Tax Deducted at

Source (TDS)

 Presented by :- Akshat
Maheshwari
&
Rajat Saraogi
 Introduction to TDS
 What is TDS?

TDS means that a person (the deductor) who is liable to

make a payment of specified nature to another person (the
deductee) must deduct a certain percentage of tax before
making the payment and deposit it with the government.

Example: If you pay ₹50,000 as professional fees to a

consultant, and the applicable TDS rate is 10%, you must:
 Deduct ₹5,000 as TDS
 Pay ₹45,000 to the consultant
 Deposit ₹5,000 with the government under the consultant's
PAN.
 Objective of TDS

 Regular Flow of income for government

 Minimization of Tax Evasion
 Helps track who got how much money
 Even people who don’t file income tax
returns can be tracked
 Easy and simple for many taxpayers
 Basic
Terminology
1. Deductor
 The person or company who is making the payment and
deducts tax before giving the money.
 Example: An employer paying salary.
2. Deductee
 The person who receives the payment after tax is
deducted.
Example: An employee receiving salary.
3. TAN (Tax Deduction and Collection Account
Number)
 A 10-digit number that the deductor must have to deduct
and deposit TDS.
It’s mandatory for TDS filings.
4. PAN (Permanent Account Number)
 A 10-digit alphanumeric number used to track all tax-
related details of the deductee.
5. TDS Certificate
Proof of tax deducted and paid to the government.
 Form 16: Given for salary.
 Form 16A: Given for other payments like rent, interest,
etc.
6. TDS Return
 A quarterly report filed by the deductor to the Income
Tax Department. It shows:
 Who tax was deducted from,
 How much was deducted,
 Where it was deposited.
9. Challan
 The form used by deductors to deposit TDS with the
government.
 When is TDS
Applicable?
 192 Salaries to employees
 194A Interest on loan or FD
 194C Contractor payments
 194H Commission or brokerage
 194I Rent for office/building
 194J Professional services
 194Q Purchase of goods
 195 Payment To Non-Resident
 Section 192 – TDS on
Salary
 TDS Rate : No fixed rate – based on income tax
slab rates /
rates in force
 Limit : If the taxable income exceeds
the
exemption limit
 Example : If an employee’s estimated taxable

income for FY 2024–25 is ₹6,00,000, the

employer will:
 Compute total taxable salary after
exemptions.
 Calculate income tax as per applicable slab.
 Divide it by 12 and deduct every month from
 194A - TDS on Interest

 TDS Rate : 10%

 Limit :
Bank, Co-operative ₹50,000 (₹1,00,000 for
Bank, Post Office senior citizens)

Others (Ind/HUF covered ₹10,000

under Tax Audit in
preceeding PY, companies,
firms)
 Exemptions :
 Interest paid to banks, LIC, UTI, insurance companies,
etc.
 Interest paid to cooperative societies (some conditions
apply).
 Savings account interest.
 Section 194C – TDS on
Payments to Contractors
 TDS Rate : 1% if payee is individual/HUF
2% if payee is others
(company, firm, etc.)
 Limit : Single payment ≥ ₹30,000, or

Aggregate payments in FY ≥ ₹1,00,000

 Contract includes :
 Advertising
 Broadcasting & telecasting
 Carriage of goods/passengers
 Manufacturing/supply of a product as per customer’s
specification, using material supplied by the customer

 Section 194H – TDS on
Commission or
Brokerage
 TDS Rate : 2%

 Limit : ₹ 20,000 per

financial year

 Exemptions :

 No TDS if amount does not exceed

₹20,000 in a financial year.

 Individuals or HUFs not liable for tax audit

 Quiz Time

Q. Which certificate is issued

by the deductor to the
deductee as proof of
TDS deduction?
Ans: Form 16 and
16A
 Case Study
1
Ms. Priya is employed with XYZ Ltd. Her annual
salary is ₹7,20,000. She has not submitted any
investment proofs under 80C or rent receipts for
HRA. XYZ Ltd. calculates her tax liability and
deducts TDS monthly.
If XYZ Ltd. fails to deduct TDS, who is liable for the
TDS ?
a) The employee
b) The employer
c) Both employer and employee
Income
d)Ans: (b) Tax Department
The employer
 Section 194I – TDS on
Rent
 TDS Rate : 2% - Plant/Machinery/Equipment

10% -
Land/Building/Furniture/Fittings
 Limit : ₹ 50,000 per month
 Exemptions :
 Individuals/HUFs not liable for tax audit in
preceeding PY are not required to deduct TDS
under this section.
 Section 194J – TDS on Fees
for Professional or Technical
Services
 TDS Rate : 10% – for professional services,
royalty
2% – for technical services
10% – for director's remuneration (NO LIMIT)
10% - Non-compete Fees
 Limit : ₹50,000 per annum per payee (per
each category
except for director’s
remuneration)
 Exemptions :
 No TDS if the total payment during the
financial year does not exceed ₹50,000.
 Individuals or HUFs not liable for tax audit
under Section 44AB in preceeding PY.
 Section 194Q – TDS on
Purchase of Goods

 TDS Rate : 0.1% on the amount exceeding

₹50 lakh
 Limit : TDS applies on amount
exceeding ₹50
lakh per seller per FY
 Deductor : Buyer whose turnover in the
preceding FY exceeds
₹10 crores
 Note : TDS under Section 194Q
is not applicable if Tax
is deductible under any other section.
 Section 195 – TDS on
Payments to Non-
Resident
 TDS Rate : Based on applicable rates in Finance
Act or DTAA, whichever
is beneficial
 Limit : No threshold – TDS applies even on
small amounts
 Note :
 TDS must be deducted before remitting funds
outside India.
 You may apply for a certificate for lower/NIL
deduction under Section 197.
 TDS PAYMENT DUE
DATES

Month Due Date for TDS

Payment
April to February 7th of the following month

30th April (for government

deductors) or 30th April
March (for non-government deductors
too)
 Case Study
2
GreenEdge Ltd. entered into an agreement with EcoPack
Services, a vendor, to supply printed packaging boxes
carrying :
 GreenEdge’s branding, Barcodes and QR codes, Eco-
certification details
EcoPack is responsible for Procuring raw material
(cardboard), Printing content provided by GreenEdge,
Delivering final printed boxes .
Should GreenEdge Ltd. deduct TDS under Section 194C?
a) Yes, as it is a contract for supplying boxes whose content is
provided by the GreenEdge Ltd
b) Yes, as it is an agreement & hence liable for tds u/s 194C.
c) No, TDS will not be deducted u/s 194C
No,
d)Ans: (d)TDS will not
No, TDS be deducted
will not u/su/s
be deducted 194C rather
194C it it
rather will
willbe
bededucted
u/s 194Q
deducted if amount
u/s 194Q of sale
if amount exceeds
of sale Rs.50
exceeds Lakhs
Rs.50 (other
Lakhs conditions
(other
satisfied) conditions satisfied)
 TDS Return Filing
 1. What is TDS Return?
TDS return is a quarterly statement submitted by the
deductor to the Income Tax Department. It contains details of TDS
deducted and deposited, PAN of deductee, TDS challan details, etc.

 2. Types of TDS Forms

Form No. Purpose Applicable For

Form 24Q TDS on salaries Employers

Form 26Q TDS on all payments other Domestic

than salaries transactions (non-
salaried)

Form 27Q TDS on payments to non- NRI payments

resident Indians or
foreigners
 3. TDS Return Due Dates
31st of Following month of Quarter End
 4. How to File TDS Returns
1. Prepare the return using TDS software
(COMPUTAX)
2. Validate the Return from Client Data
3. Upload the return through TRACES portal using
Digital Signature (mandatory for companies)
4. Acknowledgement: After successful upload, an
acknowledgment (Form
27A) is generated.
 5. Penalty and Late FeesDetails
Type Sectio
n

Late filing fee 234E ₹200 per day of delay until

the return is filed, subject
to TDS amount.
Penalty for non- 271 ₹10,000 to ₹1,00,000 if return
filing H is not filed within 1 year. May
be waived if: TDS is paid, late
fee & interest are paid, and
return is filed within 1 year.

Interest on late 201 1% per month from date on

deduction (1A) which tax was deductible to
date it is deducted.

Interest on late 201 1.5% per month from date of

payment (1A) deduction to date of deposit.
 How to Avoid TDS

Deduction
Submit Form 15G / 15H
 These are self-declaration forms submitted to banks,
post offices, companies to request no TDS deduction.

Form For Whom Conditions

15G Individuals (below Income below taxable

60 years), HUFs, limit & TDS applicable
Trusts income ≤ exemption
limit

15H Senior Citizens Total tax liability = Nil

(60 years and
above)
 Form 26AS
 If tax has been deducted from your income (like
salary, interest, rent, or professional fees), you can
easily check all such deductions through Form 26AS,
which is your consolidated tax credit statement
maintained by the Income Tax Department.

 What is Form 26AS?

Form 26AS is an annual tax credit statement
issued under the Income Tax Act, which shows the
details of:
 Tax Deducted at Source (TDS)
 Tax Collected at Source (TCS)
 Where to View Form 26AS
You can view Form 26AS:
1. By logging in to the Income Tax e-filing portal
2. Go to “e-file” > “Income Tax Returns” > “View
Form 26AS”
3. It redirects to the TRACES portal where you can
select the Assessment
Year and view/download it.
 Quiz Time

Q. What is the last date of

depositing

the TDS amount of March

month
Ans:
with theApril
30 th
Government ?
 Case Study
3
Mr. Ahuja is a full-time Executive Director at Stellar Ltd., with
an annual salary of ₹36,00,000.
Apart from his role as Director, he is also a well-known legal
expert.
The Board engages him separately to draft a high-stakes
merger agreement, for which he is paid ₹4,00,000.
What is the correct TDS treatment?
a) Deduct TDS on both payments under Section 192 (Salary)
b) Deduct TDS on both payments under Section 194J
(Professional)
c) Deduct TDS under 192 for salary & under 194J for legal
fees
Ans: (b) Deduct TDS on both payments
d) No TDS required, as director fees are below threshold
under Section
194J (Professional)
Audit of
TDS
 1. Verify TAN
Registration
 TAN - Tax Deduction and Collection Account Number.
It is a 10-digit alphanumeric number issued by the Income Tax
Department of India.
 Purpose: It is mandatory for all persons/entities who deduct or
collect tax at source (TDS/TCS) to quote TAN in:
 TDS returns (e.g., Form 24Q, 26Q)

 TDS payment challans (e.g., Challan 281)

 TDS certificates (e.g., Form 16, 16A)

 Correspondence with the Income Tax Department

 Exemption:
 Section 194-IA
 Section 194-IB
 Section 194-IM
 How to Verify TAN
 Visit Income Tax Department E-filing Site
 Go to Home Page and Select Know TAN Details
 Enter TAN No and Require Details
 Check the Details Matches with entity''s Details
 2. Review TDS
Applicability
 Identify all types of payments made by the entity:
 Salaries
 contractor payments
 rent, interest
 professional fees
 commissions, etc.
 Determine the sections under which TDS is applicable,
e.g.:
 192: Salaries
 194C: Contractors
 194J: Professional fees
 194I: Rent
 Review the Books of Accounts
 Check the Trial Balance, Ledger
 Identify all TDS-applicable entries (both
revenue and capital in nature)
 3. Verify TDS Deduction
and Applicability

 For each payment, check the following using TDS

Chart:

 Confirm whether TDS was applicable

 Check threshold limits under the relevant section
(e.g., ₹30,000 for 194C)
 Ensure the correct rate of TDS was applied
 Ensure PAN of deductee was available (else 20%
should be deducted u/s 206AA)
TDS Chart
 4. Check Timely Payment
of TDS (By Verifying
Challans)

 Verify whether TDS deducted was deposited

by the 7th of the following month (30th April
for March deductions)
 Late payments attract interest u/s 201(1A)
(1%/1.5% per month)
 5. Review TDS Returns

 Collect copies of TDS returns filed:

 Form 24Q: Salary TDS
 Form 26Q: Other TDS (residents)
 Form 27Q: Non-residents
 Check if:
 Returns were filed within due dates
 Details match books of account
 6. Check for Non-
Compliance / Penalties

 Interest u/s 201(1A): Delay in

deduction/deposit

 Late filing fee u/s 234E: ₹200/day for delay

 Penalty u/s 271H: For incorrect or non-filing

of TDS returns

 Check if these were calculated, paid, and

accounted
 7. Verify the TDS
Receivable Amount In
Books

 Download and Review Form 26AS

 Check all details of TDS Deducted of the

Entity

 Reconcile Books of Accounts with 26AS (By

Using 26AS Reco)
 Download and Review Form 26AS

 Check all details of TDS Deducted of the

Entity

 Reconcile Books of Accounts with 26AS (By

Using 26AS Reco)
 8. Recommendations (if
Internal Audit or Stat
Audit)

 Recommend TDS Calculating Technique

(From MS Excel)

 Train accounts staff on thresholds and

applicable sections
 Case Study
4
Alpha Engineers regularly makes payments to Contractors
(Sec:194C) Professionals (Sec:194J), Employees (Sec: 192).
They deducted and deposited TDS on time for Q1 (April–June
2023). However, their accountant resigned unexpectedly in
July. The TDS return for Q1 (Form 26Q and 24Q) was not filed
by the due date (31st July 2023).
The new accountant discovered the oversight in September,
and immediately filed the return on 10th September 2023.
What is the most appropriate lesson and legal implication
from this case?
a) Since TDS was deposited on time, no penalty or late fee
applies
b) Late filing of TDS return only affects vendors, not the
company
c) Ans:
Late(c)
filing attracts
Late filing aattracts
mandatory fee under fee
a mandatory Section 234E and
possible
under penalty
Section 234E under
andSection 271H
possible penalty under
d) Section
No fee 271H
applies if TDS is under ₹50,000 for the quarter
 9. Conclusion

 Essentials of TDS – Key Takeaways :

 TDS (Tax Deducted at Source) is a mechanism to collect
tax at the time of payment
 We explored the basic provisions of TDS, including when
and how it applies, relevant thresholds
 We understood the TDS return filing process, including
due dates, relevant forms (24Q, 26Q, 27Q)
 We discussed how to verify TDS compliance
 A structured approach to auditing TDS was presented —
covering books review, deduction checks, return filing,
reconciliation with TRACES/26AS, and verification of
timely deposit.
 Emphasis was placed on maintaining accurate records,
filing within deadlines, and reconciling TDS details with
books and returns to ensure compliance and avoid
penalties.
Thank
You