Easy Guide to TDS Provisions Under Income Tax Act 1961

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TDS is an acronym of Tax Deducted Source (TDS) which was implemented by the Indian government to collect taxes from sources on the income earned by an individual. TDS can be used as a tool to collect the tax which reduces the chance of tax evasion. It can be deducted directly from the earned income or salary rather than at a later date.

As per the provisions of the Income Tax Act, those individuals who are making payments like salary, commission, interest, professional fees, rent and more are entitled to deduct TDS tax before giving payment and further, the TDS must be submitted to the government.

Who is Liable to Deduct TDS?

• TDS deduction is liable for all the persons coming under audit under section 44AB of the Income Tax Act, 1961
• Under this, all companies and firms are entitled to deduct TDS. Several conditions are depending on case to case wherein TDS must be mandatory to be deducted even when the person is not responsible for the audit

TAN Mandatory for the Deduction of TDS

A TAN (Tax Deduction Account Number or Tax Collection Account Number) is a 10-digit alphanumeric number which is being issued by the Income Tax Department. Every deductor must require TAN for the deduction of TDS which is to be required in all the TDS Certificates, challans, quarterly statements, correspondence and more.

Drawback if Deductor Does not Have TAN

If in case the deductor does not have a Tax Deduction Account Number (TAN), he/she is liable to pay Rs.10,000 as a penalty.

Conditions Under Which TAN is Not Necessary for Deduction of TDS

• A person can use PAN rather than TAN in respect of selling more than 50 lakhs of immovable property other than agricultural property at the time of deducting TDS.

Deduct TDS and deposit to the government account

• Before making payments to the receiver it is mandatory for the individual to deduct the tax which has to be submitted to the government on or before the 7th of the following month. The TDS for March month should be submitted to the government before 30th April.

An Issue of TDS Certificate

• Under the Income Tax Act, it is compulsory for the deductor to issue the TDS certificate in forms 16(for the salaried person) and 16A(other than a salaried person) after the deduction of TDS.

Filing of Prescribed Return/Quarterly Statement

• An individual is liable for deducting tax which is to be required for filing quarterly statements of TDS.

Filing of E-Returns

• Filing TDS online has turned out to be beneficial for the deductor as it saves time, and minimizes the return preparation time, the volume of documentation as well as a compliance costs. Apparently, filing TDS online is also beneficial for the government which helps in coordinating taxes in a better manner. Tax Deducted At Source (TDS) is directly deposited to the banks and deductees can easily claim TDS credits.

The Requirement to File TDS E-Returns

• As per the provision of law, it is mandatory for all corporate and Government deductors to file TDS online
• A person is entitled to obtain their accounts audited u/s 44AB and also have to file TDS returns electronically
• The Deductee’s record in a statement for any quarter of F.Y. is 20 or more

Notably, In other circumstances, the individual can file the TDS return physically.

Forms for Quarterly TDS Return

Due Date of Filing TDS Return

Penalties for the Offense Committed Against the Provisions & Act

If in case, the taxpayer has failed to deduct TDS

• The Income Tax Officer might discard the expenditure in respect of which TDS has not been deducted. If it is discarded then the taxpayer is liable to pay taxes on such kind of expenditure.
• The taxpayer is entitled to pay a 1 per cent interest rate monthly from the date of the amount paid till the date of TDS is actually deducted.

Failed To Deposit Tax to Government After Deduction

• If in case the taxpayer has deducted the tax but failed to deposit it to the government. In this situation, the taxpayer is entitled to pay Interest @1.5% monthly or part of the month which will be levied from the date of deduction until the payment date. Furthermore, the penalty is likely to be levied which should not be higher than or equal to the amount of TDS.

• If in case, the taxpayer forgot or gets delayed in filing a TDS return to the government within the due date then he is entitled to pay the penalty of Rs.200 per day until the date of filing the return.

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I'm Suchi Sharma, a finance expert who is committed to doing things the right way. As a chartered accountant, I have the skills and knowledge to help you navigate the complex world of finance. Whether you need help with taxes and accounting, I'm here to provide you with the best possible advice and guidance. View more posts