Any persons responsible for making specified payment (check here specified payment) as prescribed in income tax are liable to deduct tax at source. The obligation to deduct tax at source is upon the person responsible for paying the income/amount which is subject to TDS.
What is the rate of TDS?
Its depends on the nature of payment you are paying. For example if you are paying salary then the tds rate will be applicable as per income tax slab. (See income tax slab here). If you are paying commission to someone then the TDS rate will be applicable as prescribed on commission i.e. 5% under section 194H. (See TDS on commission here).
Who are Liable to Deduct TDS?
The following persons are liable to deduct TDS and deposit to government on behalf of deductee. Income Tax Act require specified persons to deduct tax on particular types of payments being made by them. The list of such persons requiring to make TDS is contained in TDS provision listed here. The following are the specified person who are liable to deduct TDS.
- An Individuals or an H.U.F. is not liable to deduct TDS on such payment except where the individual or H.U.F. is carrying on a business/profession where accounts are required to be audited u/s 44AB, in the immediately preceding financial year. A person is liable to get its accounts audited u/s 44AB if during the relevant financial year its gross sales, turnover or gross receipts exceeds Rs. 1 Crore (Business) or Rs. 50 Lacs in case of profession.
Responsibilities of Payer / TDS Deductor
- Persons who are liable to deduct TDS as per above stated conditions must apply for allotment of ‘TAX DEDUCTION AND COLLECTION ACCOUNT NUMBER’ (TAN) in form No. 49B within one month from the end of the month in which tax was deducted. TAN is mandatory to mention on all transaction related to TDS like TDS certificate, TDS Returns and other related documents. There is penalty of Rs. 10,000 on failure to apply TAN. (Download Form 49B Here)
- He is to deduct tax from the income/payment mentioned in the various section i.e. section 192 to 196D. (Check here specified payment)
- The amount so deducted should be deposited in challan no.281 (except in case of section 194IA or 194IB) (Check here how to deposit tax)
- The payer should prepare such statement/returns and file the same with the specified period. (Check TDS Return Procedure here)
There are also some conditions where is no liability of deductor to deduct TDS as follows.
- On declaration furnished by payee on Form 15G or 15H as the case may be
- On certificate issued by ITO
- Payment to Government/RBI/Statutory Corporation etc.
- Exempt Incomes
- Interest Payment by Offshore Banking Unites
- Payment to New Pension System Trust
- Notified payment to Notified Institutions/Associations