TDS is basically a part of income tax. It has to be deducted by a person for certain payments made by them. TDS or Tax Deduction at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons making payments.
Usually, the person receiving income is liable to pay income tax but the government with the help of TDS provisions makes sure that income tax is deducted in advance from the payments being made by any person. Thus the recipient of income receives the net amount after deduction of tax at source.
When TDS should be deducted?
The concept of TDS is based on a simple principle i.e. tax is to be deducted at the time of payment getting due or actual payment whichever is earlier. A set of scenarios for will be helpful in understanding the concept:
Suppose, Startease Online Filings Private Limited has to make payment of Rs 50,000/- to Mr XYZ in exchange for professional services
Mr. XYZ was paid Rs 30,000/- in advance on 20th Oct 2018. XYZ raised invoice after completion of work on 25th Oct 2018 and rest of payment is to be made.
In such a case the company should have deducted tax in the following manner:
On 20th Oct 2018: Rs 3000/- (@ 10% on the advance of Rs 30000/-)
On 25th Oct 2018: Rs 2000/- (@ 10% of total invoice amount as deducted by tax already deducted i.e. Rs 5000/- deducted by Rs 3000/-)
Mr XYZ raised the invoice on 20th Oct 2018 and was paid whole consideration at one go on 25th Oct 2018.
In such whole amount of Rs 5000/- shall be deducted on 25th Oct 2018, the date when payment got due, and a net payment of Rs 45000/- shall be made on 25th Oct 2018.
Mr XYZ is to receive the whole amount of Rs 50,000/- well in advance before completion of the assignment.
In such particular case tax of Rs 5000/- shall be deducted right at the time of payment of advance and no tax is to be deducted at the time of making an entry for the bill due.
What is the due date for depositing the TDS to the government?
|Month of Deduction||Quarter ending||Due date for TDS Payment through Challan||Due Date for filing of Return from the financial year 2018-19 for All Deductors||Due Date for filing of Return for the financial year 2015-16|
|*For Govt. Deductor||For Other Deductor||For Govt. Deductor||For Other Deductor|
|April||30th June||7th May||31st July||31st July||15th July|
|July||30th September||7th August||31st October||31st October||15th October|
|October||31st December||7th November||31st Jan||31st Jan||15th Jan|
|January||31st March||7th Feb||31st May||15th May||15th May|
|March||7th April||30th April|
*All sums deducted in accordance with the provisions of Chapter XVII-B by an office of the Government without challan (Treasury Challan) should be deposited on the same day of deduction.
In case you have not deposited TDS by the correct date, the following penalties are applicable:
- Late filing fee (if you do not file by the deadline)
- Interest (if you do not deposit the TDS amount in time)
- Penalty (if TDS is not filed within one year of the due date)
Late Filing Fee
Under Section 234E, you will have to pay a fine of Rs 200 per day (two hundred) until your return is filed. You have to pay this for every day of delay until the fine amount is equal to the amount you are supposed to pay as TDS.
|Section||Nature of Default||Interest subject to TDS/TCS amount||The period for which interest is to be paid|
|201A||Non-deduction of tax at source, either in whole or in part||1% per month||From the date on which tax-deductible to the date on which tax is actually deducted|
|After deduction of tax, non-payment of tax either in whole or in part||1.5% per month||From the date of deduction to the date of payment|
Note: The above interest should be paid before filing of TDS return.
Under Section 201(1A) for late deposit of TDS after deduction, you have to pay interest. Interest is at the rate of 1.5% per month from the date at which TDS was deducted to the actual date of deposit. Note, that this is to be calculated on a monthly basis and not based on the number of days i.e. part of a month is considered as a full month.
The penalty for late filing of TDS return:
- Penalty (Sec 234E): Deductor will be liable to pay the way of fee Rs.200 per day till the failure to pay TDS continues. However, the penalty should not exceed the amount of TDS for which statement was required to be filed.
- Penalty (Sec 271H): Assessing officer may direct a person who fails to file the statement of TDS within due date to pay penalty minimum of Rs.10,000 which may be extended to Rs.1,00,000.
- The penalty under this section is in addition to the penalty u/s 234E.
- This section will also cover the cases of incorrect filing of TDS return.
No penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if the following conditions are satisfied:
- The tax deducted/collected at source is paid to the credit of the Government.
- Late filing fees and interest (if any) is paid to the credit of the Government.
- The TDS/TCS return is filed before the expiry of a period of one year from the due date specified in this behalf.
Filing TDS 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.