Everything you wanted to know about Tax Deducted at Source TDS

What does TDS stand for?

TDS stands for tax deducted at source.

When is TDS to be deducted?

According to the income tax act, in case of certain prescribed payments (E.g. Interest, commission, brokerage, rent, etc.), the person making the payment is required to deduct tax at source (TDS) if payment exceeds certain threshold limits. TDS has to be deducted at the rates prescribed by the tax department.

Who are a deductor and a deductee?

The company or person that makes the payment after deducting TDS is called a deductor and the company or person receiving the payment is called the deductee.

What is the full form of TAN?

The full form of TAN is Tax Deduction and Collection Account Number. 

Who must have a TAN?

Under the Income Tax Act, 1961, TAN is granted to all those peoples and companies who are allowed to pay or deduct tax on cash payments by them by the Indian Income Tax Department. It is compulsory to include the TAN in all TDS returns & Challans when paying tax under Section 203A of the Income Tax Department.

  • A taxpayer can’t pay the tax without having a TAN.

The IT division confirms the amount upon receipt of the tax amount and, by accident, if the individual has paid an additional tax, then the amount will be returned directly into his account.

What is the Format of the TAN number?

  • TAN is an alphanumeric number of 10 digits.
  • The first three TAN letters reflect a city, the fourth letter is the taxpayer’s initials, and the next five digits and the last character makes the TAN different.

How and where to apply for TAN?

  • The taxpayer must fill out Form No. 49B to apply for a TAN.
  • Individual must then add all of the documents required, including proof of identity and address verification, and send it to the NSDL or Tax Information Network Facilitation Center website.
  • The NSDL division confirms the information upon obtaining the TAN application form and transfers the application form to the IT division.

What is a Challan Identification Number or CIN?

Every Income Tax Challan is identified by CIN which contains the Bank BSR code, date of deposit and challan serial no

When is tax deducted?

Tax is deducted at the time of making the prescribed payment or credit of the income/payment to the deductee, whichever is earlier. In the case of TDS on salary, the tax is deducted at the time of actual payment. In the case of TDS on rent, tax is deducted at the time of credit of rent for the last month of the year.

What are the consequences of TDS default and non-payment to the government?

Failure to deduct tax, deducting less tax, delay in payment of the deducted tax to the Government, makes the deductor an assessee liable to a penalty, which is equal to the amount for which the assessee is a deemed defaulter.

  • In case of non-deduction or less deduction or delay in deduction of tax, an interest of 1% is levied on the tax per month or part of the month. In case of delay in payment of tax after deducting, the interest of 1.5% is levied per month or part of the month. The interest is applicable till the time the tax deducted is not credited to the Government.
  • In case of delay in payment of tax after collecting it, interest at 1% per month or part of the month shall be levied till the time the tax is not paid.
  • Failure on part of the deductor to pay the tax deducted at source, to the credit of Central Government makes him liable to rigorous imprisonment of a minimum period of three months but which may extend to seven years.
  • Delay in filing TDS quarterly statements attracts:

1. A late fee of Rs. 200/- per day for each day of default, subject to certain limits (u/s 234E)

2. Minimum penalty of Rs. 10, 000 (may be extended to Rs. 1 lakh) (u/s 271H)

What is the duty of the deductor if the deductee does not furnish his PAN?

If the deductee does not furnish PAN or furnishes incorrect PAN to the deductor, the deductor shall deduct tax at source that is higher than the following rates:

(a) The rate prescribed in the Aes

(b) At the rate in force, i.e., the rate mentioned in the Finance Act

(c) At the rate of 20%

When is the TDS deposited to the credit of the government?


What is the due date of submission of the TDS statement?


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