What does TDS Payment mean?
TDS means Tax Deducted at Source. There is a requirement of deducting tax at the source from any person or company who have failed to stay within the payment threshold limits. The tax department decides the rates along which the TDS payment has to be deducted in suitable situations.
Deductor is the person/company that cashes in the payment after deducting TDS. On the other hand, deducted is the person or company receiving the payment. It is for the deductor to cut TDS prior to conducting the payment & also deposit the same with the government. TDS is linked to the PAN of the deductor and tax deducted at source is cut out regardless of the mode of payment (cash, cheque or credit).
How to File TDS returns online?
There exists a few important points you must remember in order to file your TDS return. They are as mentioned below:
- You must have your Collection Account Number registered for e-filing & also have a valid Tax Deduction.
- Prior to validating your TDS statements using File Validation Service, remember to prepare them using Return Preparation Utility.
- If ever you wish to submit your tax returns using DSC, remember to hold a valid Digital Signature Certificate that has been registered for e-filing.
- If you wish to upload your returns using Electronic Verification Code, you must ensure that the principal contact’s PAN is linked with their aadhar. Their Demat or bank account details should also be provided.
TDS Payment is Made On
A few of the income sources that qualify for TDS payment are:
- Salary
- Amount under LIC
- Bank Interest
- Brokerage or Commission
- Commission payments
- Compensation on receiving/obtaining immovable property
- Contractor payments
- Deemed Dividend
- Insurance Commission
- Interest
- Interest on securities
- Payment of rent
- Remuneration paid to director of a company, et al
- Transfer of immovable property
- Winning from games like cards, a crossword, lottery, etc.
However, individuals do not need to deduct tax deducted at the source when they cash in rent payments or give fees to professionals like doctors and lawyers. This is a type of advance tax. This tax has to be deposited with the government in a timely manner and it is the deductor’s responsibility to do so. The tax deducted at the source can be claimed as a tax refund for the deductee after they file their ITR.
When should TDS be deducted and who is liable to deduct it?
- If one is giving any sort of payment that comes under the Income Tax Act, then TDS will be deducted during these payments. But if you are Hindu Undivided Family or just an individual, zero TDS will be deducted, and their records are not necessary to be audited.
- A TDS Payment of 5% will be deducted if the amount payable exceeds Rs.50,000 in case of rent payment by an individual or HUF member. This stands true even if your books are not exactable for a tax audit. If you are liable to have tax deducted at source at 5%, it isn’t necessary for you to apply for a Tax Deduction Account Number.
- The individual’s employer will deduct TDS according to the applicable rates of income tax if the individual is a working professional. The bank with which the individual holds a working account will deduct TDS at 10%. But TDS will be deducted at 20% if they don’t have the candidate’s PAN details.
- If the individual’s total income that is taxable is below the total taxable threshold and he/she submits their investment proofs to their employer, they will not be required to pay any tax. Thus, zero TDS will be deducted in such a case.
- If the total taxable income of an individual is lower than the total taxable limit, they can also submit 15G and 15H forms to the bank. In such cases, the bank will not deduct any tax deducted at the source on their interest income.
- Any individual can file a return and claim a refund if they failed to submit the investment proof documents to their employer and the bank deducted the TDS, provided your total taxable income is below the complete taxable threshold.
FAQs about TDS Payment
✅ On what amount is TDS Payment deducted?
Tax Deducted at Source is deducted on the gross fee, which is required to be paid by the payee to the receiver.
✅ How is the TDS Payment calculated on salary?
The total income of the individual can be calculated by adding all details like a bonus, salary, commission, etc. Then add the income received from investments, deduct eligible exemptions from the result, and calculate the TDS as per average rates.
✅ Is TDS Payment and Income Tax the same?
The difference between Income Tax and TDS is that income tax is levied on an individual whose income is more than the tax limit in a particular tenure. Whereas, TDS is levied at the source under specified cases like interest from the bank, rent, salary, professional fees, etc.