Tax Deduction at Source 101. Cheat Sheet to ensure you're accounting the right way!

1. TDS 101
(Tax Deducted at Source)
Objective:
 To understand what TDS actually.
 To understand situations when TDS is applicable.
 To understand what compliance is required for TDS.
Jaydeep S. Halbe
Disclaimer:
This is based on provisions of the Indian Income Tax Act, 1961 and these
provisions change from time to time!

2. TDS - Objective
• TDS is tax deducted at source.
• The objective is to check tax evasion by people. Only
1% of the Indian Population files an income tax return.
• That means it’s this 1% who is paying for the politicians
and development of the nation!
• The Income Tax Department introduced the concept
to check tax evasion and create a situation where
people file return of income.

3. TDS - Fundamentals
• As per the TDS provisions, there are a bunch of
payments for which TDS is applicable.
• Where ever TDS is applicable, you need to deduct the
tax (based on specified percentage) from the
payment you’re making and deposit it with the
government.

4. TDS Applicability
TDS provisions are applicable to:
 An Individual who is running a business.
 A partnership firm who is running a business.
 A Pvt. Ltd. Company
 A Public Limited Company
 An LLP

5. 194 J– Professional / Consultant
• Money paid to any professional, freelancer, consultant
is covered under section 194J of the Income Tax Act,
1961.
• The section says, 10% must be deducted from every
payment made to a professional / freelancer /
consultant.
• This is only applicable if payments made are more
than Rs. 30,000 in one financial year.

6. 194 I – Rent
• Money paid to a landlord is covered under section
194I of the Income Tax Act, 1961.
• The section says, 10% must be deducted from every
payment made to a landlord.
• This is only applicable if the rent is more than Rs.
180,000 in one financial year. Further the rental
agreement must be in the name of the company /
firm / LLP or sole proprietor.

7. 194 C – Contractor
• Money paid to a contractor / agency which is not a
professional or consultant is covered under section
194C of the Income Tax Act, 1961.
• The section says, 1% / 2% must be deducted from
every payment made to the party. It’s 2% if the
contractor / agency is a Limited Company, else it’s
1%.
• This is only applicable if the payment is more than Rs.
30,000 in one financial year.
PS: Advertising agency payments are covered here.

8. 194 H – Commission / Brokerage
• Money paid to a commission agent / broker is
covered under section 194H of the Income Tax Act,
1961.
• The section says, 10% must be deducted from every
payment made to the party.
• This is only applicable if the payment is more than Rs.
5,000 in one financial year.
PS: Housing Broker payments are covered here.

9. 192 B – Employee Salaries
• Money paid to an employee is covered under section
192B of the Income Tax Act, 1961.
• The section says, TDS must be deducted which is equal
to the amount of tax payable by the employee after
considering all income, allowable expenditure and
deductions for the employee.
• An employee needs to pay tax if his taxable salary is
more than Rs. 200,000 per financial year.
PS: Taxable Salary = Actual Salary – Allowable Expenditure / Deductions.

10. When to pay TDS
Now that you deducted TDS from payments made to the
people covered in the previous slides, what to do with
that money?
You need to pay it the account of the government
before 7th of the subsequent month.
Suppose you paid a freelance designer Rs. 50,000 in
April 2014, you need to pay 10% TDS which is Rs. 5,000 by
7th May 2014.
PS: Ensure you have a TAN (tax deduction account number). Without
this, you can’t make TDS payments.

11. TDS Return Filing
Now that you paid the TDS to the account of the
government on a monthly basis, you now need to give
the government a summary of what you paid and for
what all parties you deducted and paid TDS.
This summary is called a TDS return and needs to be filed
on a quarterly basis. Ask your auditor / accounting
service firm more about this.
This return needs to be filed by 15th of the subsequent
quarter. Return for April – June 2014 needs to be filed by
July 15th.
PS: Ensure you file your TDS returns on time. Else the penalty is Rs. 200
per day of delay.

12. So now, think if you have made any payments
to Freelancers, Consultants, professionals,
contractors, brokers, landlords etc. Apply the
TDS principles and see if it’s applicable to you.
For any queries, you can contact me:
E-mail: jay@kenspire.com
Twitter: @jayhalbe