TDS (Tax Deducted at Source) means a part of your tax is taken when you get paid. It applies to salaries, bank interest, rent, and commissions. This helps make sure people pay their taxes on time. TDS (Tax Deducted at Source) is a part of income tax when making certain payments. It helps the government collect tax on some incomes as they are earned. The main purpose of TDS is to track incomes and estimate taxes. The rules for TDS in accounting are given in the Income Tax Act of 1961. But not all incomes have TDS. It depends on the type of payment and the person receiving it.
How Does TDS Work?
When you get paid, a part of the money is taken as tax (TDS) before you receive it. Later, when you calculate your total income, you must include the full amount before TDS. The tax already deducted is then reduced from your total tax, making it easier to pay. This is how TDS works.
When and Who Should Deduct TDS?
TDS in accounting applies when certain payments are made as per tax rules. Here’s who should deduct it and when:
- Who Should Deduct TDS?
Anyone making such payments must deduct TDS.
- Who is Exempt?
Individuals and Hindu Undivided Families (HUFs) who don’t need a tax audit don’t have to deduct TDS.
- TDS on Rent
If individuals or HUFs pay more than ₹50,000 as monthly rent, they must deduct 5% TDS, even if they don’t need a tax audit.
- TDS by Employers and Banks
Employers deduct TDS based on salary slabs. Banks deduct 10% or 20% if PAN details are missing.
- Stop TDS with Investment Proof
If your income is below the tax limit, you can avoid TDS by showing proof of tax-saving investments.
- Avoid TDS on Interest Income
If your income is not taxable, submit Form 15G or Form 15H to the bank to stop TDS on interest.
- Get a Refund for Extra TDS
If TDS is deducted but your income is below the tax limit, file an income tax return to get your money back. Follow TDS rules and know the difference between TDS and income tax returns.
How to Pay TDS Online?
Follow these steps to pay TDS online:
- Visit the NSDL website for e-tax payments.
- Select ‘CHALLAN NO./ITNS 281’ under the TDS/TCS section.
- Choose the correct tax type: Select ‘Company Deductees’ if paying TDS for a company.
- Select ‘Non-Company Deductees’ for others.
- Enter your TAN (Tax Deduction and Collection Account Number) and the Assessment Year.
- Fill in your PIN code and select your State.
- Choose the purpose of payment: TDS deducted and payable by you.
- TDS on regular assessment.
- Select the type of payment and payment mode.
- Click ‘Submit.’
- Check the confirmation screen to verify your TAN and details.
- You will be redirected to your bank’s net banking site.
- Log in to your bank account and complete the payment.
- After payment, a challan counterfoil will be displayed, showing the CIN (Challan Identification Number), payment details, and bank name. This serves as proof of payment.
Once you pay TDS online, don’t forget to file your TDS return.
How to Check TDS Payment Status?
Follow these steps to check your TDS in accounting payment status online:
- Go to the TIN-NSDL Oltas challan status inquiry website.
- Choose one of the two ways to check your status:
Option 1 – Using Challan Details (CIN Based View)
- Enter these details:
- BSR code (bank code)
- Challan date (date of payment)
- Challan serial number
- Amount (optional)
You will see:
- Challan number and deposit date
- Bank code (BSR code)
- Major Head Code (tax type)
- TAN/PAN details
- Taxpayer name
- Amount confirmation (if entered)
- Receipt date by TIN
Option 2 – Using TAN (TAN Based View)
- Enter your TAN (Tax Deduction and Collection Account Number)
- Select the payment date range for a financial year
You will see:
- Challan Identification Number (CIN)
- Major Head Code (tax type)
- Minor Head Code
- Nature of payment
- The system will check if you enter an amount that matches the bank’s records.
This helps you track your TDS payment status easily.
What is TDS Return Filing?
TDS return filing means submitting a form to the Income Tax Department with details of the tax deducted at source (TDS). It includes:
- The amount of tax deducted
- Type of payment
- PAN details of both the payer and receiver
- The tax amount deposited
Anyone who deducts TDS must file returns every quarter. Filing on time ensures you follow tax rules and allows the receiver to claim the deducted amount while filing their income tax return. To know all about TDS, joining the best accounting courses in Kerala is the best option that helps learners to understand properly about TDS.
How to Change TDS Credits in Form 26AS
TDS (Tax Deducted at Source) is linked to your PAN. The person who deducts tax (deductor) and the person receiving money (deductee) use PAN for TDS records. If TDS is deducted from your income, you should check Form 26AS. This form shows all TDS deducted from your income, like salary, interest, or other payments. It also shows taxes you pay, such as advance taxes or self-assessments.
You can only claim TDS credit for amounts shown in Form 26AS. To avoid problems:
- Always use the correct PAN where TDS applies.
- Check Form 26AS regularly to make sure all details are correct.
If there is any mistake in TDS details, contact the deductor (the person or company that deducted TDS). They must correct their TDS return; after that, the updated details will appear in Form 26AS.
The income tax department may notify you if you claim the wrong TDS credit. To avoid this, you should match the TDS details in Form 26AS with the TDS amounts in your records. This is very important if many customers or vendors deduct TDS from your business.
You can easily file TDS returns using Clear TDS, an online tool by Clear Tax. It works online, so you don’t need to download or install anything. With just a few clicks, you can prepare and file TDS returns.
Penalty for Late TDS Filing
If you file your TDS/TCS return late, you must pay a fine of ₹200 per day as per Section 234E. This fine keeps increasing every day until you file the return. However, the total fine cannot be more than the TDS amount. You must pay this fine before submitting your TDS/TCS return.
Types of TDS
TDS in accounting is deducted from different types of income, including:
- Salary
- Payments to contractors
- Commission payments
- Sale of property
- Insurance commission
- Interest on securities
- Other interest (not on securities)
- Rent payment
- Professional fees
- Online gaming winnings
- Winnings from lottery, betting, gambling, crossword puzzles, card games, etc.
SMS Alerts for TDS Details
The Income Tax Department sends SMS alerts from VK-ITDEFL to taxpayers. These messages show how much TDS is deducted from your salary, interest, or other income based on your PAN. You will get these alerts every three months, and the TDS amount will be added to Form 26AS for that year.
This system helps keep things clear and correct while filing income tax returns. You should check the SMS details with your payslips to make sure there are no mistakes. TDS mismatches are a common reason for wrong tax filings. To understand properly, joining an accounting institute in Bangalore will help learners acquire more knowledge in the accounting sector.