TDS or Tax Deducted at Source is known to most salaried and self-employed people in India. Not many are gleeful about the income tax deductions that take place from their income but find a way around it by investing their money smartly. But in the end, there is some amount of TDS being paid, which is why understanding its aspects becomes crucial.
Tax Deducted at Source was introduced by the Income Tax Department for collecting taxes at the source of payment if it is above a certain limit. To understand TDS payments better, let’s take a look at the online payment method, the penalty for a delay in paying TDS, and checking due dates.
What is TDS in Income Tax?
Tax Deducted at Source (TDS) is a system of collecting income tax in India, which is administered by the Central Board of Direct Taxes (CBDT). TDS is a mechanism that ensures a steady revenue flow to the government and helps in preventing tax evasion. In this system, a certain percentage of the income earned by a person is deducted by the payer at the time of making payments, and the deducted amount is remitted to the government.
TDS is applicable to various types of income, such as salaries, interest on bank deposits, rent, commission, professional fees, etc. It is also applicable to payments made to non-residents. The person who deducts TDS is known as the “deductor,” and the person whose income TDS is deducted is known as the “deductee.”
Types of TDS
Tax Deducted at Source (TDS) is a mechanism by which the government collects taxes at the time of payment itself. It is a tool used to prevent tax evasion and ensure that the government receives its due share of tax revenue. TDS is applicable to a wide range of payments, including salaries, interest, rent, and fees, among others.
There are several types of TDS, each applicable to a different type of payment. Here are the various types of TDS in detail:
Salary TDS
This type of TDS is deducted from the salary of an employee. Employers are required to deduct TDS from the salary paid to their employees based on the income tax slab rate applicable to the employee. The TDS is subsequently paid to the government on the employee’s behalf.
Interest TDS
This type of TDS is applicable to interest income earned by an individual. Banks and other financial institutions deduct TDS at the rate of 10% on interest income above a certain threshold limit. The threshold limit for interest TDS is ₹40,000 per annum for individuals and ₹50,000 for senior citizens.
Rent TDS
This type of TDS is applicable to rent payments made to landlords. If the annual rent paid by an individual exceeds ₹2.4 lakh, TDS at the rate of 10% is deducted by the tenant and deposited with the government on behalf of the landlord.
Commission TDS
This type of TDS is applicable to commission payments made to agents and brokers. TDS at the rate of 5% is deducted on commission payments exceeding ₹15,000.
Professional Fee TDS
This type of TDS is applicable to payments made to professionals such as doctors, lawyers, and accountants. TDS at the rate of 10% is deducted on professional fee payments exceeding ₹50,000.
What is TDS Rate on Salary?
TDS on salary is the tax deducted by the employer from the salary of an employee at the time of payment. The employer deducts the TDS amount from the salary and deposits it with the government on behalf of the employee. This system ensures that the tax liability of the employee is fulfilled without the need for the employee to pay it separately.
The TDS rate on salary depends on the income tax slab that the employee falls under. The income tax slabs are revised every year in the annual budget. The TDS rate is calculated based on the income tax slab rate and the income of the employee.
How to File TDS Return Online?
Tax Deducted at Source is a tax collection mechanism implemented by the Government of India. It is an indirect way of collecting tax from the taxpayer by deducting a certain percentage of tax from the payment made to them. TDS is applicable to various types of payments such as salary, rent, interest, commission, etc. As a taxpayer, it is important to file TDS returns on time to avoid any penalties or legal issues.
Here are the steps to file a TDS return online:
Step 1: Register on the e-filing website
To file a TDS return online, the first step is to register on the e-filing website of the Income Tax Department. If you are already registered, then you can skip this step. If you are not registered, then you need to visit the e-filing website and click on the ‘Register Yourself’ option. Enter the required details, such as PAN, name, date of birth, etc., and create your account.
Step 2: Download the TDS return utility
The next step is to download the TDS return utility from the e-filing website. The utility is available in excel format and can be downloaded by clicking on the ‘Downloads’ tab on the website. Choose the applicable TDS return form, and download the utility.
Step 3: Fill in the details
Open the downloaded utility and fill in the necessary details, such as TAN, PAN, and deductee details. Make sure that the information entered is accurate and matches the information available in the records.
Step 4: Validate the details
After filling in the details, validate the information by clicking on the ‘Validate’ option. This will check for any errors or discrepancies in the details entered.
Step 5: Generate the TDS return file
Once the details are validated, generate the TDS return file by clicking on the ‘Generate File’ option. The file will be generated in the format specified by the Income Tax Department.
Step 6: Upload the TDS return file
After generating the TDS return file, log in to the e-filing website and upload the file by clicking on the ‘Upload TDS’ option. Select the appropriate form and assessment year, and upload the file.
Step 7: Verify the TDS return
After uploading the TDS return file, verify the details by clicking on the ‘Verify TDS’ option. This will check for any errors or discrepancies in the uploaded file.
Step 8: Submit the TDS return
After verifying the details, submit the TDS return by clicking on the ‘Submit’ option. Once the return is submitted, an acknowledgement number will be generated.
What is the TDS Online Payment Process?
Follow the step-by-step procedure given below for paying TDS online:
1.Go to National Securities Depository Limited (NSDL’s) official website https://onlineservices.tin.egov-.nsdl.com/etaxnew/tdsnontds.jsp)
2. Click on ‘CHALLAN NO./ITNS 281’ under the TDS/TCS section.
3. Now select the type of deductee (select ‘company deductee’ if the payment is being made towards a company, or else select ‘non-company deductee’). Fill in the rest of the information required on the page, like assessment year, type and nature of payment, Tax Deduction Account Number (TAN), etc.
4. After submitting the form, TAN will be confirmed, and the taxpayer’s full name will be displayed on the screen.
5. Now payment has to be made via net banking or debit card.
6. After successful online payment, a challan counterfoil will be displayed on the screen containing details like the Challan Identification Number (CIN), the name of the bank through which the payment took place, etc.
7. This challan acts as a confirmation of the payment made for reference.
What is a Challan for TDS Payment?
A TDS challan is a form used for depositing TDS with the government. It is a mandatory document that serves as proof of payment of TDS by the deductor. Challan for TDS payment is used for remitting the tax amount that has been deducted from the income of the deductee to the government.
The TDS challan is divided into two parts - the top portion is retained by the bank or the authorized collection centre, and the bottom portion is given to the deductor as proof of payment.
What is the Penalty for Delay?
Delay in Payment of TDS
If there is a delay in depositing the TDS deducted in whole or part before the deadline, an interest of 1.5% is levied every month under Section 201(1A) from the date of deduction to the date of deposition of TDS.
Delay in Deduction of TDS
If there is a delay in deducting TDS in whole or part, an interest of 1% is levied every month from the date of the actual deduction to the date when the deduction occurs.
Delay in Filing TDS Returns
If there is a delay in filing returns until the deadline, a penalty of ₹200 is levied per day till the date when the TDS is filed. Also, the amount of penalty levied cannot exceed the TDS collected.
How to Check the Status of TDS Online Payment?
1. Go to TDS Centralized Processing Cell (CPC) official website (https://www.tdscpc.gov.in/app/tapn/tdstcscredit.xhtml)
2. Enter the verification captcha code and click on ‘Proceed’.
3. Fill in the details required on the page like TAN, PAN, financial year.
4. Details of the TDS payment status will be displayed on the screen.
How to Claim TDS Refund?
As a taxpayer, one of the benefits you can avail of is claiming a TDS (Tax Deducted at Source) refund. TDS is a type of tax that is deducted from your income by your employer, bank, or any other institution that is required to do so by law. However, you may be eligible for a refund if you have paid more TDS than your actual tax liability.
Step 1: Gather the necessary documents
Before you start the process of claiming a TDS refund, make sure you have the following documents:
Form 16 or Form 16A: This is a certificate that shows the TDS deducted by your employer or any other institution. You will need this document to file your income tax return (ITR) and claim your TDS refund.
Bank statement: If TDS has been deducted from your bank interest, you will need your bank statement to show the amount of TDS deducted.
Challan 280: If you have paid any advance tax or self-assessment tax, you will need to provide the challan 280 receipt as proof of payment.
Step 2: File your income tax return
To claim a TDS refund, you need to file your income tax return (ITR) for the relevant assessment year. You can file your ITR online through the Income Tax Department’s e-filing portal. Make sure to select the correct ITR form and enter all the relevant details, including your income, TDS, and tax liability.
Step 3: Verify your ITR
After filing your ITR, you need to verify it. You can verify your ITR electronically using any of the following methods:
Step 4: Check your refund status
- Aadhaar OTP
- Net banking
- Bank account-based validation
- Demat account-based validation
- EVC (Electronic Verification Code)
After verifying your ITR, you can check the status of your TDS refund by visiting the Income Tax Department’s e-filing portal. You can also check your refund status by calling the Income Tax Department’s toll-free number or sending an email to their customer care.
Step 5: Follow up on your refund
If you have not received your TDS refund within a reasonable time, you can follow up with the Income Tax Department by sending an email or calling their toll-free number. You can also visit your jurisdictional Income Tax Office to check the status of your refund.
TDS Certificate
TDS Certificate or Form 16/16A is available online on the TRACES website, which contains the various income tax deductions which have occurred. This is provided by the employer to an employee after the tax deductions take place. A TDS certificate helps cross-check the details mentioned in Form 16/16A with Form 26AS and maintain transparency. Payment can be done at any time and from any location reference the official website.
Benefits of Online TDS Payment
1. Online payment makes the process efficient and convenient for taxpayers.
2. Tax payment is carried out immediately without delay.
3. Challan, which is proof of payment, is paperless and can be downloaded in future.
4. Taxpayers can also enquire about the proceedings of TDS via online modes.
5. The Income Tax Department directly receives Challan.
When should TDS be deducted?
Tax Deducted at Source (TDS) is a mechanism that helps the government collect taxes on income generated by individuals and businesses. Here is when TDS should be deducted.
Salaries
TDS should be deducted from the salaries paid to employees. The employer is responsible for deducting TDS at the time of payment of salary.
Interest in Fixed Deposits
Banks deduct TDS on the interest earned on fixed deposits if the interest amount exceeds ₹40,000 in a financial year.
Rent
TDS should be deducted from the rent paid by individuals and businesses if the annual rent exceeds ₹2.4 lakhs.
Commission and brokerage
TDS should be deducted on commission and brokerage paid to agents if the annual payment exceeds ₹15,000.
Professional fees
TDS should be deducted from professional fees paid to doctors, lawyers, and other professionals if the payment exceeds ₹30,000 in a financial year.
Contractors and sub-contractors
TDS should be deducted from payments made to contractors and sub-contractors for work. The rate of TDS varies depending on the nature of the work.
How to calculate TDS?
Since TDS is crucial for all taxpayers, calculating the right amount to be deducted becomes of equal significance. While it might appear daunting, you can easily calculate your TDS value by following some basic steps. Here is how you can calculate TDS.
Step 1: Determine the type of income
The first step in calculating TDS is to determine the type of income. Different types of income have different TDS rates. For example, TDS on salaries is calculated at a different rate than TDS on rent or interest income.
Step 2: Determine the total income
The next step is to determine the total income earned by the recipient. The TDS rate is based on the total income earned by the recipient in a financial year. To calculate the total income, one must add all the income earned from various sources, such as salaries, interest income, rental income, etc.
Step 3: Determine the TDS rate
Once you have determined the type of income and the total income, you can use the TDS rate chart to determine the TDS rate applicable to your income. The TDS rate chart is available on the Income Tax Department’s website and can be found in tax-related books.
Step 4: Calculate the TDS amount
Once you have determined the TDS rate, you can calculate the TDS amount. To calculate the TDS amount, you must multiply the total income by the TDS rate. For instance, if the total income is ₹10 lakhs and the TDS rate is 10%, the TDS amount would be ₹1 lakh.
Step 5: Deduct any exemptions
After calculating the TDS amount, you can deduct any exemptions that the recipient is eligible for. For example, if the recipient has invested in tax-saving instruments such as Public Provident Fund (PPF) or National Savings Certificate (NSC), the TDS amount can be reduced accordingly.
Step 6: Pay the TDS amount
Once the TDS amount has been calculated, it must be deposited with the government. The TDS amount can be deposited online or offline, depending on the mode of payment selected by the payer.
Concluding Thoughts
Tax Deducted at Source is an essential aspect of the Indian taxation system, which helps in the efficient collection of taxes. With the advent of technology, the process of TDS payment online has become more comfortable and convenient than ever before. Taxpayers can make TDS payments online using various modes such as net banking, credit card, and debit card.
Additionally, the government has introduced various tools and facilities to simplify the process and help taxpayers avoid any errors while making TDS payments. It is crucial to note that timely TDS payment is crucial to avoid any penalties or interest charges. Therefore, taxpayers must ensure that they are aware of the TDS due dates and make payments on time. By following the guidelines and regulations set by the government, taxpayers can fulfil their TDS obligations efficiently and contribute to the country’s growth and development.
Key takeaways
- TDS is a mechanism that ensures a steady revenue flow to the government and helps in preventing tax evasion.
- To file a TDS return online, the first step is to register on the e-filing website of the Income Tax Department.
- A TDS challan is a form used for depositing TDS with the government.
- If there is a delay in depositing the TDS deducted in whole or part before the deadline, an interest of 1.5% is levied every month.
