Question 1

What happens if TDS is not deducted when required?

Accepted Answer

Failure to deduct TDS makes the payer liable for: (1) Disallowance of 30% of the expense under Section 40(a)(ia), (2) Interest at 1% per month from date when TDS was deductible until actually deducted, (3) Penalty equal to the TDS amount under Section 271C. Even if TDS is deducted but not deposited, interest at 1.5% per month applies from deduction date to deposit date. The deductor also faces prosecution for TDS default exceeding Rs 1 lakh (up to 7 years imprisonment).

Question 2

What is the TDS rate if the payee doesn't provide PAN?

Accepted Answer

Under Section 206AA, if a payee doesn't furnish their PAN, TDS must be deducted at the higher of: (1) The rate specified in the relevant section, (2) 20%. For example, professional fees normally attract 10% TDS (Section 194J), but without PAN, it becomes 20%. This rule doesn't apply to Section 192 (salary) where slab rates apply. Additionally, if PAN is inoperative (not linked with Aadhaar), the same 20% rule applies. Always verify PAN validity on incometaxindiaefiling.gov.in before making payments.

Question 3

When should I deposit TDS and file TDS returns?

Accepted Answer

TDS Deposit: By 7th of the following month (e.g., April TDS by May 7). For March, deposit by April 30. Government deductors can pay on the same day as payment. TDS Returns: Quarterly - Q1 by July 31, Q2 by Oct 31, Q3 by Jan 31, Q4 by May 31. Use Form 24Q for salary, Form 26Q for non-salary resident payments, Form 27Q for non-resident payments. Late deposit attracts 1.5% interest/month, late filing attracts Rs 200/day penalty (max = TDS amount).

Question 4

What is the new TDS rate on rent (Section 194IB) after October 2024?

Accepted Answer

The TDS rate on rent under Section 194IB was reduced from 5% to 2% effective October 1, 2024. This applies when: (1) Individual/HUF pays rent exceeding Rs 50,000 per month, (2) The payer is NOT liable for tax audit. The threshold is monthly, not annual. TDS is deducted from the last month's rent and deposited using Form 26QC by the end of the month following the deduction. Form 16C (TDS certificate) must be issued to the landlord within 15 days. If annual rent is Rs 6 lakh, TDS is now Rs 12,000 (2%) vs earlier Rs 30,000 (5%).

Question 5

How can I get a lower TDS certificate (Form 13)?

Accepted Answer

If TDS exceeds your actual tax liability, apply for a lower/nil TDS certificate using Form 13 on TRACES. You'll need: (1) Estimated income and tax calculation, (2) Details of tax already paid, (3) Bank statements and financial documents. Processing takes 15-30 days. Valid for one financial year. Common use cases: NRIs selling property (can reduce 20% TDS to actual rate), professionals with high TDS but significant expenses, freelancers with multiple TDS deductions. The certificate specifies the reduced rate (can be 0%) that payers should apply.

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