Tax Deducted  at Source (TDS)

Financial Year 2011-12 (A.Y. 2012-13)

and

Financial Year 2012-13 (Assessment Year 2013-14)

What is Tax Deduction at Source (TDS)? According to Indian Income Tax Act there are some specified payments against which tax is to be deducted at the time of payment or at the time of accrual, is called Tax Deducted at Source. Tax is being deducted by the person who pays the money at prescribed rates and deposited with the authorities within stipulated period.

The purpose of deduction of tax at source is to bring more persons in to net of income tax. The rules for income tax deduction at source have been framed in such a manner so that tax evasion can be controlled. However, if the income of any person is not taxable and the tax has been deducted at source, he can claim for refund against the tax deducted at source from income tax department after filing the annual income tax return.

WHO IS LIABLE TO DEDUCT TAX AT SOURCE

Following persons are liable to deduct the tax at source:-

A) All Individuals (Including sole-proprietorship concerns) and HUF, who are not covered under tax audit, shall deduct TDS against all the specified payments except:-

  • Interest paid
  • Payment to contractor and sub-contractors.
  • Commission paid
  • Rent paid
  • Professional fees and technical fees paid.

B) Individual/HUF who are covered under tax audit, will deduct tax at source on all specified payments.

C) Partnership firms and Companies and persons other than individuals and HUF, will deduct tax at source on all specified payments.

Tax audit: A person is liable to get its account audited u/s 44AB of Indian Income Tax Act, if the gross receipts or gross turnover exceeds Rs.60 lacs during financial year and Rs. one crore during financial year 2012-13 in case of a business and in case of profession the gross receipts exceeding Rs.15 lacs in financial year 2011-12 and Rs.25 lacs in financial year 2013-14.

Note: Payments made by individual/HUF against specified payments, shall not be liable for deduction at source for following purposes:-

  1. Payment to contractor or sub-contractor, exclusively for personal purpose.
  2. Payment of professional fees and technical fees exclusively for personal purposes.
  3. Rent for personal purposes.

FEW IMPORTANT SPECIFIED PAYMENTS ON WHICH TAX IS TO BE DEDUCTED AT SOURCE 

For financial year 2011-12 (A.Y 2012-13) following are the payments against which tax must be deducted at source whether paid or credited during the year :-

  1. Payment of taxable salaries to the employees.
  2. Interest on listed debentures exceeding 2500/=
  3. Interest on private loans exceeding Rs.5000/=
  4. Interest on deposits in bank exceeding Rs.10000/= in each branch.
  5. Interest on 8% Saving (Taxable) Bonds,2003, exceeding Rs.10000/=
  6.  Winning from lotteries, crossword puzzles or card gain etc.Exceeding Rs.10000/= (whether in cash or in kind).
  7. Winning from horse races exceeding Rs.5000/=
  8. Payment to contractors or sub-contractor when single payment exceeds Rs.30000/=  or during the year it exceed 75000/=  (Note: No TDS shall be deducted on payment made to on goods carriers’ with effect from. 1.10.2009 if they furnish their PAN number).
  9. Commission to insurance agents exceeding Rs.20000/=
  10. Commission or prize on lottery tickets exceeding Rs.1000/=
  11. Commission other than insurance commission exceeding Rs. 5000/=
  12. Rent paid for building use exceeding Rs.180000/=
  13. Fees for professional services exceeding Rs.30000/=
  14. Fees for technical services exceeding Rs.30000/=

 RATES OF TAX DEDCTION AT SOURCE (TDS)

For financial year 2011-12 (A.Y. 2012-13) and  financial year 2012-13 (Assessment Year 2013-14),  following are the rates of TDS:-

SPECIFIED PAYMENTS RATES OF TAX
Salary Total Tax Divided by 12
Interest on loan exceeding Rs.5000/=

10%

Interest on deposits in bank exceeding Rs.10000/= in each branch.

10%

Interest on listed debentures exceeding Rs.2500/=

10%

Interest on 8% Saving (Taxable) Bonds,2003, exceeding Rs.10000/=

10%

Winning from lotteries, crossword puzzles or card gain etc.Exceeding Rs.10000/= (whether in cash or in kind)

30%

Winning from lotteries, crossword puzzles or card gain etc.Exceeding Rs.10000/= (whether in cash or in kind)

30%

Winning from horse races exceeding Rs.5000/=

30%

Payment to contractors or sub-contractor when single payment exceeds Rs.30000/=  or during the year it exceed 75000/=- Payment to individuals           1%
- Payment to others                            2%
Commission to insurance agents exceeding Rs.20000/=

10%

Commission or prize on lottery tickets exceeding Rs.1000/=

10%

Commission other than insurance commission exceeding Rs.5000/=

10%

Rent paid for building use exceeding Rs.180000/= per annum

10%

Fees for professional services exceeding Rs.30000/=

10%

Fees for technical services exceeding Rs.30000/=

10%

Note:

  1. No Education Cess and Secondary & Higher Education Cess is to be charged on TDS.
  2. With effect from 01.04.10 all payees/deductees are required to furnish their PAN (Permanent Account Number) to the deductor. Otherwise, the deductor shall deduct TDS at the applicable rate or @ 20%, whichever is higher.

WHEN NOT TO DEDUCT TAX AT SOURCE

Tax shall not be deducted at source in case of payment of interest on time deposits with bank and interest other than interest on securities, if the deductee furnishes Form 15-G (Form 15-H for senior citizens of 60 years) that the tax on his estimated total income will be nil during financial year in which the amount is paid or credited.

Note:

  1. Form 15-G and 15-H can be issued by persons other than companies and partnership firms only.
  2. Form 15-G should not be submitted by the deductee if the amount of interest exceeds exemption limit after adjusting all deductions under chapter VI-A of Indian income tax act.
  3. However, a resident senior citizen can furnish the above declaration even his/her income exceeds exemption limit.

Example:

Following are the details of Mr. X and Mr. Y for financial year 2012-13:-

Particulars

Mr. X

Mr. Y

Age

48 years

69 years

Interest from Fix deposits with bank

Rs.260000/=

Rs.300000/=

Less: Deduction under chapter VI-A

Rs.60000/=

Rs.50000/=

Total Taxable Income

Rs.200000/=

RS.250000/=

In above example Mr. X can not furnish the declaration form 15-G, to bank because his income from interest is more than Rs.200000/= even his taxable income is nil. But being a senior citizen Mr. Y can furnish Form 15-H even his income from interest from bank is more than Rs.250000/= because his taxable income is nil.

Time Limit For Depositing The TDS

If the amount is credited in payee’s  account in the month of March On or before 30th April.
In any other case Within seven days from the end of the month in which deduction is made

 PROCEDURE FOR DEPOSITING TDS

  • TDS should be deposited within prescribed time along with Challan No. 281  for All type of  TDS.
  • Separate Challans should be used for TDS deducted from companies and non- Companies.
  • TDS amount can be deposited in any authorized bank by Income Tax Department.

Note : With effect from  01.04.2008 All Companies and the assessees under Tax Audit U/s 44AB, are required to pay through Internet Banking (Online Payment) only.

TDS Certificates

Any person who deducts the tax at source, issues a certificate to the payee which gives all the details in respect tax deducted, deposit particulars of tax etc. With the help of the TDS certificate, the payee can claim the credit of TDS against tax payable by him. TDS certificates are issued in following forms:-

For salaries Form 16
For all other payments Form 16-A

 Time Limit Of Issuing TDS Certificates

  • Form 16 for salaries, should be issued annually by 31st day of May from the closing date of the financial year.
  • Form 16 should be issued on quarterly basis as follows:
Quarter Ending Due date of issue of form 16-A
30th June 30th July
30th September 30th October
31st December 30th January
31st March 30th May

 FURNISHING OF QUARTERLY STATEMENT FOR TDS (Quartery Return of TDS)

A person who deducts the TDS will have to furnish a quarterly return with Income Tax Authorities or any person authorized by income tax authorities i.e. National Securities Depository Ltd. within prescribed time as under:-

Purpose Last date for filing Form No.
TDS on  salaries 15th July, 15th Oct, 15th January in respect of first three quarters and 15th May in respect of last quarter

24Q

TDS in cases, other than above

- Do -

26Q

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