TDS Returns

Normally, the Total Income of an assessee for a Financial Year is taxable in the relevant Assessment Year ( A year next to the corresponding FY). For example, the total income for the P.Y.2017-18 is taxable in the A.Y.2018-19. However, the income-tax on such income is recovered from the assessee in the previous year i.e in the FY itself, by way of –

  • Tax deduction at source (TDS)
  • Tax collection at source (TCS)
  • Payment of advance tax

These taxes are paid in advance out of the Total Tax due for the assessee, for a corresponding Financial Year. The assessee, while filing his return of income, has to pay self-assessment tax (Final Income Tax) under section 140A, if tax is due on the total income as per his Return of Income filed in the relevant Assessment Year (AY) after adjusting, TDS, TCS and advance tax already paid by him during the Financial Year itself.

What is TDS?

TDS means TAX DEDUCTED AT SOURCE. As the name suggests, it is the Income Tax Paid by way of a Deduction from the income received by the Assessee. The person who is liable to Deduct Tax is called Deductor, who will be the person paying such payment. The person for whom the Income Tax is Deducted and paid is called the Deductee, who will be the person receiving such Income. Obviously, the Income will be subject to Income Tax, the moment it is paid by the Deductor to Deductee i.e AT SOURCE ITSELF. It cannot be deferred till the time of Filing Return by the person receiving such income.

Who should Deduct TDS ?

The liability to deduct Tax is on the person who is making the payment i.e THE DEDUCTOR. So The Deductor will be Deducting TDS for the payment made to the Person, i.e THE DEDUCTEE. By this way, The Deductee will receive only balance payment after Deduction Of Income Tax on such payment. Naturally, such Deducted Income Tax will be remitted to the Income Tax Department by the Deductor. As the Deductor will pay it under the Deductee’s PAN, the Deductee can take credit of the TDS paid and set it off agsinst the Income Tax Liability at the time of filing his Return.

Is it mandatory to Deduct TDS ?

The Income Tax Act requires the Deductor, who will be Companies, certain class of Individuals and Firms to Deduct TDS at the time of making Payment. So, it is a statutory duty for the Deductor to Deduct Income Tax while making payments.

Class of Individuals and Firms: In case of Business Assessees, he is reqired to Deduct TDS in the current FY if his Turnover in the peceeding FY exceeds Rs. 1 crore. In case of professional Assessees, he is required to deduct TDS in the current Financial Year, if his Turnover in the preceeding FY exceeds Rs. 50 Lakhs.

Do all payments attract TDS?

TDS is required to be deducted on payments made only if it exceeds the thershold limits specified under the Income Tax Act for various kinds of payments. Therefore a Company or specified class of Individulas and Firms are required to Deduct TDS only if :

  • Such Payment attracts TDS as per the Income Tax Act and
  • Such Payment exceeds the Thershold Limit prescribed under the Income Tax Act

Payments Attracting TDS:

1. Salary paid by Employer to Employees if the Total Income (not salary alone) of the Employees exceeds the Basic Exemption Limit provided in the Act.

2. Payments made by companies and certain class of Individuals and Firms:

  • Contract Payments
  • Commission
  • Interest
  • Renatal Payments
  • Again the above payments attract TDS only if they exceed the Thershold Limit under the Income Tax Act.

What is a TDS Return?

As discussed earlier, TDS deducted by the deductor has to be paid to the credit of Central Government within the due dates. As per Income Tax Act, the due date for paying the TDS to the account of Central Government is 7th of the following month in which the Deduction is made. In case of the month of March or the quarter ending March as the case may be, the due date is 30th April and not 7th April.

A TDS Return is a decleration given by the Deductor to the Central Government of the Total Payments attrcting TDS made by him during the relevant quarter and about the details of TDS deducted and depositted by him during the Quarter.

Due Date for filing TDS Returns:

The due date of filing TDS Return is the last date of the following month, of the quarter for which the TDS Return is filed.

Non-Compliance with TDS Deduction and Return Filings:

In case a person fails to deduct or pay TDS, then he will be deemed as an “Assessee in default” as per the Income Tax Act. Also an Assessee in Default is required to pay:

*Interest @ 1% for every month or part of the month on the amount of such tax, from the date on which such tax was deductible to the date on which such tax was actually deducted and

*Interest @1.5% for every month or part of the month from the date on which tax was deducted to the date on which such tax is actually paid.

Note: The above interest has to be filed before filing TDS Return.

Penalty:

As per Section 234E of the Income Tax Act,fine of Rs. 200 per day will be levied from the date of default of filing the TDS return to the date of actual filing of TDS return. However it cannot be more than the TDS liabilty payable by the Deductor.

Also, as per Section 271 H, Assessing Officer (AO) may direct the deductor who fails to file the TDS Returns within due date, to pay a penalty of minimum Rs. 10000/- which may even extend to Rs. 100000/-

Documents Required to file TDS Returns:

  • Bank Statements
  • Contract Agreements
  • Payroll details and Income decleration from employees
  • Financials of the person

Therefore it is advisable to seek the service of FIRSTMAN, who have a network of professionals who are well versed in Income Tax Law and will guide you to comply with provisions of Income Tax Law at minimum cost, with full savings in non comppliance costs.

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