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What is TDS?
TDS, short for Tax Deducted at Source , is a type of tax that is levied on payments to individuals or companies if the paid amount crosses certain threshold limits. For example, if a company is paying a salary to an individual, and if this paid amount is eligible for TDS, then at the time of payment the company has to deduct the applicable tax from the original amount and deposit the same with the Income Tax Department. In this way, the recipient gets their salary with tax already deducted at source.
Due Dates for TDS Return
It is the responsibility of the organization deducting the TDS, known as the deductor, to duly pay the applicable TDS to the government before the due date. Generally, the due date for TDS payment is always the 7th day of the next month, with a few exceptions.For example, if an organization wants to pay TDS for the month of July, then the TDS payment due date for the same will be the 7th of August. One notable exception is the month of March, TDS payments for which can be made upto the 30th of April.For government assessees paying TDS without challan, the TDS payment has to be done on the same day that the original transaction was completed.
TDS return
Once the deductor has deposited the TDS, they also have to file the TDS return. The TDS return is a detailed account of TDS paid to the government and the challan information at the end of every quarter.The due dates for the mandatory TDS filing are as follows:
- 1st Quarter - 1st April to 30th June - 31st July
- 2nd Quarter - 1st July to 30th September - 31st October
- 3rd Quarter - 1st October to 31st December - 31st January
- 4th Quarter - 1st January to 31st March - 31st May
Penalty for Late Filing of TDS Returns
If you delay the payment of TDS that exceeds the TDS due date, then under Section 234E, you will have to pay charges of ₹200 per day until the charge fee is equal to the return filing amount that is TDS.
Penalty (Sec 271H)
The penalty under Section 271H is separate and is in addition to the late filing fee under Section 234E of the Income Tax Act. Additionally, Section 271H also addresses penalties related to incorrect filing of TDS returns.If the following conditions are fulfilled, no penalty will be levied under section 271H in case of delayed filing of the TDS/TCS return:
- The TDS/TCS return is submitted within one year from the specified due date.
- The tax deducted/collected at source is paid to the credit of the Government
- Any applicable late filing fees and interest have been paid to the Government.
Also Read : Income Tax Return - ITR Filing, Types, Process and Forms
Interest on Late Deposit of TDS
The interest payable on the late deposit of TDS is as follows -
| Relevant Section of the Income Tax Act, 1961 | Nature of Default | Interest is subject to the TDS/TCS amount | Duration for Interest Payment |
| 201(1A) (i) | TDS not deducted (fully or partially) | 1% per month | From the date the tax was deductible to the date it was actually deducted |
| 201(1A) (ii) | TDS not deposited to the government after deduction (fully or partially) | 1.5% per month | From the date of tax deduction to the date of deposit. |
Note : The interest on the late deposit of TDS should be paid before filing the TDS return.According to Section 201(1A), if TDS is deposited late after deduction, interest must be paid. It is calculated at a rate of 1.5% per month from the date the TDS was deducted until the actual date of deposit. The interest on such late deposit is calculated starting from the date TDS was deducted, not from the due date for TDS payment.The interest is to be calculated every month and not on the number of days, i.e. any part of a month is treated as a full month. The term "month" is not defined in the Income Tax Act 1961. However, various High Court rulings suggest that it should be considered as a period of 30 days rather than an English calendar month.Let's consider an example where the TDS was deducted on 21st February 2024 and due date is 7th March 2024. If the TDS is actually deposited on 8th March 2024 (one day after the due date), the interest on the late deposit would be calculated from 21st February 2024, and not from 7th March 2024 through 8th March 2024. This results in interest charges for a period of 2 months due to a delay of just one day. Therefore, you would owe interest at 1.5% per month for 2 months, totalling 3% on the TDS amount. Also Read: Belated Return: Section 139(4), Penalty, How to File Income Tax Return After Due Date?
Prosecution (Sec 276B)
If an individual fails to remit TDS to the Central Government as mandated under Chapter XVII-B of the Income Tax Act, 1961 , they may face rigorous imprisonment. The minimum prison term is three months, which can extend up to seven years, along with a monetary fine.
Conclusion
Thus, all companies and organizations are required by law to deduct TDS from their payments, pay those taxes to the government before the due date, and duly file their TDS returns before the due date. Non-payment or delay in filing of TDS attracts a penalty of Rs. 200 per day until the amount is paid. So if you or your organization is eligible for TDS E payment and filing, make sure you do so on time and without fail. Also Read: Penalty for Filing Income Tax Return Late
FAQS - FREQUENTLY ASKED QUESTIONS
TDS returns are filed monthly or quarterly ?
Filing of TDS (Tax Deducted at Source) return is mandatory for every person who has deducted TDS. The returns are submitted quarterly, and details pertaining to the deduction of TDS need to be submitted. These details include TAN (Tax deduction and collection Account Number), type of payment, PAN of deductee (taxpayer) and the amount of TDS deducted etc.
The due dates for filing TDS are:
• 1st Quarter - for the period between 1st April to 30th June, the due date for filing is 31st July.
• 2nd Quarter - for the period between 1st July to 30th September, the due date for filing is 31st October.
• 3rd Quarter - for the period between 1st October to 31st December, the due date for filing is 31st January.
• 4th Quarter - for the period between 1st January to 31st March, the due date for filing is31st May.
Forms for filing tds returns ?
There are different forms which cater to the different purposes of deduction of TDS depending on the nature of the transaction.
1. Form 24 Q for tax deducted at source for salaried people. It is a quarterly statement.
2. Form 26Q for tax deducted at the source which covers all sorts of payments except salaries. It is a quarterly statement.
3. Form 27Q for deduction of tax from dividends, interest or any other sum payable to non-residents. It is a quarterly statement.
4. Form 26QB is a statement cum challan of deduction of tax under Section 194-1A.
5. Form 26 QC is a statement cum challan of deduction of tax under Section 194-1B.
6. Form 27 EQ is the collection of tax at source (TCS). It is a quarterly statement.
Why is it compulsory to file tds return ?
It is mandatory to file TDS returns as per the Income Tax Act, of 1961. Some of the benefits of filing TDS are:
• ensures regular income to the Government.
• helps in the collection of taxes on a regular basis.
• ·offers an easy mode of tax payment to the payer.
• the burden of lump sum payment is reduced since the TDS has to be filed quarterly.
Section 234E of the Income Tax Act states that if the assessee fails to file a TDS return on or before the due date, then a fine of Rs. 200 per day will be charged. However, the total penalty should not exceed the TDS amount.
In case the assessee has not filed TDS for a year from the due date or has provided incorrect information, then the penalty amount is between Rs. 10,000 and Rs. 100,000. So, to avoid late payment charges, it is better to file TDS returns on time.
Who is not liable to pay tds ?
If a person is making payment to an individual or HUF whose books are not audited needs not pay TDS. Furthermore, TDS is not required to be deducted if payment is made to RBI, Government, or a mutual fund. If payment is made to a transporter, who owns 10 or fewer goods carriers, and is in a business requiring leasing, hiring or plying goods carriage. Such a person needs to fill Form 26Q with the details of the non-deduction of tax along with the PAN of the payee. TDS is not applicable if payment is made to a non-resident person for carrying out any work.
What are the types of tds ?
The income sources that qualify for the different types of TDS are:
• Salary - This has to be filed under Section 192. TDS on salary is the same as the tax slab rate, which is as follows for FY 22-23 (new tax regime):
• No TDS on an annual income of up to Rs. 2.5 lakhs.
• 5% TDS if annual income is between Rs. 2.5 lakhs to Rs. 5 lakhs.
• 10% TDS if annual income is between Rs. 5 lakhs to Rs. 7.5 lakhs.
• 15% TDS if it is between Rs. 7.5 to Rs. 10 lakhs.
• 20% TDS if it is between Rs. 10 lakhs to Rs. 12.5 lakhs.
• 25% TDS liability if annual income is between Rs. 12.5 to Rs. 15 lakhs.
• 30% if it is above Rs. 15 lakhs.
• Commission payments - Under Section 194H. The TDS deducted is 10%. If the payee fails to furnish, PAN, then the rate of TDS on brokerage and commission is 20%.
• Bank interest - TDS applies only if the interest earned from fixed deposits increases by Rs. 40,000. In the case of senior citizen taxpayers, the interest earned from fixed deposits is Rs. 50,000. The TDS liability in such a scenario is 10%. This can be filed under Section 194A.
• Amount under LIC - If the sum payable under a life insurance policy is less than Rs. 1,00,000, then TDS is not deducted. If it is more than Rs. 1,00,000, then the applicable TDS is 5%. This has to be filed under Section 194DA.
• Brokerage - Under Section 194H, the TDS liability is 5%. This is applicable only if the brokerage is more than Rs. 15,000 in the given financial year.
• Payment of rent - the rent earned from land or building attracts 10%. The threshold limit is Rs. 2,40,000 in a financial year.
• Interest paid on debentures - if it is less than Rs. 5,000 in the financial year, then TDS is not deducted. If it is more than this, then TDS is deducted, and it has to be filed under Section 193.
• Interest on securities - Anyone giving an interest income on security to a citizen of India should deduct tax before releasing the payment. The TDS deducted is 10% and should be filed under Section 193.
• Winning from a lottery, games etc. - TDS deducted is 30% under Section 194B and Section 194BB. TDS is not deducted if the winning amount in a lottery or game is less than Rs. 10,000.
• Senior citizen saving scheme-interest earned up to Rs. 40,000 is exempted from TDS. Anything above that is liable for TDS payment under Section 194A.
• Fees from professional services- Rs. 30,000 is exempted. Anything above this will be liable for TDS deduction under Section 194J.
• Transfer or sale of immovable property- a person buying the property should deduct a tax of 1% on the sum paid or the stamp duty value of the property. This tax is deducted depending on whichever is higher. It should be filed in Section 194-1A.
• Contractor payment- TDS of 1% should be deducted if payment is made to resident individuals or HUF. TDS of 2% should be deducted if payment is made to a resident person other than HUF or an individual. It has to be filed under Section 194C.
• Remuneration paid to the director of a company - TDS is applied to the salary paid to a full-time director, managing director or executive director under Section 192. 10% TDS will be applied, and it has to be filed under Section 194J.
• Insurance commission - the applicable TDS is 5% for a person who is an insurance agent. TDS deducted is 10% for domestic companies and 20%when the PAN is not furnished by the payee.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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