All about Tax Deducted at Source (‘TDS’)

What is TDS?

Your salary just got credited and you see that you didn’t get the amount promised, is it? Well, that’s because your TDS got deducted. What is TDS, you ask? Give us just 5 minutes to explain.

TDS stands for Tax Deducted at Source.

As per the Income-tax Act, any person making a payment to another person, if the payment is of a specified nature and exceeds certain limits, is required to deduct a specified amount from the payment made, in advance and deposit it with the government. In other words, it is a deduction of tax, in advance, from the payment to be received by the recipient, by the payer.

Consequently, the benefit of such deducted tax can be availed at the time of filing income tax return by the person receiving the payment (and getting their tax deducted from such payment).

TDS is deducted on the following types of payments:

• Interest payments by banks
• Commission payments
• Rent payments
• Consultation fees
• Professional fees
• Salary

Who is required to deduct TDS?

All persons, except individuals and HUF, are required to deduct TDS as per the rate chart specified.

Individuals/ HUF are liable to deduct TDS only when, in the immediately previous year, their books of accounts are liable to audit under Section 44AB of the Income-tax Act.

Individuals/ HUF are also liable to deduct TDS in case a rent payment exceeding Rs. 50,000 per month is made, even if such individual/ HUF is not liable for an audit under Section 44AB. Such individuals/HUF are required to deduct TDS @ 5% and are not required to obtain TAN.

The Rates of TDS to be deducted are mentioned in our article here:

What to do once deductions are made as TDS?

Once the deduction is made from the payment to be made, the information about such deductions and payments needs to be filed as part of a return. Such return is called TDS return.

The TDS return mentions the party to which the payment is being made, the nature of payment, the amount of payment, the date of payment among other things. This return is required to be filed quarterly.

Payment of the TDS amount so deducted also needs to be made through a challan to the government.

When should the TDS return be filed and when to make the TDS payments?

A table detailing last date for TDS payments is outlined below:

A table detailing last date for filing TDS returns is outlined below: