The chargeability of tax on the total income of a person on an annual basis is provided by the Indian Income Tax Act. Section 192 is applicable for TDS on Salaries and the remaining Sections 193, and Section 194 are applicable for TDS other than Salary. The quantum of tax is determined as per the statutory provisions that are payable as the following:
- Advance Tax.
- Self Assessment Tax.
- Tax Deducted at Source (TDS).
- Tax Collected at Source.
- Tax on Regular Assessment.
Tax Deducted at Source (TDS) is an indirect method of Collecting tax which aims at the collection of revenue at the very source of Income. TDS combines the concept of ‘pay as you earn’ and ‘collect as it is being earned.’ Its importance to the govt lies in the fact that it brings forward the collection of tax, ensures a regular source of revenue, provides for a wider base of tax and greater reach.
At the same time, it provides a simple and convenient mode of payment, and also it distributes the incidence of the tax to the taxpayer. TDS concept requires the responsibility of the person on whom it has been cast, on whom to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The sum deducted is to be deposited to the credit of Central Govt. The recipient on whom the Income Tax is deducted at source gets the credit of the amount deducted in his personal assessment will receive a certificate issued by the deductor.
- Every person who is earning income is chargeable to tax under the head “salary” from the Section 192 of the I.T.Act, 1961 and shall deduct income tax on the estimated income of the assessee.
- The Tax required is to be calculated at the average rate of IT as computed by the rates in force. This deduction should be made at the time of actual payment.
- During the relevant financial year if the salary income of an individual does not exceed the maximum amount then he is not chargeable to tax and no tax is required to be deducted at source.
- The deducted tax must be deposited in the government account, and then they will issue a certificate to the employee.
- The employee should furnish this certificate with his IT return and after he gets the credit of the TDS in his personal Income Tax assessment.
- At last, the deductor/ employer is required to file the quarterly statements of TDS mentioned in Form No.24Q to the IT Department.
TDS other than Salary
These are the Sections that are taken into consideration while Deduction of Tax from Source other than salary.
Section 193: Deduction of Tax at Source that is TDS from interest on securities. For Example like
- Gold Bonds.
- National Development Bonds.
- Any Security of Central Government/ State Government.
- Securities of LIC.
Section 194: Deduction of tax at source from dividends.
No TDS will be made if the following conditions are satisfied.
- A company pays the Dividend by an amount payee cheque.
- An Amount of dividend distributed during the financial year does not exceed Rs. 2500/-.
Section 194A: TDS from interest another than interest on Securities.
Section 194B: TDS from winning from lotteries or crossword puzzles ( if more than Rs. 10,000/- than TDS will be deducted).
Section 194BB: TDS from winning from Horse Race if more than Rs. 5,000/- then TDS will be applicable.
Section 194C: TDS from payment to Contractors or Sub-Contractors. TDS is to be made where the amount paid to Contractor exceeds Rs. 30,000/- in a single payment or 75,000/- in aggregate during the financial year.
TDS Rate on Salary:
- If the recipient is individual/HUF, the rate is 1%.
- If any other person the rate is 2%.
Section 194D: TDS from insurance commission.
TDS Rate on Salary:
- TDS Rate is 10%.
- If it is more Rs. 20,000/- then TDS is applicable.
Section 194G: TDS from the sale of Lottery tickets.
TDS Rate on Salary:
- TDS rate is 10%.
- TDS is applicable if it the lottery ticket costs more than Rs. 1,000/-.
Section 194H: TDS from Commission or Brokerage. Here TDS is applicable for more than Rs. 5,000/-.
Section 194I: TDS from income by the way of Rent. Tax is deducted if the amount of Rent exceeds Rs. 1,80,000/-.
- Use of Machinery plant and equipment – 2%.
- Use of land, building, furniture – 10%.
Section 194J: TDS on fees for professional or Technical services.
- TDS Rate is 10%.
- TDS is to be made if the amount is more than Rs. 30,000/-.
Section 194LA: TDS from compensation payable on compulsory acquisition of immovable property.
- TDS Rate is 10%.
- TDS is to be made if the amount of compensation during the financial year exceeds 1 Lakh.
Who is to deduct Tax?
Every person is responsible for making payment of nature covered by TDS provisions of Income Tax shall be responsible for deducting tax.
Thus, the law necessarily requires the deduction of tax when
- The employer makes payment to the employee.
- The payment is in the nature of salary.
- The income under the head salaries is above the maximum amount then not chargeable to tax.
These are the persons to who the tax is mainly deducted under the I.T.Act Section 2(35):
- Principal Officer of a company for TDS purpose in case of private employment or an employee making payment on behalf of the employer.
- In the case of Government Officer designated as Drawing and Disbursing Officer (DDO).
- In the case of Interest on securities other than payments made by or on behalf of the Central Government or State Government, it is a local authority, Company or Corporation including the Principal Officer thereof.
How to Calculate TDS on Salary?
TDS Calculation on salary can be made in these different ways.
- Auto Calculation for TDS Salaries, Interest, Commission, Contract Payments, Rent, Professional Fees and all other TDS Payments.
- Generate Certificates of Forms 16, 16A, 12B, and 27D.
- Generate and auto-filled challan 281.
- Quarterly e-TDS statement for form no. 24Q, 26Q, and 27Q.
- Create Revised Return.
- Validates e-TDS file automatically with NSDL utility.
- Generates worksheets of TDS calculation, a projection of TDS for Employees, Monthly TSD to be deducted, etc.
- Data Import from Tally Accounting Software and Excel.
- Backup Restore of Data.
- Used for Limited no.of Companies.
TDS on Transfer/Sale of Immovable Property
Section 194IA: Payment on Transfer of certain immovable properties.
- TDS Rate is 1%.
- TDS is to be made where consideration is paid more than 50 Lakhs.
Here the purchaser is required to furnish a certificate of deduction of tax at source in Form No.16B to the seller within 15 days from the due date for providing the challan with the statement in Form No.26QB.
Procedure to download Form No.16B
- Log on to the website: http://contents.tdscpc.gov.in/en/deductor-home.html
- If you are New User, then you have to enter your PAN details, DOB, Last Name, Middle Name & First Name.
- After filling all your details, a new account will be created.
- User ID would be your PAN and password can be of your choice.
- An activation link is generated to your Email ID, and an SMS will be sent to your mobile.
- In your Account, you can see 26AS statement and download Form 16B in case you are the purchase/sale of immovable Properties.
- To download the form 16B click on request for form 16B then check your details and submit your request.
- Then you can see a download menu under the page and click on download button and then save the file.
Note: The Form 16B is available for download after 2-3 working days from the date of deposing TDS.
Tax Deduction Account Number – TAN
What is TAN?
Tax Collection Account Number or Tax Deduction Account Number is a 10 digit alphanumeric number issued by IT Department. Tax Deduction Account Number is required by all the persons who are responsible for deducting TDS or TCS (Tax Collected at Source).
Who are Liable to take TAN?
As per the discussions above every person liable to collect tax at source or deduct tax at source is required to obtain TAN. Assessee can also use PAN in place of TAN for deduction of tax under Section 194-IA.
Instructions to Fill TAN Form – https://tin.tin.nsdl.com/tan/InstructionsTanChangeRequest.html
Who must deduct tax at source?
Other than an Individual or HUF every person who is responsible for paying interest that is interest to a resident other than on securities is responsible for deducting tax at source under section 194A.
Q: Bhavani and Co. is a partnership firm engaged in a business of selling Soft Drinks. The total turnover of the company during the financial year 2014-2015 amounted to Rs. 84,00,000. On 2-4-2015, the firm took a loan from a friend of one of its partners who is a resident of Delhi. Interest on loan for the financial year 2015-2016 amounted to Rs. 25,000/-. Should the firm have to deduct tax from the interest of Rs 25,000/-?
A: Under Section 194A every person other than an HUF or an Individual has to deduct tax from the interest. Irrespective of its obligation to get its accounts audited under Section 44AB during the preceding financial year. So, the firm has to deduct tax from interest paid on it.