1. What is TDS?
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same to the Govt.
The deductee from whose TDS has been deducted would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
2. When TDS should be deducted?
The concept of TDS is based on a simple principle i.e. tax is to be deducted at the time of payment getting due or actual payment whichever is earlier.
3. How much tax should be deducted from salary?
TDS on salary will be deducted as per the income tax slab and the rates thereof applicable to the relevant financial year for which the salary is being paid. But following things need to be kept in mind before deducting TDS on salary:
- Exemption Limit: No tax is required to be deducted at source unless the estimated salary exceeds the basic exemption limit.
- Exempt allowances: Allowances such as LTC, HRA, conveyance, traveling exempt as per prescribed limits and other perquisites not forming part of salary should be deducted from total salary while calculating taxable salary.
- Other deductions: Other deductions such as deductions under section 80C, 80CCC, 80CCD, 80CCG, 80D, 80DD, 80DDB, 80E, 80EE, etc. should be considered before the calculation of tax on salary.
At first, the salary of the employee is calculated after taking into consideration all the deductions applicable and then tax is calculated according to the tax rate applicable to you.
The tax calculation is usually done by the employer at the beginning of the financial year. The TDS to be deducted by dividing the estimated tax liability of the employee for the financial year by the number of months of his employment under the particular employer.
4. What is TDS Certificate (i.e. Form 16/16A)?
TDS certificates are issued by the deductor (the person who is deducting tax) to the deductee (the person from whose payment the tax is deducted). There are mainly two types of TDS certificates issued by the deductor.
Form 16: which is issued by the employer to the employee incorporating details of tax deducted by the employer throughout the year, and
Form 16A: This is issued in all cases other than salary.
5. What are the due dates for payment of TDS?
The due date for the payment of TDS is different from that of the due date of filing of TDS returns. The payment of TDS that has been deducted must be deposited EACH MONTH while the TDS Return is filed on a quarterly basis.
The due dates for the payment of the deducted TDS are on or before the 7th of next month. It means, if the deductor has deducted tax from payments in the month of November, then he has to pay the TDS on or before the 7th of December.
The key point to note here is that the due dates are the same for all types of assesses whether its a Salaried case or a non-salaried case.
6. What are the due dates for filing TDS Returns?
Filing Tax Deducted at Source returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly as follows:
- For Ist Quarter (April to June) : 15th July
- For IInd Quarter (July to Sep) : 15th Oct
- For IIIrd Quarter (Oct to Dec) : 15th Jan
- For IVth Quarter (Jan to Mar) : 15th May
However, there are 2 specific cases viz. TDS on sale of property & TDS on Rent in which TDS returns is mandatory to submit within 30 days from the end of the month in which TDS is deducted.
7. What are penalty provisions for non-deduction of TDS?
There are several instances where interest, fees, and penalties are levied on non-compliance of TDS provisions. The same are discussed here step by step:
1. Consequences of non-deduction of TDS
If a person who was responsible for deducting tax at source fails to do so, then the ASSESSING OFFICER has powers to disallow whole of such expenditure for ascertaining taxable profits.
For example, PNC Limited paid a commission of Rs 2,00,000/- during the year to a single person and omitted to deduct tax on the same, then the Assessing Officer has powers to disallow deduction whole of such expenses while ascertaining taxable profits.
2. Late deduction of TDS
Tax is to be deducted at the time of payment/credit getting due or payment whichever is earlier. In terms of income tax, even a single day is counted as a month for the purpose of calculating interest.
In cases of late deduction of tax, interest @ 1% per month of the TDS amount subject to the maximum amount of TDS is levied.
For example, ABC company was supposed to deduct tax of Rs 20000/- on 15th July but instead the same was deducted by the company on 1st August. In this case interest of Rs 200/- (@1% for one month) is required to be paid by the assessee.
3. Late payment of TDS
Tax is to be deducted and paid to the credit of government on every 7th day of the succeeding month in which the tax has been deducted, otherwise, interest @ 1.5% per month of TDS amount subject to the maximum amount of TDS is levied.
For example, ABC Ltd was supposed to deposit TDS of Rs 20000/- deducted in the month of April by the 7th of May but fails to deposit the same on time and actually deposited the same in the following month. In this case interest of Rs. 300/- (@ 1.5% for one month) is required to paid by the assessee.
4. Late filing of return of TDS
TDS returns are required to be filed in the last month of the following quarter i.e. 31st July, 31st October, 31st January, and in the case of March, it is 31st May.
Fees under section 234E are levied @ Rs 200/- per day subject to a maximum amount of TDS until the return is filed.
Example, M/s ABC, a partnership deducted and paid a total TDS of Rs 40000/- in the first quarter of FY and was supposed to file its TDS return by 31st July but filed its return on 31st August. Total fees of Rs 6200 (200/- per day for 31 days) shall be paid before filing of return.
In addition to this, the Assessing officer may direct a person who fails to file the TDS return within due date to pay a penalty minimum of Rs. 10,000 which may extend to Rs.1,00,000. The penalty under this section is in addition to the penalty u/s 234E and also covers the cases of incorrect filing of TDS return.