TDS is one of the modes of collection of taxes, by which a certain percentage of taxable amount is deducted by a person at the time of making/crediting certain specific nature of payment to the other person. This deducted amount is then remitted to the Government account. It is also known as [su_highlight]“pay as you earn”[/su_highlight] scheme or [su_highlight]Withholding Tax.[/su_highlight]
TDS scheme facilitates the sharing of responsibility of tax collection between the deductor and the tax administration. It ensures regular inflow of cash resources to the Government. It also acts as a powerful instrument in preventing tax evasion and expanding tax net.
From the above definition, it is important to know what is that “certain percentage” of “taxable amount”, who is the “deductor” and “deductee” and what is “the nature of payment made” to attract liability of TDS as per Sec. 206 of I.T. Act.
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[su_spoiler title=”Who is liable to deduct TDS? ” style=”fancy”]
[su_spoiler title=”When is TDS to be deducted? ” style=”fancy”]
For Salary payments – TDS has to be deducted at the time of such payment to the employee.
For all other payments – TDS is deductible at the time of credit to the recipient account in the books of the deductor or at the time of payment, whichever is earlier.
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Tax is deductible on the entire bill amount, including taxes that may be so included in the invoice as presented by the payee.
[su_spoiler title=”Once TDS is deducted, it is to be deposited in the Government treasury. The due dates of TDS Deposit are:” style=”fancy”]
[su_spoiler title=”How is TDS paid to Govt. treasury?” style=”fancy”]
It is mandatory for all corporate assessees and those assessees covered u/s 44AB to make TDS deposit online to Government treasury.
Assessees not covered in the above 2 categories have the option of making payment online through https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp or depositing TDS amount with prescribed Banks.
[su_spoiler title=”Due dates for filing of TDS returns” style=”fancy”]
[su_spoiler title=”What forms are used for filing TDS returns?” style=”fancy”]
- Salary deductions are filed in form 24Q
- Non Salary deductions are filed in form 26Q
- Payments to non residents are filed in form 27Q
- TCS are filed in form 27EQ
- Control Sheet for electronic TDS/TCS in form 27A/27B
[su_spoiler title=”Can TDS returns be efiled?” style=”fancy”]
The Income Tax department has now notified ‘Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003’. It is applicable to all deductors furnishing their TDS return in electronic form. As per this scheme,
- It is mandatory for corporate deductors to furnish their TDS returns in electronic form (e-TDS return) with effect from June 1, 2003.
- For government deductors it is mandatory to furnish their TDS returns in electronic form (e-TDS return) from financial year 2004-2005 onwards.
- Deductors (other than government and corporates’ ) may file TDS return in electronic or physical form.
Deductors furnishing TDS returns in electronic form (e-TDS) have to furnish Form 27A. Form 27A is a control chart to be furnished in physical form along with CD/ Floppy containing the e-TDS returns. Form No 27A is required to be furnished separately for each TDS return.
Form 27A is a summary of e-TDS returns which contains control totals of ‘Amount paid‘ and ‘Income tax deducted at source’. The control totals mentioned on Form 27A should match with the corresponding control totals in e-TDS returns.
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[su_spoiler title=”How are TDS certificates obtained?” style=”fancy”]
Procedure for Issuance: It is mandatory for all type of deductors to issue quarterly form 16A (Non Salary TDS certificate) only after downloading the same from the TDSCPC (TRACES) website.i.e. www.tdscpc.gov.in.
Authentication of Form 16A: Form 16A downloaded from TDSCPC (TRACES) can be signed manually or can be authenticated through digital signature only.
The new Form 16 has been notified vide Notification 11/2013 dated 19.02.2013. The new Form 16 has two distinct parts: Part A : containing details of tax deduction and deposit; and Part B : containing details of salary and total income
Procedure for Issuance
- Vide Circular 04/2013,adeductor is required to issue
- Part A of Form 16 by downloading the same from TRACES web site
- Part B of Form 16 is to be issued by deductor manually
- Form 16 generated from TRACES will contain unique TDS Certificate Number
- Form 16 by Govt. deductors, who make TDS payment by book entry , is also to be issued by generating and downloading from TRACES
Authentication of Form 16: Form 16 must be signed manually or by using digital signature
[su_heading size=”15″]Other Important Points to Note[/su_heading]
1. TDS at higher rate ie., 20% has to be deducted if the deductee does not provide PAN to the deductor u/s 206AA.
- No TDS on Goods Transport :No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages on furnishing of his Permanent Account Number, to the person paying or crediting such sum.
Surcharge on tax is not deductible/collectible at source in case of resident individual/ HUF /Firm/ AOP / BOI/Domestic Company in respect of payment of income other than salary.
Surcharge on TDS is applicable on payment made to non resident other than company ,if payment is in excess of one crore.(10 %)
Surcharge on TDS on salary is applicable if taxable salary is more than one crore @ 10 %
6. No Cess on payment made to resident: Education Cess is not deductible/collectible at source in case of resident Individual/HUF/Firm/ AOP/ BOI/ Domestic Company in respect of payment of income other than salary.Education Cess @ 2% plus secondary & Higher Education Cess @ 1% is deductible at source in case of non-residents and foreign company.
- TDS by Individual and HUF (Non Audit) case not deductible :An Individual or a Hindu Undivided Family whose total sales, gross receipts or turnover from business or profession carried on by him does not exceeds the monetary limits(Rs.100,00,000 in case of business & Rs.25,00,000 in case of profession) under Sec.44AB during the immediately preceding financial year shall not be liable to deduct tax u/s.194A,194C, 194H, 194I & 194J.
[su_highlight]So no tax is deductible by HUF/Individual in first year of operations of business even if sales/ fees is more than Rs. 100/25 Lakh respectively.