Who Needs to Deduct TDS?

Tax Deduction at Source (TDS) is a crucial aspect of the Indian tax system. It is a process where tax is deducted from specified payments made by a payer to a recipient and the amount is deposited with the Central Government. Whether you are an individual, an HUF, or an employer, understanding the requirements and responsibilities for TDS is essential.

Understanding TDS

TDS is the responsibility of the person who incurs the expenditure and becomes the taxable income in the hands of the recipient. According to Section 200 of the Income Tax Act, TDS must be deducted either at the time of booking expenses or at the time of payment, whichever is earlier. This amount needs to be remitted to the Central Government by the due date specified.

Who Needs to Deduct TDS?

Not all payments require TDS. Under the Income Tax Act, specified payments such as salary, interest, dividends, and others are liable for TDS. However, an individual or HUF whose books are not required to be audited is exempt from this requirement.

Employers and TDS

Every employer who pays a salary to an employee must deduct TDS if the salary exceeds the basic exemption limit. This is mandated by Section 192 of the Income Tax Act. Before crediting the salary, the employer must ensure that TDS is deducted and remitted to the Central Government.

Types of Payments Subject to TDS

The following sections of the Income Tax Act specify the nature of payments and types of transactions for which TDS applies:

Section 192: Wages Section 192A: Contractors Section 193: Payments to contractors Section 194: Insurance agents Section 194A: Income from servicios Section 194B: Securities sales Section 194C: Payments to resident persons/ PAN card holders for certain income Section 194D: Rent Section 194E: Consignment sales Section 194F: Professional fees Section 194G: Income from houses Section 194H: Income from undeveloped land Section 194-1: Educational institutions/linked interest Section 194-2A: Winnings from lottery Section 194-2B: Payments to non-residents Section 194-2C: Intermediaries Section 194-2D: Directors' fees Section 194-2E: Compensation/precedent Section 194-2F: Income from annuities Section 194-2G: Income from insurance Section 194-2H: Income from credit card operations Section 194-2I: Income from shares Section 194-2J: Endowments Section 194-2K: Certain events Section 194-2L: Professional fees Section 194-2M: Income from office/annuity Section 194-2N: Income from annuities Section 198: Royalties Section 199: Lessor/financial rent Section 199A: Dividends Section 200: Interest Section 200A: Income from lease Section 202: Income from securities Section 202A: Foreign income Section 203: Payment/withdrawal from PF Section 204: Insurance Section 206: Financial benefits from units Section 206CA: Covering of interest Section 206CB: Moneylenders Section 206D: Selling of stocks Section 206DB: Bank interest Section 211: Income from capital gains Section 212: Income from property Section 213: Interest Section 214: Income from betting operations Section 215: Gambling-related fees

For more specific details and thresholds, please visit the official government TDS website for accurate information.

TDS Deposits and Reporting

TDS is deposited alongside the payment. For instance, if you are paying rent to an NRI, 30% of the rent needs to be deposited as TDS. This amount is credited against the recipient's PAN (Permanent Account Number).

Government Website for TDS Information

Further information and updates on TDS can be found on the official TDS Traces government website. This site provides comprehensive details on TDS deduction in all categories.

Visit the TDS Traces government website