TDS

All about TDS- Meaning, Applicability, Rates, Due dates & Amendments (AY 2023-24)

In this article, we will discuss about the Tax Deducted at Source (TDS) all sections & amendments in detail.

Tax Deducted at Source (TDS)

 

TDS is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons  making such payments.  Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payments.

 

Due date for depositing the TDS

 

TDS must be deposited to the government by 7th of the subsequent month.  For example, TDS deducted in the month of June must be paid to the government by 7th July.

 

Due date of filing TDS returns

 

Filing TDS returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly. Different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows:

  • Form 26Q – TDS on all payments except salary
  • Form 24Q – TDS on Salary
  • Form 27Q – TDS on all payments made to non‐residents except salaries
  • Due dates – Q1 (April to June) – 31st July, Q2 (July to September) – 31st October, Q3 (October to December) – 31st January & Q4 (January to March)  – 31st May

Rates of TDS applicable for Financial Year 2022‐23 or Assessment Year 2023‐24:

 

Section – 192 – Salaries

 

    • Deductor – Any Resident Person
    • Deductee – Any person
    • Threshold Limit – If Total Income of the Employee is upto Basic Exemption Limit, then no TDS
    • Tax Rate – Individual Slab Rate
    • Other Conditions – a) Tax will include Surcharge (if any) & Cess (always)
      b) Employer shall consider other income & deduction of employee & not consider any loss other than House Property loss if provided by employee.
      c) Employee can take credit of Tax on Non-monetary perquisite paid by the employer.
      d) In case of Arrears of salary, TDS is deducted after considering relief under section 89.
      e) If employee opts for Section 115BAC (New Tax Regime) – He will intimate to the employer & Form 10BA need to be filed before due date of filing of ITR return.

Section -192A‐ Premature withdrawal from Employee Provident Fund

      • Deductor – Any Resident Person
      • Deductee – Any person
      • Threshold Limit – Rs 50,000
      • Tax Rate – 10%
      • Other Conditions – a) TDS only if amount is taxable in the hands of employee – if employee renders < 5 years of service & amount received is more than Rs 50,000
        b) If PAN is not furnished, TDS is deducted as Maximum Marginal Rate (MMR) i.e. 30% tax rate + 37% maximum surcharge rate + 4% cess = 42.744%.
Section -193‐ Interest on securities

 

        • Deductor – Any Resident Payer
        • Deductee – Any Payee
        • Threshold Limit – Rs 2,500
        • Tax Rate – 10%
        • Other Conditions – No TDS if:
          a) Interest is payable on CG or SG Securities
          b) Interest is paid to LIC, GIC or any other insurer
          c) Interest is payable on DMAT Securities
          d) Interest is payable on debenture of public company to Individual/HUF (If amount not exceed Rs 5,000 p.a.)
Section -194‐ Dividend

 

other than the dividend as referred to in Section 115‐O (Deemed dividend)

          • Deductor – Any Resident Payer
          • Deductee – Any Payee
          • Threshold Limit – Rs 5,000
          • Tax Rate – 10%
          • Other Conditions – No TDS if:
            a) Dividend is paid to LIC, GIC or any other insurer
            b) Paid to Individual other than Cash (If amount not exceed Rs 5,000 p.a.)

 

Section -194A – Interest other than interest on securities

 

Banks Time deposits, Recurring deposit and Deposit in Co‐op Banks

    • Deductor – Any Resident Payer
    • Deductee – Any Payee
    • Threshold Limit – Rs 40,000 (for individual), Rs 50,000 (for Senior Citizens) & Rs 5000 (for others)
    • Tax Rate – 10%
    • Other Conditions – If bank opting for Core Banking Solution (CBS), then limit will be checked per bank wise not per branch wise. No TDS if:
      a) Interest on Saving Bank account
      b) Interest paid by Firms to Partners
      c) Interest on Income Tax Refund. However, Interest on IT refund of NRI will be liable for TDS deduction at applicable rate.
      d) Interest is paid to any other bank, LIC, UTI or any other insurer
      e) Interest is paid by co-operative society to its member or any other co-operative society
      f) Interest on compensation awarded by Motor Accident Claim Tribunal, if amount not exceeds Rs 50,000 p.a
      g) If interest is credited by bank to provisioning account on daily/monthly basis for macro monitoring only by use of CBS Software

 

 Section -194B – Winning from Lotteries, Crossword Puzzle, Card games etc

 

    • Deductor – Any Person
    • Deductee – Any Person
    • Threshold Limit – Rs 10,000
    • Tax Rate – 30%
    • Other Conditions – If winning in kind, then the organizer will release winning only after ensuring that TDS on winning is paid to the Govt.
 Section -194BB – Winning from Horse Race

 

      • Deductor – Any Person
      • Deductee – Any Person
      • Threshold Limit – Rs 10,000
      • Tax Rate – 30%
      • Other Conditions – TDS will be deducted without set off of loss

 

Section -194C – Payment to Contractor

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 30,000 (Single Bill/Invoice)/ Rs 1,00,000 (Aggregate Payment for whole financial year)
    • Tax Rate – Individual/HUF – 1% / Others – 2%.
    • Other Conditions – a) Work Contracts includes Advertisement, Broadcasting, Telecasting, Catering, Transportation of goods/passenger (other than railway) & Manufacturing/Supplying product as per customer specification out of the material supplied by such customer or its associate (Job Work).
      b) Payment made for personal purpose by Individual/HUF – No TDS
      c) Contract also includes Sub-Contracting
      d) TDS is not applicable on payment to Contractor engaged in plying, hiring or leasing of goods carriages u/s 44AE, where such contractor owns 10 or less goods carriages during the financial year & furnishes PAN.
      e) No TDS if Single Transaction is < Rs 30,000 & aggregate payment during the financial year is < Rs 1,00,000.

 

 Section -194D – Insurance Commission

 

    • Deductor – Any Insurance Company
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 15,000
    • Tax Rate – 5%
    • Other Conditions – Commission by Reinsurance Company to Insurer – No TDS

 

Section -194DA – Payment in respect of life insurance policy

 

    • Deductor – Any Insurance Company
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 1,00,000
    • Tax Rate – 5% (TDS will be deducted on Income Component (Maturity less Premium paid)
    • Other Conditions – a) Amount received is less than Rs 1,00,000 – No TDS
      b) If sum is received on the death of Insured – No TDS
      c) If no PAN is furnished, TDS @ 20% is deducted
      d) Section 194DA is not applicable in case of amount is exempt u/s 10(10D) i.e. the sum is received at the time of maturity of policy or death benefit received. Form 15G/15H can be given wherever applicable.

 

 

Section -194E- TDS on Payment to Non-Resident Sportsmen or Sports Association/Entertainer

 

    • Deductor – Any Person
    • Deductee – Any Person Not a Citizen of India
    • Threshold Limit – No limit
    • Tax Rate – 20%
    • Other Conditions – a) TDS on Income taxable u/s 115BBA – Participation in any game in India, Advertisement, Contribution of Article in Newspaper or perform in India
      b) Umpire & Match referee are not covered under this section.

 

Section -194EE- TDS on Payments out of deposits under National Savings Scheme

 

    • Deductor – Any Person
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 2,500
    • Tax Rate – 10%
    • Other Conditions – If PAN is not furnished, TDS @ 20% is deducted.

 

 Section -194G – Commission on Lottery

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 15,000
    • Tax Rate – 5%
    • Other Conditions – Nothing

 

 Section -194H – Commission/Brokerage

(other than Insurance & Lottery commission)

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 15,000
    • Tax Rate – 5%
    • Other Conditions – No TDS if Commission/Brokerage is related to Securities – Commission to Underwriters, Brokerage on public Issue.

 

Section -194I – Rent on Plant / Machinery / Equipment/Land and Building/furniture and fittings

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 2,40,000 for whole financial year
    • Tax Rate – 2% – Plant / Machinery / Equipment, 10% – Land & Building/furniture & fittings
    • Other Conditions – a) If property is owned by more than 1 co-owner, then limit of Rs 2,40,000 will be applied to each co-owner separately.
      b) No TDS if Lumpsum lease premium/ One-time upfront lease charges paid for acquisition of Long-Term Lease.

 

 Section -194IA – Transfer of Immovable Property other than rural agriculture land

 

    • Deductor – Any Resident Buyer
    • Deductee – Any Resident Seller
    • Threshold Limit – Rs 50,00,000 per property
    • Tax Rate – 1% of Sale Consideration
    • Other Conditions – a) No TDS on Rural agricultural land & If Sales Consideration < Rs 50 Lakhs
      b) If no PAN is furnished, then TDS @ 20% is deducted
      c) Actual Sales consideration not SDV will be considered for calculation & deduction of TDS
      d) Sales Consideration includes all charges such as maintenance fees, parking charges, club membership fees, electricity, water fees etc.

 

 Section -194IB – TDS on Rent of Immovable Property

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 50,000 per month
    • Tax Rate – 5%
    • Other Conditions – a) No TDS If Rent is less than or equal to Rs 50,000 per month
      b) TDS to be deducted in the last month (March) or when tenant vacated whichever is earlier
      c) If no PAN is furnished, TDS @ 20% is deducted, however TDS deduction will not exceed the rent of last month

 

 Section -194IC –Payment of Monetary consideration under Joint development agreement as per Section 45(5A)

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Nil
    • Tax Rate – 10%
    • Other Conditions – a) No TDS If consideration is in kind
      b) If no PAN is furnished, TDS @ 20% is deducted

 

 Section -194J – Professional Fees, Technical services, Royalty, Non-Compete Fees & Director Remuneration

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 30,000
    • Tax Rate2% – operation of Call Centre/Fees for technical services (Others)/Royalty for sale, distribution of films, 10% – Fees for technical services (Professional fees), Royalty fees & other fees.
    • Other Conditions – a) No TDS if Fees for professional services, Fees for technical services, Royalty & Non-Compete Fees is less than or equal to Rs 30,000
      b) Commission/Sitting Fees paid to non-executive/independent directors – no threshold limit. TDS will be deducted even if Re 1 is paid
      c) If payment made for personal purpose by Individual/HUF – No TDS
      d) No TDS by Individual/HUF on Royalty, Non-Compete Fees even if commercial
      e) Professional Service includes services covered u/s 44AA & Services in relation to sports activities.

 

Section -194K – Payment of any income in respect of Units of mutual fund or Units of administrator or from a specified company 

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 5,000
    • Tax Rate – 10%
    • Other Conditions – No TDS if payment is up to Rs 5,000 in a previous year

 

Section -194LA – TDS on compensation for compulsory acquisition of Immovable Property

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 2,50,000
    • Tax Rate – 10% of Sale Price
    • Other Conditions – a) No TDS if amount of compensation received < Rs 2,50,000
      b) No TDS on rural or urban agricultural land
      c) If no PAN is furnished, TDS @ 20% is deducted.

 

 Section -194LBA

 

Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders

    • Deductor – Business Trust
    • Deductee – Any Resident Unitholders
    • Threshold Limit – No limit
    • Tax Rate – 10%
    • Other Conditions – a) If no PAN is furnished, TDS @ 20% is deducted
      b) Interest payment from a SPV and Distribution of dividend by a Business Trust, to Resident unit holders shall be liable for TDS @ 10%. Whereas, in case of Non‐Resident payee, TDS on dividend shall be @ 10% & that on interest payment shall be @ 5%.

 

Section -194M- Payment of Commission, brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H or 194J

 

    • Deductor – Any Resident Payer
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 50,00,000
    • Tax Rate – 5%
    • Other Conditions – TDS applicable when Individual/HUF who are not liable to deduct TDS u/s 194C,194H or 194J & aggregate amount paid in the financial year exceeds Rs 50 Lakhs in the above-mentioned sections taken together.

 

Section -194N- TDS on Cash withdrawal in excess of Rs 1 crore during the previous year

 

From one or more account maintained by a person with a banking company, co‐operative society engaged in business of banking or a post office

    • Deductor – Any banking company, co‐operative society engaged in business of banking or a post office
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 20,00,000/ Rs 1,00,00,000
    • Tax Rate2% (when Cash withdrawn exceeds Rs 1 crore), when Cash withdrawn exceeds Rs 20 lakh upto Rs 1 Crore-2%, Above 1 Crore – 5% in case return of income is not filed
    • Other Conditions – a) TDS applicable only on excess amount over & above limit specified. For Example – Cash Withdrawal – Rs 1.30 Crore, TDS applicable on Rs 0.30 crore only.
      b) Specified limit will be checked for each & every bank separately
      c) If assessee has not filed its preceding 3 previous year ITR returns for which due date as specified u/s 139(1) has already been expired, then the limit of cash withdrawal will be 20 Lakhs.

 

Section -194O- TDS Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform

 

    • Deductor – Any E-Commerce operator
    • Deductee – Any Resident Person
    • Threshold Limit – Rs 5,00,000
    • Tax Rate – 1% (Rate will be 5% instead of 20% in case PAN is not furnished)
    • Other Conditions – No TDS if:  a) E‐Commerce operator is an Individual/HUF
      b) Gross amount of sale/services during previous year is upto Rs 5 lakhs
      c) Pan or Aadhar is furnished by the E‐Commerce participants.

 

 Section -194P- TDS by specified bank to specified senior citizen

 

    • Deductor – Any Specified Bank
    • Deductee – Any Resident Individual age 75 years or more in PY
    • Threshold Limit – No Limit
    • Tax Rate – Rates applicable to particular slab of income of Senior Citizen including applicable Surcharge & Health & Education Cess
    • Other Conditions – This section is applicable only if Individual having income in the nature of pension & no other income except income in the nature of interest received or receivable from any account maintained by such individual in same specified bank in which he is receiving his pension income & has furnished a declaration to the specified bank containing such particulars as may be prescribed.

 

 Section -194Q- TDS on Purchase of goods

 

    • Deductor – Any Person (Buyer) whose last year Turnover is more than Rs 10 Crore
    • Deductee – Resident Person (Seller)
    • Threshold Limit – Rs 50,00,000
    • Tax Rate – 0.1% of sum over & above amount of Rs 50 lakhs (Rate will be 5% instead of 20% in case PAN is not furnished)
    • Other Conditions  a) No TDS if TDS is deductible under any other section
      b) No TDS if TCS is collectible u/s 206C (Other than Section 206C(1H))
      c) Section 194O, 194Q & 206C(1H) shall not apply in relation to transaction in securities & commodities traded, cleared & settled through Recognized Stock Exchange or transaction in electricity, renewable energy certificates & energy saving certificates
      d) In case of a transaction to which both section 206C(1H) & 194Q applies, TDS to be deducted u/s 194Q
      e) In case of a transaction to which both section 206C(1)/(1F)/(1G) & 194Q applies, TCS to be collected u/s 206C(1)/(1F)/(1G)
      f) In case of a transaction to which both section 194O & 194Q applies, TDS to be deducted u/s 194O.

 

Section -194R- TDS on benefit of perquisite in respect of business or profession (New Budget 2022)

 

    • Deductor – Any Person
    • Deductee – Any Resident Individual Person
    • Threshold Limit – Rs 20,000
    • Tax Rate – 10%
    • Other Conditions  a) No TDS if perquisite amount is up to Rs 20,000 in a financial year.

 

Section -194S- TDS on Transfer of a virtual digital asset (New Budget 2022)

 

    • Deductor – Any Person
    • Deductee – Any Resident Individual Person & HUF
    • Threshold Limit – Rs 50,000 (Resident Individual & HUF), Rs 10,000 (Others)
    • Tax Rate – 1%
    • Other Conditions – Nothing

 

 Section -194LB- TDS on interest from infrastructure debt fund (non‐resident)

 

    • Deductor – Infrastructure debt fund
    • Deductee – Non-Resident/Foreign Company
    • Threshold Limit – Nil
    • Tax Rate – 5%

 

 Section -194LBB- TDS on Income in respect of investment in Securitization trust (non‐resident)

 

    • Deductor – Securitization trust
    • Deductee – Non-Resident/Foreign Company
    • Threshold Limit – Nil
    • Tax Rate – Individual: 10% /Company: 30%

 

 Section -194LBC- TDS on Income in respect of investment in Securitization trust

 

    • Deductor – Securitization trust
    • Deductee – Non-Resident/Foreign Company
    • Threshold Limit – Nil
    • Tax Rate – Individual: 25% /Company: 30%

 

 Section -194LC- TDS on Income by way of interest by an Indian specified company to a non-resident / foreign company on foreign currency approved loan / long‐term infrastructure bonds from outside India

 

    • Deductor – Indian Company/Business Trust
    • Deductee – Non-Resident/Foreign Company
    • Threshold Limit – Nil
    • Tax Rate – 5% (Section 206AA is not applicable even if PAN is not furnished, TDS rate will be 5%)

 

 Section -194LD- TDS on Interest on certain bonds & Govt. Securities to FII/QFI

 

    • Deductor – Any Person
    • Deductee – FII (Foreign Institutional Investors)/QFI (Qualified Foreign Investors)
    • Threshold Limit – Nil
    • Tax Rate – 5% (Section 206AA is not applicable even if PAN is not furnished, TDS rate will be 5%)

 

Section -195- TDS on Payment of any sum to Non-Resident (NR) or Foreign Company

 

    • Deductor – Any Person
    • Deductee – Non-Resident (NR) or Foreign Company
    • Threshold Limit – as applicable
    • Tax Rate – Higher of rate in force or Double Taxation Avoidance Act (DTAA) rate given in finance act every year
    • Other Condition – a) TDS apply only when amount received by NR or foreign company is taxable in India
      b) If rate given in DTAA are lower, then that rate will apply.

 

 Important Notes to all the above Sections

 

1.      The provisions of following TDS Sections, which were linked to applicability of Tax Audit provisions, shall now apply if the Gross Receipts / Turnover is INR 1 Crore or more for Business and INR 50 Lakhs or more for Profession -Section 194A, 194C, 194H, 194I, 194J. Thus, irrespective of applicability of Tax Audit provisions, TDS provisions as mentioned above, shall apply.

 

2.     In case payee does not furnish PAN then TDS shall be deducted at higher of the following rates
a) Rates specified in relevant provisions of the Act; or
b) Rates in force; or
c) 20%

Note – i) In case of payment by E-Commerce Operator to E‐Commerce Participant, 5% TDS shall apply instead of 20%.


ii) In case of non-filers having aggregate TDS / TCS of INR 50,000 or more & who have not filed their ITR in both of the 2 years immediately preceding the financial year & time limit for filing the original return has expired, then the rate of TDS shall be higher of the following
Twice the rates specified; or Rates in force; or 5%.iii) These provisions will not be applicable for the following payments – Salary, Accumulated Balance due to employee EPF, Winnings from lottery, crossword puzzle or horse race, Income paid in respect of investment in securitization trust, TDS by banks on cash withdrawals.

 

 Interest on late payment & late deduction of TDS

 

    • As per section 201(1A) Interest at the rate of 1%per month or part of the month on amount of TDS from the date of  tax was deductible till the date of tax actually deducted shall be charged for late deduction.
    • Also, for late payment Interest at the rate of 1.5 % per month or part of the month on amount of TDS from the date  of tax was deducted till the date such tax is paid shall be charged.

 

Fees for default in filing of TDS/ TCS return

 

Fees is payable at Rs 200 per day for each day during which the failure continues under section 234E. The amount of fees cannot exceed than the amount of TDS.

 

Assessee in default

 

    • If payer not deducted TDS or after deduction not paid to the govt., then such person will be treated as assessee in default & required to pay penalty u/s 221 & that can be maximum 100% of TDS amount.
    • AO shall pass order to treat assessee in default within 7 years from end of FY in which payment/credit is made (If payment is made to Resident without TDS).
    • If payment is made to Non-Resident without TDS or TDS deducted but not paid to govt., then there is no time limit in law to treat assessee in default.
    • Exception to above assessee in default:- Payer shall not treated as assessee in default if payment made/credited to payee without TDS, if such Payee fulfils all the following 4 conditions:
      a) He has furnished his ROI u/s 139
      b) Such sum has been taken into account by him in his ROI
      c) He has paid the tax due on income declared by him in his ROI &
      d) Payer has furnished a certificate in this regard form a CA.

 

Processing of TDS return (Intimation by CPC)

 

TDS returns filed shall be processed electronically & following adjustment can be made:
a) Rectification of any arithmetical errors
b) Incorrect claim apparent on record
An intimation will be prepared specifying the amount of demand/refund along with interest/fees (if any) & send it to the deductor/collector within 1 year from end of the FY in which return was filed.

Happy Readings!

 

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