Welcome to OnlineCorpServ, your reliable partner for comprehensive business solutions, including streamlined Tax Deducted at Source (TDS) return services. We understand the significance of TDS compliance for businesses and offer expert assistance to ensure accurate and timely filing. Let us navigate the complexities of TDS regulations while you focus on driving your business forward.
Understanding TDS Return Filing:
Tax Deducted at Source (TDS) is a mechanism through which the government collects taxes from individuals or entities at the source of income. TDS return filing involves reporting the details of TDS deducted and deposited with the Income Tax Department.
Before we directly jump on to the process of filing TDS return, let us understand a few basics of Tax Deducted at Source (TDS) return, like TDS, TDS return, obligation to file TDS return, importance of TDS return filing, due dates, different TDS forms etc.
Tax Deduction at Source refers to deducting tax from income, at the time of payment. Entities and individuals who engage in tax deductions at the source are required to file TDS returns quarterly.
TDS stands for Tax Deducted at Source, a mechanism wherein tax is deducted by a person on the payments made by him for certain specified payments such as salary, commission, rent, professional or technical fee, interest etc.
In normal course the person who earns the income is liable to pay income tax, however with income tax provisions, government has made it mandatory that a certain percentage of tax is deducted in advance at the time of payment in form of TDS.
Following are the salient features of TDS mechanism:
-> Person making payment (i.e. Deductor) deduct the specified
percentage from the payment being made, as TDS
-> Deductor pays TDS amount in government exchequer and balance amount to the recipient of income.
-> Recipient of income gets the credit of such TDS
-> Government gets the tax in advance
-> Government can track the transactions in more effectively
Every person including an individual, HUF (Hindu Undivided Family), firm and NRI (non-resident Indian), is expected to deduct tax at source, provided:
-> Any payment made under the five heads of income or as specified under the Income Tax Act, 1961 requires the payer to deduct TDS. This provision does not apply to individuals and HUFs making such payments unless specified.
-> If a person is paying rent of more than INR 50,000 per month as an individual or HUF taxpayer, the person needs to deduct TDS at 5%. This applies to all Individual and HUF taxpayers regardless of whether their books need an audit.
-> Employers must deduct TDS from the salary of those employees whose income exceeds the maximum exempt limit.
-> Banks will deduct TDS at 10% from the interest payments on fixed deposits. However, if recipient’s annual income is below the maximum exempt threshold, they can submit Form 15G and 15H to avoid this deduction.
In general, an eligible deductor is required to deduct TDS at the time of making payment, towards the specified income, to the recipient.
The due date of deposition of Tax Deducted at Source is the 7th of the subsequent month. For example, due date of tax deducted in the month of August 2024 must be deposited by 7th September 2024. Following are the exceptions to the due date mentioned above:
-> TDS deducted in the month of March can be deposited by 30th of the immediately next month i.e. 30th April.
-> TDS deducted on purchase of property, shall be paid to government within 30 days from the end of the month in which TDS is deducted. For example, if TDS on property is deducted in the month of August 2024 shall be deposited by 30th September 2024.
Tax Deducted at Source shall be deposited via Income Tax Portal based on the Tax Deduction and Collection Account Number (TAN) login. You have to click on 'e-Pay Tax' option of Income Tax Department on https://www.incometax.gov.in/ to make the TDS payment.
TDS return is a detailed report of tax deducted at source during the specific quarter for which return is being filed.
As per Income Tax rules, TDS return must be filed quarterly by all the persons who have deducted the TDS.
The TDS return contains various important information such as TAN of deductor (person deducting the TDS), amount paid to deductee (recipient of the income), PAN of deductee, amount of TDS deducted etc.
There are different forms prescribed for filing TDS return. Following is the details of TDS return form name, their applicability and due date of filing the return.
Form Name | Appliable in case of | Due date of return |
---|---|---|
Form 24Q | TDS on salary | Q1 – 31st July |
Form 26Q | TDS on all payments except Salary (to Indian resident) | Q2 – 31st October Q3 – 31st January |
Form 27Q | TDS on all payments made to non-residents except Salary | Q4 – 31st May |
Form 26QB | TDS on Sale of Property | 30 days from the end of the month in which TDS is deducted |
Form 26QC | TDS on Rent | 30 days from the end of the month in which TDS is deducted |
Form 26QD | TDS on payment to Resident Contractors and Professionals | 30 days from the end of the month in which TDS is deducted |
Form 26QE | TDS on transfer of Virtual Digital Asset (VDA)/Crypto Assets | 30 days from the end of the month in which TDS is deducted |
Please note that form 26QB, 26QC, 26QD and 26QE are challan cum returns and hence due date of payment of TDS and filing of return remains same.
Following is the step-by-step process of filing TDS return:
Gather the required information: Gather all necessary documents, including TAN of deductor, PAN of deductor and all deductees, relevant TDS payment challan details etc.
Decide appropriate TDS Form: Based on nature of payments on which TDS was deducted (e.g. salary, interest, rent etc.) decide the appropriate TDS return form, such as Form 24Q for salaries, Form 26Q for non-salary payments etc.
Download the latest Return Preparation Utility (RPU): Download latest version of TDS Return Preparation Utility from Traces (TDS Reconciliation Analysis and Correction Enabling System) website (available free of cost).
Preparation of TDS Return: Using the RPU, enter the required detail such as details of deductor, deductee, challan etc. The software will then validate the data and help in rectifying if there are any errors, before submitting it finally.
TDS Return validation: After entering the details, validate the TDS return file using File Validation Utility (FVU) provided by the Income Tax Department. This will check for any errors and also ensures the file complies with the technical & structural requirements.
Generation of FVU File: After successful validation of .fvu (extension) file will be generated by File Validation Utility. The .fvu file is the one which will be submitted in form of return.
Submitting TDS Return: Log in to the e-filing portal using TAN credentials. Go to TDS section and upload the .fvu file. Depending upon the category of deductor, it may ask you to digitally sign the return using Digital Signature Certificate.
Generation of acknowledgement: Once the TDS return is successfully submitted, an acknowledgement will be generated, which you should keep in record for future reference.
Following are the key details required to prepare a TDS return:
-> TAN of deductor: In general, TAN i.e. Tax Deduction and Collection Account Number, of deductor is must for filing TDS returns.
-> PAN of deductor and deductees: The PAN of both the deductor and the deductees is required to be mentioned. This is required so that credit is reflected in the appropriate deductee’s account.
-> Previous TDS Filing Records: Detail of previously filed TDS returns might be required for reference.
-> Transaction Count: The total number of transactions involving TDS deductions during the period shall be reported.
-> Other details like Business structure of entity like Proprietorship, Partnership, Company etc., TDS filing period etc. are also required to be mentioned.
A late fee of INR 200 per day is charged during the period failure of filing the TDS return continues (As per Section 234E of Income Tax Act, 1961), however the amount of late fee shall not exceed the total amount of TDS. The late fee is to be deposited before filing of TDS return.
Apart from the late fee as mentioned above, a deductor shall be liable to pay penalty under section 271H. Assessing officer may direct such person to pay penalty under section 271H anything from anything from INR 10,000 to 1,000,000. Penalty under this section is also leviable in case of incorrect return is filed.
However, no penalty under section 271H will be levied in case of delay in filing the TDS statements if following conditions are satisfied:
(i) The tax deducted at source is paid to the credit of the Government.
(ii) Late filing fees and interest (if any) is paid to the credit of the Government.
(iii) The TDS return is filed before the expiry of a period of one year from the due date specified.
Legal Compliance:
Filing TDS returns is a legal obligation for businesses that deduct TDS from payments made to vendors, employees, or other parties. Compliance ensures adherence to tax regulations and avoids penalties.
Timely Filing:
Timely filing of TDS returns is essential to avoid interest charges and penalties. Delays in filing can lead to additional financial burdens and impact your company's reputation.
Compliance: Filing TDS returns ensures compliance with tax laws, avoiding penalties and legal consequences.
Accuracy: Helps in maintaining accurate records of tax deductions made, reducing the chances of errors or discrepancies.
Claiming Refunds: Enables taxpayers to claim refunds for excess TDS deducted, thus optimizing cash flow.
Transparency: Enhances transparency between deductors (employers or businesses) and deductees (employees or vendors) regarding tax deductions.
Avoiding Default Notices: Timely filing of TDS returns helps in avoiding default notices from the tax authorities, ensuring smooth business operations.
TDS stands for Tax Deducted at Source, a system introduced by the Indian government to collect taxes at the source of income generation. It is applicable to various incomes such as salaries, interest, rent, commission, etc. Filing TDS returns is mandatory for individuals and entities who deduct TDS. It helps in reconciling the TDS deducted with the income earned by the recipient, ensuring transparency in tax payments.
Any person or entity who deducts tax at source while making specified payments such as salary, interest, rent, commission, etc., is required to file TDS returns. This includes employers, banks, contractors, and others. Additionally, individuals or entities who are subject to a tax audit under the Income Tax Act are also mandated to file TDS returns.
There are different types of TDS returns such as Form 24Q for salaries, Form 26Q for payments other than salaries, Form 27Q for payments made to non-residents, and Form 27EQ for TDS on payments made under Section 206C (other than salary). The due dates for filing TDS returns vary depending on the type of return and the quarter in which the deductions are made. Generally, they fall within one month from the end of the relevant quarter.
Failure to file TDS returns or filing them after the due dates can attract penalties and interest. The Income Tax Department may levy a penalty under Section 234E for late filing of TDS returns, which could amount to Rs. 200 per day until the default continues. Additionally, interest may be charged under Section 201(1A) for late payment of TDS amounts deducted.
Yes, it is possible to revise TDS returns if any errors or discrepancies are found in the original filing. This can be done by filing a revised return using the appropriate form within a specified time frame. However, it's crucial to ensure that revised returns are filed accurately and promptly to avoid any penalties or interest charges.