A Complete Guide to TDS and Its Impact on Your Income

Tax Deducted at Source (TDS) is an essential mechanism in the Indian taxation system, ensuring tax collection at the source of income generation. It applies to salaries, interest, rent, professional fees, and other types of earnings. Understanding TDS and its impact on your income is crucial for effective tax planning and compliance.

What is TDS?

TDS is a system where tax is deducted at the time of making specified payments, such as salary, rent, professional fees, or contract payments. The deducted amount is deposited with the government by the deductor (employer, bank, or payer). This process ensures steady revenue collection and minimizes tax evasion.

Types of Payments Covered Under TDS

TDS applies to various income sources, including:

How TDS impact your Income

Reduced Take-Home Salary

If you are a salaried employee, your employer deducts TDS based on your tax slab.
Higher TDS means lower in-hand salary.

Lower Interest Income

Bank deducts TDS on fixed deposits (FDs) if interest exceeds ₹40,000 (₹50,000 for seniors).
If your total income is below taxable limits, you can submit Form 15G/15H to avoid TDS.

Impact on Investment & Rent

TDS on rent (if rent > ₹50,000 per month) affects landlord.
TDS on dividends, mutual funds, or capital gains reduces net returns.

Cash Flow Management

If excess TDS is detected, you must wait for a refund after filing ITR.
Proper tax planning can help minimize TDS deduction.

How to Check your TDS Details?

Step 1: Visit the TRACES Portal

Go to the TDS Reconciliation Analysis and Correction Enabling System (TRACES) website: https://www.tdscpc.gov.in

Step 2: Log in to Your Account

Use your PAN and registered credentials to log in. New users must register first.

Step 3: Download Form 26AS

Navigate to 'View Form 26AS'.
Select the assessment year and download your TDS statement.
This form shows the TDS deductions on your income.

Step 4: Verify in Your Income Tax Portal

Visit the Income Tax e-Filing Portal (https://www.incometax.gov.in) to cross-check your TDS records under 'Tax Credit Statement'.

How to Avoid Excess TDS Deduction?

Submit Form 15G/15H if your income is below the taxable limit.
Declare Investments to your employer for lower TDS on salary.
File ITR on Time to claim refunds for excess deductions.
Verify TDS Details regularly using Form 26AS.

Recent Changes in TDS (Budget 2023-24)

TDS on EPF Withdrawal: Reduced from 30% to 20% for non-PAN holders.
TDS on Online Gaming Winnings: 30% on net winnings (from 1st April 2023).
Higher TDS for Non-Filers: 20% TDS on certain incomes if ITR not filed for 2 years

Conclusion

TDS plays a crucial role in the tax system by ensuring tax collection at the source. However, it can impact your cash flow if not planned properly. Regularly checking your TDS details, submitting required forms, and filing your returns timely can help your avoid excess deductions and ensure financial efficiency.

For professional assistance in managing TDS and Tax Compliance, Proviconn is here to help. Contact us for expert tax solutions.

FAQs

What happens if TDS is deducted but not deposited?

The deductor may face penalties, and you may not be able to claim a tax credit. Always check your Form 26AS for accuracy.

Can I get refund for excess TDS deducted?

Yes, you can claim a refund by filing your ITR.

What is the TDS rate for freelancers?

Freelancers receiving payments above ₹30,000 from a single client face a 10% TDS deduction.

Need help with your TDS? Contact Proviconn for expert guidance.