TDS or Tax Deducted at Source is used by the Government as a tool for collecting tax for the purpose of minimising tax evasion by taxing the income at the time it originated rather than at a later time. TDS was introduced to collect tax at the source of the income of the individual from where the income is originated. It is applicable on several incomes such as interest received, salaries, commission received, etc. TDS is not applicable on similar rates on every income and payment. The Income Tax Act has prescribed different rates for different payments and different recipients such as payment of redemption proceeds by a debt mutual fund to Non-Resident Indian is subject to TDS whereas a resident individual is not subject to TDS. The TDS works on a concept that every person who is making any specified type of payments to anyone shall deduct tax at the rate which is prescribed in the Income Tax Act at the source and deposit it to the government’s account. The person who has the responsibility to deduct the tax before making the payment and depositing it to the Government’s account is known as ‘deductor’ and after deducting the tax he has to issue a TDS Certificate as per section 203 of the Income Tax Act 196. The person who receives the payment after the deduction of the tax is known as ‘deductee’.
What is TDS Certificate?
The Form issued by the person who deducts the TDS is known as TDS Certificate. The TDS Certificate shows the details such as particulars of tds payment, the date on which the tax was deducted and the date of when it was credited to the Government. The taxpayer gets the facility to claim the credit and their refund on the basis of the TDS Certificate. This Certificate can be downloaded from the TRACES (TDS Reconciliation Analysis and Correction Enabling System of the Income Tax Department). The deductee have to verify the certificate by the digital signature certificate after checking all the details.
The TDS Certificate which is issued by your deductor, contains a unique six-digit number which is known as TDS Certificate Number. The TDS Certificate Number is present in Form 16A or Form 16. If you received a Form 16/16A without bearing the TDS Certificate Number then you can request your deductor to issue the Form which has been downloaded from TRACES.
What are the Types of TDS Certificate?
There are two types of TDS Certificate:
FORM 16 (for salary income which is issued annually)
FORM 16A (for non-salary income which is issued quarterly)
Form 16 is your salary TDS Certificate. If your salary income for the Financial Year is more than the exemption limit of Rs. 2,50,000/- then your employee is mandated by the Income Tax Act, 1961 to deduct TDS from your salary and deposit to the Government subsequently. If you have given the disclosure to your employee from other heads then he will take your whole income for the consideration in respect to TDS deduction.
Your employer will not deduct the TDS and will not issue Form 16 if your income is less than the basic exemption limit. The number of Form 16 issued is directly related to the number of employers you have worked with. If you have worked with more than one employer, then more than one Form will be issued.
Form 16 is nothing but just a certificate through which the employer certifies details relating to your salary which you have earned during the year and how much has been deducted as TDS. Form 16 consists of two parts, Part A and Part B. Part A includes all the details of the employer and the employee. For example, name, address, PAN details, details of TDS deducted, etc.
Whereas Part B includes the details of the salary and other incomes, tax payable, deduction allowed, etc.
It is also a TDS Certificate. Form 16 was applicable on the salary incomes whereas Form 16A is applicable for TDS on professional income other than salary. For instance, the Form 16A will be issued when your bank will deduct on the interest income which you have earned from the fixed deposit, for TDS deducted on the rent receipt, for TDS is deducted on any insurance commission and other scenarios like this. This certificate includes the same details like Form 16 such as name and address of the employer and the employee, PAN and TAN details, challan details of TDS deducted, etc. It also contains the details of the income which you have earned and the TDS which is deducted and the deposit on such income.
Form 26AS is basically an annual consolidated tax statement which can be accessed through the income-tax website by the taxpayers using their PAN (Permanent Address Number). If your tax has been deducted from your income, the Income Tax Department have all the details in their database. The Form 26AS can be referred for the details of the income on which the tax has been deducted and it also aids in knowing the taxes which has been paid by you or on your behalf by the deductor to the Government treasury. Form 26AS also includes the details of your deductor such as their names, address, TAN (Tax Deduction Account Number).
Form 26AS is a live statement which is updated as the transactions are recorded for the ongoing assessment year. You also have the option to view the statement of the previous assessment years. The credits available in Form 26AS confirms that:
The tax which was deducted or collected from your salary has been deposited to the account of Government.
To File TDS Return has been accurately filed by the collector on your behalf giving the details of the tax collected/deducted.
Bank properly furnished the details of the tax deposited.
This consolidated tax statement proves that you have paid the tax and the tax has been paid on your behalf.
In Form 26AS, an annual tax credit statement is generated for a person who is subjected to TDS. This is done by the Income Tax Department. The user has the facility to download this statement from the income tax E-Filing Website. The statement which you will download would be password-protected and the password would be the Date of Birth of the user which was entered at the time of registering with the Income Tax E-Filing Website. This statement is linked to the PAN of the user and consists of all the details in respect to TDS by employers or by others.
The users also have the option to download the statement via their net banking account provided that the bank provides the E-Filing Login facility.
Difference between TDS and TCS
TCS (Tax Collected at Source) is a tax which is collected by the seller from the buyer at the time of sale of certain goods which has tax regulations according to the tax department of the Indian Government. It is considered an income for the seller or company. Mainly, it is applicable on the items such as timber, sale of scrap, etc.
TDS and TCS both are taxes but the source of collection of both the taxes are different. There are various other differences which are listed below:
TDS is like an expense for a company whereas TCS is assumed to be an income for the company.
TDS is applicable on rents, payments, lotteries, etc. but TCS is mainly applicable on forest products, timber selling, alcoholic beverages, etc.
There is specified tax limit which has been prescribed by the Tax Department of India and TDS is applicable when the amount of tax exceeds the prescribed limit. On the other hand, TCS is applicable on the sale of specific goods specified by the Tax Department.
TDS is deducted by the buyer or the payer whereas TCS is collected by the seller or the payee.
Example for TDS: P provides services to R for Rs. 40,000, R is liable to deduct 10% TDS i.e. 4000 and P receives Rs,44000.
Example for TCS: L is selling a bike worth 12 lacs. So, he is liable to collect 1% TCS on the sale consideration and deposit it with the government. M pays 12.12 lacs (12 lacs+1%)
Due Date for Issuing TDS Certificate
TDS certificate have to be issued by the employer to employee within 15 days of filing fourth quarter TDS return. Due date for issuing TDS Certificate is listed below:
For 1st quarter of 1st Apr. to 30th June – 15th Aug
For 2nd quarter of 1st July to 30th Sept – 15th Nov
For 3rd quarter of 1st Oct to 31st Dec – 15th Feb
For 4th quarter of 1st Jan to 31st Mar – 15th June
Penalty for not issuing TDS Certificate:
TDS certificate on Form 16 have to be issued annually while the TDS Certificate in Form 16A must be issued quarterly. If the deductor fails in issuing the TDS Certificate within the stipulated time, penalty of Rs. 100/- per day of default is charged. However. The penalty shall not exceed the amount of tax collectible or deductible, as the case may be.
What should be Checked in TDS Certificate?
There are several which are needed to be checked while issuing or collecting the TDS Certificate and those points are listed below:
It has to be ensured that the TDS certificates issued are downloaded only from TRACES (TDS Reconciliation Analysis and Correction Enabling System of the Income Tax Department). Certificates which are downloaded from TRACES have a specific format. A form which is downloaded from TRACES will bear upon it a seven-character alphabet unique certificate number and will also have a TDS-CPS logo on the left side and on the right side at the top would be a National Emblem.
If the certificates are digitally signed then it is necessary to check that the signature is verified i.e. it has a check mark across it. If the signature is unverified then it will bear a question mark instead of check.
It has to be checked that the details on the TDS Certificate are correct such as name, deductor’s TAN, PAN, TDS amount, amount paid to you, etc. In TDS Certificate the financial year or the assessment year for which tax is deducted is also mentioned. In the case where the TDS Certificate is issued quarterly, the quarter for which the tax is collected would also be reflected in the TDS Certificate.
The figures mentioned in the TDS Certificate can be cross checked with figure in Form 26AS. You have the option to verify that whether the amount deducted which is shown in the TDS Certificate has actually received by the Government or not by comparing Form 26AS. It is pertinent to mention that verifying, whether the tax has been deducted by the deductor on each transaction on which it was supposed to be deducted, is the duty of every taxpayer. It must also be checked by the taxpayer that TDS mentioned in Form 16/16A is reflected in Form 26AS.
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