Where TDS is applicable and how to avoid it

Salary income: Employer deducts TDS on total income, including income other than salary after taking into account all deductions and exemptions. This saves the individual the hassle of paying tax himself.

TDS rate: As applicable to individual based on his income and deductions.

Interest income: TDS is deducted by banks on FDs and RDs if the interest exceeds Rs 10,000 a year. TDS does not end tax liability. Someone in a higher tax slab will need to pay additional tax. Those in lower income bracket can seek a tax refund.

TDS rate: If PAN has been provided, TDS is 10% of income. Otherwise it is 20% of income.

EPF withdrawals: Withdrawals from Employee Provident Fund are subject to TDS if you withdraw before five years of service. However, no TDS is deducted on withdrawals of less than Rs 30,000.

TDS rate: If PAN has been provided, TDS is 10% of the withdrawal. Otherwise it is 20% of the amount.

Property sale: TDS is applicable if the value of the property exceeds Rs 50 lakh. If instalments are being paid TDS is deducted on each instalment. The buyer must obtain a Tax Deduction Account Number to deduct TDS. TDS has to be de -posited along with Form 26QB within a week from the end of the month in which TDS was deducted. Buyer must give TDS certificate to the seller.

TDS rate: If PAN has been provided, TDS is 1% of sale value. Otherwise it is 20% of the sale value.

On NRIs: NRIs are not permitted to submit Form 15G/H for NRO deposits and TDS is mandatory on all incomes. In case of resident Indians, TDS kicks in only if interest exceeds Rs 10,000 a year. But there are no such threshold for NRO deposits. Easwar committee has recommended easing of TDS rules for NRIs.

TDS rate: 30% on interest income from bank deposits, 20% from corporate deposits, 15% on short-term capital gains if securities transaction tax (STT) has been paid and 10% on longterm capital gains. If no STT is paid on short-term gains, TDS is 30%. Flat rate of 20% on sale of property.

How to avoid it

TDS can be avoided by submitting Form 15G or 15H. Form 15H is for senior citizens. It can be submitted if there is no tax on total income. Form 15G is for everybody else, except NRIs. It can be filed if tax on total income is nil and total interest income is less than the basic exemption limit.

Key Features – File Validation Utility (FVU) version 2.148

  • Changes in Form 27A generated from File Validation Utility.

The Quarter of the statement is made available in Form 27A as generated from FVU.

Example: if the statement is validated from FVU pertaining to FY 2016-17 of the second quarter (i.e. July 1, 2016 to September 30, 2016), in such case, Form 27A will have the following statement ‘Form for furnishing information with the statement of Deduction / collection of tax at source (tick whichever is applicable) filed on computer media for the period Q2’

  • This version of FVU is applicable with effect from September 17, 2016.

Key Features – File Validation Utility (FVU) version 5.2

  • Addition of new fields for Form 24Q-Q4 under Annexure ll (i.e. salary details) as below:
  1. Aggregate rent payment exceeds rupees one lakh during the previous year:

– The above is applicable for regular as well as correction statements pertaining to FY 2016-17 onwards.

– If the rent payment exceeds rupees one lakh, in such case, flag value ‘Yes’ is to be mentioned under the above referred field, else flag value ‘No’ is to be mentioned.

– If the flag value is ‘Yes’, in such case, PAN and Name of the landlord is to be mandatorily mentioned. The details (i.e. PAN and Name) of maximum to four landlords can be mentioned.

  1. Deduction of interest under the head ‘Income from house property’ (which is paid to the lender):

– The above is applicable for regular as well as correction statements pertaining to FY 2016-17 onwards.

– If the interest is paid to the lender, in such case, flag value ‘Yes’ is to be mentioned under the above referred field, else flag value ‘No’ is to be mentioned.

– If the flag value is ‘Yes’, in such case, PAN and Name of the lender is to be mandatorily mentioned. The details (i.e. PAN and Name) of maximum to four lenders can be mentioned.

  1. Deduction of tax from contributions paid by the trustees of an approved superannuation fund:

– The above is applicable for regular as well as correction statements pertaining to FY 2013-14 onwards.

– If the contribution is paid by the trustee, in such case, flag value ‘Yes’ is to be mentioned under the above referred field, else flag value ‘No’ is to be mentioned.

– If the flag value is ‘Yes’, in such case, below fields are applicable and values in all these fields is to be mandatorily mentioned.

o Name of the superannuation fund

o Date from which the employee has contributed to the superannuation fund

o Date to which the employee has contributed to the superannuation fund

o The amount of contribution repaid on account of principal and interest

o The average rate of deduction of tax during the preceding three years

o The amount of tax deducted on repayment

o Gross total income including contribution repaid on account of principal and interest from superannuation fund.

  • Addition of new fields for Form 27Q under Annexure l (i.e. deductee details) as below:
  1. The following new fields have been incorporated:
  • Email ID of the deductee
  • Contact number of deductee
  • Address of deductee in country of residence
  • Tax Identification Number/ Unique Identification Number of deductee
  1. The above is applicable for regular as well as correction statements pertaining to FY 2016-17 onwards.
  2. The values in all the above new fields will be mandatory, if all the below conditions are fulfilled else the values in these fields are optional.
  • Value in the field no. 10 i.e. “PAN of the deductee” from deductee details record is PANINVALID or PANAPPLIED or PANNOTAVBL and
  • Value in the field no. 26 i.e. “Rate at which Tax Deducted” from deductee
  • details record is less than 20% and
  • Value in the field no. 30 i.e. “Remarks 1” from deductee details record is “C”
  • Changes in Form 27A generated from File Validation Utility.

The Quarter of the statement is made available in Form 27A as generated from FVU.

Example: if the statement is validated from FVU pertaining to FY 2016-17 of the second quarter (i.e. July 1, 2016 to September 30, 2016), in such case, Form 27A will have the following statement ‘Form for furnishing information with the statement of Deduction / collection of tax at source (tick whichever is applicable) filed on computer media for the period Q2’

  • This version of FVU is applicable with effect from September 17, 2016.