TDS Unveiled: Understanding Tax Deducted at Source
What is TDS?
TDS (Tax deducted at source) is an advance tax deducted from an individual’s income before the amount is paid or credited to the receiver’s account. In other words, TDS is the amount of tax that the payer deducts from the amount against the payment of the services as specified in the Income Tax Act. This helps increase the government’s revenue and minimize tax evasion.
The TDS deductor or the TCS collector must submit a TDS return every quarter. These TDS returns can be submitted in various forms depending on certain conditions. This guide is a comprehensive resource that consists of all that you must know about TDS returns and the various TDS forms available
What is TDS Return?
Individuals whose tax at source on specific income has been deducted and filed with the government are required to file for TDS returns. Typically, such a return is required to be filled within a stipulated period along with essential details related to the tax deduction, the deductor and the deductee, among others.
Advantages of TDS
TDS is payable on the earnings so it is important to note that the liability to pay TDS is applicable only in the event of earnings actually taking place. TDS is deducted before making. Deductions are to be made on payments that are made in cash, cheque or credit. The amount deducted under TDS is further deposited with various government agencies. Payment of TDS has various advantages which are as follows :
- Deducting TDS at source prevents tax evasion.
- Tax collection is done duly and in a timely manner.
- A large number of people come under the tax net.
- Collection of TDS is a steady source of revenue for the government.
What are the different TDS Return Forms
FORM 24Q
Form 24Q is a statement for deduction of tax at source under Section 200(3) of the Income Tax Act. It is a quarterly statement that is filed by the deductor, i.e., an employer, who deducts tax at source while making payments to employees. This form is specifically used for the deduction of tax on salary income.
The form requires details such as the PAN (Permanent Account Number) of the deductor and the deductee, salary details, tax deducted at source (TDS) details, and other relevant information. The deductor is required to submit Form 24Q to the Income Tax Department.
There are different variants of Form 24Q, such as Form 24Q-Q1, Form 24Q-Q2, Form 24Q-Q3, and Form 24Q-Q4, which correspond to the different quarters of the financial year. Each form is filed for the respective quarter in which TDS on salary has been deducted. It is essential for employers to comply with the filing of Form 24Q to ensure accurate reporting of TDS on salary payments.
Form 26Q
It is to be submitted for tax deduction at source for all the payments received other than the salary. It is submitted on a quarterly basis by the deductor and is applicable for tax deducted at source under section 200(3), 193 and 194 of the Income Tax Act of 1961.
The income on which the tax is deducted at source includes interest on securities, dividend securities, professional fees, directors’ remuneration, etc. It is compulsory to furnish PAN by the deductors who are non-government deductors. For government deductors “PANNOTREQD” has to be mentioned on the form.
FORM 26QB
As per Section 194-IA of the income tax act, TDS applies to the sale of immovable property wherein the sales consideration of immovable property is more than Rs 50 lacs.Tax @1% shall be deducted by the buyer while making the payment to the Seller of the property and as per the provisions. It is not applicable to transactions involving agricultural land.
TDS has to be submitted along with duly filled Form – 26QB (which is a challan cum statement of deduction of tax as per Section 194 IA) within 30 days from the end of the month in which TDS was deducted. The person deducting TDS shall furnish Form 16B to the payee within 15 days from the due date of furnishing challan cum statement in Form 26QB.
FORM 26QC
As per Section 194IB, individuals and HUFs who pay rent exceeding Rs 50,000 will have to deduct TDS @5% of the total rent. The TDS has to be deducted once in the financial year as per the provisions of the law. TDS deducted is required to be paid within 30 days from the end of the month in which TDS is deducted. It is accompanied by the challan cum statement in Form 26QC.
According to the rule, the Taxpayer/Tenant should furnish challan-cum-statement in Form 26QC in the following scenarios:-At the end of the FY or in the month when the premise is vacated / termination of the agreement.
In the month when the premise is vacated/ termination of the agreement ( in case the agreement period falls in the same FY).
Form 27Q
Form 27Q is applicable for payments made to non-resident Indians and foreigners other than salary. It has to be filled in for the declaration of Tax Deducted at source for the NRIs and Foreigners.
It is submitted on a quarterly basis by the deductor and is applicable for tax deducted at source under section 200(3) of the Income Tax Act of 1961.The income on which the tax is deducted at source includes interest, bonus, any additional income or any other sum owed to non-resident Indian or foreigner.
It is compulsory for non-government deductors to furnish PAN. For government deductors the code “PANNOTREQD” has to be mentioned on the form.
FORM 27EQ
When the seller collects tax from the buyer and pays it to the government. If the seller collects any such TCS, he/she is required to file Form 27EQ on a quarterly basis under section 206C of the Income Tax Act.
All the Corporates, the Government, and all Tax collectors are required to submit Form 27EQ.
TCS is collected on the following –
- Alcoholic Liquor for consumption by humans
- Tendu leaves
- Timber from a forest lease
- Timber obtained by other modes except for forest lease.
- Other forest produce except timber and tendu leaves
- Scrap material
- Minerals like coal, lignite, or iron ore
- Sale of goods; if the consideration is more than INR 50,00,000
- Sale of Cars (New and Old) when the value of sale is more than INR 10,00,000
What are the due dates of filing TDS return form?
The TDS due dates for TDS return varies depending on the quarter. Below are the TDS due dates in a financial year
Due date of filing 24Q, 26Q, 27Q-
Due date of filing of Form 26QB-
The purchaser of property i.e. deductor has to file Form 26QB online. It is a Challan cum declaration statement which needs to be filed within 30 days from the end of the month in which payment or deduction was made. In respect of such deduction no separate TDS return is to be filed.
Due date of filing of Form 26QC-
You have to pay tax online via Form 26QC, which is a challan-cum-payment form within 30 days from the end of the financial year or the day on which the property is vacated For instance, if tax is deducted in March, the last day to deposit the tax and file 26QC will be 30 April 2020.
Due date of furnishing of Form 27EQ-
How can I download TDS return forms?
TDS return forms can be downloaded from tin-nsdl official website. To download forms, follow this process
Step 1: Click on the above-mentioned link
Step 2: From the top banner, navigate to “Downloads”
Step 3: Select “e-TDS/e-TCS”
Step 4: Go to Quarterly Returns and
Step 5: Choose “Regular”
Step 6: A list of all forms will be displayed. Click to download the pdf file of the form you need
What are the consequences of filing late TDS return?
If the assessee fails to file the TDS return on the due date of furnishing the return, then the assessee is liable to pay the penalty of Rs 200 per day till the time default continues. Also, the total penalty shall not exceed the TDS amount.
For example: Say that you have deducted TDS of Rs 5000 on 13th May 2024 and you file the return for Q1 on 17th November 2024 instead of the due date 31st July 2024.The delay is 109 days counting from 1st August 2024 to 17th November 2024.
Then the calculation comes out to Rs 200 x 109 days = Rs 21,800, but since this amount is greater than TDS Rs. 5,000, you will have to pay only Rs. 5,000 as the late filing fee.
In addition to this, you also have to pay interest for delay in deposit of TDS which is covered in the next section.
Conclusion
Understanding Tax Deducted at Source (TDS) is essential for managing your finances effectively. By familiarizing yourself with the various forms and requirements, you can ensure compliance with tax regulations and optimize your tax liabilities. Remember, staying informed and seeking professional advice when needed can help you navigate the complexities of TDS and make informed financial decisions