2. TDS & TCS Return Filling

Tax Deducted at Source (TDS)

TDS is an essential aspect of the Income Tax Act. This system requires the payer to deduct tax from certain payments—such as salaries, rent, interest, and professional fees—and remit it directly to the government. TDS plays a crucial role in ensuring timely tax collection and helps the government monitor taxable income throughout the financial year.

It’s the responsibility of anyone making specified payments to deduct TDS and send it to the government.

• If you fail to provide your PAN, TDS might be deducted at a higher rate.
• You can adjust the TDS amount against your tax liability at the end of the financial year.
• Should the TDS deducted exceed your actual tax payable, you can claim the surplus as a refund.

TDS stands for Tax Deducted at Source. Under the Income Tax Act, it requires tax deductions from specified payments, including salaries, rents, interests, commissions, or professional fees. The individual deducting the tax is referred to as the deductor, while the recipient of the payment is the deductee. The deducted amount is submitted to the Income Tax Department linked to the deductee’s PAN. Although the deductee receives a net payment (after TDS), their gross income is what determines the total tax liability. The TDS deducted then offsets the final tax amount due. If the total TDS surpasses the actual tax owed, you’ll receive a refund upon filing your income tax return.

When Should TDS be Deducted and by Whom?

• Anyone making specified payments as outlined in the Income Tax Act is obligated to deduct TDS at the time of payment.
• There are various TDS regulations governing different types of payments, each with its own threshold limit. If total payments remain below this threshold during the financial year, no TDS is necessary.
• If the payee submits Form 15G or 15H to confirm that their taxable income will fall below the taxable limits for the financial year, TDS does not need to be deducted.

Example of TDS

“FRAS International is responsible for paying a monthly office rent of Rs 80,000 to the property owner. According to Section 194I of the Income Tax Act, 1961, TDS at a rate of 10% must be deducted from this payment. Consequently, FRAS International will deduct Rs 8,000 (which is 10% of Rs 80,000) and will transfer the remaining Rs 72,000 to the property owner. Therefore, the property owner receives a net payment of Rs 72,000 after the TDS deduction. This owner will then report the full rental amount of Rs 80,000 as income and can claim a credit of Rs 8,000, already deducted by FRAS International when settling their final tax obligations. TDS Rate Chart Check out our TDS rate chart to find the rates applicable to various types of payments.”

What is the Due Date for Depositing the TDS to the Government?

The TDS must be deposited with the government by the 7th of the month following the deduction of tax.

• For instance, if TDS is deducted in June, it should be submitted by July 7th.
• However, TDS deducted in March can be deposited until May 31st.
• For TDS related to property purchases (as specified in Section 194-IA), the deposit deadline is 30 days after the end of the month in which the deduction occurred.

Failing to meet these due dates could lead to interest and penalties under the Income Tax Act.

The TDS statements have to be furnished on a quarterly basis as follows:

How and When to file TDS returns?

Filing Tax Deducted at Source (TDS) returns is a requirement for anyone who has deducted TDS. These returns need to be submitted quarterly and must include various details, such as your TAN, the amount of TDS deducted, the type of payment, the PAN of the deductee, and more. Different forms are designated for filing TDS returns based on the reason for the deduction. Here are the various types of return forms available: 

What is a TDS Certificate? 

TDS certificates include Form 16, Form 16A, Form 16B, and Form 16C. These certificates must be provided by the individual or entity that deducts TDS to the taxpayer from whose income the TDS has been withheld. For example, when a bank deducts TDS on interest from fixed deposits, it issues Form 16A to the depositor. Similarly, an employer provides Form 16 to their employee.

Tax Collected at Source (TCS) 

TCS stands for Tax Collected at Source. It refers to the tax that a seller is required to collect from the buyer at the time of the sale of goods. The provisions related to TCS are outlined in Section 206C of the Income Tax Act. TCS is imposed on specific goods such as alcohol (1% - 5%), certain leasing activities (2%), the sale of high-value motor vehicles (1%), and specific remittances under the Liberalized Remittance Scheme (LRS) of the RBI (5% - 20%). This article will cover the various transactions subject to TCS, due dates for TCS payment, and penalties for late payment.

What is Tax Collected at Source (TCS)?

• Tax Collected at Source (TCS) is the tax that the seller collects from the buyer at the time of sale. 
• This tax must be deposited with the tax authorities by the applicable due dates. Section 206C of the Income Tax Act regulates provisions related to TCS.
• Individuals collecting TCS must have a Tax Collection Account Number (TAN).

Example: 

• Mr. A sold goods worth Rs.100 to Mr. B on which TCS is applicable. 
• Mr. A will collect the TCS at 1% from the buyer
• So, he will be collecting Rs.101 from Mr. B (Rs.100 + 1%of 100)
• The money so collected as TCS should be deposited to the government within the specified due dates.
• Mr. A is responsible only for collecting the tax and depositing it to the government.

Who Can Collect TCS?

The seller should collect tax from the buyer in addition to the value of the goods/services. 

A buyer is a person who purchases specific goods. He is liable to pay TCS amount along with the bill amount in applicable cases

TCS Rates for Specific Goods u/s 206C(1)

Taxes are paid only when the goods are utilized for trading purposes, and not when utilized for manufacturing, processing or producing things. The tax payable is collected by the seller at the point of sale. The rate of TCS is different for goods specified under different categories under section 206C(1):

TCS Payments & Returns

• Sellers are required to deposit the TCS amount within 7 days following the last day of the month during which the tax was collected. This is a monthly obligation.
• In cases where the seller fails to adhere to the TCS collection and payment regulations, they will incur an interest charge of 1% for each month or part of a month.
• Each tax collector must file a quarterly TCS return using Form 27EQ for the taxes collected during that quarter. It's important to settle any interest due on late TCS payments to the government before submitting the return.

TCS Certificate - Understanding Form 27D

When a tax collector submits their quarterly TCS return using Form 27EQ, it's essential for them to provide a TCS certificate to the buyer of the goods.

After the TCS has been reported for the receipts, a certificate is generated based on the details provided in Form 27EQ. This document is referred to as Form 27D, serving as proof of TCS collection from the seller to the buyer.

Form 27D includes the following information:

• Names of the Seller and Buyer
• Seller's TAN (Tax Deduction and Collection Account Number), as filed in the quarterly return
• PAN (Permanent Account Number) for both the Seller and Buyer
• Total tax collected by the Seller
• Date of tax collection
• Applicable tax rate

Due Date For Form 27D

This certificate has to be issued within 15 days from the date of filing TCS quarterly returns. All the TCS due dates are summarized in the below table:

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