Concept of TDS and TDS Rate Chart for FY 2022-2023

It is not easy to handle such a Huge yet Amazing country like India, where diversity between cultures, religions, Class can be seen clearly. The government of India, in its day-to-day routine, has been experimenting with new Ideas to generate different revenue sources for the country. We cannot deny that in doing so, our democratized government have got success; one such source revenue-generating instrument of government is Tax Deducted at Source or commonly referred to as “TDS”. Let us delve into this concept in great detail and we’ll also look into TDS Rate Chart for FY 2022-2023. 

Short Glimpse

Every Year Government of India releases its various Tax Rates applicable to the citizens of the country, for the better functioning of the country and to collect tax from the very source of revenue, the TDS idea was established. According to this concept, a person (deductor) who is required to make a payment of a certain sort to another person (deductee) must withhold tax at source and deposit it into the Central Government’s account. Based on Form 26AS or a TDS certificate provided by the deductor, the deductee from whose income tax source deductions have been made is entitled to get credit for the amount so deducted.

The TDS on payment for the transfer of virtual digital assets, the TDS on the sale of movable property (higher of the stamp duty valuation and sales consideration), the higher TDS rates for non-filers of ITR (reduced 1 year), and the TDS on benefits or perquisites of a business or profession are the major changes proposed in the Budget 2022.

Before we shall delve into our topic of concern, we must discuss first TDS, so that we could have a better understanding of this concept.

Concept of Tax Deducted at Source

A system known as Tax Deducted at Source (TDS) was instituted by the Income Tax Department. Under this system, the person in charge of making certain payments, such as salaries, commissions, professional fees, interest, rent, etc., is required to withhold a specific amount of tax before making the full payment to the recipient of the payment. The idea of TDS is to deduct tax at the source, as the name implies. TDS delivers consistent income for the government while easing the burden of tax filing for the deductee.

Isn’t it amazing how, our rulers have incorporated this concept of TDS for revenue generation, now, let us discuss by whom TDS is deducted?

When and by whom TDS is deducted?

The deduction of TDS depends upon the following factors:

• Any payment that fits the description in the Income Tax Act, 1961 will have TDS taken off at the time of the transaction.
• No TDS will be taken from your income whether you are an individual or a Hindu Undivided Family (HUF), and your records won’t be audited.
• Though you pay rent as an individual or as a member of a HUF and the amount payable exceeds Rs. 50 000, a TDS of 5% will be levied even if your books are not the subject of a tax audit.
• You won’t need to apply for a Tax Deduction Account Number if you need TDS deducted at a rate of 5%. (TAN).
• If you have a job, your employer will take TDS deductions based on your income tax slab rates.
• The bank with whom you have a working account will withhold TDS at a rate of 10%. If they do not have your PAN information, TDS at a rate of 20% will be taken.
• For the bulk of payments, TDS rates are established by the Income Tax Act, and the payer deducts TDS from the rates.
• You won’t be required to pay any tax if you provide your employer with investment evidence and your total taxable income is below the total taxable level. Therefore, no TDS will be taken into account in this scenario.
• You can also give the bank Forms 15G and 15H if your total taxable income is below the total taxable limit. The bank won’t deduct any TDS from your interest profits in this situation.
• If the bank withheld the TDS because you failed to provide your employer with the investment evidence, you can submit a return and receive a refund if your total taxable income is less than the total taxable limit.

TDS’s Benefits and Merits

The essence of TDS is the concept of “pay as and when you earn.” TDS is a situation in which the taxpayers and the government both benefit. When paying with cash, credit, or a check, tax is subtracted and deposited with the central authorities.

Merits of TDS: The following are the merits of TDS:

• It stops individuals from evading paying taxes.
• TDS is a reliable stream of funding for the government.
• The automated deduction of the necessary tax amount makes it more comfortable for the deductee.

Don’t forget to read our Articles on TDS under Section 194Q of the Income Tax Act, 1961, and Guide to new TDS Section 194R of the Income Tax Act, 1961, for better and updated knowledge on TDS.

TDS Certificate and claiming of TDS

On the IRS website, anyone can submit a TDS refund application. The individual must, however, file their Income Tax Returns and request their TDS refund. After the taxpayer files the ITR, the Income Tax Department will process the TDS. Within six months, the bank will credit the money. On the official website of the Internal Revenue Service, customers may also track the progress of their refund.

TDS Certificate: TDS certifications come in two different formats: 

• Form 16 and 
• Form 16A 

By Section 203 of the Income Tax Act, 1961, the department must issue a certificate to the deductee. The deductor is required to give this form to the deducted. Salaried employees must receive Form 16 from their employers, which must provide a breakdown of the TDS deductions made. Form 16 includes the tax computation, the tax deduction, and the payment of TDS. By May 31 of the next fiscal year, employers must give this form to their staff members.

The deductor provides Form 16A for non-salaried classes, which contains details on computation, TDS deduction, and payments.

Legal Window will assist you in timely filing your TDS Return so that your employee and others from whom TDS has been deducted may complete their form 26AS with the correct information. For TDS Working, contact our staff at 072407-51000 or by email at admin@legalwindow.in.

TDS Rate Chart for FY 2022-2023

TDS Rate Chart for FY 2022-2023 is as follows:

Penalty for Late Payment of TDS

The Income Tax Department applies the following penalties for failure to submit or delays in filing your TDS return or statements:

• Under Section 272A (2) of the Income Tax Act, a penalty of Rs. 100 would be assessed for each day that the returns are not filed, up to the TDS amount.
• Section 234E of the Income Tax Act imposes a penalty of Rs. 200 for each day that the returns are not filed, up to the TDS amount.
• Section 271H of the Income Tax Act imposes a penalty of between Rs. 10,000 and Rs. 1 lakh if the deductor fails to file the TDS return by the due date.
• If the deductor gives inaccurate information about the PAN, the amount of TDS, etc. According to Section 271H of the Income Tax Act, there would be a fine of between Rs. 10,000 and Rs. 1 lakh.
• If the taxpayer fails to pay the TDS by the deadline, interest will also be assessed in addition to the fine.
• If any or all of the tax is not withheld at source, 1.5 percent interest per month will be charged starting on the day the tax was deductible and continuing until the day the tax is withheld.

Takeaway

The phenomenon of TDS is used to lessen the possibility of income recipient avoidance. Additionally, the country’s economy might become more transparent. A deductee’s tax filing burden is lessened thanks to Tax Deducted at Source. It guarantees that the government will get consistent tax income.

We are sure enough that this article has succeeded in explaining the TDS, in case you further counter any issue, connect to us at Legal Window.