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Introduction- Tax Deducted at Source (TDS)

Introduction – Tax Deducted At Source (TDS)

When a person responsible for paying any income deducts Income Tax on income at the time of payment of income, it is called ‘Deduction of Tax at source-TDS’.

  1. Individuals (including Proprietary concerns) & HUEs, carrying on business/profession, whose Gross Sales, Turnover or Gross Receipts in the previous year exceeds As. ` 1 Cr. (in case of business) and ` 25 Lac (in case of Professionals), shall also be liable to deduct TDS on all specified payments except payments made for personal purpose.

  2. TDS has to be compulsorily deducted by the person responsible for paying.

  3. If the Payee submits a declaration in Form 15G/ 15H in duplicate stating the following, then TDS need not be deducted:

  4. That his total income is less than basic exemption limit of `. 2 Lac.

  5. Even if his total income exceeds basic exemption limit of ` 2 lac but tax payable after deducting rebates u/s 80C is nil.

  6. Int. on secuty & other loans in case of Senior Citizens (For others in Form 15G). Senior Citizen can also give self declaration in respect of Dividend & NSS. TDS in respect of Contractors/ Sub-contractors under 194C to be deducted if sum exceeds `. 30,000 or `. 75,000 in aggregate in a financial year. Expenditure will be disallowed if TDS is not deducted.

  7. If deductee does not furnish his PAN then TDS rate will be 20%.

  8. Any Person receiving any sum or income on which tax is to be deducted at source, shall furnish his PAN to the person responsible for deducting TDS.

  9. Any person who desires to furnish a declaration in Form 15G or 15H for no deduction of TDS, shall also indicate his PAN on such declaration, otherwise TDS shall be deducted @ 20%.

  10. Surcharge and cess on TDS in relation to non- salary payments removed.

  11. In case where tax was deducted but not deposited within the due date, the payment was disallowed for that financial year. It was allowed in the year of actual deposit of tax.

  12. Interest on delay in depositing taxes deducted increased to 1.5% p.m. or part of the month.

  13. TDS is a scheme of collecting tax in the year in which the income has been earned by the assessee.

  14. Under the scheme , the person, who is making the payments under the specified sources, is required to deduct tax at source at the prescribed rate.

  15. The person who deducts tax is known as tax deducter or a payer of income.

  16. if is the duty of the tax deducter to deposit the TDS into the Govt. treasury within the specified time along with a statement, in the prescribed form.

  17. if the Tax Deducter does not deduct tax at source or deducted but does not deposited with the Govt. treasury he is treated as assessee in default and is liable for  payment of interest. Penalty proceedings may also be initiated.

  18. The Tad Deducted at Source is regarded as the income of the assessee and it is included in his gross total income

  19. The Tax deducted at source is adjusted against the final payment of tax if proof of TDS certificate is furnished along with the return of income.

The specified cases where tax is deducted at source are : Salaries, Interest on Securities, Interest other than interest on securities, dividends, winning from lotteries and crossword puzzles, payment to contractor, insurance commission, winning from horse races and also on other sums chargeable under the Act, which are paid to non-resident.

The Tax on Total Income is collected in three ways---

  1. Deduction of Tax at Source (TDS)
  2. Advance Tax ; and
  3. Tax on assessment through demand notice i.e. Direct Payment of Tax.

TDS Table & Their Limits :

SL. No.


Threshold Limit(`)

TDS Rate


Int. on Debentures




Int. on FD’s in Banks/Hsg. Finance Cos. & 8% taxable bonds




Int. other than Int. on securities




Insurance Commission to Agents (Individuals)




Insurance Commission to Agents (Domestic Cos.)




Winnings from Lotteries/Cross-word/Game Shows




Commission earned on sale of Lottery Tickets




Winnings from Horse Races




Payments to Advertising Agency


1% *


Payments to Contractors (per contract)


1% *


Payments to Sub-contractors


1% *


Commission & Brokerage (other than
transactions relating to Shares & Securities




Payment of fees to Professionals Technical Services




Payment of Rent




Payment of Rent on Plant & Machinery or Equipments




Note : * 2% if the recipient is other than Individual or HUF

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Power Of Survey [ Section 133a ]
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Introduction- Deduction of Tax at Source (TDS)
Deduction of Tax from the “Salary” [ Sec-192]
Deduction Of Tax From Interest On Securities [ Section-193]
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