TDS (Tax Deducted at Source) in India: FAQs

TDS refers to the collection of tax by a deductor at the time of making specified payments such as salary, interest, rent, professional fees, and so on. The deductor deducts a percentage of the payment as tax and remits it to the government on the recipient’s behalf.

TDS should be deducted when certain payments are made by businesses or individuals who are accountable for making such payments. The deductor can be an employer, a financial institution, or any person or entity that makes certain contributions under the Income Tax Act of 1961.

The deadline for submitting TDS to the government varies depending on the type of deductor. TDS must be deposited by corporations within seven days of the end of the month in which the deduction is effected. The due date for non-corporate deductors is normally the 7th of the following month.

TDS is classified according to the type of payment, such as salary, interest, rent, professional fees, contractual payments, commission, and so on. Each type has its own set of provisions and deduction rates.

TDS can be deposited electronically via the government’s Tax Information Network (TIN) or through recognized banks. The deductor must have a Tax Deduction and Collection Account Number (TAN) and should deposit TDS using Challan 281.

TDS is levied on a wide range of payments, including salary, interest on securities, rent, professional fees, commission, contractual payments, and so on. TDS deduction rates vary based on the type of the payment and the regulations of the Income Tax Act. For appropriate deduction, it is critical to refer to the precise parts and rates.

TDS may not be applicable in some circumstances where the total amount paid or credited within a fiscal year is less than the government’s approved threshold. However, in order to calculate the threshold limit, it is important to analyze the requirements and exemptions for each type of payment.

If a taxpayer fails to file their income tax return, the deductor must deduct TDS at a higher rate, usually double the amount specified under the relevant laws or 5%, whichever is greater.

TDS may be applicable in transactions involving the acquisition of land or a building. If the transaction value reaches a certain level, the buyer must deduct and remit TDS to the government. TDS for such transactions is typically 1% when sale is made by Indian resident. If Sale is made by non-resident India TDS rate in that case is different which depends on the amount received by the seller.

Deductors must file TDS returns on a regular basis. Filing deadlines differ depending on the type of deductor and the source of payment. TDS returns are filed electronically using the Tax Information Network (TIN) portal or through authorized service providers.

As proof of tax deduction, the deductor issues a TDS certificate to the deductee. It includes information such as the PAN of the deductor and deductee, TDS amounts, payment type, and other pertinent information. TDS certifications are required for claiming credits on income tax returns.

Form 26AS is a consolidated statement that includes TDS credits and other tax-related information for a taxpayer’s PAN. It gives taxpayers a full perspective of the TDS deducted by numerous deductors, allowing them to reconcile their tax liabilities.

To comply with TDS requirements, deductors must file TDS statements in the specified format (e-TDS or TCS return). These statements detail the TDS deducted and paid for a certain period. TDS statements can be uploaded using authorized intermediaries or the government’s TIN portal.

Individuals or entities making specified remittances to a non-resident or foreign entity must file Form 15CA. It collects information about the nature and purpose of the remittance and guarantees that tax requirements are followed.

According to the requirements of the Income Tax Act and circulars issued by the Central Board of Direct Taxes (CBDT), Form 15CA may not be necessary for certain transactions. Exemptions may differ depending on the type and amount of remittance.

Tax Collected at Source (TCS) is levied on certain goods and services. If the individual collecting TCS is required to pay GST, TCS should be collected on the sum that includes GST.

Form 15CA can be submitted electronically via the government’s e-filing system. The form must be filled out accurately with remittance details, and supporting documents, such as PAN and TAN, must be submitted.

Form 15CB is a Chartered Accountant certification declaring the applicability of tax regulations and the rate of deduction on the payment being made. It is necessary in certain circumstances for non-resident remittances and should be secured prior to completing Form 15CA.

If tax was previously deducted at the source, the deductee must take the TDS amount into account when calculating their ultimate tax due. The TDS amount is considered a tax prepayment and can be applied to the total tax liability.

The person deducting tax at source is responsible for various things, including getting a TAN, correctly deducting tax, depositing TDS within the stipulated time frame, providing TDS certificates, filing TDS returns, and complying with other TDS-related laws.

TDS is deducted at a higher rate of 20% or the rate set under the relevant regulations if a taxpayer fails to provide their Permanent Account Number (PAN) to the deductor.

TAN
The deductor obtains a TAN (Tax Deduction and Collection Account Number) for the purpose of deducting and remitting TDS.
PAN
For income tax reasons, a PAN (Permanent Account Number) is a unique identifying number provided to individuals or companies.

Sections 206AB and 206CCA of the Finance Act of 2021 were added to provide for higher rates of TDS and TCS for non-filers of income tax returns, respectively. These provisions apply in certain circumstances and are designed to ensure timely submission of income tax returns.

The TDS rate on salary is calculated using the income slab and applicable tax rates for the fiscal year in question. When computing and deducting TDS on salary payments, the deductor must consider the income tax slabs, deductions, and exemptions.