TDS returns summarize all the TDS transactions that occurred during a quarter. TDS Returns are quarterly statements of TDS that are submitted by deductor to the Income Tax Department.
A TDS (Tax Deducted at Source) is a method of collecting tax by the Government of India when certain payments are made. The following are examples: rent, commissions, professional fees, interest, and salaries. Taxes are deducted when money is credited to the payee’s account or when the payment is made, whichever comes first.
In this article, we look at the various aspects of TDS return.
What is TDS Return?
The TDS Return is the quarterly statement that the deductor/employer files with the Income Tax Department. Alternatively, it can be defined as the total of all TDS-related transactions during a quarter.
TDS returns summarize all TDS entries collected by the deductor and paid to the Income Tax authority. There are the following details on the TDS return statement:
- Deductee’s PAN number
- In-detail particulars of the TDS contributed to the government’s income
- Information regarding TDS Challan
- Payment amount
- Section under which TDS is deducted
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TDS Return Types: What are they?
It is mainly determined by what type of income the deductee has that determines the type of TDS return form to be submitted. Different conditions require different forms of TDS return.
- Form 24Q
Under Section 192 of the Income Tax Act, 1961, it is used for preparing eTDS returns for a deduction on salaries. It needs to be submitted quarterly by the deductor and contains details like salaries paid and the TDS deducted.
It contains 2 annexures:
- a) Annexure-I comprises of the details of the deductor, deductees and challans
- b) Annexure-II comprises of the salary details of the deductees
- Form 26Q
To deduct taxes at source, all payments except salaries must be submitted on Form 26Q. According to Sections 200(3), 193 and 194, it is also required to be submitted quarterly. Taxes are deducted from interest, dividends, professional fees, and director’s sitting fees. For non-government deductors, it is mandatory to present a PAN.
- orm 27Q
Under Section 200(3) of the Income Tax Act, TDS is applicable to payments other than salary made to non-resident Indians and foreigners. Interests, bonuses, additional income, and sums owed to a non-resident of India are all deductible.
- Form 27EQ
There is a mandatory requirement to provide TAN in this TDS return form, which is submitted on a quarterly basis. Taxes are collected at source by sellers when buyers purchase certain commodities under Section 206C of the Income Tax Act. In addition to cash, credit cards, demand drafts, checks, or any other means of payment, the tax is collected in any form.
Where is TDS Applicable?
The following is where TDS is applicable:
- The employer deducts TDS as per the income tax slab rates applicable.
- Banks deduct TDS @10%. They may deduct 20% if they do not have your correct PAN information.
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- Rent payments made by individuals and HUF (Hindu Undivided Family) exceeding Rs 50,000 per month, has a deductible TDS @ 5% even if the individual or HUF is not liable for a tax audit.
The TDS Rates are specified under the income tax act, and TDS is deducted based on these specific rates.
How is TDS Calculated?
Section 80C and section 80D of the Income Tax Act, 1961 allow tax deductions. You can then search for various types of investments for a particular year based on this information.
By reducing the exemption from total annual earnings, you can calculate TDS on salary. To approve a tax declaration, the employer obtains the employees’ declaration and proof.
Below are a few steps to calculate TDS on your income:
1) First calculate your gross annual income, allowances and perquisites
2) Estimate The exemptions under Section 10 of the Income Tax Act on allowances such as medical, house rent and travel.
3) Reduce the exemptions from the gross monthly income
4) If you have any other source of income such as from house rent, subtract this amount from the figure calculated above
5) Now, calculate your investments for the year under Chapter VI-A of ITA and deduct the amount from the above estimated gross income
6) Finally, deduct the maximum allowable income tax exemptions on your salary