A Comprehensive Guide to TDS Returns for Salary Earners and Employers

1. Tax Deducted at Source

Tax Deducted at Source (TDS) is an important component in Indian taxation system, which is designed to ensure the collection of taxes at the different source of income. In all the sources of income, salary income holds important aspect, both for individuals and the government. TDS on salary plays an important role in the overall tax compliance framework, aiming to stop tax evasion, enhance tax collection, and promote transparency in financial transactions.

2. Basic Understanding of TDS on Salary

TDS on salary basically means tax deducted by an employer from the salaries payable to employees. It covers under the provisions of the Income Tax Act, 1961, and is applicable to individuals earning a salary.

The employer, as a deductor, is solely responsible for deducting TDS from the salary payments and depositing it with the government on behalf of the employee. TDS returns on salary is computed based on the employee’s total income, including salary, allowances, perquisites, and other benefits.

3. Components of TDS on Salary

  1. Basic Salary: It includes the fixed component of the salary structure and is subject to TDS deduction in accordance with the applicable tax
  2. Allowances: Allowances such as house rent allowance (HRA), car allowance, conveyance allowance, medical allowance, special allowances etc., are also considered for TDS However, certain allowances are exempt from TDS under provisions of the Income Tax Act subject to specific conditions.
  3. Perquisites: Perquisites or fringe benefits provided by the employer to the employee, such as rent-free accommodation, car facility, club memberships, etc., are taxable and subject to
  4. Incentives: Any incentives, bonus or performance-based sums are also included in the total income for TDS

4. Process of filing TDS Return on Salary

Filing of TDS return on salary is a systematic process that includes various stages, from TDS deduction by the employer to the submission of TDS returns Delhi to the tax department so that TDS credit can be provided to the person (deductee) whose TDS has been deducted. The Steps are as under:

  1. TDS Deduction (Tax Deducted at Source) by Employer: The employer deduct TDS from the salary of employees based on the prevailing tax rates and considering the eligible deductions & exemptions. TDS is calculated on the estimated income of the employee for the financial year.
  1. Issuance of Form 16: Form 16 is a document issued by the employer to the employee, certifying the details of salary paid and TDS deducted thereon during the financial year. It is proof of tax deduction & its deposit with tax department and is necessary for filing income tax returns so that Tax Credit can be claimed by the relevant
  2. Preparation & Filing of TDS Return (Form 24Q): Form 24Q (TDS return on Salary) is the statement of TDS deducted and deposited on salary payments. Employers prepare quarterly TDS returns vide using Form 24Q and submit it to the Income Tax
  3. Verification and Submission: Once the TDS return is prepared, the employer or the authorized signatory verifies the accuracy & completeness of the details furnished in the Once verified, the TDS return is submitted electronically to the tax department through the Tax Information Network (TIN) website or through Income tax portal using TAN credentials.
  4. Generation of TDS Certificates (Form 16& 16A): Form 16 are issued to person on whose salary tax is deducted, Apart from Form 16 issued to employees for salary TDS, employers are also required to provide Form 16A for TDS deducted on other payments such as interest, dividends, rent,
  5. Rectification and Correction: In case of any errors in the TDS return filed, employers can rectify them by filing a revised return or submitting correction
  6. Payment of TDS Demand: In case of any shortfall in the TDS deposited or discrepancies identified by the tax department, the employer is required to pay the TDS demand along with applicable interest and penalties.

5. TDS Compliance for Employers

Employers need to comply with certain compliance requirements while deducting and depositing TDS on salary:

  1. TAN Registration: Employers are mandatorily required to obtain a Tax Deduction and Collection Account Number (TAN) from the Income Tax Department for deducting and depositing
  2. Timely Deposit of TDS: TDS deducted from salary payments must be deposited with the government within the prescribed due dates i.e. 7th of the subsequent month and 30th April for the month of March. Delay or non-deposit of TDS attracts interest @1.5% per
  3. Filing TDS Returns: Quarterly filing of TDS returns using Form 24Q is mandatory for Failure to file TDS returns within the stipulated time results in penalties @ Rs. 200/- per day.
  4. Issuance of TDS Certificates: Employers are required to issue Form 16 to employees and Form 16A to deductees other than salary within 15 days from the date of filing of TDs

6. Implications of TDS Return on Salary

The TDS return on salary has many implications for both employers and employees, as well as the economy:

  1. Collection of Revenue: TDS on salary significantly contributes to the government’s tax revenue, ensuring a steady inflow of funds for public expenditure and welfare
  2. Tax Compliances: By levying TDS provisions, the government promotes tax compliance among employers and employees, which results in reducing tax evasion and increasing transparency in financial
  3. Employee Welfare: TDS deduction helps in timely payment of taxes by employees, ensuring compliance with their tax obligations.
  4. Employer Obligations: Employers play an important role in deducting and depositing TDS on behalf of employees along with fulfilling their statutory
  5. Ease of Tax Administration: TDS return on salary helps in streamlining the tax administration process by automating the collection and verification of tax payments, reducing the administrative burden on tax
  6. Tax Refunds: For employees eligible for tax refunds due to excess TDS deduction, filing of TDS returns helps in the process of claiming.

Taxcellent helps you in filing TDS returns on salary and TDS returns on other than salary. We also provide tax advisory in relation to the deduction of TDS on a monthly basis.

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