Tax Deducted at Source (TDS) is a procedure implemented by the Indian government to collect taxes at the source of income. A certain percentage of tax is deducted by the payer at the time of making payments to the receiver, and this amount is then remitted to the government. TDS is applicable to a wide range of income categories such as salaries, interest on fixed deposits, rent, commissions, etc. TDS helps prevent tax evasion and understanding it is crucial for both payers and receivers of income in India.
TDS has to be deducted at the rates prescribed by the tax department. The company or person that makes the payment after deducting TDS is called a deductor and the company or person receiving the payment is called the deducted.
It is the deductor’s responsibility to deduct TDS before making the payment and deposit the same with the government. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PANof the deductor and deducted.
Interim Budget 2024 updates
Finance Minister has announced that the same tax rates will be retained in FY 2024 - 25 for direct taxes. Hence, there will be no changes concerning tax deducted at source rates either.
Union Budget 2023 updates
Leave Encashment: The exemption threshold for Leave encashment has been increased to ₹25 lakh from ₹3 lakh for non-government employees. Thus, at the time of retirement, leave encashment of up to ₹25 lakhs for a maximum period of 10 months is tax-free under Section 10(10AA).
TDS on EPF Withdrawal: TDS rate has been reduced to 20% from 30% on taxable withdrawal of EPF.
Payment Based Deduction: Payments to MSMEs must be made within the time frame agreed upon in writing, with a maximum limit of 45 days. If there is no written agreement, the time frame is 15 days. Any payment made outside this time frame can only be deducted (as expenditure) in the year it is actually paid.
No Penalty: Where a loan is accepted or repaid by a primary agricultural credit society or a primary co-operative agricultural and rural development bank to its members or vice versa, no penalty would arise under Section 269SS or 269ST.
Capital Gains Exemption limit: The capital gains tax exemption under Section 54 to 54F is restricted to Rs.10 crores. Earlier, there was no threshold.
Online Gaming: Net winnings from online gaming will be taxed at 30%. From 1 July 2023, TDS will be withheld on such net winnings (currently the rate is 30%).
Section 80G donations: Donations made to the following funds will not be eligible for 80G deductions:
Jawaharlal Nehru Memorial Fund
Indira Gandhi Memorial Trust and
Rajiv Gandhi Foundation
TDS is deducted on the following types of payments:
Salaries
Interest payments by banks
Commission payments
Rent payments
Consultation fees
Professional fees
However, individuals are not required to deduct TDS when they make rent payments or pay fees to professionals like lawyers and doctors.
TDS is one kind of advance tax. It is tax that is to be deposited with the government periodically, and the deductor is responsible for making the deposit on time.
For the deductee, the deducted TDS can be claimed in the form of a tax refund after they file theirITR.
What is a TDS return?
A deductor has to deposit the deducted TDS to the government and the details of the same have to be filed in the form of a TDS return.
A TDS return has to be filed quarterly. Different types of TDS deductions have to be filed using different TDS return forms.
Preparing TDS returns can be done easily using the ClearTDS software. Reach out to us if youneed any helpwith your TDS returns.
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Frequently Asked Questions
Can TDS be refunded?
Yes. If excess tax is deducted at source it can be refunded by filing the Income Tax Return.
Can I avoid TDS on salary?
TDS can be avoided by filing Form 15G or 15H. Form 15H is meant for pensioners. It can be submittr=ed if there is no tax on the income. Form 15G is for everyone except NRIs.
Is fiiling TDS Retrun mandatory?
TDS Return is to be mandatorily filed id tax is deducted in a quarter. If tax is not deducted, it is not necessary to file TDS return.
How can i check my TDS amount?
The amount of tax deducted at source can be checked by downloading Form 26AS from the Income Tax e-filing portal.
About the AuthorMohammed S ChokhawalaContent WriterI'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more
TDS, or Tax Deducted at Source, is a tax obligation where the buyer withholds the tax amount from the seller during the purchase of an asset or service and files it with the Income Tax Department. In this scenario, the seller receives a tax payment receipt from the buyer.
TDS full form stands for Tax Deducted at Source. It is the tax amount deducted by the employer from the taxpayer which is deposited to the IT Department on behalf of the taxpayer. It is a certain percentage of one's monthly income which is taxed from the point of payment.
Tax Deducted at Source (TDS) is a system that ensures taxes are collected upfront on various types of income. For example, when you earn interest on a fixed deposit (FD), the bank will deduct a portion as TDS before crediting the remaining amount to you. TDS applies to many other income sources, including: Salary.
You just need to visit the income tax portal and log in to download the relevant form for an income tax refund. Enter all the particulars and submit the form. If the employer has deducted tax when you are not eligible, you can claim the amount by filing income tax returns (ITR).
Any person including an individual, HUF (Hindu Undivided Family), firm and NRI (non-resident Indian), is expected to deduct tax at source, provided: Any payment made under the five heads of income or as specified under the Income Tax Act, 1961 requires you to deduct TDS.
TDS = Taxable Income × TDS Rate. Since Rohan falls under the 30% tax slab, the TDS rate is 30%. TDS = ₹5,40,000 × 0.30 = ₹1,62,000. Using the TDS formula, his TDS amount is calculated to be ₹1,62,000.
TDS is deducted from income, while TCS is collected during sale. TDS is deducted by the payer, while TCS is collected by the seller. TDS returns are filed quarterly, while TCS returns are also submitted quarterly. If TDS is deducted, TCS is not applicable.
Yes, if you have paid the excessive tax, it will be refunded. To get your additional tax refund, you will have to first file ITR, following which your return will be processed. If you pay any excessive tax, the government will refund it back to your bank account via ECS.
Tax deduction at source (TDS) is mandated to be deducted by all employers within the specified time frame, and failure to do so may cause adverse effects on the employers. For instance, the Income Tax department will charge interest on the unpaid TDS, impose penalties, and more charges and penalties.
TDS stands for Tax Deducted at Source, which means collecting tax on income in the form of salary, rent, asset sales, dividends, etc., by requiring the payer to deduct income tax due on such income and deposit it to the government on behalf of the payee.
Use TDS to view your client's return and account information quickly, in a secure, online session. EROs and Circular 230 practitioners are eligible to request and receive: Account transcripts.
TDS refund can be granted if the expected investments declared at the beginning of the year by the taxpayer are less than the actual made at the end of the year. If the Income Tax department is late in paying you the TDS refund as applicable, then it must pay you the amount with a simple interest of 6 per cent.
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