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TDS Quick Takeaways

TDS is Tax Deducted at Source wherein income tax is reduced from the money paid at the time of making payments such as rent, commission, professional fees, salary, interest etc. by the persons making such payments. What the Government wants is to deduct Income tax in advance. Below mentioned are some basics of TDS which everyone should know.

TAN?

TAN is Tax Deduction and collection account Number. It is a TAN 10 digit alphanumeric number issued to persons who are required to deduct or collect tax on payments made by them.

When TDS is deducted and by whom?

At the time of making such a 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.

When TDS gets due?

TDS deducted must be paid to the government by 7th of the subsequent month. However, the TDS deducted in the month of March can be deposited till 30th April.

And TDS deducted on rent and purchase of property, the due date is 30 days from the end of the month in which TDS is deducted. TDS is deposited using Challan ITNS-281 which is available on the government portal.

Filing TDS Returns

TDS returns filing 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.

TDS Certificate

Form 16 (Employer to Employee) which is filed yearly, Form 16A (Bank to Depositor) filed quarterly, Form 16B (Sale of Property) filed for every transaction and Form 16C (Rent) filed for every transaction are all TDS certificates. TDS certificates are issued by a person deducting TDS to the person whose TDS was deducted while making payment.

The penalty for Late Filing of TDS Return

Pay a fine of Rs.200 per day until the return is filed.

If the taxpayer exceeds one-year time limit to file the TDS return or furnishes incorrect details of PAN, TDS amount, he/she will need to pay a penalty of minimum Rs.10,000 to Rs.1 lac.

Refund of Excess TDS Deducted

Excess TDS deductions, the deductor can make claims for refund of the excess amount. The difference between the tax deducted and the actual payments made by the deductor, whichever is higher, is accepted as the excess payment, and this amount will be refunded after adjusting against any tax liabilities under Direct Tax Acts.

When TDS is Exempt?

TDS is not collected on payments made to the Reserve Bank of India, the Government of India etc. TDS will not be collected when interest is credited or paid to:

Central or State Financial Corporations.
Banking companies.
Interest paid under Direct Tax or refund from the IT department.
UTI, LIC and other insurance or co-operative societies.
Interests earned from recurring deposit or savings account in cooperative societies or banks.
Interest in Indira Vikas Party, KVP, or NSC.
Interest earned in NRE account.
All institutions notified under no-TDS.

Apart from these, there are other avenues also where TDS may not be applicable, such as interest on compensation from MVCT (Motor Vehicles Claims Tribunal). Therefore, taxpayers are advised to check if their interest income is liable for TDS with a particular institution or not.