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Tax Deducted at Source (TDS)
TDS (Tax Deducted at Source) is a system where tax is deducted at the time of making a payment. The payer deducts the tax and directly deposits it with the Income Tax Department. This system makes tax collection more efficient and ensures that taxes are collected in advance.
Purpose of TDS
The primary objective of TDS is to collect tax in advance and ensure that individuals do not evade tax obligations. It simplifies the process of tax collection and helps taxpayers by spreading their tax liability over the financial year instead of paying a lump sum at the end.
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Changes from 25-26
| Transaction Type | Current Threshold | Proposed Threshold |
|---|---|---|
| Rent | ₹2.4 lakh | ₹6 lakh |
| Interest other than interest on securities | (i) ₹50,000 (senior citizen) (ii) ₹40,000 (others when payer is bank, cooperative society, post office) (iii) ₹5,000 (other cases) |
(i) ₹1 lakh (senior citizen) (ii) ₹50,000 (others when payer is bank, cooperative society, post office) (iii) ₹10,000 (other cases) |
| Interest on securities | – | ₹10,000 |
| Remittance under LRS for education financed through loan | 0.5% over ₹7 lakh | – |
| Remittance under LRS and overseas tour program package | ₹7 lakh | ₹10 lakh |
| Dividend for individual shareholder | ₹5,000 | ₹10,000 |
| Income from mutual fund units of specified company/undertaking | ₹5,000 | ₹10,000 |
| Winning prize from lottery, crossword puzzle, horse race | Over ₹10,000 for combined income in a financial year | ₹10,000 for single transaction |
| Fee for professional/technical services | ₹30,000 | ₹50,000 |
| Income by way of enhanced compensation | ₹2.5 lakh | ₹5 lakh |
Salary
The government has prescribed specific rates at which TDS must be deducted for different types of income.
- Interest on Securities
- Rent
- Commission and Brokerage
Professional Fees
The government has prescribed specific rates at which TDS must be deducted for different types of income.
- Contract Payments
- Dividends
- Lottery and Prize Money
Who is Responsible for Deducting TDS?
Any individual or entity making specified payments is responsible for deducting TDS before making the payment to the recipient. These include employers, banks, businesses, and contractors. The deducted tax must be deposited with the government within the due date specified under the law.
Interest and Penalties for Non-Filing and Late Payment of TDS
Late Deposit of TDS (Section 201(1A))
- Interest/Penalty: Interest on Late Payment of TDS
- Applicable From: From the date of deduction until the date of deposit
- Details: Interest at 1.5% per month or part of the month on the outstanding amount of TDS.
Late Filing of TDS Return
- Interest/Penalty: Penalty for Late Filing
- Applicable From: From the due date of filing the return until the actual filing
- Details: ₹200 per day until the return is filed, but the penalty will not exceed the total TDS amount payable.
Non-filing of TDS Return
- Interest/Penalty: Penalty for Non-filing of TDS Return
- Applicable From: From the due date of filing the return
- Details: Penalty ranging from ₹10,000 to ₹1,00,000 for non-filing of TDS returns.
Non-Deduction of TDS (Section 40(a)(i))
- Interest/Penalty: Penalty for Non-deduction of TDS
- Applicable From: From the date the TDS should have been deducted
- Details: The expense will be disallowed for tax purposes if TDS is not deducted.
Late Payment of TDS (Non-payment)
- Interest/Penalty: Interest on Late Payment
- Applicable From: From the due date of payment until the actual payment
- Details: 1.5% per month of the amount of TDS that is not paid on time.
Interest for Late Payment of TDS:
- • Rate: 1.5% per month (or part of the month).
- • Period: From the date of deduction of tax until the date of payment to the government.
- • Example: If TDS is due for deduction on 15th June and the payment is made on 10th September, interest will be calculated for 3 months (July, August, and September).
Penalty for Late Filing of TDS Return (Form 24Q, 26Q, etc.)
- • Rate: ₹200 per day of delay.
- • Maximum Penalty: The penalty cannot exceed the total TDS amount that should have been deposited.
- • Maximum Penalty: The penalty cannot exceed the total TDS amount that should have been deposited.
Penalty for Non-Filing of TDS Return:
- • Penalty Range: ₹10,000 to ₹1,00,000.
- • Applicable: If the TDS return is not filed at all by the due date.
- • Example: If you fail to file the TDS return entirely, the penalty could range between ₹10,000 to ₹1,00,000 depending on the situation.
TDS Return and Payment Deadlines
| Event | Due Date |
|---|---|
| Payment of TDS deducted during the month | 7th of the following month |
| Quarterly TDS return filing (Form 24Q, 26Q, etc.) | 15th of the month following the quarter |
| Annual TDS return filing (for FY 2024-25) | 30th June, 2025 |
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