1 (TDS) What is TDS (Tax Deducted at source) ( Hindi)
Case TDS 1 -
What is TDS
Solution - By
Amlan
TDS stands for tax deducted at source
....at source means , before making payment we deduct the tax and then remit the balance payment ...this deducted payment is called the tax deducted at source
How much tax is to be deducted at source depends on what kind if expense is being incurred ...
..
If the expense being incurred is salary , TDS is deducted at a certain rate !
If the expense being incurred is interest on securities , TDS being deducted is again at a certain rate
So , any expense has to be first identified and then the tax deduction is done ....
Much like income heads which we have been studying so far , even every expense head and applicable TDS is covered by defined sections of the IT act ,
1961
Let's look at a few examples of TDS deduction at source ,
( A) Case 1 - Salary
Say, the assesse is a employer and has to pay salary to it's employee of say
100 Rs Expense - Salary
Section for TDS -
192
Here , the company will deduct as per TDS provisions u/s 192 , which states to deduct as per income slabs
Since the income is assume at 100 Rs , ( so it falls below threshold limit ), so the employer will not deduct any tax observing income slabs which says nil tax for any amount below 2 lakhs , 10 % for 2-5 lakhs , 20 % for 5 - 10 lakhs , and 30 % for more than 10 lakhs
( B) Case 2 -
Bank FD interest income
Say in this case , the assesse is a bank which will be paying interest to the beneficiary for the term deposit of 100 Rs @ 10 % annually i.e 10 Rs
Expense - FD interest income
Here bank will look at Section 194 A for guidance
The section asks to deduct 10 % on interest i.e 10 % of 10 Rs = 1 Rs
Assuming 10 % interest on 100 Rs , the bank is supposed to pay 10 Rs ...the bank deducts 1 Rs ( 10 % of 10 Rs ) and pays the assesse 9 Rs
( C ) Case C -
Professional fees
Say , in this case , the consulting firm will pay professional fees to the assesse ......
Expense - Reimbursement for profession
Here , the firm will be guided by section 194 J
The section guides to deduct TDS at 10 %
So , 10 % of 100 Rs = 10 Rs will be deducted as TDS and and balance 90 Rs will be handed to the employee
So , we can see how depending on the expense , the assesse is guided by the sections which allow him to narrow down on the TDS rate and subsequently deduct that much amount and pay the balance to the beneficiary
We looked at expenses for salary , FD interest , Professional fee for the assesse ...however it could have been anything ----contract fees , cab hiring services etc etc .....the concept remains the same , while making the payment , the assesse has to look at specific sections listed for the marked expense for TDS and accordingly do the TDS deduction before remitting the balance to the beneficiary ,
Later the assesse files the TDS return( 24 Q etc etc )
The beneficiary files the income tax return(
ITR 1/2/3/4/5/
6/7)
Hope the concept of TDS is now clear ,
Humble regards ,
Amlan Dutta