Demystifying TDS Returns: A Comprehensive Guide for Non-Salary Income in Delhi

Tax Deducted at Source (TDS) is an important mechanism employed by the government to collect taxes at the source when any income is generated. While TDS on salary is appreciatory recognized, TDS on non-salary income is also very significant, which includes various sources such as interest, dividends, professional fees, contracts, and rent.

Basic Understanding TDS on Non-Salary Income

TDS on non-salary income relates to the deduction of tax at the source from payments made to individuals or entities other than salary. It includes a wide nature of income streams, each subject to specific TDS provisions as prescribed under the Income Tax Act, of 1961. The objective is to ensure the timely collection & payment of taxes and promote tax compliance among taxpayers, thereby increasing transparency and accountability in financial transactions.

Sources of Income other than Salary Subject to TDS

  1. Interest Earned: Interest received accounted as Income from bank deposits, fixed deposits, recurring deposits, savings accounts and any other such instrument is subject to TDS.
  2. Dividend Income: Dividend income were earlier exempt under the provisions of Income Tax Act, 1961. However, dividends received from investments in shares, mutual funds, or any such other securities attract TDS subject to threshold limit.
  3. Income from Rent: Rental income is received from letting out properties, land, or assets such as furniture’s or machinery is subject to TDS, with rates based as per the equipment or immovable property rented the and thresholds applicable based on the rent amount and the nature of the transaction.
  4. Professional & Technical Fees: Payments made to professionals, consultants, contractors, or freelancers for their services are subject to TDS, ensuring tax compliance in service transactions. For technical services TDS rate is 2% whereas services other than technical is subject to 10% TDS deduction.
  5. Commission and Brokerage: Commission or brokerages as received by agents, brokers, intermediaries, or salespersons is liable for 5% TDS deduction at the prescribed rates.

Process of TDS Return on Non-Salary Income

Filing TDS return on non-salary income involves a systematic process which requires reporting related to multiple stakeholders and various other compliance requirements. The step-by-step procedure is as under:

  1. Deduction of TDS by Deductor: The person responsible for making payments to other person is liable to deduct TDS which is basically known as the deductor, who deduct TDS at the time of credit or payment, whichever is earlier. The deductor can be an individual, a company, partnership firm or any other entity making payments subject to
  2. Ascertain the TDS Amount to be deducted: The TDS amount is calculated based on the applicable rates provided by Income Tax Act, 1961 and thresholds specified for each type of non-salary The deductor needs to ensure accurate computation of TDS to avoid under deduction of TDS otherwise it may leads to charging of interest or penalty by the tax department.
  3. Issuance of TDS Certificate (Form 16A): Once TDS is deducted, the deductor issues, the Deductor is required to deposit the TDS with tax department within the statutory
  4. Preparation of TDS Return (Form 26Q, 27Q): The deductor is required to file quarterly TDS returns by using the relevant forms prescribed for different types of non- salary For example, Form 26Q is used for TDS on payments made other than salary, Form 27Q for TDS on payments made to non-residents, whereas Form 24Q is designed for TDS on salary payments. Further, the Deductor after filing of TDS return issues certificate in Form 16A to the deductee, certifying the details of TDS deducted and deposited with the government. The deductee will use the said TDS certificate for claiming credit of TDS while filing their income tax returns.
  5. Verification and Submission g TDS returns: After preparing the TDS return, the Deductor or the authorised signatory verifies the accuracy of the details furnished therein. Subsequent to verification process, the TDS return is submitted electronically to the Income Tax Department through the Tax Information Network (TIN) portal or Income tax portal using TAN credentials within the stipulated due dates.
  6. Rectification and Correction: In case of any errors in the TDS return services in Delhi, the deductor will be required to rectify the errors by filing a revised return or submitting correction statements within the prescribed time limit.

Other Requirements for Deductors

Deductors must comply with various statutory requirements while deducting and depositing TDS:

  1. TAN Registration: Deductors are required to obtain a Tax Deduction and Collection Account Number (TAN) from the Income Tax Without TAN, TDS cannot be deducted.
  2. Deposit of TDS: TDS deducted from non-salary and salary payments must be deposited with the government by 7th of the subsequent month and for the month of March, TDS is to be deposited by 30th In case of any delay interest and penalties may be levied.
  3. Filing TDS Returns: TDS returns are to be filed Quarterly using the appropriate forms (e.g., Form 26Q, 27Q, ). Failure to file TDS returns within the specified time attracts penalties of Rs. 200/ per day from the due date of filing to till the date of actual filing.
  4. Issuance of TDS Certificates: Deductors must issue TDS certificates in Form 16A to the deductees within the stipulated time frame, providing details of TDS deducted on non-salary payments.
  5. TDS Rates and Thresholds: Deductors need to deduct TDS as per the prescribed TDS rates and thresholds applicable based on nature of expense on which TDS is liable to be deducted.
Taxcellent provides TDS return filing services along with guidance in obtaining TDS, deducting & depositing TDS in a timely and accurate manner.

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