Tax Deducted at Source

Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act of 1961.

Any payment cover under these provisions shall be payable after deducting a prescribed percentage. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service.

It has great importance while conducting tax audits. Assessee needs to file quarterly return to CBDT. Returns state the TDS deducted & paid to government during the Quarter to which it relates.

TDS is also a direct tax – Collect from the people at the time of payment like salary, rent, commission, etc. Also, The TDS collection needs to transfer to Government Account.

The full form of TDS is Tax Deducted at Source. The deductor is referred to the person deducting the tax, and the deductee is the person from whom tax is deducted. TDS payment is made at a specified rate prescribed.

No tax will deduct in case the amount doesn’t exceed the specified limit. TDS will deduct from the payments will generate by the individuals as per Income Tax Act. Various types & rates of TDS deduction are present. Focus on a pay as you earn.

Tax Deducted at Source

TDS on Dividends

Section 302of Income Tax Act, 1961 by law notes.

  • TDS provisions under this section are attracting only in respect of deemed dividend u/s 2(22)(e) If such dividend exceeds 2500 in the year.
  • The rate of deduction of tax in respect of such dividends is 10%.
  • Provisions will not apply to dividend receivable by SADHA, GIC(General Insurance Corporation). Its subsidiaries or any other insurer provide shares are own by it or in which it has full beneficial interest: Provide also that no such deduction in respect of any dividends referred to in section 115-O.

TDS on immovable property

(1). Section 194IA of Income Tax Act,1961.

  • This provision is applicable in respect of transactions effect on or after June 1, 2013
  • It seeks deduction of tax at source on the transfer of certain immovable property other than agricultural land to a resident transferor.
  • Any person being a transferee who is liable to Pay to a resident by way of consideration for transfer of any immovable property exceeding 50 Lakhs shall at the time of credit of such sum to the account of the transferor or at the time of payment in whatever manner, has to deduct tax at source at 1% only

This TDS on the property needs to be deposit in 30 days from the end of the month in which deduction for all payments to generate on or after 01st June 2016.

(2). Section 194IB of Income Tax Act,1961

  • This provision is applicable in respect of transactions effect on or after June 1, 2017
  • It seeks deduction of tax at source on payment of rent exceeding Rs. 50,000 in a month by an individual or HUF to a resident landlord.
  • TDS shall deduct at 5% at the time of credit of rent for the last month of the previous year or the last month of the tenancy if the property is vacant during the year, as the case may be.

(3). Section 194C of Income Tax Act,1961

  • Tax needs to deduct at 1% (for individual, HUF)/ 2% (for others) of payment where payment generate for carrying out any work (including the supply of labor for carrying out any work and advertisements) by a contractor/sub-contractor.
  • Such work must be in pursuance of a contract (including subcontract) between the contractor and payer.
  • TDS is generating at the time of credit to the account of contractor or at the time of payment in cash or by cheque or draft or by any other mode whichever is earlier.
  • No TDS deducted if the single time payment to the contractor does not exceed RS. 35000 or Rs. 1,00,000 in aggregate during the year.
Tax Deducted at Source

TDS Certificates

A deductor needs to issue a TDS certificate called form 16 for salaried employees and form 16A for non-salaried employees within a specified time.

Therefore Deductor has to issue TDS Certificates within two months of the next financial year.