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TDS or Tax Deducted at Source is a specific amount that is reduced when a certain payment like salary, commission, rent, interest, professional fees, etc. is made. The person who makes the payment deducts tax at the source, while the person who receives a payment/income has the liability to pay tax.
An individual and HUF is required to deduct TDS on the specified services if they are engaged in:-
(i) business having turnover of Rs 1 crore or more during the previous financial year or
(ii) profession having receipts of Rs 50 lakh or more during the previous financial year
However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% although the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% needn’t apply for TAN.
Employer deducts TDS at the income tax slab rates applicable on Salary of Employees. Banks deduct TDS on Interest income @10% if PAN is Provided, but in case of no PAN may deduct @ 20%
Tax is deducted when a payment is due or when an actual payment is made; whichever is earlier
Tax Deducted at Source has to be deposited using Challan ITNS-281 on the government portal or physically at the notified banks on or before 7th date of the next month. For the month of march the due date is 30th April.
| IT Section | Nature of Payment | Threshold Limit | TDS Rate |
| Section 192 | Salary | As per applicable income slab | As per income tax slab rate |
| Section 193 | Interest on securitie | Rs 2500.00(₹ 5000 for debenture payment) | 10%. |
| Section 194 | Dividend other than the dividend as referred to in Section 115-O | 5000 | 10% |
| Section 194A | Interest other than interest on securities – Banks Time deposits, Recurring deposit and Deposit in Co-op Banks | Senior Citizen Rs. 50000.00 · Others Rs. 40000.00 | 10% |
| Section 194B | Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort | 10,000 | 30% |
| Section 194BB | Income by way of winnings from horse races | 10,000 | 30% |
| Section 194C | Payment to Contractors | 30,000 which is for each contract, whereas 100,000 is for p.a. | • Individuals or HUF @ 1% • Non-Individual/corporate @ 2% |
| Section 194D | Insurance commission | 15,000 | 5% |
| Section 194EE | Payment in respect of deposit under National Savings scheme | 2,500 | 20% |
| Section 194F | Payment on account of repurchase of unit by Mutual Fund or Unit Trust of Indi | NIL | 20% |
| Section 194G | Commission on sale of lottery tickets | 15,000 | 5%. |
| Section 194H | Commission or brokerage | 15,000 | 5% |
| Section 194I | RENT | 2,40,000 | 2% on rental amount of plant & machinery/ 10% on the rent of land & building |
| Section 194J | Fees for professional or technical services: | 30,000 p.a | 10% |
| Section 194LA | TDS on compensation for compulsory acquisition of immovable Property | 2,50,000 | 10% |
If deductors fail to deposit the TDS collected , they need to pay simple interest on the total amount deducted as tax at the rate of 1.5% per month.. If deductors fail to deduct the TDS , they need to pay simple interest on the total amount deducted as tax at the rate of 1% per month..
If the deductor fails to furnish the TDS return on or before the specified due date, he shall be liable to pay a penalty under section 234E of ₹ 200 per day till the date of default subject to the maximum amount of TDS is levied
| Quarter | Quarter Period | Quarter Ending | Due Date |
| 1st Quarter | April – June | 30 June 2020 | 31 March 2021 |
| 2nd Quarter | July – September | 30 September 2020 | 31 March 2021 |
| 3rd Quarter | October – December | 31 December 2020 | 31 January 2021 |
| 4th Quarter | January – March | 31 March 2020 | 31 May 2021 |
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
When PAN of Deductee is not available TDS rate is 20%
The tax shall be deducted under Section 194Q by a buyer carrying on a business whose total sales, gross receipts or turnover from the business exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which such goods are purchased. This provision shall be applicable from 01-07-2021. Thus, the liability to deduct tax under this provision in the financial year 2021-22 shall arise if the turnover of the purchaser was more than Rs. 10 crores in the financial year 2020-21.
The tax shall be deducted by the buyer of goods at the rate of 0.1% of the purchase value exceeding Rs. 50 lakhs if the seller has furnished his PAN or Aadhaar, otherwise, the tax shall be deducted at the rate of 5%.
Section 194Q provides that any person, being a buyer who is responsible for paying any sum to any resident, being a seller, is required to deduct tax at source under this provision. Thus, the obligation to deduct tax under this provision arises only when the payment is made to a resident seller. As in the case of import, the seller is a non-resident, the buyer will not have any obligation to deduct tax under this provision. However, the TDS under Section 195 or payment of Equalisation Levy may be required in respect of such transaction.
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