What is meant by TDS?

TDS is short for ‘Tax Deducted at Source.’ As per the ITA or Income Tax Act, any individual earning above a certain threshold is required to deduct tax at source as TDS. The Income Tax Department has prescribed certain rates as per which TDS is deducted for differently salaried individuals. The person or company that makes a payment after deducting tax as TDS is known as the ‘deductor’. The company or individual receiving the payment with TDS is referred to as the ‘deductee.’

The deductor is responsible to ensure they subtract TDS from the deductee’s salary if the latter is eligible for TDS. This amount is then deposited with the Government. Irrespective of how one is paid  – cheque, credit, cash – and is linked to the PAN card of the deductee and deductor. Your employer is required to deduct TDS as per the applicable income tax slab rates. Typically, banks deduct TDS at 10%. In cases where the deductee’s PAN information is not available, an employer may deduct TDS at 20%.

When is TDS applicable?

Now that we know what is meant by TDS, here are the types of payments upon which TDS is applicable.

  • Job Salary
  • Rent charges
  • Commission payments
  • Interest repayments by banks
  • Professional expenses
  • Consultation charges

Do note that as per the Income Tax Act, individuals who pay rent or make payments to professionals like lawyers and doctors are not required to deduct TDS. TDS is once again not applicable if the person behind the payment is an individual or HUF whose books, in one way or another, are not required to be audited.

If an individual submits their investment proofs (to claim tax deductions) to their employer and their gross taxable income is under the taxable limit  –  they are not required to pay TDS. In the case of one’s bank, simply submitting Form 15H and Form 15G to your bank will allow you to prove that your total taxable income is below the TDS threshold. No tax will be deducted when you receive interest on your income. In case, these forms and investment proof are not submitted to the respective parties in advance, a TDS return can be filed to claim your tax returns.

When is TDS due for depositing with the Government?

TDS is required to be deposited to the government by the 7th of each subsequent month post deduction. Take for example, that you deduct TDS towards a payment in May. It must be deposited to the government by the 7th of June. There are some exceptions to his rule.

One exception is that when TDS is deducted in March, it is due for depositing with the government by April 30th. Another exception is TDS deducted on purchasing property or paying rent. In these cases, the due date for deposition is an additional 30 days from the last day of the month in which the tax was deducted.

What is TDS Return?

TDS is one form of tax paid in advance or ‘advance tax’. The idea behind it is that it is periodically deposited with the government and the responsibility for doing so rests with the deductor. For those whose tax has been deducted –  the deductee – the gross amount must be reclaimed as a tax refund after each deductee files their Income Tax Returns around the end of the financial year. This is known as one’s TDS return. However, it is not just filed once a year but mandatorily has to be filed quarterly.

When filing TDS returns, various details need to be provided such as the amount of TDS deducted, PAN of deductee, TAN, type of payment, etc. There are different forms for TDS returns depending on the purpose of the TDS. Here are all the types of TDS return forms:

Form Transaction Due dates
Form 24Q TDS on Company or Individual’s salary Q1: July 31st

Q2: October 31st

Q3: January 31st

Q4: May 31st

Form 27Q TDS on all payments made to any Indian  non-residents excluding salaries Q1: July 31st

Q2: October 31st

Q3: January 31st

Q4: May 31st

Form 26QB TDS on property sale made 30 days from the last day of the month during  which TDS was deducted
Form 26QC TDS on rent paid 30 days from the last day of the month during  which TDS was deducted
Form 26QTDS TDS on all payments excluding salaries Q1: July 31st

Q2: October 31st

Q3: January 31st

Q4: May 31st

 

What is a TDS certificate?

Since we know what is TDS return for, it’s important to note that they are only applicable when a TDS certificate was issued. A TDS certificate must be issued by the deductor towards the deductee as proof of tax deducted. Here are all TDS certificates issued by the deductor towards the deductee depending on the type of TDS deducted.

Form Certificate for Issued Each Due date
Form 16 TDS on salary Year 31st May
Form 16A TDS on any non-salary expenses Quarter 15 days from last day to file returns
Form 16B TDS on property sale Transaction 15 days from last day to file returns
Form 16C TDS on rent paid Transaction 15 days from last day to file returns