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TDS: All you need to know about tax deducted at source

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TDS is among the many taxes that people earning an income or profit must pay to the government under the income tax laws.
TDS full form

The acronym TDS stands for tax deducted at source.

TDS: How does tax deduction at source work?

To keep a check on evasion of tax payments, income tax laws in India prescribe deduction of taxes at the source of the income. To effectuate this system, the payers of an income or profit are responsible for the deduction of TDS. This is why employers deduct TDS from salaries, home buyers deduct TDS from the payment made to the seller and tenants deduct TDS from the rent amount.

For example, if you buy a property worth over Rs 50 lakhs, you are required to deduct 1% of the property value as TDS. As a buyer, you are obliged to pay this amount to the government and issue a TDS certificate to the property seller.

In all these cases, the receiver of the income – the employee, the seller, or the landlord – receives the income after tax deduction by the payer. The recipient must declare the gross income at the time of filing the ITR so that the amount of TDS can be adjusted against the final tax liability.

Who deducts TDS?

The Income Tax Act states that those making payments are required to deduct TDS before making the payments, not the person receiving the income or profit.

Hence, with respect to payments to which the TDS provisions apply, the payer has to deduct tax at the source on the payments made by him and deposit the TDS to the credit of the government.

TDS is deducted on which payments?

Under the income tax laws, the TDS is deducted on several payments such as salary, interest, commission, brokerage, professional fees, royalty, and contract payments, among others.

TDS deduction threshold

TDS is deducted only when the payments exceed a certain threshold. Mentioned below are the threshold limit for TDS under various sections:

TDS payment due date

TDS must be deposited to the government by the seventh of each month. This means that if you deduct the TDS in June 2022, it must be submitted by July 7, 2022. However, there are exceptions to this rule. For example, the TDS deducted in March of any year can be deposited till April 30 of that year. Similarly, for the TDS deducted on rent and home purchase, the due date is 30 days from the end of the month in which the TDS is deducted.

Types of TDS forms

Different forms are available for filing different TDS returns.

Form 24Q: Tax deducted at source from salaries.Form 26Q: Tax deducted at source on all payments other than salaries.

Form 27Q: 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.

See also: Everything you wanted to know about ITR or income tax return

Is TAN a must for TDS deduction?

PAN stands for the Permanent Account Number while TAN stands for the Tax Deduction Account Number. TAN must be obtained by the person responsible to deduct tax. The TAN must be quoted in all the TDS-related documents and correspondence with the Income-Tax Department.

How is TDS paid online?

TDS can be paid online by following some simple steps. Check out our guide on TDS online payment to understand the process.

What is a TDS certificate?

Those deducting TDS have to issue a TDS certificate to the person on whose behalf the TDS has been deducted and paid. For example, your employer issues Form 16 to you when TDS is deducted from your salary.

TDS certificate

Form type Transaction type Frequency Due date
Form 16 TDS on salary payment Annual May 31
Form 16 A TDS on non-salary payment Quarterly 15 days from the due date of filing the return
Form 16 B TDS on property sale For each TDS deduction 15 days from the due date of filing the return
Form 16 C TDS on rent For each TDS deduction 15 days from the due date of filing the return

TDS credit in Form 26AS

In case TDS has been deducted on your behalf, it would find a mention in Form 26AS, a consolidated statement made available to all PAN holders. All the TDS deductions linked to your PAN are reported in Form 26AS.

What to do if the TDS credit is not reflected in Form 26AS?

If the TDS credit is not reflected in Form 26AS, it can be due to non-filing of the TDS statement by the payer or quoting incorrect PAN of the deductee in the TDS statement. In such cases, the payee must contact the payer, to ascertain the reasons for the non-reflection of the TDS credit in Form 26AS.




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