Who Is Liable to Deduct and Pay TDS Under Income Tax Act?


Who Is Liable to Deduct and Pay TDS Under Income Tax Act?

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Any individual or HUF, who pays rent to any other entity, is liable to deduct TDS @ 5% or 3.75% on rental income. This should be deducted at the time of making payment and deposited in the government account through any authorized bank branch. This deduction comes under Section 194-IB of the income tax act.

TDS stands for Tax Deducted at Source and was introduced with the aim of collecting taxes from people directly. It is a system wherein the person who makes any payment to you or credits your income in his/her account deducts tax @ specified percentage and deposits it in the Government account. This makes sure that no one evades paying taxes.

The deductor is bound to issue a TDS certificate (Form 16A) to you which contains all details regarding computation of tax, amount deducted and deposited with the Government. Salaried individuals are also issued this form by their employers which is a proof of the amount that they earned and the TDS that has been deducted.

TDS is applicable only when the value of a transaction crosses certain threshold levels that are specified by the Income Tax department. For instance, interest income that you earn on your FDs is eligible for TDS only when it exceeds Rs 50,0000 in a year. A TDS return must be filed by the deductor stating the details of the payments made, the amount of TDS deducted and the taxes paid.The same applies to dividend income that you receive. Similarly, long term capital gains earned by NRIs are taxable at 20% along with surcharge and education cess.

 

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