Standing for ‘Tax Deducted at Source’ TDS is mandated under the Income Tax Act of India. It was introduced as a measure against tax evasion as a means of bringing forward tax revenue for the Government.
Accordingly it has become mandatory when making payments to deduct an amount at applicable rates and thresholds as prescribed by the income tax department, from the amount otherwise payable. The deducted amount is then to be deposited with the Government of India.
The one who is making the payment (and thus responsible for the deduction of TDS) is called the “deductor” while the one supposed to receive the payment is called the “deductee.”
Types of Payment that qualify for TDS
The entity intending to make payment (the Deductor) to another person (the Deductee) has to first of all possess a TAN Number. While making payment:
Compute the TDS to be deducted, ensuring it conforms to directives of the tax department
Deduct TDS at applicable rates and fill and file documents, ensuring TAN Number is entered in all
Pay TDS deducted by due date to the government
File periodic TDS statements on all payment transactions by due date which is on a quarterly basis currently
Issue TDS certificate (applicable Form 16) to the payee by due date
This starts with submitting an application for TAN; either Online or Offline along with a Fee (currently) of Rs.55 plus G.S.T.
A TDS Certificate is one that has to be issued by the deductor to the deductee specifying the amount of TDS deducted and paid to the government. This document is used at the time of assessment for adjusting the TDS paid against the tax payable – allowing for a tax refund if qualifying.
There are various types of TDS certificates, such as: FORM 16: For Salaried Individuals FORM 16A: For Non-salaried Individuals
Yes, Form 26AS in your Income Tax Account.
If the total deductions of TDS are more than the computed Tax liability one can claim this excess tax deducted as TDS Refund. If there are any back-taxes due, the department will adjust this against the excess and refund the balance..
Without a PAN number, the payer is supposed to deduct tax at the rate of 20% (or other rates higher than that applicable in case of PAN).
To arrive at the correct amount of TDS that is deductible you can refer to the following Sections of the
Income Tax Act.
Salaries and PF related: Section 192 & 192A
Interest on Debentures: Section 193
Bank Interest & Senior Citizen savings: Section 194A
Lottery, Games of Chance & Horse Racing: Section 194B & BB
Insurance Policies: Section 194DA (Life Plans are entitled to refund)
Rent: Section 194I
Professional Services: Section 194J
Note: TDS need not be deducted if Thresholds (in Sections below) are not exceeded.