What is TDS?
The full form of TDS is Tax Deducted at Source, as the name suggests, it is a collection of tax at the source of income. It is a method of collecting income tax in India as per the Income Tax Act, 1961. It is an indirect method of tax collection with concepts such as ’pay as you earn’ and ‘collect as it is earned.’ According to TDS rules, the employer/deductor is supposed to deduct a specified amount of tax before making payments to the receiver/deductee. The tax is deducted from a person’s income either on a periodical or on an occasional basis. And, then the deducted amount is deposited with the central government.
In case the deduction exceeds the liable tax amount then, the deductee can file a claim for a refund of the excess amount. A portion of the overall payment is withheld by the deductor while making payment to a person. Here, the person or the organization that deducts TDS is called the ‘deductor’ and the person, whose payment is being deducted is known as the ‘deductee.’
TDS is applicable for salaries, interest payment by banks, payment of a commission, payment of rent, payments made to consultants, fees to lawyers or freelancers. In case of a salaried individual, the employer deducts based on income tax slab rates. For interest earned on money in the bank account, the banks will deduct TDS @10% and if the bank does not have PAN information of the customer then it will deduct TDS @20%.
As TDS is collected at the source of income, therefore tax deduction of an individual is not taken into account. So, the individual can, later on, declare and submit his/her investment proof to file a return and then claim for the TDS refund.
TDS on Salary
If you want to calculate for salary, then, first of all, you need to arrive at the gross income from salary plus from other income sources. Then calculate investments & exemptions. After, you arrive at the total sum, then deduct investments & exemptions from your salary, doing so you will arrive at your annual income that will be taxed based on the income tax slab rates.
Modes of TDS Payment
There are two modes of payment.
Electronic Mode: e-TDS Payment
The IT department provides an option for online payment of taxes. E-payment is compulsory for all corporate assesses and every assessee (other than a company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
Physical Mode: Challan 281 for TDS Payment
Challan ITNS (Income Tax National Security) 281 is the form for making payment of TDS and TCS. This form is applicable to corporates and non-corporates.
Challan no. 281 is useful for depositing TDS/TCS. For depositing tax through this form, you will have to provide the 10-digit Tax Deduction Account Number (TAN), name along with the address of the deductor on every challan. A taxpayer should use separate challans in order to deposit tax deducted under each section and specify the exact nature of payment code in the appropriate column in the challan.
TDS return is necessary for maintaining the financial record. Also, a person must file a return to receive refunds. Make sure that you file a return within the due date. You should fill the form based on the income category you fall in and then furnish the documents for kick-starting the refund process. After registration and subsequent submission of the return, you will have to authenticate the Return File.
TDS Return Due Date
TDS last dates/due dates of FY 2017-18 are mentioned in the table below:
|Quarter||Quarter Period||Last Date of Filing|
|1st Quarter||1st April to 30th June||31st July 2017|
|2nd Quarter||1st July to 30th September||31st October 2017|
|3rd Quarter||1st October to 31st December||31st January 2018|
|4th Quarter||1st January to 31st March||31st May 2018|
TCS Return Due Date
TCS last dates of FY 2017-18 are mentioned in the table below:
|Quarter||Quarter Period||Last Date of Filing|
|1st Quarter||1st April to 30th June||15th July 2017|
|2nd Quarter||1st July to 30th September||15th October 2017|
|3rd Quarter||1st October to 31st December||15th January 2018|
|4th Quarter||1st January to 31st March||15th May 2018|
Penalty for Late Filing of TDS Return
If you fail to file the TDS return within the due date, then you will be liable to pay a penalty of Rs.200/day till you file the return. This fine is applicable each day until the fine amount equals the total liable amount.
In case the taxpayer crosses 1-year time limit to file the return or provides wrong details of PAN, TDS sum, then the taxpayer will require to pay a fine of minimum Rs.10,000 to maximum Rs.1 lakh.
TDS certificate is a certificate of deduction of tax at source. According to section 203 of the Income Tax Act, the deductor will provide a certificate to the deductee. Wherein the details are provided regarding TDS/TCS for several transactions between the deductor and the deductee. Banks, too issue this certificate for deductions made on pension payments. The certificate will issue on deductor’s own letterhead. The issue certificates to taxpayers are mandatory.
- The deductor will share the responsibility with the tax collection organizations.
- Avoids tax evasion.
- Broadens the base of tax collection.
- A stable source of revenue for the central government.
- The deductee is tension free as the tax is collected automatically and subsequently deposited with the central government.