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What is TDS?

Tax deducted at source or TDS is the tax collected by the government of India at the time when a transaction takes place. In this case, the tax is required to be deducted at the time money is credited to the payee's account or at the time of payment whichever happens earlier.

In the case of salary payment or the life insurance policy, tax is deducted at the time the payment is done. The deductor then deposits this amount with the Income-tax department. Through TDS a portion of the tax is paid directly to the IT department.

Tax is deducted usually over a range of 10%.

What is TAN or Tax deduction and Collection Number?

TAN or Tax Deduction and Collection Number is a mandatory 10 dight alpha number that is to be obtained by all people who are responsible for Tax Deduction at Source or Tax Collection at Source on behalf of the Government.

The person who deducted the tax at the source is required to deposit the deduction to the Central Government quoting his TAN number. Salaried individuals are not required to obtain TAN or to deduct the tax at the source.

In the case of proprietorship businesses and other entities must deduct tax at the source while making certain payments like the salary, payments to the contractor, payment of rent exceeding Rs.1,80,000 per year. IndiaFilings can help you obtain the TAN registrations.

The entities that have TAN registration must file the TDS returns quarterly. IndiaFilings can help you file the TDS returns online. Our TDS experts can help in computing the TDS payments and file the TDS returns and comply with the TDS regulation.

Eligibility criteria for filing TDS Return

TDS returns can be filed by organizations or employers who have availed a valid Tax collection and deduction Number (TAN).

Any person making specified payments mentioned under the Income Tax Act is required to deduct tax at the source and they need to deposit the tax within the stipulated time for the following payments:

  • Salary payment
  • Income on Securities
  • Income by winning lotteries, puzzles, and others
  • Income from winning horse races
  • Insurance commission
  • Payment concerning National Saving Scheme and many others.

Due Date for TDS Filing

The due date for Payment of TDS deducted is the seventh of the next month.

Quarter Period The due date for Filing Form 27Q
Q1 1st April - 30th June On or before 31st July
Q2 1st July - 30th September On or before 31st October
Q3 1st October - 31st December On or before 31st January
Q4 1st January - 31st March On or before 31st May

How to File TDS return online?

Here is the step by step process to file the TDS returns:

  • 1

    At first, Form 27A which contains multiple columns must be filled, in case of hard copy of the form is filled it should be verified along with the e-TDS return that has been filed electronically.

  • 2

    The next part is that the tax deducted at the source and the total amount that has been paid must be correctly filled and should be tallied.

  • 3

    The TAN of the organizations must be mentioned on Form 27A. There will be difficulties in the verification process if the TAN mentioned is incorrect.

  • 4

    While filing the TDS returns the appropriate challan number, the mode of payment and the tax details must be mentioned. In case of an incorrect challan number or incorrect date of payments, there will be a mismatch and the TDS returns might have to be filed again.

  • 5

    To bring consistency the basic form used for filing e-TDS must be used. The 7-digit BSR must be entered for easing the tallying process.

  • 6

    Physical TDS returns must be submitted at the TIN-FC. The NSDL manages all the TIN-FCs. In case of online filing, they can be submitted on the official website of the NSDL TIN. A level 2 signature must be used by the deductor in case TDS returns are filed online.

  • 7

    If the provided information is correct a token number or provisional receipt will be received. This tells us that the TDS return has been filed.

  • 8

    In case of rejection, a non-acceptance memo along with the reason for rejection is issued and the returns must be filed again.

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Failure to Furnish PAN

A Valid PAN (if not obtained) must be obtained by any person receiving payment for which the tax has been deducted at the source and the correct PAN must be furnished to the deductor.

While furnishing the PAN proper care must be taken so that the deducted tax can be credited to the correct account. Non-furnishing of PAN or furnishing incorrect PAN would result in deductor incurring higher TDS at 2% rate and levy a penalty of then thousand rupees.

Hence, the deductee must first check the PAN status and number before furnishing PAN for TDS. PAN status and number can be checked online through the PAN website of the Income Tax Department.

Ensure the PAN is in the active state before furnishing. In case of inactive PAN, the deductee must contact the jurisdictional assessing officer to change the PAN status to active.

TDS Certificate

After deducting the TDS the deductor would furnish to the deductee a TDS certificate. The deductee can cross-check the tax credit by viewing a valid TDS certificate in the TDS certificate downloaded from TRACES which bears a 7 digit unique certificate number and a TRACES watermark.

The TDS certificates must be preserved by the deductee. TDS certificates on payments other than salaries are issued every quarter and the TDS certificate for the salary is provided on annual basis.

In case the deductee loses possession of the certificate he can request a duplicate TDS certificate.

Claiming TDS

TDS credit can be claimed by the deductor, to claim the credit of the TDS the deductee has to mention the details of the TDS in his returns of income.

The deductee should take due care to quote the correct TDS certificate number and the TDS details while filing the return of income.

In case of incorrect details provided by the deductee, there will be a discrepancy with the tax credit of processing the TDS returns.

TDS Return Form

Different TDS Forms are depending on the income of the deductee or the type of deductee who pays the TDS. The different TDS forms are listed below as follows:

Form Periodicity Particulars
Form 24Q Quarterly The quarterly statement for TDS from "Salaries"
Form 26Q Quarterly Quarterly statement of TDS in respect of all payments other than “Salaries”
Form 27Q Quarterly Quarterly statement of TDS from interest, dividend, or any other sum payments to non-residents
Form 27EQ Quarterly Quarterly statement of collection of tax at source

TDS Form 24Q

Under Section 192 of the Income Tax Act 1961, an employer deducts TDS while paying salary to an employee. An employer has to file a salary TDS return in Form 24Q, which has to be submitted every quarter. Details of the salary paid to the employees and the TDS deducted from the payment have to be specified in Form 24Q. In other words, Form 24Q is the quarterly statement of the payment made to the employee and the TDS deducted from it by the deductor.

TDS Form 26Q

When a taxpayer pays taxes, the payee deducts TDS on certain occasions. Form 26Q is used to file TDS details on payments made other than salary. The form mentions the total amount that is paid during the quarter and the TDS amount that has been deducted. Form 26Q has to be submitted every quarter.

Form 27Q

Form 27Q is a TDS Return or Statement containing details of Tax Deducted at Source (TDS) deducted on payments other than salary made to Non-Resident Indian (NRI) and foreigners. Form 27Q is required to furnish every quarter on or before the due date. Form 27Q contains details of payments made and TDS deducted on payments made to NRI by the deductor.

Form 27EQ

Form 27EQ contains all details about tax that is collected at the source. According to Section 206C of the Income Tax Act 1961, this form must be filed every quarter. The form has to be submitted by both the corporate and government collectors and deductors.

TDS Return Filing FAQ

What is TDS return filing?

Tax deducted at source is the practice of reducing the tax evasion and the spillage by TDS payment mandatory at pre refined rates.

What is the concept of TDS?

TDS was introduced to collect the tax from the source of income. Here the deductor who is liable to make payment to the deductee should deduct the tax at source and remit the same into the account of the central government.

On what amount is TDS deducted?

TDS is deducted only the total income is taxable, the TDS will not be deducted in case the total income is Rs 2,50,000 and this amount is applicable for both men and women below the age of 60 years.

What happens if the TDS deducted is not deposited on time?

There is a penalty for not depositing or not deducting TDS on time, the employer can make the interest payment on such late payment of the TDS before filing the TDS returns or the demand raised by TRACES.

How is TDS calculated on salary?

First compute the exemptions that are available under Section 10 of the Income Tax (ITA) then subtract the exemptions that are found in step (2) from the gross monthly income calculated in step (1), multiply the obtained number from the above calculation by 12 as the TDS is computed on the yearly income.

Duration required for TDS refund?

It takes 30-45 days from the date of the E-verification of the income tax return to get the refund credited.

Who is eligible for a TDS return?

TDS returns are filed by employers or organizations who have a valid Tax Collection and Deduction Number (TAN). A person who is making specified payments that are mentioned under the Income Tax Act is required to deduct tax at the source and it to be deposited within a stipulated time.

What is the penalty for delay in TDS payment?

In case a person fails to file the statement of TDS within the due date there is a minimum penalty of Rs.10,000 which can be extended to Rs.1,00,000.

How long it takes to reflect the TDS in 26AS?

It takes 30-45 days to reflect the TDS deposit in Form 26AS, depending on the efficiency of the company's accounts department.

Is it necessary to pay tax after TDS?

Most of the payment rates of the TDS are set in the income tax act and the TDS is deducted by the payer based on the specified rates. In case you have submitted the investment proofs to the employee and the total taxable income is below the tax limit then he doesn't have to pay any tax.

Who issues the TDS Certificate?

Form 16/16A is the certificate of tax deduction at source and is issued on the tax deduction by the employer on behalf of the employees. These certificates provide details of TDS / TCS for various transactions between the deductor and the deductee. It is mandatory to issue the TDS certificates to the Taxpayers.

What is TDS reconciliation?

TRACES is the TDS Reconciliation Analysis and Correction Enabling System, an online portal of the Income Tax Department that helps in connecting all the stakeholders involved in the implementing and administration of Tax Deducted at Source and the Tax Collected Source.

What are TDS and TCS?

TDS is the tax deducted on the payment that is made to the company, in case the amount is exceeding certain limits. TCS is the tax that is collected by the sellers while selling something to the buyers. The Deduction of TCS is applicable on sales of goods like timber, scrap, mineral wood, and so on.

What is Form 27A TDS?

Form 27 A is the summary of e-TDS/TCS return ( Form 24Q.26Q,27Q, and 27EQ) which contain control totals of Amount Paid, Income Tax deducted at source, and tax deposited at the source.

What is Form 26Q TDS?

Form 26 Q is to be submitted every quarter.

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Last updated: June 30, 2021

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