Introduction of Tax Deducted at Source (TDS)
According to the Income Tax act, 1961 TDS is a part of income which is deducted at the time of making the payment. Under this system, tax is deducted at the very source of income generation. This TDS is deducted by the person making the payment & this has to be submitted with the government within the specified time limit.
For an effective method of tax collection & to minimise tax evasion, income tax department designed a new system for paying tax at the point of income generation. This design is termed as “Tax Deducted at Source (TDS)”.
Generally, the person who is on the receiving end is liable to pay income tax. But the government with the help of TDS collects the tax in advance and reduces the chances of tax evasion.
Introduction to Form 13
Under section 197 of Income tax act, 1961 has the provision of collecting tax in advance from an individual’s income by the way of TDS. However such scenarios could arise where taxpayers:
- Incurred loss in financial year.
- Carried forward losses of previous years.
- Eligible for certain exemptions.
The above situations could lead to a much difficult situation for the taxpayers don’t have any taxable income at all for the year yet TDS is being charged from them. As a result they end up filing for refund and interest thereafter.
Therefore, to remove the hardship which they face, Income tax department provides for a clause under which the assessing officer (AO) can issue a certificate to the taxpayer with Nil/Reduced TDS rate depending on the facts/circumstances of the case. Format for the same is mentioned in Form 13.
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Procedure for filing Form 13
Under section 197, an application for Nil/Lower deduction of TDS can be made by the income tax officer to the concerned authorities. Certain details which are required to be furnished in form 13 are:-
- Name & PAN no.
- Purpose of payment
- Last 3 years ITR
- Projected income of current year
- Tax deducted/paid of current year
Step 1: Login to TDSCPC
Step 2: create your user ID (if you’re not existing user).
Step 3: select whether you are a deductor/taxpayer.
Step 4: Enter your TAN no.
Step 5: once your PAN is found to be valid, you can fill up the challan details
Step 6: on successfully entering the valid details and clicking on Login, it will redirect you to the Net banking page.
Step 7: on successful payment of TDS, a challan identification number (CIN) would be displayed containing the payment details, bank name etc.
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NATURE OF PAYMENTS UNDER WHICH TDS MECHANISM IS APPLICABLE
| 192 | Payment of salary |
| 192A | Payment of taxable accumulated balance of provident fund |
| 193 | Interest on security |
| 194 | Dividend |
| 194A | Interest other than interest of securities |
| 194B | Winning from lottery, puzzle, card name etc. |
| 194BB | Wining from horse race. |
| 194C | Payment/credit to a resident/contractor/sub-contractor |
| 194D | Insurance commission |
| 194DA | Payment in respect of life insurance policy |
| 194EE | Payment in respect of National savings scheme,1987 |
| 194F | Repurchase of units of MF/UTI |
| 194G | Commission on sale of lottery tickets |
| 194H | Commission or brokerage |
| 194I | Rent |
| 194IB | Payment of rent by an individual or HUF not subjected to tax audit U/S 44AB |
| 194J | Professional fees, royalty, technical fees |
| 194LA | Payment on acquisition of moveable property |
INTEREST ON LATE PAYMENT OF TDS
In case of any delay in depositing the amount of TDS by the assesse, he shall be liable to pay interest @1.5% for every month.
Earlier this rate was 1% but now it has been increased to 1.5% so as to discourage the practice of delay in deposit of tax after deduction.
Important Note: Interest @1.5% would chargeable from the date tax was deducted not from the due that.
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FREQUENTLY ASKED QUESTIONS (FAQ)
Q. Is it mandatory for everyone to file Form 13?
A. No, it is not mandatory for everyone to file form 13 with the authorities. Those who want to claim the benefit associated with it need to file Form 13.
Q. Eligibility of making the application under section 197?
A. An individual whose income attracts TDS as per above mentioned sections but the final income at the end of the year justifies non-deduction or lower deduction of tax based on his estimated tax liability.
Q. Timeline for making the application?
A. There is no specified timeline under section 197. However, as TDS is charged in the ongoing financial year so it is advisable to make an application in that financial year only to avoid any discrepancy.
Q. Validity of application made under section 197?
A. valid for the particular financial year from date of issue unless canceled by the assessing officer (AO) before expiry date.