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You might have to pay TDS at higher rates starting July 1, 2021 if you haven’t filed TDS in the last 2 years, and TDS duducted every year exceeds INR 50,000. As per Section 206AB which was introduced in Budget 2021, the final TDS rate will be the highest amongst the following:
The last date of filing TDS — for the 4th quarter of FY 2020-21 — which was May 31, 2021 earlier has been extended to June 30, 2021 by the Central Board of Direct Taxes (CBDT). Similarly, the last date to issue Form 16 has also been moved up to July 15, 2021.
It’s important to note that the new Section 206AB will not hold for the following:
TDS or Tax Deducted at Source is the tax levied by the Government of India on the income of Indian individuals. According to the Income Tax Act, the payer or employer or the firm must deduct TDS at source before paying the fee to the payee or employee, if their annual income is likely to cross the minimum threshold of the tax exemption.
It is, then, the responsibility of the deductor (payer or firm) to deposit the deducted TDS amount with the Income Tax Department as TDS payment in favour of the deductee (payee or employee).
The TDS system of tax collection was introduced by the Government of India with the idea to collect tax at the very source of income to prevent tax evasion. TDS is applicable to different types of payments, which includes:
TDS should be deducted, regardless of the payment method, viz. cheque, cash or credit, and should be deposited with the Income Tax Department under the PAN number of the deductee.
Mentioned are the different types of TDS and the corresponding rates for TDS, as per the Income Tax Department:
Type of payment | Applicable section | TDS rate from 1st April to 13th May 2020 | TDS rate post 14th May 2020 |
Salary | 192 | As per relevant income tax TDS slabs, including cess if any | As per relevant income tax slabs, including cess if any |
Interest earned from securities | 193 | 10.00% | 7.50% |
Accumulated taxable earnings on PF | 192A | 10.00% | 10.00% |
Interest earned from fixed deposit | 194A | 10.00% | 7.50% |
Dividends earned from company-owned shares and mutual funds | 194K & 194 | 10.00% | 7.50% |
Winnings from bets on horse races | 194BB | 30.00% | 30.00% |
Winnings from crosswords, lottery or any other game | 194B | 30.00% | 30.00% |
Insurance commission earned by the individual | 194D | 5.00% | 3.75% |
Contractors and subcontractor payments | 194C | 1% (HUF/Individual), 2% (others) | 0.75% (HUF/Individual), 1.5% (others) |
Payments on deposits made under National Savings Scheme | 194EE | 10.00% | 7.50% |
Taxable Life Insurance Policy as per Section 10(10D) | 194DA | 5.00% | 3.75% |
Commission, prize money, etc. on selling lottery tickets | 194G | 5.00% | 3.75% |
Payments made on UTI or Mutual Funds re-purchases | 194F | 20.00% | 15.00% |
Payment made for buying property or land | 194 IB | 1.00% | 0.75% |
Brokerage or commission received other than an insurance commission | 194H | 5.00% | 3.75% |
Rent payment by HUF or individual exceeding ₹50,000 every month | 194 IB | 5.00% | 3.75% |
Cash withdrawal of more than ₹20 lakhs or ₹1 crore | 194N | 2.00% | 2.00% |
Payment made to professionals or brokerage or commission of ₹50 lakhs or above | 194M | 5.00% | 3.75% |
Professional fees payment | 194J | 2% (FTS, call centre, certain royalties), 10% (others) | 1.5% (FTS, call centre, certain royalties), 7.5% (others) |
Rent for machinery and plant | 194- I(a) | 2.00% | 1.50% |
Rent for immovable property | 194- I(b) | 10.00% | 7.50% |
TDS for e-commerce participants (w.e.f 01.10.20) | 194O | 1.00% | 0.75% |
In the year 2004, the manual tax collection process was replaced with the Online Tax Accounting System (OLTAS). The technology was introduced to minimise human intervention and to bring in more efficiency and transparency into the tax collection process. The online process not just reduces errors but facilitates online tax collection, deposit and refund, etc. The OLTAS system issues a challan on the same day when the tax gets deposited to the corresponding PAN number. This single copy challan helps taxpayers track their e-challan or challan status.
Depending on the category of the taxpayer, challan is divided into the following three types:
Ideally, the TDS collected or deducted by the payer or employer or deductor must be deposited with the Income Tax Department by the 7th of the next month. However, due to the COVID-19 pandemic, companies are under constant pressure to meet the compliance requirements of the Income Tax Act. The Finance Ministry of the Government of India has made certain changes to the TDS payment due date, keeping in mind the struggles companies are facing due to the pandemic and the lockdown. Thus, the government has reintroduced new dates for TDS payments for FY 2020-21. They are as outlined below.
The month of TDS deduction | TDS payment due date with challan for Govt deductor | TDS payment due date with challan for other deductors |
April | 7th May | 7th May |
May | 7th June | 7th June |
June | 7th July | 7th July |
July | 7th August | 7th August |
August | 7th September | 7th September |
September | 7th October | 7th October |
October | 7th November | 7th November |
November | 7th December | 7th December |
December | 7th January | 7th January |
January | 7th February | 7th February |
February | 7th March | 7th March |
March | 7th April | 30th April |
The payer or deductor or employer must file a TDS return after depositing the tax with the Income Tax Department for the given PAN number.
TDS return is essentially a quarterly statement that must be provided to the IT department by the payer or employer. It is mandatory for TDS deductors to submit the TDS return by the prescribed due date. The details needed to file the TDS return include:
Every employer or payer, who deducts tax at source, has to provide a TDS certificate to the employee or payee.
TDS certificate is essentially a certificate that provides all details about TDS/RCS deductions done by the deductor on the deductee’s income. A TDS certificate is generally known as Form 16/ Form 16A.
While TDS is applicable to most types of income earned by the individual, there are certain scenarios where TDS deduction rules are not applicable to the income. They are:
According to the Income Tax Act, the employer can deduct tax at source at the time of salary paying salary to their employee. The employer can deduct tax only while making the payment if the total annual salary of the employee goes beyond the minimum tax exemption limit. This means that if the total salary income of the employee is above ₹2,50,000/-, then the employer is liable to deduct tax as per the TDS slab rates specified by the Income Tax Department. The TDS slab rates or tax slab rates are applicable for both men as well as women below 60 years of age.
Income tax slab | Tax rate |
Up to ₹2.5 lakh | Nil |
₹2.5 lakh to ₹5 lakh | 5% (Tax rebate of ₹12,500 is available as per section 87A) |
₹5 lakh to ₹7.5 lakh | 10% |
₹7.5 lakh to ₹10 lakh | 15% |
₹10 lakh to ₹12.5 lakh | 20% |
₹12.5 lakh to ₹15 lakh | 25% |
₹15 lakh and above | 30% |
Note: 4% as health and education cess over and above the tax slabs.
IT Filing Deadline Extended: Taxpayers Who Will Have To Pay Double TDS
In the wake of the second wave of Covid, the Central Board of Direct Taxes (CBDT) has extended the TDS filing deadline to July 15, 2021 for the last quarter of FY 2020-21. It’s also important to note that starting July, 2021 some taxpayers may need to pay higher TDS.
As per Section 206AB (Budget 2021), non-filers in the last 2 years with aggregate TDS exceeding INR 50,000 in each year will have to comply with the Income Tax Department’s higher deductions when filing ITR. The TDS rate will either be 5% or twice the rate specified in the relevant section, whichever is higher.
To check if the rule applies, the taxpayer on the IT portal, under “Compliance check for Sections 206AB & 206CCA” can enter single PAN or multiple PANs (bulk search) and get a response if the deductee is a specified person.
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View Comments
Thank you sir for all knowledge on TDS
Sir isi trh pf ki b detail m jankari dijiye please
Hi Radhey,
We have plenty of blogs on PF. You can check them out here.
I have not received my income tax refund yet.
Hi Anand,
Please log into the income tax e-filing portal and check the status of the refund first as there may be a variety of reasons behind the delay.
A nice Blog post for according to professionals.
This is such an amazing post. The information that you share in this post is really helpful for me. Thanks for sharing