How to deduct TDS, keep records, and deposit TDS with the government

As a follow up to our series on TDS, today we bring you details about how to deduct TDS, what sort of records must be kept and how to deposit it with the government.

You can read up our previous posts here –

Do remember to get a TAN number before you deduct TDS. You can read this post to understand how to apply for a TAN.

Consider the following before deducting TDS 

  • Residential status of the receiver – there are separate rates for Residents and Non-Residents
  • Type of payment – rate to be applied also depends on whether you are paying salary or rent or to a sub-contractor.
  • Whether PAN is available or not – The rates mentioned in the income tax act are applicable where PAN is provided by the receiver. iIf the receiver does not provide you a PAN, TDS has to be deducted at 20% or rates as per the type of payment, whichever is higher. In case of EPF withdrawal, if PAN is not mentioned TDS is deducted at maximum marginal rate, which is 34.608 (for financial year 2015-16).
  • When the receiver has a certificate for lower or no deduction of TDS – if the receiver has a certificate from an Assessing Officer for lower or no deduction of TDS, a copy of the letter can be kept and TDS deducted according to it.
  • Amount of payment to Non Resident – there are different rates for payment
    • to a non-corporate payment is 1crore or less OR is more than 1 crore
    • to a foreign company payment is Rs 1 crore or less OR more than Rs 1crore but less than 10 crores OR more than Rs 10 crores.

Here is a guide that lists all TDS rates, for your quick reference.

Keeping Records

As such no specified records are mandated, however, do keep a record of – the invoice and details of payment made, name address and PAN information of the receiver, date of deduction and amount paid after deduction.

In case you are an employer and deduct TDS for payments made to employees, you are required to maintain documentation of all deductions claimed & exemptions allowed. Where an employee claims HRA, rent receipts, rent agreement must be kept in record. Similarly, documentation for Section 80 deductions claimed. Medical expenses reimbursed and also details of LTA claimed must be kept. If certain perquisites are allowed, the tax computation and documentation for these must be maintained. In case an employee submits details of income from previous employer, it must also be filed.

Depositing TDS with the Government

  • TDS collected by the deductor in a month has to be deposited by the 7th of the next month.
  • In some cases the Assessing Officer may allow TDS to be deposited quarterly. The due date for such a deposit is 7th of the month following the end of the quarter.
  • Quarterly statements of TDS deducted & deposited have to be submitted by due dates.
  • TDS certificate has to be issued to the receiver, such as Form 16, Form 16A.
  • Deductor has to use a ‘challan’ for depositing TDS with the government.
  • TDS collected can be deposited through a single challan. Even though TDS may have been collected under different sections of the income tax act. For example -TDS deducted on salary and on rent can be deposited via a single challan.

In our next article we will discuss about the penalities when TDS is not deducted or not deposited timely.

You can use our TDS Guides for more details on how to prepare and file a quarterly TDS Return.

We’re sure you have plenty more questions for us. We’ve tried answering quite a few on our FAQ page. But for further support you can reach out to us on 011 39595559.

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