TDS (Tax Deducted At Source)

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Hiral Vakil

Form 16
TDS
TDS Due Date
TDS Return
Last updated on December 1st, 2022

What is TDS (Tax Deducted At Source)?

The concept of TDS or Tax Deducted at Source was introduced with the aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make a payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get the credit of the amount so deducted on the basis of Form 26AS or the certificate issued by the deductor.

How is TDS deducted?

The Payer making a payment of specific nature withholds a percentage of the total amount payable. The payer is also known as the “Deductor”. The payee whose tax is deducted is known as a “Deductee”. It needs to be deducted from the following type of payment:

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

ABC Pvt Ltd needs to make a payment of INR 50,000 to Jay for his professional services. Then, in this case, ABC Pvt Ltd (Payer/ Deductor) needs to deduct TDS at 10% on INR 50,000 i.e, INR 5,000. And make a payment of INR 45,000 (INR 50,000 – INR 5,000) to Jay (Payee/ Deductee).

Who needs to deduct TDS?

The Payer/ Deductor has to deduct TDS before making payment to a payee. The payer needs to obtain a TAN for depositing and filing the Return. The following persons are required to deduct:

Tax Deducted at Source (TDS) on Salary

Every employer needs to deduct tax on salary payments made to employees. The TDS on Salary comes under Section 192. An employer needs to file a TDS Return in Form 24Q quarterly.

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Here is a brief overview of how the total amount of tax to be deducted from Salary is decided.

Section TDS Rate  Applicability
Section 192 Applicable Income Tax Slab Rate
  • When the estimated income of the employee is taxable, TDS is deducted.
  • The employer is not allowed to deduct tax on non-taxable allowances (for eg. conveyance allowance, rental allowance, medical allowance, etc..)
  • If the estimated total income of the employee is less than the minimum taxable income, no TDS is deducted. (Which is INR 2,50,000/- in the case of Individual, HUF, AOP, BOD, and AJP. Nil for others.)

As mentioned in the table, if you have any investments (which fall under Section 80) or life events that call for official allowances (Such as your child’s school fees or your wife’s medical treatment), then you can claim deductions. To claim the same you need to provide the relevant documents to your employer. It will also be mentioned in your Form 16. Form 16 issued by the employer is Proof of TDS Deduction and Salary Payments. It is used to file ITRs by employees.

EXAMPLE:

Particulars Amount (in INR)
1. Income from Salary 8,00,000
2. Tax Deductible Investments and Payments  
a. ELSS 25,000
b. PPF 15,000
c. Insurance premium 17,500
d. Home Loan principal repayment 90,000
e. Home Loan interest 1,30,000
3. Total taxable income (1-2) 5,22,500
4. Tax liability as per slab rates 17,680
5. Monthly tax to be deducted by the employer (17680 / 12 months) 1473

Tax Deducted at Source on Income other than Salary

There are various payments other than salary for which tax is deducted such as professional fees, contract payments, commission or brokerage, property transactions, etc. TDS rates vary by the nature of the payment.

In the case of TDS payments other than salary, details of tax deducted can be found in Form 16A. It should be furnished by the deductor within fifteen days from the due date for furnishing the ‘statement of Return’ under rule 31A. You will read about it in the next section.

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Due Date to Deposit TDS

The following table displays the due date to deposit TDS:

Month End of Quarter TDS Payments Due Date – Government  The TDS Payments Due Date – Non- Government 
January 31st March 7th February 7th February
February 31st March 7th March 7th March
March 31st March 7th April 30th April
April 30th June 7th May 7th May
May 30th June 7th June 7th June
June 30th June 7th July 7th July
July 30th September 7th August 7th August
August 30th September 7th September  7th September 
September 30th September 7th October 7th October
October 31st December 7th November 7th November
November 31st December 7th December 7th December
December 31st December 7th January 7th January

Due Date to File TDS Return

Quarter Months  Due Dates
                Q1           APRIL-JUNE           31st July 
               Q2        JULY-SEPTEMBER         31st October
               Q3       OCTOBER-DECEMBER         31st January 
               Q4       JANUARY-MARCH          31st May

What is TDS Certificate?

These certificates are to be issued by a person who is deducting the tax of the assessee while making payment. For instance, banks issue Form 16A to the depositor when tax is deducted on interest from fixed deposits. Form 16 is issued by the employer to the employee and it can be downloaded from the TRACES account.

What are the different types of TDS Returns?

The Income Tax Department has notified different TDS Returns/ Statements to be filed by the payer/ deductor within prescribed due dates. The quarterly returns/statements should be submitted in the following forms:

Type of Payment Return Type
Salary Payments Form 24Q
Payments other than Salary to a Resident Form 26Q
Payments other than salary to NRI Form 27Q
Tax Collected at Source Form 27EQ
Payment on Sale of Property (by Individuals) Form 26QB
Payment of Rent on Property (by Individuals) Form 26QC
Payment to Contractor or Professional (by Individuals) Form 26QD

FAQs

1. Do I need to file my income tax return if my TDS is deducted by my employer?

Yes. It is very common for salaried individuals to have all their taxes deducted by their employer in form of TDS. Still, you should file an income tax return to claim any refund and/or carry forward any losses.

2. How to deposit TDS online?

– Go to TIN-NSDL, select Challan No./ ITNS 281 and enter TAN, Assessment Year, and Personal Information.
– Select the Type Of Payment and Nature Of Payment
– Select Bank Name and you will be redirected to the net banking site, make payment, and Save Challan 281 for your records.

3. How to check my TDS Credit?

The deductor/employer is liable to give you a TDS Certificate i.e; Form 16, Form 16A confirming the amount of tax deducted. You can also check your TDS credit from your Form 26AS by login into your income tax e-filing account.

4. Why am I receiving SMS alerts from VK-ITDEFL?

ITD has been sending SMS to the taxpayers from VK-ITDEFL that mentions the amount of TDS against the PAN of the taxpayer. It lets you know the TDS credited in respect of your income from salary, interest, etc., every quarter. The amount of TDS would stand accumulated in your Form 26AS for the respective financial year. This initiative was implemented by the Finance Ministry to increase transparency and reduce the cases of TDS mismatches at the time of income tax filing.

Got Questions? Ask Away!

  1. Hey @ViraajAhuja47

    TDS and TCS both come under Income Tax.

    TDS: Tax Deducted at Source

    TDS is a taxation method, where a person making a payment of specific nature is liable to deduct tax and deposit it with the government.

    The rate at which TDS is deducted and paid is based on the specified based on nature of the payment.

    The person making the payment is required to make deduct and deposit the TDS.

    TCS: Tax Collected at Source

    TCS is collected by the seller from the buyer at the time of sale made. Sellers selling any specified item are liable to collect tax at a predefined rate from the buyer the time of making a sale. This TCS collected has to be deposited by the seller with the government.

    Hope this helps!