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Tax Deducted at Source (TDS) is a type of income tax wherein the tax is collected right from the source of income. It is an effective way to minimize tax evasion by generating the tax automatically at the time of payment. 

 

The tax applies to salaries, commissions, financial interests, and dividends. This article explains all about TDS return, how it works, and the rates for the financial year 2022–23. 

 

An Introduction to TDS and How it Works 

 

The TDS applies to only specific types of payments, which puts the responsibility of obtaining the tax on the payer rather than the person who gets paid. 

 

Any individual making a payment to another person is required to withhold tax at the source, meaning the payment should come with the deducted tax, the rates of which are outlined in the Income Tax Act, and the amount should be transferred to the Central Government’s Account. 

 

An example of TDS: Consider that you must give the landlord INR 1,50,000 in office rent. You must deduct the applicable 10% of TDS, i.e., INR 15,000, pay the net amount of INR 1,35,000 as rent to the landlord, and pay INR 15,000 as tax to the Income Tax Department. 

The landlord will include the gross rent of INR 1,50,000 in his income and can get credit for the INR 15,000 that the renter or deductee has already deducted against the total tax due.

what is TDS and how it works

Payment Types That Attract TDS in India 

 

The tax rates that are deposited or deducted in a fiscal year are stated on Form 26AS by the person’s name and PAN number. The deductee is entitled to get a credit for the amount so deducted based on Form 26AS for the TDS certificate issued by the deductor.

 

TDS applies to only specific people and transactions. Different TDS rates have been prescribed by the Income-tax Act of 1961 for different payments and different categories of recipients. The types of payments subject to TDS are listed below:

 

  • Salary 
  • Commission
  • Rent
  • Interest
  • Professional/ Technical fees
  • Payment made to contractors and subcontractors.
  • Payments made to non-resident Indians or foreign entities
  • Payment of Perquisites: salary bonuses, incidental income, profits, privileges and similar gains

 

Types of TDS Returns and Their Rates 

 

The Income-tax Act of 1961 established varied TDS rates for certain payments and recipient groups. The Form 26AS lists the tax rates that are deposited or subtracted throughout a fiscal year by the person’s name and Permanent Account Number (PAN). Based on Form 26AS or a TDS certificate issued by the deductor, the deductee is entitled to a credit for the amount that was so withheld.

 

Type of Payment  Section  Tax Rate  Threshold Limit 
Salaried  192 10% – normal slab rates  Rs 2,50,000
Premature withdrawal from EPF Section 192A 10% – normal slab rates  Rs 50,000
Interest Income obtained from Government Securities 193 10% Debentures: Rs. 5,000

Taxable Bonds 2003 – 8% Savings

Taxable Bonds 2018 – 7.75% Savings

Dividends  194 10%  Rs. 5,000
Interest on deposits paid by banks, post offices or similar institutions.   194A 10% General: Rs. 40,000 

Senior Citizen: 

Rs. 50,000

Lottery wins, horse racing and similar income through games  194 B & 194 BB 30% Rs. 10,0000
Payment to contractors and subcontractors  194C Individuals/HUF – 1%

All others – 2%

Single transaction- Rs. 30,000

Aggregate transactions- Rs. 1,00,000

Payments towards insurance policies and commissions  194D Individuals/HUF – 5%

All other agents: 10%.

Rs. 15, 000 in an FY
Maturity of Life Insurance  194DA 5% Rs. 1,00,000
Payments to non-resident sportsmen/athletes or sports associations  194E 20% + Cess Any amount
Payments to NSS deposits  194EE 10% Rs. 2500 in an FY
Brokerage and commissions 194 H 5% Rs 15,000
Rental payments for houses, equipment, furniture, etc.  194I Land, Building or Furniture: 10%

Plant & Machinery: 2%
Up to Rs. 2,40,000
Sale or transfer of movable property, except agricultural land. 194 IA 1% 50,000,000 (fifty lacs)
Payments for professional and technical services  194J Royalty towards intellectual property: 20%

Technical services: 2%

All other services: 10%.

Rs. 30,000
Amount paid as compensation for acquiring a specific real estate 194LA 10% Up to Rs. 2,50,000
Interest against  infrastructure or bonds paid to Non-Resident Indians (NRIs) 194LB 5% Any Amount 
Cash Withdrawals  194N 2% Without ITR file: Rs. 20,00,000


With ITR file: Rs. 1,00,00,000

eCommerce Sales –  products or services  194O 1% Rs. 5,00,000
Logistics and other payments involved with purchasing of goods  194Q Rs. 50,00,000 0.10%
Payments in cryptocurrency and virtual assets  194S 1% Any Amount
TDS payments without PAN 206AA Any rate higher than following: 

  • Rate as per act
  • Rate in force 
  • Any rate greater than 20%
Any Amount 
TDS payments without ITR File 206AB Any rate higher than the following:

  • 5%
  • The rate in force
  • Twice the mentioned rate in provision
Any Amount

 

Make TDS Filing Simple with MPVD & Associates 

 

Businesses must make regular TDS payments to the government under a number of headings, including those for salaries, vendor payments, and more. Depending on why TDS is being deducted, different forms must be used to file returns.

 

Depending on the reason for the TDS deduction and the period of the year, different types of forms are required for submitting TDS returns.

 

By arranging for your TDS returns to be filed with MPVD & Associates, you may make things a lot simpler. As a leading CA firm in Kolkata, we offer online TDS statement preparation, revision, and updating assistance to our clients. We serve clients from all around India, whether they are new taxpayers, elderly people managing rent and property transactions, or incredibly busy business owners. For every problem, we have a solution. Just give us a call!

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