TDS Preparation and E-Filling

The tax deducted at the very source of the income is nothing but TDS. Tax Deducted at Source is a concept introduced in order to collect income tax in advance. It can be deducted by any person who makes a payment of a specified nature like a salary, interest, professional fees, etc. to any other person. That person who makes such payments is called a deductor and the person to whom such payments are made is called a deductee. The deductor will collect the tax at the source and has to convey the same to the Government.

The deductee will then receive the net amount after the deduction of TDS. Like every person, when the deductee will file his income tax return with the gross amount of his income, his final tax liability is adjusted with the amount of TDS. The deductee thus takes credits for the amount paid on his behalf i.e. the TDS.

Who should deduct TDS?

Any person who makes payments of a specified nature provided under the provisions of the Income Tax Act, 1961, is liable to deduct tax at source. For most payments TDS rates are provided in the Income Tax Act. The deductor has to deduct TDS according to these rates. 

Also, no TDS has to be deducted if the person making payments is an individual or a Hindu Undivided Family (HUF) whose books are not needed to be maintained. However, if an individual or HUF is making a rent payment exceeding Rs.50,000 per month, they are required to deduct tax at the source. Such deductors need not apply for TAN (Tax Deduction Account Number).

The employer deducts TDS as per the income tax slab rates applicable to the salary of the employee. Banks deduct 10% TDS on interest income if PAN is provided. In case PAN is not provided then 20%. You have to submit for 15G and 15H to the banks to avoid such deductions if your total taxable income is below the taxable limit you are not liable to pay tax.

Following are the examples where TDS should “not” be deducted:

1) Payment to Government agencies

2) Interest earned on investment schemes like NSC, VPS, etc.

3) On declaration on form 15G or 15H

4) Certificate issued by Income Tax Officer under section 197 of the Income Tax Act

5) Interest earned through deposits or through saving accounts opened in cooperative societies

6) Exempt Incomes (Incomes that are not chargeable to tax as per income Tax Law)

What is a TDS certificate?