What is TDS?
TDS is a mechanism initiated for collecting tax on income at fixed percentage. It is deducted by a person at the time of making/crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government account.
It is based on the concept of “pay as you earn”. As soon as you earn income under the specified sources, the payer of income shall deduct the tax amount on such income and remit it to the government.
It has shifted responsibility on the payer of income to collect and deposit tax.
Reason behind it:
Many a time the recipient of income may be a non tax payer or liable to pay tax but is not paying the same. This results in revenue loss to the department as the due tax amount is not paid on the income earned. To mitigate this loophole, TDS is introduced so that it taxes the income at source of its generation.
On what TDS is deducted?
It is deducted when the source of income is the specified source and the amount of income is more than the specified limit, then TDS shall be deducted on whole amount.
|
Section |
Payment Nature |
Payment in excess of |
TDS Rate |
TDS Rate |
|---|---|---|---|---|
|
194A |
Interest from a Banking Company |
10000 |
10% |
10% |
|
194A |
Interest other than from a Banking Co. |
5000 |
10% |
10% |
|
194C |
Contractors (including Advertising & Sub-Contractor) |
30000 (per payment) or 75000 p.a. |
1% |
2% |
|
194C |
Transport Contractors (Providing PAN and engaged in the business of plying, hiring or leasing of goods carriages |
Nil |
Nil |
Nil |
|
194D |
Insurance Commission |
20000 |
10% |
10% |
|
194H |
Commission or Brokerage |
5000 |
10% |
10% |
|
194I |
Rend of Land & Building |
180000 |
10% |
10% |
|
194I |
Rent of Plant & Machinery and Other Equipments |
180000 |
2% |
2% |
|
194IA |
Transfer of Immovable Property other than Agriculture Land |
5000000 |
1% |
1% |
|
194J |
Payment for Professional Services, Technical Services & Royalty |
30000 |
10% |
10% |
|
194J(1)(ba) |
Payment to Directors any remuneration or fees or commission by whatever named called if the same is not covered u/s 192 |
- |
10% |
10% |
Who deducts it?
Let us take an example to understand this concept.
Suppose there is Mr. X he is owner of several properties and his sole source of income is renting of properties. Now Mr. X may or may not be filing his return on income or short declaration of income. To avoid revenue loss due to such improper declaration of income, department has made payer responsible for deduction of TDS.
So, now if Mr. X earns rent income of INR 250,000 from his tenant Mr. Y then Mr. Y shall be responsible to deduct TDS on such payment at specified rate of 10% and deposit it to the government.
How to avail it?
Payee (recipient of income) should give his PAN to Payer so that payer can put in TDS certificate and in TDS returns. It will help indirectly to payee for getting refund easily and fast.
Such certificate issued can be used by the payee while filing his return of income and take credit of the tax already deposited to the government on his behalf by the payer.
SOURCE : https://wordpress.com/#/read/post/id/78138101/6/
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