TDS Compliance

TDS or Tax Deducted at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons making such payments.

Usually, the person receiving income is liable to pay income tax. But the government with the help of Tax Deducted at Source provisions makes sure that income tax is deducted in advance from the payments being made by you.

The recipient of income receives the net amount (after reducing TDS). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes credit of the amount already deducted and paid on his behalf.

Documents Required for TDS Compliance

TDS challans copy deposited during the month
Details of vendors on which TDS is deducted during the month
Pan numbers of all vendors on which TDS is deducted during the month
Details of Proprietor / Directors / Partners who are authorized to sign TDS returns Like Name , Address, Pan number and Digital Signature

When should TDS be deducted and by whom?

Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payment. But no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited.

However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN.

Your employer deducts TDS at the income tax slab rates applicable. Banks deduct TDS @10%. Or they may deduct @ 20% if they do not have your PAN information. For most payments rates of TDS are set in the income tax act and TDS is deducted by payer basis these specified rates.

If you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit – you do not have to pay any tax. And therefore no TDS should be deducted on your income. Similarly, you can submit Form 15G and Form 15H to the bank if your total income is below taxable limit so that they don’t deduct TDS on your interest income.

In case you have not been able to submit proofs to your employer or if your employer or bank has already deducted TDS and your total income is below the taxable limit) – you can file a return and claim a refund of this TDS.

The complete list of Specified Payments eligible for TDS deduction along with the rate of TDS.

TDS Rate Chart for F.Y. 2020-21 (A.Y: 2021-22)

Section	Nature of payment	Threshold Limit	Applicable from 01/04/2020 to 13/05/2020	Applicable from 14/05/2020 to 31/03/2021
			Resident	Non-resident *	Resident	Non-resident *
		Rs.	TDS Rate (%)	TDS Rate (%)	TDS Rate (%)	TDS Rate (%)
192	Salaries	–	Normal slab rate	Normal slab rate	Normal slab rate	Normal slab rate
192A	Premature withdrawal from EPF	50000	10	10	10	10
194C	Contractor-Single transaction-Individual/HUF -Others	30000	1 2	– –	0.75 1.5	– –
194C	Contractor – Consolidated Payment During the F.Y. – Individual/HUF – Others	100000	1 2	– –	0.75 1.5	– –
194H	Commission/Brokerage	15000	5	–	3.75	–
194I	Rent of – Plant/Machinery /Equipment – Land and Building/Furniture & Fixture	240000	2 10	– –	1.5 7.5	– –
194IA	Transfer of certain immovable property other than agriculture land	50 lakh	1	–	0.75	–
194IB	Rent by Individual/HUF	50000 per month	5	–	3.75	–
194IC	Payment under Joint Development Agreements to Individual/HUF	–	10	–	7.5	–
194J	Professional Fees	30000	10	–	7.5	–
194J	Technical Fees (w.e.f. 01.04.2020)	30000	2	–	1.5	–
194J	Director’s fees	–	10	–	7.5	–
195	Long-term capital gain – Under Section – 115E/ 112(1)(c)(iii)/112A – Any Other Gains	–	– –	10 20	– –	10 20
195	Short-term capital gain – 111A	–	–	15	–	15
195	Royalty	–	–	10	–	10
195	Fees for technical services	–	–	10	–	10