Latest TDS and TCS Rate Chart for FY 2020-21

TDS Rate Chart

TDS is nothing but an early collection of tax. It needs to be deducted on a specific payment at a prescribed rate by the payer/deductor. Deductor is a person who is liable to deduct TDS before making payment to a deductee. Let’s take a look at the TDS Rates for FY 2020-21. In this article, we take a closer look at the TDS rate chart.

Finance Minister confirms TDS Rates applicable for the coming Financial year in every Budget. During the year 2020, there was Covid-19 induced distress. In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation, the government announced various relief measures on 13 May 2020 through a press release. One of them was a reduction in TDS Rates for FY 2020-21 on non-salaried payments.

The TDS Payments can be divided into 3 sections as TDS on:

  1. Salary Payments
  2. Non-Salary Payments.
  3. Applicable to Non-Residents
TDS Return (24Q) for Salary Payments (Quarterly)
CA Assisted TDS return filing of one quarter for startups, companies and partnership firms making salary payments.
[Rated 4.8 stars by customers like you]
TDS Return (24Q) for Salary Payments (Quarterly)
CA Assisted TDS return filing of one quarter for startups, companies and partnership firms making salary payments.
[Rated 4.8 stars by customers like you]

TDS on Salary Payments

As per Section 192 of the Income-tax Act, the employer needs to deduct TDS on salary payment. Employer/Deductor needs to deposit TDS deducted on salary before the 7th of the next month (30th April for the month of March). The employer has to file TDS Return in FORM 24Q.

Due to Covid-19, the government announced a reduction in TDS Rates on Non-Salaried payments on 13 May 2020.
However, there has been no reduction in the TDS Rate of Section 192 TDS on Salary Payments. Therefore, regular slab rate shall be applicable to the employee based on the slab he/she falls in.
Tip
Due to Covid-19, the government announced a reduction in TDS Rates on Non-Salaried payments on 13 May 2020.
However, there has been no reduction in the TDS Rate of Section 192 TDS on Salary Payments. Therefore, regular slab rate shall be applicable to the employee based on the slab he/she falls in.

TDS on Non-Salary Payments

TDS on payments other than Salary depends upon the nature of Payment. Some common payments which feature the TDS system of taxation include commission, FD interest, rent, etc. TDS on different payments and their applicable rates are notified by the Income Tax Act, 1961. For payments other than salary deductor has to file TDS Return Form 26Q.

TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

In a press release, Finance Minister Nirmala Sitharam as part of the Covid-19 package to revive the economy declared that the TDS rates for all non-salaried payment to residents, and TCS rates will be slashed by 25 percent of the specified rates for the remaining period of FY 2020-21. These rates shall be applicable for the period starting from 14th May 2020 to 31st March 2021.

TDS Rate Chart and sections applicable to Individual/HUF

Given below is the TDS rate chart:

Section

Nature of Payment

Threshold Limit (INR)

Existing Rates

TDS Rates From 14/05/2020    to          31-03-2021

193 Interest on Securities 5000 10% 7.5%
194 Dividend 2500 10% 7.5%
194A Interest other than Interest on Securities 5000 10% 7..5%
194C Payment of contractors and sub-contractors 100000 1% 0.75%
194D Insurance Commission 15000 5% 3.75%
194DA Payment in respect of Life Insurance Policy 100000 1% 0.75%
194EE Payments in respect of
deposits under National
Savings Scheme
2500 10% 7.5%
194F Payments on account
of re-purchase of Units
by Mutual Funds or UTI
20% 15%
194G Commission, prize, etc. on sale of lottery tickets 15000 5% 3.75%
194H Commission or brokerage 15000 5% 3.75%
194-I(a) Rent for Plant and Machinery 240000 2% 1.5%
194-I(b) Rent for immovable property 240000 10% 7.5%
194-IA Payment for acquisition of immovable property 5000000 1% 0.75%
194-IB Payment of Rent 180000 5% 3.75%
194-IC Payment for Joint Development Agreements 10% 7.5%
194J Fee for Professional or
Technical Services
(FTS), Royalty, etc.
30000 2% (FTS, certain
royalties, call
center)
10% (others)
1.5% (FTS, certain
royalties, call
center)
7.5% (others)
194K Payment of Dividend by Mutual Funds 5000 10% 7.5%
194LA Payment of compensation on acquisition of immovable property

250000

10% 7.5%
194LBA(1) Payment of income by business trust  – 10% 7.5%
194LBB(i) Payment of income by investment fund  – 10% 7.5%
194LBC(1) Income by Securitisation Fund  – 25% 18.75%
194M Payment to
commission, brokerage
etc. by Individual/HUF
 – 5% 3.75%
194-O TDS on e-commerce
participants
 –

1%  (w.e.f 01-10-2020)

0.75%

Note: No Reduction in rate of TDS where the tax is required to be deducted at higher rate due to non furnishing of PAN.

TDS Caculator
Is your payment liable for tds? Calculate your TDS liability, rate and due date.
Explore
TDS Caculator
Is your payment liable for tds? Calculate your TDS liability, rate and due date.
Explore

TDS Rate Chart and sections applicable to Others

Section

Nature of Payment

Threshold Limit (INR)

Existing Rates

TDS Rates From 14/05/2020    to          31-03-2021

193 Interest on Securities 5000 10% 7.5%
194 Dividend 2500 10% 7.5%
194A Interest other than Interest on Securities 5000 10% 7..5%
194C Payment of contractors and sub-contractors 100000 2% 1.5%
194D Insurance Commission 15000 5% 3.75%
194DA Payment in respect of Life Insurance Policy 100000 1% 0.75%
194EE Payments in respect of
deposits under National
Savings Scheme
2500 10% 7.5%
194F Payments on account
of re-purchase of Units
by Mutual Funds or UTI
20% 15%
194G Commission, prize, etc. on sale of lottery tickets 15000 5% 3.75%
194H Commission or brokerage 15000 5% 3.75%
194-I(a) Rent for Plant and Machinery 240000 2% 1.5%
194-I(b) Rent for immovable property 240000 10% 7.5%
194-IA Payment for acquisition of immovable property 5000000 1% 0.75%
194-IB Payment of Rent 180000 5% 3.75%
194-IC Payment for Joint Development Agreements 10% 7.5%
194J Fee for Professional or
Technical Services
(FTS), Royalty, etc.
30000 2% (FTS, certain
royalties, call
center)
10% (others)
1.5% (FTS, certain
royalties, call
center)
7.5% (others)
194K Payment of Dividend by Mutual Funds 5000 10% 7.5%
194LA Payment of compensation on acquisition of immovable property

250000

10% 7.5%
194LBA(1) Payment of income by business trust –  10% 7.5%
194LBB(i) Payment of income by investment fund  – 10% 7.5%
194LBC(1) Income by Securitisation Fund  – 30% 22.5%
194M Payment to
commission, brokerage
etc. by Individual/HUF
 – 5% 3.75%
194-O TDS on e-commerce
participants
 –

1%  (w.e.f 01-10-2020)

0.75%

TCS Rate Chart for AY 2020-21 and AY 2021-22

The below table consists of the TCS rate charts from AY 2020-21 and 2021-22. The Finance Minister has made various changes in TDS provisions in the Finance Act, 2020. She also introduced two new sub-section such as section 206C(1G) and 206C(1H) which provides TCS on foreign remittance through Liberalised Remittance Scheme (LRS) and on selling of overseas tour package TDS as well as TCS on sale of goods over a limit.

TCS Rate Chart

Section Particulars TCS Rates  (AY 2020-21) TCS Rates  (Upto 13th May, 2020) TCS Rates (From 14th May, 2020 to 31st March, 2021)
206C(1) Sale of the following:      
  a) Alcoholic Liquor for Human Consumption 1% 1% 1% (No Change)
  b) Tendu leaves 5% 5% 3.75%
  c) Timber obtained under a forest lease 2.5% 2.5% 1.875%
  d) Timber obtained by any mode other than under a forest lease 2.5% 2.5% 1.875%
  e) Any other forest produce not being timber or tendu leaves 2.5% 2.5% 1.875%
  f) Scrap 1% 1% 0.75%
  g) Minerals, being coal or lignite or iron ore 1% 1% 0.75%
206C(1C) Grant of lease or license of the following:      
  a) Parking lot 2% 2% 1.5%
  b) Toll Plaza 2% 2% 1.5%
  c) Mining and quarrying (Other than mining and quarrying of mineral oil, petroleum and natural gas) 2% 2% 1.5%
206C(1F) Sale of the motor vehicle of the value exceeding Rs. 10 lakh whether payment is received by cheque or by any other mode 1% 1% 0.75%
206C(1G)(a) TCS on foreign remittance through Liberalised Remittance Scheme (LRS)

 

(This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/10/2020)

(Please refer Note 1 for in depth explanation of this new section)

NA 0.5%: Where
remittance is a repayment of loan obtained for the
purpose of
pursuing any
education.5% In any other
case.(wef 01.10.2020)

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

0.5%: Where
remittance is a repayment of loan obtained for the
purpose of
pursuing any
education.5% In any other
case.(wef 01.10.2020)

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

206C(1G)(b) TCS on selling of overseas tour package

 

(This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/10/2020)

(Please refer Note 2 for in depth explanation of this new section)

NA 5%

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

5%

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

206C(1H) TCS on sale of any goods [except goods on which TCS applicable as per Section 206C (1), 206C (1F) and 206C (1G)]

 

(This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/10/2020)

(Please refer Note 3 for in depth explanation of this new section)

NA 0.10%

 

(1% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

0.075%

 

(1% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

TDS on payments to Non-Resident

Tds u/s 195 is deducted on payments to be made to Non-Resident. There is no threshold limit under section 195 of the Income Tax Act, hence TDS will be deducted from the entire income/amount. TDS shall be deducted at the time of making payment. Form 27Q is required to be submitted on quarterly basis on or before the due date on payments other than salary made to NRI. 

Due to Covid-19, there has been a reduction in TDS Rates. However, there has been no reduction in the TDS Rates of Section 195. Therefore, TDS u/s 195 shall be deducted at the same existing rates.

TDS Return (27Q) for NRI Payments (Quarterly)
CA Assisted TDS return filing for employers, individuals and companies making payments to Non Resident Indian (NRI).
[Rated 4.8 stars by customers like you]
TDS Return (27Q) for NRI Payments (Quarterly)
CA Assisted TDS return filing for employers, individuals and companies making payments to Non Resident Indian (NRI).
[Rated 4.8 stars by customers like you]

FAQs

At what rate the payer will deduct tax if I do not furnish my Permanent Account Number to him?

As per section 206AA​, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax from whichever is the higher of the following, i.e, at the rate of 20%, or the rates specified in the relevant provision of the act or rates in force or the prescribed in the Finance Act.

How can I know the quantum of TDS deducted?

To know the quantum of the tax deducted by the payer, you can ask the payer to furnish you a TDS certificate in respect of tax deducted by him. You can also check Form 26AS​ from your e-filing account on Income Tax Portal.
You can also use the “View Your Tax Credit” facility available at www.incometaxindia.gov.in

What happens if TDS not deducted?

​It is the duty and responsibility of the payer to deduct tax at source. Therefore, if the payer fails to deduct tax at source, penalty is levied for not depositing or not deducting TDS on time. However, the employer can make the interest payment on such late payment of TDS before filing TDS returns or demand raised by TRACES.


TDS on EPF Withdrawal u/s 192A

What is Section 192A?

A new section 192A was inserted by the Finance Act, 2015 regarding TDS on payment of accumulated provident fund balance. The Rate of TDS on EPF withdrawal is 10%. There are two components of the Employee Provident Fund:

  • Employee’s Contribution: Gets Income deduction u/s 80C
  • Employer’s Contribution: Exempt up to 12% of Salary.
  • Interest on EPF: Exempt upto 9.5% p.a

TDS on EPF withdrawal shall be deductible only if the following conditions are satisfied:

  • The amount from EPF has been withdrawn before completion of continuous 5 years of service, and
  • The amount withdrawn is more than INR 50,000.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS

The Deductor is required to deduct TDS @ 10% on withdrawal of EPF. However, if the employee fails to furnish his Permanent Account Number (PAN), then, the Deductor would deduct TDS at the maximum marginal rate.
The Deductor shall deduct TDS at the time of payment of the Accumulated EPF balance due to the employee.

TDS Calculator
Is your payment liable for TDS? Calculate your TDS liability, rate and due date.
Explore
TDS Calculator
Is your payment liable for TDS? Calculate your TDS liability, rate and due date.
Explore

TDS on EPF withdrawal not deductible

TDS shall not deducted by the trustees of the Employees’ Provident Fund or any person authorized under the scheme under the following circumstances –

  • If the employee has submitted Form 15G/ Form 15H along with the PAN.
  • If there is a termination of employment due to employee’s ill health, completion of the project for which employee was employer, discontinuation of the employer’s business, or any other reason which is beyond the control of the employee.
  • The aggregate amount of EPF withdrawal is less than INR 50,000.
  • The withdrawal has been done after a continuous service of 5 years.
  • In case of a job change, the PF amount is transferred from one account PF account to another.

TDS Return

The Deductor shall deposit TDS with the Government within 7 days from end of the month in which TDS is deducted. However, in the case of TDS deducted for the month of March, the same shall be deposited on or before 30th April. In case of TDS deduction u/s 192A deductor shall file quarterly return in Form 26Q on TRACES within following due dates :

Quarter Due Date for Filing Form 26Q
April-June 31st July
July-September 31st October
October-December 31st January
January-March 31st May
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

FAQs

At what rate will the payer deduct TDS if I do not furnish my PAN to him?

As per section 206AA​, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax at the higher of the following :
1. The Specified rate in the relevant provision of the Act.
2. Rate or rates in force, i.e., the rate prescribed in the Finance Act.
3. At the rate of 20%.​

Where can I show 192A income in ITR?

Employee’s contribution gets an income deduction under section 80C. However, if you have withdrawn money from your EPF account, then you are required to report the same by under ‘Section 10(12) Recognised Provident Fund’ from the drop-down menu. Furthermore, withdrawal from PF account will be tax-exempt only if you have completed 5 years of service.

Section 194N : TDS on Cash Withdrawal

What is Section 194N?

TDS on Cash Withdrawal u/s Section 194N is applicable when the aggregate amount of cash withdrawals are more than Rs 1 crore during a financial year. This section will apply to all the sum of money or an aggregate of sums withdrawn from a particular payer in a financial year. The Government introduce Section 194N in the Union Budget 2019 in order to discourage cash transactions in the country and promote the digital economy.

The budget 2020 has reduced the threshold limit for TDS to Rs 20 lakh for taxpayers who have not filed their income tax returns for past 3 years. Such taxpayers withdrawing cash in excess of Rs 20 lakh but less than Rs 1 crore have to pay 2% as TDS. For withdrawal more than Rs 1 crore TDS @ 5% is required to be deducted .
Tip
The budget 2020 has reduced the threshold limit for TDS to Rs 20 lakh for taxpayers who have not filed their income tax returns for past 3 years. Such taxpayers withdrawing cash in excess of Rs 20 lakh but less than Rs 1 crore have to pay 2% as TDS. For withdrawal more than Rs 1 crore TDS @ 5% is required to be deducted .

Who shall deduct TDS on Cash Withdrawal?

The following payers are shall deduct TDS under this section:

  • Any bank (private or public sector)
  • A co-operative bank
  • A post office

The provisions under section 194N are not applicable in case payment to the following person:

  • Central or State GovernmentBanking Company
  • Co-operative Banks
  • Business correspondents authorised by RBI
  • White label ATM operators
  • Any other person notified by goverment
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

Rate of TDS u/s 194N

The rate of TDS on cash withdrawal u/s 194N is 2% on the amount exceeding Rs. 1 crore. TDS will be deducted when the payment would be made by the Bank, Co-operative society, or Post Office i.e. TDS will be deducted at the time of making the payment. The limit of Rs 1 crore in a financial year is with respect to per bank or post office account and not a taxpayer’s individual account.
For example if cash withdrawn by Mr. Arjun is Rs. 1cr then in that case TDS will not be deducted. Since the amount does not exceed Rs 1cr.

Here is a detail example to help you understand the provision:

XYZ ltd has made the following cash withdrawals for FY 2019-20

  • 85 Lakhs on 25th August 2019
  • 30 Lakhs on 10th September 2019
    There will be two separate calculations:
  1. The threshold limit of Rs. 1 crore
    Aggregate cash withdrawal in a financial year
    85 lakhs + 30 lakhs = 1.15 crore
    Therefore Section 194N will be applicable in this case.

2. Calculation of TDS

The tax deduction would be made for any cash withdrawal exceeding 1 crore after 01 September, 2019.

Transactions Amount (Rs.)
Cash Withdrawal on 25th August 85 Lakhs
Cash Withdrawal on 10th September 30 Lakhs
Total Cash withdrawal in FY 2019-20 1.15 crore
Less: Threshold Limit of 1 crore (1 crore)
Amount eligible for TDS u/s 194N 0.15 crore
TDS @ 2% 30,000

TDS Certificate

Deductors of tax shall quarterly issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the TDS while filing Income Tax Return.

TDS Return

The Deductor liable to deduct tax under section 194N of the Income Tax Act shall file quarterly return in Form 26Q. The deductor, after filing the Form, should provide Form 16A to the deductee.

Received Form 16A and need help with filing ITR
Let our experts help you
[Rated 4.8 stars by customers like you]
Received Form 16A and need help with filing ITR
Let our experts help you
[Rated 4.8 stars by customers like you]

FAQs

Whether the limit of Rs. 1cr is for single account or for all accounts maintained with a bank?

The limit of Rs. 1cr is overall limit for all accounts (like saving A/c, current A/c etc) maintained by a person with one bank. The limit is per bank rather than per account.

How the TDS under Section 194N will be reflected under Form 26AS?

Form 26AS is a statement for such income on which tax is deducted and deposited to government by deductor. However, cash withdrawal cannot be considered as an income. Therefore, the government has simultaneously amended section 198 of the Income Tax Act wherein it is clarified that cash withdrawal shall not be deemed to be the income of the person.

Section 194LA : TDS on Payments of Compensation on Acquisition of certain Immovable Property

What is Section 194LA?

Section 194LA relates to the TDS provisions applicable on the payment of compensation at the time of acquisition of certain type of immovable property. Any person, who is responsible for paying to a resident, any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land) shall, deduct TDS at the rate of 10%.

TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

When to deduct TDS under Section 194LA?

The payer is liable to deduct TDS u/s 194LA if the aggregate amount of payment during the financial year exceeds INR 2,50,000. The payer shall deduct TDS within earlier of the below mentioned dates –

  • At the time of payment of the amount in cash; or
  • At the time of payment of the amount in cheque or draft or any other mode.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS

  • The Deductor is liable to deduct TDS @ 10% under section 194LA of the Income Tax Act, 1961.
  • No surcharge, education cess or SHEC shall be added to the above rate. Hence, TDS shall be at the basic rate.
  • The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Cases where there is no need to deduct TDS under Section 194LA

TDS is not deductible under section 194LA in following cases when –

  • The person is paying an amount to a ‘non-resident’ person.
  • Aggregate consideration during the Financial Year is less than INR 2,50,000.
  • Payment is in respect of any award / agreement which is exempt from income tax.
  • The payee has filed an application in Form No. 13 to the Assessing Officer and has obtained a certificate for No / lower deduct of tax.
Residential Status Calculator
Taxability in India depends upon Residential Status. Know your Residential status from Resident, NRI or Resident but Not Ordinarily Resident(RNOR)
Explore
Residential Status Calculator
Taxability in India depends upon Residential Status. Know your Residential status from Resident, NRI or Resident but Not Ordinarily Resident(RNOR)
Explore

TDS Certificate

Deductors of tax shall issue TDS certificate to the deductee in Form 16A on Quarterly basis for TDS u/s 194LA. The due dates to issue of TDS certificates is 15 days from due date of filing TDS return. Deductor can download TDS Certificate from TRACES. The certificate shall be given on a quarterly basis. The due dates for receipt of TDS certificates are as below:

TDS For Quarter Due-Date
Q1 April to June 15th August
Q2 July to September 15th November
Q3 October-December 15th February
Q4 January to February 15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

Filing TDS returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. In case of TDS on non salary payments TDS Return Form 26Q is to be filed. Due dates for TDS returns are as follows:

Quarter Due-Date
Q1 31st July
Q2 31st October
Q3 31st January
Q4 31st May

FAQs

What is a compulsory acquisition?

Compulsory acquisition is the power of government to acquire the land from its owner without the willing consent of owner in order to benefit the society.

How can I claim TDS refund?

You need to file a TDS refund claim when the deductor has deducted more tax than the actual liability. You can claim the difference amount by filing an income tax return.

Section 194D : TDS on Insurance Commission

What is Section 194D?

Section 194D covers the provisions relating to deduction of TDS on insurance commission. As per provisions of section 194D, the person who is responsible for making payment to a resident person, as remuneration/ rewards, by the way of commission or for the following purposes:

  • For Soliciting / procuring insurance business; or
  • For the continuance, renewal, or revival of an insurance policy.

TDS is required to be deducted only when the aggregate of the amounts of such income credited or paid or likely to be paid or credited during the financial year exceeds INR 15,000 (Applicable from June 1st 2016).

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

When is TDS deducted?

The deduction of tax on insurance commission under Section 194D shall be earlier of the following:

  • The credit of commission to the account of the payee(reciever), or
  • The actual payment in cash or cheque or in kind.

There are 2 instances when TDS is not deductible under Section 194D:

  • Commission paid does not exceed INR 15,000
  • Self-declaration under Form 15G/ 15H
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS under Section 194D

If the provisions of section 194D of the Income Tax Act, 1961 is applicable, the Deductor shall deduct TDS at the following rates:

Particulars Rate of TDS
Domestic Company 10%
A Resident person other than Domestic Company 5%

The rate of TDS will be 20% in cases where the deductee has not quoted PAN.

TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

TDS Certificate

Deductors of tax shall issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. You can download a certificate from here. The due dates for receipt of TDS certificates are as below:

TDS for the QuarterDue-Date
April-June15th August
July-September15th November
October-December15th February
January-March15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q.

FAQs

What if TDS is not deducted?

The Deductor liable to deduct TDS as per provisions of section 194D fails to deduct the same, then, in such case the Deductor is liable to pay interest @ 1% per month from the date on which tax was deductible till the date TDS actually deducted.

Whether TDS u/s 194D is deductible on commission paid on reinsurance accepted by assessee?

No, TDS is not deductible on commission paid on reinsurance.

Can the payee request the payer not to deduct tax at source and to pay the amount without deduction of tax at source?

A payee can approach to the payer for non-deduction of tax at source but for that they have to furnish a declaration in Form No. 15G/15H.
Form No. 15G is for the individual or a person (other than company or firm) and Form No. 15H is for the senior citizens.

TDS u/s 193 : Interest on Securities

What is Section 193?

TDS on interest on securities is deducted under section 193 of the Income Tax Act. It requires to deduct TDS on interest on securities @ 10%. Let us first understand the meaning of interest on securities. Interest on securities means the interest on:

  • Any security of the Central Government or a State Government
  • Debentures or other securities issued by or on behalf of a local authority or a company or a corporation [established by a Central, State or Provincial Act]
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

Who shall deduct TDS on interest on securities?

The person who is responsible for paying interest on securities to a resident shall deduct the tax component from the interest amount at the time of payment or credit to the account of payee/deductee/receiver whichever is earlier.
TDS mechanism covers Payments made to non-residents. However, tax in such a case is to be deducted as per section 195. Further provisions of section 193 are not applicable to the non-resident.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS u/s 193

The payer shall deduct tax at the rate of 10% from the sum of interest. However, if the payee does not furnish his Permanent Account Number (PAN), then the payer has to deduct tax at the higher of the following:

  • Rate specified in the relevant provision of the Income-tax Act.
  • The rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Due Date to deposit TDS with Government

Particulars Time Limit to deposit TDS
If the amount is credited in the month of March On or before 30th April
If the amount is credited in the month other than March Within 7 days from the end of the month in which deduction is made.

Penalty on Late Remittance of TDS

  • Penalty u/s 201(1A) for late deduction/late payment of TDS
    • Late Deduction: If TDS has not been deducted then in that case interest will be levied @1% per month or part of a month on the amount of TDS from the date on which tax was deductible to the date of actual deduction
    • Late Payment: If TDS has been deducted but not deposited to the government in such case interest will be charged @1.5% per month or part of a month on the amount of TDS from the date in which TDS was deducted to the date in which TDS was deposited.

No TDS deduction u/s 193 under following cases:

The following are exempt from TDS deduction:

  • A National Defence Bond held by a resident, the rate of interest for which is 4.25%.
  • National Defence Loans availed during the period of 1968 or 1972, at an interest rate of 4.25%.
  • Interest payable on National Defence Loan.
  • Payment of Interest on 7-year National Savings Certificate.
  • Interest payable on debentures issued by a company wherein the public is substantially interested, provided that the sum of interest is confined to Rs 5000; and the company deposits the interest courtesy an account payee cheque (applicable for resident individual, resident or HUF).
  • Overdue interest on any security of the Central Government or State Government if the interest is not above Rs. 10,000 for a financial year [will not be applicable for 8% Savings (Taxable) Bonds, 2003].
  • Payment of Interest on certain notified debentures issued by any institution/authority, public sector company or any co-operative society.
  • Interest payable to certain companies established under the General Insurance Business Act or any other insurer.
  • Interest payable on dematerialized security issued by a company provided that the security is listed on a recognized stock exchange as per the regulations of the Securities Contracts (Regulation) Act, 1956.
  • Interest payable on 6.5% gold bonds, 1977 or 7% gold bonds, 1980 held by a resident individual if the total nominal value of such bonds is limited to a sum of Rs. 10,000 during the period to which the interest relates.
  • Payee, who is not a company or a firm, has issued Form no 15G/15H.
  • The payee is in the custody of a certificate that permits no deduction or less deduction of tax.

TDS Certificate

Deductors of tax shall issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. You can download a certificate from here. The due dates for receipt of TDS certificates are as below:

TDS for the Quarter Due-Date
April-June 15th August
July-September 15th November
October-December 15th February
January-March 15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q within the following due dates:

Quarter Due-Date
April to June 31st July
July to September 31st October
October to December 31st January
January to March 31st May

FAQs

Is it mandatory to file TDS return by deductor?

Yes, the government considers it mandatory for the deductors of tax to specify the details of TDS payments made to the government in the form of a return. In addition TDS returns must be filed on a quarterly basis.

What is the TDS rate if PAN not available?

All transactions liable for TDS will have tax deduction at a higher rate of 20% if the Permanent Account Number (PAN) of the payees is not available.

Whether assessee liable to deduct TDS u/s 193 on provision of interest in case payee is not known?

In a case where a person who is to receive interest cannot be identified at a stage at which provision for ‘interest accrued but not due’ is made. In such case there was no obligation upon the assessee to deduct tax at source. Therefore there could not be any question of levy of penalty and interest under section 201 upon the assessee.

Section 194 : TDS on Dividend from Equity Shares

What is Section 194?

Under Budget 2020 applicable from 1st April 2020 i.e. FY 2020-21, the Finance Minister abolished Dividend Distribution Tax (DDT). As a result, the dividend received on equity shares and mutual funds which were earlier exempt is now taxable at slab rates. It is taxable in the hands of the shareholder. Since the income would be taxable in the hands of the shareholder, TDS would be applicable. As a result, the Finance Minister made an amendment to the existing Section 194 to add a provision to deduct TDS on Dividend from Equity Shares.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

The Company paying a dividend on equity shares should deduct TDS under section 194. The deduction is at 10% on the number of dividends, only if a resident shareholder’s total dividend in a financial year exceeds INR 5,000. Section 194 is applicable from 1st April 2020 i.e. FY 2020-21 onwards.

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Section 194 – TDS on Dividend from Equity Shares

  • Deductor
    • The company distributing dividends to the investors of equity shares should deduct TDS on such dividends. The deductor must deposit the TDS and file the TDS Return on TRACES.
  • Deductee
    • Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Sec 194. Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K. NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
  • Nature of Payment 
    • Sec 194 covers the payment of Dividend on Equity Shares to a resident shareholder exceeding INR 5000 in a financial year.
  • Time of Payment
    • TDS shall be deducted at the time of credit of income to payee account or at the time of payment, whichever is earlier. If the payee of the amount credits the amount to be paid to “suspense account” or any other account, it is considered as ‘deemed payment’ and the payer must deduct TDS on such credit.
  • Rate
    • Deductor should deduct TDS u/s 194 at the rate of 10% if the dividend amount exceeds INR 5000. If the payee does not provide the PAN, TDS shall be deducted at the rate of 20%
  • TDS Certificate
    • Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the tax deducted while filing Income Tax Return.
  • TDS Return
    • After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES. The details of the dividend payment are part of this report. The deductor, after filing the report, should provide Form 16A to the deductee.
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

FAQs

Is TDS required to be deducted on dividend paid to NRI shareholder ?

Section 195 applies to the dividend paid to NRI investors/shareholders, as per provisions of the Income Tax Act. Hence, TDS needs to be deducted on the dividend at 20% on equity shares and equity mutual funds. Therefore, TDS has to be deducted at 10% as per Sec 194 and Sec 194K for an NRI shareholder.

What is Dividend Distribution Tax (DDT) ?

DDT is the tax paid on declaration, distribution or payment of dividend by an Indian Company at the rate of 15%. Since the Indian Company pays DDT, the dividend income is exempt in the hands of the shareholder or investor.
However, the Budget 2020 applicable abolished DDT from 01.04.2020 i.e. FY 2020-21. The dividend is now taxable in the hands of the shareholder or investor. The company is liable to deduct TDS at 10% if the dividend is in excess of INR 5000.

Section 194O : TDS on E-Commerce Sales

What is Section 194O?

Under Budget 2020, a new TDS section 194-O was introduced. With the increase in e-commerce sales, there has been a drastic increase in the number of sellers who sell goods and services through e-commerce platforms. It is important that the sellers pay taxes on such income. Thus, Budget 2020 introduced a new section 194O to deduct TDS on e-commerce sales.

It is mandatory to deduct TDS u/s 194O by the e-Commerce operator on payments made to the e-Commerce seller (Individual/HUF) at the rate of 1% on the gross amount of sales if it exceeds INR 5,00,000 in a Financial Year. Section 194O is applicable from 1st October 2020.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 5%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 5%

Let us understand Section 194O in detail

Deductor

E-Commerce Operator is a person who owns, manages, and operates a digital platform for the sale of goods and services online. Therefore, e-Commerce Operators should deduct TDS on making payments to e-commerce sellers. Hence, the TDS should be deposited with the income tax department and a TDS Return should be filed.

Deductee

E-Commerce Participant or E-Commerce Seller is a person resident in India who sells goods and services on an e-commerce platform. An E-Commerce Seller receiving payment for goods as well as services sold will receive the amount after the deduction of TDS under Sec 194O. E-Commerce Sellers, not resident in India making e-commerce sales will receive the amount after deduction of TDS under Sec 195

Nature of Payment

E-Commerce Operator is required to deduct TDS on the Gross Sales of goods or services. The Gross Sales includes GST and commission charged by the e-commerce operator.
Further, If the buyer of goods or services has made a direct payment to the e-commerce seller, it shall be deemed that the payment has been made by the e-commerce operator and the amount shall be included in the Gross Sales on which TDS is required to be deducted.

Time of Payment

TDS shall be deducted at the time of credit of the amount to the account of an e-commerce participant or at the time of payment, whichever is earlier.

Rate

If the Deductee is a resident Individual or HUF also the Gross Sales exceed Rs. 5,00,000 in the financial year, deduct TDS u/s 194O at the rate of 1% on Gross Sales. In case of any other deductee, deduct TDS at the rate of 1% on Gross Sales irrespective of the number of gross sales.
If the deductee does not provide the PAN or Aadhar, then TDS shall be deducted at the rate of 5% irrespective of the gross sales amount.

TDS Certificate

Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. Using Form 16A, the deductee can claim credit of the tax deducted while filing Income Tax Return

TDS Return

After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES to report details of dividend payment. Once the return is filed, the deductor should provide Form 16A to the deductee

Example 1

Rahul is a registered e-commerce seller on Amazon India. For May 2020, here are the details of his sales on Amazon:

  • Total Sales = Rs. 5,90,000
  • GST @ 18% included in the above sales = Rs. 90,000
  • Commission @ 6% charged by Amazon included in above sales = Rs. 35,400
  • Sales from Rahul to Rohan through Amazon. However, Rohan directly made payment to Rahul of Rs. 20,000 (including GST)

Solution

  • E-Commerce Operator – Amazon India
  • E-Commerce Seller – Rahul
  • Gross Sales = Rs. 5,90,000 + Rs. 20,000 = Rs. 6,10,000
  • Since Gross Sales exceeds Rs. 5,00,000 and Rahul is a resident Individual, Amazon India should deduct TDS @ 1% on Gross Sales before making payment to Rahul
  • TDS = 1% of 6,10,000 = Rs. 6,100
  • Payment to Rahul = 6,10,000 – 35,400 – 6,100 = Rs. 5,68,500
  • Amazon would deposit TDS of Rs. 6,100 with the Income Tax Department also file TDS Return Form 26Q
  • If Rahul has not provided PAN or Aadhar, then TDS should be deducted @ 5% irrespective of gross sales amount
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Example 2

ABC Private Limited is a registered e-commerce seller on Amazon India. For May 2020, additionally, here are the details of its sales on Amazon:

  • Total Sales = Rs. 1,18,000
  • GST @ 18% included in the above sales = Rs. 18,000
  • Commission @ 6% charged by Amazon included in above sales = Rs. 7,080
  • Sales from ABC Private Limited to Rohan through Amazon. However, Rohan directly made payment to ABC Private Limited of Rs. 20,000 (including GST)

Solution

  • E-Commerce Operator – Amazon India
  • E-Commerce Seller – ABC Private Limited
  • Gross Sales = Rs. 1,18,000 + Rs. 20,000 = Rs. 1,38,000
  • Amazon India should deduct TDS @ 1% on Gross Sales before making payment to ABC Private Limited. TDS should be deducted irrespective of the sales amount
  • TDS = 1% of 1,38,000 = Rs. 1,380
  • Payment to ABC Private Limited = 1,38,000 – 7,080 – 1,380 = Rs. 1,29,540
  • Amazon would deposit TDS of Rs. 1,380 with the Income Tax Department and file TDS Return Form 26Q
  • If ABC Private Limited has not provided PAN, then TDS should be deducted @ 5%
Ask an Expert of TDS
Having doubts? We are here to help you.
[Rated 4.8 stars by customers like you]
Ask an Expert of TDS
Having doubts? We are here to help you.
[Rated 4.8 stars by customers like you]

FAQs

When is TDS under Sec 194O not required to be deducted by the E-Commerce Operator?

E-Commerce Operator is not required to deduct TDS under Sec 194O if all the following conditions are satisfied:

> The E-Commerce Seller is a resident Individual or resident HUF and
Gross Sales do not exceed INR 5,00,000 and
> E-Commerce Seller has provided their PAN or Aadhaar to the e-commerce operator

Is E-Commerce Operator required to deduct TDS on payment to Non-Resident E-Commerce Seller?

The definition of e-commerce participant as per Sec 194O includes a person resident in India. Thus, E-Commerce Operator is not required to deduct TDS on payment to a Non-Resident E-Commerce Seller under Sec 194O. However, TDS must be deducted under Section 195 as per the prescribed rates.

Whether the TDS is to be deducted for Non-Resident selling well through e-Commerce Portal u/s 194O?

E-commerce Participant is defined a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce. And thus No TDS is required to be deducted when Participant is Non Resident.

Section 194K : TDS on Dividend from Mutual Funds

What is Section 194K?

Under Budget 2020 applicable from 1st April 2020 i.e. FY 2020-21, Dividend Distribution Tax – DDT was abolished. As a result, the dividend received on equity shares and mutual funds which were earlier exempt under Section 10(35) of the Income Tax Act is now taxable at slab rates. It is taxable in the hands of the shareholder. Since the income would be taxable in the hands of the shareholder, TDS would be applicable. As a result, the Finance Minister introduced a new Section 194K to deduct TDS on Dividend from Mutual Funds.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

The person paying dividends on mutual funds should deduct TDS u/s 194K. The deduction is at 10% on the number of dividends, only if a resident shareholder’s total dividend in a financial year exceeds INR 5,000. Section 194K is applicable from 1st April 2020 i.e. FY 2020-21 onwards.

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Section 194K – TDS on Dividend from Mutual Funds

  • Deductor
    • Mutual Fund distributing dividends to the investors of equity mutual funds should deduct TDS on such dividends. The deductor must deposit the TDS and file the TDS Return on TRACES.
  • Deductee
    • Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K. Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Section 194. NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
  • Nature of Payment 
    • Sec 194K covers Payment of Dividend on Equity Mutual Funds to a resident shareholder exceeding INR 5000 in a financial year.
  • Time of Payment
    • TDS shall be deducted at the time of credit of income to payee account or at the time of payment, whichever is earlier. If the payee of the amount credits the amount to be paid to “suspense account” or any other account, it is considered as ‘deemed payment’ and the payer must deduct TDS on such credit.
  • Rate
    • Deductor should deduct TDS u/s 194K at the rate of 10% if the dividend amount exceeds INR 5000. If the payee does not provide the PAN, TDS shall be deducted at the rate of 20%
  • TDS Certificate
    • Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the tax deducted while filing Income Tax Return.
  • TDS Return
    • After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES. The details of the dividend payment are part of this report. The deductor, after filing the report, should provide Form 16A to the deductee.
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

What is the meaning of ‘Income’ under Section 194K?

As per the Income Tax Act, ‘Income’ includes dividend paid on units of mutual funds specified under 10(23D) of Income Tax Act, units of mutual funds from a specified company or units of mutual funds from the administrator of the specified undertaking

There was confusion about whether the TDS under Section 194K on “Income from Mutual Funds” would include only dividends; or also include capital gains on the sale of MFs. On 4th Feb 2020, CBDT issued a clarification on this issue.

CBDT Clarification TDS at 10% should be deducted on Dividend Income only and not on Income from Capital Gains on the sale of Mutual Funds. Here is the official clarification from CBDT.

Import Your Trades
File ITR Online

India’s fastest growing Tax Filing Platform

[Rated 4.8 stars by customers like you]

Import Your Trades

File ITR Online

India’s fastest growing Tax Filing Platform

[Rated 4.8 stars by customers like you]

FAQs

Are Capital Gains from the sale of Mutual Funds subject to TDS under Sec 194K ?

Sec 194K mentions TDS on ‘Income’ from Mutual Funds. There was confusion about whether capital gains income on the sale of MFs should be subject to TDS u/e 194K. However, the CBDT issued an official clarification on 02nd February 2020. Therefore, TDS needs to deducted at 10% on Dividend Income only. Additionally, it is not applicable for Income from Capital Gains on the sale of Mutual Funds.

Is TDS required to be deducted on dividend paid to NRI shareholder ?

Section 195 applies to the dividend paid to NRI investors/shareholders, as per provisions of the Income Tax Act. Hence, TDS needs to be deducted on the dividend at 20% on equity shares and equity mutual funds. Therefore, TDS has to be deducted at 10% as per Sec 194 and Sec 194K for an NRI shareholder.

How to Download Form 16A from TRACES?

TRACES is the online portal for filing TDS Returns, correction of TDS Returns, and downloading TDS documents. Form 16A is a TDS Certificate issued by a deductor for non-salary payments like professional fees, brokerage, commission, interest, rent, contractual payment, etc. It contains details of the nature of payment and TDS deducted on it. The deductor can download Form 16A from his account on TRACES. To do so, it is necessary that the status of the submitted return i.e. Form 26Q should be ‘Statement Processed with Default’ or ‘Statement Processed without Default’.

TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

While Form 16A is TDS Certificate for non-salary payments, Form 16 a is TDS Certificate for salary payments. A deductor can download both from their account on TRACES.

How to Download Form 16A?

  1. Login to TRACES

    Login to TRACES – Enter User Id, Password, TAN or PAN and captcha

  2. Navigate to Form 16A

    Go to Downloads > Form 16A

  3. Select Financial Year and PAN

    Select the Financial Year and PAN for which you want to download the TDS certificate. Click on ‘Go’. The deductor can request for Form 16A using the option ‘Search PAN’ or ‘Bulk PAN’

  4. Details of authorised person

    The details of the Authorised Person will appear on the screen. These details are populated from the profile information on TRACES. Further, these details would be printed on Form 16A. Click on Submit

  5. Select either of the following for KYC validation:

    1. Digital Signature Support KYC validation – Select if you want to use KYC validation using DSC
    2. Normal KYC Validation (without Digital Signature) – Select if you want to use KYC validation without using DSC

  6. KYC Validation using DSC option

    Select the Financial Year, Quarter and Form Type for KYC validation using DSC. Click on ‘Validate DSC’

  7. Enter password of DSC

    Enter the password of DSC and click on ‘ok’. Select the DSC certificate and click on ‘Sign.’ Enter the following details:
    1. Enter the Token number of the TDS Return filed for the Financial Year, Quarter and Form Type selected in Step 5 above
    2. Select the checkbox for Nil Challan or Book Adjustment
    3. Enter the challan details – BSR Code, challan serial number, challan amount, date on which tax is deposited
    4. Enter unique PAN-Amount combination – Enter PAN as entered in TDS Return and amount deposited
    5. Click on Proceed
    Note: Enter the details of the latest TDS return or TDS correction return filed

  8. Option 2: Normal KYC Validation without using DSC

    Select the Financial Year, Quarter and Form Type for KYC validation using DSC. Enter the Authentication Code if you have finished the validation earlier and you have the authentication code
    Enter the following details:
    1. Enter the Token number of the TDS Return filed for the Financial Year, Quarter and Form Type selected in Step 5 above
    2. Select the checkbox for Nil Challan or Book Adjustment
    3. Enter the challan details – BSR Code, challan serial number, challan amount, date on which tax is deposited
    4. Enter unique PAN-Amount combination – Enter PAN as entered in TDS Return and amount deposited
    5. Click on Proceed

  9. Success page

    Success page will appear on the screen once the KYC details are validated. Two Unique Request Numbers are generated separately for Form 16A. You can download the file from tab ‘Downloads’

  10. Navigate to Requested Downloads

    Enter the Request Number or Request Date or View All. Select the applicable row. If the status is ‘Available‘, click on the download button

  11. Download TRACES utility

    Click on HTTP Download button. A zip file is downloaded. Please do not extract the file. Go to Downloads > Requested Downloads. Click on the ‘Click here’ button.

  12. Enter verification code

    1. Click on TRACES PDF Converter 1.4L to download utility for Form 16A

  13. Extract the zip file and open JAR file. Follow the steps to download pdf of Form 16A

    1. Select zip file of Form 16A
    2. Enter your TAN as the password for the input file
    3. Select the folder to save the output pdf file
    4. Select digital certificate to digitally sign the PDF files – this is not mandatory
    5. Certificate details will be displayed under the certificate store
    6. Click on the button ‘Proceed’
    7. The pdf file of Form 16A is saved in the selected folder
    8. The password to open Form 16A is TAN number in Capital letters i.e. ABCD12345E

FAQs

I am a professional service provider and my TDS has been deducted u/s 194J. How can I download Form 16A?

You cannot download Form 16A on your own. You should request your deductor to provide you with Form 16A since he has deducted the TDS and filed TDS Return. He can download Form 16A at the end of each quarter from TRACES. However, you can download the tax credit statement from your account on the income tax website. It contains details of total income and TDS deducted on it.

Is Form 16A different from Form 16 Part A?

Yes. Form 16A is different from Form 16 Part A.
The employer issues Form 16 TDS Certificate to the employee with details of Salary Income and TDS deducted on it. It comprises of two parts – Part A and Part B. Form 16 Part A contains all the TDS information – employer’s details, employee details, tax details, and assessment year.
The deductor issues Form 16A TDS Certificate for non-salary payments like professional fees, brokerage, commission, interest, rent, contractual payment, etc. It contains details of the nature of payment and TDS deducted on it.

What are the different ‘Request Status’ to download Form 16A on TRACES?

1. Submitted – Successful submission, Request in processing
2. Available – Form 16A available for Downloading
3. Disabled – Duplicate request submitted for downloading
4. Failed – User is advised to contact CPC(TDS)
5. Not Available – All PAN mentioned in the statement is invalid