Tax Deducted at Source: All About TDS Meaning, Filing& Return

Budget 2023 Updates Impacting TDS

• Section 194BA: Introduction of TDS on income generated from online gaming.
• Section 196A: Non-residents earning income from mutual funds in India, commencing April 1st, 2023, can furnish a Tax Residency Certificate to avail of TDS benefits as per the tax treaty rate.
• Section 192A: Reduction of TDS rate to 20% from the maximum marginal rate on PF withdrawal for employees lacking PAN.
• Section 193: Elimination of TDS exemption on interest from listed debentures, necessitating tax deduction on such specified securities’ interest.
• Section 194N: Increase in TDS threshold on cash withdrawal by co-operative societies to Rs 3 crore from April 1st, 2023.

Illustrative Example of TDS

Let’s consider Shine Pvt Ltd, which pays Rs 80,000 monthly rent for office space. With a mandated 10% TDS, Shine Pvt Ltd deducts Rs 8,000 as TDS, disbursing the remaining Rs 72,000 to the property owner. Here, the owner, as the income recipient, adds the gross amount of Rs 80,000 to their income while crediting the deducted Rs 8,000 against their final tax dues.

TDS Deduction Criteria and Responsibility

Any entity making specified payments outlined in the Income Tax Act is obligated to deduct TDS during payment. However, individuals or Hindu Undivided Families (HUFs) with business or professional sales below Rs.1 crore or Rs.50 lakhs, respectively, are exempt from TDS deductions. Notably, individuals and HUFs making rent payments exceeding Rs 50,000 monthly must deduct TDS at 5%, even without tax audit liability. Additionally, they needn’t apply for a Tax Deduction Account Number (TAN). Employers and banks typically deduct TDS at slab rates and 10%, respectively, or 20% sans PAN information.

Adjustments and Refunds

Submission of investment proofs to employers, resulting in taxable income below the limit, obviates tax liability and subsequent TDS deductions. Likewise, Form 15G and Form 15H submission to banks, with income below taxable thresholds, prevents TDS deduction on interest income. In cases of missed proof submission or premature TDS deductions, filing returns enables refund claims, thus ensuring compliance with taxation norms.

TDS Deposit Deadlines

TDS obligations mandate remittance to the government by the 7th of the subsequent month. For instance, TDS deducted in June necessitates payment by July 7th, with a grace period till April 30th for March deductions. Property purchase-related TDS payments adhere to a deadline of 30 days from the month-end of deduction.

Understanding TDS intricacies is paramount for individuals and entities alike, ensuring adherence to tax regulations and facilitating seamless financial operations.

How to Deposit TDS?

Tax Deducted at Source (TDS) must be deposited via the Income Tax Portal using TAN login credentials. The direct tax payments facility has transitioned from OLTAS ‘e-payment: Pay Taxes Online’ to the e-Pay Tax facility on the Income Tax Department’s e-filing portal. To make direct tax payments, including TDS, visit the Income Tax Department’s website at https://www.incometax.gov.in/ and select the ‘e-Pay Tax’ option.

When and How to File TDS Returns?

Filing TDS returns is obligatory for all entities that have deducted TDS. These returns are to be submitted quarterly, providing various details such as TAN, the amount of TDS deducted, the type of payment, the PAN of the deductee, etc. Different forms are prescribed for filing returns depending on the purpose of the TDS deduction. The due dates for various forms are as follows:

• Form 26Q: TDS on all payments except salaries. Due dates are Q1 – 31st July, Q2 – 31st October, Q3 – 31st January, and Q4 – 31st May.
• Form 24Q: TDS on Salary. Due dates are Q1 – 31st July, Q2 – 31st October, Q3 – 31st January, and Q4 – 31st May.
• Form 27Q: TDS on all payments made to non-residents except salaries. Due dates are Q1 – 31st July, Q2 – 31st October, Q3 – 31st January, and Q4 – 31st May.
• Form 26QB: TDS on sale of property. Due within 30 days from the end of the month in which TDS is deducted.
• Form 26QC: TDS on rent. Due within 30 days from the end of the month in which TDS is deducted.

Understanding TDS Certificates

TDS certificates, including Form 16, Form 16A, Form 16B, and Form 16C, are crucial documents issued by the deductor to the assessee from whose income TDS was deducted. These certificates vary based on the type of payment and its frequency. For instance, banks issue Form 16A to depositors when TDS is deducted on interest from fixed deposits, while employers issue Form 16 to employees.

TDS Credits in Form 26AS

Form 26AS, a consolidated tax statement available to all PAN holders, plays a pivotal role in understanding TDS. Linked to PAN numbers for both the deductor and deductee, Form 26AS lists details of TDS deducted on various incomes, alongside direct taxes paid by the individual. Accurate reconciliation of TDS credits in Form 26AS with TDS receivables is essential to avoid discrepancies.