TDS Return Filing

Introduction to TDS (Tax Deducted at Source)

Tax Deducted at Source or commonly referred as TDS is the amount of tax deducted from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest, etc. The TDS amount is deducted at the time of making payments. Here, the tax is deducted when the money is credited to the payee’s account or at the time of payment, whichever is earlier.

TDS is deducted at the time of payment of salary or life insurance policy. The amount deducted as TDS is then deposited to the Income - tax department. By way of TDS, some portion of the tax is automatically paid to the Income Tax department. Thus, TDS is considered as a means of reducing tax evasion.

Who is Liable to Deduct TDS as per Income Tax Act?

The following entities are liable to deduct Tax Deducted at Source (TDS) under the Income Tax Act:

• Individuals: Individuals, in certain cases, may be required to deduct TDS on specific payments such as salaries, interest, or rent.
• Hindu Undivided Family (HUF): HUFs are obligated to deduct TDS on payments made in the course of their business or profession.
• Limited Companies or Organizations: Companies and organizations must deduct TDS on various payments, including salaries, contractor payments, and interest.
• Partnership Firms: Partnership firms are required to deduct TDS on payments like salaries, rent, and professional fees as per the provisions.
• Body of Individuals (BOI): BOIs must comply with TDS requirements for payments made in their business activities.
• Association of Individuals (AOI): AOIs are also responsible for deducting TDS on certain payments in accordance with the Income Tax Act.
• Local Authorities: Local authorities are required to deduct TDS on payments made for services or other obligations as specified by the Act.

Deduction Rate of TDS

On salary income, TDS is deducted depending upon the income tax slab rates applicable to a person. For other types of income such as rent, interest on securities, insurance commission, dividend, etc. the TDS rates are fixed and vary between 10% and 20%.Some of them are shown in table below:

Section	Nature of Payment	TDS Rate for Individual/HUF (in %)	TDS Rate for INR (in %)
192	Payment of salary	As per category in income tax	As per category in income tax
194B	Income earned by winnings from card games, lotteries, and other games	30%	30%
194BB	Income from winning of horse races	30%	30%
194EE	Payment made into National Savings Scheme (NSS) deposit	10%	10%
194F	Payment made towards repurchase of units by Unit Trust of India or Mutual Funds	20%	20%
194G	Income that arises from sale of lottery tickets/commissions and/or other transactions	5%	3%
194LBB	Investment fund which pays income to the unit holder [except for incomes that are exempted under Section 10 (23FBB)]	10%	30%
194LBC	Income generated from investments made in securitisation trust as per Section 115TCA	25%	30%

Advantages of TDS

• Cost Savings

  By outsourcing tax preparation, an entity can save up to 60% of the costs compared to handling it in-house, thereby increasing profit margins.

• Increased Efficiency in Tax Returns

  Outsourcing ensures that tax returns are computed carefully with all relevant laws considered, reducing mistakes and ensuring timely, accurate filing.

• Increased Operational Efficiency

  Outsourcing tax preparation allows an entity to allocate resources to core operations, thereby enhancing overall operational efficiency.

• Reduced Burden

  Outsourcing relieves the entity from the complex task of tax filing, freeing up human resources for other business-enhancing activities.

• Quick Fix for Tax Issues

  Outsourcing ensures that tax-related concerns are handled promptly by experienced professionals, resolving complications efficiently and on time.

Due Dates for Filing of TDS Returns

Quarter	Quarter Period	Last Date of TDS Returns
1st Quarter	From 1st April to 30th June	31st July
2nd Quarter	From 1st July to 30th September	31st October
3rd Quarter	From 1st October to 31st December	31st January
4th Quarter	From 1st January to 31st March	31st May

What is TAN?

The main purpose of the Tax Deduction and Collection Account Number (TAN) is related to the deduction or collection of tax at source. As prescribed in Section 203A of the Income Tax Act, 1961, obtaining TAN is mandatory for individuals or businesses authorized to deduct or collect tax. Failure to quote TAN in documents can result in a penalty of Rs. 10,000.

TDS Return Filing

TDS return filing is a quarterly statement that must be submitted to the Income Tax Department by the deductor (i.e., all persons responsible for deducting TDS). The return contains details of TDS deducted and deposited, PAN of deductor and deductee, TDS challan information, type of payment, and amount of TDS deducted. It must be done by every assessee who has deducted TDS at prescribed intervals.

An investment proof may be submitted by an employee to claim deductions and reduce taxable income below the maximum not chargeable to tax, resulting in no TDS deduction by the employer.

Types of TDS Return Forms

Types of TDS Return Forms	Particulars of the Form
Form 24Q	TDS statement of salaries
Form 26Q	TDS statement on all payments other than salaries
Form 27Q	TDS statement on income received from interest, dividends, or any other sum payable to non-residents
Form 26QB	TDS on payment for transfer of immovable property
Form 27EQ	Statement of collection of tax at source

The return statement of quarterly TDS needs to be accompanied by a signed Form 27A, which acts as a control chart of all quarterly TDS or TCS statements. This form is filed by those deducting or collecting tax along with quarterly TDS/TCS statements and summarizes the totals of payments and income tax deducted at source.

TDS Credit Certificate

The deductor issues a TDS certificate (Form 16 or Form 16A) to the deductee, detailing payment, TDS date, and credit to the Income Tax Government. The deductee claims credit and refund based on this certificate, which can be downloaded from TRACES (TDS Reconciliation Analysis and Correction Enabling System). The details should be verified, including the digital signature certificate (DSC).

TDS deductions are linked to PAN numbers for both deductor and deductee. Form 26AS is a consolidated tax statement showing all TDS deductions linked to the PAN, including salaries or interest income.

Process of TDS Filing

• Fill Form 27A completely.
• If filing a hard copy, verify it along with the electronically filed e-TDS return.
• Ensure TDS and total amounts match in their respective forms.
• Include the TAN of the organization filing the TDS returns on Form 27A.
• Specify the appropriate challan number, payment mode, and tax details on the TDS returns.
• Use the basic form for e-TDS filing for consistency, entering the 7-digit BSR for ease of tallying.
• Submit physical TDS returns at the TIN-FC managed by NSDL.
• Use a level two digital signature for online TDS returns.
• Receive a token number or provisional receipt as acknowledgment of successful filing.
• Refile if TDS returns are rejected, accompanied by a non-acceptance memo with reasons.

Penalty for Delay in Filing TDS Return

As prescribed in Section 234E, if TDS returns are not filed before the due date, a penalty of Rs. 200 per day is applicable until the default continues. The total penalty shall not exceed the TDS amount.

Requirements for Filing TDS Returns

• Possess a TAN registered for online filing.
• Prepare the TDS statement using RPU (Return Preparation Utility).
• Validate the TDS statement using FVU (File Validation Utility).
• Have a valid Digital Signature (DSC) registered for e-filing.
• Provide Bank Account Details of the Principal Contact.