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A step by step guide to filing e-TDS returns online
January 15, 2018
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Technical Jargons for Accounting
March 19, 2018

A complete guide on Tax Deducted at Source (TDS)

Complete guide on TDS

What is TDS?

Tax Deducted at Source (TDS) is a mechanism that has been introduced by the Income Tax Department. Under this, the responsible person is supposed to deduct a certain percentage of tax before making the payment to the receiver. The payment includes salary, commission, professional fees, interest, rent, etc.

ABC Ltd. makes a payment of 50,000 INR by the way of fees to Mr. X. In this case, the company shall deduct a tax amounting to 5,000 INR. The net payment will be 45,000 INR. This amount will then be deposited to the Government’s account by ABC Ltd.

Who is supposed to deduct tax at source?

Every person who is responsible for making payment of nature covered under the TDS provisions of Income Tax Act, 1961 shall be liable to deduct tax at source. In case of payments made u/s 194A, 194C, 194H, 194I and 194J, all assesses other than individual and HUF whose accounts are not subject to Tax Audit Under Section 44AB of the Income-tax Act, 1961 during the preceding financial year, is required to deduct tax at source.

Which persons fall under this category?

  • The Principal Officer of a company responsible for deducting tax at source. It includes the employer in case of private employment or an employee making payment on behalf of the employer.
  • Drawing and Disbursing Officer (DDO) in case of Govt. office any officer designated as such.
  • In the case of “interest on securities” other than payments made by or on behalf of the Central Govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof.
  • The person who deducts the tax is called Deductor while the person from whom the tax is deducted is called Deductee.
  • The tax must be deducted at the time of payment in cash or cheque or credit to the payee’s account whichever is earlier. Credit to payable account or suspense account is also considered to be a credit to payee’s account and TDS must be made at the time of such credit.

What are the forms to file TDS/TCS returns?

  1. Form 24Q for salaries
  2. Form 26Q for other than salaries
  3. Form 26QB for Section 194IA
  4. Form 26QC for Section 194IB
  5. Form 26QD for Section 194M*
  6. Form 27Q for Non-resident
  7. Form 27EQ for TCS

* If an individual/HUF (who is not required to deduct tax u/s 194C, 194H or 194J) paid more than Rs. 50 lakh during the year to a resident then section 194M is applicable and tax is required to be deducted at the rate of 5% on such payment.

What is a TDS Certificate?

Under section 203 of the Income Tax Act, the tax deductor requires to issue a TDS certificate to the deductee within a stipulated period. This certificate is proof regarding the deduction and payment of the respective TDS amount to the bank. The deductee needs to produce the details of the certificate during the regular assessment of income tax for the adjustment of the TDS amount against the tax payable by the deductee or assesse.

What are the types of TDS Certificates?

For Salaries:

In this case, the certificate should be issued in FORM 16 containing details like computation, deductions, and payment of taxes. This refers to the details submitted in Form 24Q.

For Non-salaries:

The certificate, in this case, should be issued in FORM 16A containing the tax deducted and tax paid. For each section, separate certificates should be issued. This refers to the details submitted in Form 26Q and Form 27Q.

TDS in case of Section 194IA:

The certificate, in this case, should be issued in FORM 16B containing the amount of property, tax deducted amount and address of the property, etc. For each seller, a separate certificate should be issued.

TDS in case of Section 194IB:

The certificate, in this case, should be issued in FORM 16C containing the amount of rent, tax deducted amount and address of the property, etc. For each landlord, a separate certificate should be issued.

TDS in case of Section 194M:

The certificate, in this case, should be issued in FORM 16D containing the amount of payment, tax deducted amount and nature of the transaction, etc.

For TCS:

The certificate, in this case, should be issued in FORM 27D containing the tax collected and paid. This refers to the details submitted in Form 27EQ.

What is the process of filing e-TDS returns?

  1. Select the relevant format for the e-TDS return.
  2. The ASCII format with “txt” as the file name extension for e-TDS.
  3. Validation and Verification of e-TDS.
  4. Rectification of errors.
  5. Submission of e-TDS.

A step by step guide to filing TDS returns online

When should one file e-TDS?

Month Quarter The due date for payment of TDS challan The due date for filing of return for all deductors
For Govt. sector For other deductors
April 30th  June 7th May 31st July
May 7th June
June 7th July
July 30th September 7th August 31st October
August 7th September
September 7th October
October 31st December 7th November 31st January
November 7th December
December 7th January
January 31st March 7th February 31st May
February 7th March
March 7th April 30th April

What are the consequences in case of non-compliance with TDS provisions?

  • The notice would be sent by the Income-tax department u/s. 201(1) of the Act
  • The penalty would be applicable u/s 271C, equal to the tax which has not been deducted.
  • The penalty would be levied u/s 221 of Act for non-payment of demand raised.
  • Disallowance of expenses on which no tax is deducted u/s. 40(a)(ia).
  • Assessing officer may direct a person who fails to file the statement of TDS within the specified time to pay penalty minimum of Rs. 10, 000 which may be extended to Rs. 1,00,000 under section 271H. The penalty under this section is in addition to the penalty u/s 234E. No penalty will be charged if the following conditions are satisfied:

– The tax deducted/collected at source is paid to the credit of the Government.

– Late filing fees and interest (if any) is paid to the credit of the Government.

– The TDS/TCS return is filed before the expiry of a period of one year from the due date specified in this behalf.

  • Penalty u/s 272A(2)(K) of the Act is attracted to the late filing of TDS returns.
  • Prosecution u/s 276B of the Act – Failure to pay tax to the credit of central government Under Chapter XII-D OR XVII-B Involves rigorous imprisonment which shall not be less than 3 Years but which may extend up to 7 years and with fine.
  • Penalty u/s 272BB of the Act – Failure to get TAN or to quote such number in Tax Challans, Certificates, and returns, etc. Amount: Rs.10, 000/-.
  • An individual has to pay a fine of Rs 200 per dayunder section 234E as long as the return is not filed. The total fee computed should not exceed the total amount of tax deducted.
  • Interest would be charged u/s 201(1A) of the Income Tax Act, 1961.

 

Section Nature of Default Amount of Interest Period
201(1A) Non-deduction of tax at source, in whole or in part 1% per month From the date on which tax is deductible to the date on which tax is deducted
After deduction of tax, non-payment of tax either in whole or in part 1.5% per month From the date of deduction to the date of payment

Some Do’s and Don’ts for filing TDS returns

Do’s

  • Enter the correct challan particulars including CIN and amount in TDS challan.
  • A correction statement should be filed as soon as a discrepancy is noticed.
  • Download details of challan from Challan Status Enquiry from TIN-NSDL.com
  • Make sure that the correct section is quoted against each deductee.
  • The correct rate should be quoted against each deductee.
  • The correct PAN of the deductee should be mentioned.
  • Ensure that TDS return is filed with the same TAN against which TDS payment has been made and a TDS certificate is issued.

Don’ts

  • Never file late returns as it affects deductee tax credit.
  • Avoid quoting incorrect TAN and TDS payments.

This complete guide on TDS would help you understand what TDS is all about and the things to be taken into consideration while filing TDS returns. But, some TDS filing issues if not tackled properly can hamper the workflow. HostBooks TDS simplifies the process of TDS return filing and helps you battle your TDS struggles. Switch over to HostBooks TDS and experience a smooth process of TDS return filing!

11 Comments

  1. M.S. HEDE says:

    MOST RESPECTED SIR,
    Good evening and namaste with my hearty respects, because, your kind self have revealed tremendous knowledge with regard to e-TDS, ie its meaning, step by step procedure, the dates on what we have to deposit the tax to Govt and also to file the e-TDS on line. Sir, really I am lucky to come across such a wonderful knowledge in simple language in understandable manner even to a layman in e-TDS through TAXGURU. But, now onwards I have to digest the food you have given with regard to e-TDS.
    With due respects,
    Yours faithfully,
    M.S. HEDE,
    Mob.No. 9343107962
    e-Mail: hedemasanappa@yahoo.com

  2. MOHD KAMIL says:

    Hi,
    I want to about TDS proper processes how to generate the challan and from where deposit the TDS amount etc.
    so i want to any helpline no.
    Thanks,
    MOHD KAMIL

  3. Nora Khan says:

    Very well written blogs, The Complete Guide Of TDS and tax filing

  4. Mamata says:

    Hi there,
    First a fall, congratulations. I appreciate your efforts. Informative and user-readable. I loved reading your article. Thank you for sharing this valuable information with us.

  5. Surendra Kumar Gutgutia says:

    What is the new rate of TDS on rent if paid by Bank to an individual

    • Arpita Bora says:

      The person other than Individual or HUF who is responsible for paying any income to a resident by way of rent is liable to deduct tax at source under section 194-I of the income tax act 1961 at the rate of 10 % for the use of any land or building or land appurtenant to a building or furniture or fittings and at the rate of 2% for the use of any machinery or plant or equipment if whole amount of such rent for the year exceeds 240000. Any individual / HUF who is not liable to tax audit under section 44AB paying rent to a resident exceeding Rs. 50,000 per month or part of a month are also liable to deduct TDS @ 5% under section 194-IB.
      In the given case we are assuming that rent is paying to a resident individual for the use of land and/or building hence if, whole amount of the rent payable for the year exceeds Rs. 2,40,000 then TDS is deductible at the rate of 10%.

  6. debora says:

    Great Article. Its really informative and useful. keep posting with latest updates. Thanks for sharing.

  7. Ramachandran M says:

    ABC Ltd. providing service to y ltd and the value of service is 95,000/- and this service is only one time… is it required to deduct tds 1.5% u/s 194c.

    • Arpita Bora says:

      As per section 194C of the Income-tax Act, 1961, Any person who is responsible for paying any sum to any resident contractor for carrying out any work in pursuance of a contract, is required to deduct tax at source. Tax is to be deducted at the time of payment or at the time of credit of such sum to the account of the payee, whichever is earlier. Tax is required to be deducted when the amount credited or paid exceeds Rs. 30,000 in a single payment or Rs. 1,00,000 in the aggregate during the financial year. Tax is required to be deducted at the rate of 1% (if recipient is individual or HUF) or 2% (if recipient is any other person).
      In the given case, single amount credited to the account of payee exceeds the limit of Rs. 30,000, so tax is required to be deducted u/s 194C in this given scenario. ABC Ltd. (i.e. recipient) is come under the category of other person to determine the rate of TDS, so 2% tax is required to be deducted from the payment. However, Due to Covid-19 situation, the rates of TDS on payments made to resident Indian has been reduced by 25% for the period starting from 14th May, 2020 to 31st March, 2021. If your transaction date is coming between 14/05/2020 to 31/03/2020 then applicable rate of TDS is 1.5% in the given case.

  8. neha rohatgi says:

    hi whether such kind of relaxation apply on lower deduction certificate also.

    • Arpita Bora says:

      Section 197 of the Income-tax Act, 1961 allows the deduction of tax at lower rate or NIL rate. In order to avail this benefit assessee whose income would be liable for deduction of tax, needs to make an application in Form 13 to the assessing officer having jurisdiction over the assessee.
      On receipt of the application the assessing officer may grant the certificate for deduction of tax at lower rate or NIL rate on the basis of total income of the assessee and the estimated tax liability.
      Due to Covid-19 situation, the rates of TDS on payments made to resident Indian has been reduced by 25% for the period starting from 14th May, 2020 to 31st March, 2021. However, this reduced rate would not applicable for the assessee paying tax at lower rate on the basis of Form 13 furnished to the assessing officer.

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