TDS -Tax Deducted at Source

TDS is the amount of tax getting deducted from the person (Employee/Deductee) by the person paying (Employer/Deductor).


On this page:

  1. What is Tax Deducted at Source in Indian Tax System?
  2. Mandatory to deduct tax?
  3. Salary Tax Deducted at Source
  4. Certificate Form 16
  5. Form No.13
  6. Related Topics

Introduction

TDS is tax deducted at source. When tax is deducted at source, like, while receiving interest on deposits from banks or companies, they give Form 16A where they state that a sum of Rs.___ has been deducted as tax and paid to the Govt.

If you are well under the tax payable slab, or if you have paid your taxes in excess/in advance, then you can claim it as refund while filing your tax return.

Without filing your tax papers you can’t get a refund of the tax deducted at source or of the taxes paid in excess by you.

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Tax Deducted at Source Income Tax India

Under the process of Tax Deducted at Source, Deductor is a person/company who is liable to deduct the Tax at source, from the payment being made.

Deductee is the person, from whom the tax is being deducted or accrued for deduction. Depending on the nature of the deductions being made, deductees are categorized to 3 types:

  1. Salaries: In case of salaries, the deductee is termed as an Employee. All the information of deductions and payments made in this category should be submitted to the Government using the Form 24Q.

  2. Non-Salaries - Resident: In case of non-salaries and the payment is made to a resident in India, then all the information of deductions and payments made in this category should be submitted using the Form 26Q to the Government.

  3. Non-Salaries - Nonresident: In case of non-salaries and the payment is made to a Non-Resident of India, then all the information of deductions and payments in this category should be submitted in Form 27Q to the Government.

It is mandatory for the tax deductor to issue Tax Deducted at Source certificate to the deductee within specified time under section 203 of the Income Tax Act.

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Salary Tax Deducted at Source

Employers will deduct Tax based on the projected salary for the whole year if salary exceeds minimum non-taxable limit. They will also consider salary allowances & deductions like,

  1. HRA (house rent allowance)

  2. Conveyance allowance

  3. Medical allowance

  4. Deduction u/s 80C, 80CCC, 80D, 80DD, 80DDB etc.,

Employers allow investment declaration at the start of a financial year. You need to declare investments made.

Some employers do not allow any declaration. They may consider only investments which have already been done. In such case you need to produce the actual receipts and / or copies of the same as and when they materialize.

Then they will calculate the projected salary for whole year and the income tax on the salary. Dividing the projected tax amount by 12 will give the amount that is to be deducted from your salary.

Employer can always increase of decrease the TDS amount to take into consideration any changes in the deductions or income.

You must provide the copy of receipts of the deductible investments and medical receipts. If you fail to provide this even at the end of the specified period / month (normally end of December of the relevant financial year), then the employer may deduct more tax & will not report those items in Form 16.

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Tax Deducted at Source Certificate

Tax Deducted at Source certificate is a certification from the deductor, for the deduction and payment of the respective amount to the bank.

As a deductee you should produce the details of this certificate, during the regular assessment of your income tax, to adjust the amount of Tax Deducted at Source against the Tax payable by you.

The following are the two different forms of Tax Deducted at Source Certificates prescribed under the Act: -

  • Salaries - Form 16: In case of Salaries, the Tax Deducted at Source certificate should be issued in FORM 16 containing all the Tax computation details and the Tax deducted & Paid details.

    This refers to the details submitted in Form 24Q. Usually this Form 16 would be accompanied by Form 12BA providing details of Perquisites, Other Fringe Benefits or amenities and profit in lieu of salaries, etc.

  • Non-salaries - Form 16A: In case of Non-Salaries, like Interest on securities, Dividends to a resident, the certificate should be issued in FORM 16A containing the Tax deducted & Paid details.

    Separate certificates should be prepared for each Section based on the nature of payment, like, Winnings from lottery, Insurance commission to a resident etc. This refers to the details submitted over Form 26Q and 27Q.

Deductors shall download the Tax Deducted at Source Certification forms from TIN Web site.

It is mandatory for,

  1. Companies,

  2. Banks, or

  3. Co-operative societies engaged in banking business

to download Form 16A from TIN Web Site and issue such downloaded certificates to the deductees.

For other deductors, it is optional to download Form 16A from TIN Web site.

The TDS certificate will have a unique TDS Certificate Number. This procedure is applicable for all deductions made on or after 01-04-2011.

TDS amount and the certificate thereof received from the employer should be submitted while filing your Income tax return. On assessment, any excess amount receivable would be credited to your account.

Failed to issue TDS Certificate

Where the employer has failed to issue TDS certificate (form 16) within one month of the end of financial year (by 31st of May of the next F.Y. for F.Y. 2010-11 onwards) or has failed to furnish the quarterly statement of tax in form 24Q, within the time prescribed u/s 200(3) (rule 31A), then a penalty of Rs. 100 is leviable for each day during the period for which default continues.

Duplicate

Where the original TDS certificate is lost, the employee can approach the employer for issue of a duplicate TDS certificate.

The employer may issue a duplicate certificate on a plain paper giving the necessary details.

However, there is no obligation to issue TDS certificate in case tax is not deducted because of claims of exemptions/ deductions.

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No TDS or Deduction at a lower rate

You can make an application to the Assessing Officer for deduction of tax at a lower rate or non deduction of tax. The application has to be made in Form No.13.

If the Assessing Officer is satisfied that the total income of a tax payer justifies the deduction of income tax at any lower rate or no deduction of income tax, he may issue a certificate in Form No. 15AA providing for deduction of tax at lower rate or no deduction of tax.

The certificate is valid only for the assessment year as specified therein. On expiry of the validity period, a fresh application may be made.

A certificate is issued directly to the person responsible for deducting tax/DDO with a copy to the applicant. In absence of such a certificate from the employee, the employer will deduct income tax on salary payable at normal rates.

Click here to download Form 13.

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Forms 12B

If employee joined during the year, then the employee should furnish Form 12B to the new employer. Then the new employer must take previous employer's income in consideration for the deduction of correct amount of TDS.

Click here to download Form 12B.

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« Due dates for filing & payment of Tax deducted at source

« Salary Tax deducted at source

« PF Tax deducted at source

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