What is TDS

Tax deducted at source is tax deducted by a person while making the payment to the recipient. TDS makes sure tax flows to the government as and when transactions happen.

TDS is applicable on the specified nature of the transaction i.e. Salary, interest, rent, professional fees, contract fees, Commission, dividend, etc. TDS never exempts a person from filing their Income tax return. Every person has to file the return income tax return if the income of that person exceeds the threshold limit as specified in law.

Why Tax Deduction

• It avoids tax evasion, the liability to pay the TDS is always on the payer instead of the receiver.
• The government gets the tax throughout the year as and when transactions happen and need not wait for a whole year.
• Taxpayers pay the tax gradually instead of making an impact on cash flow at one time.

How can Sterling Tax Partners help you with TDS Services?

• Applying the Correct TDS Rates: Tax regulations are constantly changing, and goods and services often shift between tax brackets. We pay close attention to the numbers to ensure accuracy.
• Timely Filing of E-TDS Returns: With numerous invoices and bills moving through an organization, businesses have plenty to manage. We take care of the dates and deadlines for you, ensuring timely filing.
• Generating Form 16/16A: These certifications serve both employees and businesses by maintaining accurate records. They give extensive TDS/TCS information for several transactions involving the deductor and deducted.
• Assistance with Filing Correction Returns: Errors and misjudgments may happen, but we ensure they don't affect your records. Our experienced accountants help you maintain clean, accurate books, addressing any corrections efficiently.

Applicability of TDS on Services

• TDS on Salary: TDS on salary is deducted by the employer at the applicable income tax rates based on the employee's income and declarations. This ensures compliance with tax laws.
• TDS on Premature Withdrawal of Provident Fund: TDS on services like provident fund withdrawal applies when the withdrawal is made before five years of continuous service. The rate is 10% if PAN is provided.
• TDS on Interest on Securities: TDS on interest on securities applies to income earned from debentures, bonds, or other listed securities. The deduction rate depends on the nature of the security.
• TDS on Dividends: Companies deduct TDS on dividends paid to shareholders if the amount exceeds ?5,000 in a financial year. The rate is typically 10%, ensuring smooth tax compliance.
• TDS on Interest (Other than Securities): TDS on services like bank interest is deducted by banks when the interest amount exceeds ?40,000 for non-senior citizens and ?50,000 for senior citizens.
• TDS on Winnings from Lottery or Crossword Puzzles: Any winnings from lotteries, crossword puzzles, or similar activities attract TDS at 30%. This applies to winnings exceeding ?10,000.
• TDS on Winnings from Racehorses: TDS on winnings from racehorses is deducted at a flat rate of 30%, irrespective of the amount, ensuring all such incomes are duly taxed.
• TDS on Insurance Commissions: Insurance companies deduct TDS on services like commissions paid to agents. The deduction is at 5% for amounts exceeding ?15,000 annually.
• TDS on Payment in Respect of Life Insurance Policy: TDS is applicable on payouts from life insurance policies if they do not qualify for exemption under Section 10(10D). The rate of deduction is 5%.
• TDS on Payments to Non-Resident Sportsmen or Sports Association: TDS is deducted on payments made to non-resident sportsmen or sports associations at 20%, ensuring compliance with international tax norms.
• TDS on Rent: TDS on rent is deducted at 10% for land/building and 2% for plant/machinery if the total annual rent exceeds ?2,40,000, as per tax regulations.
• TDS on Payment on Purchase of Immovable Property: TDS on services like property transactions applies at 1% on the total consideration exceeding ?50 lakh, ensuring transparency in real estate deals.
• TDS on Purchase of Goods Subject to Specified Conditions: TDS is deducted at 0.1% on the purchase of goods exceeding ?50 lakh in a financial year, applicable to specified taxpayers under Section 194Q.

Time of deduction of TDS

TDS is deducted at the time of payment or credit whichever is earlier.

Certain payments exempted from deduction of TDS
TDS is not required to be deducted while making the payment to the Bank

The amount of payment is below the threshold

• Statutory payment
• Payment made to entities registered under section 10 of the Income Tax Act and not required to file the return of income u/s 139 of the Income Tax Act.
• In the case of non-residents, income is deemed to accrue or arise outside India.

Consequence of non-deduction of TDS

Interest on non-deduction of TDS and non-payment of TDS

• 1% per month interest is applicable for non-deduction of TDS
• 1.5% per month interest is applicable for non-payment of TDS

Penalty

Penalty may be levied equal to the amount of tax.

Prosecution

If a person deducts tax at the source and is required to deposit it with the government but fails to do so, he may be punished with at least 3 months in prison, with a maximum penalty of 7 years.

TDS return

Anyone responsible for deducting TDS is required to file returns. This comprises firms, corporations, and individuals paying payments including salary, rent, and commissions.

Filing Frequency

Tax Deducted at Source returns are submitted quarterly. Here are the due dates:

• Q1 (April-June): July 31st
• Q2 (July-September): October 31st
• Q3 (October-December): January 31st
• Q4 (January-March): May 31st

Information Required for TDS Returns

Filing Tax Deducted at Source returns requires details such as:

• TAN (Tax Deduction and Collection Account Number)
• Amount of Tax Deducted at Source deducted
• Type of payment
• PAN (Permanent Account Number) of the deductee

How much is the Penalty for delaying the TDS return?

In case the assessee fails to file within this deadline of TDS return then they would be liable to pay ? 200 per day as a penalty U/S 234E, but the same would not be more than the amount of TDS payable.

Under U/S 271H, a penalty will be levied on the assessee up to ?1 lakh if the return is not filed on time or if the wrong information is given. The addition of this will also result in Section 234E penalty.

The penalty U/S 271H can be avoided in some conditions as follows:

• Deposit the tax deducted at the source to the central government.
• Pay late fees and interest if payable to the government.
• File the TDS return within one year from the due date.

Tax and Compliance Services in Gurgaon by Sterling Tax Partners

Sterling Tax Partners provides a wide range of tax and compliance services to help businesses remain compliant and develop efficiently. We provide the following services:

• GST Services - Ensuring that your firm follows GST requirements.
• International Taxation - The proper management of cross-border tax concerns.
• Company Registration - Helping you set up and manage your business.
• Direct Tax and Regulatory Services - Advancing income tax legislation and regulations.
• Transfer Pricing - Ensuring compliance in transactions involving connected entities.

Sterling Tax Partners, based in Gurgaon, provides reliable and professional TDS on services that are customized to your company's needs.

Sterling Tax Partners can ensure that you never miss a TDS reporting deadline. Allow us to submit your TDS file correctly and on schedule.