Introduction to TDS and TDS rate Chart | AY 2019-20 onwards

DEDUCTION AT SOURCE AND ADVANCE PAYMENT [SECTION 190]

The total income of an assessee for the previous year is taxable in the relevant assessment year. For example, the total income for the financial year (FY) 2018-19 is taxable in the assessment year (AY) 2019-20. However, income-tax is recovered from the assessee in the previous year itself through –

• Tax deduction at source (TDS)
• Tax collection at source (TCS)
• Payment of advance tax

Another mode of recovery of tax is from the employer through tax paid by him under section 192(1A) on the non-monetary perquisites provided to the employee.

These taxes are deductible from the total tax due from the assessee. The assessee, while filing his return of income, has to pay self-assessment tax under section 140A, if tax is due on the total income as per his return of income after adjusting, inter alia, TDS, TCS and advance tax.

DIRECT PAYMENT [SECTION 191]

Section 191 provides that in the following cases, tax is payable by the assessee directly –

• in the case of income in respect of which tax is not required to be deducted at source; and
• income in respect of which tax is liable to be deducted but is not actually deducted

In view of these provisions of section 191, the proceedings for recovery of tax necessarily had to be taken against the assessee whose tax was liable to be deducted, but not deducted.

In order to overcome this difficulty, the Explanation to this section provides that if any person, including the principal officer of the company –

• who is required to deduct tax at source; or
• an employer paying tax on non-monetary perquisites under section 192(1A)

does not deduct the whole or part of the tax, or after deducting fails to pay such tax deducted, then, such person shall be deemed to be an assessee-in-default.

However, if the assessee himself has paid the tax, this provision will not apply.

What is TDS?

In simple words, it is tax deducted by deductor while making payment to deductee. Tax so deducted by deductor is then paid to Central Government on behalf of deductee.
Example : Mr A has to make payment of Rs 1,00,000/- to Mr B. On this, assume that on this tax has to be deducted at 10% as per Income tax rules. So, Mr A will deduct tax of Rs 10,000/- and pay balance of Rs 90,000/- to Mr B. Mr A will pay Rs 10,000/- to Central Government.
This Rs 10,000/- are paid to Central Government by Mr B through Mr A, So Mr A will get credit Rs 10,000/- at the time of filing return.
Here, Mr A is deductor and Mr B is deductee. Tax is not required to be deducted on all type of payment, it is required to be deducted only on specified payments.
In certain cases tax is deducted at the time of -

• making payment or
• credit to books of accounts, whichever is earlier.

'Credit to books of accounts' means the date on which transaction is recorded in books of accounts.

Which are those specified payments on which TDS is to be deducted and at what rate?

TDS Rate Chart