All About Tax Deducted at Source – TDS Meaning, Filing, Return & Due Dates

TDS stands for Tax Deducted at Source. It is a system under the Income Tax Act where tax is deducted from certain payments like salary, rent, interest, and professional fees at the time they are made. TDS ensures timely tax collection and helps the government track taxable income throughout the financial year. The applicability of TDS varies based on the nature of the transaction and the type of taxpayer involved.

What is TDS? – TDS Meaning and Full Form

TDS stands for Tax Deducted at Source. It is a system under the Income Tax Act where tax is deducted by the person making specified payments such as salary, rent, interest, commission, or professional fees. The person deducting tax is known as the deductor, and the person receiving the payment is the deductee.

The deducted amount is deposited with the Income Tax Department against the deductee’s PAN. While the deductee receives the net payment (after TDS), the gross income is used to calculate total tax liability. The TDS deducted is credited against the final tax payable. If the total TDS is more than the actual tax liability, the excess is refunded after filing the income tax return.

Example of TDS

Shine Pvt. Ltd makes a payment for office rent of Rs 80,000 per month to the owner of the property. TDS is required to be deducted at 10% under Section 194I of the Income Tax Act, 1961. Shine Pvt ltd must deduct TDS of Rs 8,000 (i.e., Rs 80,000*10%) and pay the balance of Rs 72,000 to the owner of the property. Thus, the recipient of income i.e. the owner of the property in the above case receives the net amount of Rs 72,000 after deduction of tax at the source. He will add the gross amount i.e. Rs 80,000 to his income and can take credit of the amount already deducted i.e. Rs 8,000 by Shine Pvt. Ltd against his final tax liability.

When Should TDS be Deducted and by Whom?

Any person making specified payments mentioned under the Income Tax Act is required to deduct TDS at the time of making such payments. But no TDS has to be deducted if the person making the payment is an individual or HUF whose sales from business or profession, is not exceeding Rs.1 crore or Rs.50 lakhs, respectively.

However, if payment is towards rent, brokerage, commission etc., made by an individual or HUF exceeding specified limits mentioned in the Act, TDS will have to be deducted by the individual or HUF at lower rates as applicable even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS need not apply for TAN. 

Employers deduct TDS at applicable income tax slab rates. Banks deduct TDS @10% or they may deduct @20% if they do not have your PAN information. It is also to be noted that, TDS will have to be deducted at a higher rate specified when the deductee does not furnish his PAN, and credit against such deduction will also not be available. Hence, it is advisable to furnish PAN to the deductor.

For most payments rates of TDS are set in the Income Tax Act and TDS is deducted by the payer on basis of these specified rates. If your total taxable income is below the taxable limit – you do not have to pay any tax and no TDS should be deducted from your income.

Similarly, you can submit Form 15G and Form 15H to the bank if your total income is below the taxable limit so that they don’t deduct TDS on your interest income. If the TDS has already been deducted and your total income is below the taxable limit then you can file a return and claim a refund of this TDS.

What is the Due Date for Depositing the TDS to the Government?

TDS must be deposited to the government on or before the 7th of the following month in which the tax is deducted.

• For example, TDS deducted in June must be deposited by 7th July.
• TDS deducted in March, however, can be deposited up to 31st May.
• In the case of TDS on purchase of property (Section 194-IA), the due date is 30 days from the end of the month in which TDS is deducted.

Missing the due date may attract interest and penalties under the Income Tax Act.

The TDS statements have to be furnished on a quarterly basis as follows:

How to Deposit TDS?

TDS has to be deposited via the Income Tax Portal based on the TAN login. Direct tax payments facility has been migrated from OLTAS 'e-payment: Pay Taxes Online' to e-Pay Tax facility of e-Filing portal. You have to click on 'e-Pay Tax' option of Income Tax Department on https://www.incometax.gov.in/ to make direct tax payments including TDS.

How and When to file TDS returns?

Filing Tax Deducted at Source returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. Also, different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows: 

What is a TDS Certificate?

Form 16, Form 16A, Form 16B and Form 16C  are all TDS certificates. TDS certificates have to be issued by a person deducting TDS to the assessee from whose income TDS was deducted while making payment. For instance, banks issue Form 16A to the depositor when TDS is deducted on interest from fixed deposits. Form 16 is issued by the employer to the employee.

TDS Credits in Form 26AS

TDS deductions are directly linked to the PAN of both the deductor and the deductee. If TDS has been deducted from your income, you must refer to Form 26AS, a consolidated tax statement available to all PAN holders on the income tax portal.

Form 26AS provides a complete summary of all TDS deducted and deposited against your PAN, including payments like salary, interest, commission, etc. It also reflects advance tax or self-assessment tax paid by you. 

Since TDS credit can only be claimed for amounts that appear in Form 26AS, it is crucial to ensure your PAN is correctly quoted wherever TDS is applicable. Regularly checking your 26AS helps you verify whether the deductor has accurately deposited the TDS.

Failing to reconcile TDS credits may lead to incorrect claims and notices from the Income Tax Department. This is especially important for businesses where multiple clients or vendors deduct TDS.

Follow the below guide for uploading TDS statements on the Income Tax Department website:

1. Visit Income Tax website. Login with your TAN.
2. Select e-File > Income Tax Forms > File Income Tax Forms on the dashboard
3. Select the relevant form and fill in the details
4. Validate the return using either DSC or EVC.

Penalty for Late Filing of TDS Returns

A late fee of ₹200 per day is levied under Section 234E for the delayed submission of TDS/TCS returns to the Income Tax Department (ITD). This means that the fee accumulates for each day the return is late, up to a maximum limit equal to the total TDS amount. It's important to pay this late fee before submitting the TDS/TCS return.

Types of TDS

Here are some of the income sources that qualify for TDS:

• Salary
• Payments to Contractor 
• Commission payments
• Sale of House
• Insurance Commission
• Interest on securities
• Interest other than interest on securities
• Rent Payment 
• Professional fees
• Online Gaming
• Winning from games like a lottery, betting, gambling, crossword puzzle, card, etc.

SMS Alerts for Higher Transparency

The income tax department has been sending SMS to taxpayers from VK-ITDEFL that mentions the amount of TDS against the taxpayer's PAN. The SMS alert will let you know the TDS credited to your income from salary, interest, etc., every quarter. The amount of TDS would be accumulated in your Form 26AS for the respective financial year.

This initiative was implemented by the Finance Ministry to increase transparency and reduce the cases of TDS mismatches at the time of income tax filing. Taxpayers can cross-check the information provided in the SMS with the information on the payslips to make sure that there is no mismatch. TDS mismatch could be a common reason for incorrect income tax return filing.

Tax Liability in a Case Where TDS is Already Deducted from Income

On salary, TDS is deducted based on the income tax slab applicable to you. In the case of other income types, the TDS rates are fixed and vary between 10% and 20%. The tax rates are not based on your total income. Hence, you would suffer a TDS on your receipts in certain cases. Separately, you would be required to calculate your annual income by aggregating income from all sources.

Your actual tax liability would be calculated on the total taxable income. From the taxes calculated, you can claim credit for TDS deducted on various receipts. Reduce the TDS from your actual tax liability to know the balance to be paid to the income tax department. You may have a refund too. In both cases, you have to file an income tax return and pay the tax due or claim a refund.

Difference Between TDS and Income Tax

The following table explains the difference between TDS and Income Tax:

Other TDS Articles: 
1. What is Tax Deducted at Source 
2. TDS Rate Chart  
3. How to claim TDS Refund 
4. How to Make TDS Payment Online 
5. TDS Interest Calculator 
6. Section 194LBC of Income Tax Act 
7. Tax Deductions on Tips Given to Hotel Employees