Income tax is one of the most important financial planning aspects. You need to keep a check of your incomes, your investments and strategically plan to buy life insurance, a term plan, or any other tax-saving investment to save tax.
Income tax is not the only source of taxes for the government. It also collects indirect taxes such as TDS, TCS, and GST from us, by levying them on goods, services, and transactions. In the case of direct taxes, payments are made by the ones earning the money. In case of indirect taxes, it becomes the responsibility of the seller to deposit the tax with the government.
Two indirect taxes frequently confused with one another are TDS and TCS. Let us find out what they are.
Tax Deducted at Source and Tax Collected at Source are both incurred at the source of income.
TDS is the tax which is deducted on a payment made by a company to an individual, in case the amount exceeds a certain limit. TCS is the tax which is collected by sellers while selling something to buyers.
TDS deduction is applicable on payments such as salaries, rent, professional fee, brokerage, commission, etc. TCS deduction is applicable on sales of goods like timber, scrap, mineral wood, and so on.
TDS is applicable only on payments that exceed a certain amount. TCS is applicable on sales of specific goods which don’t include production or manufacturing material.
CompuTds Tax deduction at source (TDS) in India is a means of collecting tax on income, dividends, or asset sales by requiring the payer (or legal intermediary) to deduct tax due before paying the balance to the payee (and the tax to the revenue authority).
Under the Indian Income Tax Act of 1961, income tax must be deducted at source as per the provisions of the Income Tax Act, 1961. Any payment covered under these provisions shall be paid after deducting a prescribed percentage of income tax. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service. It has a great importance while conducting tax audits. Assessee is also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to government during the Quarter to which it relates.
TDS or Tax Deducted at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons making such payments. Usually, the person receiving income is liable to pay income tax. But the government with the help of Tax Deducted at Source provisions makes sure that income tax is deducted in advance from the payments being made by you. The recipient of income receives the net amount (after reducing TDS). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes credit of the amount already deducted and paid on his behalf.
Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payment. But no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited.
However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN. Your employer deducts TDS at the income tax slab rates applicable. Banks deduct TDS @10%. Or they may deduct @ 20% if they do not have your PAN information.
For most payments rates of TDS are set in the income tax act and TDS is deducted by payer basis these specified rates. If you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit – you do not have to pay any tax. And therefore no TDS should be deducted on your income.
Similarly, you can submit Form 15G and Form 15H to the bank if your total income is below taxable limit so that they don’t deduct TDS on your interest income. In case you have not been able to submit proofs to your employer or if your employer or bank has already deducted TDS and your total income is below the taxable limit) – you can file a return and claim a refund of this TDS. The complete list of Specified Payments eligible for TDS deduction along with the rate of TDS.
Filing Tax Deducted at Source returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. Also, different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows: Form 26QTDS on all payments except salaries Q1 – 31st July Q2 – 31st October Q3 – 31st January Q4 – 31st May.
|Form No||Transactions reported in the return||Due date|
|Form 24Q||TDS on Salary||Q1 – 31st July Q2 – 31st October Q3 – 31st January Q4 – 31st May|
|Form 27Q||TDS on all payments made to non-residents except salaries||Q1 – 31st July Q2 – 31st October Q3 – 31st January Q4 – 31st May|
|Form 26QB||TDS on sale of property||30 days from the end of the month in which TDS is deducted|
|Form 26QC||TDS on Rent||30 days from the end of the month in which TDS is deducted|
|Form||Certificate of||Frequency||Due date|
|Form 16||TDS on salary payment||Yearly||31st May|
|Form 16 A||TDS on non-salary payments||Quarterly||15 days from due date of filing return|
|Form 16 B||TDS on sale of property||Every transaction||15 days from due date of filing return|
|Form 16 C||TDS on Rent||Every transaction||15 days from due date of filing return|