TDS in India: Rates, Compliance, and Filing Explained

TDS is a type of tax that is deducted by the payee (person making the payment) while making certain payments. Hence, it is called tax deducted at source. This is an indirect way of collecting income taxes at the source by the Government of India and is taken care of by the Central Board of Direct Taxes(CBDT).

TDS is deducted from various types of income, including income earned from salaries, commissions, incentives, dividend payments, money received from renting or selling properties, and interest earned from fixed deposits.

The TDS deduction rate in India depends on your income source. It could be in the range of 1% to 30%.

How is TDS Calculated in India: Example

Ram Enterprises pays office rent of ₹1,00,000 per month to the property owner. As per the tax laws, TDS should be deducted at 10%. Accordingly, Ram Enterprises should deduct ₹10,000 (10% of ₹ 1,00,000) as the TDS.

The remaining ₹90,000 will be paid to the property owner. The property owner receives ₹90,000 post-TDS deduction. He should show his total income as ₹1,00,000 and can claim ₹10,000 deducted by Ram Enterprises as a credit against the final tax due.

Any person who is making specific payments mentioned in the Income Tax Act is required to deduct TDS at the time of making that payment. For example, an employer is required to deduct TDS while paying salaries to the employee. Similarly, a bank will deduct TDS on interest while paying the interest to the account holder.

According to the TDS criteria in India, if an individual or Hindu Undivided Family (HUF) is not required to get their books of accounts audited, they are not mandated to deduct TDS.

However, there is something more to it; if an individual or HUF pays more than ₹ 50,000 as rent, they must deduct a TDS at 5%. Moreover, they do not need a Tax Deduction Account Number(TAN) to deduct TDS.

If your annual income falls below the threshold limit mentioned in the income tax slabs, no TDS is required to be deducted from the payments made to you. By submitting Form 15G and Form 15H, you can prove that your income is below the threshold limit, and no TDS is required to be deducted.

Following is an account of how much TDS percentage is deducted from income as a TDS on various payments made in India:

Note 1: This is not a complete list of payments covered under TDS.

Note 2: These rates are for FY 2024-25. The rates are subject to change from year to year, as the government proposes.

Filing Tax Deducted at source is compulsory for all entities that deduct TDS. These entities must file TDS returns quarterly and also furnish some essential details regarding the TDS in various forms as prescribed by the authorities. These details include things like the amount of TDS deducted, TAN, PAN of deductee, and type of payment.

The following are the types of forms that the deductor must file TDS returns on within the specified due dates.

Forms for TDS e-Filing

How to File TDS Returns

• Step 1: Log in to the Income Tax Department portal using your TAN.
• Step 2: Click on “e-file,” “Income Tax Forms,” and then select “File Income Tax Forms” on the home page.
• Step 3: Select the appropriate form that you require to file as per the nature of the payment.
• Step 4: Upload the TDS form by clicking on the ‘Let’s Get Started Option.’
• Step 5: Enter the details as required in the fields and click on ‘Proceed to e-Verify.’
• Step 6: Confirm it with a Digital Signature Certificate or an Electronic Verification Code(EVC).

TDS returns must be filed every quarter as per the rules of the Income Tax Act. Here are the dates for filming returns for each quarter.

Form 26 AS is one of the most crucial documents relating to TDS as it consists of all the information related to tax deposited or collected by the deductor or collector with the government. TDS deductions are linked to the PAN of the deductor and deductee. Hence, all the amounts deducted are reflected in Form 26 AS.

It is, therefore, crucial for individuals to mention the PAN correctly so the TDS is reflected. Remember that you can claim deductions only for those amounts that are mentioned in Form 26 AS.

In a nutshell, it is wise to understand the concept of TDS, its rates, and filing requirements in India, as it is one of the most crucial components of the Indian tax system. The rates for TDS vary as per the transaction and are decided by the government every year. Hence, you must stay updated with the most recent TDS developments so you can fulfil your obligation.

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