Tax Deducted at Source

Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act of 1961. Any payment covered under these provisions shall be paid after deducting prescribed percentage. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service . It has a great importance while conducting tax audits. Assessee is also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to government during the Quarter to which it relates.

Objectives of Tax Deducted at Source

  • To enable the salaried people to pay the tax as they earn every month. This helps the salaried persons in paying the tax in easy instalments and avoids the burden of a lump sum payment.
  • To collect the tax at the time of payment of income to various assessees such as contractors, professionals etc.
  • Government requires funds throughout the year. Hence, advance tax and tax deducted at source help the government to get funds throughout the year and run the government smoothly.

TDS on Dividends

Section 302of Income Tax Act, 1961 by law notes.[1]

  • TDS provisions under this section are attracted only in respect of deemed dividend u/s 2(22)(e), If such dividend exceeds 2500 in year.
  • Rate of deduction of tax in respect of such dividend is 10%.
  • Provisions will not apply to dividend receivable by SADHA, GIC(General Insurance Corporation), its subsidiaries or any other insurer provided shares are owned by it or in which it has full beneficial interest :] [Provided also that no such deduction shall be made in respect of any dividends referred to in section 115-O.]

TDS on immovable property

1. Section 194IA of Income Tax Act,1961.[2][3]

  • This provision is applicable in respect of transactions effected on or after June 1, 2013
  • It seeks deduction of tax at source on transfer of certain immovable property other than agricultural land to a resident transferor.
  • Any person being a transferee who is liable to Pay to a resident by way of consideration for transfer of any immovable property exceeding 50 Lakhs shall at the time of credit of such sum to the account of the transferor or at the time of payment in whatever manner, has to deduct tax at source at 1% only

This TDS on property is required to be deposited in 30 days from the end of the month in which deduction is made for all payments to be made on or after 01st June 2016. [4]


2. Section 194IB of Income Tax Act,1961

  • This provision is applicable in respect of transactions effected on or after June 1, 2017
  • It seeks deduction of tax at source on payment of rent exceeding Rs. 50,000 in a month by an individual or HUF to a resident landlord.
  • TDS shall be deducted @ 5% at the time of credit of rent for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case

may be.


3. Section 194C of Income Tax Act,1961 [5]

  • Tax need to be deducted 1% (for individual, HUF)/ 2% (for others) of payment where payment is made for carrying out any work (including supply of labour for carrying out any work and advertisements) by a contractor/sub-contractor.
  • Such work must be in pursuance of a contract (including sub contract) between the contractor and payer.
  • TDS is to be made at the time of credit to the account of contractor or at the time of payment in cash or by cheque or draft or by any other mode whichever is earlier.
  • No TDS shall be deducted if the single time payment to contractor does not exceed RS. 35000 or Rs. 1,00,000 in aggregate during the year.

TDS Certificates

A deductor is required to issue a TDS certificate called form 16 for salaried employees and form 16A for non-salaried employees within a specified time.[6]

Deductor has to issue TDS Certificates within two months of the next financial year

Impact of non-compliance to TDS

Income Tax Act, 1962[7]

  • Disallowance u/s. 40(a) (ia) of Income Tax Act, 1962 (Act)
  • Raising of demand u/s. 201(1) of the Act
  • Charging of Interest u/s (1A) of the Act
  • Levying penalty u/s. 271C of the Act

TDS rate chart for FY 2013-14

TDS rate chart for FY 2013-14 & AY 2014-2015

TDS rate chart for FY 2014-15

TDS rate chart for FY 2014-15 & AY 2015-2016

TDS rate chart for FY 2015-16

TDS rate chart for FY 2015-16 & AY 2016-2017

TDS rate chart for FY 2016-17

TDS rate chart for FY 2016-17 & AY 2017-2018

TDS rate chart for FY 2017-18

TDS rate chart for FY 2017-18 & AY 2018-2019

References

How to view your Form 26AS?

Know your PAN Structure Meaning of PAN digits (Income Tax India)

Types of Corrections in TDS Returns

Tips to avoid Defaults in TDS Returns

Calculation of Late Deduction interest

Points to remember before filing the quarterly TDS statement

TDS on the interest income accrued to the minor is required to be deducted against PAN of the minor child– incase both the parents of minor are dead

  1. ↑ "TDS on Dividends". LawNotes.
  2. ↑ "TDS on Immovable Property". TopCAfirms.
  3. ↑ https://www.hamaratax.com/blog/tds-on-property-certain-confusions-solutions/
  4. ↑ "Time to Deposit TDS on Property". www.taxheal.com. Retrieved 3 May 2016.
  5. ↑ "TDS on Contractor". Top CA firms. Retrieved 28 December 2013.
  6. ↑ TDS Certificates
  7. ↑ "Non-compliance with TDS provisions". TopCAfirms. Retrieved 4 December 2013.
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