What is TDS?

 

A service provider is the person working for another entity or individual. While, service receiver is the one who pays the service provider for the efforts. Hence, the service receiver is responsible for deducting the tax from the income of a service provider. As a result, the service receiver is called a Deductor. And the service provider a Deductee.

When should one deduct TDS?

Here, one observes the scenario for deducting the tax. A deductor deducts the tax. For illustration, to understand this better, one can imagine the instance where a person has provided the service to the receiver. So, now the income is to be paid to the service provider.  It is deducted in between the action of paying the income to the provider. And the provider receiving the income.

The receiver allots the payment of a certain income to the provider. Thus, an income is finalized. Tax deduction takes place after the finalization. But, the person receives less amount in hand due to the deduction of tax. So there are 2 trigger points that lead to deducting TDS.

1) Receipt of advance for provision of service / goods. Or,

2) Raising an invoice and the receiver acknowledging the same.

Note that Depending upon the type of income, tax is deducted with a certain rate. Specifically at the rate decided by the government.

What is a TDS Return?

There are some steps to collection of Tax. The very first is the collection of tax from the deductee. As, discussed above. Afterwards, there are two more steps that an employer / service receiver has to perform. Firstly, the payment of TDS to the government. Secondly, filing Returns. Payment of TDS involves only the payment of the tax. While, TDS returns is the secondary and a very important process.

A TDS Return is a document submitted after deducting Tax. It consists the submission of the details of the deductee. Thus, the service provider. The document contains details of the total deduction, rate of taxation and much more. Consequently, these details are required to calculate the taxation with the respective rates. Further, similar to income tax returns, there are a number of TDS returns.

The returns are filed by a service receiver before the due dates specified by the government. Further, we mention the due dates below.

Due Dates for TDS.

The very first thing to be clear about is that TDS is paid in the Financial Year. Also, the filing takes place in Previous Year. While, the filing of ITR (Income Tax Returns) is followed in Assessment Year. 

• Due dates for making TDS Payment, 2021-22.

Note that generally the due date for TDS payments is 7th of the next month. Except, March. March Specifically has due date of 30th day of April.

• Due dates for filing TDS, 2021-22.

TDS filing takes place quarterly. The first quarter starts from 1 April. And ends on 30 June.

Quarter	Time Period	Due Date
1.	1 April to 30 June.	31 July, 2021
2.	1 July to 30 September.	31 October, 2021
3.	1 October to 31 December.	31 January, 2022
4.	1 January to 31 March.	31 May, 2022

 

What is a TDS Certificate?

A document issued by a Service receiver after deducting the tax is called a TDS Certificate. Specifically issued for the provider. It is an important document.   Because, it is a proof that the receiver has paid the TDS to the government. Not only a proof, but it also contains the details of the tax paid. For example, the amount and the rate of taxation. One has to issue Form 16 A. The same phenomenon is followed by banks. To be more precise, banks issue Form 16 A when it is deducted from the fixed deposit. Often, obtained after interest, by a receiver. That is a person having the bank account. TDS certificate plays a huge role in filing ITR. A service provider needs it for sure for the filing of ITR.

Summary.

As a result, one concludes that TDS is a method of tax collection imposed on the receivers. It is a direct method to collect taxes from the service receiver. It is mandatory to pay and file a TDS Return after crossing a certain benchmark. Which is declared by the government. Income Tax Department issues a notice in case of violation. In the name of the service receiver. And, legal action is taken.

It is a receiver’s responsibility to pay the TDS from the income of a provider. Penalties are imposed for late payments and filing. Therefore, one should make sure to complete the payments and the filing in time. After the submission of TDS to the government. TDS Certificate is issued by a provider. Thus, TDS is a mandatory tax. And, every business has to comply.