You are on page 1of 11

TDS – Quick and Complete Summary [Part-I]

taxguru.in/income-tax/tds-quick-complete-summary-part-i.html

niteshbind

In some manner, all of us must have somehow come across the Tax Deductions, be it on
Salary, on Fees or any other kind of payments. But people are very less aware of the various
situations and the law governing TDS. What are the limits up to which TDS should not be
deducted? What are the troubles of not deducting TDS?? etc. etc. Therefore, today we will
be discussing the various provisions and other relevant details about the TDS. So, Let’s
start from the very beginning:

A. What is TDS?

The assessee is required to pay taxes on his income. This tax is collected by two
modes; (i) Direct payment by Assessee e.g. Advance tax, Self Assessment Tax. (ii) Tax
Deducted at Source (TDS) which is the deduction of Tax by the payer from the income of
the recipient. As per the Income Tax Act, 1961, Any person liable for making a payment is
required to deduct TDS if the payment exceeds the certain threshold limits.

B. Some Very Important Concepts:

Before we are heading towards the main sections we must have to understand some
important points which are commonly applied to all the sections of TDS. These are as
follows:

(i) Applicability of Surcharge and EC & SHEC: The applicability of Surcharge and EC &
SHEC would generally be dependant on the Status (Resident/Non-Resident) of the
payee(deductee).

In case of Resident Payee: TDS shall be deducted WITHOUT ANY


SURCHARGE/EC/SHEC which means TDS shall be deducted at applicable rates only.
Except for the case of Salary i.e., while deducting TDS on salary then Surcharge, EC &
SHEC shall be deducted at normal slab rates. e.g if the salary exceeds Rs. 50 Lakhs
then SC and EC & SHEC shall also be calculated and deducted.

In case of Non-Resident Payee: TDS shall always be deducted inclusive of the


respective Surchage, EC & SHEC with the rates of TDS.

(ii) In the entire chapter of TDS under any section where no TDS is required to be
deducted on Individual/HUF; that Individual/HUF shall not include the Individual/HUF
whose accounts are required to be audited. In simple words, Individual/HUF whose
accounts are required to be audited shall not be considered as the Individual/HUF for the
purpose of TDS exclusion.

(iii) TDS SHALL ALWAYS BE DEDUCTED ON GST EXCLUDED AMOUNT.

1/9
C. When TDS needs to be deducted?

TDS needs to be deducted under various situations and for various payments which are as
follows:

1. TDS on Salaries [u/s 192]:

Deductor: Any person responsible for paying Salaries

Deductee: Any Individual Employee [Resident/Non-Resident]

When to Deduct : At the time of Payment only

Rate of TDS: At the average rate of tax for Current F.Y. in which payment is being made.

Important Point:

In the case of Non-Monetary Perquisites, Employer instead of deducting TDS could


directly pay the tax him/herself. But tax rate shall be the same average rate which
would have been charged on the total salary of the employee including this non-
monetary perquisite.

If the employee is working under more than one employer OR has worked under more
than one employer during the previous year (i.e. left the job at one place and join
somewhere else) then the employee MAY (at his option) could provide any employer
(if simultaneously working)/last employer (if left and join another employer) his other
employment details and the Employer would calculate TDS after considering the
entire salary including which he is receiving from other employers as well and deduct
the TDS on such salary.

If Employee is having incomes from other heads as well (any other heads) or Loss
(ONLY under House Property) then Employee may give such details to his Employer
and Employer would consider such income/loss (from house property) while
calculating TDS.

[Section 192A] TDS on Accumulated Balance of Recognised Provident Fund


(RPF): While paying the amount accumulated in RPF account of Employee, Employer
would Deduct TDS @10% (at MMR i.e. 35.535% if PAN not provided) if the RPF
balance is Above Rs. 50,000/- & Employee has withdrawal it pre-maturely (e.g.
Before completion of 5 years of continuous service). Also, If form 15G/15H
provided by Employee then, No Deduction at all.

2. TDS on Interest on Securities [u/s 193] :

Deductor: Any Person responsible for paying Interest on Securities

Deductee: Any Person [Resident Only]

When to Deduct : At the time of Credit to the Account of Payee OR Actual Payment;
Whichever is Earlier.

Rate of TDS: 10%


2/9
Important Notes: There are also some EXCEPTIONS in which NO TDS u/s 193 would be
deducted on Interest. These are as follows:

When Interest on Debentures is being paid by Widely Held Company to Resident


Individual/HUF through A/c Payee Cheque and Such Interest amount is Up to Rs.
5,000/- only.
If Debentures has been issued by Listed Company; but Debenture is in Physical
form then, No TDS if Interest is Up to Rs. 5,000/-.
If Debentures has been issued by Listed Company; but Debenture is Not Listed
(whether Physical form or Demat Form) then, No TDS if Interest is Up to Rs. 5,000/-.

[In all the above 3 cases if Interest amount exceeds Rs. 5,000 then TDS would be on entire
Amount]

If Any Securities (Share, Debenture, Bonds etc.) is in Demat form & Listed then there
would be NO TDS at all (i.e. without any threshold).
No TDS at all in any manner on Govt. Securities.
When the Interest On Securities is being received by the Insurance Company then, No
TDS at all.

3. TDS on Dividend [u/s 194] :

Deductor: Indian Company

Deductee: Any Person being a Shareholder [Resident Only]

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

Rate of TDS: 10% [If amount up to Rs. 2,500/- = NO TDS; If Exceeds then TDS on the
whole amount]

Important Note:

Here Deduction would be made only in case of Dividends which are covered u/s 2(22)
(e) & u/s 115BBDA. Because on rest all the other dividends Company itself pays the
DDT and they are exempt in the hands of the Shareholders.
If Dividend is being received by the Insurance Company then, No TDS at all.

4. TDS on Interest other than Interest on Securities [u/s 194A] :

Deductor: Any Person other than Individual/HUF (but Including 44AB Ind/HUF)

Deductee: Any Person [Resident Only]

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

Rate of TDS: 10%

Important Note: There are also some EXCEPTIONS in which NO TDS u/s 194A would be
deducted on Interest. These are as follows:

When the Payer is Banking Co., Co-Operative Society Bank, Post Office; & Interest is
3/9
being Paid on Time Deposit (i.e. FD/RD) up to Rs. 10,000/- (but if amount Exceeds
Rs. 10,000/- then TDS on the whole amount). No TDS at all on Interest on Saving
Accounts.
In any other type of Interest; Up to Rs. 5,000/- = No TDS (if exceeds then on the whole
amount)
When interest is being paid to Co-Op Society/Insurance Co./Financial
Corporation/UTI.
When Interest is paid by Firm to its partner (e.g. Interest on Loan/Capital etc.)
No TDS on Interest on Refund of Income Tax.
Interest on ZCB.
Interest is paid by Co-Operative Society–> to its Member/Another Co-Operative
Society.
Interest is Paid on Compensation of Motor Accident Claim Tribunal if Interest is up to
Rs. 50,000/- (if exceeds then TDS on the whole amount).

5. TDS on Winning from Lottery, Card games etc. [u/s 194B] :

Deductor: Any Person

Deductee: Any Person [Resident or Non-Resident]

When to Deduct : At the time of Payment.

Rate of TDS: 30% [Up to Rs. 10,000/- No TDS; If exceeds then TDS on the whole Amount]

Important Note:

TDS u/s 194B shall be deducted on Lottery, Crossword Puzzles, Card games or any
other games of any sort. TV Programmes e.g. Kaun Banega Crorepati, Dance India
Dance etc. shall also come under its purview and program organizer has to deduct
TDS before releasing the Award money/Prize.
TDS shall be deducted even if the Prize is not wholly in money. The FMV of the Prize
shall be considered for TDS deduction.

6. TDS on Winning from Horse Race [u/s 194BB] :

Deductor: Any Person (being a Bookie/License Holder for Horse Racing)

Deductee: Any Person (Resident or Non-Resident)

When to Deduct : At the time of Payment

Rate of TDS: 30% [Up to Rs. 10,000/- No TDS; If exceeds then TDS on the whole Amount]

7. TDS on Payments to Contractors [u/s 194C] :

Deductor: Any Person

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

4/9
Rate of TDS: When Receiver is Ind./HUF = 1%; In case Received by Other Person = 2%. [If
Amount Paid is Up to Rs. 30,000 (Per contract) OR Rs. 1,00,000/- Per year = NO TDS. But
if Exceeds then TDS on Entire Amount]

Important Note:

(i) In Case of Job Work:

When Invoice separately shown the Amount Charged by Job worker and Value of
Material = Then TDS shall be deducted on Amount Charged only.
When there is no such separation then TDS shall be charged on the entire
amount (including Value of material)

(ii) No TDS shall be charged on the amount paid to the contractor by Individual/HUF for any
services taken Exclusively for Personal Purposes.

(iii) If Payment is being made to any Transporter who is having max. up to 10 goods
carriage during the Previous year and such Transporter made declaration along with PAN
to the Payer then NO TDS shall be deducted.

8. TDS on Insurance Commission [u/s 194D] :

Deductor: Any Person

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Credit OR Payment; Whichever is Earlier.

Rate of TDS: 10% [If Amount Up to Rs. 15,000/- = NO TDS; If Exceeds then on the whole
amount]

9. TDS on Payment to Non-Resident Sportsmen or Sports Association or Entertainer [u/s


194E]:

Deductor: Any Person

Deductee: Sportsmen/Sport Association/Entertainer (cheerleaders) [Non-Residents Only]

When to Deduct : At the time of Payment OR Credit; Whichever is Earlier.

Rate of TDS: 20%

10. TDS on Payment toward Life Insurance Policy [u/s 194DA]:

Deductor: Any Person

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Payment (including Payment of Bonus on such policy) of
such amount which is not exempt u/s 10(10D).

Rate of TDS: 1% [If amount Up to Rs. 1,00,000/- = NO TDS; If exceeds then TDS on the
whole amount]

5/9
11. TDS on Commission etc. on the sale of Lottery Tickets [u/s 194G] :

Deductor: Any Person

Deductee: Any Person (Resident or Non-Resident)

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

Rate of TDS: 5% [If Amount Up to Rs. 15,000/- = NO TDS; If exceeds then TDS on the
whole amount]

Note: This deduction is on Amount paid as commission, remuneration, or prize etc. on


stocking, distributing, purchasing or sale of lottery tickets.

12. TDS on Commission or Brokerage [u/s 194H] :

Deductor: Any Person other than Ind./HUF (But including 44AB Ind/HUF)

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

Rate of TDS: 5% [If amount up to Rs. 15,000 = NO TDS; If exceeds then TDS on the whole
amount]

Important Note:

(i) Transactions related to SECURITIES are not covered u/s 194H. i.e NO TDS on the;

Underwriting commission paid to Underwriters


Brokerage or Sub-Brokerage paid to Stock Exchange Transaction.

BUT; TDS SHALL BE DEDUCTED ON COMMISSION/BROKERAGE PAID ON COMMODITIES


TRANSACTIONS.

13. TDS on Rents [u/s 194-I] :

Deductor: Any Person excluding Ind/HUF (but Including 44AB Ind/HUF)

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

Rate of TDS: For Rent of Plant & Machine = 2%; For Land & Building = 10% [If amount up to
Rs. 1,80,000 in aggregate during the F.Y. then NO TDS; If Exceeds then TDS on the whole
amount].

Important Note:

Where there is more than one owner (i.e. co-owner) then limit of Rs. 1,80,000/-
shall be allowed for each such co-owner separately.
TDS on Deposit: TDS shall not be deducted on Refundable Deposits. If the Deposit is
Non-Refundable then TDS has to be deducted. Further, If Deposit was Refundable
initially but later on such deposits has been adjusted then on such adjustment TDS
6/9
shall be deducted.

14. TDS on Certain Immovable Property [u/s 194-IA] :

Deductor: Any Person

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Credit or Payment; whichever is Earlier.

Rate of TDS: 1% [If the Immovable Property Value Up to Rs. 50 Lakhs = NO TDS; If
exceeds then TDS on the whole amount].

Important Note:

TDS under this section is deducted when payment is made towards any immovable
property Other than Agriculture Land (i.e. No TDS at all in case of Agri. land) and the
sale price exceeds Rs. 50 Lakhs.
No TDS when the property is being purchased from Non-Resident.
For Deducting TDS under this Section, Purchaser is not required to obtain TAN.
IF PAYMENT HAS BEEN MADE IN INSTALLMENTS THEN TDS NEED TO BE DEDUCTED
ON EVERY INSTALLMENT.

15. Payment of Rent by Ind./HUF (non-audit) [u/s 194-IB] :

Deductor: Ind./HUF (who are not covered for tax audit) responsible for paying rent
exceeding Rs. 50,000/- or more AT ANY TIME DURING THE YEAR.

Deductee: Any Person (Resident Only)

When to Deduct : ONLY AT THE END OF THE YEAR (i.e. March) OR At the time
of VACATING the property [it need to be deducted once and not every month]

Rate of TDS: 5%

Important Note:

If the Tenant has paid rent of Rs. 50,000/- at any time during the Previous year (even
in any single month) then TDS shall be deducted on the entire amount paid during the
whole previous year.
TAN is not required for deducting TDS under this Section.

16. Payment under Specified Agreement [u/s 194-IC]:

Deductor: Any Person (responsible for paying any sum under Joint Development
Agreement)

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

Rate of TDS: 10%

7/9
Note: TDS shall be deducted on Monetary consideration only. Non Monetary
considerations shall not be considered for TDS under this Section.

17. TDS on Professional or Technical Services [u/s 194J] :

Deductor: Any Person excluding Ind/HUF (But including 44AB Ind/HUF)

Deductee: Any Person (Resident Only)

When to Deduct : At the time of Credit OR Payment; whichever is Earlier.

Rate of TDS: 10%; If Payee is engaged only in Business of Operation of Call Center = TDS
2% [If Amount paid is up to Rs. 30,000/- then NO TDS; If exceeds then TDS on the whole
amount]

Important Note:

Any amount paid as a remuneration etc. or by any name to DIRECTOR of a Company


then TDS shall be deducted irrespective of the amount. i.e. Even Rs. 1,000/- is paid,
TDS shall be deducted.
No TDS shall be charged on the amount paid by Individual/HUF for any services
taken Exclusively for Personal Purposes.
No TDS on Professional Fees paid by Non-Resident to the CAs, Lawyers, Advocates,
solicitors in India if such payment is made through banking channel and such non-
resident does not have any agent or business connection in India.

18. Payments to Non-Residents [u/s 195]:

Deductor: Any Person

Deductee: Any Non-Resident or Foreign Company

When to Deduct : At the time of Credit OR Payment; whichever is Earlier;

Rate of TDS: As per the relevant rates in force for Non-Residents.

D. SOME IMPORTANT POINTS:

Whenever any threshold limit is given then as soon as the payment would cross that
threshold then TDS would always be deducted on the Entire amount.
Whenever the Deductee does not Furnish his PAN then TDS shall be deducted at the
rates which are HIGHER of the Rates in force (as per the Relevant section/Finance
Act) OR 20%.

These were the Relevant Section as per the most recent updates till date. In the Part-II of
this Article, we would cover the various procedural parts related to TDS concepts e.g. Due
Date of Payment of TDS, Due Date of TDS Returns, TDS Certificate Issue, Penalty for Non-
Deduction/Non-Payment or Late Payment/Late Deduction of TDS, Form 15G/15H etc. I
believe this summary would be helpful for the all stakeholders especially for all my CS
Student friends’ whose exams are just to start.

8/9
TDS – Quick and Complete Summary [Part-II]
taxguru.in/income-tax/tds-quick-complete-summary-part-ii.html

niteshbind

In the last part of this summary, we have learned about the basic meaning of TDS, some
concepts which were very useful and commonly applied on all sections, and the various
sections under which the TDS is being deducted. Read- TDS – Quick and Complete
Summary [Part-I]

Now, In the Part-II, we will get the details about the procedural parts regarding compliance
of TDS. So, let’s proceed with that:

1. What is the Time Limit for Payment of deducted Tax?


Contents [hide]

TDS needs to be deposited on or before the 7th day of Next Month in which such tax is
deducted. For the month of March, the last date for depositing TDS is 30th April.

[However, In case of Govt. Employer when TDS is deposited without Challan (i.e. through
Book entry) then TDS deposit date shall be the Same Day.]

2. What is the Due Date for Quarterly Return of TDS?


For First Quarter (i.e. Qtr ending on 30June) — — — 31st July
For Second Quarter (i.e. Qtr ending on 30 Sep) — — — 31st Oct
For Third Quarter (i.e. Qtr ending on 31 Dec) — — — 31st Jan
For Fourth Quarter (i.e. Qtr ending on 31 Mar) — — — 31st May

3. What is the TDS Certificate?


TDS certificate is the statement issued by Deductor to the Effect that tax has been
deducted and specifying the amount, Section, Rates etc under which it has been deducted.
In common parlance, it is widely known as Form-16 (in case of Salary) and Form-16A (in
other cases).

4. What is the Time Limit for the issue of TDS Certificate?


In Case of Form-16: It is issued Annually and the due date for issue of Form 16 is
31st May of the following year from the year in which Tax has been deducted.

In Case of Form-16A: It is to be issued Quarterly and the due date for issue of Form-
16A; 15 days from the due date of Furnishing Return (i.e. which comes as 15Aug,
15Nov, 15Feb, 15June)

1/4
[Imp. Note- If TDS Certificate is not issued within the said time limit then there is a penalty of
Rs. 100/- per day per certificate up to which the failure continues subject to max. of TDS
amount.]

5. What is the Lower Deduction Certificate?


It is a certificate issued by the Assessing Officer (AO) u/s 197 on request of Assessee; if
AO is satisfied that on the income of Assessee which is liable for tax deduction under TDS
is such that deduction should be made on lower rates, then AO may issue a Certificate in
this regard i.e. called Certificate of Lower Deduction.

[Note- Certificate of Lower Deduction cannot be issued for TDS to be deducted u/s 194-IA]

6. What is Form 15G & 15H?


It is a Self Declaration given by Assessee to the Payer (Deductor) that his/her tax on total
income including the income on which TDS is to be deducted shall be Nil. On receipt of
such form the Deductor submit this form to the Income-tax department and did not deduct
any amount as TDS.

Form 15G is for any assessee (excluding Firm & Company) while Form 15H is for Resident
Individual who is Senior Citizen.

Form 15G & Form 15H can be given only when there is a liability for TDS under 5 Section
only i.e. 192A (RPF), 193 (Int. on Securities), 194A (Other Interest), 194DA (Insurance
Amount), 194-I (Rent). It cannot be submitted against any other Section Liability.

[Note- If any of Such Income received by any person (who is eligible for 15G) is exceeding
the exemption limit then 15G can’t be submitted.]

6. What if there is no PAN detail of Payee?


(i) In case the Payee (Deductee) has not provided the PAN then the TDS shall be deducted
at the Rates HIGHEST from the following:

Rate given in relevant TDS Sections


At the Rates in Force (i.e. given in Finance Act)
20%

[Note:- But if the amount received itself is within the threshold limit of TDS then NO
question of Deduction at higher rates.]

(ii) If PAN is not given then there would not be provided any Lower tax deduction certificate.
Also, any request submitted in Form 15G or 15H shall be taken as Invalid.

7. What are the consequences of Failure to Deduct or Pay


TDS?
If any such person who is liable to deduct TDS;
2/4
Does not deduct whole or any part of TDS; OR
Has deducted but not deposited whole or any part of TDS;

Then Such person would be considered as Assessee-in-Default for tax not so deducted or
deposited and therefore shall be liable for the Interest u/s 220 and Penalty u/s 221 for
being Assessee in Default.

V. Important Note:
If Deductor has not deducted the TDS and paid the whole amount to the Deductee
(Payee); &
Deductee (resident only) has himself/herself declare this amount in his return and
paid the tax thereon;

then the Deductor shall not be considered as Assessee-in-Default. But still, he will be liable
for the Interest on Late Deduction of TDS.

8. What are the consequences of Late Deduction/Payment of


TDS?
If any person is liable for deduction of TDS does not Deduct TDS within time OR after
deduction does not Pay within Time then s/he shall be liable to simple interest as follows:

Late Deduction: 1% Per Month or part thereof [From When Deductible –to– When
Deducted]
Late Payment: 1.5% Per Month or Part thereof [From Deducted –to– Actual
Payment]

And such interest shall be paid before filing of Return of TDS.

9. Default in Furnishing Quarterly Return of TDS?


When a Person fails to Deliver the Quarterly Return of TDS within the Time Prescribed then
s/he shall be liable for a Fee of Rs. 200/- Per day during which the failure continues subject
to the maximum of TDS amount.

Apart From this a penalty u/s 271H can be levied for delay in filing the quarterly return of
TDS which may extend anywhere in between Rs. 10,000 (min.) to Rs. 1,00,000/- (max).

And that’s all..!! This was the entire concepts of TDS which we covered in Two parts. Now
you must be aware of Various situations and various compliances which one need to do
regarding TDS. Hope you find this Article useful.!

In case of any ideas, suggestions, or queries, do comment below. You can follow my blogs
@ Taxeffects.blogspot.com also reach me at niteshkbind@gmail.com

Thanks. Be Helpful to One Another!

Author Bio

3/4