Who can deduct TDS?

The Finance Ministry has initiated the e-TDS since year 2003. When the paper work became huge at corporate level, the instances of typo-errors started increasing thus making it difficult to check and balance the TDS deducted and paid to the Government. The TDS software helps in filing the eTDS returns to both corporate and non-corporate Tax payers and tax deductors.

The responsibility of remitting the taxes deducted to the Government lies on the person who deducts the tax at source. The prescribed time is within 7 days’ from the end of the month for which the tax is deducted.

The Income tax laws identify two types of assessees who can deduct Tax:

• 1)    Corporate assessees
• 2)    Non Corporate Assessees
• 3)    Individuals and Partnership firms that are subject to Tax Audit under Section 44AB of the Income tax Act, 1961.
• Separate challan should be used for the above type of deductees.

a)    Any person who makes payment to other, which exceeds Rs 20,000/- per year should deduct Tax at source.

b)    In case of interest payment, if the amount exceeds Rs 10,000/- per annum, the Tax has to be deducted at source from such interest payment.

c)    Company or firm that makes payment to contractors or suppliers should deduct TDS from the gross payment and pass on the net amount to the concerned.

d)    Partnership firms/ individuals who do not fall within the purview of tax audit (i.e. gross income does not exceed Rs 40 Lakhs per annum) are not required to deduct tax at source.

e)    Again, those firms or individuals who are subject to Tax audit under Section 190 of the Income Tax Act, 1961 have to deduct Tax at source and remit the money to Government Treasury.

Rule 30 lays down the due dates for remittance of TDS amount into the Government treasury:

1. 1.    In case of Government – the same day on which Tax was deducted.
2. 2.    In case of Non Government: within 7 days from the month ending in which tax was so deducted.
3. 3.    In case of tax that was deducted as provision for payments to be done, then the amount should be deducted within 60 days from the end of the financial year to which such provision applies.
4. If there is any delay in remitting the amount, the assessee will be liable for penalty by way of interest on the TDS amount payable to the Government, which is normally @ 1%. Timely filing of TDS returns will save the penalty.

The TDS software is a boon to the Government and also for the Corporate and non-corporate assesses whose entries are voluminous. The Government can easily track the erratic filings and incomplete returns. The software is a handy tool for corporate assesses because it generates all kinds of reports and helps in filing the e-TDS returns online without much trouble. Without the TDS software, the manual entries were cumbersome and time taking. The software is featured to calculate the TDS amount, generate the TDS certificates in prescribed format and also to retain data for any number of years.

When is TDS not applicable?

The TDS software is provided by many solution providers who are in the business of Tax consultancy. Before buying TDS software one must make sure that the vendor is of proper standing in the industry with atleast 5 years of experience. The vendor should be able to provide training to the users within the organization and also should be available to resolve any issues while running the programme.

TDS is applicable for almost every payment made or payment received. There are of course a few classes of services received or provided that is not subject to TDS. These can be enlisted as:

1.    Where the gross amount payable or receivable does not exceed Rs 10,000/- or more during the previous year

2.    When the receiver submits the form 15H or 15G as may be applicable before tax is deducted at source

3.    When the salaried employees’ income does not fall in the ambit of tax slabs for that particular year

4.    When the advertising agency makes payment to the media, TDS is not applicable, however TDS is applicable when client makes payment to the advertising agency

5.    When PAN is provided by the transporter, TDS and surcharge is not applicable

6.    Not applicable to hotel rents

7.    Also in cases where the court decision exists, TDS is not applicable. This applies to the rest of the class of similar nature.

8.    In some cases, the Assessing officer considers the merits of the case and exempts certain services from applicability of TDS for that particular case. This ruling may or may not be applicable to classes of similar nature.

TDS applicability can be avoided in cases where the assessing officer certifies that the income of the professional or service provider of technical services does not exceed the prescribed limits. In such cases, the assessed should furnish this certificate to the clients so that they do not deduct tax at source from the payments made to him.

All the TDS certificates do now bear the TIN (Tax Identification Number) of the person deducting taxes, which makes it easy for the Department as well as the individual to track if the money is actually deposited with the Government.

The TDS certificate also bears the challan number and date of filing the challan at the IT department which helps in tracking, if the person deducting the tax at source is prompt in notifying the Government of the taxes.

The TDS software has the in-built programme to generate the TDS certificates in the prescribed format. The user has to enter the TIN, challan date and the PAN of the person from whom Tax was deducted. The data is then processed and a certificate is printed automatically with the click of a mouse without having to manually write the details of challan every time. Not only the TDS certificates in prescribed form, the TDS software also enables storage of data, synchronization of data with other software and generate statements and challan as per the prescribed format. 

Ways to pay TDS easily

Earlier, the tax payments to the Government was pretty difficult –one while deducting the taxes from the assesses at source which was due to multiple tax rates for various items and second- payment of taxes so deducted to the Government which was due to manual entries and errors in manual system. But now with TDS software, the tax deduction at prescribed rates and also online payment of tax returns/ TDS challan has become very simple and easy.

The Income Tax department has designated the National Depository Services Limited (NDSL) as the authority to collect taxes on behalf of the Government. NDSL is the largest depository in India which was incorporated in the year 1996. Since its inception, it has made its presence felt in paperless environment in India with services related to demat of shares, issue of PAN card/ tracking the status of PAN/TAN and many more.

The Tax information Network of this NDSL website makes the online payment of taxes and filing of tax returns a simple task with the click of a mouse. This article gives a brief on how to go about the ways to pay TDS easily:

• 1.    Log on to the NDSL website
• 2.    Under the e-payment section of the Tax information network, one can view the options to pay taxes
• 3.    Select the challan No ----/ITNS 281 under the TDS/TCS drop down menu
• 4.    Complete the data in the challan with TIN, PAN and other details as required
• 5.    Click on the proceed button
• 6.    The screen opens up to next page which allows verification and modification of data
• 7.    Once done, click on the “payment to Bank” button
• 8.    This page redirects to the payment gateway of the Banks designated for deposit of Taxes
• 9.    Proceed to make the payment
• 10.  Once done, the system generates a challan copy which should be printed and filed for record purposes.

Payment of taxes on time avoids penalty. Whether it is an individual or a corporate assesse, they should pay taxes on time. The TDS deducted, if any should be deposited with the Government within 7 days from the end of the month in which Tax was deducted at source. After generating the challan, the date and number of the challan should be appropriately mentioned in Form 16 or 16A and issued to the concerned persons. This will enable the filing of returns by those concerned persons on time. This will go a long way in ensuring that neither the person deducting tax nor the assessed is put to avoidable problems of payment of interest and penalties.

After reading the above points, one may wonder why we need the TDS software when the website provides everything. But, one has to notice that the data required to be filled in the challan for online payment of tax has to be kept ready while filing the returns. The use of TDS software makes available the required data all at one place and that too the accurate information which is not possible in manual entries.