Tax Deducted at Source ( TDS )

The aim of TDS concept is to collect tax at source

The concept is based on payer of Income collecting Tax at the time of payment, by following this
process the income is being taxed at the source only.

The person paying the income/ deducting tax is called deductor;

The person whose income is taxed / receiving the income is called deductee.

 TDS shall be deducted based on thresholds given under the act.

 Taxes shall be deducted at the rates specified in the relevant provisions of the Act,

(For withholding tax on Non-resident’s income DTAA will be applicable).

TDS shall be deducted by:

 Every Company
 All assessee (except company) who is liable to tax audit u/s 44AB.

Now the Tax deducted by entity shall be deposited with the government within due date and shall
also file the return.

Tax shall be deducted on following income payment:

 Salary u/s 192

 Interest on other than securities u/s 193
 Dividend income u/s 194
 Interest on other than securities u/s 194A; (Eg: Interest on FD, RD etc)
 Contract payment u/s 194C; (only if single payment exceed 30,000 or aggregate exceed
1,00,000);
 Insurance commission u/s 194D; (Only if payment exceed 15,000 );
 Commission payment u/s 194H; ( Only if payment exceeds 15,000);
 Rent u/s 194-I (exceeds 1,80,000)
 Payment by way of: (sum exceeds 30,000)
o Professional fees
o Royalty
o Fees for Technical services
o Remuneration to directors
o Fees for non-sharing of Know-how, Patent etc.

Mechanism of deducting TDS and depositing it with government by deductor:

SAGAR NAGARAJ 1
Illustration

Mr. Arun sir earned income by way of salary from BMS college of law for the month October 2017,
BMS college of law deducted TDS on salary income paid to Mr Arun sir at the time of payment and
deposited within due date.

BMS college of law ( assessee liable to tax audit) is paying salary income to Mr.Arun sir

BMS college of law will deduct TDS from salary income paid to Mr.Arun sir and shall deposit the
same amount with government within due date.

After deducting TDS and depositing it with government; BMS college of law should declare the
entire process through TDS return.

Note: TDS amount deducted shall be deposited with government through a challan, Challan no.281
in e-payment portal of NSDL.

Note: TAN and PAN of the deductor is mandatory at the time of depositing tax with government.

SAGAR NAGARAJ 2