Tax deducted at Source

TDS means Tax Deducted at Source. The concept of TDS was introduced in the Income Tax Act, 1961, with the objective of deducting the tax on an income, at the source of income. It is one of the methods of collecting Income Tax, which ensures regular flow of revenue to the Government.
TDS Process
1. Deductee (Seller) provides Services and Bill to the Deductor (Buyer).
2. Deductor makes the payment after deducting TDS.
3. Deductor remits the TDS amount into Bank (Treasury).
4. Bank (Treasury) remit the amount to the Government Account.
5. Deductor Issues Form 16A to Deductee for the TDS amount deducted.
6. Deductor Files the e-TDS to NSDL.
7. NSDL uploads the e-TDS information to Income Tax Department.
8. Deductee Files the Return with Form 16A to Income tax Department.

Issue of TDS Certificate

TDS certificate is a proof that deductor has deducted the tax and paid the same to the government. This proof is essential to the deductee to claim the credit of tax in his Income Tax returns.
U/s 203 of Income Tax Act, any person deducting the tax as per the provisions of:
• Section 192 (Salary) shall furnish a certificate of Deduction of tax in Form 16 or Form 16AA within one month from the close of Financial year in which such deduction was made.
Example: For the Financial Year 2007-2008, the TDS certificate must be issued on or before 30th April, 2008
• Section 193, 194, 194A, 194B, 194BB, 194C, 194D, 194E, 194EE, 194F, 194G, 194-I, 194J, 194K, 194LA, 195, 196A, 196B, 196C and 196D shall furnish a certificate of Deduction of tax in Form 16A with one month from the end of the month during which the credit has been given or the payment has been made, as the case may be.
• In case of a deductee to whom more than one TDS certificate was issued for the deductions made during the year, may on request from such deductee, a consolidated certificate in Form 16A may be issued within a period of one month from the close of such financial year.
Filing of e-TDS Returns

e-TDS Returns
The Income Tax department has now notified ‘Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003’. It is applicable to all deductors furnishing their TDS return in electronic form. As per this scheme,
• It is mandatory for corporate deductors to furnish their TDS returns in electronic form (e-TDS return) with effect from June 1, 2003.
• For government deductors it is mandatory to furnish their TDS returns in electronic form (e-TDS return) from financial year 2004-2005 onwards.
• Deductors (other than government and corporates’ ) may file TDS return in electronic or physical form.
Deductors furnishing TDS returns in electronic form (e-TDS) have to furnish Form 27A. Form 27A is a control chart to be furnished in physical form along with CD/ Floppy containing the e-TDS returns. Form No 27A is required to be furnished separately for each TDS return.
Form 27A is a summary of e-TDS returns which contains control totals of ‘Amount paid‘ and ‘Income tax deducted at source’. The control totals mentioned on Form 27A should match with the corresponding control totals in e-TDS returns.

Returns and Timelines
The following Returns are required to be filed under TDS:

Financial Year Form No. Particulars Periodicity
2008-09 Form 26 Annual return of deduction of tax in respect of payments other than salary Annual
Form 27 Annual return of deduction of tax in respect of payments other than salary made to Non-residents Annual
Form 27A Physical control charts containing control totals mentioned in TDS returns furnished electronically. Form 27A in physical form to be submitted along with e-TDS annual return forms. With each e-TDS returns Form 26 and/ or Form 27. With each e-TDS returns Form 26 and/ or Form 27.
2008-09 Form 26Q Quarterly return of deduction of tax in respect of payments other than salary Quarterly
Form 27Q
Quarterly return of deduction of tax in respect of payments other than salary made to Non-residents. Quarterly
Form 27A Physical control charts containing control totals mentioned in TDS returns furnished electronically. Form 27A in physical form to be submitted along with e-TDS quarterly return forms With each e-TDS returns Form 26Q and/or Form 27Q.

Changes in Finance Act 2009

As per Finance Act, for the Financial Year 2009-10 surcharge or Cess is not applicable for TDS with effective from 1st April, 2009. For tax deduction only the specified TDS rates are considered.
Changes in the Surcharge and Cess are applicable as follows.
Nature of payment Whether surcharge is applicable whether education cess @ 2% and secondary and higher education cess @ 1% is applicable
Salary to a resident or non resident No Yes
Payment other than salary to a resident No No
Payment other than salary to a non-resident not being foreign company No Yes
Payment other than salary to a foreign company (payment or credit subject to TDS does not exceed Rs.1 Crore) No Yes
Payment other than salary to a foreign company (payment or credit subject to TDS exceeds Rs.1 Crore) Yes @ 2.5% of TDS Yes



TDS in Tally.ERP 9

TDS (Tax Deducted at Source) in Tally.ERP 9 provides an easy-to-use and flexible interface. It helps you to handle intricate cases and calculate the tax payable to the Income Tax Department.
Tally.ERP 9 calculates the tax of all parties/ suppliers where TDS deduction is mandatory. It calculates the TDS automatically and prints Form16A certificates, Forms 26Q, 27Q, 26, 27 and 27A (Cover Note) for Quarterly/ Annual Returns as per statutory requirement.
It allows the user to view and print various TDS reports, Challans and TDS Outstanding statements.
Features of TDS in Tally.ERP 9
The TDS functionality in Tally.ERP 9 supports the following features:
1. Simple and user-friendly.
2. Quick and easy to set up and use.
3. Accounting for tax payment of bills.
4. Flexibility for assisted calculation of TDS.
5. Complete tracking of each transaction from deduction to payment.
6. Challan management and printing for prompt and accurate filing of tax.
7. The Auto allocation feature prevents error-prone data entry and helps track the transactions faster.
8. Form 16A management:
9. Can be printed for a transaction
10. Can be printed for a period
11. Can be printed yearly
9. Allows multi-party printing.
10. Exporting of data in NSDL compliant TDS file format.
11. Electronic format (e-TDS return) with Form 26Q, 27Q, 26 and Form 27 and which will be validated by the utility, provided by the government.
12. Generates Form 16A, TDS Challan, TDS Computation and TDS Payable reports.