TDS Compliance

TDS Compliance

TDS or Tax Deducted at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons making such payments.

Usually, the person receiving income is liable to pay income tax. But the government with the help of Tax Deducted at Source provisions makes sure that income tax is deducted in advance from the payments being made by you.

The recipient of income receives the net amount (after reducing TDS). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes credit of the amount already deducted and paid on his behalf.

Documents Required for TDS Compliance

  • TDS challans copy deposited during the month
  • Details of vendors on which TDS is deducted during the month
  • Pan numbers of all vendors on which TDS is deducted during the month
  • Details of Proprietor / Directors / Partners who are authorized to sign TDS returns Like Name , Address, Pan number and Digital Signature

When should TDS be deducted and by whom?

Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payment. But no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited.

However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN.

Your employer deducts TDS at the income tax slab rates applicable. Banks deduct TDS @10%. Or they may deduct @ 20% if they do not have your PAN information. For most payments rates of TDS are set in the income tax act and TDS is deducted by payer basis these specified rates.

If you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit – you do not have to pay any tax. And therefore no TDS should be deducted on your income. Similarly, you can submit Form 15G and Form 15H to the bank if your total income is below taxable limit so that they don’t deduct TDS on your interest income.

In case you have not been able to submit proofs to your employer or if your employer or bank has already deducted TDS and your total income is below the taxable limit) – you can file a return and claim a refund of this TDS.

The complete list of Specified Payments eligible for TDS deduction along with the rate of TDS.

TDS Rate Chart for F.Y. 2020-21 (A.Y: 2021-22)

SectionNature of paymentThreshold LimitApplicable from 01/04/2020 to 13/05/2020Applicable from 14/05/2020 to 31/03/2021
ResidentNon-resident *ResidentNon-resident *
Rs. TDS Rate (%)TDS Rate (%)TDS Rate (%)TDS Rate (%)
192SalariesNormal slab rateNormal slab rateNormal slab rateNormal slab rate
192APremature withdrawal from EPF5000010101010
194CContractor-Single transaction-Individual/HUF            -Others300001 2– –0.75 1.5– –
194CContractor – Consolidated Payment During the F.Y. – Individual/HUF – Others100000  1 2  – –  0.75 1.5  – –
194HCommission/Brokerage1500053.75
194IRent of – Plant/Machinery /Equipment – Land and Building/Furniture & Fixture2400002 10– –1.5 7.5– –
194IATransfer of certain immovable property other than agriculture land50 lakh10.75
194IBRent by Individual/HUF50000 per month53.75
194ICPayment under Joint Development Agreements to Individual/HUF107.5
194JProfessional Fees30000107.5
194JTechnical Fees (w.e.f. 01.04.2020)3000021.5
194JDirector’s fees107.5
195Long-term capital gain – Under Section – 115E/ 112(1)(c)(iii)/112A – Any Other Gains  – –  10 20  – –  10 20
195Short-term capital gain – 111A1515
195Royalty1010
195Fees for technical services1010

What is the due date for depositing the TDS to the government?

The Tax Deducted at Source must be deposited to the government by 7th of the subsequent month