Every person crossing the basic exemption limit during the financial year must file Income Tax Return and pay tax on such income. However, there is still a large portion of the population that does not file an Income tax return. To prevent loss to the exchequer, provisions of tax deduction were introduced. This tax deduction is made compulsory for specified persons when making a specified payment. This tax deduction at the time of making a payment is known as Tax Deducted at Source (TDS). The meaning of TDS in income tax can be understood as a deduction of tax at the time of making any specified payment. This TDS so deducted must be deposited with the government within the time prescribed.
Meaning of TDS in Income tax
It has a simple meaning that tax is deducted at source when making the payments. In this article, we will understand Meaning of TDS in Income tax with examples. Also, we will focus on liability to deduct TDS, due dates, TDS returns, certificates and rates of deduction.
When does TDS Liability arises?
Normally, a person earning income is required to deposit tax with the government. However, in TDS, a person making payment need to deduct TDS and pay the same to the government. Therefore, it is a type of advance tax being collected by the government. Now, the most important question is beyond meaning of TDS in income tax in India and extends to when does TDS liability arises?
- The liability to deduct TDS arises at the time of making specified payments.
- Every person except an Individual or HUF is liable to deduct TDS at the time of making a payment.
- An individual or HUF is only liable to deduct TDS, if it is liable to tax audit u/s 44AB of the Income Tax Act,1961.
- Any individual or HUF not liable to a tax audit, however, it is making rent payment of more than Rs. 50,000 per month, must deduct TDS @ 5% at the time of making such payment.
TDS due dates chart in explained Meaning of TDS in income tax
Once we understand the meaning of TDS in income tax, it is important to understand the due dates. Every person is liable to deduct tax from the payment being made if it is mentioned under the provisions of income tax. However, every person must deduct tax if the payment made is liable for deduction under provisions of the Income Tax Act, 1961. The TDS due dates chart below explains the dates by which the payments need to be made
These persons deducting tax must deposit the same with the Income-tax Department. The due date for depositing tax collected are as follows:
| Month | Due Date |
| April | 7th of May |
| May | 7th of June |
| June | 7th of July |
| July | 7th of August |
| August | 7th of September |
| September | 7th of October |
| October | 7th of November |
| November | 7th of December |
| December | 7th of January |
| January | 7th of February |
| February | 7th of March |
| March | 30th of April |
An assessee can make payment of TDS online on https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp through Challan 281.
Every person must deduct tax if the payment made is liable for deduction under provisions of the Income Tax Act, 1961
TDS due date of Return
Every person deducting TDS must also file a return with the department. There are various forms prescribed by the department under which the assessee needs to furnish details of tax deducted and deposited. A form is prescribed for each type of payment. In the chart below, we have explained the TDS due date of return. It is pertinent to understand the meaning of TDS in income tax as only then you would be able to make the timely payments and file returns.
The TDS return is filed quarterly. Details of form to be filed and its due date is as follows
| Form No | Details to be furnished | Due Date |
| 24Q | Salary | Quarter-1: 31 July
Quarter-2: 31 October Quarter-3: 31 January Quarter-4: 31 May |
| 26Q | All payments other than salary (for example- professional fee, etc.) | Quarter-1: 31 July
Quarter-2: 31 October Quarter-3: 31 January Quarter-4: 31 May |
| 26QB | On the sale of property | Within 30 days of the end of the month in which TDS was deducted |
| 26QC | TDS deducted on rent u/s 194-IB | Within 30 days from the end of the month in which TDS was deducted
|
| 27Q | On payments made to Non-residents (except salary) | Quarter-1: 31 July
Quarter-2: 31 October Quarter-3: 31 January Quarter-4: 31 May |
| 27EQ | Tax Collected at Source | Quarter-1: 15 July
Quarter-2: 15 October Quarter-3: 15 January Quarter-4: 15 May |
TDS CERTIFICATE Income Tax
The meaning of TDS in income tax would be clear by now. Another important point to remember is that every person deducting tax must issue a TDS Certificate to the person whose tax is deducted. It is compulsory to issue TDS certificate. Type of TDS Certificates and their due dates are as follows:
Normally the due date of issuing TDS certificates is within 15 days of the due date of filing of TDS return.
| Form | Certify TDS Deducted on | Due Date |
| Form 16 | Salary | Yearly- June 15 |
| Form 16A | Non-salary (for example professional fee) | Quarter-1: 15 August
Quarter-2: 15 November Quarter-3: 15 February Quarter-4: 15 June |
| Form 16B | Property | 15 days from the due date of filing of return |
| Form 16C | Rent | 15 days from the due date of filing of return |
TAN
Once we have understood the meaning of TDS in income tax another important topic is TAN. Tax Deduction and Collection Account Number also known as TAN is a 10-digit alphanumeric number. TAN is obtained so that a person can deduct tax at source (TDS) or collect tax at source (TCS). A person’s conducting business cannot deduct tax until he obtains TAN. In case of failure to apply for TAN on eligibility attracts a penalty.
After getting a TAN a person must deduct and deposit tax on transactions specified under the provisions of Income Tax act 1961. TAN number is mandatory to be quoted on Form 16/16A, 26AS.
Any individual or HUF deducting TDS on rent @ 5%, as mentioned above, need not obtain TAN.
TDS rate chart 2019-20
The Income Tax Act has prescribed various rates at which tax is to be deducted on making the specified payment. For this year, we need to follow TDS rate chart 2019-20. These rates vary from payment to payment. We hope you have clarity around meaning of TDS in income tax and will be able to differentiate between types of payments. Some of the payment as specified by the provision of the Income Tax Act, 1961, on whom TDS needs to be deducted are as follows:
| S. No. | Type of Payment | Section | Cut-off | TDS Rate Chart 2019-20 | |
| PAN Available | PAN not available | ||||
| 1 | Salary | 192 | Slab Rate | Slab rate | 30% |
| 2 | Accumulated Balance of Employees’ Provident Fund | 192A | If more than Rs. 50,000 | 10% | 20% |
| 3 | Payment of Interest on Securities by Company | 193 | 10000 | 10% | 20% |
| 4 | Dividend on which Dividend Distribution Tax is not paid | 194 | 2500 | 10% | 20% |
| 5 | Payment of Interest by bank | 194A | Rs. 40000 for normal citizens Rs. 50000 for Senior Citizens |
10% | 20% |
| 6 | Payment of Interest by others | 5000 | 10% | 20% | |
| 7 | Winnings from Lotteries, etc. | 194B | 10000 | 30% | 30% |
| 8 | Winnings from Horse Race | 194BB | 10,000 | 30% | 30% |
| 9 | Contractors | 194C | single bill Rs. 30000 or total bill more than 1 lakh total bills during the year | Individuals-
1% Others- 2% |
20% |
| 10 | Transporter (owns no more than 10 goods transporting vehicles | 194C | Declaration Required | 0% | 20% |
| 11 | Transporter (owns more than 10 goods transporting vehicles | 194C | single bill Rs. 30000 or total bill more than Rs. 75000 total bills during the year | Individuals-
1% Others- 2% |
20% |
| 12 | Insurance Commission | 194D | 15000 | Individuals-5%
Others- 10% |
20% |
| 13 | Payment on Life Insurance Policy | 194DA | 100,000 | 5% | 20% |
| 14 | Non-resident Sportsmen/association/organization | 194E | – | 20% | 20% |
| 15 | Payment from National Saving Scheme | 194EE | 2,500 | 10% | 20% |
| 16 | Payment concerning repurchase of units by Mutual Fund Companies. | 194F | – | 20% | 20% |
| 17 | Payment of Lottery Commission | 194G | 15,000 | 5% | 20% |
| 18 | Payment of commission or Brokerage | 194H | 15000 | 5% | 20% |
| 20 | Rent (land, building, furniture, and fittings) | 194I | 240,000 | 10% | 20% |
| 21 | Payment of rent on plant, machinery or equipment | 240,000 | 2% | 20% | |
| 22 | Transfer of immovable property other than agriculture land | 194IA | 50,00,000 | 1% | 20% |
| 23 | Rent payable by an individual or HUF not covered above (w.e.f. from 01.06.2017) | 194IB | If rent is more than Rs. 50,000 per month | 5% | 20% |
| 24 | Payment under specified agreement | 194IC | – | 10% | 20% |
| 25 | Professional Fees other than call centers | 194J | 30000 | 10% | 20% |
| 26 | Professional Fees to call centers | 30000 | 2% | 20% | |
FREQUENTLY ASKED QUESTIONS (FAQs)
1. What is meaning of TDS in income tax?
It has a simple meaning that tax is deducted at source when making the payments
2. I am an employer. Do I need to deduct tax on salaries payable to employed?
Yes. Every employer must deduct TDS on salary payable if the salary during the year is more than the basic exemption limit. You should follow TDS rate chart 2019-20
3. Does the bank deduct tax on payment of interest?
Yes, if payment of interest during the year is more than Rs. 40,000, then the bank will have to deduct tax on payment of interest @ 10%.
4. Is it mandatory to obtain TAN if I am liable to deduct TDS?
It is mandatory for every person who is periodically deducting TDS to obtain TAN. However, an individual or HUF deducting tax u/s194-IB does not need to obtain TAN.
5. What is the due date of paying tax deducted?
The due date of depositing TDS is by the 7th of next month by following TDS rate chart 2019-20. However, tax deducted for March can be deposited by 30th April.
6. Which TDS return is filed for tax deducted on salary?
Form-24Q is filed quarterly furnishing details of tax deducted, deposited and details of persons whose tax is deducted.
7. I want to deposit TDS deducted online, where should I deposit the same?
You can deposit TDS online on the NSDL site by clicking here. You need to deposit the tax deducted through Challan No. 281.
8. I am paying monthly rent of Rs. 60,000. Do I have to deduct TDS?
Yes, if you understand the meaning of TDS in income tax, all individuals or HUF, even if not liable to tax audit, need to deduct tax @ 5% as per TDS rate chart 2019-20, if monthly payment is more than Rs. 50,000.
9. I have deducted tax on purchase of property. What is the last date of payment?
You must deposit TDS with the Income Tax Department by the 7th of the next month from the month in which such tax was deducted.
10. Which form is used to file return for TDS deducted on purchase of property and what is the due date of filing such return?
You must furnish details of tax deducted and deposited on purchase of immovable property in form 26QB within 30 days form the end of month in which TDS was deducted.
11. Which TDS certificate is issued for salary?
The meaning of TDS in income tax describes the nature of payments on which TDS needs to be deducted. When TDS is deducted from salary, Form 16 is the tax certificate issued annually by the employer. This form contains details of salary credited and tax deducted on such salary.
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