What are TDS provisions, exemption thresholds and claim of credit?

TDS helps make sure the government knows the details of the recipient such as his PAN, and total income earned.

Business Standard : Tax Deducted at Source (TDS) was introduced by the government to crack down on the tax evaders. TDS is basically collecting tax at source. TDS can also be considered a prepayment of tax. As per the TDS concept, if the payment exceeds a defined threshold, then a company or a person making the payment (deductor) must deduct tax while making a payment. The deductor must then deposit the tax deducted into the account of the central government on behalf of the recipient of income. TDS is applicable at various rates as specified by the Income Tax Department. The person from whose payment tax is being deducted (deductee) is issued a TDS certificate by the deductor.

TDS Provisions

The person receiving income (like salaried individuals) faces TDS in the form of a tax deducted salary paid to them. TDS laws have given the authority to the payee or employer, to deduct tax prior to making the full payment to the employee.

TDS helps make sure the government knows the details of the recipient such as his PAN, and total income earned. Any TDS deduction also gets mapped to Form 26AS.

TDS Exemption Threshold

Tax has to be deducted by the deductor at the rates (specified below) if the amount payable is more than the threshold limit as given in the following table, the below rates are applicable for FY 2018-19:

There have been changes to the threshold in some the aforementioned section applicable from the FY 2019-20 onwards. For instance,

1. Under section 194A, the threshold of interest earned on bank/post office deposits has been raised from Rs 10,000 to Rs 40,000.

2. Tax deduction limit on rent under section 194I has also been increased from Rs 1,80,000 to Rs 2,40,000.

Claiming TDS Credit

A TDS deductor must issue TDS certificates to the deductee. This includes banks and employers. For instance, employers issue Form 16 to their employees annually, whereas a bank provides Form 16A quarterly to the deductees whose tax was deducted at source.

The TDS certificate states how much tax was deducted as TDS along with the income received from the employer/ deductor. You can view and download your Form 26AS by logging into TRACES through your PAN.

Filing out a tax return for the first time? Here are seven important tips

Individuals (residents and non-residents) need not pay taxes on income up to Rs 2.5 lakh. Beyond this limit, their income becomes taxable based on slab rates prescribed under the law.

There are many who find income tax calculation and filing to be a tough task. However, reading and learning about it can turn out to be a skill useful for a lifetime. Knowing this basic skill gives you the confidence to deal with your income and taxes. Here are a few important tips that are useful when filing income taxes, especially for first-time taxpayers.

Tips for first-time taxpayers

Tax payment period and related terms

Tax is calculated based on the income earned during the period from April 1 of the current year to March 31 of the following year. This period is called the financial year (FY) and the year in which the income is assessed is called the assessment year (AY).

For example, the income accrued during the financial year 2018-19 is assessed in the assessment year 2019-20.

Income tax slabs

Taxpayers must determine the income tax slab they fall under to determine their tax liability for a given financial year. The income tax slabs are designed based on the income range per annum.

Each category of income per annum will correspond to a certain percentage of tax. Additionally, a certain percentage of cess will also be applicable.

Individuals (residents and non-residents) need not pay taxes on income up to Rs 2.5 lakh. Beyond this limit, their income becomes taxable based on slab rates prescribed under the law. The basic exemption limit is increased to Rs 3 lakh for a senior citizen and to Rs 5 lakh for a super senior citizen.

Form 16

Form 16 is a TDS certificate provided by an employer for salaried individuals. This form includes all the salary details to be entered while filing income tax returns. The latest Form 16 is designed such that it can be directly used to report all the information to be entered in new ITR-1 form. It consists of information on the deductions you have claimed, the salary earned, and exemptions availed.

The employer should provide Form 16 by 15 June every year. Though, the due date for providing Form 16 has been extended to 10 July 2019.

Business Standard