TDS or Tax Deducted at Source is the tax that is deducted at the source of income of a person. During the union budget every year, the revised rates are announced. There are a number of rates for different nature of income falling under different heads. This could vary from 1%-30%.
The main aim of TDS is to deduct the income at the very source and remit the deducted amount to the central government’s account. Furthermore, the person from whose account this amount is deducted is eligible to get a credit of such amount through Form 26AS or TDS certificate issued by the deductor.
TDS is exempted in few cases. For instance, if you make the payment to the RBI or Central government. Along with this, TDS is exempted from the interest paid to the following
Income Tax act 1961 describes TDS as a spot tax which is deducted from the actual source of income.
It is applicable on the income received from financial products like interest received on fixed deposits, incentives from the employer, commission’s payments, dividends on bonds, sale/purchase or rent of any immovable property and money earned as lottery or awards.
The rates at which TDS is charged is declared under various provisions of the Income Tax Act or the first schedule of the Finance Act. If this payment is to non resident citizens, then the provisions of withholding tax rates under Double Taxation Avoidance agreement shall also be considered.
Tax deducted at source is supposed to be transferred to credit of Central government account via the following ways:
Electronic mode: E-payment is necessary for
Physical mode: A person can file TDS by launching a challan 281 in the bank.
TDS charged rates on salary
Under section 192, TDS is charged on the average income from the employee’s account. If the income of the employee doesn’t exceed INR 2,50,000 then there is no TDS. But if the income exceeds this limit, then the TDS is charged 20%, if the person has no PAN card.
TDS charged on Insurance commission
The exemption limit of Insurance commission is Rs.15,000. Earlier it was Rs.20,000. The TDS % is 5 but 20% when the PAN card is not furnished. The TDS rates for other commissions include:
TDS charged on services
According to section 194J, a person is liable to pay the TDS in the following payments
If the person possess PAN card, he/she is supposed to pay 10% but when PAN card is not furnished, then higher rates are charged as follows
TDS charged on Fixed Deposits
TDS charged on fixed deposits is exempted till INR 10,000 per annum i.e. until the fixed deposit year exceeds Rs. 10,000, no TDS is charged. When this limit is exceeded, the TDS is charged at the rate 10% otherwise 20% (when there is no PAN card). For senior citizens (above 60 years old) this limit is Rs.50,000 per year.
TDS rates charged on contracts
Under section 194C, the payment made to complete the contract for the following work is charged.
The rate under section 194C is 1% for individual or HUF, but otherwise it is 2%. In case of absence of PAN card it is 20%.
TDS rates charged on interests
Section 194A communicates the provision of TDS charged on interest other than securities. TDS will be charged if the interest paid by bank exceeds Rs.10,000 and if the interest paid by other sources exceed Rs.5,000.
Under this section, TDS is charged at the rate of 10% (if the person has PAN card) and 20% (if he/she doesn’t)
Exemptions of section 194A:
This article is written by Anubhav, who is a content writer at LegalRaasta.
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