In strictly financial terms, TDS refers to Tax Deduction at Source. To elaborate, TDS is basically the event where the payer deducts an amount of money while paying the payee, as the payment amount exceeds the threshold. The threshold limit and the rate at which the amount is deducted, are all mentioned under the Income Tax Act of 1961.
There are strict rules to comply with the TDS rules, and not adhering to them can have consequences. A TDS defaulter usually has a large amount of fine to pay.
TDS Deduction and Return Filing
TDS is deducted from the parties concerned on the 7th of the month following the current one. For example, your TDS deduction for February will take place on the 7th of March.
The payment for TDS can be made via cheque or cash by challan, or through an online banking system. For challan, the assessment year and section under which the TDS is being deducted are mentioned.
In case of filing a TDS return, the deductors applied with a Tax Deduction and Collection Account Number (TAN), have to file quarterly. There also needs to be a declaration if there is no deduction.
There are certificates that show the amount of tax deducted by the depositor. You can generate the TDS certificates from a website that the Income Tax Department of India owns. There are two main types of forms for TDS – Form 16 and Form 16A.
Form 16 is required for the TDS for income from salary. It’s a sign of you being employed. It contains a salary breakup and tax deduction for the particular financial year.
On the contrary, form 16A is the TDS certificate applicable for the deduction of any kind of income other than salary.
Applicability for TDS Compliance
Not everybody has an equal slab for TDS compliance. There are varying conditions for TDS to be deducted on a particular transaction. The conditions are mentioned under the Income Tax Act of 1961, while the limits and rates are followed as per the latest changes for Fiscal Year, 2019-20 and Assessment Year, 2020-21. Based on salary and other sources of income, the limit exceeds INR 2,50,000, depending on the section it is under.
It’s not that the TDS is only applicable for Indian residents. It is applicable to NRIs as well. However, for the NRIs, it is applicable only if the income is liable to tax in India or if the income is earned at the source in India.
TDS Compliance Calendar for March 2020
There are certain due dates to comply with the TDS norms. For the month of March 2020, the dates range from the 1st to the 31st.
7th March 2020: For TDS payment, for the month of February 2020.
10th March 2020: For GSTR-7 and GSTR-8 filing, related to TDS for the month of February 2020.
Non Compliance Consequence
As mentioned earlier, TDS compliance is mandatory. Not complying with it is a serious offence and a punishable crime under the Income Tax Act of 1962.
Under section 201A, non-deduction and non-payment of TDS shall result in interest @ 1% and 1.5% per month respectively being charged on the TDS Amount.
Under Section 271(c), the penalty for defaulters varies between INR 10,000 and INR 100,000, depending on the level of their offence. For wilful defaulters, Section 276(b) applies, where the guilty can face imprisonment of 3 to 7 years.
If you file your TDS return at a later date than the prescribed due date, a penalty of INR 200 is incurred each day. The total penalty can go up to INR 100,000 if the return is filed a year or more after the due date.
In the world of finance, TDS compliance is necessary to fulfil the responsibilities of an employed adult citizen. The due dates for March, with regards to the compliance, remain the same for most years, as it brings the end of the Fiscal Year.