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TDS - Tax Deducted at Source

Tax Deducted at Source (TDS) is a mechanism where tax is deducted by the payer (deductor) when making certain specified payments to the payee (deducted). Tax is automatically deducted from an individual's payments during certain transactions, such as salary, rent, interest, professional fees, and commissions. Typically, the recipient is obligated to pay the income tax, but in TDS returns, payers or deductors are supposed to deposit TDS online. However, the TDS mechanism allows the tax to be collected upfront from the payments made, ensuring timely tax collection by the government.

The amount received after the TDS deduction is the recipient's net income, and they must then report the gross amount (before the TDS deduction) in their tax return. After the deposit, one must do the TDS filing online, which is a part of TDS rules and regulations.

Who should deduct TDS?

Individuals, HUFs, firms, companies, and other entities required to deduct TDS under the Income Tax Act, 1961 (depending on turnover and specific conditions). Those must complete the TDS apply process and register as a TDS deductor.

Deposit of TDS

The deposit of TDS refers to the process of remitting the deducted TDS to the government within the prescribed TDS due date. Concerned persons who have done the TDS apply and registration must ensure timely deposits to comply with tax regulations and avoid penalties. After the deposit, one should engage and complete TDS filing online to avoid penalties and legal complications. 

TDS Due Date

• Usually by the 7th of the subsequent month.
• For TDS deducted in March: by April 30 (in many cases) or by March 31 (for some government deductors).

Common Payments Attracting TDS

Salaries, rent, contractor/sub-contractor fees, professional fees, commission, interest (other than interest on securities), etc.

TDS Thresholds

Please ensure you comply with TDS regulations if any of the following apply to your business. As the threshold may be revised, ensure to verify with current provisions,

• Rent (Sec 194I): TDS applies if annual rent exceeds Rs. 2,40,000.
• Contractor/Sub-Contractor (Sec 194C): TDS applies if single payment exceeds Rs. 30,000 or aggregate payment in a financial year exceeds Rs. 1,00,000.
• Professional Fees (Sec 194J): TDS if annual payment exceeds Rs. 30,000.
• Interest (Sec 194A): TDS if annual interest exceeds Rs. 40,000 for non-senior citizens (Rs. 50,000 for senior citizens).
• Salary (Sec 192): TDS if employee’s total taxable salary exceeds the basic exemption limit.

TDS Rates & Key Sections

TDS rates vary based on the type of income, including salaries, professional services, commissions, rent payments, and interest from investments. The applicable rate depends on the nature and total income level. Remember, The TDS Rates may be subject to change

Who is Required to File a TDS Return?

TDS filing obligations extend to employers and organizations that possess a TAN (Tax Deduction and Collection Account Number). This requirement also applies to individuals subject to audit under Section 44AB, and those in government or corporate positions who are expected to do the TDS quarterly return filing. The TDS return quarterly due date must be met in order to avoid penalties and legal complications.

A wide array of entities, including individuals, collectives, Hindu Undivided Families (HUFs), corporations, local authorities, partnerships, and other associations, are eligible as deductors, deposit TDS online and does TDS quarterly return filing. It must be filed with the right forms before the TDS return filing due date to avoid legal problems.

Under the provisions of the Income Tax Act, TDS paid online, and the TDS returns must be filed for transactions before the prescribed TDS due date involving:

• Salary Payment
• Income on securities
• Income by winning the lotteries, puzzles, and others
• Income from winning horseraces
• Insurance commissions
• Payment concerning the National saving scheme and many others

TDS Return Filing Due Date

The TDS return due date is crucial for ensuring compliance with tax obligations. For each financial quarter, the TDS return quarterly due dates are as follows:

To fulfil TDS payment obligations effectively, it's important to adhere to this TDS return quarterly due date and ensure the timely filing of TDS returns.

Penalty for Non-Compliance

Below, we have outlines the penalties for TDS non-compliance,

Late Deduction/Payment

• Interest @ 1% per month (or part thereof) for late deduction.
• Interest @ 1.5% per month (or part thereof) for late remittance of TDS to the government.

Late Filing of TDS Return

• Fee @ Rs. 200 per day up to the amount of TDS until the return is filed.

Penalty

Assessing Officer may impose penalty up to the amount of TDS if not deducted or remitted, in addition to interest and late fees.

TDS Return Forms

TDS forms depend on the income of the deductee or the type of deductee paying taxes. The TDS return filing forms are mentioned below:

TDS Form 24Q

Under Section 192 of the Income Tax Act 1961, an employer deducts the TDS while paying the salary to an employee. An employer has to file the Salary TDS returns in Form 24 Q, which needs to be submitted every quarter. The details of the salary that is paid to employees and the TDS deducted from the payment are to be specified in Form 24 Q. In other words, Form 24 Q is the quarterly statement of the payment that is made to the employee, and the TDS is deducted that is made by the deductor.

TDS Form 26Q

When a taxpayer pays taxes, the payee deducts TDS on certain occasions. Form 26Q is used to file TDS details on payments other than salary. The Form mentions the total amount that is paid during a particular quarter and the TDS amount that has been deducted. It is necessary to submit Form 26 Q every quarter.

Form 27Q

Form 27 Q is a TDS return or a statement that contains the details of the Tax Deducted at Source on payments other than salary made to a Nonresident India and foreigners. Form 27 Q is to be furnished every quarter or before the TDS return filing due date. Form 27 Q contains the details of the payments that are made and the TDS deducted on payments made to the NRI by the deductor.

Form 27EQ

Form 27 EQ contains all details about tax that is collected at the source. According to Section 206 C of the Income Tax Act 1961, this form has to be filed every quarter. The Form has to be submitted by both corporate and government collectors and the deductors.

Ensure that the appropriate forms are filed before the TDS return due date for legal compliance.

Why is TDS Return Filing Essential?

TDS returns must be filed to fulfil legal obligations and ensure compliance with tax laws. Here's why TDS filing process is necessary:

• Legal Requirement: Entities and individuals who deduct tax at source are mandated by law to file TDS returns. Failure to do the TDS return filing process and non-compliance can lead to penalties and legal consequences.
• Documentation of Tax Deductions: TDS returns document the tax deductions made at the source of income, providing a transparent record of tax payments to the tax authorities. 
• Verification of Tax Deductions: By filing TDS returns, taxpayers can verify that the correct amount of tax has been deducted and remitted to the government on their behalf.
• Credit for Tax Deductions: TDS return filing enable taxpayers to claim credit for the tax deducted at source against their total annual tax liability, reducing the risk of overpayment.
• Facilitation of Refund Claims: In cases where excess tax has been deducted, filing TDS returns facilitates the process of claiming refunds during income tax return filing.
• Compliance with Tax Regulations: TDS Filing process ensures compliance with tax regulations and helps maintain transparency in financial transactions.
• Contribution to Revenue Collection: Timely filing of TDS returns ensures that the government receives its due share of taxes on time, contributing to revenue collection and nation-building efforts.

Essential Details for Online TDS Return Submission

As mentioned, the TDS return must be filed along with the requirement of TDS paid online. For the seamless filing of TDS returns online, it's essential to have the following details ready:

• TAN Details: The Tax Deduction and Collection Account Number (TAN) is mandatory for filing TDS returns, as it identifies the entity responsible for the deduction of tax.
• PAN Details: The Permanent Account Number (PAN) of both the deductor and the deductees must be provided, ensuring accurate attribution of tax payments and deductions.
• Previous TDS Filing Records: If you have filed TDS returns in the past, details of these filings might be required for reference or to maintain continuity in record-keeping.
• TDS Filing Period: To ensure proper alignment with tax periods, you need to specify the quarter and financial year for which the TDS return is being filed.
• Incorporation Date: The date when the business or entity was incorporated might be necessary, particularly for new filers or when filing for the first time in a fiscal year.
• Transaction Count: The total number of transactions involving TDS deductions during the period must be reported, which helps categorize and process the return accurately.
• Entity Type: Clearly specifying the nature of the entity, whether it's a Proprietorship, Partnership, Company, or LLP (Limited Liability Partnership), is crucial as it dictates the applicable tax norms and reporting standards.

Ensure to have these required details before proceeding to TDS return filing online.

Revised TDS Returns

Once the TDS returns are submitted and errors are detected like incorrect challan details or the PAN is not provided or incorrect PAN is provided then the tax amount credit with the government will not be reflected in the Form 16A / Form 26AS. To make sure that the amount is properly credit and reflected in Form 16/ Form 16A / Form 26 AS a revised TDS return has to be filed.

Prerequisites for submission of Revised TDS returns

The revised TDS returns can be filed only when the original TDS return is accepted by the TIN central system. The assessee can check the status of the TIN Central System. The assessee can check the status of the TDS returns that are filed online by providing the required details, such as the PAN and the Provisional Receipt Number/ Token number on NSDL.

The revised TDS returns have to be prepared by using the most recent consolidated TDS statement. The certificate can be downloaded from the TRACES website.

Claiming TDS return

TDS Credit can be claimed by the deductor. To claim the credit of the TDS, the deductee must mention the details of the TDS in his returns of income. The deductee is required to take due care to quote the correct TDS certificate number and the TDS details while filing the returns of income.

In case of incorrect details that are provided by the deductee, there will be a discrepancy with the tax credit for processing the TDS returns.

Why Choose JRS for Your TDS Return Filing?

With JRS, you get expert guidance throughout the TDS return filing process. Our experienced professionals help you navigate complex tax regulations on how to file TDS return effortlessly. We ensure compliance by staying updated on the latest tax laws, helping you avoid penalties and legal issues. Our streamlined service simplifies TDS calculations, form submissions, and documentation management. Whether you're an individual taxpayer or a business, our comprehensive support ensures a stress-free filing experience.