TDS Deductions (Tax Deducted at source)

TDS means tax deducted at source. Tax is to be deducted when payment is due or actual payment is made, whichever is earlier. If a person who is responsible for deducting TDS fails to do so, then the Assessing Officer has powers to disallow whole of such expenditure for ascertaining taxable profits. TDS payments to the income tax departments need to be paid before the 7th of the next month to which the payment corresponds. Let us understand this with scenarios.

 TDS on Rent:

TDS of 10% is to be deducted in case the rent payable is more than Rs 1.8 lakh in a financials year. Let’s say the rent payable is Rs 20,000 per month, the person paying rent must deduct 10% (Rs 2,000) must be deducted from the rent and it should be paid to the income tax department as TDS before the 7th of the next month.

 TDS on Technical Payment:

Let’s say you make a payment of Rs 40,000 to a website developer as technical payment. TDS of 10% must be deducted at the time of payment. So Rs 36,000 will be paid to the website developer and Rs 4000 will be paid to the income tax department as TDS.

 TDS on Salary to Employee:

The person responsible for paying salary is liable to deduct TDS and pay the same to the income tax department. The TDS to be deducted depends on the salary, allowable allowances, taxable perquisites and deductions under chapter VI-A. Only if TDS return is filed, form 16 can be issued to the employees.