction takes place. Here, the tax is required to be deducted at the time money is credited to the payee’s account or at the time of payment, whichever is earlier.
In case of payment of salary or life insurance policy, tax is deducted at the time of payment. The deductor then deposits this TDS amount to the Income Tax (I-T) department. Through TDS, some portion of your tax is automatically paid to the I-T department. Thus, TDS is considered as a method of reducing tax evasion.
Tax is deducted usually over a range of 1% to 10%.
Due Dates for Payment of TDS
|Amount paid/credited||Due date of TDS deposit|
|Government Office||Without Challan||Same Day|
|With Challan||7th of next month|
|On perquisites opt to be deposited by employer||7th of next month|
|Others||In month of March||30th April|
|In other months||7th of next month|
What is TDS Return?
Apart from depositing the tax, the deductor should also file a TDS return.
TDS return is a quarterly statement to be given to the I-T department. It is compulsory for deductors to submit a TDS return on time. The details required to file TDS returns are:
- PAN of the deductor and the deductee
- Amount of tax paid to the government
- TDS challan information
- Others, if any
Eligibility Criteria for TDS Return
TDS return can be filed by employers or organizations who avail a valid Tax Collection and Deduction Account Number (TAN). Any person making specified payments mentioned under the I-T Act are required to deduct tax at source and needs to deposit within the stipulated time for the following payments :
- Payment of Salary
- Income by way of “Income on Securities”
- Income by way of winning lottery, puzzles and others
- Income from winning horse races
- Insurance Commission
- Payment in respect of National Saving Scheme and many others
TDS Return Filing
Due dates of TDS Return FY 2018-19 :
|Quarter||Quarter Period||TDS Return Due Date|
|1st Quarter||1st April to 30th June||31st August 2018|
|2nd Quarter||1st July to 30th September||31st October 2018|
|3rd Quarter||1st October to 31st December||31st January 2019|
|4th Quarter||1st January to 31st March||31st May 2019|
TDS Return Forms
|TDS on Salary||Form 24Q|
|TDS where deductee is a non-resident, foreign company||Form 27Q|
|TDS on payment for transfer of immovable property||Form 26QB|
|TDS in any other case||Form 26Q|
Various forms are used for filing TDS return, depending on the purpose of deduction. These returns have to be in company with a signed verification in Form No. 27A. It is a form that controls the quarterly statements. This has to be filed by deductors together with quarterly statements. It summarizes the control totals of “amount paid” and “income tax deducted at source” which has to match with the totals in TDS return.
TDS Return Submission
- Assessees who are liable to submit TDS return electronically:
An assessee is liable to file e-TDS return if TDS is deducted from his/her
income. It is obligatory to file TDS return within the due date mentioned above. In case an assessee does not file the return within the prescribed time, he will be liable to pay a penalty.
Following are the assessees liable to file quarterly TDS return electronically:
(a) People whose accounts are Audited u/s44AB
(b) People holding an office under the Government
TDS Return filing Process
The following points are required to be considered to make sure that an error-free TDS return is submitted :
- Form 27A contains a control chart whose all columns must be filled. This form is then verified in hard copy form with the e-TDS return filed electronically.
- The totals of the amount paid and the tax deducted at source have to be correctly filled and the same has to be filled in all the forms, including Form No. 27A, Form No. 24, Form No. 26 and Form No. 27.
- The assessees are required to mention their Tax Deduction Account Number (TAN) in Form No. 27A. This is similar to what is done in case of e-TDS return. This is dictated by ‘sub-section (2) of section 203A of the I-T Act in India’.
- At the time of filing the TDS return, ensure that details relating to the depositing of tax deducted at source have been mentioned accurately.
- The basic form that has been used for e-TDS return recommended by the department is compulsory to follow. This is because it brings consistency and better understanding in filling the forms. It is necessary to mention the Bank Branch Code or the BSR code. It is a 7-digit code provided to the banks by the Reserve Bank of India.
- E-TDS return has to be filed in the ASCII clean text format. To avail this format, you can use software of your choice such as Computex, MS Excel or Tally. Also, you have an option of using the software available at NSDL website known as Return Prepare Utility (e-TDS RPU Light) for filing the return online. It is important to ensure that the online TDS file formats come with ‘txt’ as the filename extension.
- The physical returns are submitted at any TIN-FC’s managed by NSDL. TIN-FC’s are found at specified areas across the country.
- If returns are filed online, then they can be submitted directly at NSDL TIN website. In this case, the deductor has to sign the return through digital signature.
- While submitting the return, if all the information mentioned is accurate then a provisional receipt/token number would be issued. This provisional receipt/token number is considered as an acknowledgment, stating the fact that the return has been filed. In case, the return is not accepted, then a non-acceptance memo will be issued along with the reasons for rejections.
Validation of the TDS Return File
The procedure for the validation of TDS return file is given below:
- Fill in the required details in the file
- After filling in the details, update it in the portal validation utility tool
- The tool is available on NSDL website for free
- In case any error is found in the file, FVU will provide a report for the same
- Make the necessary changes and verify the file again through the FVU
Penalty for delay in filing TDS Return
According to Section234E, if an assessee fails to file his/her TDS Return before the due date, a penalty of Rs 200 per day shall be paid by the assessee until the time the default continues. However, the total penalty should not exceed the TDS amount.
Non-filing of TDS Return
If an assessee has not filed the return within 1 year from the due date of filing return or if a person has furnished incorrect information, he/she shall also be liable for penalty. The penalty levied should not be less than Rs 10,000 and not more than Rs 1,00,000.
TDS Return Preparation Utility
Deductors/collectors are required to prepare e-TDS/TCS statements as per these file formats using, NSDL e-Gov. Return Preparation Utility or in-house software or any other third party software and submit the same to any of the TIN-FCs established by NSDL e-Gov. NSDL e-Governance has developed a software called e-TDS Return Preparation Utility (RPU) to facilitate preparation of e-TDS returns. Users must pass the e-TDS/ TCS return file generated using RPU through the File Validation Utility (FVU) to ensure format level accuracy of the file. This utility is also freely downloadable from NSDL e-Gov TIN website.
Revised TDS Return
After submitting the return, if any error is detected, such as incorrect challan details or PAN not provided or incorrect PAN provided, the tax amount credited with the government will not reflect in the Form16/ Form 16A/ Form 26AS.
To facilitate conformity and make sure that the tax amount is properly credited and reflected in the Form 16/Form 16A/ Form 26AS, a revised TDS return has to be filed.
Procedure for filing Revised Return
The following are the different types of corrections that are to be made in order to submit an error-free TDS return:
- C1 correction: Under this type, you can fill in the correct details of the deductor like the name and address of the deductor
- C2 correction: Under this type, you can update challan details which include specific details like challan amount, BSR code, serial number of the challan, tender date of the Challan, etc.
- C3 correction: Under this, you can add, change or update details of the deductee
- C4 Correction: Under this type, you can add or delete salary details erstwhile mentioned
- C5 correction: Under this type, the PAN number of the employee or the deductee can be edited
- C9 correction: Under this type, you can insert a completely new challan and then put in the essential deductees
The above mentioned charges would also be required to be again paid in case a revised return is filed by the deductor.
Revised Return can be filed multiple times to incorporate any changes.
Prerequisites for the submission of revised TDS return
- Revised TDS return can be filed only if the original TDS return is accepted by the TIN central system.
- The assessee can check the status of the TDS return filed online by providing required details, such as PAN number and Provisional Receipt number/Token number on NSDL website https://onlineservices.tin.egov-nsdl.com/TIN/JSP/tds/linktoUnAuthorizedInput.jsp
- Revised TDS return has to be prepared by using the most recent consolidated TDS statement. This can be downloaded from the TRACES website. For downloading this statement, the provisional receipt/token number of the original statement should be mentioned.
TDS is the tax amount deducted at the time of payment. At the year end, while assessing the total tax liability, there is a difference between the total tax deducted during the year and the actual tax liability. If the tax deducted at the source is less than the actual tax liability, then the difference between the two has to be paid by the assessee. On the other hand, if the tax deducted at source is more than the actual tax liability, it results in TDS refund.
Status of TDS Refund
The status of TDS refund can be verified in the following ways:
- An acknowledgment is sent to your registered e-mail address
- You can use your PAN on the website https://incometaxindiaefiling.gov.in/
- You can also call at CPC Bangalore on 1800-4250-0025 (toll-free number) to check the status
TDS Refund period
The excess TDS paid by the assessee gets refunded. The time period of TDS refund amount depends on whether you have filed your income tax return on or before the due date or not. If you have filed it on time, then excess TDS amount will be refunded between three to six months.
Interest on TDS Refund
According to Section 200A of the I-T Act, 1961, if the income tax department does not pay the TDS refund amount within the specified time period, they will have to pay an interest of 6% p.a. on the refund amount. This interest is calculated from the first month i.e. April of any financial year. However, no interest is applicable if the TDS refund amount is less than 10% of actual tax liability.
Benefits of TDS
Filing TDS return is mandatory as per I-T Act, 1961. Some of its benefits are:
- It helps in regular collection of taxes
- Ensures a flow of regular income to the government
- Reduces the burden of lump-sum tax payment. It helps in spreading the entire tax payment over a number of months which makes it easier for the taxpayer
- Offers an easy mode of tax payment to the payer!