Are you a running a business or a profession? If you have employees or you take services of another person, you may have to deduct TDS from payments you make to them.
Let’s see a few cases where deduction of TDS applies –
- You pay salary – Any person who pays salary has to deduct TDS on such amount. Salary is paid as a result of an employment agreement. It is taxable for the recipient under the head ‘salaries’ in his tax return. (Section 192)
NOTE: In the below cases TDS must be deducted by you if you are an individual or HUF with turnover exceeding Rs 1crore or professional with receipts in excess of Rs 25lakhs.
- You pay interest – Any person who pays interest which is more than Rs 5,000 to anyone has to deduct TDS. If you are a bank or a cooperative society or post office this limit is Rs 10,000. (Note : this is applicable only to interest paid to residents, there are separate rules for payments to non-residents) (Section 194 A)
- You pay for work done by a contractor –TDS has to be deducted from payments to a contractor. A contractor is someone who does a ‘work contract’ or a ‘supplies labour for a work contract’. Work can mean advertising, broadcasting, telecasting, carriage of goods and passengers, catering or manufacture of supply of a product as per specification and where material for this purpose is provided by you. (Section 194 C)
- You pay rent – You are required to deduct TDS before making rent payments. Rent may be under a lease, sub lease, tenancy or any other similar arrangement. It may be paid for land building, plant & machinery, equipment, furniture. (Section 194-I)
- You pay for professional or technical services – TDS shall be deducted from any payments for professional or technical services, royalty or non-compete fees. Professional services could be that legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, or any other profession that may be notified for this purpose. (Section 194 J)
Any person who is required to deduct TDS must obtain a TAN. This can be done either before deducting TDS or within one month from the end of the month in which TDS is deducted or collected.
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