What is TDS (Tax Deducted at Source)?

TDS full form refers to Tax Deducted at Source by an authorized deductor while paying any bill. It is an important part of the tax collection under the Indian Income Tax Act. It is remitted to the Central Government of India and is applicable to any income. There are 27 sections under TDS with different provisions of deduction and a threshold limit of exemption.

Under TDS, a certain percentage of tax is deducted by the payer and deposited with the government on behalf of the payee. TDS applies to various types of payments, including salaries, interest on fixed deposits, rent, professional fees, and more.

TDS falls under the act of advanced Income Tax, 1961, and all organizations or individuals are liable to pay it. The TDS concept is a tool by the Government to minimize tax evasion and collect taxes at the income source. The source of income includes salary, interest, rent, brokerage, professional service, etc.

If TDS in a fiscal year exceeds income tax liability, the excess amount can be refunded by filing ITR and claiming TDS on the basis of Form 26AS/TDS certificate issued by the deductor. If a payee/deductee fails to give a PAN card, then it may incur higher TDS on the income. TAN and Pan are the two most important documents to deposit TDS.

An organization (other than Individuals or HUFs) is liable to deduct TDS from certain payments, subject to threshold limits and pay it to the government by way of TDS challan. Individuals or HUFs can deduct TDS on certain payments if they carry a ‘business’ whose turnover or sales or receipts exceeds ₹1 crore (in case of ‘profession’, the limit is ₹50 lakhs.

The deductor should deposit the TDS in the Government account on or before the 7th day of every month. Different products and services have different rates of TDS deductions.

TDS is to be deducted at the time when it becomes due or at the time of actual payment whichever is earlier. If an invoice is of May 2024 but payment is to be made in June 2024, TDS becomes due in May (the time of raising invoice) hence it should be deducted in May and paid by the 7th of June.

The TDS concept is to deduct the income at the source and remit it to the Government. Therefore, the deducting organization/individual is duty-bound to deposit it to the Government. The following is the process of depositing TDS:

• Log in to NSDL’s website for e-payment.
• Select Challan No ITNS 281 under the section TCS/TDS. Here you must enter TAN, assessment year, PIN code, and payment mode.
• Next, select between TDS on regular assessment and TDS deducted or payable. Click on “Submit”.
• A confirmation message will appear with TAN and the full name of the taxpayer according to the master data.
• Now, this will take you to the payment page. Here, make your payment.
• Upon successful payment, a counterfoil with CIN, payment confirmation, and bank details will come as payment proof. Now you have to know how to file a TDS return.

When learning about the TDS meaning, individuals must also have knowledge about the TDS return. It is returning the excess amount deducted as TDS to a taxpayer.

Now you may wonder if TDS is a part of income tax, then even after paying it, why do individuals have an income tax liability at the end of every year?

Here, you must understand that TDS is tax deducted at the source of income to avoid payment delays. In case the total TDS paid in a year exceeds your tax liability, the Government will return the excess amount.

To get this return, you should ask your deductor how to get a TDS certificate. A TDS certificate is necessary while filing a TDS return.

To file a TDS return, follow these steps:

1. You have to log in to the website of Income Tax Department.
2. Click on “Upload TDS” under the TDS tab on the navigation bar.
3. Enter the following statement details and then validate:
   • FVU version
   • Financial year
   • Form name
   • Quarter
   • Upload type
4. Now you have to upload the zip file of TDS. Now you have to attach a signature file or DSC. After choosing all files, then click on “Upload”.
5. An email on your given mail ID and an SMS on the given mobile number will come if the TDS is successfully filed.

You can now view the filed TDS return by clicking on View File TDS under the TDS tab on the navigation bar.

The 7th day of the subsequent month is the TDS deposit due date. For example, if you have deducted TDS between 1st to 30th September, you must deposit it by 7th October. However, it differs in two cases:

• If TDS is deducted in March, you can deposit it until 30th April of that calendar year.
• TDS deducted on rent or purchase of any property can be deposited within 30 days from the end of the month you have deducted TDS.

You may ask for the TDS certificate from the deductor or find it online using the following steps:

1. Visit the official portal of TRACES. Enter the Captcha code and hit “Proceed”.
2. Provide documents, including:
   • TAN of the deductor
   • PAN of payer
   • TDS certificate number
   • Financial year
   • Source of income
   • TDS amount as per the certificate
3. Click on “Validate”.
4. To download the TDS certificate again, provide data regarding:
   • PAN
   • TAN
   • Fiscal year
   • Quarter
   • Type of Return
5. Now click on “Go to downloads”.

1. For Late filing of return

Not filing taxes is a punishable offence; however, late payment incurs a penalty. The late fine is ₹200 for each day starting from the due date of payment until you file it. If the late fine exceeds the total payable amount, the late fine will be equal to the TDS payable amount.

For instance, your TDS payable amount is ₹5000, and the due date is 20th May. You filed the return of quarter 1 on 24th November. So, you are late by 105 days.

₹200 x 105 Days = ₹21000

However, your payable TDS amount is ₹5000, which is lower than ₹21000. Therefore, you just have to pay ₹5000 as a penalty.

2. For Late Deposit of TDS

If TDS is deducted on time but not paid within the due date of deposit of TDS, then interest @1.5% per month is levied on the TDS amount up to the actual date of TDS payment.

If TDS is not deducted at all, interest @1% per month is levied from the date when TDS was required to be deducted to the actual date of deduction.

Here are some common circumstances when taxpayers can claim a TDS refund or reduction:

• The total income is not within the income tax payable slab.
• TDS paid is more than the tax payable liability.
• The taxpayer has a loss of income in the current month.
• The previous year's loss carried forward into the present year.
• The taxpayer is eligible for tax exemption.

You may avoid TDS deduction by submitting Form 15G/15H. Form 13 can be submitted for claiming a refund or non-reduction of TDS.

Each taxpayer should thoroughly know what TDS is, TDS full form, and why it is deducted to file the return and get maximum benefits. It is a payee-friendly act to justify the income tax payment seamlessly.