What is TDS & How it is Calculated? How to File TDS Return Online



What is TDS?

TDS stands for ‘Tax Deducted at Source’. The concept of TDS has been brought in order to collect tax at the very source of income. It is a certain way of collecting income tax in India according to the provisions of the Income Tax Act of 1961. TDS is currently under the management of the Central Board for Direct Taxes (CBDT).

TDS is the amount of income tax reduced from the payment of rent, commission, fees, salary, etc. by the people making such payments. A person who receives income is under the liability of paying income tax. The Government makes this easier by ensuring that the income tax is deducted in advance from all the payments made by you. The recipient of the income receives the amount left after the deduction of TDS.

Who is deductor and deductee?

A deductor is the person who deducts the tax and the deductee is the person from whom the tax is being deducted.

How is TDS deducted?

Your employer deducts TDS at the applicable income tax slab rates. Banks also deduct TDS at the rate of 10% or at 20% if they do not have your PAN information. Almost every payment has its particular rate of TDS set in the income tax act and the TDS is deducted by the payer on the basis of these.

How is TDS calculated?

Employers can calculate TDS by the following method:

Step 1. You need to calculate your gross monthly income.

Step 2. Calculate your exemptions under Section 10 of the Income Tax Act (applicable on allowances such as medical, travel, HRA). Calculate the amount left after deducting your exemptions from the gross monthly income.

Step 3. Multiply the figure obtained in step 2, by 12. This is the yearly taxable income from your salary.

Step 4. If you have any other income source like income from house rent or have incurred losses from paying loan interests and add/subtract the amount obtained from the figure above.

Step 5. Calculate your investments for the year and deducting the amount from the gross income calculated above.

Step 6. Subtract the maximum allowable income tax exemptions on your salary which will be according to the income tax slab 2019-20.

Is GST applicable on TDS?

According to the Central GST (CGST) Act, the notified entities need to collect TDS at 1% on payments to goods or services suppliers in excess of INR 2.5 lakh. In addition to that, states will levy 1% TDS under State GST (SGST) law.

Who can deduct TDS under GST?

The following group of people need to deduct TDS on GST from the payment being if the contact value is more than INR 2.5 lakhs:

  • Any department or establishment of the Central or State Government.
  • Local Authority
  • Government Agencies
  • Categories or People notified by the Government:
  1. Anybody or authority or board with 51% or more participation by way of equity or control set up by an Act of Parliament or State Legislature or established by any Govt.
  2. Society being established by the Central or state Govt. or any Local Authority under the Society Regulations Act passed in 1860.

 Incomes on which TDS is not deducted

There are some particular types of income on which TDS is not collected, which are as follows:

  • Interest to be paid to the central or the state financial organizations.
  • Institutions notified under no-TDS.
  • Interest being earned on KVP, NSC or Indira Vikas Patra schemes.
  • Interest you earn on NRE accounts.
  • Interest you earn from your Recurring Deposits or Savings Account opened in the co-operative societies.
  • Amount received from LIC, UTI and other insurance companies.

TDS Return

If you wish to maintain a healthy financial record then you must file a TDS Return and in order to do that, you have to visit the Income Tax website, www.incometaxindia.gov.in. You have to sign in using your existing credential or you have to register.

What is Challan TDS Payment?

A challan, namely the ITNS 281, is meant for the payment of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source). Alternatively, you can refer the challan ITNS 281 to any bill receipt, invoice or an official summon.

TDS is managed directly by the Central Board of Indirect Taxes with the online version being introduced in 2004, hoping to minimize human intervention and thereby, reducing errors.

 How to make online TDS payment?

You have to visit the NSDL (National Securities Depository Limited) website to make the online payment.

Step 1. Log on to NSDL website for e-payment of taxes.

Step 2. Select the option ‘CHALLAN NO./ITNS 281’ under TDS/TCS section. You will be directed to the e-payment page.

Step 3. You have to fill in the relevant details in the page.

Step 4. After submission of this page, if your TAN is valid, then the full name of the taxpayer will be displayed on the screen.

Step 5. Once the data entered is confirmed, you shall be directed to the net banking website of your chose bank. Make your payment here.

Step 6. After successful payment, a TDS challan counterfoil will be displayed containing the CIN, payment details and the bank name (via which the e-payment has been done). The counterfoil is the proof for the payment. Then, you will have to file your TDS return.

Offline Process:

The taxpayer can make the payment by submitting a challan in person and visiting a bank. This payment can be made in cash or via cheque. After the submission of the challan, bank will issue a counterfoil/ receipt which will be back stamped as a proof of submission.

How to check the status of Challan ITNS 281?

All the taxpayers who wish to check the status of their Challan online can do so by visiting the nsdl portal. There will be two modes to check the status:

  1. CIN based
  2. TAN based

In order to view the status via CIN based mode, you need to enter the following details:

  1. BSR code
  2. Challan date
  3. Challan serial number
  4. Amount

If you want to view the status through TAN based mode, then enter the following details:

  1. TAN
  2. Challan date

 

Is TDS and Income Tax the same?

The only similarity between the two is that they fall under taxes collected by the government. They have some considerable differences which are as follows:

  • Income tax is to be computed for a particular financial year and is to be paid on the net annual income whereas TDS is deducted at the source itself, in a particular financial year.
  • All individuals and corporates have to pay income tax on their income earned in the previous year while TDS is a tax deducted at the source of income presuming that the person has taxable income.
  • The payer deducts the tax and remits it to the government on behalf of the payee while Income Tax is paid by the tax payer. If a tax payer’s income is less than the taxable limit but TDS has already been deducted then he can claim it back in his tax returns.

 

What is Professional Tax?

This is a type of tax levied on all earning professionals by state governments. It does not stay restricted just to the salaried person but to anyone who earns and makes a living through it via any medium. The amount is usually 200 but that is not universal. This comes under the discretion of the state government and differs for every state.

What is a TDS certificate?

As pee the section 203 of the Income Tax Act, the deductor needs to provide a TDS certificate to the deductee/payee. This with certain other documents works as the proof of tax deduction. This certificate can also be obtained from banks which make deductions in pension payments.

The following table will help in clarifying the procedure of TDS payments:

Form To be issued for TDS on: When Due date for TDS payment
Form 16 Salary payment Yearly 31st May
Form 16A Non-salary payments Quarterly 15 days from the date of filing TDS return
Form 16B Sale of property Every transaction 15 days from the date of filing TDS return
Form 16C Rent Every transaction 15 days from the date of filing TDS  return

 

 TDS rate chart for the FY 2019-20 and its various types

Nature of Payment % of TDS
Section 192 – Payment of salary Normal slab rate(as per income tax rates)
Section 192A – Payment of accrued PF balance, taxable in the hands of the employee 10%
Section 193 – Interest on securities 10%
Section 194 – Dividend excluding those mentioned in section 115-O 10%
Section 194A – Income from interest other than “interest on securities” 10%
Section-194B & 194BB – Income received from winning lotteries, crosswords, games, and horse races. 30%
Section 194C – Payment to contractors / sub-contractors 1% for payments made to contractors/sub-contractors and 2% for others
Section 194D – Insurance commission 5%
Section 194DA – Payment for the life insurance policy 1%
Section 194EE – Payment for depositing money under the National Savings Scheme (NSC) 1%
Section 194F – For repurchase of units by Mutual Fund or Unit Trust of India 2%
Section 194G & 194H – Commission on the sale of lottery tickets or brokerage 5%
Section 194I – Rent Plant and machinery = 2%, Land / furniture / fitting / furniture = 10%
Section 194IA – Transfer of immovable property except agricultural land 1%
Section 194IB – On payment of rent not holding the liability to tax audit 5%
Section 194IC – On financial consideration under the Joint Development Agreements 1%
Section 194J – Any fee paid by way of professional or technical services, as royalty, remuneration/fee/commission to a director, not carrying out any activity in relation to any business, or not sharing any know-how, patent, copyright, etc. 1%
Section 194LA – Payment due to acquisition of a certain immovable property 1%
Section 194LBA (1) – Business trust in order to deduct tax in the process of distribution, any interest received or receivable by it, from an SPV or any income received, from renting or leasing or letting out any real estate asset directly owned by it, to its unit-holders. 1%
Section 194LBB – An investment fund paying an income to a unit-holder (other than income which is exempt under Section 10(23FBB)) 1%
Section 194LBC – Income for the investment made in a securitization trust

 

25% for individual or HUF. 30% for any other person

 How to get TDS certificate online from TRACES?

Step 1. Visit the link: https://incometaxindiaefiling.gov.in/.

Step 2. Register on the website if you are a first time user else sign in.

Step 3. Click on “My Account”. You will see a drop down menu. Click on “View Form 26AS (Tax Credit)”. Click on “Confirm”.

Step 4. Check the small box in order to agree to the terms of usage of Form 16/ 16A and click on “Proceed”.

Step 5. Now, click on “View Tax Credit (Form 26AS)” for viewing all the returns that still require verification.

Step 6. Under the drop down menu of “Assessment Year”, choose the year for which you wish to view the Form 26AS and then select the file type in the drop down menu of “View As” and choose “View/Download”.

Step 7. Click on “SUBMIT”.

 Penalty for Late Filing of TDS Return

If you fail to file TDS return within the due time, then you are bound to pay a fine of INR 200 per day until the day when the TDS return is filed. Besides, the fee is applicable for each day until your fine amount becomes equal to your total liable TDS amount.

If you are a late depositor of TDS, then the interest is payable under the section 201(1A) at a rate of 1.5% per month from the date when TDS was deducted to the actual date of deposit. In addition to that, if the taxpayer exceeds one year limit to file their TDS return or gives incorrect details of PAN, TDS amount, then they will be required to pay a penalty of at least INR 10,000 to INR 1 lakh under the section 271H.

What are the Advantages of TDS?

TDS might be thought of as another troublesome issue. However, in reality, it is an efficient measure and helpful for all the involved parties, namely government, employer and employee.

Following are some of the benefits of TDS are:

  • Since the tax is collected at the source, scope of tax evasion gets reduced.
  • This is not only one of the best but also one of the steadiest source of income for our government.
  • Since, deduction of tax happens at the source itself, so the tax collection base widens.
  • The entire process is very convenient for the tax payers as well due to the auto deduction of the tax.

 

Some FAQs

 1. What is TDS refund?

If a person is subjected to excess TDS deductions, then the deductor can claim for the refund of this excess amount. The difference between tax deducted and the actual payment made by the deductor, whichever higher, is accepted as the excess amount. This amount shall be refunded only after adjusting against any tax liabilities under the Direct Tax Acts.

2. How to apply for TDS Refund?

Visit the website www.incometaxindiaefiling.gov.in and login or sign up. Now, you need to download the relevant form for the purpose of refund of income tax. Fill this form duly and submit it. You can then, periodically, check your refund status from the same link.

3. What is form 26AS?

The form 26AS provides you with a detailed account of each and every tax deductions made on your PAN. This is a consolidated tax statement and can be easily accessed from the income tax website by everyone who pays tax and uses their PAN. You could refer to your form 26AS to get to know the details of your income on which taxes have been deducted and also those taxes being paid by the deductor.

4. Who is required to obtain TAN?

TAN is an abbreviation for Tax Deduction Account Number. It is a 10 digit alphanumeric number and is needed to be obtained by anyone who hold the responsibility of collecting or deducting taxes.

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