TDS

TDS, Form 26AS and TRACE: TDS or Tax Deducted at Source is one of the leading tax collection modes in India. According to the department of Income-tax, any person or organisation that executes pay must subtract tax right at the source of the payment to cross a certain limit. The tax deduction under TDS is done at prescribed rates by the department of Income-tax.

The company or person that executes the payment after deducting TDS is known as the deductor, and the organisation or person accepting the payment is called the deductee. The tax deduction under TDS is the responsibility of the deductor before any payment is made to the deductee. TDS is deducted irrespective of the payment or cash mode, cheque or credit, and is linked to the PAN of the deductor and deductee. Every individual responsible for making payment of nature incorporated by TDS provisions of the Income Tax Act is accountable for deducting tax. This article will give you information about TDS via Form 26AS.

Tax Deducted at Source

TDS, or Tax Deducted at Source, is one of the tax collection modes by which a specific percentage is deducted at the time of payments, and the deducted amount is rerouted to the Government account. The Tax Information Network (TIN) by NSDL was used till 31st Oct 2012 to collect data about Tax Deducted at Source (TDS) on account of the Income Tax Department (ITD). Presently Income Tax Department (ITD) has initiated a Correction Enabling System and TDS Reconciliation Analysis or TRACES. This new portal has been designed to improve swift communication between the deductor, deductee, income tax, and CPC. It serves in discerning challan status, downloading the reports of justification, the NSDL Conso File, and Form 16 / 16A, and inspecting annual tax credit statements (Form 26AS).

Form 26AS

Income Tax Department expedites a PAN holder to inspect its Tax Credit Statement, i.e. Form 26AS online. Form 26AS has two parts Part A & A1 which contains the tax details deducted on the taxpayer’s account by deductors. Part B of Form 26AS holds the details of the tax collected on behalf of the taxpayer by the collectors. Part C of Form 26AS contains Advance tax/self-assessment tax/regular assessment tax, etc., deposited by the taxpayers. The Part D of Form 26AS incorporates the details of the paid refund collected during the financial year. The Part E of Form 26 AS includes the details of the High-value Transactions regarding shares, mutual fund etc. The Tax Credit Statement (Form 26AS) is produced wherein a valid PAN has been reported in the TDS statements. It is a form issued under Rule 31AB.

Accessing Tax Credit – Form 26AS

The statements of Tax Credits (Form 26AS)can be accessed in the following ways :

• Tax Credit can be viewed from the website – incometaxindiaefiling.gov.in. Taxpayers can enroll at the portal “incometaxindiaefiling.gov.in” in the “My Account” tab by clicking on ‘View Tax Credit Statement’ (Form 26AS). This process is free of cost.
• From the bank site by net banking facility Access, the Tax Credit (Form 26AS)- This facility is available to a PAN holder with a net banking account with any of the approved banks.

List of Banks Registered With NSDL

The List of banks registered with NSDL to provide a view of the Tax Credit Statement (Form 26AS) is given below.

Allahabad Bank Andhra Bank Axis Bank Limited Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Citibank N.A. City Union Bank Limited Corporation Bank Dena Bank HDFC Bank Limited ICICI Bank Limited IDBI Bank Limited Indian Overseas Bank Indian Bank

Karnataka Bank Limited Oriental Bank of Commerce Punjab National Bank State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of India State Bank of Mysore State Bank of Patiala State Bank of Travancore Syndicate Bank The Federal Bank Limited The Karur Vysya Bank Limited The Saraswat Co-operative Bank Limited UCO Bank Union Bank of India United Bank of India

NSDL

National Securities Depository Limited or NSDL based in Mumbai, under the jurisdiction of the Ministry of Finance, Government of India is an Indian central securities depository. NSDL was founded in 1996, in the month of August. It was a first of its kind national electronic securities depository. It is responsible for managing the majority of the securities of the Indian capital market, held and dematerialised. The Tax Information Network (TIN) founded by NSDL was a repository of tax-related information on account of the Income Tax Department (ITD).

Tax Information Network

The TIN or Tax Information Network system collects information about Tax Deducted at Source, i.e. TDS from the tax deductors; the banks assemble the TDS on behalf of the Income Tax Department and present information ITD and the people for whom the tax is deducted. TIN is designed to make tax administration more effective, furnishing returns convenient, reducing compliance costs, and bringing greater transparency. The Tax Information Network system joins the nationwide users through its combined service centres acknowledged as TIN Facilitation Centers (TIN FC) and the web-based central system. The various roles of TIN are:

• Receiving the TDS returns in electronic format (e-TDS).
• Collecting Tax Payment information.
• E-Return Intermediaries registration.
• Applications Processing for issuance of Tax Deduction Account Numbers (TAN).
• Processing of applications for allotment of PAN (Permanent Account Number)
• Assembling and processing Annual Information Return (AIR) from particularised persons for designated transactions on behalf of ITD.
• Assesses can observe the details of taxes paid and TDS deducted for them on the internet.

TRACES

The Income Tax Department (ITD) has initiated an effort to facilitate the easy filing of TDS / TCS correction statements by deductors or collectors, and similar functionalities named as the TDS ((Tax Deducted at Source)CPC (Centralised Processing Cell). TDS CPC strives to elevate the overall service levels for deductors and taxpayers. It has installed a new portal named TRACES or TDS Reconciliation Analysis and Correction Enabling System.

The portal will improve communication between the deductor, deductee, department of income tax and CPC. Deductors can register online correction records after enrolling on TRACES. Taxpayers can also register to download and view Form 26AS. TDS CPC rectifies errors to facilitate correct reporting of TDS / TCS by expediting timely filing and processing statements by looking into deductors or collectors. It gives an interface to all stakeholders connected with TDS management. The system has been created to bring clarity and effectiveness to the taxation process. The TDS-related services for ITD were arranged by TIN-NSDL.

TRACES Registration

TRACES registration is compulsory to file a Correction Statement. It helps to file online changes. Once you are registered, you can notice many facilities granted by trace TRACES. Applicants who had already enrolled at the NSDL TIN site doesn’t require to enlist again on TRACES. The registration done under NSDL TIN migrates to TRACES. The login can be done with the NSDL TIN login.

Here are the following steps to enroll in TRACES:

• Step 1: Click the tab “New Registration”, select the “user type”, and click on “Continue”.
• Step 2: Provide deductor TAN and enter the “Verification code”, and click on “Continue”.
• Step 3: Token number of the original (regular) statement needs to be entered, alongside the CIN/BIN and details of PAN for the financial year and quarter and the related form displayed.
• Step 4: The authentication code is formed after KYC information details validation. One continues with code, TAN, and the name of the deductor are prefilled; you will have to update PAN and the person’s details and address.
• Step 5: Confirm all the submitted details; the confirmation page will show all the details. Click on “Edit” to change the details and click on “Confirm” to register.
• Step 6: Lastly, the “Registration request successfully submitted” message will be received. This will be followed by the reception of an activation link and codes in the registered mobile and email address given at the time of registration.

Conclusion on TDS, Form 26AS and TRACE

TDS is one of the significant tax collection methods of the government of India. The process of deduction is essential know-how that each deductor and deductee need to understand and know. As there are many steps involved and many terminologies included, knowing the step-by-step guide and the different processes is very helpful. This article will help the reader understand the TDS process and its elements like Form 26AS. It will help both the deductor and deductee to streamline TDS.

TDS on Interest: The deduction of TDS on debt rather than interest on shares are covered by Section 194A. If the provisions are attracted, the Deductor must deduct TDS Rates @ 10%. The charge under Section 194A is in the form of interest (other than interest on securities). Interest charges such as fixed account interest, interest on any debt, and interest on revolving deposits are also included. The TDS mechanism also applies to payments given to non-residents.

TDS is Deducted From The Following Payments

Under this clause, TDS must be deducted from payments rendered to a resident individual for interest.

The rules of section 194A only apply as interest is paid to a resident; they do not apply to the amount of interest paid to a non-resident. The equivalent is covered inside the domain of section 195.

People Who Need To Deduct TDS Under Section 194A

Under section 194A, any person (i.e., the payer) who is responsible for paying interest (interest other than on securities) to a citizen, other than an entity or a Hindu undivided family (HUF) under audit under section 44AB, is at risk to deduct charge at the source.

Individuals or HUFs whose net revenue, gross receipts, or profits from their company or career exceed Rs. 1 crore in the case of a business and Rs. Fifty lakhs in the case of a profession promptly going before the monetary year in which the sum mentioned above is charged or charged are entitled to deduct tax under section 194A.

Time of Deduction of TDS

The Deductor responsible for deducting TDS according to arrangements of segment 194A is needed to deduct TDS inside prior to the accompanying dates –

• At the point when cash is credited to the payee’s record; or
• When making a payment by cash, check, draught, or some other method.

Rate of Deduction of TDS

In case the provisions of section 194A of the Income Tax Act are invoked, the Deductor is required to deduct TDS on interest on loan except for interest on securities at a rate of 10%.

In any case, if the Permanent Account Number isn’t outfitted, around there, the Deductor would be obligated to deduct TDS @20%, i.e., highest marginal rate.

The Deadline for Depositing the TDS That Has Been Deducted

The Deductor who has deducted TDS under Section 194A is expected to deposit it inside the accompanying due dates

Months	Due date
April to February	7th of the following month
March	On or before 30th April

In the Following Situations, TDS Is Not Expected To Be Deducted

Assume that an Indian resident furnishes to the payer a written declaration in Form 15G/15H, considering the circumstances, to the extent that his income is below the exemption cap. In that case, the Government shall make no tax deduction under this provision. The following are the laws in this regard:

• Statement (in copy) is to be made in Form No. 15H when the beneficiary is a senior resident and in Form No. 15G when the beneficiary is other than a senior resident.
• The assertion in Form No. 15G/15H can be made simply by an individual occupant in India.
• If the annual interest does not meet the exemption cap, an individual may file Form No. 15 G/15H. (i.e., Rs.2,50,000 or INR 3,00,000 or INR 5,00,000, as the case may be).In the case of a resident senior citizen, this requirement does not apply (i.e., a resident person of at least 60 years of age), i.e., a resident senior citizen can file a Form 15H declaration even though the annual interest likely to be paid to him reaches the exemption cap of INR 2,50,000 or INR 5,00,000, depending on the situation, provided the tax due on his net income after considering the remuneration under section 87A is nil.

The assessment payable on the full payment of the year ought to be “Nil.” The payer who collects a declaration in Form No. 15G/15H must upload information of such statements every quarter under his digital signature on the e-filing portal (www.incometaxindiaefiling.gov.in) within:

• 15 days from the finish of the primary, second, and second from last quarter
• 30 days from the finish of the final quarter.
• Section 194A would not allow the company to withhold any tax on interest credited or paid to its partners.
• At the point when the payee has acquired an authentication from the Assessing Officer for no derivation or lower charge allowance, the payee may document an online application in Form No. 13 for issuance of declaration for no funding of assessment or lower derivation of duty at the source.
• Premium paid to any bank, monetary enterprise, Life Insurance Corporation Unit Trust of India, any organization, or a co-usable society occupied with the protection business is absolved under segment 194A.
• There is no need to pay TDS if the total amount of interest paid by a bank does not exceed INR 40,000 [INR 50,000 in the case of a senior citizen].
• On account of any Co-operative Society, TDS isn’t to be deducted if a total measure of interest doesn’t surpass INR 40,000 [INR 50,000 if there should arise an occurrence of a senior citizen].
• TDS is not applied on interest charged or earned on deposits notified by the Central Government. The same rules apply to TDS on interest on a loan with a direct agricultural credit society, a primary credit society, a co-operative land mortgage bank, or a co-operative land development bank.
• Under Section 197, an assessee may request no TDS or a reduced rate of TDS from the assessing officer.

Is TDS Deductible On Interest On Late Payments On Purchase Bills?

According to section 201, if a person who is required to deduct tax at source fails to do so, or if an individual who is required to deduct tax at source fails to pay the whole tax or a portion of it to the benefit of the Government, at that point such individual will be responsible for paying a basic premium at following rates:

• From the date on which such tax becomes deductible until the date on which such tax is deducted, interest at the rate of one percent a month or half of a month shall be charged on the balance of such tax.
• The Government will collect a premium at 1.5% for consistently or part of a month on the measure of such expense from the date on which such duty was deducted to the date on which such assessment is paid to the Government’s credit.

To put it another way, interest will be charged at a rate of 1% for late deductions and 1.5 percent for late payments following deductions.

How To Deduct TDS On Contractor With Example: What is TDS? The full form of TDS is tax deducted source. Under the TDS system a person while paying in exchange for services such as brokerage, the commission is required to deduct a certain amount from the total amount. That amount is further deposited to the Government. This amount can further be claimed while filing Income Tax Return.

For example, XYZ Pvt Ltd has to make a payment of Rs. 1,00,000 to Mr. A as a professional fee under 10% TDS.

TDS deducted = 10% of 1,00,000 = 10,000

Net payment to Mr. A = Gross amount-TDS = Rs. 1,00,000- Rs, 10,000 = Rs. 90,000

TDS that ABC Pvt Ltd needs to pay the Government = Rs. 10,000

TDS Amount Deduction Under Section 194C

If you are making a payment to the contractor and the amount does not exceed Rs. 30,000, then no amount is deducted for TDS. But if the sum total of the payment to be made or already made during the same financial year exceeds Rs. 70,000 then TDS is deducted. It is explained below with the help of few examples:

Case	TDS to be deducted or not
Contract of Rs. 25000 in a year	NO
Two contracts of Rs. 25,000 in a year	NO
Contract of Rs. 69,999	YES
Contract of Rs. 69,999	NO
Contract of Rs. 69,999 in a year	YES
Two contracts of Rs. 30,000 in a year	NO
Two contracts of Rs. 70,000 in two years	YES
Two contracts of Rs.35,000 in a year	YES

Exceptions on Deduction on TDS

1. If the person does not fall under the category of paying taxes under section 44AB.
2. If the payment is used for personal use.
3. If payment is made for hiring resources, plying or leasing good carriage.
4. If payments are made to airlines or travel agencies for the purchase of air tickets.

Calculation of TDS Amount

Example 1

Service provided by an individual contractor ‘Mr. A’ to a partnership firm ‘XYZ’ and the following payment is being made to the contractor during the year:-

• First payment – Rs 40,000
• Second payment – Rs 20,000
• Third payment – 60,000

Solution

First payment – Rs 40,000

TDS is to be deducted @ 1% as the sum exceeds the limit of Rs 30,000 in a single payment. Therefore, the net payment to be made to A will be Rs 39,600 after deducting TDS of Rs 400 (32,000 * 1%).

Second payment – Rs 20,000

No TDS is deducted since the total single payment amounts less than the limit that is Rs. 30,000. Total payment made during the year will amount to Rs 60,,000 (40,000 + 20,000) which is also less than the threshold limit of RS 75,000.

Third payment – 60,000

Here, TDS is supposed to be deducted since it crosses the threshold of Rs. 30,000. Therefore an amount of 1% shall be deducted from the amount as TDS. Total TDS required to be deducted is Rs 800 (20,000 * 1% + 60,000 * 1%) at the time of making payment of Rs 60,000. Net payment to be made to Mr.  A will be Rs 52,000.

Example 2

In the above example if contractor A is a Partnership Firm in place of an individual.

Solution

First payment – Rs 31,000

It crosses the threshold of Rs. 30,000 so therefore 3% TDS is deducted. After deduction of TDS of Rs. 930, the total amount payable becomes Rs. 30,070.

Second payment – Rs 20,000

No TDS is deducted since the amount is less than Rs. 30,000 and also the total amount throughout the year is less than Rs. 75,000 (31,000+20,000=51,000).

Third payment – 61,000

2% TDS is deducted since total amount (20,000+61,000 = 81,000)

Total TDS to be deducted is Rs 16,20 (20,000 * 2% + 61,000 * 2%) at the time of making payment of Rs 61,000. Net payment to be made to A will be Rs 59,380.

Conclusion on How To Deduct TDS On Contractor With Example

TDS forms a very important and integral part of Income-tax law In India. You must always abide by the rules and regulations of the nation. You should never hide your income statements or lie about them. Pay your taxes regularly and do not forget to claim them at the end of each financial year. If you want to avoid serious complications, do get in touch with a well-known CA around your locality who will assist you and guide you on matters regarding taxes and accounting.

Section 194C TDS Contractors: Requirements To Deduct TDS Under This Section. Section 194C deals with the amount of any sum to the resident contractor (including the supply of labour) by any person to carry out any work based on a contract. The contract can be between the contractor and any one of the following:

• Any State Government or Central Government.
• Local Authority.
• Corporation established under Central, State or Provisional Act.
• Co-operative Society.
• Company.
• Firm.
• Any Deemed University or University.
• Societies registered under Society Registration Act, 1980.
• Authorities constituted in India under any law engaged in satisfying and dealing with housing accommodation, development and improvement of cities, towns, villages and planning.

Limitations for TDS Under Section 194C

• TDS shall not be deducted if payments under section 194C limit to ₹30,000 for a single contract.
• TDS shall be deducted if the aggregate payment of a contract exceeds ₹100,000.
• Payment made at any time during the previous year to any goods transporter who is in the business of hiring, plying or leasing goods and owns ten or more carriages. The contractor has to furnish PAN along with the declaration of the above.
• Personal purposes
• Section 194C limits TDS deduction if payments are made to any non-resident contractor or sub-contractor.
• Payments made to any bank listed in the Second Schedule of the RBI act excluding foreign bank for
• Cash management service charges
• Clearing charges (MICR charges)
• Bank guarantee commission
• Depository charges on maintenance of DEMAT accounts
• Underwriting service charges
• Charges for warehousing services for commodities
• Debit card or Credit card commission for transactions between the merchant establishment and acquirement bank – Notification no. 56/2012, dated 31st December 2012
• According to the payer’s specification, if payments are made for purchasing any products. TDS is to be deducted if the product is manufactured using material purchased by the payer.

Threshold Limit In Section 194C

• The threshold limit for a single payment or credit is 30,000.
• The threshold limit for the aggregate amount credited or paid or likely to be paid is ₹100,000.

Rate Of TDS Under Section 194C

Payment Made To	Contractor/Payee provides PAN	Contractor/Payee does not provide PAN
Hindu Undivided Families (HUFs)	1%	20%
Resident Individuals	1%	20%
Any party which is other than HUFs or resident individuals	2%	20%
Transporters, with not more than 10 vehicles	No TDS deduction	20%
Transporters, with more than 10 vehicles	Either 1% or 2% Depends on the recipent status	20%

Deduction Time

When the amount is credited to the payee’s account of such contract or sub-contractor by cash, draft, cheque or any other modes, tax is to be deducted. If the amount is credited in March, TDS will be deposited on or before 30th April. If the amount is credited in a month other than March, then TDS should be deducted within seven days from the end of the month.

What Is The Meaning Of Sub-contractor And Contractor?

Sub-contractor: It means a person who enters into a contract for:

• Supplying labour for all or part of work taken by the contractor.
• Performing all or part of work for which the contractor has agreed to complete.

Contractor: It means any person who enters into a contract with state/central government, corporation, local authority, company or a cooperative society to perform any form of work (including the supply of labour).

What Is The Meaning Of Work u/s 194C?

• Advertising
• Telecasting and broadcasting, including the production of programs too.
• Catering.
• Transport of passengers and goods using any mode of transport excluding railways.
• Supply or manufacturing product as per customer specification and by using materials purchased from him or her. It does not include the supply and manufacture of a product as per customer specification but materials purchased from other customers.

Other Points

• As per notification no. 01/2014, tax is deductible on the amount excluding GST if the GST amount is shown separately.
• Under section 194C, education cess, surcharge or secondary and higher education cess is not payable.
• Manufacturing or supplying product based on contract, TDS shall be deductible on the value of product excluding the value of material, if such value is separately mentioned in the invoice. TDS shall be debited on the whole amount of the invoice if not mentioned separately.

Calculation Of TDS In Case Of Composite Work Under Section 194C

Work includes supplying or manufacturing a product as per customer specification and by using the material purchased by the customer. Therefore, TDS will be deducted on:

TDS will be debited on the invoice value, excluding the material price.

When the material price is not indicated separately, TDS will be deducted from the total invoice value.

Under Section 194C, The Specified Persons Who Are Required To Deduct TDS

• Any person, being a HUF or an Individual or a body of individuals or an association of persons if such person—fails to fit into any of the preceding sub-clauses and
• Is liable to accounts audit under clause (a) or clause (b) of Section 44AB during the financial year immediately preceding the financial year in which such sum is credited to the contractor’s account. In other words, the only assessee is liable to audit due to receipts or turnover greater than ₹ 10 million or ₹ 2.5 lakh as the case may be.
• Any partnership firm
• Any company
• Local Jurisdiction
• Any corporation recognized by or under a Central, State or Provincial Act.
• The Central Government or any State Government
• Any cooperative society
• Authorities constituted in India under any law engaged in satisfying and dealing with housing accommodation, development, and improvement of cities, towns, villages, and the purpose of planning.
• Any university recognized or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956)
• Societies registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India
• Any Trust
• Any foreign enterprise or any association or Government of a foreign State or body established outside India.

SMS Alerts for TDS Deduction From Income Tax Department: SMS Alert for TDS is to resolve the issue of Income Tax Return (ITR) made by individuals due to a mismatch in the TDS deducted in the salary.  The Central Board of Direct Taxes (CBDT) launched the SMS Alert service to inform the salaried taxpayers about their TDS against the PAN.

What Is TDS?

TDS refers to Tax Deducted At Source. As per the Income Tax Act, any individual or company making structured payments must deduct the TDS amount of Tax at the source if the cost exceeds certain threshold limits.

Every individual or company deducts TDS at the rates prescribed by the tax department. A company or an individual making the structured payment upon deduction of TDS is referred to as a deductor. The individual or the company receiving the deducted amount is referred to as the deductee.

The deductor’s responsibility is to deduct TDS before cashing the payment and deposit the same with the Government. It is to be noted that TDS is deducted irrespective of the mode of payment- cheque, cash, or credit. TDS is linked to the PAN of the deductor, and then the amount is deducted.

TDS amount is subtracted on the multiple types of payments:

• Salaries
• Interest payments by banks
• Commission payments
• Rent payments
• Consultation fees
• Professional fees

What Is TDS Return?

A deductor has to deposit the deducted TDS amount to the Government, and the details regarding the  TDS amount have to be filed in the form of a TDS return. A TDS return has to be completed quarterly, and the different types of TDS amount deductions have to be filed using various TDS return forms. While preparing a TDS return, the process can be done quickly using the ClearTDS software.

Features of Quarterly SMS Alert for TDS Deduction

The CBDT board stated that all employees would receive quarterly SMS alert Service for salaries regarding TDS. Through the SMS alerts, deductees can check the TDS amount through the message received. If any mismatch or errors are flagged, then immediate issues can arise with their employers or the deductors.

Simultaneously, SMS Alerts for TDS will also be sent to the deductor who have either failed to deposit taxes deducted or to e-file their TDS returns by the due date.

The SMS Alert initiative is aimed to benefit around 2.5 Crore salaried taxpayers. The Income Tax Department wishes to expand the SMS Alerts frequency to 4.4 crores for non-salaried taxpayers. The SMS Alerts frequency will be increased once the TDS returns filing process is streamlined to receive any critical information on a real-time basis.

To receive an SMS alert, deductees must update the respective mobile number in the E-filing account. Upon receiving the quarterly SMS Alert for salaried taxpayers on the TDS amount, the deductees will have to cross-check the details with the Form 26AS on priority.

What Is Form 26AS?

The Income Tax Department issues the annual consolidated statement known as Form 26AS. Form 26AS comprises the details of refund,  TDS, or TCS facility related to a particular PAN number. The Form will reflect the Government’s Tax on various income sources like Pension income, Salary, or Deposits. Form 26AS is generated on an annual basis, that is, for every Financial year. The Form will be generated whenever the TAx related transactions like Advance tax paid or TDS occurs with the salaried taxpayer.

Where To Access Form 26AS?

The primary source of Form 26AS is the e-Filing portal of the Income Tax Department. To access Form 26AS, log in
with the credentials and invoke the “My Account” tab. From the drop-down menu, select the 26AS option.

The page will be directed to the TDS Reconciliation Analysis and Correction Enabling System (TRACES) website. Upon reaching, input the relevant AY and the format of the report. This allows the deductee to view and download Form 26AS.

The process is straightforward, and the individual will receive Form 26AS in the registered mail ID seamlessly. However, the source is TRACES.

Reasons for TDS Mismatch

There are several reasons for a TDS mismatch to occur, but the most significant reason is the employer’s negligence or deductor. A few other reasons are:

• If the employer or deductor has failed to file a TDS return.
• Mention of a wrong PAN number of the employee or deductee.
• Recognition of a wrong PAN and TAN number of employers or deductors.
• Missing out the inclusion of details of TDS payment while filing TDS return.
• Mention of a wrong challan identification number.
• Error in the amount entered.
• Statement of the wrong assessment year.

The Advantages Of SMS Alerts

• Mismatches in the TDS amount deducted and details updated in Form 26AS can create errors or problems while filing Income Tax Returns. A mismatch can result in the payment of additional taxes or restriction in the refund of excess Tax for taxpayers.
• SMS Alerts helps employees or deductees remain aware of the TDS amount deducted and deposited against their PAN. This facility allows deductees to take immediate and necessary actions to rectify and correct the flagged error or mismatch.
• In case of a mismatch or an error, salaried taxpayers should consult the employer or deductor and report the error or mismatch to rectify the necessary corrections.
• As per the CBDT press release, the SMS Alert service for direct tax payment has been activated for about 2.5 million salaried employees or deductees in both the private and Government sector. The CBDT department plans to expand this facility to about 44 million non-salaried taxpayers, including professionals like doctors and lawyers and business people.
• Similar SMS Alerts will be sent to the deductors who have collected the TDS amount.
• The SMS Alerts aims to inform and remind the deductors to file the Tax if left undone and to fill the file necessary for TDS returns by the due date.
• According to Income-tax Rules, the TDS deducted needs to be deposited by the seventh day of the corresponding month in which the TDS amount was deducted.
• The Income-tax department aims to increase SMS Alerts’ frequency upon which the process for filing TDS return is streamlined, making the alerts go out on a real-time basis.
• To receive an update regarding SMS Alerts, the deductees must enter the applicable mobile number in the e-filing account.

TDS Challan Correction: If one has selected the wrong assessment year, or furnished incorrect PAN/TAN details, or entered an incorrect amount in the TDS challan, one can lose tax credit benefits or even be charged a hefty fine.

However, if one realise their error in time, they can initiate a TDS challan correction to rectify the mistakes and resubmit it with the tax authorities. This process, also known as OLTAS (Online Tax Accounting System) challan correction, provides a simple method of rectification for those filing TDS returns. Challan correction can be carried out either by the online or offline process.

TDS Challan Correction Offline Physical Challan

A new challan correction mechanism for the correction of physical challans has been prescribed for payments made on or after 1st September 2011. We have provided below a list of challan corrections that can be carried out and who is authorised for such modification:

Serial Number	Field In Which Correction Has To Be Made	Authority To Make Correction	Time Limit For Correction By Bank
1.	PAN/TAN	Collecting bank* / assessing officer in case of offline challan. The concerned assessing officer in case of online challans.	Within seven days after the challan deposit date
2.	Assessment Year		Within seven days after the challan deposit date
3.	Major Head Code		Within three months after the challan deposit date
4.	Minor Head Code		Within three months after the challan deposit date
5.	Nature Of Payment		Within three months after the challan deposit date
6.	Total Amount		Within seven days after the challan deposit date
7.	Name	The concerned assessing officer in case of both online and offline challans.	N/A

Challan Correction by the Bank

Challan correction by the bank is subjected to the following conditions:

• The bank cannot carry out name correction.
• Any combination of correction of the Minor Head and Assessment Year together is not permitted.
• PAN/TAN correction will only be allowed when the name in the challan matches with the name in the new PAN/TAN
• Change of amount is allowed only when the amount so corrected is not different from the bank’s amount and credited to Government Account.
• Correction is permitted only once for a single challan for a particular field. E.g., Where 1st correction request is made only for the amount, a 2nd correction request will be allowed for correction in other areas.
• There will be no such partial acceptance of the change correction request. Either all the requested changes will be permitted if they pass the validation, or no change will be permitted if any one of the changes fails the validation test.

Fields needed to be filled out during the TDS Challan Correction Form.

OLTAS Correction Request Form

The following are the main fields to be filled out in an OLTAS challan correction request form:

• Taxpayer details – Name, Address and PAN/TAN details
• Address of the bank branch where the form is being submitted
• Authorised signatory name (if the taxpayer is a non-individual)
• Choose the Challan number which requires correction (Challan 280/Challan 281/Challan 282/ Challan 283)
• Details of TDS challan requiring modification – Challan Tender date, Serial number and BSR Code.
• Details of correction needed for challan – choose which challan detail needs correction and provide original (incorrect) entry and correct entry.
• Signature of taxpayer/authorised signatory

Procedure for Approaching The Bank for Challan Correction

• The taxpayer needs to submit the request form for correction (duplicate) to the concerned branch of the bank.
• The taxpayer is needed to attach a copy of the original challan counterfoil.
• In the case of modification desired for challans in Form 280, 282, 283, a copy of the PAN card must be attached.
• In the case of non-individual taxpayers, the original authorization with a seal of the non-individual taxpayer is needed to be attached with the request form.
• A separate request form needs to be submitted for each challan.

Procedure for Approaching Assessing Officer for Challan Correction

Once the time limit to approach the bank for challan correction expires, a taxpayer can request a modification.

The request has to be made to the concerned assessing officer who is authorized under the OLTAS application to make any such correction in challan data in genuine cases enabling credit of the taxes paid to the concerned taxpayer. The other steps are similar to approaching a bank as mentioned above.

TDS Challan Correction Online

Online correction of TDS challan must be carried out on the website ‘TRACES’ (TDS Reconciliation Analysis and Correction Enabling System). It is mandatory to have a digital signature to register on TRACES in order to request online challan correction.

Steps for online correction on TRACES are as follows

• Login to the TRACES website with the user ID, passwords and TAN.
• Under defaults, choose ‘Request for correction.’
• Enter relevant Form Type, Financial Year, Quarter, whether Latest Accepted Token number. The correction category should be “Online”, and click on ‘Submit.’
• A request number will be generated.
• Next, click on ‘Go To Track Correction Request’ under Defaults again. Now enter Request number or Request period and click on ‘View Request’ or click on ‘View All Requests’
• When request status** shows ‘Available’, click on Available / In progress status to proceed with the correction
• Provide information on valid KYC.
• Select type of correction category from the drop-down as ‘Challan Correction.’
• Make the needed corrections in the selected file.
• Click on ‘Submit for Processing’ to submit your correction.
• A 15 digits token number will be generated and mailed to the registered e-mail ID.

Status of Correction Request

Request	The user has submitted a request for correction.
Initiated	TDS CPC is processing the request
Available	Request for modification is accepted, and the statement is made available for modification. The user can start correcting the statement. By clicking on this hyperlink, the user will be directed to the validation screen. Once the user clicks on the request with ‘Available’ status, the status of the request/statement will change to ‘In Progress.’
Failed	Request cannot be made available because of a technical error. Users can re-submit the request for the exact details.
In Progress	The user is working on a statement. Clicking on the hyperlink will direct the user to the validation screen.
Submitted to Admin User</strong	Sub-user / Admin User has submitted the correction statement to the Admin User.
Submitted to ITD	The admin user has submitted the correction statement to ITD for processing.
Processed	The statement has been processed by TDS CPC (either for Form 26AS or for defaults).
Rejected

The statement has been rejected by TDS CPC after processing. Rejection reasons will be displayed in the ‘Remarks’ column.

TDS On Interest On Loan: The deduction of TDS on debt rather than interest on shares is covered by Section 194A. If the provisions are attracted, the Deductor must subtract TDS at a rate of 10%.

The charge under Section 194A is in the form of interest (other than interest on securities).

Interest charges such as fixed account interest, interest on any debt, and interest on revolving deposits are also included. The TDS mechanism also applies to payments given to non-residents.

TDS is Deducted from The Following Payments

Under this clause, TDS must be deducted from payments rendered to a resident individual for interest. The rules of section 194A only apply as interest is paid to a resident; they do not apply to the amount of interest paid to a non-resident. The equivalent is covered inside the domain of section 195.

People Who Need To Deduct TDS Under Section 194A

Under section 194A, any person (i.e., the payer) who is responsible for paying interest (interest other than on securities) to a citizen, other than an entity or a Hindu undivided family (HUF) under audit under section 44AB, is at risk to deduct charge at the source.

Individuals or HUFs whose net revenue, gross receipts, or profits from their company or career exceed Rs. 1 crore in the case of a business and Rs. Fifty lakhs in the case of a profession promptly going before the monetary year in which the sum mentioned above is charged or charged are entitled to deduct tax under section 194A.

Time of Deduction of TDS

The Deductor responsible for deducting TDS according to arrangements of segment 194A is needed to deduct TDS inside prior to the accompanying dates

• At the point when cash is credited to the payee’s record; or
• When making a payment by cash, check, draught, or some other method.

Rate of Deduction of TDS

In case the provisions of section 194A of the Income Tax Act are invoked, the Deductor is required to deduct TDS on Interest On Loan Except for Interest On Securities At A Rate Of 10%.

In any case, if the Permanent Account Number isn’t outfitted, around there, the Deductor would be obligated to deduct TDS @20%, i.e., highest marginal rate.

The Deadline for Depositing The TDS That Has Been Deducted

The Deductor who has deducted TDS under Section 194A is expected to deposit it inside the accompanying due dates

Months	Due date
April to February	7th of the following month
March	On or before 30th April

In the Following Situations, TDS Is Not Expected To Be Deducted

Assume that an Indian resident furnishes to the payer a written declaration in Form 15G/15H, considering the circumstances, to the extent that his income is below the exemption cap. In that case, the Government shall make no tax deduction under this provision. The following are the laws in this regard:

• Statement (in copy) is to be made in Form No. 15H when the beneficiary is a senior resident and in Form No. 15G when the beneficiary is other than a senior resident.
• The assertion in Form No. 15G/15H can be made simply by an individual occupant in India.
• If the annual interest does not meet the exemption cap, an individual may file Form No. 15 G/15H. (i.e., Rs.2,50,000 or INR 3,00,000 or INR 5,00,000, as the case may be).In the case of a resident senior citizen, this requirement does not apply (i.e., a resident person of at least 60 years of age), i.e., a resident senior citizen can file a Form 15H declaration even though the annual interest likely to be paid to him reaches the exemption cap of INR 2,50,000 or INR 5,00,000, depending on the situation, provided the tax due on his net income after considering the remuneration under section 87A is nil.

The assessment payable on the full payment of the year ought to be “Nil.” The payer who collects a declaration in Form No. 15G/15H must upload information of such statements every quarter under his digital signature on the e-filing portal (www.incometaxindiaefiling.gov.in) within:

• 15 days from the finish of the primary, second, and second from last quarter
• 30 days from the finish of the final quarter.
• Section 194A would not allow the company to withhold any tax on interest credited or paid to its partners.
• At the point when the payee has acquired an authentication from the Assessing Officer for no derivation or lower charge allowance, the payee may document an online application in Form No. 13 for issuance of declaration for no funding of assessment or lower derivation of duty at the source.
• Premium paid to any bank, monetary enterprise, Life Insurance Corporation Unit Trust of India, any organization, or a co-usable society occupied with the protection business is absolved under segment 194A.
• There is no need to pay TDS if the total amount of interest paid by a bank does not exceed INR 40,000 [INR 50,000 in the case of a senior citizen].
• On account of any Co-operative Society, TDS isn’t to be deducted if a total measure of interest doesn’t surpass INR 40,000 [INR 50,000 if there should arise an occurrence of a senior citizen].
• TDS is not applied on interest charged or earned on deposits notified by the Central Government. The same rules apply to TDS on interest on the loan with a direct agricultural credit society, a primary credit society, a co-operative land mortgage bank, or a co-operative land development bank.
• Under Section 197, an assessee may request no TDS or a reduced rate of TDS from the assessing officer.

Is TDS Deductible On Interest On Late Payments On Purchase Bills?

According to section 201, if a person who is required to deduct tax at source fails to do so, or if an individual who is required to deduct tax at source fails to pay the whole tax or a portion of it to the benefit of the Government, at that point such individual will be responsible for paying a basic premium at following rates:

• From the date on which such tax becomes deductible until the date on which such tax is deducted, interest at the rate of one percent a month or half of a month shall be charged on the balance of such tax.
• The Government will collect a premium at 1.5% for consistently or part of a month on the measure of such expense from the date on which such duty was deducted to the date on which such assessment is paid to the Government’s credit.

To put it another way, interest will be charged at a rate of 1% for late deductions and 1.5 percent for late payments following deductions.

How to Download & Install TRACES Web Socket Emsigner: TRACES is the online platform offered for the administration and implementation of TDS and TCS. For Registering DSC on TRACES or for the KYC validation using the DSC, it is compulsory to download and install the WebSocket emSigner. Thus, the deductor should download the WebSigner Utility from their account on TRACES.

• What is the TRACES website?
• How to download and install emsigner
• WEBDESIGNER OF TRACES SETUP V2.0
• Installation Guide for the TRACES EmSigner
• Error in establishing a connection with the TRACES Web-socket Designer

What is TRACES Website?

TDS Reconciliation Analysis and Correction Enabling System, abbreviated for TRACES, is an online platform offered by the Indian Income Tax Department at the website – www.tdscpc.gov.in. The TDS return processing takes place online with a dashboard, and the status of filings and tremendous demand is shown therein. TRACES Emsigner – Download & Install

How to Download and Install Emsigner

The steps to download and install designer for digital signing on TRACES portal.

Step-1: Login to TRACES WEBSITE

Step-2: Fill in the User ID, the Password and the TAN number of the deductor.

Step-3: Go to the download tab, click on ‘Requested Download’. After that, the following screen appears. Select ‘Click here for downloading the utility.

Webdesigner Of TRACES Setup V2.0

Step-4: Click on the ‘Traces WebSigner Setup V2.0’ for downloading the Emsigner setup.

Step-5: Click on the ‘Run’ option. After the completion of the installation process, please click the ‘Finish’ option.

Installation Guide for TRACES EmSigner

Step-6: Complete the process of installation. Make sure that the following process is completed.

• Download the WebSigner Setup on the local system
• Please make sure to install the JRE 7 or above (version 32-bit only) on the machine
• Make sure to Unzip the file that you have downloaded.
• Click on the setup file and select the “Install” option in order to start the process of installation.
• Finish the process step by step by clicking the ‘Next button
• Click on Finish
• Go to the start menu and click on emSigner to start the service

Error in Establishing a Connection with the TRACES Web-socket Designer

The above is going to be resolved if the TRACES EmSigner has been loaded. Before the digital signature, click on the option “Run as administrator” in the start-up panel of windows.

Step-7: After that, one can choose to register their DSC on the TRACES Portal. After Logging in to Traces and Click on the ‘Profile’ Tab and the ‘Signature’ Tab. Choose the DSC certificate and enter the DSC password.

 

TDS on Transportation Charges: Confusion regarding the application of Section 194C has been observed amongst people. Section 194C focuses on TDS on the contract during payment to the transporter. This might result from various amendments through the years related to the specific points 194C(6) and 194C(7). The summarization of the details of Section 194C is discussed below.

Points Regarding TDS Under Section 194C

• This revised sub-section is applicable with effect from April 1st, 2015.
• The transporter for the sub-sections mentioned is the person handling plying, hiring, or leasing assets carriages.
• The advantage of non-deduction of tax is available only for small transportation operators owning less than ten goods carriages.

Therefore, if the transporter having not more than ten goods carriages through the year, provides his PAN and the declaration, then, being a payer, they don’t have to deduct his TDS.

But suppose the transporter was owning more than ten goods carriages at any time during the year. Then, as payers, they must deduct TDS during payment of charges to goods transporter at the price of 1% or 2% depending on the case and status of the transport contractor.

Note: The TDS rate of 1% and 2% will decrease to 0.75% and 1.50%, respectively, through the period from the month of May 14^th, 2020, to the month of March 31^st, 2021.

• The person accountable for paying or charging any amount to such transporters shall furnish a declaration along with their PAN to the income tax authority.

Under Section 194C, the specified persons must deduct income tax:

• Central/State Government employee
• Co-operative society/Statutory corporation
• Housing/Town development authority
• Registered society
• Trust/Local authority
• University
• Foreign Government/Enterprise/Association
• Individual/Association of persons gross receipts Rs. 1 crore during the preceding financial year.

Is TDS applicable on transportation charges?

What is TDS on Transportation (Freight)? According to Section 194C, any payment made to a transporter is subject to TDS deduction on freight charges. The payer must reduce the income tax amount before transferring the fee.

What is the TDS on transportation?

Section 194C of Income Tax Act is amended to include TDS deduction of 1 % for individuals and Hindu Undivided Families owning more than 10 goods carriage, and at the rate of 2% in case of other payees.

What is the TDS limit for transporter?

TDS on transporter

Is transporter in TDS return?

As per Income tax act 194C, TDS is not required to be deducted on payments made to transporter If PAN number has been provided to the deductor. To incorporate nil rate transporter entries in E-TDS return by inserting a tag “T” in remarks in 26Q.

Is TDS applicable on vehicle insurance?

Most times people choose their insurance via agents, brokers, etc. In such cases, the insurance commission or any other remuneration/reward received by such agents, brokers etc., are subjected to Tax Deducted at Source (TDS) as dictated under Section 194D of the Income Tax Act.

TDS: TDS stands for Tax Deducted Source. In the TDS system, individuals responsible for making payment for specified services such as brokerage, professional consultancy, commission, etc., are required to subtract a fixed percentage from the amount.

• About TDS
• Persons Who Are Required to Deduct TDS
• What is TAN? Its Requirement and Exception
• When to deduct TDS?
• The Threshold Limits and Nature of Payments
• Payment And Return Filing
• TDS Certificate
• The Nature of Payment and Due Dates
• Provisions for Penalty
• Utility to Check the Amount Deducted and Credited to Deductee’s Account
• Request For Non-Deduction or Lower Deduction
• Applying For a Refund

About TDS

The like deducted amount (which is called TDS) have to be deposited to the government by the deductor (person who is deducting tax) on behalf of the deductee (person who is providing services), which deductee can claim as Income Tax Paid at the time of filing his Income Tax Return.

• For example, ABC Pvt Ltd has to pay Rs 1,00,000 to Mr XYZ for a professional fee. TDS rate specified on the professional cost is 10%. The TDS needed to be deducted 10% on Rs 1,00,000, which equals Rs 10,000, and the Net payment to Mr XYZ is TDS Deducted from the Gross Amount that equals Rs 1,00,000 – Rs 10,000 and gives Rs 90,000. So, the TDS to be deposited to the Government by ABC Pvt Ltd is Rs 10,000.

TDS can also be deducted from salary. The calculation of tax subtractable is different in the case of wages since TDS is not deductible as a fixed percentage but according to a specific method under section 192.

Persons Who Are Required to Deduct TDS

The government has notified the persons mentioned below, who are required to subtract TDS for the services specified:

1. An Individual and HUF is needed to deduct TDS on the selected services if they are involved in:
2. Any business having a turnover of Rs 1 crore or above during the last financial year.
3. A professional with receipts of Rs 50 lakh or above during the previous financial year must get books of account audited under section 44AB.

Exception

1. If a person is required to get his books of account audited due to reporting the net profit, which is lower than 8% of the business’s turnover (according to Section 44 AD). According to Section 44ADA, 50% of the gross receipt in professional services; is not required to subtract TDS.
2. Other persons apart from Individual and HUF include Private Limited Company, Partnership Firm, Co-operative Society, LLP, etc.

Exception for Individual and HUF

The cases below are also required to deduct TDS:

1. In the case of the Purchase of immovable property where the consideration paid for the property is more than Rs 50 Lakh (as per Section 194IA).
2. The rent paid for building exceeding or land exceeds Rs 50,000 per month (according to Section 194IB). Only those Individuals or HUF are covered, which are not required to deduct TDS as per the point mentioned above (as per section 194IB). If an individual is covered as per point (a), they must deduct TDS under section 194I and not section 194IB.

• The only two cases in which a non-business is also required to deduct TDS are mentioned above.

What is TAN? Its Requirement and Exception

The Tax Deduction and Collection Account Number (TAN) is a unique ten-digit alphanumeric number allotted to the deductor or collector of TDS. It is furnished to identify every deductor.

Each individual who is required to deduct TDS should apply for TAN. TAN is needed to be quoted on all TDS payment challans, TDS certificates & TDS returns. You can use Form 49B in any NSDL office, or you can also apply online for TAN from the NSDL website.

Penalty – The penalty of Rs. 10,000 on failing to apply for TAN or quoting TAN in payment challans, TDS return and TDS certificates.

The Time Limit to get a TAN

No specified time limit is given for getting TAN. However, you should apply for TAN when you become liable to deduct the TDS of any person since TDS payment and return filing cannot be accomplished without TAN.

Notes

• A separate TAN is not required to obtain TCS.
• If you have made any payment above the threshold limit and TDS is required to be deducted, you must apply for the TAN. For example, if you certify as a Private Limited Company and do not make any payment on which TDS is required to be deducted, there is no need for a TAN.

Exception

TAN is not required if TDS is deducted for Purchase of Immovable property (Section 194IA) or rent paid (Section – 194IB). Deductor has to use their PAN for the TDS payment and for filing returns.

When to Deduct TDS?

The time of deducting TDS depends on the nature of the payment. TDS is required to be removed at the time of actual payment only, not on a due or accrual basis in the following cases:

1. Salary
2. The Payment of the assembled balance of the Employee’s Provident Fund.
3. Victory from lottery or crosswords puzzle.
4. Win from horse races.
5. The Payment in respect of life insurance policy to the policyholder.
6. The Payment for deposits under the National Saving Scheme.
7. The Payment on account of repurchase of units by Mutual Funds or Unit Trusts of India.
8. The Payment of compensation on compulsory acquisition of specified immovable property.

During the time of credit of such income to the payee’s account or at the time of actual payment, whichever is earlier in case of all other payments (such as commission, profession fee, consultancy etc.) except the payments mentioned in the above point.

Note: TDS must be deducted from the beginning if it is likely that the total amount will exceed the threshold limit during the financial year.

For example: if you have a professional service contract amounting to Rs 2,00,000 and the first payment is due in April, adding up to Rs 13,000. If so, TDS is required to be deducted at 10%, as it is likely that the total amount will exceed the threshold limit.

The Threshold Limits and Nature of Payments

The points below summarize the nature of the transaction where TDS is required to be subtracted if the amount exceeds the threshold limit, together with the applicable rates of TDS for payments commonly used.

TDS Amount Calculation

TDS needs to be subtracted from the total amount if such amount exceeds the threshold limit specified for that particular nature of transactions.

Few examples which will help in understanding the calculation of TDS

Example 1 – Service provided by an individual contractor ‘A’ to a partnership firm ‘B’. The contractor during the year is being paid as per the payment that follows.

Payment 1 is Rs 32,000

Payment 2 is Rs 24,000

Payment 3 is 60,000.

Solution:

When Payment 1 is Rs 32,000: the TDS is required to be deducted at 1% as the sum exceeds the threshold limit of Rs 30,000 in a single payment. After deduction, the net payment to ‘A’ will be Rs 31,680, with a TDS of Rs 320 (32000 * 1%).

If Payment 2 being Rs 24,000: no TDS is required to be deducted as the single payment is less than Rs 30,000, and the total payment made during the year will be Rs 56,000 (32,000 + 24,000), which is also less than the threshold limit of RS 75,000.

If Payment 3 is 60,000: the TDS should be deducted at 1% on the gross amount as the total payment in the year surpasses Rs 75,000.

The total TDS required to be deducted is Rs 840 (24,000 * 1% + 60,000 * 1%) at the time of making payment of Rs 60,000. Net payment is to be made to ‘A’, which is Rs 59,160.

Example 2 – If contractor A is a Partnership Firm in place of the individual.

Solution:

If Payment 1 is Rs 32,000, then TDS is required to be deducted at 3% as the sum exceeds the threshold limit of Rs 30,000 in a single payment. The net payment that needs to be paid to ‘A’ is Rs 31,360, after deduction of TDS of Rs 640.

If payment 2 is Rs 24,000: No TDS is required to be deducted as the single payment is less than Rs 30,000, and the total payment made during the year will be Rs 56,000 (32,000 + 24,000), which is also less than the threshold limit of RS 75,000.

If payment 3 is 60,000: the TDS at the rate of 2% must be deducted from the total amount as the annual payment in the year exceeds Rs 75,000.

The total TDS required to be deducted is Rs 1680 when making a payment of Rs 60,000. The net revenue to be made to ‘A’ will be Rs 58,320.

Payment And Return Filing

Persons deducting TDS must deposit the TDS amount to the government and file quarterly returns with the TDS details removed.

TDS Deposit

The TDS deducted in salary or non-salary must be deposited within seven days from the end of the month in which TDS is deducted. However, TDS deducted in March is required to be deposited on or before 30 April.

The due date for deducting TDS under sections 194IA & 194IB – 30 days from the end of the month in which TDS is deducted.

Notes:

TDS is required to be deposited using challan or form:

(Section 194IA) TDS on Purchase of property of Form 26QB

(Section 194IB) TDS on rent of the property of Form 26QC

Challan No./ITNS 281 for other TDS payments.

• TDS can be deposited in any Authorized bank or online.
• E-payment is compulsory for companies, and a person must get his books of account audited under section 44AB.
• A separate challan needs to be entrusted for each nature of payment for which TDS is subtracted.

For example, you must deposit two forms for each section if TDS is deducted on the contractor fee and a professional fee.

TDS Return

A quarterly TDS return is required to be filed by the deductor. For filing return as different return forms are specified below:

• In the case of Form 24Q for salary, the deductee can be a resident or non-resident.
• In the case of Form 26Q, apart from salary, the deductee should be a resident.
• In the case of Form 27Q, apart from salary, the deductee can be a non-resident, not an Ordinary Resident, or a Foreign Company.
• In the case of Form 26QB for immovable property, the deductee should be a resident.
• In the case of Form 26QC for Payment of Rent, the deductee should be a resident.

For the following Quarters; the due date for Form 24Q or 26Q are:

• Apr to Jun: 31 July
• July to Sep: 31 October
• Oct to Dec: 31 January
• Jan to Mar: 31 May

For the following Quarter; the due date for Form 27Q is:

• Apr to Jun: 15 July
• July to Sept: 15 October
• Oct to Dec: 15 January
• Jan to Mar: 15 May

Form 26QB and 26QC: It is a challan cum TDS statement that is needed to be filed under 30 days from the end of the month in which TDS needs to be deducted.

TDS Certificate

TDS Certificate shows the amount of tax that the deductor has deposited. Deductor is required to issue a TDS certificate to the deductee within the specified time limit given in the below table. Such certificates have to be generated online using TRACES websites only. Deductor is required to deposit tax and file TDS returns to the government before requesting a certificate from TRACES.

Nowadays, individuals can quickly check the tax deposited via 26AS, so the importance of such a certificate has been reduced. However, it is better to collect the certificate from the deductor to make sure TDS has been deposited along with the correct reporting of the Deductee PAN.

The Nature of Payment and Due Dates

• Form 16 for TDS on Salary: to be paid on or before 31 May of the financial year.
• Form 16A apart from Salary: Within 15 days from the due date of furnishing TDS return.
• Form 16B for Purchase of Immovable Property: Within 15 days of turning return cum challan (Form 26QB).
• Form 16C for TDS on rent: Within 15 days of turning return cum challan (Form 26QC).

Provisions for Penalty

Under TDS, various penalties are applicable on the deductor, such as:

Interest on late payment of TDS to Government

Interest is chargeable on short payment/late payment of TDS. There can be the following scenarios:

• When TDS is not deducted: The interest rate of 1% every month or part thereof for the period starting from when TDS is deductible or collectible until TDS or TCS is deducted/collected.
• If TDS is deducted, but payment is made late: The interest rate of 1.5% monthly or part thereof starts when TDS is deducted or collected until TDS /TCS is paid.

The calendar month is considered in calculating interest; therefore, you have to pay interest for two months if you delay the payment by one day. For example, if TDS is deducted in July and deposited on 8 August, you must pay interest for two months, i.e., July and August. The total interest payable will be 3%.

Penalty on the wrong/late filing of TDS return:

• Rs 200 per day as a Late filing fee (section 234E).
• The penalty of Rs. 200 per day is payable for any delay in furnishing the TDS statement.
• The total late filing fees should not surpass the total amount of TDS reported in return.
• A Penalty ranging Rs 10,000 to Rs 1,00,000 (section 271H).
• Delay in filing TDS statement for more than a year from the due date of filing such TDS return.
• If a TDS statement is not filed within a year from the due date of furnishing of TDS return, a minimum penalty of Rs 10,000 to Rs 1,00,000) can be levied. The liability under this section will be in addition to the late filing fee under section 234E.
• Incorrect furnishing details in the statement filed like PAN, Challan and TDS Amount, etc. – Section 271H also covers filing faulty TDS/TCS return cases. Similarly, a minimum penalty of Rs 10,000 (which can go up to Rs 1,00,0000) can be levied.

Penalty on late issuing of TDS Certificate: A penalty of Rs 100 per day shall be payable for any delay in issuing the TDS certificate. The total late issuing fees should not exceed the total amount of TDS reported in return.

Utility to Check the Amount Deducted and Credited to Deductee’s Account

You can quickly check the number of TDS that has been deducted from your receipts/incomes online.

• Step 1: Go to income tax India e-filing.
• Step 2: Then, for the income tax account, Log in or register.
• Step 3: Select the option ‘View Form 26AS’ (Tax Credit) available under My Account.
• Step 4: You will automatically be redirected to the TRACES website, where you are required to select the Assessment Year for which you want to check the TDS amount.

Details of Form 26AS

• Tax deducted at source
• The tax collected at the source
• Advance or Self-assessment tax deposited by the assessee
• Income tax refund issued by IT Department
• Annual Information Return (AIR) of high-value transaction

Request for Non-Deduction or Lower Deduction

You can request the tax deductors not to deduct tax if your income stands below the basic exemption limit. The two ways of doing this are: –

Filing Form 15G/15H

• A resident individual or HUF can file a declaration in Form 15G/15H for non-deduction of TDS. In this declaration, the deductee declares that his income is below the basic exemption limit at a particular financial year; no TDS should be deducted.
• The deductee is required to file this declaration for each financial year.

Note: Form 15G applies to an individual, and Form 15H applies to senior citizens.

Application in Form 13 to Assessing Officer

Anyone can apply for a certificate for non-deduction or lower deduction to his assessing officer. If satisfied, a certificate to the deductee will be issued by the Assessing Officer.

Applying for a Refund

The only refund, i.e., Income Tax Refund, is an excess of tax already paid by TDS, TCS, advance tax or self-assessment tax less tax on your total income. You can get an additional tax refund only after filing your income tax return for that particular year.

In other words, there are no other methods to get a refund other than by filing an Income Tax Return.

TDS on Dividend Section 194: Deducting tax at source is required of the principal officer of an Indian company or a corporation that has made the requisite arrangements for the declaration and payment of any dividend (including dividends on preference shares) to a shareholder who is a resident of India. On this page, let’s learn everything about TDS on Dividend Section 194k in detail.

• TDS On Dividend Threshold Limit
• When TDS Under Section 194 Is Deducted?
• When TDS on Dividend Is Not Applicable?
• TDS Rate on Dividend Section 194
• TDS on Dividend for Resident Shareholders
• TDS on Dividend for Non-Resident Shareholders
• TDS on Dividend for FPI
• Compliance Requirements Under TDS Dividends
• FAQ’s on TDS on Dividend Section 194

TDS On Dividend Threshold Limit

If the dividend is paid by any method other than cash, there is no deduction up to Rs. 5000. So the dividend threshold limit on TDS is Rs. 5000/-

When TDS Under Section 194 Is Deducted?

Tax is deducted at the time of crediting the money to the payee’s account or at the time of payment, whichever comes first. This means before making a dividend payment, any TDS applicable must be deducted.

When TDS on Dividend Is Not Applicable?

TDS is not required to be deducted if the following conditions are met:

• Form 15G or 15H is used to declare dividends covered by section 115-O.
• The amount of dividend paid or projected to be paid to a shareholder in a financial year does not exceed Rs. 2,500, and it is paid by account payee cheque.
• Any dividend due to LIC, GIC, or any of their subsidiaries or any other insurer in respect of shares in which they possess or have a full beneficial stake.

TDS Rate on Dividend Section 194

The tax will be deducted at a rate of 10%. (7.5 percent w.e.f. 14.05.2020 to 31.03.2021). TDS will be deducted at a rate of 20% if the income recipient does not provide his PAN to the deductor.

Details	TDS Rate
PAN Card Provided	10%
No PAN Card Provided	20%

Also, under Section 197, an assessee might request no TDS or a lower rate of TDS from the assessing officer.

TDS on Dividend for Resident Shareholders

• If the dividend amount exceeds INR 5,000, the tax rate is 10% (now decreased to 7.5%)
• In the absence of a PAN, the tax rate is 20%.
• If Form 15G/15H is submitted, there is no TDS.
• TDS is not required for certain insurance companies/mutual funds and AIFs.

TDS on Dividend for Non-Resident Shareholders

• TDS Rate: 20% plus applicable surcharges and cess, or DTAA rates, whichever is more beneficial.
• Surcharges are limited to a maximum of 15%.
• TRC must be secured with a statement of PPT, beneficial ownership, and the absence of PE/POEM in India.

Note: The above pointers are applicable only for non-resident shareholders other than FPI.

TDS on Dividend for FPI

The TDS rate for FPI’s is 20% along with applicable surcharges and cess.

Compliance Requirements Under TDS Dividends

• In the event of any payments to non-residents, filing TDS returns and issuing TDS certificates (Form 15CA) is required.
• If a payment to a non-resident exceeds INR 5 lakhs, a CA certificate on Form 15CB is required.

FAQ’s on TDS on Dividend Section 194

Question 1.
Is TDS is applicable to dividends?

Answer:
Yes, due to the elimination of the Dividend Distribution Tax (DDT), dividend income becomes taxable in the hands of investors, and tax deduction at source (TDS) becomes applicable on dividend payout under Section 194 of the Income Tax Act.

Question 2.
How can I claim TDS on dividends?

Answer:
Yes, the deductee can claim credit for the tax deducted on Form 16A when submitting an income tax return.

Question 3.
How can I claim TDS exemption in dividends every financial year?

Answer:
Form 15G can be submitted to the corporation or mutual fund paying the dividend by a domestic individual whose projected annual income is below the exemption limit to claim the TDS.