What is the Tax Deducted at Source under section 194

What is the Tax Deducted at Source under section 194

TDS or Tax deducted at source. It is the tax collected by Indian government from the very source of income. A person (deductor) who is liable to make payment of specified nature such as salary, commission, professional fees, interest and Rent etc. to other person (deductee) shall deduct tax at source and remit the same to central government through challan no. 281. The deductee from whom tax was deducted is eligible to take credit of same on the basis of 26AS or TDS certificate (form 16, 16A, 16B) issued by the deductor.

 Who has to deduct TDS?

The person responsible for paying income or any amount which is subject to TDS as specified in the income tax act 1961 has to deduct TDS from deductee. However in case

·         Sec 194H –  TDS on commission on brokerage

·         Sec 194I  –   TDS on Rent

·         Sec 194J  –   TDS on Professional / Technical services

·         Sec 194A –   TDS on Interest on securities

·         Sec 194C –   TDS on Contracts

An individual/HUF have to deduct tax at source only if turnover exceeds 1 crore (others) or 25lakh (professionals).

 Consequences of not deducting TDS?

Ø  Disallowance

a)      Non Resident: As per section 40(a)(i) of income tax act 1961 any sum payable (other than salary) outside india or non resident which is taxable in india in the hands of recipient, shall not be allowed to be deducted if it is paid without deducting tax at source or if tax is deducted but not deposited with central government till due date of filling return. It is allowed as deduction only if tax is deducted and deposited to central govt. It is allowed even if the tax is deducted in subsequent year.

b)      Resident:  As per section 40(a)(ia) of income tax act 1961 any sum payable to resident which is subject to TDS is attracted to 30% of disallowance if it is not deducted or deposited with central government before filling of return specified under sec 139.

Ø  Interest

As per sec 201 of income tax act 1961 if deductor fails to deduct TDS or fails to deposit the same with central government the he shall be deemed to be assessee in default and liable to pay interest as follows

·         1% for every month or part of the month on such amount of tax from the date on which tax is deductible to the date on which such tax is deducted and

·         1.5% for every month or part of the month on such amount from the date on which such tax is deducted to the date on which such tax is deposited.

Ø  Penalty

As per section 271C penalty is equal to amount of Tax not deducted.

 Types of TDS, Rates of TDS and Limits of TDS? 

Section

Particulars

Rate %

Limit

192

TDS on Payment of salaries

As per slab

2,50,000

192A

TDS on accumulated balance of PF ( Provident Fund) which is taxable in the hands of Employee

10

50,000

193

TDS on interest on securities

10

10,000

194

TDS on dividend (other than dividend under section 115O)

10

2,500

194A

TDS on income by way of interest other than interest on securities

10

5,000(Other ) /10,000 (Banks)

194B

TDS on income by way of winning from lotteries, crossword puzzles, card games and any other games

30

10,000

194BB

TDS on Income by way of winnings from horse races

30

5,000

194C

Payment to contractor/sub-contractor

Individual/HUF

Others

 

1

2

30,000 for single payment/

1,00,000 for aggregate payments during Financial years

194D

TDS on Insurance commission

5

20,000

194DA

TDS on Payment in respect of life insurance policy

1

1,00,000

194EE

TDS on Payment in respect of deposit under National Savings scheme

10

2,500

194F

TDS on Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India

20

No minimum

194G

TDS on Commission on sale of lottery tickets

5

15,000

194H

TDS on Commission or brokerage

5

15,000

194I

 TDS on Rent

Plant & Machinery

 Land or building or furniture or fitting

 

2

10

 

1,80,000

194IA

TDS on Payment on transfer of certain immovable property other than agricultural land

1

50,00,0000

194J

 TDS on Any sum paid by way of

Professional services,

Technical services

Royalty,

Remuneration/fee/commission to a director

Not carrying out any activity in relation to any Type of business

Not sharing any know-how/patent/copyright etc.

10

 



30,0000 ( individually for every service provided)

194LA

TDS on Payment of compensation on acquisition of certain immovable property

10

2,50,000

194LBA

TDS on Income distribution by a Business Trust u/s 115UA

10

No Minimum

194LBB

TDS on Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)]

10

No minimum

194LBC

 TDS on Income in respect of investment made in a securitization trust

Individuals/HUF

Other Person

 

 

25

30

 

 

No minimum

What is the procedure of TDS?

·         Apply for TAN by submitting application form 49B at TIN NSDL website

·         Deduct Tax from income or from payments specified above

·         Deposit the tax within time limit specified.(due date 7th of every month)

·         File quarterly TDS return within time limit( Due date within 1 month from the end of quarter)

·         Issue certificate of TDS within time limit specified ( 15 days from the date of furnishing return)