According to the Indian taxation code, TDS stands for tax deducted at source. TDS is considered as a type of advance tax as it is a type of tax in which the tax is deducted from the earnings of any individual or organization before the money is actually credited into their account. The government is able to generate revenues by imposing TDS on the earnings of individuals as well as businesses. TDS rules and regulations are controlled and governed under the Income Tax Act of 1961 by the Central Board of Direct Taxes (CBDT). As the name suggests, “Tax Deducted at Source” implies that the payee or the employer deducts the tax before making a payment to the receiver. Tax Deducted at Source is applicable on income that is earned regularly and also on the income that is earned occasionally or irregularly. Thus TDS is applicable on various incomes including but not limited to Salary, Commission, Rent, Professional Fees and Interest.
Advantage of imposing TDS:
TDS is payable on the earnings so it is important to note that the liability to pay TDS is applicable only in the event of earnings actually taking place. TDS is deducted before making payments. Deductions are to be made on payments that are made in Cash, Cheque or Credit. The deducted TDS is further deposited with various government agencies. Imposing TDS has various advantages which are as follows:
- Deducting TDS at source prevents tax evasion.
- Tax collection is done duly and in a timely manner.
- Due to TDS, a large number of people come into the tax net.
- Collection of TDS is a steady source of revenue generation for the government.
Following is the list of deductors who are liable to deduct TDS:
- Hindu Undivided Family
- Limited Companies
- Partnership Firms
- Body of Individuals
- Association of Individuals
Rate of TDS deduction:
Payments such as salaries, commission, professional fees, interest earned, rent etc. are subject to TDS deduction. Based on the type of income and amount of income earned, TDS is imposed at various rates. Thus, different kind of income has different TDS rates and the tax is imposed on the extra amount that is earned after a certain maximum threshold limit is attained. The rate at which TDS is imposed varies from 1% to 30% depending on the income that is taxed.
Method of TDS deduction
As commonly known, TDS is deducted on the payments made to the receiver. It means that the payments are done to the receiver after deduction of appropriate tax for the income in question. The amount of TDS that the receiver is liable to pay is deducted from the payment the receiver is liable to receive and the remainder is paid out. It is important to note that the liability to deduct TDS is of the deductor. For instance, in case of employer paying salary to employee, the employer is the deductor and the employee is the TDS deductee.
All About TDS Return
A TDS Return is a summary of all the transactions related to TDS made during a quarter. TDS Return is a quarterly statement which is submitted by the deductor to Income Tax Department. The statement shows a summary of all the entries for TDS collected by the deductor and the TDS paid by the deductor to the Income Tax Authority. The TDS Returns statement includes details like the PAN number of the deductor & the deductees, all the detailed particulars of the TDS paid to the government and the TDS Challan information.
The following are the TDS Return due dates for the financial year 2017-2018
|Quarter||Quarter Period||Last Date of Filing TDS Returns|
|1st Quarter||From 1st April 2017 to 30th June 2017||31st July 2017|
|2nd Quarter||From 1st July 2017 to 30th September 2017||31st October 2017|
|3rd Quarter||From 1st October 2017 to 31st December 2017||31st January 2018|
|4th Quarter||From 1st January 2018 to 31st March 2018||31st May 2018|
Late Filing of TDS return
Late filing of TDS Returns attracts a penalty as per current tax rules. If there is a delay in filing the TDS returns within the stipulated due dates mentioned above, then a penalty or a fine is imposed. As per current rules, a fine of Rs. 200 per day is imposed until the TDS Returns are filed. The fine is imposed every day and it is imposed till the day the amount of fine imposed is equal to the TDS amount that is to be paid out. If the taxpayer furnishes wrong information like incorrect PAN number or wrong TDS amount or if there is a default in payment of TDS exceeding one year, then the penalty in such cases is a minimum of Rs. 10,000 to maximum of Rs. 1 lakh.
TDS Return Forms: An Overview
As the deductor is liable to deduct tax and file the TDS Return form as the supporting document, it is very important to note that there are various types of TDS Return Forms on offer. Thus there are different types of TDS Forms that are applicable for different situations. The type of TDS Return Form to be submitted is based on the Nature of Income of the deductee or the type of deductee on whom the TDS is imposed.
|Type of TDS Return Form||Particulars of the TDS Return Form|
|Form 24Q||Statement for tax deducted at source from salaries|
|Form 26Q||Statement for tax deducted at source on all payments other than salaries.|
|Form 27Q||Statement for tax deduction on income received from interest, dividends, or any other sum payable to non residents.|
|Form 27EQ||Statement of collection of tax at source.|
Let us study in detail various types of TDS Return Forms.
Form 24Q: Form 24Q is the form for preparing eTDS returns for the TDS deducted on salary under Section 192 of the Income Tax Act of 1961. The form 24Q has to be submitted on quarterly basis. This form has to be submitted by the deductor. Form 24Q contains details like the salaries paid and the TDS deducted of the employees by the employer.
The form 24Q contains 2 annexures namely Annexure-I and Annexure II. Annexure-I contains details of the deductor, deductees and challans while Annexure II contains the salary details of the deductees.
Annexure-I is to be submitted by the deductor for all the four quarters of the financial year. On the other hand, Annexure II need not be submitted in the first three quarters of the financial year but have to be furnished and submitted in the fourth quarter of the financial year with all the details of all employees’ salaries of the entire financial year.
Form 26Q: Form 26Q is the form that is to be submitted for tax deduction at source for all the payments received other than the salary. The form 26Q is to be submitted on quarterly basis by the deductor. Form 26Q is applicable for tax deducted at source under section 200(3), 193 and 194 of the Income Tax Act of 1961. The income on which the tax is deducted at source includes interest on securities, dividend securities, professional fees, directors’ remuneration etc.
It is compulsory to furnish PAN Number by the deductors who are non-government deductors. For government deductors “PANNOTREQD” has to be mentioned on the form.
Form 27Q: Form 27Q is applicable for the payments made to non resident Indians and foreigners other than salary. The form 27Q has to be filled in for the declaration of Tax Deducted at source for the NRIs and Foreigners. The form 27Q is to be submitted on a quarterly basis by the deductor. Form 27Q is applicable for tax deducted at source under section 200(3) of Income Tax Act of 1961. The income on which the tax is deducted at source includes interest, bonus, any additional income or any other sum owed to non-resident Indian or Foreigner. It is compulsory to furnish PAN number by the deductors who are non-government deductors. For government deductors the code “PANNOTREQD” has to be mentioned on the form.
- Form 27EQ: Form 27EQ is a quarterly statement that furnishes the details and information of the tax collected at source as per section 206C of the Income Tax Act 1961. The form 27EQ has to be submitted on a quarterly basis. In this form it is mandatory to furnish TAN number. This form is the statement to show the Tax Collected at Source (TCS). Tax Collected at Source is the tax collected by the seller. When a buyer purchases certain goods or commodities from the seller the seller collects the tax from the buyer using the TCS route. This tax is collected on the payment received from the buyer either in cash, credit, cheque, demand draft or from any other mode of payment. Form 27EQ is to be furnished by corporate deductors and collectors but not by government deductors and collectors. It is compulsory to furnish PAN number by the deductors who are non government deductors. For government deductors, the code “PANNOTREQD” has to be mentioned on the form.