TDS Filing
Are the complexities of taxes making your head spin?
You are not alone!
Taxes are a tricky subject for Indians – and the entire world! One of the most critical aspects of tax regulations in India is Tax Deducted at Source (TDS).
At TaxProClarity, we are committed to unpacking the TDS filing concept so it becomes easier and clearer. Whether you are just starting your business or a seasoned entrepreneur, we help you understand and manage TDS to avoid legal complications.
So…
What is TDS?
TDS is a method that allows the government to collect taxes directly from individuals. Whenever someone pays you, TDS regulations require you to withhold some tax for remission to the government. The deduction occurs when you are receiving specified payments.
Usually, you are responsible for paying your income tax. However, the government ensures the tax is removed before a payment comes to you through TDS.
What is TDS Filing?
Filing a TDS involves filling out the return. The TDS return is a quarterly summary or statement of all transactions related to TDS you have made in a quarter. The report contains information on the amount of TDS you have collected and deposited to the Income Tax Authority.
Items that must be in the TDS return statement include:
- Challan details
- Specifics on TDS paid
- The deductee’s and deductor’s PAN
The deductor must submit the TDS return on time. To ensure compliance with these requirements, consider our TDS filing services.
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Who is Eligible for TDS Return?
Businesses, organizations, and employers with a valid TAN must file TDS returns. Further, anyone holding an office in the government or company and those whose accounts are subject to Section 44AB auditing must file their returns. Under this definition, the deductor can be a limited company, individual, local authorities, partnership businesses, and more.
Payouts that should be filed under TDS include:
- Wins from puzzles, lotteries, and others
- Earnings from horse race wins
- Salary income
- Insurance commission
- Income generated on securities
- Rent income
- Consultation or professional fees
- Compensation from immovable assets
- Contractor payments
Are There Different Types of TDS Forms?
Yes. Deductors have access to various forms for filing their DTS returns, depending on the purpose of the deduction. These are:
- 26Q for all payments apart from salaries
- 24Q for salaries
- 27Q for any payments made to non-residents but not salaries
- 26QB for recording the sale of properties
- 26QC for recording proceedings from rent
What are The Non-Compliance Penalties?
Failing to adhere to the TDS regulations attracts one of these penalties depending on the category of non-compliance.
Non-deduction penalties
The Income Tax Act requires that interest for late payment and non-deduction of TDS be calculated as:
- Late Payment – When TDS is deducted is not deducted in time, there should be a 1.5% interest per month levied
- Late Deduction – Failing to deduct TDS in time attracts a 1% interest charge monthly to the date of deduction
The Act states that if TDS is not deducted or deposited, the expense is disallowed when computing taxable income. Examples include:
- When making domestic payments – If you are required to deduct TDS but fail, 30% of your expense amount will not be allowed
- When making payments to non-residents – Your entire expense amount where TDS was required is disallowed
Late filing penalties
Income Tax Act outlines three disciplinary actions for late filing of TDS returns. These are:
- Fee for late filing – The deductor will be charged Rs. 200 for each day they are late in filing the return until the amount is equal to the expected TDS amount
- Penalty – Incorrect or non-filing of TDS returns can attract a penalty of between Rs. 10,000 and Rs. 1,00,000, which is additional to interest charges
- Prosecution – Failing to remit TDS within a specified period may result in a jail term ranging from three months to seven years, with a fine
Who is Eligible for TDS Return?
Businesses, organizations, and employers with a valid TAN must file TDS returns. Further, anyone holding an office in the government or company and those whose accounts are subject to Section 44AB auditing must file their returns. Under this definition, the deductor can be a limited company, individual, local authorities, partnership businesses, and more.
Payouts that should be filed under TDS include:
- Wins from puzzles, lotteries, and others
- Earnings from horse race wins
- Salary income
- Insurance commission
- Income generated on securities
- Rent income
- Consultation or professional fees
- Compensation from immovable assets
- Contractor payments
Are There Different Types of TDS Forms?
Yes. Deductors have access to various forms for filing their DTS returns, depending on the purpose of the deduction. These are:
- 26Q for all payments apart from salaries
- 24Q for salaries
- 27Q for any payments made to non-residents but not salaries
- 26QB for recording the sale of properties
- 26QC for recording proceedings from rent
What are The Non-Compliance Penalties?
Failing to adhere to the TDS regulations attracts one of these penalties depending on the category of non-compliance.
Non-deduction penalties
The Income Tax Act requires that interest for late payment and non-deduction of TDS be calculated as:
- Late Payment – When TDS is deducted is not deducted in time, there should be a 1.5% interest per month levied
- Late Deduction – Failing to deduct TDS in time attracts a 1% interest charge monthly to the date of deduction
The Act states that if TDS is not deducted or deposited, the expense is disallowed when computing taxable income. Examples include:
- When making domestic payments – If you are required to deduct TDS but fail, 30% of your expense amount will not be allowed
- When making payments to non-residents – Your entire expense amount where TDS was required is disallowed
Late filing penalties
Income Tax Act outlines three disciplinary actions for late filing of TDS returns. These are:
- Fee for late filing – The deductor will be charged Rs. 200 for each day they are late in filing the return until the amount is equal to the expected TDS amount
- Penalty – Incorrect or non-filing of TDS returns can attract a penalty of between Rs. 10,000 and Rs. 1,00,000, which is additional to interest charges
- Prosecution – Failing to remit TDS within a specified period may result in a jail term ranging from three months to seven years, with a fine