TDS is treated as pre-paid taxes as it is paid in advance to the government. It is the duty of the person who paid to someone for his service, goods etc. These payments are specified by the act like salary payment, interest on securities, contract payment, dividends etc. Who deduct TDS of payee is called deductor and whose tax is deducted called deductee. 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 (A.Y. 2015-16) (Rs.60 lacs for A.Y.2012-13) in case of a business, or Rs. 25 lacs (A.Y.2015-16) (Rs. 15 lacs for A.Y. 2012-2013) in case of a profession.
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.
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