TDS rates revised for accounting year 2019-2020
Overview
TDS or Tax Deducted at The source is the tax that is deducted at the source of income of a person. During
the union budget every year, the revised rates are announced. There are a
number of rates for different nature of income falling under different heads. This
could vary from 1%-30%.
Aim of TDS
The main aim of TDS is to
deduct the income at the very source and remit the deducted amount to the
central government’s account. Furthermore, the person from whose account this the amount is deducted is eligible to get a credit of such amount through Form 26AS
or TDS certificate issued by the deductor.
The basis of TDS Deduction
- TDS is deducted at source before receiving income under
different heads such as an incentive (bonus/perks), interest earned on fixed
deposit, lottery winnings, rent paid or commission payment.
- Tax is deducted, according to a rate, before the process of
payment is carried out and if the tax is deducted more, then the person is eligible for TDS return. Apply now for TDS return
filing
- Deductor is the person/organization/company/institution
providing income. And Deductee is the person from whose account the tax is
deducted.
- The employer is needed to provide form 16/16A (TDS
certificate) to the employee. And there is no need for this certificate in
case of TDS exemptions.
Exemption from TDS
TDS is exempted in few
cases. For instance, if you make the payment to the RBI or Central government.
Along with this, TDS is exempted from the interest paid to the following
- Banking companies.
- Refund on income tax.
- Direct taxes.
- LIC, UTI, and interest made in co-operative societies.
- Financial corporations formed under the finance bill of
union government or any state.
- Any organization falling under Nil TDS organization.
- The interest earned on the following:
- from a savings account operated in cooperative societies or
commercial bank.
- on NRE account.
- on Indira Vikas Patra, NSC or KVP.
Sections of TDS
Income Tax act 1961
describes TDS as a spot tax which is deducted from the actual source of
income. It is applicable to the income received from financial products like interest
received on fixed deposits, incentives from the employer, commission’s payments,
dividends on bonds, sale/purchase or rent of any immovable property and money
earned as lottery or awards.
Latest
TDS rate of the annual year 2019-20
The rates at which TDS is charged is declared under
various provisions of the Income Tax Act or the first schedule of the Finance
Act. If this payment is to non-resident citizens, then the provisions of
withholding tax rates under Double
Taxation Avoidance agreement shall also be considered.
Payment portals of income tax
Tax deducted at source is
supposed to be transferred to the credit of Central government account via the
following ways:
Electronic mode: E-payment
is necessary for
- Every corporate assesses
- All other corporate assesses other than
companies, to whom the section 44AB of Income tax, 1961 is applicable
Physical mode: A person can file TDS by launching a challan 281 in the
bank.
TDS charged
rates on salary
Under section 192,
TDS is charged on the average income from the employee’s account. If the income
of the employee doesn’t exceed INR 2,50,000 then there is no TDS. But if the
income exceeds this limit, then the TDS is charged 20%, if the person has no
PAN card.
TDS charged on
Insurance commission
The exemption
limit of Insurance commission is Rs.15,000. Earlier it was Rs.20,000. The TDS %
is 5 but 20% when the PAN card is not furnished. The TDS rates for other
commissions include:
- Section 194G: Commission charged on
sale of lotteries, which is 5%
- Section 196H: Commission charged on
brokerage, which is 5%
- Section 196J:
Remuneration/fee/commission charged to a director, which is 10%.
TDS charged on
services
According to
section 194J, a person is liable to pay the TDS in the following payments
- Service charge for technical services
- Service charge for professional
services
- Remuneration/fee/commission to the
director
- Royalty paid
If the person
possess PAN card, he/she is supposed to pay 10% but when PAN card is not
furnished, then higher rates are charged as follows
- Provisions mentioned under either the
Finance Act or Income Tax Act
- TDS at the rate 20%
TDS charged on
Fixed Deposits
TDS
charged on fixed deposits is exempted till INR 10,000 per annum i.e. until the
fixed deposit year exceeds Rs. 10,000, no TDS is charged. When this limit is
exceeded, the TDS is charged at the rate 10% otherwise 20% (when there is no
PAN card). For senior citizens (above 60 years old) this limit is Rs.50,000 per
year.
TDS
rates charged on contracts
Under
section 194C, the payment made to complete the contract for the following work
is charged.
- Advertisement
contracts
- Telecasting
or broadcasting contract
- Transport
of goods from any mode (other than railways)
- Catering
services
- Production
or supplying goods according the specifications made by the buyer, for
which the raw material is supplied by the buyer as well.
- Supplying labor
for contractual work
The rate under
section 194C is 1% for individual or HUF, but otherwise, it is 2%. In case of
absence of PAN card, it is 20%.
TDS rates
charged on interests
Section 194A
communicates the provision of TDS charged on interest other than securities.
TDS will be charged if the interest paid by bank exceeds Rs.10,000 and if the
interest paid by other sources exceeds Rs.5,000.
Under this
section, TDS is charged at the rate of 10% (if the person has PAN card) and 20%
(if he/she doesn’t)
Exemptions of
section 194A:
·
If the
interest is paid on loan taken from the bank
·
If the
interest is paid on loan is taken from friends and relatives
·
Interest
is paid on an unsecured loan.
This article is
written by Anubhav, who is a content writer at LegalRaasta.
LegalRaasta is a platform that offers tons of legal services like Income
tax return filing, GST return filing and many more.
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