Read this blog to learn about the different types of TDS deductions as employed by the government.
The Central Board of Direct Taxes (CBDT) is responsible for administering the rules and regulations surrounding tax deductions at the source (TDS) as outlined in the Income Tax Act, 1961.
The ‘Deductor’ is the individual obligated to make the deduction, and the ‘Deductee’ is the person from whom the tax is withheld. Deductor will withhold tax at the payment time (if the amount is more than the threshold) and remit to the government on the deductee’s behalf per the TDS method. Deductor must pay the tax withheld at origin to the state before the due date. After the deductor files tax returns, the deductee receives a TDS certificate.
When And By Whom Should Tax Withholding Be Taken?
When making certain payments outlined in the Income Tax Act, every payer must withhold tax at the time of payment. But if the payer is a non-corporate entity, such as an individual or a person belonging to HUF (Hindu Undivided Family), no TDS is needed.
However, if the monthly rent paid by a person or HUF is more than ₹50,000, then TDS of 5% must be withheld from the payment, regardless of whether or not the person or HUF is subject to a tax audit. Individuals and HUFs subject to TDS deductions of 5% are also exempt from submitting a TAN application. The amount of TDS deducted by your employer is based on the income tax bracket in which you fall. The rate of tax deduction at the source for banks is 10%. When they do not possess the PAN information, they may deduct 20%.
TDS rates for most payments are established there in an income tax statute, and the payer deducts TDS based on these rates. When an employee’s total taxable income falls below the taxable limit and submits investment evidence (for claiming deductions), the employee is exempt from paying taxes. It means that you should not have any tax withheld from your pay.
If the total income is less than the taxable limit, you may avoid TDS on interest income by providing the bank with Forms 15G and 15H. Conversely, suppose your employer and bank already have deducted TDS from your pay, and you have documentation that your income exceeds the taxable limit. In that case, you may file a return to get the money back—information on all types of specified payments subject to TDS deduction and the applicable TDS rate.
Types of TDS
Some examples of taxable income are given below:
- Coverage amount for Term Insurance
- Bank payments to contractors in the form of interest, commission, or brokerage fees
- Payment for the purchase of real estate
- Money earned on commission
- Paid out in dividends
- The interest earned on securities
- Earnings besides securities interest
- Insurance commission
- Rent due and paid.
TDS Certificate Types
Here are the certificate types that you should be aware of:
- The deductee may rely on the deductor’s TDS certificate as evidence that the deductor has filed the TDS after the deduction has been made
- Salaried workers should expect to get a Form 16 from their employer that details the total amount of tax withholding and submission to the government
- In the case of individuals who do not receive a salary, the deductor will provide the deductee with Form 16A
- Form 16B is issued on the sale of a property by the deductor. It provides details to the seller of the tax deducted at the source while purchasing a property
- Form 16 C is required to be filled out by a person who pays rent and provided to the person who receives the rent. The tax will be reduced at the source, and the details will be provided in the form. It is issued by an individual or HUF who needs to pay rent.
When is TDS Applied?
TDS applies to miscellaneous income and expenses, including wages, lottery winnings, bank interest, commissions, rent, freelancer payments, and more. Payments under these subheadings are subject to a withholding percentage determined by the funding source. The term ‘Deductor’ refers to this contributor, who may be an individual or a business. The Deductee is the recipient of the withheld funds. For example, an employer who withholds money from an employee’s paycheck is an example of a deductor (the Deductee).
Tax Withholding and Reporting Return
A TDS return must be filed for a person to get a TDS refund and keep accurate financial records. However, you may file your TDS return electronically through the Income Tax India website.
The user must either log into the website with an already existing account or register for the services before they may use them. A person must adhere to certain timetables to submit their TDS returns on time. The taxpayer must fill out the appropriate form and submit the proper documentation for the return process to begin, which varies depending on the taxpayer’s income bracket.
The TDS Return file must be validated once the person has registered and filed the return. Using the free software that the Department of Revenue offers, you won’t have to worry about validating anything. Whether you’ve overpaid on your TDS and are wondering if you can get your money back, you can by filing a claim via your TDS return.
TDS Refund: How to File an Online Request?
Did you know that you may get a tax return on your salary? We’ve got you covered if you’ve ever wondered how to get your tax withholdings back from your paycheck. But completing income tax forms and requesting a TDS refund is quick and easy online. The process consists of the following actions:
- Access the Income Tax Department’s online e-filing system by signing in or creating an account
- Complete the ITR page with the notably important information
- The portal generates an acknowledgement once you are done with the submission of the ITR
- Using a digital signature, online banking, or even an Aadhaar-based one-time password, electronically validate the acknowledgement (OTP).
Where can I Submit My Request for a TDS Refund And Income Tax Return (ITR)?
How to file for a Tax Deducted at Source(TDS) refund online is another often-asked question by the taxpayers in the country. As previously indicated, obtaining a TDS refund is simple and uncomplicated if you are aware of the proceedings well. Your income tax refund paperwork is available for download on the tax portal after you log in. The next step is to fill up the form with your detailed personal information.
You may get back the taxes your employer withheld wrongfully if you file your tax returns (ITR). The tax amount will be reviewed by the relevant department and then deposited into your bank account.
FAQ:
What are the types of TDS deducted?
There are various types of TDS deductions in India, including salary TDS, interest TDS, rent TDS, professional fees TDS, and more. The type of TDS levied depends on the nature of the payment.
What is an example of TDS deduction?
An example of TDS deduction is when an employer deducts a portion of an employee's salary each month as tax and submits it to the government on the employee's behalf.
How to deduct TDS 1 or 2?
TDS can be deducted by the deductor (e.g., employer or payer) while making payments. The deductor needs to calculate the applicable TDS rate and deduct it from the payment before transferring the amount to the payee. TDS rates and procedures can vary depending on the type of payment and the applicable section of the Income Tax Act.
How much TDS can be deducted?
The amount of TDS to be deducted depends on the specific provisions of the Income Tax Act, the nature of the payment and the residency status of the payee. Depending on these parameters, TDS rates might range from 2% to 10% or higher.
Why 2 TDS is deducted?
For payments to any resident person other than individual / HUF, 2% TDS is deducted under section 194C of the Income Tax Act when a contractor or sub-contractor receives payment for services rendered. This is done to ensure that taxes are collected at the source before the contractor receives the full payment.
Where is 2% TDS applicable?
Under the GST regime when paying a supplier of goods or services under a contract, 2% TDS is applicable if the value of such supply exceeds Rs.2.5 lakh.
Conclusion
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