TDS stands for ‘Tax Deducted at Source‘. It’s a method of collecting Income Tax in India as per the provisions of the Income Tax Act of 1961 and is managed by the Central Board for Direct Taxes (CBDT). It’s essentially a tool used by the government to minimise tax evasion by taxing the income (partially or wholly), at the very point it’s generated. It’s not just applicable to your salary but any kind of payment you make – rent, commission, professional fees, salary, interest etc.
Who is deductor and deductee?
A deductor here is the person deducting the tax, while the deductee is the person from whom tax is deducted. The recipient from whose payment, income tax has been deducted at source, gets the credit of the amount, deducted in his personal assessment, on the basis of a certain TDS certificate issued by the deductor.
What are the Advantages of TDS?
You might think of TDS as trouble for you, but in reality, it’s an effective measure, helpful for all parties involved – the government, the employer and the employee.
The following are some of the ways in which it is beneficial.
- Given the fact that the tax is collected at source, the scope of tax evasion is reduced.
- Goes without saying that it’s not only one of the best but also the steadiest source of income for the government.
- The tax collection base gets widened as the deduction happens at the source itself.
- It’s also convenient for the tax payers because of its auto deduction.
Is TDS and income tax the same?
The only similarity that the two carry is that they both are taxes, collected by the government. Apart from that, the two differ in more than one respects.
- Income tax is computed for a particular financial year and is paid on the overall annual income while TDS is deducted at source, in a particular year, which is a partial contribution to his total income.
- Income tax is levied on all individuals or corporates, on the income earned during the previous year whereas TDS is tax deducted at the source of income, assuming that you have taxable income.
- In TDS, the tax is deducted and remitted to the government, by the payer on behalf of the payee whereas Income tax is paid by the taxpayer.
Also, if a taxpayer’s income is below the taxable limit but TDS has been deducted, then he can claim for the same in his tax returns.
What is Professional Tax?
Professional tax is a small deduction levied by state governments on all earning professionals. It’s not limited to only salaried professionals but anyone who earns a living through any medium. Although the amount, usually, is Rs 200, but it’s not universal. The amount of professional tax deducted from you comes under the discretion of state governments and as such, differ for every state.
What is a TDS certificate?
Per Section 203 of the Income Tax Act, the deductor is required to provide a TDS certificate to the deductee/payee. This serves as the proof of tax deduction along with certain other particulars. This certificate is also offered by banks, making deductions in pension payments.
The following table will clarify how the TDS payments are made.
|Form||What is it for||When||TDS payment due date|
|Form 16||TDS on salary payment||Yearly||31st May|
|Form 16 A||TDS on non-salary payments||Quarterly||15 days from the date of filing return|
|Form 16 B||TDS on sale of property||Every transaction||15 days from the date of filing return|
|Form 16 C||TDS on rent||Every transaction||15 days from the date of filing return|
TDS rate chart (For FY 2018-19) 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 deposit under 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||For plant and machinery = 2% For land / furniture / fitting / furniture = 10%|
|Section 194IA - Transfer of immovable property apart from agricultural land||1%|
|Section 194IB – On payment of rent not liable to tax audit||5%|
|Section 194IC – On monetary consideration under 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 on acquisition of certain immovable property||1%|
|Section 194LBA (1) - Business trust to deduct tax while distributing, 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 owned directly by it, to its unitholders.||1%|
|Section 194LBB – An investment fund paying an income to a unitholder (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 Calculate TDS on your Salary?
Steps to calculate TDS on your salary
Step 1 – Firstly, you’ll be required to calculate your gross monthly income – a sum of basic income, allowances and perquisites.
Step 2 – Then, calculate your exemptions under Section 10 of the Income Tax Act (applicable on allowances such as medical, HRA, travel). Subtract your exemptions from the gross monthly income (step 1).
Step 3 – Multiply the figure you got in step 2, by 12 (TDS is calculated on yearly income). This’ll be your yearly taxable income from salary.
Step 4 – In case you have any other income source, like income from house rent or have incurred losses from paying housing loan interests, add/subtract this amount from the figure you got above.
Step 5 – Next step would be calculating your investments for the year (under Chapter VI-A of ITA), and deducting this from the gross income calculated above.
Step 6 – Now, subtract the maximum allowable income tax exemptions on your salary. These will be according to the income tax slab 2018-19.
Note that there’s a different tax slab for senior citizens, with higher exemptions.
You can make online payment by visiting the NSDL (National Securities Depository Limited) website.
Step 1: Log on to NSDL’s website for e-payment of your taxes.
Step 2: Select ‘CHALLAN NO./ITNS 281’ under TDS/TCS section. You will be directed to the e-payment page.
Step 3: Following are the details you’ll be required to fill in, in the below page,
- Under ‘Tax Applicable’ click on ‘Company Deductees’, if your TDS deduction was while making payment to a company. In any other case click on ‘Non-Compay Deductees’.
- Fill in the TAN and Assessment Year for which the payment is done.
- Enter the ‘Pin Code’ and choose ‘State’ from the drop down.
- Select whether the payment is made for TDS deducted and payable by you or on regular assessment.
- Select the ‘Nature of Payment’ and ‘Mode of Payment’ from the drop-down.
- Click on ‘Submit’.
Step 4: After submission, if your TAN is valid, the full name of the taxpayer will be displayed on the screen.
Step 5: Once you confirm the data entered, you’ll be directed to the net banking website of your bank. Make the payment here by using your user id and password.
Step 6: Upon successful payment, a TDS challan counterfoil will be displayed containing CIN, payment details and bank name (through which e-payment has been made). The counterfoil is your proof for the payment made. After payment, you’ll have to file your TDS return.
How to get TDS certificate online from TRACES website?
TRACES (TDS Reconciliation Analysis and Correction Enabling System) website comes under the purview of the income tax department and facilitates the easy filing of TDS correction statements by deductors. This step by step procedure will help you download and view your Tax Credit Statement from the TRACES website:
Step 1: Go to the link – https://incometaxindiaefiling.gov.in/.
Step 2: You’ll have to register on the website if you’re a first-time user. Otherwise, enter your “User ID” and “Password” and click on “Login”.
Step 3: Click on “My Account”. A drop-down menu will appear where you’ve to select “View Form 26AS (Tax Credit)”. Click on “Confirm”.
Step 4: Check the small box to agree to the terms of usage of Form 16/Form 16A and click “Proceed”.
Step 5: Next, click on “View Tax Credit (Form 26AS)” for viewing all the returns pending for verification.
Step 6: Under the “Assessment Year” drop-down menu, choose the year for which you want to view the Form 26AS and then select the file type in the “View As” drop-down menu and click “View/Download”.
- To view your Form 26AS online, choose “HTML” as your file type.
- For downloading a form, choose “PDF” or “text” as the file type. You’ll be required to enter a password to open this downloaded Tax Credit Statement. This password will be your date of birth.
Step 7: Click on “SUBMIT”.
Some Frequently Asked Questions (FAQs)
What is TDS refund?
If your financial declarations made at the beginning of the year, are lesser than the investment proof’s submitted at the end of the financial year, you are entitled for a refund of taxes. This usually happens when investment projections that you declare during the start of a financial year fall short of the actual investments you make by the end of that year.
How to apply for TDS Refund
Filing for Income Tax process is simple. All you have to do is visit or click on www.incometaxindiaefiling.gov.in. You need to login or sign up to download the relevant form for refund of income tax and enter all the particulars in the form and submit. The Income Tax Return forms are available for various categories and one needs to choose the form that is applicable to your income category. You can also check your refund status from the same link.
What is form 26as?
Form 26AS gives you a detailed account of every tax deductions made on your PAN. It’s a consolidated tax statement that can be accessed from the income-tax website by all taxpayers using their Permanent Account Number (PAN). If you have paid taxes on your income or tax has been deducted from your income, the Income-tax department already has these details in their database.
You could refer to your Form 26AS for the details of your income (on which taxes have been deducted) as well as the taxes that have been paid by or on your behalf by the deductor.
Who is required to obtain TAN?
TAN is a 10 digit alphanumeric number and is the abbreviated form of Tax Deduction Account Number. It’s required to be obtained by anyone who is responsible for collecting or deducting taxes.
Who is liable to deduct TDS on rent?
TDS on rent comes under section 194-IB, as per the finance act of 2017. According to this, it can be deducted by individuals or HUFs, in case the monthly rent exceeds Rs 50,000. From June 1, 2017, the tenant is mandated to deduct 5% tax from his monthly rent and deposit the same to the government account.
Who pays TDS on the sale of property?
The TDS rule on the sale of property is in effect since June of 2013. As per the mandate, on any property sale that exceeds Rs. 50,000 lakhs, the buyer has to deduct 1% as tax, before paying the amount to the seller. And later, deposit the same amount to the government.
How is TDS calculated on FD?
Any Fixed Deposit (FD) that earns an interest rate of more than Rs.10,000, in a given financial year attracts a TDS of 10%. In most cases, the banks and financial institutions themselves deduct this so you don’t get to worry about it. In the case of Senior citizens, only if the interest income exceeds Rs.50,000, in a given financial year, it will be deducted. The earlier limit of Rs.10,000 was increased to Rs.50,000, in the Union Budget 2018.
Another important thing to know about TDS on FD is that in case the depositor does not provide PAN information while opening an FD, the bank/NBFC will deduct 20% TDS.