Tax Deducted at Source (TDS) – An Overview by Tax Swami

Introduction Tax Deducted at Source (TDS) is a taxation mechanism introduced by the Government of India to collect tax at the source of income generation. It is applicable to various types of payments, including salaries, interest, rent, professional fees, and commissions. The primary objective of TDS is to ensure that tax is collected in a timely manner and to minimize tax evasion. At Tax Swami, we simplify the complexities of TDS compliance for individuals and businesses, ensuring smooth and hassle-free tax management.

Understanding TDS TDS is deducted when a payment is made by one entity (deductor) to another (deductee) as per the specified rates under the Income Tax Act. The deductor is responsible for deducting the tax before making the payment and depositing it with the government. The deductee receives the net amount after TDS deduction, which can be claimed as a tax credit while filing their income tax return.

Applicability of TDS TDS applies to various transactions, including:

• Salaries: Employers deduct TDS on salaries based on the applicable income tax slab rates.

• Interest Income: Banks and financial institutions deduct TDS on interest earned on fixed deposits and other instruments.

• Rent Payments: If rent exceeds a specified threshold, TDS must be deducted before making the payment.

• Professional and Technical Services: Payments made to professionals, consultants, and contractors are subject to TDS deduction.

• Commission and Brokerage: Any commission or brokerage payments exceeding a certain limit attract TDS.

TDS Rates and Threshold Limits TDS rates vary depending on the nature of the payment. Some common TDS rates include:

• 10% on professional and technical services (Section 194J)

• 1% on property sales exceeding Rs. 50 lakh (Section 194IA)

• 5% on interest income above Rs. 40,000 (Rs. 50,000 for senior citizens) (Section 194A)

• 30% for payments to non-residents if no PAN is provided

At Tax Swami, we assist businesses and individuals in determining the applicable TDS rates and ensuring proper compliance.

TDS Payment and Filing The deducted TDS must be deposited with the Income Tax Department before the due date. Additionally, the deductor is required to file TDS returns quarterly, providing details of TDS deducted and deposited. Failure to comply can lead to penalties and interest charges.

TDS Certificate (Form 16, 16A, 26AS)

• Form 16: Issued by employers to employees, showing TDS deducted on salaries.

• Form 16A: Issued for TDS deductions on non-salary payments.

• Form 26AS: A consolidated statement of TDS credited to a taxpayer’s account.

Why Choose Tax Swami for TDS Compliance?

• Expert guidance on TDS applicability and deductions.

• Hassle-free TDS return filing and compliance management.

• Assistance in generating and verifying TDS certificates.

• Timely reminders and support to avoid penalties.