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THINGS TO KNOW BEFORE YOU REGISTER-TAX DEDUCTED SOURCE

TDS stands for Tax Deducted at Source, and it is needed to be deducted when making payments to parties at a certain rate. The income tax department has set a specific rate of deduction and a threshold limit on which it is needed to be deducted for certain identified expenses/payments.

 
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INTRODUCTION

  • TDS or Tax Deducted at Source is a specific amount which is deducted when a certain payment like salary, commission, rent, interest, professional fees, etc is made. The person who makes the payment deducts tax at source, and the person who receives a payment/income has the liability to pay tax. It lowers tax evasion because tax will be collected at the time of making a payment. Each business, whether a startup or a current organization, is sure to incur a few costs or to make payments to its parties regardless of its size and scale. Accordingly TDS provisions apply to all types and size of organizations. It applies in a similar way to a proprietor, firm, LLP or an organization registered under the companies, Act. 2013. The payment of expense by a person is an Income in the hands of the recipient. Accordingly the payer is under an obligation to deduct the tax at pertinent rates while making payment to the party. For little payments, the provision of TDS doesn't have any significant bearing until it surpasses the threshold limit as recommended. It must be noted that the TDS is applicable only on the specified payment and after it reaches the threshold limit. The most widely recognized kinds of expenses on which TDS is applicable is given hereunder.

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Our Packages for TDS Registration

BASIC

All Inclusive Fees

  • 14,99
  • For 15 entries one quarter

PRO

All Inclusive Fees

  • 2,499
  • For 25 entries One quarter

PREMIUM

All Inclusive Fees

  • 4,999
  • For More than 25 Entries

Key Points of TDS Deduction & Payment

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Payment of TDS Deducted

The tax deducted at source (TDS) while making payment to parties for qualified costs should be kept before seventh of next month. For instance, the TDS deducted in November 2017 is payable prior to 7th December 2017. The challan number for setting aside TDS installment is 281. While making TDS Payment care should be exercised while choosing the appropriate section/nature of the payment.

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Filing of TDS Return

Subsequent to making the payment of TDS to the income tax, the taxpayer is needed to file a quarterly return where the TDS kept is planned against the PAN of the individual from which TDS was deducted. The TDS Return is filed before the 30th of the month succeeding the quarter. For instance, the first quarter closes on 30th June, consequently the TDS Return should be submitted before 30th July.

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Interest on Non -Deduction of TDS

At the point when a person while making a payment for which he should have deducted TDS fails in deducting TDS or deducts an amount, not exactly the necessary amount then in such cases, the deductor is liable to pay an interest @ 1% per month or part of the month, till the date on which TDS is deducted. Consequently, a businessperson should be reasonable while making payment to parties and make sure that TDS is deducted.

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Interest on NON Payment of TDS

The TDS deducted by a person should be deposited within the seventh day of the following month. Any non-fulfillment or postponement in depositing the TDS is punishable under section 271 C or/and Section 276 B. The defaulter is further liable to pay interest on deferred payment at the rate of 1.5% per month or part thereof. There is no arrangement in law where the interest can be deferred; thus the assessee ought to be exceptionally cautious.

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The Consequence of Non - Compliance

The non-compliance of TDS provisions is a grave offence and is punishable under section 271 (C) of the Income Tax Act 1961, wherein the minimum penalty is 10,000 which can go up to Rs. 1,00,000/-. Further section 276B applies to all such cases where a willful default is established, in all those cases the punishment is 3 Years rigorous imprisonment which can go up to seven years.

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Other Consequence of Default on TDS

The expenses on which TDS was needed to be deducted will be disallowed as an expense under section 40(a) while computing the total taxable income. To comprehend it immediately we should take an illustration of business where the income is 10 lac and the expenses are also 10 lac, then effectively there will be zero income and hence, zero income tax. However, on the off chance that the TDS isn't deducted, the tax will be three lacs (30% of 10 lac)

The expenses on which TDS was required to be deducted shall be disallowed as an expense under section 40(a) while computing the total taxable income. To understand it quickly let’s take an example of business where the income is 10 lac and the expense is also 10 lac, then effectively there shall be zero income tax, However, if the TDS is not deducted then the tax shall be three lacs (30% of 10 lac).

TDS Rate Chart for The FY-2019-2020 (AY: 2020-21)

Note TDS deducted in a month is required to be paid before 7th day of next month. While making TDS mention correct section in the challan number 281. For TDS payment use separate challan while making payment for specific type (section). Interest on Late Payment is- 1.5% per month or part thereof, The penalty on Late filing of TDS Return is Rs. 200 per day, however it is limited to the TDS amount.

Due Date of Payment of TDS & FIling of TDS Return

Note TDS deducted in a month is required to be paid before 7th day of next month. While making TDS mention correct section in the challan number 281. For TDS payment use separate challan while making payment for specific type (section). Interest on Late Payment is- 1.5% per month or part thereof, The penalty on Late filing of TDS Return is Rs. 200 per day, however it is limited to the TDS amount.

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