TDS stand for Tax Deducted at Source. As per the Income Tax Act,
while making certain specified payments, the person making the payment is required to deducte tax at source,
if the payment exceeds certain specified limits. Tax has to be deducted at the rates prescribed by the Income Tax Department.
Eg; Salary, Rent, Commission, Proffessional Fees, Divident, etc...
For eg: X & Co pays ₹100,000/- as proffession fees to M/s JKS & Co Chartered Accountants. As per the income tax act
while making the payment X & Co should deduct ₹10,000/- as TDS and pay the remaining amount i.e ₹90,000/- should pay to JKS & Co.
The deducted amount of ₹10,000/- should be deposited to the central government account as tax deducted at source.
TCS stands for Tax Collection at source.As per the income tax act certain persons are
required to collect a certain percentage as tax from buyers on some specified transactions that
exceeds some specified limits.
Some of the specified transactions are purchase of timber obtained under a forest lease,
Alcoholic Liquor for human consumption, Tendu leaves, etc…
For eg: X & Co sold tendu leaves to Mr. Krishnan for ₹500,000/-.
X & Co should collected ₹25000/- as TCS from Mr Krishnan.
The total amount paybale becomes ₹525,000/-
The person makes the payment after deduting TDS is called Deductor. The deductor is responsible for the proper
compliance of the provisions of tax deducted at source, like deduction of tax,
depositing tax, filing return, issuing certificates, etc....
He should execute his duties and responsabilities either himself or through an authorised person.
For eg: X & Co pays ₹100,000/- as proffession fees to M/s JKS & Co Chartered Accountants. As per the income tax act
while making the payment X & Co should deduct ₹10,000/- as TDS and pay the remaining amount i.e ₹90,000/- should pay to JKS & Co.
The deducted amount of ₹10,000/- should be deposited to the central government account as tax deducted at source.
In this case, X & Co is the deductor.
The company or persons receiving the payments is called Deductee. the deductee is reposnsible for
submission of PAN card and fulfilling other requirements as stipulated by the Deductor for
proper execution of the complaince requirements of the provisions of the income tax act regarding TDS.
For eg: X & Co pays ₹100,000/- as proffession fees to M/s JKS & Co Chartered Accountants. As per the income tax act
while making the payment X & Co should deduct ₹10,000/- as TDS and pay the remaining amount i.e ₹90,000/- should pay to JKS & Co.
The deducted amount of ₹10,000/- should be deposited to the central government account as tax deducted at source.
In this case, JKS & Co is the deductee.
The person who act on behalf of the deductor for the execution of the TDS compliance requirements is called Authorised person or Responsible person. Such a person should execute all the duties and responsiblities of the deductor on his behalf.
Tax Deduction or Collection Account Number(TAN): The person who requires to deduct or collect tax at source is required to obtain Tax deduction or collection account number (TAN) from IT Department. Deductor should quote TAN in every correspondence related to TDS.The structure of TAN is "ABCD 12345 E"
Time of Deduction: Tax is deducted at the time of making the prescribed payments or credit of the income or payment to the deductee, whichever is earlier. For instance, In case of TDS on Salary the Tax is deducted at the time of actual payments In case of TDS on rent, tax is deducted at the time of credit of rent.
Depositing TDS: TDS colleted by a deductor should be deposited to the account of central government within the stipulated time. The different modes of are given below;
- Net Banking
- Debit Card
- Over the Counter
- NEFT/RTGS
- NEFT/RTGS
The challan used for depositing TDS is Challan No. ITNS-281. Every such challan is identified by Challan Identification number (CIN). CIN contains the BSR Code of bank, date of deposit and challan serial no.
However, in case of govenment dedcutors, TDS will be deposited through book adjustment. each book entry is identified by Book Entry Identification Number (BIN). Deductors should obtain the Book entry Identification Number (BIN) from thier respective accounts officer in time. They can also collect the BIN from the NSDL portal.
For depositing TDS on purchase of immovable property u/s 194(IA), Form 26QB need to be used. For depositing TDS on payment of rent by certain individuals and HUF u/s 194(IB), Form 26QC need to be used.
The tax so deducted should be deposited within the due date specified. The due dates for depositing TDS is tabulated below;
| Particulars | Payment due date |
|---|---|
| Tax deducted during the month of March | On or before 30th April. |
| Tax deducted during any month other than March | On or before 7th day of from the end of the month. |
| TDS on purchase of immovable property 194(IA) | On or before 30 days from the end of the month of deduction. |
| TDS on Rent u/s 194(IB) | On or before 30 days from the end of the month of deduction. |
TDS Statements or Returns: Every person responsible to deduct tax must funrnish TDS statement in specified form & in the specified manner. These statememts should be filed on or before the due dates specified in the Income Tax Act. Different forms used for filing TDS and TCS returns tabulated below;
| Particulars | Form |
|---|---|
| TDS on Salary | Form No. 24Q |
| TDS on payment other than salary to a non-resident or a foreign company
or a resident but not ordinarily resident |
Form No. 27Q |
| TDS on payment other than salary to any person other than above | Form No. 26Q |
| TDS on sale of immovable property | Form No. 26QB |
| TDS on payment of rent by certain individual or HUF | Form No. 26QC |
| Quarterly statement of collection of (TCS) tax at source | Form No. 27EQ |
Proof of Deduction or TDS Certificates: Deductor should issue TDS certificates to the deductee as proof of deduction. Such certificates should be issued in the specifie form within the specified time period. Now, it mandatory to issue TDS certificate downloaded from www.tdscpc.gov.in. The deductor should verify the accuracy of certificates. The certificate is valid only if it is duly authenticated by a manual or digital signature of the authorised or responsible person. The different forms and the due dates for issuing the TDS certificates is tabulated below;
| Particulars | Form | Issued |
|---|---|---|
| TDS on Salary | Form No. 16 | Yearly |
| TDS on payment other than salary to a non-resident or a foreign company or a resident but not ordinarily resident |
Form No. 16A | Quarterly |
| TDS on payment other than salary to any person other than above | Form No. 16A | Quarterly |
| TDS on sale of immovable property | Form No. 26QB | For every transaction |
| TDS on payment of rent by certain individual or HUF | Form No. 26QC | For every transaction |
| Quarterly statement of collection of (TCS) tax at source | Form No. 27D | Quarterly |
As we discussed earlier, the deductor should file TDS returns within the stipulated time. The due dates for filing TDS returns as well as issuing the TDS certificates is tabulated below;
| Type | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| TDS | 31st July | 31st October | 31st January | 31st May |
| Form 16/16A | 15th August | 15th November | 15th February | 15th June |
| TCS | 15th July | 15th October | 15th January | 15th May |
| Form 27D | 30th July | 30th October | 30th January | 30th May |
Mode of Filing TDS Statements or Returns: The TDS statments can be filed in Electronic format only. Such returns should be prepared using the return preperation utility provided by NSDL or by any other software providers listed by NSDL. Such electronic returns should be accompanied by Form No. 27A, duly signed by the authorised person of the deductor. Statments prepared should be submited through the Efiling portal of Income tax or through the TIN-FC managed by NSDL.
Consequences of TDS defaults and non-payment: Failure to deduct tax, deducting less tax, delay in payment of the deducted tax to the Government, makes the deductor an assessee liable to penalty, which is equal to the amount for which the assessee is a deemed defaulter.
In case of non-deduction or less deduction or delay in deduction of tax, an interest of 1% is levied on the tax per month or part of the month. In case of delay in payment of tax after deducting, interest of 1.50% is levied per month or part of the month. The interest is applicable till the time the tax deducted is not credited to the Government.
In case of delay in payment of tax after collecting it, interest at 1% per month or part of the month shall be levied till the time the tax is not paid.
Failure on part of the deductor to pay the tax deducted at source, to the credit of Central Government makes him liable to rigorous imprisonment of a minimum period of three months but which may extend to seven years.
Download the justification report to know the details of TDS defaults if any, on the processing of TDS statement from the TRACES portal
Furnishing wrong statements or filing incorrect information: Failure to apply for TAN or quote correct TAN by the deductor may result in a penalty of ₹10, 000.
With effect from 1 July 2012, failure to file TDS statement within the prescribed time shall make the deductor liable to pay by way of fee u/s 234E, a sum of ₹200 for each day during which the default continues.
With effect from 1 July 2012, the furnishing of incorrect information in the statement by the deductor would make him liable to a penalty, which shall not be less than ₹10, 000 but which may extend to Rs. 1 Lakh.
In case the delay in filing TDS statement is more than one year from the prescribed date, then the deductor shall be additionally liable to pay a minimum penalty of ₹10,000 which may extend to Rs. 1 lakh.
Late filing fee u/s 234E, being statutory in nature, cannot be waived off.
Duty of deductor if the deductee failed to furnish PAN: If the deductee does not furnish PAN or furnishes incorrect PAN to the deductor, the deductor shall deduct tax at source that is higher than the following rates:
- The rate prescribed in the Aes
- At the rate in force,I.e., the rate mentioned in the Finance Act
- At the rate of 20%