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All about TDS (Tax Deducted at Source)

The TDS or Tax Deducted at Source was introduced with the motive to collect tax from the direct income source. In this article let us see the provisions regarding the TDS under the Income Tax Act in detail.


What is TDS?

TDS (Tax Deducted at Source) is a tax that is reduced directly from the income of an individual. For the purpose of TDS, income includes the money received from the commission, rent, professional fees, interest, salary etc.

Generally, the TDS is deducted from the account of the person receiving income. Moreover, the government with the help of deductor makes sure that the tax is deducted directly from the payment itself. Let us understand this with an example:

XYZ Pvt. Ltd pays the monthly rent of 1,00,000 INR to the property owner. (Assuming TDS rate to be 10%)

Then in such a case, XYZ Pvt. Ltd will deduct 10,000 INR as TDS and will pay the remaining balance of 90.000 INR to the property owner.

Hence the property owner in the above example will receive the net income of 90,000 INR after tax deduction at source. Howsoever, the property owner will mention 1,00,000 INR as his gross income and have to take credit of the amount deducted that is 10,000 INR by XYZ Pvt. Ltd. at the time of calculating his/her final tax liability.

When and who should deduct TDS?

As per TDS concept, a person (deductor) who has to make a specified payment to the other person (deductee) shall deduct TDS and the same into the Central Government account.

In simple words, any person who is carrying out any payment that is specified under the Income Tax Act shall deduct Tax at the time of making payment for such specified payment

However, TDS shall be not deducted in case if the payment is made by the one whose books of accounts are not audited such as HUF or individual.

But if the HUF or individual is making a rent payment exceeding 50,000 INR monthly then TDS shall be deducted at the rate of 5%. In addition, this HUF or Individuals have to obtain TAN (Tax deduction and collection Account Number).

Due Date for TDS remittance into the accounts of Central Government

The due date for depositing the TDS into the account of the Government is the 7th of every subsequent month.

For example:

If the TDS is deducted in the May month that the payment shall be remitted into the account of the Central Government by the 7th of the subsequent month i.e., 7TH of June. Howsoever, in the case of the March month, the amount shall be deposited till 30th April.

Types of TDS Returns

It is compulsory for every person to file TDS who has deducted it. Every Tax deducted at Source return has different filing date depending upon the source. While filing TDS Return the person has to furnish various details such as TAN, type of transaction, deductee’s PAN, TDS amount deducted. In addition to this, there are different types of TDS Return depending transaction let us understand this with the below table:

Form No. Types of Transactions The due date for filing TDS Returns
Form 24Q Salary Quarter 1: 31st July
Quarter 2: 31st October
Quarter 3: 31st January
Quarter 4: 31st May
Form 26Q Any payment except salaries Quarter 1: 31st July
Quarter 2: 31st October
Quarter 3: 31st January
Quarter 4: 31st May
Form 26QB Sale of property The due date for filing this return is 30 days from the month end in which TDS is deducted
Form 26QC Rent In this case, the due date for filing TDS is 30 days from the month end in which TDS is deducted

What is a TDS certificate?

The deductee from whose income tax has been deducted at source would be entitled to TDS certificate that shall be issued by the deductor. There are different types of TDS certificates such as Form 16, Form 16A, Form 16 B and Form 16C.

For instance, Form 16/16A is the TDS certificate that is issued by the employer at the time when he deducts the tax on behalf of the employees.

Let us understand the applicability of different TDS form using the below table:

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We at Masters India can take care of all your TDS worries as we have a team of professionals for whom filing the TDS Return is an everyday task. This, in turn, ensures that you concentrate on your business activities worry-free.