Basic Concept of TDS

• TDS stands for Tax Deducted at Source, a mechanism introduced to collect tax at the very source of income.
  
• It ensures regular inflow of revenue to the government and reduces tax evasion.
  
• The person making a payment (called the deductor) deducts a specified percentage of tax before making payment to the recipient (called the deductee).
  
• The deducted amount is then deposited with the government.
  
• TDS is applicable to various types of payments such as salary, rent, commission, interest, and professional fees.
  

Applicability of TDS

• TDS applies to both individuals and entities making specified payments beyond prescribed thresholds.
  
• It is mandatory for employers, businesses, and even certain individuals under specific conditions.
  
• Different sections of the Income Tax Act govern TDS on different payments.
  
• TDS is deducted at the time of payment or credit, whichever is earlier.
  
• Non-compliance can attract penalties, interest, and disallowance of expenses.
  

Common TDS Rates and Sections

• Salary (Section 192): As per applicable income tax slab rates.
  
• Interest on securities (Section 193): 10%.
  
• Bank interest (Section 194A): 10% if interest exceeds ₹40,000 (₹50,000 for senior citizens).
  
• Rent (Section 194I): 10% on land/building rent if it exceeds ₹2.4 lakh per year.
  
• Professional fees (Section 194J): 10% if payment exceeds ₹30,000.
  
• Purchase of immovable property (Section 194-IA): 1% if value exceeds ₹50 lakh.
  

TDS Returns and Certificates

• Deductors must file TDS returns quarterly with details of deductions and challans.
  
• Form 16 is issued for salary, and Form 16A for other TDS payments.
  
• These certificates help the deductee claim credit of TDS in their income tax return.
  
• TDS details also reflect in Form 26AS and Annual Information Statement (AIS).
  
• Mismatch or non-reporting may delay refunds or attract scrutiny.
  

TDS Credit and Refund

• The deductee can claim TDS as advance tax paid while filing the income tax return.
  
• If excess TDS is deducted, the refund can be claimed from the Income Tax Department.
  
• PAN is mandatory to receive correct TDS credit.
  
• Timely filing of TDS returns by deductors is essential for smooth credit to deductees.
  
• TDS acts as a prepaid tax and is adjusted against the final tax liability.