TDS vs Income Tax

TDS vs Income Tax

TDS is a small amount of tax that can be deducted monthly, annually, periodically or occasionally from the earning of an individual or a business (the earning is not limited to salary but also includes interest, commission, fee etc.). The earning could be regular or irregular in nature. Income tax is levied on the total income (salary) on an annual basis for individuals as well as businesses.

Frequently Asked Questions: TDS

1. What is the minimum salary one should have for TDS to be deducted by the employer?
   A) Salary needs to be subject to TDS only if the employee falls under the Income Tax Slab. This means that an individual earning less than Rs. 2.5 lakh, senior citizens with a salary of less than Rs. 3 lakh and super seniors (above the age of 80) earning less than Rs. 5 lakh, do not need to pay tax and hence no TDS has to be deducted from their remuneration.
2. Is TDS applicable only on salary?
   A) No. TDS is also applicable on items such as income from interests on savings, fixed and recurring accounts, securities and deemed dividends, income from horse racing and insurance commissions, lottery or game-related prize money, payment in NSS deposits, repurchase of UTI or mutual fund units, etc. The details are available in Income Tax Act, Sections 192 to 194L.
3. How do I know how much TDS has been deducted and whether it has been credited to me?
   A) The employer/deductor is liable to give you a TDS certificate or Form 16 and 16A confirming the amount of tax deducted. You can also log in to your Income Tax e-filing portal and check either your Form 26AS or ‘View Your Tax Credit’ option on the menu.
4. Can I request tax deductors to not subtract tax from an amount and pay the whole amount to me?
   A) Non-deduction of tax at source is possible only if your income is going to be below the minimum income tax slab. If that is the case with you, then you can declare your income as being lower than Rs. 2.5 lakh (or others as applicable to various category of citizens) through Form 15G/15H and provide the form to the deductor. Form 15G is for individuals and Form 15H for senior citizens. You can also apply to the Assessing Officer of the Income Tax Department through Form 13 and get a certificate approving deduction of lower taxes or nil deduction of taxes. But if your income is above the minimum tax rate slab, then you cannot seek exemption from TDS.
5. What will happen if the tax deductor fails to deduct tax or deposit the collected tax with the government?
   A) The deductor will have to pay an interest on the amount due to the government under Section 201 of the Income Tax Act. The interest applicable is: a) 1 percent for every month or part of a month on the tax due, calculated from the date on which the tax had to be deducted to the date when it was actually deducted (ii) at 1 and 1.5 percent for every month or part of a month on the tax pending, calculated from the date when the tax was deducted to the date when it is actually paid. Under section 271C, the deductor may also have to pay penalty of an amount equal to the tax not deducted or not paid.
6. Is an employee responsible if the deductor fails to collect or deposit the tax?
   A) No. The onus of deduction and deposit of tax collected at source lies with the employer/deductor and not an employee or deductee.
7. Why is one required to be registered as a taxpayer and not as a deductor while deducting TDS on the purchase of property having consideration above Rs. 500,0000?
   The purpose that Tax Deducted at Source solves is basically keeping a strict check on property deals that are underhand in nature, including keeping a stringent check on under valuation of a certain property or in case a property has been purchased but not reported. A particular property buyer could be from any sector of the society. He/she could be a corporate, a salaried individual, HUF, or a member of a certain association or a trust. In most cases though, properties and houses are bought by single individuals or salaried persons.
   Now, it is critical to understand here that not all of these beings from multiple classifications hold a TAN. Furthermore, you also have to keep in mind that if you are an individual or a member of the HUF, you will be legally not permitted to have possession of a TAN altogether! Unlike the rest of the people, individuals and HUF members are not supposed to deduct TDS in any form, under any head.
   The burden on the department will increase if every deductor of TDS has to hold a TAN (without which you basically cannot deduct TDS). This would mean that every time an individual wants to invest in a property somewhere, he/she would have to apply for a TAN first. This provision however underwent a change and the component of TAN was essentially replaced by PAN. The deduction basis from now on will be solely on the element of PAN. The entire process of registering for TAN, obtaining one and then purchasing a property had become too tiresome for a lot of people. Hence, the Indian government altered the basis of deduction. This provision functions on the assumption ground that any purchaser who holds a property that exceeds the amount of Rs.50 lakh will already have a PAN registered under his name. Hence, all they will be required to do is log in to their respective e-filing accounts, fill up the necessary form (which will be your challan and return form both), and make the said payment.
   The assessee’s assets and income will also be rendered easy to determine as PAN already holds all that information. Providing TAN details while purchasing any property is not a mandatory element anymore.
8. Is TDS deducted on traveling expenses?
   No, TDS is not deducted for traveling expenses.
9. Will TDS be deducted on service tax?
   Considering the fact that service tax is not an income for the service provider, TDS is to be deducted at the total amount excluding the service tax, if service tax is separately indicated in the invoice.