Posting Point
TDS (tax deduction at source), often known as withholding tax, is a primary tax collecting technique for the government, as well as a source of data for identifying revenue leaks. The Income Tax Act, 1961 (“the Act”), which governs Indian taxation, provides extensive provisions on TDS return filing online, including applicability, tax rates, compliance, and penalties for non-compliance.
The laws impose an onerous tax withholding duty on taxpayers when making certain payments. The government has made several amendments over the years to broaden the scope of withholding tax, such as TDS on purchases of goods, e-commerce transactions, cash withdrawals, and so on, as well as provisions to ensure better compliance by imposing higher TDS rates for non-compliant recipients or where the PAN card is not provided. keep reading the blog to learn more.
Applicability and Consequences of TDS Return Filing Online
Tax is required to be deducted by the payer at the time of payment to the recipient’s account. Furthermore, whichever occurs first, and is subject to thresholds suggested for such payments, depending on the nature of the transaction.
The percentage of tax that deducts ranges from 0.1 percent to ten percent (except for payroll payments). However, if the recipient is unable to provide its permanent account number, a higher TDS rate of 20% applies (PAN). Similarly, the applicable withholding tax rates for payments to non-residents. They determine the applicable domestic tax statute and relevant treaty terms. Moreover, whichever is more favorable to the recipient.
A non-resident must present a tax residence certificate received from the tax authorities of his or her resident nation, as well as a self-declaration that he or she is not carrying on any business in India through a permanent establishment, in order to benefit from treaty provisions.
Any non-withholding or under-withholding of taxes will result in interest, which is usually between 1% and 1.5 percent per month. It may also result in the payer’s costs disallow. Certain types of failures, such as withholding tax and failing to deposit it with the government exchequer, are subject to penalties and prosecution under the law.
TDS Compliance: Key Steps
The major steps in the TDS compliance framework are as follows:
The Deductor will need to receive a one-time tax deduction account number (TAN).
Gather information on the payee, such as PAN, address, transaction type, and payment/credit date.
Determine whether or not a tax should withhold on a specific transaction. If yes, what is the tax rate that will withhold?
Deduct the necessary tax at the time of transaction recording or payment, whichever comes first.
Except for the month of March, where tax withheld can deposit on April 30. Moreover, deposit taxes diminsh from the government exchequer by the seventh of the following month.
File quarterly TDS returns on the appropriate forms by the deadlines. These are due at the end of the month immediately following the quarter.
To the deductee, issue Form 16/16A withholding tax certificates.
Final Thoughts
Various forms OF GST and income tax have been prescribed to make it easier for tax deductors to file TDS returns, such as Form 24Q for payroll TDS returns, Form 26Q for non-payroll transactions, and Form 27Q for non-resident payments (other than salary), and so on.
