Tax Deducted at Source (TDS)

TDS is an abbreviated form of Tax Deducted at Source which is required to be deducted while making payment to parties at a given rate. There are some identified expenses/payments against which income tax department has prescribed a specific rate of deduction and the threshold limit on which it is required to be deducted.

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Tax Deduction at Source (TDS)

Every business, whether a startup or an existing company, is certain to incur some expenses or to make payments to its parties irrespective of its size and scale. Thus TDS provisions apply to all types and size of businesses. It applies in the same or similar way to a proprietor, firm, LLP or a company registered under the companies, Act. 2013. The payment of expense by a person is an Income in the hands of the recipient. Thus the payor is under a liability to deduct the tax at applicable rates while making payment to the party. For small payments, the provision of TDS does not apply until it crosses a threshold limit as prescribed. It must be noted that the TDS is applicable only on the specified payment and after it reaches the threshold limit. The most common types of expenses on which TDS is applicable is provided hereunder.

Key Point of TDS Deduction & Payment

Payment of TDS deducted
Payment of TDS deducted
The tax deducted at source (TDS) while making payment to parties for qualified expenses must be deposited before 7th of next month. For example, the TDS deducted in November 2017 is payable on or before 7th December 2017. The challan number for making TDS deposit is 281. while making TDS Payment care must be exercised while selecting the appropriate section/nature of the payment.
 
 
Filing of TDS Return
Filing of TDS Return
After making the payment of TDS to the income tax, the taxpayer is required to file a quarterly return where the TDS deposited is mapped against the PAN of the person from which TDS was deducted. The TDS Return is filed within 30th of the month succeeding the quarter. For example, the first quarter ends on 30th June, hence the TDS Return must be submitted before 30th July.
 
 
Consequence of Non Compliance
The consequence of Non-Compliance
The non-compliance of TDS provisions is a grave offence and is punishable under section 271 (C) of the Income Tax Act 1961, wherein the minimum penalty is 10,000 which can go up to Rs. 1,00,000/-. Further section 276B applies to all such cases where a willful default is established, in all those cases the punishment is 3 Years rigorous imprisonment which can go up to seven years.
 
 
Interest on Non Deduction of TDS
Interest on Non-Deduction of TDS
When a person while making payment for which he ought to have deducted TDS fails in deducting TDS or deducts an amount less than the required amount. In all such cases, the deductor is liable to pay an interest @ 1% per month or part of the month, till the date on which TDS is deducted. Hence, a businessperson must be prudent while making payment to parties and ensure that TDS is deducted.
 
 
Interest on NON Payment of TDS
Interest on NON Payment of TDS
The TDS deducted by a person need to be deposited within 7th day of the next month. Any failure or delay in depositing the TDS is punishable under section 271 C or/and Section 276B. The defaulter is further liable to pay interest on delayed payment at the rate of 1.5% per month or part thereof. There is no provision in law where the interest can be waived; hence the assessee should be very careful.
 
 
Other Consequences of Default on TDS
Other Consequences of Default on TDS
The expenses on which TDS was required to be deducted shall be disallowed as an expense under section 40(a) while computing the total taxable income. To understand it quickly let's take an example of business where the income is 10 lac and the expense is also 10 lac, then effectively there shall be zero income tax, However, if the TDS is not deducted then the tax shall be three lacs (30% of 10 lac)
 
 

TDS Rate Chart for FY 2017-18 (AY 2018-19) - Most Used Sections

Section

table
  • 192
  • 193
  • 194A
  • 194A
  • 194B
  • 194BB
  • 194C
  • 194C
  • 194H
  • 194I
  • 194I
  • 194IA
  • 194J

Nature Of Payment

table
  • Salaries
  • Interest on Securities
  • Interest From Bank
  • Interest From Other Than Bank
  • Winning from Lotteries
  • Winnings from Horse Race
  • Contractor (Single / Yearly)
  • Transporter (Declared with PAN U/S 44AE)
  • Commission / Brokerage
  • Rent -Land, Building, Furniture & Fittings
  • Rent -Plant, Machinery & Equipments
  • Sale Of Immovable Property
  • Professional Fee

Cut Off Amount(INR)

table
  • -
  • 10,000
  • 10,000
  • 5,000
  • 10,000
  • 10,000
  • 30K/ 1 Lakh
  • As above
  • 15,000
  • 180,000
  • 180,000
  • 50 Lac
  • 30,000

TDS Rate (%)

table
  • Average Rate
  • 10
  • 10
  • 10
  • 30
  • 30
  • 2 (1% for Individuals)
  • 0
  • 5
  • 10
  • 1
  • 1
  • 10

Note TDS deducted in a month is required to be paid before 7th day of next month. While making TDS mention correct section in the challan number 281. For TDS payment use separate challan while making payment for specific type (section). Interest on Late Payment is- 1.5% per month or part thereof, The penalty on Late filing of TDS Return is Rs. 200 per day, however it is limited to the TDS amount.

Section

192

Nature Of Payment

Salaries

Cut Off Amount(INR)

0

TDS Rate (%)

Average Rate

193

Interest on Securities

10,000

10

194A

Interest From Bank

10,000

10

194A

Interest From Other Than Bank

5,000

10

194B

Winning from Lotteries

10,000

30

194BB

Winnings from Horse Race

10,000

30

194C

Contractor (Single / Yearly)

30K/ 1 Lakh

2 (1% for Individuals)

194C

Transporter (Declared with PAN U/S 44AE)

As above

0

194H

Commission / Brokerage

15000

5

194I

Rent-Land, Building, Furniture & Fittings

180,000

10

194I

Rent-Plant, Machinery & Equipments

180,000

1

194IA

Sale Of Immovable Property

50 Lac

1

194J

Professional Fee

30,000

10

Note TDS deducted in a month is required to be paid before 7th day of next month. While making TDS mention correct section in the challan number 281. For TDS payment use separate challan while making payment for specific type (section). Interest on Late Payment is- 1.5% per month or part thereof, The penalty on Late filing of TDS Return is Rs. 200 per day, however it is limited to the TDS amount.

Due date of payment of TDS and Filing of TDS Return

Sl. No.

table
  • 1
  • 2
  • 3.
  • 4.
  • 5.

Particular

table
  • Payment of TDS deducted under various sections of the income tax act
  • 1st Quarter TDS Return (1stApril to 30the June)
  • 2nd Quarter TDS Return(1st July to 30th September)
  • 3rd Quarter TDS Return(1st October to 31st December)
  • 4th Quarter TDS Return(1st January to 31st March)

Due Date

table
  • Before 7th day of Next Month
  • 31st July 2017
  • 31st Oct 2017
  • 31st Jan 2018
  • 31st May 2018

Type of event

table
  • Monthly
  • Quarterly
  • Quarterly
  • Quarterly
  • Quarterly

Sl. No

Particular

Due Date

Type of event

1

Payment of TDS deducted under various sections of the income tax act

Before 7th day of Next Month

Monthly

2

1st Quarter TDS Return (1stApril to 30the June)

31st Oct 2017

Quarterly

3

2nd Quarter TDS Return(1st July to 30th September)

31st Oct 2017

Quarterlyt

4

3rd Quarter TDS Return(1st October to 31st December)

31st Jan 2018

Quarterly

5

4th Quarter TDS Return(1st January to 31st March)

31st May 2018

Quarterly