What is TDS?
TDS stands for tax deducted at source. As per the Income Tax Act 1961, any individual or company making the payment must deduct tax at source if such payments exceed different threshold limits so prescribed by income tax law. TDS must be deducted at the rates prescribed by the tax department.
TDS is one kind of advance tax. It must be deposited with the government as and when deducted and in the mode as prescribed by income tax law. Parties involved in these transactions can claim deducted tax in the form of a tax refund after they file their ITR (if tax deducted exceeds the tax liability of individual or company).
What is TDS Return?
Not only deducting TDS is must even depositing and filing TDS returns within due dates mentioned in the law are mandatory. A deductor must deposit the deducted TDS to the government and the details of the same must be filed in the form of a TDS return. A TDS return must be filed quarterly. TDS returns apt to the type of deductions must be used.
TDS Aspects of start-up business:
A lot of hard work and meticulous working goes into building a start-up and nurturing it into a profitable business. A major part that affects any business including start-ups is taxation. One Aspect of taxation that start-ups often tend to ignore is TDS (Tax deducted at source). Let's have an overview of TDS sections that may apply on start-ups
Salary: if the salary paid to an employee exceeds the basic tax exemption limit of the individual (Rs 2,50,000 per annum) such payment is subject to TDS under section 192. It is pertinent to note that for current FY there is a tax rebate of INR 12500 till income slab of INR 500000
Rent: if a company has entered a lease, sub-lease, tenancy or any other agreement for use of land or building or both, plant and machinery or other equipment, rent shall be subject to TDS under section 194I
Professional Fees: The company will be liable to pay a person for professional or technical services, royalty or any other fee/ commission not in the nature of salary, such payment shall be above Rs 30000 in aggregate for a year, attracts TDS under section 194J.
Commission and brokerage: Any payment of commission or brokerage other than insurance commission or security brokerage exceeding Rs 15,000 per annum, for services rendered shall be subjected to TDS under section 194H.
Contract: Any payment to a contractor exceed Rs 30,000 for one time or Rs 1,00,000 per annum, for carrying out work such as advertising, broadcasting, telecasting, carriage of goods or passengers by any mode of transport other than railways, catering and manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, shall attract TDS under section 194C.
Rates of TDS:
|Sl No.||Nature of transaction||Threshold||Rates||No PAN|
|1||Payment of salaries||-||Based on Slab||-|
Commission / Brokerage
|3||Rent – land & building||240000||10%||20%|
|Rent – plant & machinery||240000||2%||20%|
|Payment to call center operator||30000||2%||20%|
|5||Contractor – a single transaction||30000||
|Contractor – during the year||100000||
Types of TDS returns
|Sl No.||Form No.||Description|
|1||24Q||Payment of TDS cut on salaries|
|2||26Q||Payment of TDS cut on other payments excluding Salaries|
|3||27Q||Payment to Not residents or foreigner|
Due dates for filing TDS returns:
1st quarter (April – May – June)
|15th of July|
2nd quarter (July – August - September)
|15th of October|
3rd quarter (October – November – December)
4th quarter (January – February – March)
Due dates for payment of TDS so deducted
Every 7th of the next month of the month when TDS was so deducted, for march the payment is extended to the 30th of April.
How to file TDS returns for start-up?
TDS returns can be filed with the help of Tax deduction Account Number (TAN), which must be applied by the company to the Income Tax department. It is the same as PAN for an Individual. The TAN so given by the government to the company will be used at the time of making the deductions payment to the government.
TDS statements should be prepared using Return preparation utility (RPU) and validated using file validation utility (FVU)
Upload the statements on the income tax portal and generate the acknowledgment.
It is pertinent to note that as per income tax law every company, including any start-ups, is required to deduct TDS, and deposit the same with the government along with the filing of TDS returns. Default in filing TDS returns are may lead to a penalty of INR 200 per day and the maximum penalty is upto the amount of the TDS for a particular quarter. However, the late filing of TDS or correction of TDS statements can be done as per income tax provisions.
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