TDS COMPLIANCE

What is TDS?

TDS or Tax Deducted at Source is basically income tax reduced from the money paid at the time of making specified payments such as commission, salary, rent, professional fees, interest, etc. by the persons making such payments. Any person who will make payment as specified under the Income Tax Act is liable to deduct TDS at the time of making such payment.

Usually, the person receiving income is liable to pay income tax, But the government with the help of Tax Deducted at Source (TDS) provisions makes sure that income tax is deducted in advance from the payments received by an assessee. The recipient of income receives the net amount (Amount Received = Gross Amount – TDS at source). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes the credit for the amount already deducted and paid on his behalf i.e. TDS amount.

For Example- ABC Private limited makes a payment for professional fees of Rs. 80,000 annually then, he shall deduct TDS @ 10% and make the net payment. Thus the recipient of income i.e. the professional would get Rs. 72,000 (i.e. Rs. 80,000 – Rs. 8,000) after deduction of tax at source. He will add gross amount i.e. Rs 80,000 to his income and can take credit of the amount already deducted i.e. Rs 8,000 by ABC Private limited against his final tax liability.

When TDS needs to be Deducted?

Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such a specified payment. However, not required in case of individual or HUF whose books of accounts are not required to be audited.

However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN.

Where to deposit TDS Deducted?

Tax Deducted at Source has to be deposited using Challan ITNS-281 on the government portal. It is very simple to deposit TDS online.

Due Date for Depositing TDS Deducted?

For any month except March – 7th of the subsequent month

For the month of March – 30th April

For Rent & Purchase of Property - 30 days from the end of the month in which TDS is deducted

Due Date for filing TDS Returns?

What will happen if TDS not Deposited?

When your employer has not paid the TDS to the income tax department, the TDS would not be available against your PAN in your Form 26AS. Hence, you cannot take tax credit of the TDS while filing your income tax return. However, if you take the tax credit for this amount, you will receive a notice from the income tax department for the mismatch in the TDS claimed and taxes paid.

Remedies under the Income Tax Act?

To avoid the delay from companies in depositing TDS, the Central Board of Direct Taxes (CBDT) has become more vigilant and started imposing penalties on companies that are not complying with the deadlines (i.e. not deducting/depositing TDS or not filing TDS Returns). CBDT has announced that if there is a mismatch in the TDS or tax credit information due to deductor delay in payment, the taxpayer will not be made responsible anymore.

Penalty for Non-Compliance?

• Not Deducting TDS or Not Depositing TDS on time

• Delay Filing in TDS Returns

As per section 234E of the Income Tax Act, All companies, irrespective of government or private, must bear a penalty of Rs.200/day, for the delay in filing TDS  after the specified due date. However, such a penalty will not exceed the amount of TDS for which the statement was required to be filed.

As per section 271H of the Income Tax Act, a penalty of Rs. 10,000 up to Rs.1 lakh is leviable if a company provides incorrect information or fails to submit the returns within the specified due date. This penalty will be charged in addition to the penalty under Section 234E.

No penalty under Section 271H will be charged in case of delay in filing the TDS return if the following conditions are satisfied:

1. The tax deducted or collected at source is paid to the credit of the government.
2. Late filing fees and interest (if any) is paid to the credit of the government.
3. The TDS return is filed before the expiry of a period of one year from the due date specified in this behalf.

What is TDS Certificate?

TDS certificates have to be issued by a person deducting TDS to the assessee from whose income, TDS was deducted while making payment to such person.

Note: Amidst outbreak of COVID-19 Pandemic and lockdown, the due date for filing returns has been extended till 30th June 2020 for due dates falling between 20.03.2020 to 30.06.2020.

TDS Rate Chart for the F.Y. 2020-21