TDS: The Definitive Guide To TDS, Rules & Certificate

TDS or Tax Deducted at Source, is an indirect tax collected by Indian tax authorities at source from where an individual’s income is generated as per the norms of Income Tax Act, 1961. TDS comes under the Indian Revenue Services (IRS) and is managed by the Central Board of Direct Taxes (CBDT), to keep a stable revenue source for the government across the year while demotivating the tax evasion practices.

What is TDS?

Tax Deducted at Source or TDS is a tax applicable on the regular and irregular income of an individual and is deducted from his/her income on a periodic or occasional basis. TDS is regulated by the Income Tax Act, 1961, in India through the Central Board of Direct Taxes (CBDT) under the Indian Revenue Services (IRS), which directs the payee or employer to deduct a certain amount of tax before making full payment of salary/ commission/professional fees /interest /rent, etc. to the receiver. TDS is collected at the source of one’s income to considerably attenuate tax evasion by getting the already taxed income taxed.

How is TDS Deducted?

Under the TDS law, any amount (income/expenditure) such as salary, interests from banks, payment of commissions, rent payment, lotteries, payments to freelancers, etc., paid from one party to another, fall under the ambit of TDS, adhere to the provisions of the Income Tax Act, 1961. The percentage of the overall payment, withheld by the source, will then be deposited to the Department of Income Tax.

Any person making payments as stated under the Income Tax Act is liable to deduct TDS at the time of making such specified payment except if the person making the payment is an individual or HUF whose books do not need to be audited.

But when the rent payments made by individuals and HUF surpass the limit of Rs 50,000 per month, then it is subject to the TDS @ 5% even if the individual or HUF is not accountable for a tax audit, without the need to apply for TAN.

The amount of TDS deductions differs from individual to individual and depends on various factors like types of income categories. The deducted or payee can file a claim for a refund of the extra amount, in the case when an individual has paid surplus TDS over the liable tax amount.

How and When to File TDS Returns?

It is mandatory for every individual or organization who has deducted TDS to submit Tax Deducted at Source returns. TDS returns must be filed quarterly with various details like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. There are different forms prescribed for filing returns based on the purpose of the deduction of TDS. Various types of return forms are as follows:

Form	Certificate Type	Frequency	Due Date
Form 16	TDS on Salary Payment	Yearly	31st May
Form 16A	TDS on non-salary payment	Quarterly	15 days from due date of filing returns
Form 16B	TDS on property sale	Every transaction	15 days from due date of filing returns
Form 16C	TDS on rent	Every transaction	15 days from due date of filing returns

TDS E-Payment

The Tax Deducted at Source must be deposited to the government by the 7th of the subsequent month.

The Income Tax Department provides an online option to Pay Taxes Online, using Challan ITNS-281 on the government portal.

The taxpayer will need only the net banking services from authorized banks to pay the taxes directly online.

TDS Only Applicable Above Threshold Level

TDS on specified transactions are deducted only when the value of the payment is above the specified threshold limit. If the value does not cross the specified threshold limit, then no TDS will be deducted.

The Income Tax department has specified different threshold levels for different payments such as salaries, interest received, etc.

TDS Certificate

The person who is making the payment is liable to deduct the tax and deposit the same to the government. The person who deducts the tax is known as the ‘deductor’ and the person who gets the payment after the tax deduction is called the ‘deductee’.Each deductor must issue a TDS certificate, stating the amount deducted in the deductee's name and deposited with the government.

Form 26AS is a statement that shows the amount of tax deducted and deposited in a person’s name/PAN. TDS certificate validates the assessee to claim his/her tax credit, along with the applicable refunds.

Form 16, 16A, 16 B, and 16 C TDS Certificates

TDS returns can be easily and conveniently filed through the online software Gen TDS which can easily be downloaded with the desktop installation. It helps in the easy preparation of regular & correct e-TDS statements online with just a couple of clicks on your computer. The process becomes even easier with its compatibility with TDS returns of previous F.Y. for effortless and rapid import. E-Filing with Gen TDS Software [https://saginfotech.com/GeneTds.aspx] also facilitates the generation of TDS certificates.

Types of TDS Certificates

• Annual TDS Certificate and
• Quarterly TDS Certificate
• Annual TDS Certificate in form 16

Annual TDS Certificate is the TDS certificate issued by employers to employees for TDS on salary, issued in Form 16. Form 16 should contain details about the TDS deducted by the employer from the salary and the details of TDS deposited with the Government. Like, an employer issues Form 16 to the employee.

Note: Form 16 need not be issued for employees whose total income is less than Rs 2,50,000, as TDS would not be applicable in such cases.

Quarterly TDS Certificate in Form 16A

Quarterly TDS certificates are the certificates issued for the deduction of TDS on income other than salary and are issued in Form 16A. For example, banks issue Form 16A to the depositor when TDS is deducted on interest from fixed deposits.

Due Date for Issuing TDS Certificate

Employers must issue a TDS certificate to the employee within 15 days of filing their fourth-quarter TDS returns. It implies that Form 16 must be issued within 15 days of the fourth quarter TDS returns filing via Gen TDS Software while Form 16A has the following due dates:

15th August - For the first quarter of 1st April to 30th June
15th November - For the first quarter of 1st April to 30th June
15th February- For the third quarter of 1st October to 31st December
15th June- For the fourth quarter of 1st January to 31st March