What is TDS ?
TDS or tax deducted at source is a deduction made by someone while making a payment or crediting the account, whichever is early. This could be your employer, customer or even a bank paying you interest on a fixed deposit. Before making a payment to you, the payer deducts and pays tax on your behalf to the Income tax department. You can claim/adjust TDS credit while filing your income tax return against income tax payable. You can view the details of the TDS credit in Form 26AS by logging into your income tax efiling account.
TDS could be while purchasing a property, paying rent or paying a salary to any person. In such circumstances, you should know how much tax to deduct (TDS) as well as how and when to pay it to the Income Tax Department. For example, if you are a company/partnership paying professional fees of Rs 60,000, you have to deduct TDS of 10% (see details below). This means Rs 6,000 to be deducted as tax from professional fees. Alternatively, if you have purchased a flat worth Rs 60 lakhs, you have to deduct TDS at 1%. This means you have to keep aside Rs 60,000 and pay this amount to the Income Tax Department rather than to the seller. To know more about when to deduct TDS and how to pay it, is elaborated below
TDS Rate Chart
|Income Type||TDS Rate|
|Fixed Deposit Interest||10%|
|Savings Account Interest||Nil|
|NCDs listed on exchange||Nil|
|Professional and Technical Services||10%|
The rates mentioned are for payments made to Resident individuals who have provided their PAN to the person responsible for deducting tax. Different rates apply under the various heads mentioned for specific circumstances and other categories of taxpayers. Please refer to the notes below.
TDS on Salary
Tax is deducted by your employer as per your income tax slab under section 192 of the Income Tax Act, 1961.This is why employers asked for investment declarations at the start of the year and investment proofs towards the end. This enables them to calculate your taxable income and applicable slab and deduct tax accordingly. If your slab is 30%, the tax will be deducted at 30% and so on.
TDS on Interest Income (Fixed Deposit)
Interest Income of resident person is taxable under section 194A of the Income Tax Act, 1961. Banks are required to deduct tax on anyone whose interest payment on a time deposit (FD) exceeds Rs 10,000. This threshold applies to interest from a single FD or the cumulative interest from all FDs with the bank if there are more. The rate at which the bank deducts tax is as follows:
|If PAN number is not given to the bank||20%|
|If PAN number is given to the bank||10%|
|If an individual submits form 15G/15H||No TDS|
If your total income is below the taxable limit, you can submit form 15G/15H to prevent the bank from deducting tax on your fixed deposits. Form 15H is for senior citizens, those who are 60 years or older; while Form 15G is for persons other than senior citizens.
TDS on interest received from bonds
Interest paid on bonds, is subject to Tax deducted at source (TDS) at 10% under section 193 of the Income Tax Act, 1961. This would also include government issued bonds like the 7.75% Savings (Taxable) Bonds. In case of tax-free bonds, this provision would not apply.
TDS on Insurance Commission
Individual & HUF who receive insurance commission will have tax deducted on this commission income under Section 194D of the Income Tax Act, 1961. The rate of deduction is 5% if the payee’s PAN is provided. For entities other than individual & HUF however, the TDS rate is 10% if PAN is provided. If PAN is not provided then TDS rate is 20%. Those getting commissions less than Rs 15,000 per annum will not have any TDS deducted.
TDS for contractors
Contractors undertaking various types of work such as construction projects for governments at different levels, local bodies or co-operative societies are subject to TDS under Section 194 C of the Income Tax Act, 1961. This can include even services such as advertising or catering. The applicable rate is 1% for individuals & HUF and 2% for entities other than Individuals & HUF (like companies/firms). If the PAN number is not furnished, the rate of deduction is 20%. Those getting payments upto Rs 30,000 in a single payment or upto Rs 100,000 in aggregate in a financial year, will not have any tax deducted under this section.
TDS on interest on deposits in savings accounts
No TDS is applicable to savings account interest. In fact savings account interest up to Rs 10,000 per annum is available as a deduction under Section 80TTA. For senior citizens, the deduction is higher under Section 80TTB upto Rs 50,000 for all kinds of deposits.
TDS on rent
Individuals or HUFs who are subject to tax audit are under an obligation to deduct the tax at source if the rent paid by them is more than Rs 1.8 lakhs in a financial year. The rate of deduction is 2% for the use of any machinery, plant and equipment and 10% for the use of any land, building and furniture or fittings.
For individual or HUF (Not liable for Tax Audit)
Any individual or HUF not liable for tax audit, paying rent to a resident for use of land or building or both of more than Rs 50,000 for a month or part of the month is required to deduct 5% tax under section 194IB of Income tax Act, 1961.They have to deduct tax at the time of credit of rent for the month of March or the last month of tenancy, if the property is vacated during the year, as the case may be. They have to pay the tax deducted to the government within a period of 30 days from the end of the month in which the deduction is made accompanied by a challan-cum-statement (Form 26 QC).
The person deducting the tax has to provide a tax deduction certificate (Form 16C) to the landlord within 15 days from due date of tax payment and submission of form 26QC. Tenants do not need a Tax Deduction Account Number (TAN) for deducting TDS under this section. If the landlord does not provide his PAN number, the tenant has to deduct tax at 20% instead of 5% of the rental payment.
TDS on shares and mutual funds
There is no Tax deducted at source (TDS) on capital gains in shares and mutual funds.
TDS on property
Buyers of flats, houses or other property which has a value of Rs.50 lakhs or above have to deduct tax of 1% of the purchase value. If the seller’s PAN number isn’t provided to the buyer, tax will be deducted at 20%. The buyer does not need to obtain a TAN for this purpose. The buyer has to pay the tax deducted to the government within a period of 30 days from the end of the month in which the deduction is made accompanied by a challan-cum-statement (Form 26 QB).
The person deducting the tax has to provide a tax deduction certificate to the landlord within 15 days from the due date of tax payment and submission of form 26QB.
TDS on brokerage
Any Person (other than individual or HUF) who is paying brokerage or commission (other than insurance commission) to a resident shall deduct tax at the time of credit to the account of the payee or at the time of payment, whichever is earlier at the rate of 5% under section 194H of the Income Tax Act, 1961. If PAN number is not provided to the person making the deduction, tax will be deducted at the rate of 20%. However if the amount payable is less than Rs 15,000 in a financial year, no TDS will be deducted. Individuals or HUFs who are subject to tax audit are also under an obligation to deduct the tax at source under this section.
TDS on fees for professional and technical services
Any Person (other than individual or HUF) who is paying fees for professional services or technical services to a resident shall deduct tax at the time of credit to the account of the payee or at the time of payment, whichever is earlier at the rate of 10% under section 194J of the Income Tax Act, 1961. The rate of deduction is 20% if PAN is not furnished to the person making the deduction. No deduction will be made if the professional fee paid in a financial year does not exceed Rs 30,000.
Individuals or HUFs who are subject to tax audit are also under an obligation to deduct the tax at source under section 194J of Income Tax Act, 1961.
If excess tax is deducted, you will have to claim a refund in your income tax return. For most individuals the return has to be filed by 31st July for the previous financial year.
TDS Payment Online
- Login to the NSDL tax payment website.
- Select Challan no/ ITNS 281.
- Select company or non-company deductee as applicable.
- Enter the Tax Deduction or Collection Account Number and assessment year to which the payment relates. Assessment year is the year which follows the financial year of the transaction
- Now select, whether payment is made by taxpayer for regular assessment.
- Enter the nature of payment, mode of payment and hit ‘submit.’
- If the TAN is valid, the full name of the taxpayer will be displayed on the confirmation screen.
- Once you confirm the data, you will be redirected to your net-banking account.
- Enter the password and OTP/authentication device password and make the payment.
- On payment, a challan will be generated displaying the details of the payment made.
Important Dates for TDS Payment
The due date for each TDS payment is the 7th of the month following the month in which you have made the deduction. For example if TDS is deducted on 15th January, it must be deposited with the Income Tax Department before 7th February, except in certain cases as specified above. After making payment, you have to file a TDS return. The due date for each TDS return is the last day of the month following the quarter in which TDS has been paid (except for the Jan-March quarter). Have a look at the table below.
|Quarter||TDS Payment Date||TDS Return Date|
|Jan – March||7th Feb, 7th March, 30th April||31st May|
|April – June||7th May, 7th June, 7th July||31st July|
|July – September||7th August, 7th, September, 7th October||31st October|
|October - December||7th November, 7th December, 7th January||31st January|
1Tax benefit of ₹ 54,600 (₹ 46,800 u/s 80C & ₹ 7,800 u/s 80D) is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on life insurance premium u/s 80C of ₹ 1,50,000 and health premium u/s 80D of ₹ 25,000. Tax benefits under the policy are subject to conditions under Section 80C, 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.
2Tax benefit of ₹ 7,800 is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on health premium u/s 80D of ₹ 25,000. Tax benefits under the policy are subject to conditions under Section 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.
3Tax benefit of ₹ 46,800 is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on life insurance premium u/s 80C of ₹ 1,50,000. Tax benefits under the policy are subject to conditions under Section 80C, 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.
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