TDS Provisions at a glance

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Under Chapter XVII of the Income-tax Act, 1961 (the Act), whenever certain persons (deductor) are making payments or provisions for payments under certain categories (salary, interest, winnings from lottery, crossword puzzle, card game or other game, horse race, rent, brokerage and commission, professional/technical fees, contractors, repurchase of mutual fund units and compensation of acquisition of non-agricultural land and building), they are required to deduct income-tax at source (TDS) at different prescribed rates and pay the TDS to the Central Government within the prescribed period. Thus, while making the final payment, such persons would pay the net (gross less TDS amount) only to the deductee.

Moreover, the deductor is also required to issue within the prescribed time frame, TDS Certificates showing the details of the payments on which TDS has been deducted in Form No. 16 or 16AA for Salaries and Form No. 16A for Other Payments.

Further, the deductor is required to file an Annual Return for the TDS on various specified categories of payments - Form No. 24 for Salaries and Form No. 26 for Other Payments. These Annual Returns need to be filed by the prescribed person in the case of every office of Government and the principal officer of a company in electronic form (floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media) and by others in manual or electronic form.

The Switch & Makeover

However, the Finance Act, 2005 amended the law relating to TDS covered in the Act as under:

1. Where any person deducts any sum on or after April 1, 2005 in accordance with Chapter XVII of the Act, such person shall, after paying the TDS to the credit of the Central Government within the prescribed time, prepare quarterly statements for the period ending on 30th June, 30th September, 31st December and 31st March in each financial year and file with the prescribed income-tax authority by 15th July, 15th October, 15th January and 30th April respectively a statement in the prescribed form (Form No. 24Q for Salaries and Form No. 26Q for Other Payments) duly verified.

2. Where TDS has been deducted or paid under Chapter XVII of the Act on or after April 1, 2005, the deductor shall not be required to furnish a TDS Certificate to every deductee.