What is TDS , when TDS is to be deducted

TDS stands for tax deducted at source.  TDS system, persons responsible for making payment for specified services such as commission, brokerage, professional consultancy etc. Are required to deduct a fixed percentage from the amount .

Such deducted amount ( which is called TDS ) have to be deposited to the government by the Deductor (person who deducting tax ) on behalf of deductee (person who is providing services) which deductee can claim as income Tax paid at the time of filling his income tax return.

For example ,ABC pvt.ltd. Have to make payment of Rs. 1 lakh to Mr. XYZ for professional fee . TDS  rate specified on professional fees is 10% .

TDS required to be deducted = 10% on Rs 100000 = Rs 10000

Net payment to Mr. XYZ = Gross Amount – TDS Deducted = Rs 100000 – Rs 10000 = Rs 90000

TDS to be deposited to government by ABC Pvt Ltd  = Rs 10000

TDS is also deductible on salary. Calculation of tax deductible is different in case of salary as TDS is not deductible as fixed percentage but as per specified method under section 192.

Person who are required to deduct TDS.

Government has notified below persons who is require to deduct TDS for the specified service:-

1. Individual and HUF

An individual and HUF is required to deduct TDS on the specified services. If they are engaged in:-

• Business having turnover of Rs 1 crore or more during the previous financial years or
• Profession having receipts of Rs 50 lakhs or more during the previous financial years and they are required to get books of accounts audited under section 44AB.

 

• Any others person apart from individual and HUF such as a Partnership Firm, LLP, Private Limited company, Co-operative society etc.

• In case of purchase of immovable property where the  consideration paid for the property is more than Rs 50 lakh (Section 1914A) .

 

(B ) When the rent paid for land or building exceeding Rs 50000 per month (Section 194B) only those individual or HUF are covered which are not required to deduct TDS as per above mentioned point (a) If a person is covered as per point (b) then such person is required to deduct TDS under section 1941 not under section 194B.

TAN – Meaning , requirement

 

Tax Deduction and collection account number (TAN) is a unique 10 digits alpha numeric number allotted to deductor /collector of TDS .  it is issued to identify each deductor .

 

Every person who is required to deduct TDS shall apply for TAN .TAN  is required to be quoted on all TDS  payment challans, TDS certificate & TDS  returns . you can submit a application in form 49B  in any NSDL office or you can also apply online TAN from NSDL website . penalty – there is penalty of Rs. 10000 on failure to apply for TAN or failure in quoting TAN in payment challans, TDS certificate & TDS returns ..

Time limits for getting TAN no specific time limit is provided for getting TAN how ever  you should apply for TAN once you become liable  to deduct TDS of any person.because TDS payment and return filling can not be done with out TAN .

Notes :-

• No separate TAN is required to obtain for the purpose of TCS .
• You are required to apply for TAN only if you have made any payment above the threshold limit and TDS is required to be deducted .

 

When TDS is to be deducted

 

The incidence of deducting TDS  depends  on the nature of payment .

TDS  is required to be deducted at the time .of the actual payment  or account credited only ,not on due or accrual basis in following cases

 

• Salary
• Payment of accumulated balance  of employees provident fund .
• Dividends .
• Winning from lottery or crosswords puzzle.
• Winning from horse race.
• Payment in respect of life insurance policy to policy holder.
• Payment in respect of deposits under national saving scheme .
• Payment on account of repurchase of units by mutual funds or unit trust of India.
• Payment of compensation on compulsory acquisition of certain immovable property.

At the time of credit of such income to the account of the payee or at the time of actual payment ,whichever is earlier in cases of all other payment (such as commission,profession fee, consultancy etc) except the payment mentioned in above point .

 

Nature of payments, threshold  limits and rates .

 

Which TDS is required to be deducted if the amount exceeds the threshold limit along with the applicable rates of TDS  for commonly used payments .

 

Calculation of TDS amount

 

TDS is required to be deducted on the gross amount if such amount exceeds  the threshold limit specified for that particular nature of transactions.

 

Payment and return filing

 

Person deducting TDS have to deposit the amount of TDS  to the Government and have to file quarterly returns  with the details of the TDS deducted.

 

TDS certificate .

 

TDS certificate shows the amount of tax which has been deposited by deductor . deductor are required to issue TDS certificate to the deducted within specified time limit given in the below table.Such certificate have to be generated online using traces websites only Deductors are required to deposits tax and files TDS return to the government before he can request for certificates from traces.

 

UTILITY  FOR DEDUCTEE TO CHECK THE AMOUNT WHICH HAS BEEN DEDUCTED AND CREDITED TO HIS ACCOUNT

 

You can easily check the amount of TDS which has been deducted from your receipts/incomes online.

 

Request for non deduction or lower deduction

 

You can ask the tax deductor to not deduct tax if your income is below the basic exemptions limit.

 

Applying for refund

 

There is only a single refund income tax refund which is excess of tax already paid by way of TDS , TCS, Advanced tax or Self assessment tax less tax on your total income. You can get the refund of additional tax only after filling your income tax return for that particular years.

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