Tax Deducted at Source or TDS applies to income earned by individuals and other entities operating in India regardless of their residential status. The applicable TDS rate varies from 1 to 30% depending on the income source and may sometimes touch 50%. The payer applies TDS at the appropriate rate and pays the net amount. In addition, the deductor deposits the TDS to the Income Tax Authorities within the stipulated deadline. As a result, the payee gets credit for the TDS and is eligible to claim a refund while filing the relevant ITR for the financial year.Read more
High ReturnsGet Returns as high as 15%*
Zero Capital Gains taxunlike 10% in Mutual Funds
Save upto Rs 46,800in Tax under section 80 C
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
TDS applies to your income, investments, and even your earnings from fixed assets. Therefore, be aware of the TDS provisions before investing. The ambit of TDS is much broader than people commonly think. For example, you pay tax even on the earnings made from online poker. Usually, any entity with an income in India is liable to pay taxes beyond the threshold limits defined in the national budget. Additionally, the government ensures advance taxes from the payments in a range of situations. However, we will confine our discussion to TDS-impacting individuals.
Any payment specified under the Income Tax Act is liable for TDS application by the person making such payment. However, individuals and HUF whose books do not need audit are exceptions to the rule. On the contrary, payment amounts exceeding Rs.50000 made by individuals and HUF must apply TDS of 5%, even if not liable for audit. Moreover, employers recover TDS based on their employee’s income tax slab, while banks levy 10% TDS while paying interest on their deposits. The rate increases to 20% if the depositor fails to submit a PAN card.
TDS rates are uniform for most payments defined in the Income Tax Act. However, the employer provides a TDS waiver if the employee submits investment proof and the income falls below the taxable threshold. In addition, depositors can submit 15G or 15H to the bank seeking a TDS waiver for the interest earned during the financial year. If you pay TDS for failure to furnish investment proof to your employer or 15G or 15H to the bank, you can file the relevant ITR seeking a refund per Income Tax rules.
TDS recovery goes into the government’s coffers within a stipulated timeframe. Use a specific Challan ITNS-281 at the official portal by the 7th of the subsequent month. For example, the deposit date of June TDS is 7 July. However, March is an exception, where you can deposit the TDS until 30 April. However, the time limit is 30 days from the TDS deduction month for rental income and property purchase.
Merely depositing TDS to the government is not enough. All deductors must mandatorily file TDS returns. The frequency for TDS returns is quarterly, containing specific information like TAN, TDS amount, payment type, deductee’s PAN, etc. In addition, you must adhere to the prescribed forms for filing TDS returns. So, let us take a quick look at what forms to use.
|Various Forms for filing TDS|
|26Q||Payments except for salaries||31 July||31 October||31 January||31 May|
|24Q||Salary||31 July||31 October||31 January||31 May|
|27Q||Payments to NRI except for salaries||31 July||31 October||31 January||31 May|
|26QB||Sale of property||30 days from the TDS month-end|
|26QC||Rent||30 days from the TDS month-end|
The following summarizes the responsibilities of the TDS deductor per the Income Tax norms.
Register and obtain the Tax Deduction Account Number (TAN) and mention it in all TDS-related documents
Ensure TDS collection at the appropriate applicable rate
Deposit the TDS collection to the government within the specified timeline.
File quarterly TDS returns within the specified due dates.
Issue the TDS certificate to the deductee within the specified deadline.
It is an essential document required for filing the relevant ITR within the stipulated timeframe every financial year. The statement is a comprehensive certificate describing the details of the deductor, deductee, income break up during the financial year, and TDS in the four quarters against each category of income, alongside the investments and exemptions. In addition, the certificate contains the challan numbers for the TDS filed every quarter.
The deductor’s responsibility is to issue the TDS certificate duly signed by the competent authority. Therefore, the TDS certificate acts as the template around which the ITR filing revolves. Accordingly, let us determine the different TDS certificates issued and generated from the government’s TRACES website.
|Form Type||Certificate For||Frequency||Due Date|
|Form 16||Salary||Yearly||31 May|
|Form 16A||Non-salary payments||Quarterly||15 days from the due date for filing a return|
|Form 16B||Property||Every Transaction||15 days from the due date for filing a return|
|Form 16C||Rent||Every Transaction||15 days from the due date for filing a return|
Knowing your tax credits is essential for ITR filing, especially an income tax refund. Accordingly, individual tax credits are available under Form 26AS generated for each PAN card from the government’s TRACES portal.
It is a consolidated tax statement comprising all the payment receipts during the financial year and Its TDS alongside, specific to the PAN card. Additionally, its accuracy depends on the deductor using your PAN card details and filing TDS returns without any flaws. In addition, the statement also contains all the advance income taxes paid during the financial year against the income. Therefore, Form 26AS is the culmination of TDS, and you cannot claim an IT refund without its reflection in the statement.
The applicable TDS rates vary according to the nature of income and the status of the PAN cardholder. So, let us check them out.
|TDS Rate Chart for Chart for Resident and Non-resident Indians|
|Section||Income Class||Resident (%)||NRI (%)|
|192||Salary||Income tax slab||Income tax slab|
|194B||Card games, lotteries, etc.||30||30|
|194BB||Winnings from horse racing||30||30|
|194F||Repurchase of units by UTI and mutual funds||20||20|
|194G||Commission/ income on lottery ticket sales||5||5|
|194LBB||Income from investment fund||10||30|
|194LBC||Income from securitization fund under Section 115TCA||25||30|
In addition to the rates described in the above grid, residents and NRIs have a bunch of TDS provisions to contend with. So, the tables below describe specific TDS rates applicable to the individuals separately.
|TDS Rates Specific to Resident Indians|
|Section||Income Class||TDS Rate (%)|
|193||Interest on securities||10|
|194||Other than specified dividends under Section 115-O||10|
|194A||Interest earned on securities||10|
|194DA||Payment towards Life Insurance Policy||1|
|194H||Commission on brokerage||5|
|194I||Rent on Plant and Machinery||2|
|194I||Rent on Furniture and Fixture||10|
|TDS Rates Specific to Non-resident Indians|
|Section||Income Class||TDS Rate (%)|
|195||Payment of other sums||30|
|Income from investments||20|
|Income from long-term capital gains (LTCG)||10 to 20|
|Income from short-term capital gains (STCG)||15|
|Income from the Indian government or an Indian company||20|
|Income from Royalty payable||10|
|Technical fees earned from the government or an Indian company||10|
|196C||Income from units linked to offshore fund||10|
|196D||Income received from institutional security investors||20|
The new sections inserted in the Union Budget proposals in 2022 cover perquisites and “Crypto” digital currencies for TDS application. So, let us take a quick look.
Section 194R: TDS applies to persons providing perks or benefits to residents in profession or business regardless of conversion into money. The applicable rate is 10%, provided the aggregate value of the benefits or perquisites does not exceed Rs.20,000.
Section 194S: The new provision applies TDS at 1% for payment of sums for transfer of digital assets. The TDS provision is subject to the aggregate value of transfer not exceeding Rs.10000 during the financial year.
It is essential to know the provisions of TDS to plan investments and minimize your tax outgo. Moreover, it pays to invest in tax-saving vehicles like insurance policies and provident funds. In addition, submit investment proof to your employer to reduce the TDS on salary income remitted as advance tax payments. However, with proper ITR filing, you can seek refunds for any TDS recovered in excess.
10 Jun 2022Every year on the 1st of February, the Government of India...
08 Jun 2022Tax planning is vital for salaried individuals to streamline...
08 Jun 2022NPS or National Pension Scheme is a voluntary pension plan...
08 Jun 2022Any property or security in your name is a capital asset for...
08 Jun 2022Fixed deposits are the safest investment vehicles for most...