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24 Sep 2020

What is TDS

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What is TDS?

You may have come across the word TDS on several occasions; even more so if you’re a salaried employee. But the question everyone has on their mind is- What is TDS?

TDS Full Form-

TDS Full form is Tax Deducted at Source and the fundamental idea behind this concept is to collect taxes from individuals directly from the source of income. This provision was introduced in 2013 by the Income Tax Department of India and TDS falls under the Income Tax Act of 1961. The objective of TDS is to ensure no one evades tax as the company is entitled to pay income tax on their employees’ behalf.

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When is TDS collected?

TDS is collected at the time of making relevant payments as specified by the IT Act, 1961- such as rent, professional fees, interest accrued, salary, commission earned, etc.

In the case of salaried employees, the employer is required to deduct TDS as per the slab rates prescribed by the government. Some employees that earn an annual salary of less than the taxable limit are exempted from paying taxes.

In the case of rent paid/payable during the Financial Year, a flat 10% TDS needs to be deducted under section 1941I if the annual rent paid/payable exceeds Rs. 2.4 Lakhs.

Deductions need to be made only in the case of Businesses and professionals meeting the above criteria, who are legally required to get their tax audit conducted by chartered accountants under section 44AB. Salaried taxpayers/ businessmen/ professionals paying rent of more than Rs. 50,000 per month need to deduct TDS @ 3.75% under Section 194IB.

Under section Section 192A, the receiving accumulated part of PF attracts a 10% TDS deduction.

Under section 193, interest received on investment instruments like securities attract a 7.5% TDS.

Under Section 194 and 194K, returns received on mutual funds and a company’s shares attract 7.5% TDS deduction.

Section 194A- Interest on Fixed Deposits (any interest apart from what is received on securities) is taxable at 7.5%.

Under Section 194B and Section 194BB, winnings from games like lottery winnings, horse races etc. are taxable at 30%. Section 194C states that the Payment of Contractors and sub-contractors is taxable at 0.75% in the case of individual and HUF and 1.5% in the case of others.

In the case of Section 194D, Insurance Commission received by an Individual attracts a tax of 3.75%.

Under Section 194DA, Life Insurance Policies that are not exempt under Section 10(10D) attract a 3.75% tax.

Under Section 194EE, National Savings Scheme payments with regard to deposits are taxable at 7.50%

Payments made with respect to the re-purchase of Units (either Mutual Funds or UTI) under section 19F attract a 15% tax.

Under section 194G, earnings received from the sale of lottery tickets attract a 3.75% tax.

Commission/brokerage earned apart from insurance commissions under sec 194H attracts a 3.75% tax.

Under section 194J, payment made for professional services attract 1.5% tax (if payment is made to a call center) and 7.5% in the case of other services.Under Section 194I(a), payment made for the purchase of immovable property with the exception of agricultural land attract 0.75% TDS.
If we’ve missed out on any slab rates, you can visit the official website for updated TDS slab rates.

TDS Online Payment-

TDS online payment facilities, offered by NDSL, facilitates individuals to pay direct taxes online. TDS needs to be paid by the 7th of every month and one is required to have a PAN/TAN card to do so. In order to pay taxes online, one would need to select their relevant challans such as ITNS 280, ITNS 281, ITNS 282 or ITNS 283, ITNS 285, ITNS 286, ITNS 287, Form 26QC, Form 26QB, Form 26QD, Demand Payment for Form 26QC or Demand Payment for Form 26QB, whichever is relevant and applicable to the individuals. E-taxes can be paid online here

How to file TDS returns?

TDS return is a statement of all financial transactions pertaining to payment of taxes made by the individual or on the behalf of individuals to the Income Tax department. It is a quarterly statement and can be filed with all the necessary documents. One would need to fill all the forms as applicable and mandated by the tax department here.

TDS Forms-

The various forms pertaining to TDS are as follows-

Form 24Q- Form required to filled by the employer of an organization for all payments in the form of salaries.

Form 26Q- Form required to be filled by a person/organization making payments apart from salaries to the recipient.

Form 27Q- TDS form filled by individuals/organizations making payments in the form of interest, dividends, or any other non-salary payments to non-resident Indians (NRIs).

Form 27EQ- TDS form consisting of all details relevant to the collection of tax at the source.

Forms can be downloaded here

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.