Tax Deducted at Source or commonly known as TDS is implied on various types of income and collected in accordance with provisions mentioned in the yearly union budget. The tax slabs and rates are decided on the nature of the heads under which the income is booked. Likewise, the other indirect taxes such as service tax, TDS are also collected prior release of a payment. The TDS rates and collection is regulated by CBTD (Central Board for Direct Taxes).TDS is basically like a spot tax, deducted from the actual source of income. The same is described in the indirect tax section of Income tax Act 1961.It is implied on receiving income from various financial products. TDS is charged on various incomes earn generated in the form of incentives, commissions, payment & dividends earned for a variety of sale, services, rent or purchase of a property, interest earned on term deposits, etc.
The rates at which TDS is applied may vary as per the nature of income which could be between 1% – 30%. The onus to collect TDS and deposit the same lies on the service provider or the seller.
Rationale for TDS Deduction
TDS is applied on any Income or overheads such as incentive (over & above salary), interests on fixed deposit from banks, lotteries, commission payment and rent payment. While making payments in any of these heads, a fixed rate is applied and the tax liability is deducted prior making the payment. If one has deducted more than the required tax amount, you will be eligible for a TDS Refund.
The source or person who deducts TDS is referred as “Deductor”. The person to whom the payment is being done is termed as “Deductee.”. For example, a deductor is an employer/ organization paying salary or incentive to their employee who would be a deductee.
The employer or Deductor is accountable to provide Form 16 /16A (TDS certificate) to the employee with the computation of the tax deducted amount. NO TDS certificate can be issued for nil tax holding such as those payments which are exempted. Internships – Your jobs provides listing in Learner ships, Internships, Bursaries and Jobs vacancy in Southern Africa. Relevant Learner ship programmers are available as advertised by both the public and the private sector. Visit: www.yourjobs.co.za.
Exceptions in TDS deduction:
There are few cases when the TDS is exempted. TDS is not levied on payments in favor of RBI, or towards any other recompense to the central government. Apart from this, TDS is exempted from the payment of interest from the
- Banking companies
Financial corporations formed under the finance bill of union government or any state
Income Tax refund
Direct taxes interest payment
LIC, UTI and investments in co-operative societies
Interests earned in recurring deposit or any savings account held with any commercial banks or cooperative societies
Interest earned on Indira Vikas Patr (IVP), NSC or KVP
Interest earned on NRE account
Any institutions notified as Nil TDS organization
Apart from the above, TDS might not be pertinent on various other avenues as well. For example interest earned on the compensation granted from Motor Vehicles Claims Tribunal.
Different Sections of TDS
TDS return filing is basically a spot tax, deducted from the actual source of income. The same is described in the indirect tax section of Income tax Act 1961. It is implied the income received from financial products like interest received on fixed deposits, incentives from the employer, commission’s payments, dividends on bonds, sale/purchase or rent of any immovable property and money earned as lottery or awards. The TDS rate applicable under different sections & subsection of is between 1- 30%.