Tax Deducted at Source (Part 1) - Deduction and Deposit

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make a payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source (TDS) would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.

Objective -
  • TDS system provides information about taxpayers and helps tax administration.
  • It helps in recovering tax from the assessees in the year in which the income has been earned.
  • Other objectives of TDS are having a regular cash flow; preventing evasion of tax and minimizing collection expenses.

Rates of TDS -
  • TDS shall be deducted at the rates specified in the relevant provisions of the Act or the First Schedule to the Finance Act.
  • However, in case of payment to non-resident persons, the withholding tax rates specified under the Double Taxation Avoidance Agreements shall also be considered.

How to deposit Tax Deducted at source?

The person making the payment is liable for the TDS deduction. Tax deducted or collected at source shall be deposited to the credit of the Central Government by the following modes:

1) Electronic mode: E-Payment is mandatory for
  • All corporate assesses; and
  • All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
2) Physical Mode: By furnishing Challan 281 in the authorized bank branch.

Note - Where tax is deducted by the government office, it can remit the tax to the Central Government without producing income-tax challan. In such case, the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by whatever name called to whom the deductor reports the tax so deducted and who is responsible for crediting such sum to the credit of the Central Government, shall submit a statement in Form No.24G to NSDL with a prescribed time-limit (i.e., same day).

Step-1: To pay taxes online, login to https://www.protean-tinpan.com > Services > e-payment: Pay Taxes Online or Click Here.

Step-2: Select the relevant challan i.e. ITNS 280, ITNS 281, ITNS 282, ITNS 283, ITNS 284 or Form 26 QB demand payment (only for TDS on sale of property) as applicable.

Step-3: Enter PAN / TAN (as applicable) and other mandatory challan details like the accounting head under which payment is made, the address of the taxpayer and the bank through which payment is to be made etc.

Step-4: On submission of data entered, a confirmation screen will be displayed. If PAN / TAN is valid as per the ITD PAN / TAN master, then the full name of the taxpayer as per the master will be displayed on the confirmation screen.

Step-5: On confirmation of the data so entered, the taxpayer will be directed to the net-banking site of the bank.

Step-6: The taxpayer has to login to the net-banking site with the user id/password provided by the bank for net-banking purposes and enter payment details at the bank site.

Step-7: On successful payment, a challan counterfoil will be displayed containing CIN, payment details and bank name through which the e-payment has been made. This counterfoil is proof of payment being made.

We can also make payment through efiling portal - Home > e-Pay Tax or Click here

Point of Deduction -
  • In case of Salary: At the time of payment
  • In other cases: When a taxpayer gets payment due or receives actual payment (whichever is earlier).
The deductor may be liable for the following penalties and Interest-
  • Interest for late deduction of TDS is applicable at the rate of 1% per month or part thereof. It is applicable from the date on which tax is deductible to the date of actual deduction.
  • Interest for late deposit of TDS after deduction is applicable at the rate of 1.5% per month or part thereof. It is applicable from the date on which TDS was deducted till the actual date of deposit.
  • If any person fails to deduct or deposit TDS within the due dates mentioned, then the penalty under section 271C is leviable to the extent of an amount equal to TDS not deducted/ not paid.
Due date for deducting TDS -
  • Date of credit of specified income to the account of the payee; or
  • Date of payment of specified income through cash or draft or cheque or any other payment mode (whichever is earlier).
Due date for depositing TDS -
  • For income credited or paid in the months of April to February - 7th of the following month in which TDS is deducted.
  • For income credited or paid in the month of March - 30th April.


--
Hemanth Uppala
Chartered Accountant
Content Writer | TAX DESTINATION

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