TDS is the abbreviation for the term- Tax Deducted at Source. As the name suggests, it is the deduction from the source of generation of Income. It means that it is deductible by the one making the payment known as Deductor. And it is deducted from the person receiving the payment known as the Deductee.  It is an eternal source of income of Government, collect to eliminate Tax Evasion by taxing the income at its source rather than later through the self. It further administers the duty of tax collection between the Payers and the Tax Administration.  The Income Tax Act, 1961 governs the TDS through the Central Board of Direct Taxes besides the Indian Revenue Services.

The range of applicability of TDS is up to:

  • Salary- Section 192
  • Interest on Securities- Section 193
  • Dividends- Section 194
  • Interests except for Interest on Securities- Section 194-A
  • Earnings from Lotteries and Crossword Puzzles- Section 194-B
  • Payments to Contractors and Sub- Contractors- Section 194C
  • Insurance Commission- Section 194 D
  • Payment to Non-Resident Sportsmen or Sports Association- Section 194E
  • Payment in respect of NSC- Section 194EE
  • Fees on Technical and Professional Services- Section 194J
  • Payment on Compensation of certain immovable property- Section 194 LA
  • Other sums as specified under Section 195
  • Long-Term Capital Gain- Section 196 B
  • Income or Long Term Gain from Foreign Currency Bonds/ Global Depository Receipts- Section 196 C
  • Commission on Sale of Lottery Tickets- Section 194G
  • Payment in respect of repurchase of units of Mutual Funds or UTI- Section 194 F
  • Commission/Brokerage- Section 194 H
  • Rent- Section 194 I
  • On Transfer of Movable Property- Section 194 I A
  • The income of Foreign Institutional Investors from Securities- Sec 196D

WHO IS ENTITLED TO DEDUCT TDS?

Any person who is making a payment concerning the above-given sections can deduct the TDS. They are also responsible to submit it to the Government. In the case of the payments related to Section 194 A, 194C, 194H, 194I, and 194J, TDS is only chargeable if the turnover is more than 1 crore and the professional receipts go up to Rs. 25 lakhs in the previous year.

The information relating to TDS deduction from an individual is accessible through form 26AS. From the TRACES website or through the net banking account of an individual. The TDS rates chargeable for the annual year 2017-18 are:

SECTION BASIS OF INCOME RATE LIMIT OF EXEMPTION
192 Salary AS PER CALCULATION INCOME TAX SLABS
193 Interest on Securities 10%
194 Dividends 10%
194-A Interest other than Interest on Securities 10% Banking-Rs.10,000

Others- Rs. 5000
194-B Winnings from Lotteries and Crossword Puzzles 30% Rs. 10,000
194-C Payments to Contractors and Sub- Contractors 1% to HUF/Individual, 2% to other than Individuals/HUF Rs. 30,000 per contract, Rs. 1,00,000 per annum
194-D Insurance Commission 5% Rs. 15,000 per annum
194-E Payment to Non-Resident Sportsmen or Sports Association 20%
194EE Payment in respect of NSC 10%
194F Payment in respect of repurchase of units of Mutual Funds or UTI 20%
194G Commission on Sale of Lottery Tickets 10% Rs. 1000
194H Commission/Brokerage 5% Rs. 15,000 per annum
194I Rent 10%-Land and Building

2%-Plant and Machinery

 Rs. 1,80,000 per annum
194J Fees on Technical and Professional Services 10% Rs.30,000 per annum
194LA Payment on Compensation of certain immovable property 1% Rs. 50,00,000 per annum
196B Long Term Capital Gain 10%
196C Income or Long Term Gain from Foreign Currency Bonds/ Global Depository Receipts 20%
196D The income of Foreign Institutional Investors from Securities 20%

Time of Filing

If a person has his TDS Deducted at any source of income, he is liable to file a TDS Return and default on this part attracts penalty under Section 234-E of the Income Tax Act, 1961. TDS returns are to be filed every quarter, i.e.,

April to June- 30th June

July to September- 30th September

October to December-31st December

January to March- 31st March

Upon Default, in payment of TDS, there is a fine of Rs. 200 per day with no maximum limit, an interest of 1.5% per month as per Section 201(A), a fine as much as the TDS amount may be levied. Further, there may be prosecuted under Section 276-B. Which the taxpayer may be subjected to a rigorous punishment of three months which may extend up to seven years with a fine.

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