Tax Deducted at Source (TDS) is a form of direct tax that serves as a means for the Indian government to collect taxes during business transactions. TDS is deducted either at the time money is credited to the payee’s account or at the time of payment, whichever occurs earlier.
When paying salaries or conducting any business transactions, TDS must be deducted at a predetermined percentage. The deducted TDS amount must then be deposited with the Income Tax Department. The range for TDS deduction typically falls between 1% and 30%.
In addition to depositing the deducted amount with the government, the deductor is also required to file a TDS return. This is a quarterly statement submitted to the Income Tax Department of India. Timely submission of TDS returns is mandatory for deductors.
TDS returns are filed using four different forms:
- Form 24Q: This form is used for reporting TDS on salaries.
- Form 26Q: This form covers all TDS statements other than salaries.
- Form 27Q: This form is used for reporting TDS on additional income, such as interest, dividends, or any other amount payable to non-resident Indians (foreigners).
- Form 27EQ: This form is used for reporting Tax Collected at Source (TCS).
TDS deducted during a specific month must be paid on or before the 7th of the following month.
Filing TDS returns offers several advantages:
- Ease of Tax Payment: TDS return filing helps in distributing the tax payment burden over multiple transactions, reducing the requirement to pay a large sum of tax at once. This facilitates easier tax compliance for businesses and individuals.
- Smooth Tax Collection: TDS return filing ensures a regular and steady flow of tax revenue to the government. By deducting and remitting TDS amounts periodically, it enables the government to collect taxes in a more organized and consistent manner.
- Contribution to Welfare: The taxes collected through TDS are utilized by the government for various welfare initiatives and public services. By filing TDS returns, individuals and businesses contribute to the overall development and betterment of society.
- Compliance with Legal Obligations: TDS return filing is a mandatory requirement imposed by the income tax authorities. By fulfilling this obligation on time, taxpayers ensure compliance with the tax laws and avoid penalties or legal consequences associated with non-compliance.
- Transparent Financial Reporting: TDS return filing involves reporting and documenting financial transactions, providing a transparent record of income and tax deductions. This promotes accountability and enhances financial transparency for both taxpayers and the tax authorities.
Overall, TDS return filing brings benefits such as convenient tax payment, steady revenue for the government, social welfare contributions, compliance with legal obligations, and transparent financial reporting.
Here is a checklist of requirements for filing TDS returns:
- TAN Number: Obtain and verify the Tax Deduction and Collection Account Number (TAN).
- Deductee PAN Numbers: Collect and ensure the accuracy of the Permanent Account Numbers (PAN) of the deductees or recipients.
- Last TDS Filing Details: Note down the details of the previous TDS return filed, if applicable.
- Filing Period: Determine the specific period (quarterly or annually) for which the TDS returns need to be filed.
- Date of Incorporation: Provide the date of incorporation of the entity.
- Transaction Details: Gather information on the number of transactions where TDS has been deducted, including dates, amounts, nature of payment, and deductee PAN.
- Entity Name: Provide the name of the deducting entity or organization.
By following this simplified checklist, you can ensure a smooth TDS return filing process.
Step-by-step process for filing TDS returns:
- Share Documents: Provide the necessary documents and invoices for verification with the Books of Account.
- Calculate TDS: Determine the TDS amount to be deducted in accordance with the Income Tax Act, 1961.
- Make TDS Payments: Pay the TDS amount under the respective section heads for the month.
- Verify and Prepare TDS Returns: Review and ensure the accuracy of the TDS calculations and details. Prepare the TDS returns accordingly.
- File Returns: Submit the TDS returns to the Income Tax Department within the specified timeframe.
- Share Deliverables: Share the relevant documents and acknowledgments as required for record-keeping and compliance purposes.
By following these simplified steps, you can effectively complete the process of TDS return filing.
Key deliverables for TDS return filing:
- Payment Challan Copies: Provide copies of the payment challans as proof of TDS payment made under the respective section heads.
- Return Acknowledgement Copies: Share copies of the return acknowledgements received from the Income Tax Department after filing the TDS returns.
These deliverables serve as important documentation and evidence of compliance with TDS requirements.
What do you want to know?
Tax Deduction Account Number or Tax Collection Account Number is a 10 -digit alpha-numeric number issued by the Income-tax Department. TAN is to be obtained by all persons who are responsible for deducting tax at source (TDS) or who are required to collect tax at source (TCS).
Tax deducted or collected at source shall be deposited to the credit of the Central Government by following modes:
- 1) Electronic mode: E-Payment is mandatory for
- a) All corporate assesses; and
- b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
- 2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch
You will need to file your income tax return in the appropriate ITR applicable for you to get a refund of TDS in case there is scope.
The Act clearly says that a return for TDS has to be filed for deductions. If there is no deduction, then TDS return need not be filed and no one should compel you to file it.
No, TDS certificate in Form 16 is required to be issued to the employee only when TDS has been deducted. In case no TDS has been deducted by the employer he may not issue you a Form 16. Any person responsible for paying salaries is required to deduct tax at source on the amount payable.