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TDS - Process, Procedure, Document Required, Fees, Eligibility, Duration

Tax Deducted at Source (TDS) is the amount deducted by a person (deductor) who is required to pay another person (deductee) a specific amount of money. TDS is tax deducted from money while making payments such as salary, rent, fees, commission, interest, and so on. The deductor transfers the balance to the deductee after deducting the sum. The TDS so deducted is remitted to the Central Government by the deductor.

TDS is an income tax deducted when a specific payment is made. According to the Income Tax Act, every firm or individual is required to deduct tax at the point of payment if the amount paid exceeds a specified threshold. The individual who gets a payment is likewise obligated to pay taxes. The goal of TDS is to reduce the possibility of evading taxes by the income recipients.

TDS must be deposited with the central government by the individual or firm deducting it. Once deposited, the amount will be reflected on the Form 26AS of the person who got the income after the TDS deduction. All TDS payments reflected on the deductee's Form 26AS will be immediately adjusted in their taxable income.

The deductee should also receive a TDS certificate from the deductor, which they can use to file their Income Tax Return. All TDS deducted provides the deductee with tax credits, lowering their tax liability.

Key points of TDS

  • TDS must be deducted when the payment becomes due or when the actual amount is paid.
  • By the 7th day of the next month, everyone must credit the tax deducted to the government's account.
  • Delays in TDS deduction will result in a monthly interest charge of 1% until the tax is deducted.
  • In the event of late or non-payment of TDS, an interest of 1.5 percent per month shall be charged until the tax is deposited.
  • TDS returns must be filed quarterly. In the event of a late or non-filing of the return, a fine of Rs. 200/- per day would be charged till the return is eventually filed.

Filing TDS returns

Filing TDS returns are required for all individuals who have deducted TDS from the deductee. TDS returns must be produced quarterly. Details such as TAN, amount of TDS deducted, kind of payment, PAN of deductee, and so on must be provided to file TDS return.

TDS certificate

TDS certificates must be delivered to the assessee from whose income TDS has been deducted by the deductor while making payment. The deductor may issue a TDS certificate on Form 16.

Claiming a TDS return

An individual must file ITR for the assessment year if they intend to claim a TDS return. The applicable credits are deducted from their tax liability for the fiscal year. If they are entitled to a refund, it will be processed and refunded to their bank account within six months.

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TDS Frequently Asked Questions

Individuals, businesses, Hindu Undivided Families, and NRIs are all required to deduct tax at the source. The following conditions must be met for deducing TDS: • The payment falls within the specific categories described in Income Tax Act sections 192 to 195. • The amount exceeds the limits stated in the CBDT circular for the assessment year for such payments.
TDS is levied on the following types of payments: • Salary • Fee for consultation • Professional fee • Rent • Commission • Dividends paid on corporate stock and mutual funds • Winnings from lotteries and other comparable games • Royalty payment • Securities and Deposit Interest
TDS is exempted in the following conditions: • If the income recipient’s total taxable income is less than the taxable limit, they are not required to pay any tax. As a result, no TDS should be deducted from their earnings. • Allowances such as LTC, HRA, conveyance, and travel are considered exemptions within the limits provided. • There is no set rate for deducting TDS from pay income. It is determined by the income tax brackets that apply to the employee's taxable income. Unless the expected salary exceeds the basic exemption ceiling, no tax will be deducted at the source.

TDS Important Due Dates

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