Taxes! They are here to stay, and business is all about knowing them even better. One of the important characteristics of taxes is TDS – Tax Deducted at Source. And as in tax payment, so also is the filing of TDS returns obligatory. StartupFlora, your business allies in making startups and businesses a success, are here to assist you in making filing of TDS returns easy. We help companies get started, and learning about taxes is a big part of it.
What is TDS?
Suppose you borrowed money from your friend for ₹100. Your friend pays you ₹10 as tax and hands over ₹90. That ₹10 is TDS. It's one of the ways the government collects taxation at intervals. The withholding tax party (your friend in our case) pays it to the government. Payment of tax in instalments.
Why is TDS So Important?
The TDS system has the following benefits:
Regular Revenue to the Government: TDS provides a consistent source of tax collections for the government, which makes managing finances a cake walk.
Monitoring Monetary Transactions: TDS deduction allows monitoring of money transactions an easy task from where it is simple to identify potential tax evasion.
Simple Tax Collection: It facilitates tax collection an effortless exercise by taxing the source point itself.
Reduced Tax Evasion: TDS becomes more difficult to evade paying taxes, since a part of the income is already deducted and paid to the government.
What are Returns of TDS, and Why are They Required?
A TDS return is a form that a deductor (the organization that deducts TDS) completes and files with the Income Tax Department. It presents a comprehensive list of all TDS deductions for a given time frame. It's an exhaustive report card of all the tax you deducted on payments made to others. Filing TDS returns is a mandatory legal requirement for any person deducting TDS. It's required to stay in sync with the law of taxes and avoid penalties.
Who is Required to File TDS Returns?
Any person or company making deductions under TDS are required to furnish TDS returns. These are:
Business entities (sole proprietorship, partnership, company)
Institutions (government organizations, others)
Individuals (in exceptional situations, as while deducting TDS on rent payments in excess of a specified amount)
What has to be Filed in a TDS Return
A TDS return has serious details, i.e.,
Deductor's PAN: Permanent Account Number of the individual or organization, who is a deductor.
Payee's PAN: Permanent Account Number of the entity or person for whose payment the TDS is deducted.
TDS Amount: The amount actually deducted as TDS.
Payment Details: Details of the payment made, i.e., date of payment and whether it is salary, rent, professional charges, etc.
TAN (Tax Deduction and Collection Account Number): Special number required for deducting TDS.
Various Forms for Various Payments: TDS Return Forms
Various forms are provided for the filing of return TDS, which are classified based on the type of payment. Some of the most commonly utilized forms are:
Form 24Q: Used for TDS deductions on payment of salary.
Form 26Q: Called for TDS deductions on payments other than salaries such as rent, professional fees, interest payment, and commission.
Form 27Q: Called for TDS deductions from payments made to non-residents.
Form 27EQ: To be employed for deduction of TDS on payments made to non-residents.
When are TDS Returns Due?
TDS returns are normally filed on a quarterly basis. The due dates for a quarter are as below:
Quarter 1 (April-June): July 31st
Quarter 2 (July-September): October 31st
Quarter 3 (October-December): January 31st
Quarter 4 (January-March): May 31st
It is important that TDS returns be filed on or before due dates to avoid penalty and interest fees.
Step-by-Step Procedure to File TDS Returns
TDS returns are filed online on the e-filing portal of the Income Tax Department. The step-by-step procedure is presented below in simple format:
Gather Needed Information: All information needed regarding the TDS deducted during the quarter must be gathered. This might be payment details, TDS paid, PAN of recipients, and your TAN.
Download Relevant Form: Download the respective TDS return form (Form 24Q, 26Q, etc.) from the income tax department's official website.
Complete Form Carefully: Carefully fill all the details in the form of TDS return. Validate the correctness of PAN details, TDS value, and other concerned data.
Verify the Form: Use the validation tool provided on the Income Tax Department website for a form discrepancy. This ensures no problem while filing.
Upload the Form: Upload the certified form of TDS return on the website of e-filing of the Income Tax Department. You need to login on the portal with your credentials.
Docket and furnish the TDS Certificate (Form 16/16A): Once the TDS return is furnished, the TDS certificate (Form 16 in the case of a salary payment case and Form 16A in the case of a non-salary payment case) is to be drawn and furnished to the payee. The TDS certificate is evidence of TDS deducted and can be utilized by the payer while giving the credit while submitting income tax return.
What to do After Filing the TDS Return?
The Income Tax Department accepts and processes the submitted TDS return.
The TDS information is credited to the payee's account.
The payee can avail a credit of TDS deducted while filing his income tax return through the TDS certificate (Form 16/16A).
Why Filing of TDS Return is so Important
It is not a ritual to submit TDS returns: it is a legal requirement. Non-compliance can lead to:
Penalties: Failure to file or delayed filing of TDS returns can attract huge penalties.
Interest Charges: Interest may be charged on the amount of TDS if it is not paid to the government in time.
Legal Consequences: In certain instances, non-compliance can even lead to legal action.
StartupFlora: Your Business Partner in Compliance and Growth
We at StartupFlora understand that it can be overwhelming to handle tax legislation, especially for small businesses and startups. We cannot prepare your TDS returns on your behalf, but we can connect you with registered tax professionals and provide you with helpful resources so that you can find it easier. We're dedicated to assisting your company grow by providing you with information and resources so you can comply and thrive. Contact us today for more details about how we can help your company grow!
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