Defining the fundamentals of TDS provisions:
According to the regulations outlined in the Income Tax Act, individuals who make various types of payments such as salary, commission, interest, professional fees, rent, and others are required to deduct TDS (Tax Deducted at Source) before disbursing the payment. Furthermore, it is mandatory to remit the deducted TDS amount to the government.
What is the date for the applicability of TDS provisions and the deadline for TDS payments?
Within the framework of the TDS provisions outlined in the Income Tax Act, it is essential to adhere to specific deadlines for the remittance of TDS (Tax Deducted at Source) amounts.
When TDS is deducted during June, it is imperative to ensure its submission to the government by no later than the 7th of July. Conversely, for TDS deductions made in the month of March, the deadline for payment extends until the 30th of April, allowing for a slightly more flexible time frame.
As for TDS deductions associated with rent and property purchases, it is crucial to fulfill the payment obligation within 30 days from the culmination of the respective month in which the TDS was deducted. This careful adherence to the stipulated deadlines ensures compliance with the TDS provisions established by the Income Tax Act.
Unfolding the TDS provisions' applicability:
TDS Deduction Requirement:
Every person or organization that makes specific payments as outlined in the Income Tax Act is required to deduct Tax Deducted at Source (TDS) during the payment process.
However, no TDS deduction is necessary if the payer is an individual or HUF (Hindu Undivided Family) whose books are not required to undergo an audit.
TDS on Rent Payments:
Individuals and HUFs making rent payments exceeding Rs 50,000 per month are obligated to deduct TDS at a rate of 5%, even if they are not liable for a tax audit.
Individuals and HUFs subject to TDS deduction at 5% are not required to apply for a TAN (Tax Deduction and Collection Account Number).
TDS Deduction by Employers and Banks:
Employers deduct TDS from employee incomes based on the applicable income tax slab rates.
Banks deduct TDS at a rate of 10%, but if PAN (Permanent Account Number) information is not available, they may deduct TDS at a rate of 20%.
TDS Rates and Specified Payments:
The income tax act specifies the rates of TDS for various types of payments, and the payer deducts TDS based on these rates.
Exemption from TDS:
If you submit investment proofs to your employer and your total taxable income falls below the taxable limit, you are not required to pay any tax, and hence no TDS should be deducted from your income.
In a similar vein, if your overall income falls below the taxable threshold, you have the option to submit either Form 15G or Form 15H to the bank, thereby preventing any deduction of Tax Deducted at Source (TDS) on your interest earnings.
Claiming Refund of TDS:
If you were unable to submit proof to your employer or if TDS has already been deducted by your employer or bank, and your total income is below the taxable limit, you can file a return and claim a refund of the TDS amount.
Complete List of Specified Payments:
The income tax act provides a comprehensive list of specified payments eligible for TDS deduction, along with the corresponding TDS rates.
Let us find out which section deals with the TDS provisions in GST
Tax Deducted at Source (TDS) serves as a mechanism for collecting taxes, whereby a certain percentage of the payment amount for goods or services is deducted by the receiver. This deducted tax serves as a vital source of revenue for the government.
The regulations concerning TDS in the context of the Goods and Services Tax (GST) are outlined in Section 51 of the Central Goods and Services Tax (CGST) Act, which should be referred to in conjunction with CGST Rule 66. These provisions lay down the guidelines and procedures for the deduction and remittance of TDS under the GST framework.
Unveiling the Entities Accountable for TDS Deduction under GST Guidelines:
Under the GST law, there are entities that bear the responsibility of deducting Tax Deducted at Source (TDS). These include departments or establishments associated with the Central Government or State Government, local authorities, governmental agencies, and individuals or specific categories of individuals as notified by the Government. It is crucial for these entities to adhere to the TDS provisions while making specified payments mentioned in the Income Tax Act.
Furthermore, as per the September 13, 2018 notification, certain entities have been mandated to deduct TDS. This includes authorities, boards, or bodies established by Parliament, State Legislature, or any government, with 51% government equity (control). Societies registered under the Societies Registration Act of 1860, established by the Central or any State Government or Local Authority, are also obligated to deduct TDS.
Additionally, public sector undertakings (PSUs) are among the entities required to comply with TDS deduction as per the provisions. These measures ensure the effective implementation of TDS regulations and contribute to the proper collection of taxes under the GST framework.
In accordance with GST regulations, TDS must be deducted at a rate of 2% on payments made to suppliers of taxable goods and/or services. This deduction applies when the total value of such supplies, under a specific contract, surpasses Rs. 2,50,000.
However, it is important to note that no tax deduction is required when the supplier's location and the place of supply differ from the state where the recipient is registered.
Let us find out about the updates regarding the TDS provisions for fy 2022-23 and a year prior
1) A person is liable for Tax Deduction at Source (TDS) at a rate of 1% when making payments for the transfer of virtual digital assets.
2) Starting April 1st, 2023, cooperative societies are required to deduct tax on cash withdrawals exceeding Rs 3 crore, instead of the previous limit of Rs 1 crore.
3) A proposed amendment to the amount for TDS deduction on the sale of immovable property. The buyer should deduct tax at a rate of 1% on the sum paid/credited or the stamp duty value of the property, whichever is higher.
4) There is no exemption from TDS on interest earned from listed debentures. Therefore, the tax must be deducted from the interest accrued from such specified securities.
5) The TDS rate on provident fund (PF) withdrawals for employees without a PAN has been reduced to 20% from the maximum marginal rate.
6) Starting April 1st, 2023, non-residents earning income from mutual funds in India can present a Tax Residency Certificate to avail of the TDS benefit as per the rate specified in the tax treaty, instead of the standard 20% rate.
7) Any person providing perks or benefits, whether convertible into money or not, to a resident for carrying out any business or profession is required to deduct TDS at a rate of 10%.
8) Section 194BA introduced TDS on income earned from online gaming activities.
Q1: What is the significance of Tax Deducted at Source (TDS)?
TDS serves as a pivotal measure to collect taxes at the source of income. It entails deducting the applicable tax amount before making specific payments and subsequently remitting it to the government.
Q2: Who bears the responsibility for TDS deduction under the GST law?
The obligation of TDS deduction under the GST law falls upon entities such as departments or establishments of the Central Government or State Government, local authorities, governmental agencies, and individuals or categories of individuals as notified by the Government.
Q3: At what point should TDS be deducted in accordance with the Income Tax Act?
TDS should be deducted during the payment process for the specified payments as outlined in the Income Tax Act. However, it is noteworthy that individuals or Hindu Undivided Families (HUFs) whose books are not subject to audit are exempted from this deduction requirement.
Q4: What are the ramifications of non-compliance with TDS deduction or failure to remit the deducted amount to the government?
Non-compliance with TDS deduction or the failure to remit the deducted amount within the specified timeframe can give rise to penalties, interest, and legal repercussions. Adhering to TDS provisions is essential to ensure compliance and avoid potential consequences with the tax authorities.