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TDS - Tax Deduction at Source

Key TDS Rate Chart

Last Updated 13th Jul 2020

Section Nature Rate
Section 192 Salary As per slab rate
Section 194I Rent on Plant and Machinery 2%
Rent on Land, building, furniture, house, apartments 10%, if payment is more than ₹ 2.40 Lakh per annum.
Section 194C Payment to contractor and sub-contractor 1%
Section 194J Fee paid for Professional Services 10%
  • Covid-19 Relief Atmanirbhar Rs 20 lakh Crore Package ( 13th May 2020 ): TDS Rates for non-salaried specified payments made to residents reduced by 25% and reduced rates will remain valid till March 31, 2021. Payment for contract, professional fees, interest, rent, dividend, commission, brokerage etc will all be eligible for this reduced TDS. news
INCOME TAX CALCULATOR

What is TDS?

As per the Income Tax Act, 1961 every person or company making a payment of certain kind above a specified threshold limit is required to deduct tax at source. The full form of TDS is Tax Deducted at Source. The tax is to be deducted based on the provisions specified in the Act. The company who is deducting tax at source is called deductor and the person or coimpany who is receiving the payment after the deduction of tax at source is called the deductee.

The burden of deducting the tax at source and depositing it with the government is on the deductor. Some of the type of payments where tax is deducted at source are:
a) Interest payments by banks
b) Salaries
c) Consultation fee
d) Rent
e) Professional fee
f) Commission fee

TDS is a kind of advance tax and needs to be deducted irrespective of the mode of payment. Since TDS is a part of income tax, both deductors and deductee’s PAN is linked to it. In case PAN of deductee is not updated, the deductor must deduct TDS at higher of the following rates:
a) the rate as prescribed in the Act;
b) at the rate mentioned in the Finance Act; or
c) at the rate of 20%.

Revised TDS Rates for Residents till 31st March 2021

Section Section and Nature of Payment TDS Rates for payment made to Indian Resident till 13th May 2020 TDS Rates for payment made to Residents till 31st March 2021
Section 192 Salaries Average rates as applicable Average rates as applicable
192A Payment of accumulated balance due to an employee 10% 10%
194I TDS on rent for plant and machinery 2% 1.50%
194I TDS on rent for land, building, houses, offices, flats, residential apartments, furniture and fittings 10% in case of payment in excess of ₹ 2,40,000 per annum 7.50%
193 Interest on Securities 10% 7.50%
194 Dividends 10% 7.50%
194A Interest other than "Interest on securities" 10% 7.50%
194B Interest by way of winning from lotteries, crossword puzzles, games etc. 30% 30%
194BB Income by way of winning from horse race 30% 30%
194C Payment to contractor/ subcontractor 1% 1%
194D Insurance Commission 5% 3.75%
194DA Any sum paid to a resident under a life insurance policy 5% 3.75%
194EE Payment in respect of deposits under National Savings Scheme 10% 7.50%
194F Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India 20% 20%
194G Commission etc. on sale of lottery 5% 5%
194H Commission or brokerage 5% 3.75%
194I A Payment on transfer of certain immovable property other than agricultural land 1% 0.75%
194J Sum paid by way of fees for Professional Services 10% 7.50%
194LA Payment of compensation on acquisition of certain immovable property 10% 10%
Section- 194LBA(1) Business trust shall deduct tax while distributing, any interest received by it from SPV or from renting or leasing out any real estate asset owned by it 10% 10%
Section- 194LBB Investment fund paying an income to a unit holder 10% 10%
Section- 194LBC Income in respect of investment made in securitization trust Individuals- 25%
HUF- 30%
Individuals- 25%
HUF- 30%

TDS Rates for Payment made to Non-Residents

Section Section and Nature of Payment TDS Rates for payment made to Non Residents
Section 192 Salaries Average rates as applicable
192A Payment of accumulated balance due to an employee 10%
194B Interest by way of winning from lotteries, crossword puzzles, games etc. 30%
194BB Income by way of winning from horse race 30%
194E Payment to non- resident sports association 20%
194EE Payment in respect of deposits under National Savings Scheme 10%
194F Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India 20%
194G Commission etc. on sale of lottery 5%
194LB Payment of interest on infrastructure debt fund 5%
Section- 194LBA(2) Business trust shall deduct tax while distributing any interest received by it from SPV to its unit holders 5%
Section- 194LBA(3) Business trust shall deduct tax while distributing any income received by it from renting or leasing out any real estate asset owned directly by it to its unit holders 30%
Section- 194LBB Investment fund paying an income to a unit holder 30%
Section- 194LBC Income in respect of investment made in securitization trust 30%
Section- 194 LC Payment of interest by an Indian Company in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds 5%
Section- 194LD Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or Qualified Foreign Investor including long term infrastructure bonds 5%

TDS Deduction

TDS applies to most forms of income including salary, professional income, commission, etc.

TDS simply stands for tax deducted at source that is where the income gets generated. As per mentioned in the income tax act, a person who makes payments is required to deduct TDS at prescribed rates and deposit the same with the income tax department. The amount is adjustable by the tax department against the tax liability of the person or entity (identified by its PAN number) whose tax has been deducted. TDS is deducted as per the income tax rate for a particular financial year. TDS can be deducted from salaried employees, freelancers, commission payments etc.
The TDS is required to be deducted by any person who is making the payment, as mentioned in the Income Tax Act. However, if the person making the payment is an individual or HUF whose books are not mandatory to be audited, in such case, no TDS deduction is required. The liability to pay the TDS to Income Tax Authorities is on the person who has made the deduction.

TDS Online Payment

The process of TDS is followed by making payment of TDS. The first step in TDS online payment is to obtain TAN number. TDS payments cannot be made without TAN number.

Every person or company or entity responsible for deducting TDS must mandatorily obtain a Tax deduction Account Number or TAN number. This is a ten digit alpha numeric number allotted by the income tax department on request. Note that TAN is different fro income tax permanent account number or PAN number. While one legal entity can obtain only one PAN, the same entity may obtain multiple TAN numbers if it operates multiple establishments responsible for deducting TDS. PAN number is a mandatory requirement for obtaining TAN number.

  • Every person or company or entity responsible for deducting TDS must mandatorily obtain a Tax deduction Account Number or TAN number. A TAN number is a ten digit alphanumeric number allotted by the income tax department on request. Deductor who is liable to deduct TDS shall obtain a TAN number and must quote the number in all returns. As per section 203A of income tax act, it is necessary for the assessee to quote TAN number in all the communications related to TDS and if they fail to do so, a penalty of ₹ 10,000 will be charged.
    TAN numbers can be easily obtained easily. A payment of ₹ 62 is to be made for application of TAN number. The employer can apply for TAN number online by visiting the link https://tin.tin.nsdl.com/tan/form49B.html. Note that TAN is different from income tax permanent account number or PAN number.
  • Deductor is then required to select the challan 281 for TDS payment. After selecting the challan, Deductor needs to fill his TAN number. TAN numbers would be checked for validity online automatically.
  • Once the TAN number is validated, Deductor is required to fill other details such as accounting head under which the payment is to be made, address, name etc.
  • Deductor is required to confirm the information filled and submit the challan for the further process of making the payment.
  • Once an deductor submits the challan, the website will automatically route to the net banking page whereby the TDS online payment is made by logging in into the net banking page.
  • On successful payment of TDS, a challan counterfoil is displayed that contains Challan Identification Number (CIN), payment details and the bank name through which the payment is made. CIN number is mainly divided into three parts that contains BSR code (7 digits) of bank, date of deposit and challan serial number. The counterfoil is the proof of payment being made.
  • Deductor can also check the status of challan on "Challan status enquiry" on NSDL - TIN website after a week of making payment using the CIN so generated.
  • After depositing TDS to the income tax department, Deductor shall issue FORM 16 (in case of salary), Form 16A ( in case of other income) and Form 26QB ( in case of property)or TDS certificate to the employee on quarterly/ annually.

Interest on Late TDS payment

If a deductor delays the payment of TDS to the Central Government or if he delays the deduction then he is liable to pay the penalty.
As per section 201, interest will be levied at the rate of 1% every month for delay in deduction and 1.5% every month for delay in remittance after deduction.

TDS Payment – Some Common Types of Income

Almost all common forms of payments are covered by TDS.
Following are the incomes covered under TDS:

  • Salary
  • Dividend
  • Rent
  • Transfer of immovable property
  • Insurance commission
  • Interest on securities
  • Winning from lottery
  • Winning from horse race
  • Fees for technical or professional services
  • Payment to contractor or subcontractor
  • Commission on brokerage
  • Commission on sale of lottery tickets
  • Repurchase of units of Mutual Funds
  • Deposits under NSS

Due dates of TDS Online payment for FY 2019-20

Month Due Date of TDS Payment
April 7th May
May 7th June
June 7th July
July 7th August
August 7th September
September 7th October
October 7th November
November 7th December
December 7th January
January 7th February
February 7th March
March 30th April

TDS Return

TDS Return Form

There are different forms for different taxpayers to file TDS returns. The following forms are:

TDS Return Form Deductee type
Form 24Q Deductions made in case of salaried employees
Form 26Q Deductions made in case of other than salaried employees
Form 27Q Deductions made in case of Non-Resident

TDS Return Due Date

Quarter Due Date for filing of Return for all deductors
30th June 31st July
30th September 31st October
31st December 31st January
31st March 31st May

TDS Refund

TDS is deducted in advance and most often there is an inconsistency in the investment claimed to be made in the year and the actual investment made. Hence, there is a chance of excess TDS deduction which is refundable by the government in accordance with the procedure as per TDS refund.

TDS Refund Process

  • There is no specific form that is required to be filled. You can claim your TDS refund while filling your income tax return. You have to show the computation of your income and the total TDS deducted. The income tax software will automatically check the details filled by you and will reflect your excess TDS if there is any.
  • Once you apply for the TDS refund, it may take few months on part of income tax officer in sanctioning the refund. However, if the amount of TDS refund is more than 10% of total tax paid for the year, then government will be liable to pay you interest at the rate of 6% per annum for the delayed refund.

TDS Refund- Check Status Online

You can visit the website https://tin.tin.nsdl.com/oltas/refundstatuslogin.html to check the status of your refund. You are required to furnish your PAN details and the year for which the refund was filed.
You can also check the status of your refund by contacting the help desk of SBI through email at itro@sbi.co.in

TDS on Sale of Property

As per section 194- IA of Income Tax Act, when a buyer buys an immovable property costing more than ₹ 50 Lakh, he has to deduct TDS when he pays to seller. The immovable property can be any piece of land or building other than the agricultural land. The buyer is required to deduct 1% TDS of the total sale consideration. The notification on TDS on immovable property was announced in budget for the year 2013-14.

Key Points
  • TDS is to be deducted by buyer not the seller
  • Property should cost more than ₹ 50 Lakh and then only TDS will be deducted.
  • TDS will be deducted on the entire amount of sale
  • Buyer does not need to obtain TAN number.
  • In case the property is purchased by seller, PAN number is required or TDS will be deducted at the rate of 20%. Buyer is also required to show his PAN number.
  • TDS has to be deposited along with Form 26QB within 7 days from the end of the month in which TDS was deducted.
  • Buyer is required to present the TDS certificate to the seller. Seller is required to obtain Form 16 and buyer requires Form 26QB.
  • TDS is required to be deducted in all cases irrespective of the capital gains arising to seller.
  • In case of home loan, TDS is to be deducted at the time of making payment to the seller, not at the time of paying EMI to the bank.
  • In case of two or more buyers, separate Form 26QB is to be filled.
  • Both buyer and seller are required to file income tax return in the year of purchase.

Note: In case there are two buyers and the share of each individual is less than ₹ 5 Lakh but aggregate value of land is more than ₹ 50 Lakh, the same procedure of deducting the TDS will be followed by buyer.

Penalty for Nonpayment or Delayed TDS on Property

  • In case TDS is not deducted by the buyer then he is required to pay interest at the rate of 1% per month as penalty on the amount not deducted.
  • In case TDS is deducted but not paid on time, then the buyer has to pay interest at the rate of 1.5% per month as penalty for delayed TDS payment.

Penalty for Late Filing of Form 26QB

In case the buyer gets late in filing TDS return, a penalty of ₹ 200 per day would be levied.

FAQs

What is the TDS rate?

The rate based on which the payee makes a certain deduction on account of tax deducted at source under a specific section of the Income Tax Act is called the TDS rate.

On what amount TDS is deducted?

TDS is deducted on the gross amount, which is to be paid by the payee to the receiver.

How is TDS on salary calculated?

Calculate the total income by adding all the salary, commission, bonus, etc. Then add the income received from any investments. Deduct any eligible exemptions from the resulting taxable income, and calculate the TDS as per the average rates applicable.

Who is liable to deduct TDS?

The liability to deduct TDS is on the deductor or the person who is making the payment. However, individuals and HUFs whose books are not required to be audited. However, when the rent payment for each month exceeds ₹ 50,000 per month, then individuals and HUF are required to deduct TDS @ 5%, even if their books are not required to be audited.

Why do we deduct TDS?

Deduction of TDS is mandatory as per the Income Tax Act, 1961 as and when required. The government introduced the deduction of tax at source to minimise the activities of tax evasion by taxing at the source of income generation.

How can I get a TDS refund?

To get a TDS refund, you need to first declare it in your IT return, following which the Income Tax department will automatically credit it in your bank account.

Is TDS and Income Tax the same?

The basic difference between TDS and income tax is that TDS is levied at the source where income is generated under specified cases like salary, interest from the bank, rent, professional fee, etc. Whereas, income tax is levied on assessee whose income is above the tax limit in a particular period.

What is the minimum amount for TDS deduction?

The minimum amount for TDS deduction varies with each payment type. For example, in the case of payment made to the contractor, TDS is deducted when total payment in a financial year exceeds ₹ 30,000.

What is the TDS rate for contractors?

The TDS rate for contractors is 1% when the payment is made to an individual or HUF and 2% in case the payment is made to any other person.


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