TDS or Tax Deduction at Source, as the name implies, aims at collection of income tax at the very source of income. It is essentially an indirect method of collecting tax and works on the concept of taxing actual payments, or booking of payables, whichever is first.

Rational Behind TDS

The concept of withholding of tax was introduced as a measure to prepone the tax collection by the tax department while achieving a greater reach and a wider tax base. It also helps the tax payers to distribute the incidence of tax instead of bearing it together during personal tax assessment, at the end of the year.

Another major reason for introduction is to curb tax evasion – this is done purely on the basis of the mode of operation of this tax and point of collection (at the source itself).

How Does TDS Work?

The department has cast a responsibility of deduction of tax at source on the payer of any salary or other expense of business. This means that at the time of receipt itself, the tax has been deducted by the payer, who directly remits it to the Government. The recipient from whose Income Tax has been deducted at source gets credit of the amount deducted in his personal assessment on the basis of a certificate issued by the deductor.

Based on the nature of the payment made, rates have been prescribed for withholding of tax. Monthly remittance of the tax deducted at source has to be made to the Central Government. Various rules are formulated to ensure strict compliance and that the amount deducted is paid to the department in a timely manner and the credit is made available to the recipient of income.

The Challenge

From the mode of operation of the concept of TDS, it is clear that the responsibility to deduct tax and remit it is cast on the payer of any amount of income. However, individuals and companies are still not aware of the compliance requirement cast upon them including rate of TDS and due dates. Unknowingly, they default on the provisions and face consequences of interest and penalties, etc.

Applicability of TDS provisions

The provisions of TDS apply to all assesses responsible for making payments. The TDS Rate Chart below provides a short summary of the various categories of payments that are subject to TDS and the threshold beyond which the provisions apply.

TDS Rate Chart for FY 2017-18 Section Nature of Income Amount over which TDS to be deducted Rate of TDS
If PAN is Available If PAN is not Available
1 192 Salary To be seen as per slab Average Rate 30%
2 192A Payment of accumulated balance due of Employee's Provident Fund If accumulated balance is more than 50,000 10% 30%
3 193 Interest on Securities 10,000 10% 20%
4 194 Dividend other than of 115-O 2,500 10% 20%
5 194A Interest other than Interest on Securities
Interest received from Bank 10,000 10% 20%
Interest received from others 5,000
6 194B Income by way of winnings from lotteries, puzzles 10,000 30%
7 194BB Income by way of winnings horse race 10,000 30% 30%
8 194C Payment to contractors/ subcontractors 30,000 one time Individual/ HUF 1% Others 2% 20%
75,000 in whole year
9 194D Insurance Commission 15,000 5% 20%
10 194DA Payment under Life Insurance Policy 1,00,000 1% 20%
11 194E Payment to NR Sports Person No Limit 20% 20%
12 194EE Payment from National Savings Scheme 2,500 10% 20%
13 194F Payments on account of Repurchase of units by Mutual Fund No Limit 20%
14 194G Commission on Sale of Lottery Tickets 15,000 5% 20%
15 194H Payment of Commission or Brokerage 15,000 5% 20%
16 194-I Payment of Rent
For Land, Building or Furniture 1,80,000 10% 20%
For Plant and Machinery or 20% Equipment 2%
17 194 IA Payment on transfer of certain immovable property other than agricultural land 50,00,000 1% 20%
18 194 IB Payment of rent by Individual/HUF other than those covered under 44AB 50,000 p.m. 5%
19 194 IC Payment of Consideration (not being in kind) under Joint Development Agreement No Limit 10%
20 194J Fees for Professional or Technical Services
Normally in all cases 30,000 10% 20%
person engaged only in the business of operation of call centre (w.e.f 01/06/2017) 2%
21 194K Income in respect of Units Omitted w.e.f 01.06.2016
22 194L Payment of Compensation on acquisition of Capital Asset Omitted w.e.f 01.06.2016
23 194LA Payment of compensation on acquisition of certain immovable property 2,50,000 10% 20%
24 194LB Income by way of interest from infrastructure debt fund to a nonresident or foreign company No Limit 5% 20%
25 194LBA Certain income from units of a business trust
Payment to Resident No Limit 10% 20%
Payment to Non-resident 5% 20%
26 194LBB Income in respect of units of Investment Fund
Payment to Resident No Limit 10% 20%
Payment to Non-resident 30%
27 194LBC Income in respect of investment in securitization trust
Payment to Individual/HUF No Limit 25%
Payment to Others 30%
28 194LC Income by way of interest from Indian Company No Limit 5%
29 194LD Income by way of interest on certain Bonds and Government Securities No Limit 5%

Exception to the rule of TDS

Applicability of TDS for individuals and HUF.
An individual and HUF is not liable to the provisions of TDS unless he is subject to tax audit provisions under section 44AB of the Income Tax Act, 1961. Hence once an individual of HUF is covered under Tax audit provisions, the liability to deduct tax at source arises from the payments made by it.

TDS Payment Due Dates for FY 2016-17 and FY 2017-18 for Individual, company, HUF, Partnership Firms

Month of Deduction Due Date for Payment of Tax
April 7th May
May 7th June
June 7th July
July 7th August
August 7th September
September 7th October
October 7th November
November 7th December
December 7th January
January 7th Feb
February 7th March
March 30th April

TDS Return Filing Due Dates for Individual, company, HUF, Partnership Firm

Quarter Ending Due Date for filing of Return from FY 2016-17
30th June 31st July
30th September 31st October
31st December 31st January
31st March 31st May
Talk to us

If you are looking for Tax Experts In India, talk to V. Purohit & Associates. Our tax professionals help you understand the applicable rules and compliance requirements and to adhere to them as per due dates.

We are a new-age financial accounting company, that upholds age-old values and principles of Chartered Accountancy. We offer a fairly-differentiated set of services, tailored to specific business goals and challenges.