Tax Deducted at Source (TDS) is a mechanism under which tax is deducted from income at the time of payment. Governed by the Income Tax Act, 1961, and regulated by the Central Board of Direct Taxes (CBDT), TDS applies to a variety of income streams, such as salaries, rent, commissions, and interest.
The responsibility of deducting TDS lies with the payer, who deposits the deducted amount with the government before disbursing the remaining sum to the recipient. This approach ensures consistent tax collection and simplifies compliance for taxpayers.
What is Form 27Q?
Form 27Q is a quarterly return used to report TDS deductions on payments made to Non-Resident Indians (NRIs), excluding salaries. It must be submitted if TDS has been deducted for any non-salary payments during the quarter.
Key features include:
- Applicable Payments: Non-salary incomes like interest, royalties, dividends, or technical service fees paid to NRIs.
- Higher TDS for Non-PAN Holders: A 20% TDS rate applies if the NRI does not have a PAN.
- Timely Submission: Filing must occur before the due dates for each quarter.
Parties Involved in TDS
- Deductor (Payer):
The individual, organization, or entity responsible for deducting TDS and depositing it with the government. - Deductee (Payee):
The NRI receiving the payment, whose residential status is determined under Section 6 of the Income Tax Act.
TDS Rates for Various Transactions
TDS rates depend on the nature of the payment, as shown below:
|
Section |
Payment Type |
TDS Rate |
|
194E |
Payments to sports associations or NRI sportspeople |
20% |
|
194LB |
Interest on infrastructure debt |
5% |
|
194LC |
Interest on foreign currency loans or bonds |
5% |
|
195 |
Various NRI payments (investments, capital gains) |
10%-30% |
|
196B-D |
Offshore funds, royalties, securities income |
10%-20% |
Additional charges like education cess and surcharge may also apply.
Filing Form 27Q Online
Although Form 27Q cannot be directly filed online, it can be prepared electronically and submitted at a TIN Facilitation Centre.
Steps for Filing Form 27Q:
- Download the RPU Tool: Available for free on the official TIN website.
- Provide Details: Include information about the payer, payee, tax challan, and payments.
- Validate the Form: Use the File Validation Utility (FVU) to ensure accuracy.
- Submit the Form: File the validated form at a TIN Facilitation Centre.
- Track Filing Status: Check the status online using the PAN and token number.
Penalties for Late Filing or Non-Compliance
- Late Filing: ₹200 per day under Section 234E, up to the total TDS amount.
- Delayed Deduction: Interest at 1% per month for delays between the due date and the actual deduction date.
- Delayed Deposit: Interest at 1.5% per month for delays in depositing deducted TDS.
- Non-Filing Penalty: Fines ranging from ₹10,000 to ₹1,00,000 under Section 271H if returns are not filed within one year.
Budget 2024 Updates
The Union Budget 2024 introduced important changes for taxpayers under the new regime:
- Increased Standard Deduction:
- Salaried individuals: ₹50,000 → ₹75,000
- Pensioners: ₹15,000 → ₹25,000
- Revised Tax Slabs:
|
Income Range (₹) |
Tax Rate |
|
0–3 Lakh |
Nil |
|
3–7 Lakh |
5% |
|
7–10 Lakh |
10% |
|
10–12 Lakh |
15% |
|
12–15 Lakh |
20% |
|
Above 15 Lakh |
30% |
Benefit: Salaried individuals could save up to ₹17,500 in taxes under the new regime.
TDS Certificate
After the TDS returns are filed, the payer can issue the Form 16A or a TDS certificate to the non-resident. This TDS certificate needs to be delivered to the non-resident seller within 15 days from the last date of filing TDS returns for the respective quarter.
Conclusion:
TDS is an integral part of India’s tax system, ensuring timely tax collection and easing compliance for taxpayers. Form 27Q is crucial for reporting non-salary payments to NRIs, while the Union Budget 2024 brings tax relief to salaried employees and pensioners. Adhering to deadlines and filing returns correctly is essential to avoid penalties and ensure compliance.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.