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What is TDS?
The concept of Tax Deducted at Source (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 into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
When is TDS deducted?
TDS is required to be deducted by responsible person at the appropriate rates, from payments of specific nature i.e. salary, rent, contract payments, consultancy fees, commission, etc. Applicable to all assessees other than indv/HUF.
Generally, tax is required to be deducted at the time of the credit to account of the payee or at the time of payment, Whichever is earlier.
However, In case of payment of salary and payment in respect of life insurance policy, tax is required to be deducted at the time of payment.
What are the Rates for deduct of Tax at source (TDS)?
Taxes shall be deducted at the rates specified in the relevant provisions of the Act or the First Schedule to the Finance Act. However, in case of payment to non-resident persons, the withholding tax rates specified under the Double Taxation Avoidance Agreements shall also be considered. Click here to view the TDS Rate Chart.
How to pay Tax Deducted/Collected at source?
Tax deducted or collected at source shall be deposited to the credit of the Central Government by following modes:
1) Electronic mode: E-Payment is mandatory for –
a) All corporate assesses; and
b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch
What happens incase of failure or late filing of TDS return?
1) Late filing fees for TDS Return U/s 234E: Mandatory late filing fees U/s 234E of Rs 200/- per day subject to maximum of TDS amount.
2) Penalty for Late filing or non filing of TDS Return U/s 271H: Failure to filing TDS return within 1 year from specified date will attract minimum penalty of Rs. 10000 and maximum penalty of Rs. 100000/-.
Applicability of Interest on Non/ Late deduction TDS and Late payment of TDS :
i) Late Deduction: Interest @ 1% p.m. for late deduction of TDS on applicable amount.
ii) Late remittance: Interest @ 1.5% p.m. for late remittance on applicable amount.
Penalty U/s 271C upto the amount of TDS if not deducted and paid to the Government account.