TDS – Tax Deduction at Source

TDS – Tax Deduction at Source Below are the applicable TDS rates when the deductee has provided its PAN number to the deductor. In case PAN of deductee is not updated, the deductor must deduct TDS at higher of the following rates: a) the rate as prescribed in theAct; b) at the rate mentione din the Finance Act;or c) at the rate of20%.
Section	Section and Nature of Payment	15G-15H	TDS Rates for payment made to Indian Resident	TDS Rates for payment made to Non Residents
Section 192	Salaries	NO	Average rates as applicable	Average rates as applicable
192A	Payment of accumulated balance due to an employee	YES	10% Premature withdrawal from EPF above Rs.50000/-	10%
193	Interest on Securities/ Debentures	NO	10%	NA
194	Dividends (other than listed Companies)	YES	10%	NA
194A	Interest other than “Interest on securities”	YES	10% Interest (Banks)above Rs.40000 PA	NA
			10% Interest (Others)above Rs.5000/-PA
			10% senor Citizens above Rs.50000/-PA
194B	Interest by way of winning from lotteries, crossword puzzles, games etc.	YES	30% in case of payment in excess of Rs. 10,000 per annum	30%
194BB	Income by way of winning from horse race	NO	30% in case of payment in excess of Rs. 10,000 per annum	30%
194C	Payment to contractor/ subcontractor	NO	1% Contractor – Single Transaction Rs.30000/– During the F.Y. 1 Lakh 2% Contractor – Single Transaction Rs.30000/– During the F.Y. 1 Lakh	NA
194D	Insurance Commission	YES	5% in case of payment in excess of Rs. 15,000 per annum 10% in case of payment in excess of Rs. 15,000 per annum	NA
194DA	Any sum paid to a resident under a life insurance policy	YES	1% in case of payment in excess of Rs. 100,000 per annum	NA
194E	Payment to non- resident sports association	NO	20%	20%
194EE	Payment in respect of deposits under National Savings Scheme	YES	10% in case of payment in excess of Rs. 2500 per annum	10%

194F	Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India	NO	20%	20%
194G	Commission etc. on sale of lottery	NO	5% in case of payment in excess of Rs. 15,000 per annum	5%
194H	Commission or brokerage	NO	5% in case of payment in excess of Rs. 15,000 per annum	NA
194I	Rent on plant and machinery	YES	2% in case of payment in excess of Rs. 240,000 per annum	NA
194I	Rent on land, building, houses, offices, flats, residential apartments, furniture and fittings	YES	10% in case of payment in excess of Rs. 240,000 per annum	NA
194I	Land or building or furniture or fittings	YES	10% in case of payment in excess of Rs. 240,000 per annum	NA
194I A	Payment on transfer of certain immovable property other than agricultural land	NO	1% in case of payment in excess of 50 Lakh PA	NA
194I B	Rent by Individual / HUF (wef 01.06.2017)	NO	5% in case of payment excess of Rs.50000/PM
194J	Professional Fees / Technical Fees /Royalty /Director Sitting Fees etc.	NO	10% in case of payment excess of Rs.30000/PA	NA
194J	Payment to Call Centre Operator (wef 01.06.2017	NO	2% in case of payment excess of Rs.30000/PA
194LA	Payment of compensation on acquisition of certain immovable property	NO	10% in case of payment excess of Rs.250000/PA	NA
194LB	Payment of interest on infrastructure debt fund	NO	NA	5%
	Immovable Property (TDS exempted under RFCTLARR Act (wef 01.04.2017)	NO	NA	NA
Section- 194LBA(1)	Business trust shall deduct tax while distributing, any interest received by it from SPV or from renting or leasing out any real estate asset owned by it	NO	10%	NA
Section- 194LBA(2)	Business trust shall deduct tax while distributing any interest received by it from SPV to its unit holders	NO	NA	5%
Section- 194LBA(3)	Business trust shall deduct tax while distributing any income received by it from renting or leasing out any real estate asset owned directly by it to its unit holders	NO	NA	30%
Section- 194LBB	Investment fund paying an income to a unit holder	NO	10%	30%

Section- 194LBC	Income in respect of investment made in securitization trust	NO	Individuals- 25% Residents -30%	40%
Section- 194LBC		NO	HUF- 30%	40%
Section- 194 LC	Payment of interest by an Indian Company in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds	NO	5%	5%
Section- 194LD	Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or Qualified Foreign Investor including long term infrastructure bonds	NO	5%	5%
Section- 194M	Effective from 1st September 2019 –Individual or HUF responsible for paying any resident for carrying out any work in pursuance of a contract or by way of fees for professional services during a financial year.		5% in case of payment in excess of Rs. 50,00,000 per annum
Section- 194N	Effective from 1st September 2019 –Banking company or a co-operative society or post office paying any sum in cash in excess of INR 1 Crore to any person from an account maintained by the recipient.		2% in case of payment in excess of one Crore per annum
Section- 195	Other sum (payable to non Resident)
	a) Income in respect of investment made by a Non-resident Indian Citizen	NO	20%	20%
	b) Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen	NO	10%	10%
	c) Income by way of long-term capital gains referred to in sub- clause (iii) of clause (c) of sub-section (1) of Section193	NO	10%	10%
	d) Income by way of short-term capital gains referred to in Section 111A	NO	15%	15%
	e) Any other income by way of long-term capital gains [not being long-term capital gains referred to in clauses (33), (36) and (38) of Section 10]	NO	20%	20%
	f) Income by way of interest payable by Government or an Indian concern on money borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC	NO	20%	20%
	Any other income	NO	30%	30%

TDS ON SALARY

What is Salary Income?

Salary is the compensation you receive at regular intervals (mostly monthly) for providing a service or a set of skills to a company or business. You will usually have a written or verbal contract with your employer, which stipulates what you must do and how much you will receive.

Under the Indian Income Tax Act (ITA), 1961, a salary includes wages, pension, annuity, gratuity, profits or perquisites as well as commissions, fees, etc.

However, not all kinds of remuneration can be termed as salary. You may also receive payments such as:

Professional/ technical fees: Payments made to professionals for services rendered – an interior decorator or a plumber. This can be a one-time payment or a regular payment over a period.
Profits or gains from profession or business
Interest income on savings and deposits
Rental income
Honorarium received
Sitting fees received
Payments received as commission

What is TDS Calculated on for Salary Income ?

In India, salary is usually calculated as the Cost To Company (CTC), which covers both salary and perquisites. Perquisites, privileges or perks include facilities and benefits provided by the employer such as travel expenses, fuel subsidy, hotel expenses, etc.

CTC includes:

Basic salary
Travel allowance
House rent allowance
Medical allowance
Dearness allowance
Special allowances
Other allowances

From the above, an employee can claim tax exemptions on the following:

House Rent Allowance– You can claim an exemption for HRA if you are paying house rent
Conveyance or Travel Allowance– You can claim tax exemption for the amount spent on travel or commuting etc.
Medical Allowance– You can claim medical allowance by producing bills as evidence

Besides these, the government allows you to claim tax exemptions under Sections 80C and 80D for specific investments, amounts spent on repaying home loans or expenses such as insurance premium.

The TDS is, therefore, calculated on your total income less the exemptions that you can claim.

Before making any tax deductions at source, an employer must obtain a declaration and proof of investment from employees.

How to Calculate TDS deducted on Salary?

Employers can calculate TDS using the following method:

Calculate total earning:Calculate the total earning of an employee over the year (including perks, commission, bonus etc)
Collect Declaration:Collect declaration from employees about the investments they plan to make. At the end of the year, collect proof of investment. Without it, the employer cannot approve tax exemptions. Final proofs should be collected before the month of January or February end to confirm the exemptions.
Calculate total amount eligible for tax exemption: Consider all exemptions that an employee is eligible for. Reduce allowable exemptions from the gross annual salary. This is the taxable income..
Calculate balance taxable income and tax on same: After deducting all deductions and exemptions, what you get is balance taxable income. Based on the tax slab,the employer must calculate total tax payable by the employee for the year and deduct tax at source appropriately. Important is to note that this tax has to be deducted throughout the year more or less equally.

What are important options for investments or expenses which can be claimed for deduction under section chapter VIA?

Deductions can be claimed under Section 80C, Section 80CCC and Section 80CCD(1) (max allowed 1.5 lakhs) on:

Investment in Public Provident Fund or recognised Providend fund
National Savings Certificate
Employee’s share of Provident Fund contribution
Premium payment towards life insurance policies
Tuition fees of children (Only tution fees portion)
Home loan principal repayment amount
Unit-linked insurance plans
Equity-linked savings schemes (ELSS-Tax saving Mutual Funds)
Sukanya Samruddhi Account
Deferred annuities
Senior Citizens Savings Scheme
5-year tax-saving fixed deposit scheme
Subscription to notified deposits scheme / notified securities
Subscription to National Housing Bank’s Home Loan Account Scheme
Contribution to LIC’s notified annuity plan
Subscription to deposit scheme of companies involved in offering housing finance or public sector companies
Contribution to notified Pension Fund set up by UTI or Mutual Fund
Subscription to NABARD’s notified bonds
Subscription to debentures / equity shares of approved eligible issues

Apart from this there are many other deductions under chapter VI A which are available to salaried employees. Some of which are as mentioned under:

Section 80D : Medical Insurance Deduction

Section 80D is a deduction you can claim on medical expenses. One could save tax on medical insurance premiums paid for the health of self, family and dependent parents. The limit for Section 80D deduction is Rs 25,000 for premiums paid for self/family.

For premiums paid for senior citizen parents, you can claim deductions of up to Rs 50,000. Additionally, health checkups to the extent of Rs 5,000 are also allowed and covered within the overall limit.

Your employer may pay premium on your behalf and deduct it from your salaries. Such premium paid is also eligible for deduction under section 80D.

Section 80E : Deduction for Loan for Higher Studies

Income Tax Act provides a deduction for interest on education loans. The significant conditions attached to claiming such deduction are that the loan should have been taken from a bank or a financial institution for pursuing higher studies (in India or abroad) by the individual himself or his spouse or children.

One may begin claiming this deduction beginning from the year in which the loan starts getting repaid and up to the next seven years (i.e. total of 8 assessment years) or before repayment of the loan, whichever is earlier. Even a legal guardian could avail this income tax deduction.

Section 80G : Deduction account of donations

Section 80G of the Income Tax Act, 1961 offers income tax deduction to an assessee, who makes donations to charitable organizations. This deduction varies based on the receiving organisation, which implies that one may avail deduction of 50% or 100% of the amount donated, with or without restriction. Remember that from next financial year, your deduction on account of donations will be available only if same is reflected in the ‘Donation return’ filed by the person to whom donation is made. Also donation paid in cash is not allowed if amount exceeds Rs.2,000.

Sec 80TTA : Deduction on account of Savings Account interest :

Section 80TTA of the Income Tax Act, 1961 offers a deduction of up to INR 10,000 on income earned from savings account interest. This exemption is available for Individuals and HUFs.

In case the income from bank interest is less than INR 10,000, the whole amount will be allowed as a deduction. However, in case the income from bank interest exceeds INR 10,000, the amount after that would be taxable.

Sec 80EE : Additional Deduction for Interest on Home Loan:

Section 80EE allows homeowners to claim an additional deduction of Rs.50,000 (Section 24) for interest component of the home loan EMI.Provided, the loan must not be for more than Rs 35,00,000 and the value of the property must not be more than Rs 50,00,000. Furthermore, the individual must not have any other property registered under his name at the time the loan is sanctioned.

Following deductions are also important for a salaried person

Standard Deduction

A Standard deduction of Rs.40,000 for AY 19-20 was introduced which was Rs.50,000 for AY 2020-21.This deduction replaced the transport allowance and medical reimbursement of Rs 19,200 and Rs 15,000 per year, respectively. The standard deduction is deducted from the gross salary and can be claimed as an exemption.

Relief U/s 89

Marginal relief is provided in respect of salary or arrears of salary being subject to a higher rate of tax due to change in the slab rates. To get this relief, you must file Form 10E on the official income tax portal. In the absence of this form, you will not receive relief under Section 89.

Time to deposit the tax under Section 192:

If the TDS is deducted by any government employer – It has to be deposited on the same day.

If the TDS is deducted by any employer other than the government –

If the salary is credited and TDS is deducted in the month of march – On or before 30 April
If the salary is credited and TDS is deducted in any month other than March- Within seven days from the end of the month in which the deduction is made.

SALARY FROM MORE THAN ONE EMPLOYER

If you are engaged with two or more employers simultaneously, you can provide details about your salary and TDS in Form 12B to any one of the employers. Once the employer receives all kinds of information from you, he/she will be responsible in computing your gross salary to deduct TDS.Subsequently, if you resign and join a different employer, you can provide details of your previous employment in Form 12B to your new employer. This employer will consider your previous salary and TDS will be deducted for the remaining months of the financial year. So, its your responsibility to let your employer know the details about your previous employments and TDS made thereunder.

FILING OF TDS RETURNS

Sec 80EE : Additional Deduction for Interest on Home Loan:

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