Tax Deducted At

Source
TDS
 Basic
Introduction of
TDS
India’s Leading ‘e’ Compliance
Solutions Company
 What is TDS ?

Tax Deducted at Source (“TDS”) is the

advance tax mechanism (on indirect basis)
introduced by the Income Tax Department.
Under this mechanism, tax will be
deducted at the time of receipt of amount
by the assessee.
Reason of Introducing TDS

To collect the tax directly from the source.

Some people conceal their income to avoid the payment of taxes.

To overcome this problem, tax deduction at sources was derived by the

department.

Another reason for TDS Deduction is Assessee pays taxes in the assessment
year on the income earned in the Previous Year and accordingly, the tax
collection by government gets delayed till the completion of the previous year.

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Solutions Company
 Reason of Introducing TDS India’s Leading ‘e’
Compliance Solutions
Company

In other words, income earned by

Electrician, Plumber, Technical person,
Contractor and person who is not capable
to make compliance every month, they
are trying to skip the tax payments.
Therefore, this mechanism was
introduced.
Objective of TDS India’s Leading ‘e’
Compliance Solutions
Company

To enable the salaried people to pay the tax as they earn every month. This helps
the salaried persons in paying the tax in easy installments and avoids the burden
of a lump sum payment.

To collect the tax at the time of payment of income to various assesses such as
contractors, professionals etc.

There is always a time gap between deriving of income and payment of tax there
upon .The objective of introduction of the provision tax deduction at source is to
reduce that time gap and also ensure the regular flow of funds to government.

Government requires funds throughout the year. Hence, advance tax and tax
deducted at source help the government to get funds throughout the year and run
the government smoothly.
 TDS –Tax Paid During The Year

TDS mechanism is based on the concept

” Pay as you earn” which means TDS should be

deducted during the year when the payment is made in
the previous year or financial year.

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Financial Year (FY)

Financial Year is the previous year, in which income has been earned.

It starts on 1st April and ends on 31st March of every year.

TDS Deduction
Period
Financial Year

Starts From Ends At

 Assessment Year (AY) and Previous Year (PY)

Assessment year is the year in which Income Tax Return (ITR) is filed based on Income
earned in the previous year or Financial Year.

Starts From Ends At

Previous Year (PY)

"Previous Year" means the financial year immediately preceding the assessment year.
 Example:

Mr. RAM joins the company Webtel on 1st April 2023. During the year he
earned Income from Salary. The year closes on 31st March 2024, He is
Liable to pay taxes on his Income earned in the previous year. This implies
that the Financial Year in this case is from 1st Apr 2023 to 31st Mar 2024
and can be denoted as FY 2023-24.
RESPONSIBILITY SHIFTED TO THE ANOTHER PARTY

Under TDS mechanism all obligations from deduction

to return filling of TDS are maintained by the person
responsible for making the payment.

Govt. has imposed the obligation of TDS deduction on

person to whom payment is made/credited.

Every person deducting the amount of TDS

will pay the remaining amount to the payee.

Amount of TDS deducted required to be

deposited by the payer on behalf of the Payee to
the Government.

Payer is referred to as “Deductor”.

And Payee is referred as Deductee.

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 Deductor and Deductee

Deductor Deductee
 Deductor/Employer is a person who  Deductee/Employee/Vendor is a person
makes the payment. on who’s earning tax has been deducted.

 In other words, deductor is a person  In other words, deductee is a person

who deducts the Tds. who bares the ultimate tax liability.

India’s Leading ‘e’ Compliance

Solutions Company
Let’s take an example

India’s Leading ‘e’ Compliance

Solutions Company
 India’s Leading ‘e’
Compliance Solutions
Company

Webtel Electrosoft is making a payment to Mr. Aarush, accordingly Webtel is the deductor and Mr.
Aarush is the Deductee.

Webtel Electrosoft Mr. Aarush

 India’s Leading ‘e’ Compliance Solutions
Company

What is TAN and who is required to

have TAN ?

TAN or Tax Deduction and Collection Account

Number is a 10 digits alpha numeric number
required to be obtained by all persons who are
responsible for deducting or collecting tax.

It is compulsory to quote TAN in all TDS/TCS

returns (including e-TDS/TCS return), TDS/TCS
payment challans and TDS/TCS certificates.
 Structure of TAN Number India’s Leading ‘e’
Compliance Solutions
Company

2
4th character of the TAN
stands for
3
Company Name First
5 sequential
Letter
running series.

1
First 3 characters
of TAN stands for 4
Name of State Last Character of
the TAN number
DEL-Delhi would a check
MUM-Mumbai and digit.
so on.
DELA12345A
 What is PAN no.? India’s Leading ‘e’
Compliance Solutions
Company

PAN (Permanent Account Number) is an

identification number assigned to all taxpayers in
India. PAN is a unique 10-digit alphanumeric
identity allotted to each taxpayer by the Income Tax
Department under the supervision of the CBDT. It also
serves as an identity proof. PAN is mandatory for
financial transactions such as receiving taxable salary
or professional fees, sale or purchase of assets above
specified limits, buy mutual funds and more.
 Structure of PAN number India’s Leading ‘e’
Compliance Solutions
Company

AAAPS1234A

2 5
A
1234
Status of the person 3 4
whether the person is Sequential Series
1
individual, Company, S A
AAA-ZZZ Firm, AOP, Trust etc.
Surname First Letter Random Check digit
Any Alphabet from or name’s first letter
AAA to ZZZ
 Why PAN is mandatory in case of TDS/TCS? India’s Leading ‘e’
Compliance Solutions
Company

Section 206AA provides that any person whose receipts are

subject to deduction of tax at source i.e. the deductee, shall
mandatorily furnish their PAN to the deductor.

The non-quoting of PAN by deductees in many cases have led to

delay in issue of refund on account of problems in the processing
of returns of income and in granting credit for tax deducted at
source.

And the rate of TDS will be 20% in case of non availability of

PAN no.
Type of TDS Returns India’s Leading ‘e’
Compliance Solutions
Company

Form 24Q
Payment of Salary

Form 26Q
Payment of other than salary to
residents

Form 27Q
Payment to NRI other than salary

Form 27EQ
Payment of TCS
 TDS RETURN PROCESS FLOW India’s Leading ‘e’
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Company

ISSUES THE TDS CERTIFICATES TO 1. DEDUCTOR ISSUES TAN

THE EMPLOYEES/PARTY/VENDOR NUMBER

06 01

FILES THE TDS/TCS

RETURN 05 02 MAKES THE PAYMENT TO THE
EMPLOYEE / PARTY / VENDOR

DEPOSIT THE CHALLAN

NO.281 IN BANK DEDUCTS THE TDS AFTER
DEPOSIT TAX ON OR 04 03 MAKING THE PAYMENTS
BEFORE 7TH OF NEXT SAME DAY DEDUCTION WILL BE
MONTH DONE
 Date of filing TDS Returns India’s Leading ‘e’
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Company

Month Quarter Date of Deduction Date of deposit Date of filling TDS return
Apr-Jun Q1 31st July
July-Sept Q2 On the same day on 7th of every next 31st Oct
which payment is made. month in which
Oct-Dec Q3 payment is made 31st Jan
Jan-Mar Q4 31st May

Note : Form 26Q, 27Q and 27EQ for the quarter 1 (F.Y 23-24) date of filing returns has been extended till 30 th Sept.
 Date of filing TCS Returns India’s Leading ‘e’
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Company

Month Quarter Date of deposit Date of filling TCS return

Apr-Jun Q1 15th July
July-Sept Q2 7 of every next month in which
th 15th Oct
Oct-Dec Q3 payment is made 15th Jan
Jan-Mar Q4 15th May
 Interest on Late Deduction and Deposit India’s Leading ‘e’
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Company

RATE OF PERIOD FOR WHICH

TYPE OF DEFAULT
INTEREST INTEREST HAS TO BE PAID

In Case TDS not

From the date on which tax
deducted on the
1% per month becomes deductible until the
same on which
date it is actually deducted.
payment was made

RATE OF PERIOD FOR WHICH

TYPE OF DEFAULT
INTEREST INTEREST HAS TO BE PAID

In case TDS not deposited

on time before 7th of next 1.5% per From the date of deduction
month in which tds was month until the payment date
deducted
 Fees and Penalty for Late/Non Filing of India’s Leading ‘e’

TDS/TCS returns
Compliance Solutions
Company

As per the Section 234E, the taxpayer must have to

pay a late fee of INR 200 per day, until if file the return.
You also have to pay this fine every day of delay until
the fine amount gets equal to the actual TDS amount
required to be paid.

Deductor will have to pay INR 200 until TDS Return

filing is done. However, the penalty should not exceed
the TDS amount for which statement filing was
required.
 RETURN FILING OF TDS India’s Leading ‘e’
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Company

TDS Return filing is a simply process and it requires a specific format of files to
be upload on Government Portal. It is compulsory for Deductors to submit a TDS
return on time. Every person involved in the filing of return has performed
specific role which follows

S no. Person involved Roles and Responsibility

1 Deductor Makes payment, deduct & Deposit of TDS
2 Authorized Bank Collect amount of the TDS/TCS and forward to Govt’s Accounts
3 Authorized Tin Facilitation Center Receives TDS/TCS Return Offline
4 Online Portal – TRACES/ Income Tax Receives TDS/TCS Return Online
5 Government TDS/TCS collected as Tax Collection
 DOCUMENTS OR INFORMATION REQUIRED India’s Leading ‘e’
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Company

FOR RETURNS
Information Collected from Whom involved Information Required for Return

(a) Name of Deductee

(b) Date of Payment / Credit ,Date of deduction
(c) Applicable Section
(d) Rate of TDS/TCS
Payment Invoice or vendor bill Deductee
(e) Amount Paid
(f) TDS Amount
(g) PAN of Deductee
(h) Nil or Lower Certificate if Applicable.

(a) Name of Bank with BSR CODE

(b) Date of Challan Deposit
Deposit of TDS /TCS in Challan 281 Deductor and Bank (c) Challan Sr. or Reference Number
(d) Section applicable
(e) Amount of TDS , interest amount, Late fee amount, Excess Deposit

(a) TAN
(b) PAN if available
Deductors Information Deductor
(c) Name and Address
(d) Authorized Signatory with mobile and Email Id
 FILES TO BE SUBMITTED AS TDS RETURN India’s Leading ‘e’
Compliance Solutions
Company

TDS return should be submitted in specific format called FVU. FVU is File Validation Utility provided by NSDL
to verify the e-TDS return format. It is a java based utility to validate the correct information as required by
Department. There is no need to take pdf or document version of return to be submit.
By using latest FVU Version Converter with the help of TDS Software convert data into folder. The folder
should contain the following items:-
S no. Attachment File Format Information Contains
1 Text file .txt File Encrypted Data of return in text format.
2 FVU .txt File All TDS related data i.e. Deductor, Deductee, Payment, Deposit etc.
3 CSI .csi File Challan reconciliation file with Bank Deposit details
4 Statics Report HTML Information about record maintain in fvu. file (Only for view)
5 Verification Latter PDF Signed by authorized signatory to verify the return
6 27A PDF Statement of tax deduction/collection of all the deductee/collectee.
7 If Challan mismatch HTML Electronic Statement Warning File
 WEBSITES India’s Leading ‘e’
Compliance Solutions
Company

tdscpc.gov.in tin-nsdl.com incometax.gov.in

This website is used to This website is used to
This website is used to
check the tds/tcs returns apply for the TAN, PAN.
upload tds/tcs returns
data. This is used to view
online.And also for the
the challan status and
online payments of
TDS/TCS credit for a PAN.
challan
 Difference between TDS and TCS India’s Leading ‘e’
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Company

Particulars TDS TCS

Meaning TDS stands for Tax deducted at source it means that TCS stands for Tax collected at source, tax
the tax will be deducted at source by any company or will be collected at source by the seller at
individual while making the payment and if the the time of sale.
payment exceeds the threshold limit mentioned under
respective sections.
Applicable on TDS will be applicable on the payments like interest, TCS will be applicable on the sale of
rent, commission, professional or technical services. timber, tendu leaves, alcoholic liquor ,
forest products etc.
Limits Different sections have different threshold limits. For Under TCS there are no such threshold
example , 194 Dividend threshold limit is Rs.5000. limits but for the few sections there are
threshold limits defined as per the
sections.
Time of TDS is deducted whenever a payment is due or made, TCS is collected by the seller at the time of
Deduction/Collection whichever is earlier. sale.
Person Responsible TDS is deducted by the person making the payments. TCS is collected by the person making the
sale of some specified goods.
Due Dates of Filing TDS Returns (Form 24Q,26Q, 27Q) will be filed TCS return (Form 27EQ) will be filed
Return quarterly on 31st after the end of the quarter. quarterly on 15th after the end of the
quarter.
THANKING
YOU

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https://www.webtel.in/

9310230011

@mail.id

@webteldotin