Every entity is liable to pay taxes in India.
However, since people managed to avoid paying taxes, the Government of India introduced TDS (Tax Deducted at Source) to ensure taxes would be deducted from specified payments well in advance.
This blog will explore what is TDS and everything you should know about TDS.
Table of Contents
What is TDS?
TDS is a direct tax that allows the government to collect taxes at the source of income.
It is collected from payments like rent, commission, and salaries that cross a certain threshold.
The introduction of TDS has ensured that income tax is deducted from payments well in advance. The deductee receives the net amount after tax is deducted.
The deductee? Let’s understand what this means.
Deductee is the person who receives the income after tax has been deducted. The TDS amount gets adjusted against their final income tax liability.
Deductor: The deductor is the party that gives the income after deducting taxes to the deductee.
Listed below are the types of payments for which TDS is applicable:
- Professional fees
- Consultation fees
- Commission payments
- Interest payments by banks
- Rent payments
After knowing what TDS is, one must be aware of the rules that it is governed by.
- Deduction of the requisite amount has to be done when the payment gets due or when the amount is disbursed.
- After deducting the amount, employers must submit the TDS to the government’s account mandatorily by the 7th of the following month.
- A delay in tax deduction will attract a penalty in the form of interest every month at the rate of 1% until the tax is deposited with the government.
- If an employer fails to deposit TDS to the Central Government’s account within the stipulated date, interest at a 1.5% rate will be levied every month until it gets deposited.
Tax Deducted at Source (TDS) is different from Tax Collected at Source (TCS). Read our blog to know the difference between the two!
We’ve covered the basic details of what is TDS under the Income Tax Act. Different rates of TDS are applicable to different sections of income. This next section lists what these rates are.
What is TDS Payment Rates
Here is a brief overview on what the TDS payments rates are across different goods and services. For a more detailed list, read our blog on TDS Rates!
|Section||Type of Payment||Rate (%)|
|Section 192||Salary income||The average rate will be calculated based on one’s existing income tax slab rate|
|Section 194||Dividend u/s 2 (22)||10%|
|Section 194 A||Interest income (other than on securities)||10%|
|Section 194 C||Payment to a resident contractor or a subcontractor||1% (for HUFs and Individuals)
2% (for others)
|Section 194 D||Insurance Commission||5% (for HUFs and Individuals)
10% (for others)
|Section 194 G||Commission on the sale of lottery tickets||10%|
|Section 194 H||Commission or brokerage||5%|
|Section 194 – I||Rental income||2% (plants, machinery or equipment)
10% (land or building, furniture or fixture)
|Section 194 – IA||Transfer of immovable properties (except rural land)||1%|
|Section 194 J||Royalty, professional or technical fees to a director||10%|
|Section 194 LA||Acquisition of specified immovable properties||10%|
What is TDS Payment Due Dates?
While discussing what is TDS, we mentioned that it must be credited to the account of the Central Government before the due date. Deductors must credit this amount, failing which they have to pay penalties.
The following is a table with all the due dates for TDS payments:
|April||By 7th May|
|May||By 7th June|
|June||By 7th July|
|July||By 7th August|
|August||By 7th September|
|September||By 7th October|
|October||By 7th November|
|November||By 7th December|
|December||By 7th January|
|January||By 7th February|
|February||By 7th March|
|March||By 30th April|
Details of TDS on Salary
Salary is a type of compensation that people receive from employers. It is not associated with any fixed rate of tax deduction, but is dependent on the income tax slabs to which an employee belongs.
It is the employer’s responsibility to calculate the amount payable as tax, depending on the income tax average rate.
This average rate is defined as the entire tax liability divided by an employee’s total income. Employers also need to consider any employee investments before deducting the applicable tax on salary.
Given below are crucial points related to tax that is deducted from an individual’s salary:
Tax will not be deducted at source if one’s salary is equal to or less than Rs 2,50,000.
- Exempted Allowances
The amount allocated for House Rent Allowance (HRA), LTC or Leave Travel Concession, and traveling and conveyance are exemptions to TDS. Other benefits not part of the salary need to be subtracted from the employee’s total salary to calculate taxable income.
RazorpayX enables businesses to improve their operations by supercharging payouts and automating payroll compliance. The best part? It automates TDS payments and vendor invoices, so you don’t have to deal with the headache of calculating and subtracting taxes!
This is a convenient tool for anyone who needs to learn what is TDS and the applicable rates on various payments.
What is TDS Returns Filing Process?
Given below is a step by step guide for filing TDS returns online:
Step 1: Visit the official site of Income Tax and log in. Note that a user’s TAN would be their user ID.
Step 2: Navigate to the TDS menu and click “Upload TDS” from the dropdown menu.
Step 3: Select the correct details in the form that you’ll be provided. Click on ‘validate’ to confirm.
Step 4: Upload the TDS zip file and click to e-verify.
Step 5: Validate the form using either DSC or Electronic Verification Code. Submit the form after validation.
Why Should You Choose RazorpayX Tax Payments?
If you are struggling to understand what is TDS and how to file it, you can choose RazorpayX for one-tap automated tax payments.
Listed below are the key benefits of choosing RazorpayX Tax Payments:
- No data entry error as TAN and address details are saved in the system.
- Employers can store the data and make TDS payments later.
- No need to provide account details for every TDS payment.
- The dashboard will display CIN and CRN numbers after the TDS payment.
- It saves a you a lot of time.
Types of TDS Returns Forms
The following table provides the details of TDS return forms:
|TDS Return Forms – Types||What It Includes|
|Form 24Q||Statement of TDS from salaries|
|Form 26Q||Statement of TDS for all payments other than salaries|
|Form 27Q||Statement of TDS on incomes made from dividends, interests and other amounts payable to NRIs|
|Form 27EQ||Statement of tax collection at source|
Dates for Filing TDS Returns
The table below provides the details of TDS filing dates:
|Quarter Period||Date for Filing TDS Returns|
|April – June||31st July|
|July – September||31st October|
|October – December||31st January|
|January – March||31st May|
The process of TDS calculation and payments is quite tedious and long.
Fortunately, there’s a solution!
Choose RazorpayX to receive the benefits of automated TDS payments. You won’t have to Google “What is TDS” ever again!
Is PAN required for TDS payments?
Yes, PAN (Permanent Account Number) details are required for TDS payments.
Is TDS payable only by salaried individuals?
As per the rules of the IT Act, everyone with an annual income above ₹2.5 lakhs must pay taxes. TDS needs to be paid both by salaried and self-employed people.
Is TDS applicable for freight and transportation charges?
If the taxpayer owns more than 10 goods carriers, TDS will be applicable for the amount paid for freight and transportation charges.
Who has to file TDS Returns?
Employers and businesses with valid TAN who have deducted tax for specified payments must file TDS returns.
What is the TDS rate for contractors?
The stipulated TDS rate for contractors is 1% if payments are made to individual/HUFs. The TDS rate is 2% if such payments are made to others.