TDS by HA TAX

TDS

Jun 10, 2022

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Introduction to TDS

Tax deducted at Source is generally known as TDS. This tax is collected at the point of source of income. The tax deducted at the source/ by the employer is subsequently deposited to the Income Tax Department. 

As to lower the rate of tax evasion, the Income Tax Act of 1961 implemented this taxation practice. The tax and it collected are looked at by the Income Tax department as well as the Central Board of Direct Taxes and Department of Revenue. 

An employer or entity can deduct TDS on the payments like Salaries, Professional fees, Rent, Interest payments by banks, and Commission payments. 

Note: However, individuals are not required to deduct TDS when they make rent payments or pay fees to professionals like lawyers and doctors.  

The tax rates depend upon the income level of the individual. For the reference the table below will help:

Annual Income Rates
Up to Rs. 2.5 Lakhs NIL
Rs. 2.5 Lakhs to Rs. 5 Lakhs 5%
Rs 5 Lakhs to Rs. 7.5 Lakhs 10%
Rs 7.5 Lakhs to Rs. 10 Lakhs 15%
Rs. 10 Lakhs to Rs. 12.5 Lakhs 20%
Rs. 12.5 Lakhs to Rs. 15 Lakhs 25%
>Rs. 15 Lakhs 30%

 

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The return filing can be done online too and in case it is not filed then one is eligible for a penalty. The penalty can be due to various reasons such as when a return is not submitted, untimely payment, filing up incorrect details, and non-payment of TDS.

Looking at the other side of tax collection, Tax Collection at Source (TCS) according to the Income Tax Act 1961 Section 206C directs certain individuals such as sellers to collect a certain amount as per the tax slab from the buyer at the time of buying. But there are certain cases where tax collection is exempted like

  • When goods are used for the personal consumption
  • When the goods are used for further processing such as for manufacturing, production or processing

Just like while one collects GST must carry GSTIN, similarly for collecting TCS  as well for TDS one must have Tax Assessment Number (TAN). According to the type of goods, the rates are fixed by the Government.

The distinction between buyer and seller must be well defined under TCS as one can face a penalty for wrong filing. Individuals and organisations like Central and State governments, Local Authority, Statutory Corporation, Companies (registered under the Companies Act), Partnership Firms, cooperative societies and Any person or HUF who is subjected to an audit of accounts under the Income-tax act for a particular financial year are only eligible to collect the tax.

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Procedure for TDS

Tax collection requires filling out Form 27EQ as quarterly returns and in case of delayed payment, interest should also be paid along with it. This form contains some the important details such as-

  1. Name of the Seller and Buyer
  2. Date of collection
  3. The rate of tax applied
  4. Total tax collected by the seller
  5. PAN of both seller and buyer
  6. TAN of the seller and buyer

Within 7 days Challan 281 is deposited from the last day of the month and if the collector doesn’t pay it to the Government on time then one has to pay 1% interest/ month or part of the month. For the Government office when the tax is paid without the usage of Challan, Form 24G is used. But one should take care that within 15 days from the end of the relevant month Form should be submitted.

One of the major aspects that the general public is focused on is one TDS deduction on their salary. Under Section 192 of the Income Tax Act, 1961 employers such as Individuals, HUF, Partnership Firms, Trusts, Co-operative Societies, and Companies (both Private and Public) are required and can deduct TDS and deposit to the Government. But taking care the aspect that there must be an employer and employee relationship between the two.

The deduction still happens if one’s employer pays the salary in advance. If the estimated salary doesn’t come under the purview of the deduction then it won’t happen. All these rules are applicable to individuals who don’t have a PAN card even.

There are cases when one is employed in more than one organization. In this case, the employee has to submit salary details and TDS in Form 12B to any one of his/ her employers which will help the employer to calculate the gross salary. On the other side, the employer provides Form 16 which contains details of salary paid by him and tax deducted by him.

Apart from this strand one of the most common types of services which are offered and taken up by most the people is the services from the professionals such as lawyers, doctors, engineers, architects, interior- decorators, and many more. For these types of services, Section 194J takes care. When the payment is greater than Rs. 30,000 is made during a year then the tax is deducted.

The rates of the deduction are like

  • Any payment covered under this section shall be subject to TDS at the rate of 10%
  • From 1 April 2020, the payment of fees for technical services shall be subject to TDS at the rate of 2%
  • With effect from 01.04.2017, the tax on payments made to operators of call centres shall be deducted at a reduced rate of 2%
  • In case the payee does not furnish his PAN then the rate of the deduction would be 20%

Steps to upload the TDS returns on the portal can be done with simple steps such as:

1. Visit (https://www.incometax.gov.in/iec/foportal) and log in with credentials

2. Under the dashboard section, click on “Upload TDS”

3. Fill the details under the “Statement Details” screen

4. Validate the details via using a Digital Signature Certificate/ Electronic Verification Code

5. Click on “Submit”

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Form 13

Due to unforeseen circumstances, there are cases when the business goes down which changes the position of tax slab consideration. This leads to a lot of hardship for taxpayers, so to beat the difficult circumstances in filing tax Section 197 provides a means to reduce or remove the hassle.

One should justify the reason for reduced income to attract this facility. Form 13 has to be filed (either offline or online mode) completely and accurately. Other documents which are needed are income enclosures of 3 financial years, a copy of the PAN card, Estimated financial year income, other documents with respect to the nature of income and many more. Once the application is submitted to the Jurisdictional Assessing Offer (JAO), the assessing officer will review the document and subsequently pass or reject the proposal.

In simple terms, one can understand that Form 13 is similar to filing up NIL GST return. The income that one earns from interest from income & corporate bonds, rental income, interest from the post office, insurance commission, and other sources. This relief can be availed by Individuals, Hindu Undivided Family and Trust but companies and partnership firms are not eligible to use it.

 

Form 15

There are two types of forms Form 15, that is Form 15 G and Form H. Both these forms are self-declaration form which states that one’s income is below the taxable limit. Form 15 G is applicable for resident individuals who are below 60 years of age whereas Form 15 H is for resident individuals whose age is greater than 60 years (that is, they are super seniors). The only major difference between Form 15 G and Form 15 H is that Hindu Undivided Family is not covered under Form 15 H.

Generally, these forms are submitted at the start of the financial year. These forms need to be submitted to the financial institute or place where one income. The form doesn’t need to be submitted directly to the Income Tax department. According to Section 206AA, the declaration is not valid if one doesn’t have PAN and if one wants to then the tax deducted will be at a higher rate.

If one wishes to fill this form then with the help of these simple steps one can do it.

  • Visit (https://www.incometaxindia.gov.in/Pages/default.aspx) website
  • Under tab, click on Forms/ Downloads > Income Tax Forms
  • In the nested window, click on the PDF file of Form 15 G and Form 15H and download them subsequently.
  • Now fill the form according to the instructions which are given. (Note: There are some financial institute which accepts online form filling)

Challan

It is basically a bill of receipt which is considered to be an official document. In the year 2004, Online Tax Accounting System (OLTAS) was introduced which reduced the human intervention in process of collecting taxes. Apart from this facility, one can also track the status of his challan. All the three types of challan (Challan ITNS 280, Challan ITNS 281 and Challan ITNS 282) can be filled up online.

There are chances when one can possibly make mistake while filing up Challan. So as to make corrections the tax department has provided a mechanism for correcting the errors.

There are basically two modes of correcting-

    1. Offline
    2. Online

For Offline mode, the major corrections aspects such as TAN/PAN, Assessment Year, Major Head code, Minor Head Code, Nature of Payment, and Total Amount are mentioned on the form whereas in case online mode one has to login to the TRACES link (https://www.tdscpc.gov.in/app/login.xhtml) and carry out the process.

We at HA are here to carry this responsibility and assures that each aspect of this tax filing will be made easy like never before. Since each topic described here is just a brief introduction with an aim to help our clients to get the basics.

To carry forward the responsibility of filing and processing all these compliances will be made easy with our virtual team. You just only need to ring us once and relax afterwards.

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