TDS (Tax Deducted at Source) plays a crucial role in tax collection in India, as it allows the government to collect taxes directly from the income source. So, whether you are a businessperson, employee, or professional, understanding the TDS return filing process is essential to avoid legal issues and penalties.
This guide here covers the fundamentals of TDS, including who deductors and deductees are, what a TDS certificate is, how to claim a TDS refund, and more. By the end of this article, you will have a clear understanding of how TDS works and how to file a TDS return correctly.
What is TDS?
TDS (Tax Deducted at Source) ensures that taxes are collected as income is generated, rather than at the end of the financial year. A deductor withholds a portion of the payment and submits it to the government, making it easier to manage tax collection.
Parties Involved in TDS Filing
Deductor– The person or organization responsible for deducting TDS. For example, employers deduct TDS from salaries or banks deduct TDS on interest payments.
Deductee– The individual receiving the payment, from whom TDS has been deducted. It’s important for the deductee to verify that the correct TDS amount has been deducted, which can be checked through Form 26AS.
Key Components of TDS Return Filing
TAN (Tax Deduction and Collection Account Number): Every entity deducting or collecting TDS must obtain a TAN. It is used for tracking and processing TDS transactions.
TDS Rates: TDS rates vary based on the type of payment and recipient. It’s essential to apply the correct rate to avoid penalties. Find TDS Rate Chart for FY 2024-2025.
GSTrobo® as an e-TDS filing software also facilitates auto-population of TDS rates as per your transaction, eliminating the need for manual intervention in the process.
TDS on Various Payments
1. Salaries (Section 192): Employers must deduct TDS based on the employee’s income tax slab after accounting for deductions.
2. Interest Income (Section 194A): A 10% TDS rate applies to interest income from fixed deposits, recurring deposits, and savings accounts. This rate increases to 20% if the PAN is not provided.
3. Rent (Section 194I): TDS applies if the annual rent exceeds ₹240,000. The rate is 2% for machinery and equipment, and 10% for land, buildings, and furniture.
4. Professional Fees (Section 194J): Freelancers and professionals (doctors, lawyers, accountants) are charged a 10% TDS rate for professional services, while technical services are taxed at 2%.
5. Dividends (Section 194): Companies deduct 10% TDS on dividends exceeding ₹5000 per year.
How is TDS Calculated for Return Filing?
The process of calculating TDS is a significant component of tax management for both companies and taxpayers. So, it not only supports the payment of the tax in an organized manner but also prevents penalties and interest levied for the wrong deduction of TDS.
TDS Threshold Limits and Exemptions
TDS is deductible only if the payment made is over certain prescribed limits. These limits depend on the kind of payment being made. For instance, there is no deduction of TDS on salary if the employee’s income is below the basic exemption level. Likewise, in the case of rent, TDS is required only if the annual rent paid is more than ₹2,40,000.
Example: If a company pays rent of ₹20,000 per month, the annual rent equals ₹2,40,000 which is the minimum limit of rent. Hence, TDS will be applicable on this rent payment.
Understanding TDS Slab Rates
The rates of TDS vary depending on the nature and frequency of the payment together with the type of the deductee. For instance, the TDS rate on the salary income depends upon the tax slab for the individual, whereas for the interest income on fixed deposits, a standard rate of 10 % is applicable for the interest amount more than ₹40,000 per annum.
How to File TDS Return Online?
Filing TDS returns is an important process to adhere to the TDS rules and regulations. Here is how you file TDS returns online:
Preparation and Payment: Before filing the TDS return, make sure that the total amount of TDS has been deducted and has been deposited through the TDS challan. For this purpose, Challan 281 is used, which can be paid online through TDS e-filing portal.
Uploading Statements: Having made the payment, the next course of action is to file a TDS return statement. The statement is then filled out and uploaded to the TDS e-filing portal. GSTrobo® is the best software for e-TDS return filing and can help in the preparation of statements for filing these returns, eliminating any chance of human error.
Forms for Different Types of TDS Payments
The TDS returns can be filed in four forms, which cover different types of payments:
1-Form 24Q: Applicable to TDS on salaries.
2-Form 26Q: TDS on other payments excluding salary payments.
3-Form 27Q: TDS for payments to non residents
4-Form 27EQ: Used for collection of tax collection at source (TCS).
Quarterly Deadlines for TDS Return Filing
One needs to file TDS returns each quarter. Here are the deadlines of TDS return filing for each quarter:
| PERIOD | DEADLINE |
| April to June | July 31 |
| July to September | October 31 |
| October to December | January 31 |
| January to March | May 31 |
Consequences of Non-Payment or Delay
Penalties for non-valuation for TDS returns include prosecution under section 276B, fine under section 271C, Section 271D for failure to supply correct information and Section 234E for delay in filing TDS returns. Hence, one must file their TDS returns promptly to not to incur fines and legal problems. Read in detail about penalties for TDS Non-Compliance.
What are Different TDS Certificates?
TDS certificates are essential documents that serve as proof of tax deducted at source. Hence, these certificates are important for both deductors and deductees to reconcile and verify TDS deductions. There are three main types of TDS certificates:
1. Form 16 (For Salaried Employees)
Employers issue Form 16 to the salaried employees on an annual basis. It provides:
- A summary of salary paid.
- Deductions under various sections (like 80C for investments).
- Total tax deducted by the employer.
Form 16 has two parts:
- Part A: Shows details like PAN, TAN, and the total TDS deposited with the government.
- Part B: Breaks down salary components, deductions, and taxable income.
2. Form 16A (For Non-Salary Income)
Issued for payments like interest, rent, or professional fees. Form 16A includes:
- The amount paid and TDS deducted.
- Useful for verifying non-salary income deductions.
3. Form 26AS (Annual Tax Statement)
Form 26AS is a consolidated annual statement that shows:
- All TDS credits across different types of income.
- Advance tax payments and refunds.
This form helps in cross-verifying tax deductions with the records available on the income tax portal.
How to Claim TDS Refunds?
It doesn’t take much to apply for TDS refund; however, one needs to be careful and constantly check the status of their refund. Here is what you need to do to claim TDS refunds:
Filing Income Tax Returns (ITR): As a basic requirement, you cannot claim a TDS refund without filing your income tax return (ITR). While filing, make sure that the income on which TDS has been paid is disclosed aptly. You have to provide the total tax liability and TDS deducted during the financial year in the ITR form, which can then calculate the payable or refundable tax in the ITR form.
Verification of Form 26AS: While filing your ITR, verify the TDS deducted as per your Form 16, Form 16A, or Form 26AS. This will ensure that all deductions tally with the records available with the Income Tax Department. These differences could potentially cause a delay in the issuance of your refund.
Claiming the Refund: While filing your ITR, you can claim refund for TDS deducted in excess to your actual tax liability. The refund amount would be transferred to your bank account once the ITR has been verified by the income tax department. We also need to provide our bank account details in the income tax portal, so that there will not be any problem in receiving the refund.
Timelines for Refunds: When you file an ITR, the Income Tax Department verifies your return and then pays the refund. It depends, but generally, it doesn’t take long to get your money back – it may take a few weeks to several months.
Tracking Refund Status: You can check the status of your TDS refund through the income tax website. If it is checked regularly, one can stay updated of any delay or any problem that may occur in the process.
Conclusion
Understanding various aspects of TDS return filing is beneficial for individuals as well as business entities to meet their tax compliance requirements efficiently and effectively.
For accurate and timely TDS returns, you can always use a proficient e-TDS software like GSTrobo® that keeps you on top of your TDS game! It not only helps you maintain utmost accuracy in your TDS return filing process but also saves you time and unnecessary manual effort. Book a free demo to try GSTrobo® today!
