The TDS rate is the rate or percent of salary to be paid as tax. Also, it is to be noted that different rates of TDS are applicable for different salaries, and thus, the tax can be deducted as per the regulations. If there is a case of default in TDS, it comes under Section 40 (a).
The nature and amount of payment or income determine the tax rate that has to be charged from the person receiving them. The employed people who receive salaries face no detection in TDS.
With effect from May 14th, 2020, these new circumstances have reduced the TDS rates by 25% on the employees who are non-salaried and whose income depends upon sources like rents, etc.
The salaried employees would pay their regular taxes.
Also, these new rates will only be applicable until the end of the current fiscal.
Let’s read about the TDS and TDS Rate Chart for the Fiscal Year 2020-21 / AY 2021-22 in detail.
What Is TDS And Why Was It Introduced?
The term TDS is the abbreviation for “Tax Deducted Source.” It was put into the Indian financial and tax systems to deduct tax from where the income was generated, i.e., through your salaries, dividends, interests received in cases of banks and other sectors, or commissions received by you through various sources and firms.
The main idea behind introducing this TDS system was to prevent people from cutting corners and prevent tax evasions. Certain people either don’t pay taxes or forge their salaries and other profits to hide from the Tax Department their real income to give fewer taxes.
To curb such practices, new ideas were formulated under this system. It was imperative to collect the tax at the source of their incomes so that no forgery in salaries and no hidden or shady practices are being organized.
The TDS Rate Chart
The nature and amount of payment or income determine the tax rate that has to be charged from the person receiving them. There are different rates of TDS that apply for different income nature and ranges.
For the Fiscal year 2020-2021, the government has brought changes in TDS rates due to the world-wide Covid-19 situation and its effect on most of the population. But, the employed people who receive salaries face no detection in TDS.
With effect from May 14th, 2020, these new circumstances have reduced the TDS rates by 25% on the employees who are non-salaried and whose income depends upon sources like rents or interests received from shares, etc. The salaried employees would pay their regular taxes.
These new rates will also only be applicable until the end of the current fiscal year, i.e., March 31st, 2021.
The TDS Rate Chart For The Fiscal Year 2020-2021 :
The rates are provided for each nature and amount of payment and the minimum amount required for it to be under the subject of the tax rate.
The whole chart is prepared for everyone to understand the current fiscal year rates, which would end on 31st March.
The whole process involves the person who is initiating the transaction. This person is responsible for the tax deduction and regulation at the source by the rate prescribed in the Income Tax Act.
After the tax deduction, it is the person’s responsibility to pay the tax to the nation’s government. This person is also called the ‘deductor’ and the person from whom the tax is deducted, called the ‘deductee.’
The Permanent Account Number or the PAN which is usually issued in the form of a card. It is issued to anyone who comes under the Indian Income Tax Act, 1961, and is very important for tax returns.
Form 26AS is responsible for showing the amount of tax deducted and deposited in the person’s name from whom the tax has been deducted. All this is shown through a person’s PAN number, which is unique for every citizen and foreign nations with a visa.
Any failure or delay, or hindrance in TDS’s deposition is considered a crime and punishable under the law under section 271 C and section 276B; this can lead to punishment and penalties.
The process can be summarized as follows :
i. First comes the payment of the TDS.
ii. After the payment has been done; you have to file an income tax return.
iii. The consequences of the Non-Compliance should be understood and firmly adhered to.
iv. There should be an interest if there is a non-payment of TDS, and hence, on-time payment is a must.
V. There is a rule that states that for a given month, the TDS should be paid within 7 days from the beginning of the next month.
vi. If there is a case of default in TDS, it comes under Section 40 (a).
Frequently Asked Questions
1. How is the regulation of TDS ensured?
2. How is TDS calculated?
3. Why is TDS necessary?
4. What are the duties of a person collecting tax at the source of income?
ii. Deduct the liable tax at the required TDS rate.
iii. Filing without fail, periodic Tax Returns.
iv. Issuing the TDS certificate to the deductee.
V. The tax should be credited to the Government of India.
5. When a payment is made to the Government, will TDS be required?
a. the Government of India
b. the RBI or Reserve Bank of India
c. a corporation that has been established under the guidelines and rules of a Central Act or Law.
d. a Mutual Fund which comes under the clause 23D of section 10 of the Constitution.
6. In what situations can a deductor not be seen as a default if he failed to deduct TDS?
ii. Has paid all the due taxes on the income which he declared.
iii. Has already taken into account the tax sum in the amount of salary.
Hope this article helps you to know about TDS Rate Chart for FY 2020-21 / AY 2021-22