What is TDS?


Any person or company making a payment is required to deduct TDS, if the payment exceeds a specific threshold limit, prescribed by the income tax department. TDS is deducted on salaries, commission payments, rent & interest payments, consultation & professional fees.

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How does online TDS return work for you?

The prescribed rate of deduction of TDS varies based on expense recognized by the Income Tax Department.

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Overview

In India, TDS is an abbreviation for Tax Deducted at Source. It is a system introduced by the Income Tax Department wherein taxes are deducted from the income of an individual before it is paid to them. The amount of tax deducted is based on the Income Tax Slab rates. TDS is also applicable on interest earned on Fixed Deposits and other investments.

Income Tax Slabs for Financial Year 2022 to 2023

Income tax slab for Financial Year 2022-2023 (AY 2023-24) is given below:

Income Tax Slab for Individuals & HUFs

As per Sec. 201(1A) of the Income-tax Act, 1961, if the Assessee does not deduct the whole or any part of the TDS or after deducting fails to pay the TDS as required by or under the Act, then the Assessee is liable to pay simple interest on the amount of such TDS, for every month or part of a month, at the rate of:

Income Tax Slab for Individuals & HUFs

Not exceeding ₹2,50,000Nil
Exceeding ₹2,50,000 but not exceeding ₹5,00,0005% of the amount exceeding ₹2,50,000
Exceeding ₹5,00,000 but not exceeding ₹10,00,000₹12,500 + 20% of the amount exceeding ₹5 Lakhs
Exceeding ₹10,00,000₹1 Lakh + 30% of the amount exceeding ₹10 Lakhs

Income Tax Slab for Companies

Turnover or Gross Receipts not exceeding ₹2 Crore in preceding FY25% + surcharge + cess as applicable
Turnover or Gross Receipts exceeding ₹2 Crore but not exceeding ₹5 Crore in preceding FY30% + surcharge + cess as applicable.

Interest on Non Deduction or Non Payment of Tds or Delay in Payment of TDS

As per the Indian Tax Laws, if an individual or organisation fails to deduct TDS or delay in payment of TDS, then they are liable to pay interest on the same. The rate of interest is specified by the Income Tax Department and is generally higher than the normal rate of interest. This is done to discourage people from delaying the payment of TDS or failing to deduct it.

Penalty for Late Filing of TDS Return

If you fail to file your TDS return on time, you will be liable to pay a late filing fee. The late filing fee is levied as follows:

  • If the return is filed after the due date but on or before 31st December of the assessment year, a late filing fee of ₹5,000 will be levied
  • If the return is filed after 31st December of the assessment year, a late filing fee of ₹10,000 will be levied.

Time Limit for Issue of TDS Certificate

As per Indian Tax Laws, TDS needs to be deducted by the deductor at the time of paying or crediting salary, commission, professional fees, interest, rent, etc. to the resident payee. The amount of TDS so deducted shall not exceed the prescribed limit as mentioned in the Income Tax Act. The deductor is required to deposit the TDS so deducted within the specified time limit. After deducting TDS, the deductor needs to furnish a certificate in Form 16/16A to the deductee.

When Can You Submit Form 15G or 15H

As per Indian tax laws, an individual can submit form 15G or 15H to their bank or financial institution if they do not want TDS to be deducted on their interest income. However, there are certain conditions that must be met in order for an individual to be eligible to submit form 15G or 15H.

Firstly, the individual must not have any tax liability for the previous year. This means that their total taxable income must be below the threshold for taxation. Secondly, the individual must not be a senior citizen. Senior citizens are liable for TDS on their interest income even if it is below the threshold for taxation.

Individuals who meet both of these conditions can submit form 15G or 15H to their bank or financial institution in order to avoid TDS on their interest income.

What Are Section 197 and Section 197A

  • Section 197: This section lays down conditions under which TDS is not required to be deducted.
  • Section 197A: This section lays down rates at which TDS has to be deducted in case no specific provision has been made under any other section for deduction of such tax.

Procedure for Claiming Lower TDS or No TDS

The process for claiming a lower rate of TDS or no TDS at all is as follows:

The individual must firstly furnish their PAN details to the deductor | They should then submit Form 15G or Form 15H, as applicable, to the deductor | Once the forms are accepted, the deductor will adjust the tax deducted at source (TDS) accordingly.

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