TDS

What is TDS?

TDS (Tax Deduction at Source) is one of the modes of collecting Income tax from all earning individuals who are liable to pay direct taxes. Such collection of tax is effected at the source when income arises or accrues. Hence where any specified type of income arises or accrues to any one, the Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of Income tax and pay only the balance amount to the recipient. The tax so deducted at source by the payer, has to be deposited in the Government treasury to the credit of Central Govt. within the specified time. The tax deducted from the income of the recipient is deemed to be payment of Income tax by the recipient at the time of his assessment.

Income from several sources is subjected to tax deduction at source, one of which is salary. The annual budget of India stipulates the tax slabs that serve to identify the income groups that are supposed to pay taxes in a year. However, these income groups are entitled to receive tax deductions in India on fulfilling requisite conditions defined under many sections. Amount invested in various funds, amount donated to relief bonds or charity, loan amounts etc are exempted from tax and are called Tax Deductions.

A tax deduction represents an expense incurred by a taxpayer. They are variable amounts that can be subtracted, or deducted, from assessee’s gross income. It is subtracted from gross income when the taxpayer computes his or her income taxes. As a result, the tax deduction will lower overall taxable income and thus lower the amount of tax paid.

The exact amount of tax savings is dependent on the tax rate and can be complicated to determine. Nothing is as tangled and knotty as the TDS provisions. The funds, returns, limits, sections, rates and rules make TDS much tedious to sort out.

When should TDS be deducted and by whom?

Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making payment. But no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited. If you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit , you do not have to pay any tax. And therefore no TDS should be deducted on your income.

How and When to file TDS returns?

Filing Tax Deducted at Source returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. Also, different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows:

Form 26QTDS on all payments except salaries

Q1 – 31st July

Q2 – 31st October

Q3 – 31st January

Q4 – 31st May

Form No	Transactions reported in the return	Due date
Form 24Q	TDS on Salary	Q1 – 31st July Q2 – 31st October Q3 – 31st January Q4 – 31st May
Form 27Q	TDS on all payments made to non-residents except salaries	Q1 – 31st July Q2 – 31st October Q3 – 31st January Q4 – 31st May
Form 26QB	TDS on sale of property	30 days from the end of the month in which TDS is deducted
Form 26QC	TDS on rent	30 days from the end of the month in which TDS is deducted

TDS certificates

Form 16, Form 16A, Form 16 B and Form 16 C are all TDS certificates. TDS certificates have to be issued by a person deducting TDS to the assessee from whose income TDS was deducted while making payment.

Form 26QTDS on all payments except salaries

Form	Certificate of	Frequency	Due date
Form 16	TDS on salary payment	Yearly	31st May
Form 16 A	TDS on non-salary payments	Quarterly	15 days from due date of filing return
Form 16 B	TDS on sale of property	Every transaction	15 days from due date of filing return
Form 16 C	TDS on rent	Every transaction	15 days from due date of filing return