1) What is tax deducted at source (TDS)?
TDS or Tax Deducted at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons making such payments.Usually, the person receiving income is liable to pay income tax. But the government with the help of Tax Deducted at Source provisions makes sure that income tax is deducted in advance from the payments being made by you.The recipient of income receives the net amount (after reducing TDS). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes credit of the amount already deducted and paid on his behalf.
2) What is a TDS certificate?
Form 16, Form 16A, Form 16 B and Form 16 C are all TDS certificates. TDS certificates have to be issued by a person deducting TDS to the assessee from whose income TDS was deducted while making payment.For instance, banks issue Form 16A to the depositor when TDS is deducted on interest from fixed deposits. Form 16 is issued by the employer to the employee.
3) When should TDS be deducted and by whom?
Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payment. But no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN.Your employer deducts TDS at the income tax slab rates applicable. Banks deduct TDS @10%. Or they may deduct @ 20% if they do not have your PAN information. For most payments rates of TDS are set in the income tax act and TDS is deducted by payer basis these specified rates.If you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit – you do not have to pay any tax. And therefore no TDS should be deducted on your income.Similarly, you can submit Form 15G and Form 15H to the bank if your total income is below taxable limit so that they don’t deduct TDS on your interest income.In case you have not been able to submit proofs to your employer or if your employer or bank has already deducted TDS and your total income is below the taxable limit) – you can file a return and claim a refund of this TDS. The complete list of Specified Payments eligible for TDS deduction along with the rate of TDS
4) What is the due date for depositing the TDS to the government?
The Tax Deducted at Source must be deposited to the government by 7th of the subsequent month.
TDS deducted in the month of June must be paid to the government by 7th July. However, the TDS deducted in the month of March can be deposited till 30th April.
For TDS deducted on rent and purchase of property, the due date is 30 days from the end of the month in which TDS is deducted.
5) Can I request tax deductions to not deduct tax from an amount and pay the whole amount to me?
Yes, if your gross income is well below the basic exemption limit then you can request the person who is responsible for TDS, to not to deduct tax on such income. For doing the same you have to options:
1. Apply to the Assessing officer under whose jurisdiction you fall in Form 13 to get a certificate approving deduction of tax at a lower rate or NIL rates.
2. Submit a declaration in Form 15G/15H in which you declare that your income is below the basic exemption limit during the financial year and tax is required to be deducted at source. This certificate has to be submitted every year and non-submission may lead to deduction of tax. Please note that Form 15G is for individuals and Form 15H is for senior citizens.
One major difference between Form 13 and Form 15G/15H is Form 15G/15H can be issued only by individual’s assesses, whereas request in Form 13 can be submitted by any person i.e. individual, partnership firm, company, etc. to the ASSESSING OFFICER to get approval for deduction of taxes at lower or NIL rate.
6) TDS credits in Form 26AS
It is important to understand how TDS is linked to your PAN. TDS deductions are linked to PAN numbers for both the deductor and deductee. If TDS has been deducted from any of your income you must go through the Tax Credit Form 26AS. This form is a consolidated tax statement which is available to all PAN holders. Since all TDS is linked to your PAN, this form lists out the details of TDS deducted on your income by each deductor for all kinds of payments made to you – whether those are salaries or interest income – all TDS linked to your PAN is reported here. This form also has income tax directly paid by you – as advance tax or self-assessment tax. Therefore, it becomes important for you to mention your PAN correctly, wherever TDS may be applicable on your income.
7) How to apply for TDS refund?
There is this major misconception that refund of excess TDS is different from income tax refund and is called as TDS refund. However, the fact is that there is only one kind of return which you claim while filing your annual income tax return. Nowadays, it is compulsory to quote bank account details such as account number and IFSC code while filing of return and non-entering of such details will not generate a valid .xml file. In case if someone has deducted more tax than he should have deducted, then income tax refund will arise which can be claimed upon the filing of your annual income tax return.
8) What are TDS rules?
There are certain rules set out by the tax authorities in regard to TDS, that if complied properly you will not end up paying penalty, interest, and fees.
- Tax deduction rules:Tax is required to be deducted at the time of payment getting due or actual payment whichever is earlier. Delay in deduction of tax will attract interest @ 1% per month until the tax is deducted.
- TDS payment rules:Every person is required to pay the tax deducted to the credit of government by the 7th day of the following month. Non-payment or late payment of TDS will attract interest @ 1.5% per month until the tax has not been deposited.
- TDS return filing rules:TDS returns are required to be filed timely on the 31st day of July, October, January, and May during a financial year. Non-filing or filing of return after the due date will attract fees under section 234E @ Rs 200/- per day until the return is filed. However, this amount shall not exceed the amount of tax.