Q 1. What is TDS
As per Income-tax Act in India,there is a requirement of deduction of tax at the point of generation of income. This system is called as “Tax Deducted at Source”, commonly known as TDS or Withholding Tax. Under this system tax is deducted at the origin of the income. Tax is deducted by the payer and is remitted to the Government by the payer on behalf of the payee.
Q2.Who is Liable to deduct TDS
Any artificial person ( Company,Firm,Trust,Society etc) or an Individual whose accounts are audited and is making payment covered under the Income Tax Act, 1961 is liable for Deduction of Tax.
Q 3 What are the duties of the deductor.
Following are the basic duties of the person who is liable to deduct tax at source.
• He shall obtain Tax Deduction Account Number and quote the same in all the documents pertaining to TDS.
• He shall deduct the tax at source at the applicable rate.
• He shall pay the tax deducted by him at source to the credit of the Government (by the due date specified in this regard*).
• He shall file the periodic TDS statements, i.e., TDS return (by the due date specified in this regard*).
• He shall issue the TDS certificate to the payee in respect of tax deducted by him
Q4.What are the payments on which TDS is required to be deducted.
TDS is required to be deducted on Salary,Contractual Services,Professional Services,Interest,Rent, Commission
Q5 What if the deductor fails to deduct the TDS.
The expenditure on which the deductor fails to deduct TDS is disallowed while computing the Income.
Interest @1% for each month is charged on the amount on which TDS ought to have been deducted.
Q6.What if the deductor fails to deposit the TDS to the Governments Account.
Interest @1.5% for each month is payable on the TDS amount which ought to be deposited.
Penalty of an amount equal to tax not deducted or paid could be imposed under section 271C of Income Tax Act.
Rigorous imprisonment up to 7 years.