Ashish Garg & Associates TDS Return

TDS Return

TDS Return Filing

TDS – Tax Deducted at Source

Tax Deducted at Source (TDS) is a system introduced by the Income Tax Department of India to collect tax at the point of income generation. In this system, the payer deducts a certain percentage of the payment being made to the payee and deposits it with the government. This deduction serves as an advance payment of tax for the payee. TDS is applicable on various types of payments, such as salary, interest, rent, professional fees, etc.

Who Should Deduct TDS?

The following entities are required to deduct TDS under the applicable provisions of the Income Tax Act:

  1. Employers: An employer must deduct TDS on employee salary payments.
  2. Businesses/Entities: Businesses that make payments to contractors, professionals, and other service providers are required to deduct TDS.
  3. Banks: Banks are required to deduct TDS on interest income over the specified threshold.
  4. Government Authorities: Any government agency making payments to individuals, contractors, etc., must deduct TDS.
  5. Individuals: Individuals or entities making certain payments like rent, professional fees, etc., may also be required to deduct TDS.

Deposit of TDS

Once TDS has been deducted, the deductor must deposit the amount with the government using the prescribed method. TDS can be deposited online through the official website of the Income Tax Department or through designated banks. The amount must be deposited before the due date to avoid penalties and interest charges.

Common Payments Attracting TDS

The following payments typically attract TDS:

  1. Salary: TDS is deducted from employee salaries based on income tax slabs.
  2. Interest: Banks and financial institutions deduct TDS on interest income above the threshold limit.
  3. Rent: TDS is deducted on rent payments exceeding Rs. 2.4 lakh annually.
  4. Professional/Technical Fees: TDS is applicable to payments made to professionals like doctors, lawyers, chartered accountants, etc.
  5. Contractor Payments: Payments to contractors for services or work contracts are subject to TDS.
  6. Dividends: TDS is deducted on dividend income above a certain limit.
  7. Commission/Fees: TDS is applicable on commission or fees paid to individuals or companies.

TDS Thresholds

TDS is not applicable to all payments; it is applicable only when the amount exceeds a certain threshold. The thresholds depend on the type of payment and the category of the payee. Here are some examples of common TDS thresholds:

  1. Salary: TDS is deducted based on income tax slabs.
  2. Interest on Securities: TDS is applicable if the interest amount exceeds Rs. 5,000 in a financial year.
  3. Rent: TDS is applicable on rent payments exceeding Rs. 2.4 lakh annually.
  4. Professional Fees: TDS is applicable if the professional fees exceed Rs. 30,000 per year.
  5. Contractor Payments: TDS is deducted if the amount exceeds Rs. 30,000 in a single transaction or Rs. 1 lakh in total in a financial year.

TDS Rates & Key Sections

TDS rates vary depending on the type of payment and the applicable section of the Income-tax Act. Some common TDS rates and sections are as follows:

  1. Salary: TDS is deducted based on income tax slabs (Section 192).
  2. Interest on Bank Deposits: 10% under Section 194A (for interest above Rs. 40,000 annually).
  3. Rent: 10% under Section 194I for rent payments exceeding Rs. 2.4 lakh annually.
  4. Professional Fees: 10% under Section 194J for payments exceeding Rs. 30,000 annually.
  5. Contractor Payments: 1% (individual/HUF) or 2% (others) under Section 194C for payments exceeding Rs. 30,000 per transaction.
  6. Commission: 5% under Section 194H.

Who is Required to File a TDS Return?

All entities that are required to deduct TDS are also required to file TDS returns. This includes:

  1. Employers: Employers who deduct TDS from employee salaries must file TDS returns.
  2. Businesses/Individuals: Entities or individuals who deduct TDS on payments such as professional fees, rent, commissions, and contractor payments must file returns.
  3. Government Agencies: Government agencies that deduct TDS from various payments must file TDS returns.

TDS Return Filing Due Date

The due dates for filing TDS returns vary depending on the type of payment and the quarter in which the deduction was made. Here are the general due dates for TDS return filing:

  1. Quarter 1 (April to June): July 31st.
  2. Quarter 2 (July to September): October 31st.
  3. Quarter 3 (October to December): January 31st.
  4. Quarter 4 (January to March): May 31st (for Government deductors) and June 30th (for non-Government deductors).

TDS returns must be filed within the prescribed due dates to avoid penalties and interest charges.

Penalty for Non-Compliance

Failure to file TDS returns on time or to deposit the deducted tax can lead to penalties and interest charges:

  1. Late Filing Fees: Under Section 234E, if the TDS return is filed after the due date, a penalty of Rs. 200 per day is levied until the return is filed.
  2. Interest on Late Payment: Interest is charged under Section 201(1A) for late payment of TDS. The interest rate is 1.5% per month or part of the month.
  3. Prosecution: If the default is willful or involves fraudulent activity, prosecution may be initiated under Section 276B of the Income-tax Act.

TDS Return Forms

The TDS return filing is done using the following forms:

  1. Form 24Q: Used for TDS on salaries.
  2. Form 26Q: Used for TDS on payments other than salaries (e.g., interest, rent, professional fees).
  3. Form 27Q: Used for TDS on payments to non-residents.
  4. Form 27EQ: Used for TCS (Tax Collected at Source) returns.

These forms need to be submitted online through the Income Tax Department’s e-filing portal. After submission, a TAN (Tax Deduction and Collection Account Number) is required to file the return and to track the deducted tax.

Why is TDS Return Filing Essential?

  1. Tax Compliance: TDS return filing ensures that the tax deducted is properly reported to the Income Tax Department, making the process transparent.
  2. Avoiding Penalties: Timely filing of TDS returns helps avoid penalties and interest charges.
  3. Credit to Payee: Filing TDS returns ensures that the tax deducted is correctly credited to the payee’s tax account, allowing them to claim the TDS as a credit in their own tax returns.
  4. Government Monitoring: TDS returns help the government track tax deductions from various sources, aiding in the efficient collection of tax.

Essential Details for Online TDS Return Submission

To file an online TDS return, the following details are required:

  1. TAN (Tax Deduction and Collection Account Number).
  2. Form for the specific type of payment (24Q, 26Q, etc.).
  3. Details of TDS deducted: Amount deducted, section under which it was deducted, and the recipient’s PAN.
  4. Challan Details: The challan number and payment details for TDS deposited with the government.
  5. Taxpayer’s Digital Signature (for online filing).
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