Tax Deducted at Source (TDS) collects income tax in India under the Indian Income Tax Act of 1961. TDS is managed by the Central Board for Direct Taxes (CBDT), part of the Department of Revenue and managed by the Indian Revenue Service (IRS).
TDS plays a crucial role in India’s fiscal system, aiming to collect taxes directly from the source of income.
TDS Meaning in India
Tax Deducted at Source (TDS) refers to the tax deducted when the money is credited to the payee’s account or at the time of payment, whichever is earlier. The purpose of TDS is to collect tax directly from the source of income.
The deductor is required to make a specified payment. The deductor must deduct tax at source and remit it to the Central Government’s account. The payment, minus the TDS, is then paid to the deductee.
The deductee whose income tax has been deducted at the source would be entitled to a credit for the amount deducted based on the Annual Information Statement (AIS) or TDS certificate issued by the deductor.
Types of TDS Deductions in India
Below is a tabular list showcasing various TDS deductions in India, current TDS rates, and relevant sections from the Income Tax Act. It includes specific deductions such as tax deduction at source from salary and TDS on flat rent, highlighting the broad range of rules for TDS deduction.
| Income Type | Section | TDS Rate (%) |
| Salaries (deduction of tax at source from salary) | 192 | As per the Income Slab |
| Interest on securities | 193 | 10 |
| Dividends | 194 | 10 |
| Interest other than Interest on securities | 194A | 10 |
| Winnings from lotteries and crossword puzzles | 194B | 30 |
| Winnings from horse races | 194BB | 30 |
| Payments to contractors and subcontractors(Exempt up to ₹30,000 for individual bills or ₹1,00,000 for aggregate in a financial year.) | 194C | 1 (Individuals/HUF), 2 (Others) |
| Insurance commission | 194D | 5 |
| Payments in respect of deposits under National Savings Scheme | 194EE | 10 |
| TDS on flat rent | 194I | 10 |
| TDS on Purchase of property (where the property’s sale consideration or the stamp duty value is ₹ 50,00,000 lakhs or more). | 194IA | 1 |
This table is not exhaustive but covers some key sections and rates, demonstrating the wide application of rules for TDS deduction.
TDS Forms Required
Several forms are required for TDS compliance.
| Form ID | Description | Frequency |
| Form 24 | This form is used for the yearly submission detailing tax deducted at source from salaries as per Section 206 of the Income Tax Act, 1961. | Yearly |
| Form 26 | Used for the annual reporting of tax deducted at source for transactions other than salaries under Section 206 of the Income Tax Act, 1961. | Yearly |
| Form 27 | A quarterly report for taxes deducted at source on payments like interest, dividends, or other amounts to specified individuals. | Quarterly |
| Form 27E | It is an annual report on tax collection governed by Section 206C of the Income Tax Act 1961. | Yearly |
| Form 24Q | A quarterly report that details the tax deducted from salaries at the source. | Quarterly |
| Form 26Q | This quarterly report covers the tax deduction at source for payments other than salaries. | Quarterly |
| Form 27Q | Quarterly tax report deducted at source from payments like interest, dividends, or other sums to non-residents. | Quarterly |
| Form 27EQ | Quarterly report on the collection of tax at source. | Quarterly |
You can also make a taxation checklist to ensure all necessary forms and documents are prepared and submitted correctly.
The Annual Information Statement (AIS) and Form 26 AS
The Annual Information Statement (AIS) in India is a detailed tax document that offers a broad view of a taxpayer’s financial activities within a fiscal year, extending beyond the scope of Form 26AS.
It shows various financial transactions, including high-value transactions, property dealings, and share transactions, reported to the Income Tax Department by entities like banks and mutual funds.
It aims to simplify tax filing by compiling a taxpayer’s financial data in one place, aiding in accurate income tax return submissions, and assisting the department in pre-filling returns.
Although AIS provides a more extensive data set than Form 26AS, it hasn’t replaced it.
Form 26AS contains tax deductions, collection details, and advance and self-assessed tax payments. Both AIS and Form 26AS are crucial for taxpayers, serving complementary roles in ensuring accurate and comprehensive tax return filing. Taxpayers should review both documents to reconcile their financial and tax records thoroughly.
TDS Deduction: Deductor and Guidelines
Who is responsible for the deduction of TDS?
The deductor (employer or payer) is responsible for deducting TDS before making any payments. The deductor can be an individual, a partnership firm, a company, etc., making specified payments mentioned under the Income Tax Act.
How to deduct TDS?
The TDS rate depends on the nature of the payment, and the deductor must deduct TDS at the applicable rates. Deductors should file an e-TDS return per Section 206 of the Income Tax Act. This aligns with the guidelines set on August 26, 2003, by the CBDT for filing TDS returns electronically. TDS is deducted at a higher rate if the deductee does not have a PAN.
TDS Filing Process
Requirements for Submitting TDS Return
The person submitting the return must possess the following:
- An active TAN registered on the e-filing website
- A correctly generated FVU file using the Return Preparation Utility (RPU) from the TIN-NSDL website
- Digital Signature Certificate (DSC) registered on the e-filing portal if using DSC for upload
For those opting to upload via EVC, the main bank account details must be pre-validated.
How to Upload Statements for TDS Returns?
The deductor must prepare and upload TDS statements using Return Preparation Utility (RPU) provided by the Income Tax Department or any other third-party software.
After preparation, the statement should be validated using File Validation Utility (FVU).
How to Submit TDS Return on the e-Filing Website?
- Access the Website and Sign In: Use your TAN to sign in on the e-filing website.
- Navigate to the TDS Return Option: Select e-File > Income Tax Forms from the main menu> File Income Tax Forms.
- Locate the Relevant Form: Find the form you need to file by clicking the “File Now” button under the Tax Deducted at Source – TDS Form section.
- Begin the TDS Form Submission: Click “Let’s Get Started” to proceed.
- Fill in the Necessary Information: Provide the required details, including selecting the form, entering the financial year and quarter, choosing the upload type, and uploading the TDS zip file.
- Complete the Verification of TDS Return: To finalize the submission, use the OTP sent to your registered mobile number for verification.
A confirmation message will be displayed once the process is completed.
You can still authenticate the TDS statements using an Electronic Verification Code (EVC) if a DSC is not set up.
TDS Due Dates for Return Filing
Quarterly TDS Returns:
- 31st July for Q1 (April-June)
- 31st October for Q2 (July-September)
- 31st January for Q3 (October-December)
- 31st May for Q4 (January-March)
Conclusion
Tax Deducted at Source is a crucial part of India’s tax infrastructure, ensuring that tax is deducted at the source and reducing tax evasion. Understanding TDS rates, applicable sections, and compliance requirements is essential for both deductors and deductees. Regular updates and compliance with rules for TDS deduction ensure smooth tax operations and credit.
Also, considering varied investment avenues as part of a financial planning and taxation checklist can benefit your financial growth alongside tax compliance.
Navigating the investment market can be challenging if you are new to investing. A SEBI-registered advisory can make the process easier for you in such situations. From easing you into investment to advice on long-term investment stocks, an authorized and reliable advisory can be the ideal source for all your investment advice.
FAQ
Who is responsible for the deduction of TDS?
The deductor (employer or payer) is responsible for deducting TDS before making any payments. The deductor can be an individual, a partnership firm, a company, etc., m who is making specified payments mentioned under the Income Tax Act.
How to deduct TDS?
You can check your TDS deductions in the Annual Information Statement (AIS) or Form 26AS, which is available on the e-filing website of the Income Tax Department or through your net banking account if your PAN is linked to it.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.