TAX DEDUCTED AT SOURCE (TDS)

CLASS : B.COM II AND BBA II YEAR

FACULTY NAME: DR. SEEMA SHUKLA 

SUBJECT: VOCATIONAL (TALLY)

INTRODUCTION​

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make 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 credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.

How TDS Works

The process involves three main steps: 

1.     Deduction: A person (e.g., an employer, bank, or tenant) liable to make a specified payment (like salary, interest, or rent) exceeding a certain threshold deducts tax at the source.

2.     Deposit: The deductor remits the deducted tax amount to the Central Government's account, generally by the 7th of the following month.

3.     Certification: The deductor issues a TDS certificate (e.g., Form 16 for salaries, Form 16A for other payments) to the deductee as proof of the tax remitted. The deductee uses this certificate and Form 26AS to claim the tax credit. 

TDS Rates and Charges

TDS rates vary based on the nature of the payment, the amount, and the recipient's tax status (e.g., individual, senior citizen, non-resident). There are also specific penalties and interest charges for non-compliance by the deductor. 

Type of Payment	Relevant Section	Applicable TDS Rate	Threshold Limit (per financial year)
Salaries	192	As per income tax slabs	Basic exemption limit of employee
Interest on bank deposits	194A	10% (20% without PAN)	₹50,000 for senior citizens; ₹40,000 for others
Rent (Land/Building/Furniture)	194I	10%	₹2,40,000 annually
Rent (Plant/Machinery)	194I	2%	₹2,40,000 annually
Professional/Technical Fees	194J	10%	₹30,000
Winnings from Lottery/Games	194B	30%	₹10,000
Commission or Brokerage	194H	5%	₹15,000     Penalties for Non-Complian

Failure to comply with TDS provisions attracts penalties: 

·        Late deduction: Interest at 1% per month from the date the tax was deductible to the actual date of deduction.

·        Late payment/deposit: Interest at 1.5% per month from the date the TDS was deducted to the actual date of deposit with the government.

·        Late filing of TDS return: A late fee of ₹200 per day until the return is filed, up to a maximum limit equal to the total TDS amount.

·        Failure to provide PAN: Tax is deducted at a higher rate (usually 20%) if the recipient does not provide their Permanent Account Number (PAN).