Tds is a vital statutory compliance in accounting department. tally.erp 9 makes TDS process easy and automated. It also help users to prepare TDS certificate without any manual work. However before starting tds entries in tally.erp 9, one should understand Basic of TDS and should become familiar with the provisions of Income tax in this regard.You may also refer to the official website of the income tax department to know more about Basic of TDS
TDS Stands for TAX Deducted at Source
Any payment made or payable to any contractor /firm/companies
Any payment made or payable to any professional or technical person/firm/companies
Any rent paid or payable to any person/firm/companies
Any commission paid or payable to any person/firm/companies
Any salary paid or payable to employees
Other heads of income as above paid or payable under the I.Tax Act.
A person who is liable to pay to any person/firm or companies as above is responsible to deduct a sum of applicable Tax from such payable amount from the payee and has to deposit the so deducted amount to the account of the Income Tax India and after that only balance amount he should pay to the payee.
Let’s give me you an example
A partnership firm ABC brothers is engaged in the business. The firm constructed a factory building on its land for which the contractor raised a bill for Rs.2 lac. Now M/s. ABC brothers can not make full payment of Rs. 2 lac to the contractor.
Rs.4000 to be deducted from the said bill and balance Rs. 1.96 to be paid to the contractor.
It is the responsibility of M/s. ABC brothers to deposit Rs.4000 so deducted to the bank a/c. of the Income tax department within the stipulated time limit which is 7th of the subsequent month.
What if the ABC brothers doesn’t Deduct tax and pay full amount to the Contractor. ?
In that case the contractor has nothing to lose. But the firm M/s. ABC brothers will be prosecuted. Its expenditure will be disallowed. It has to pay the TDS along with interest and fine. And if it has been proved that the default was willful then the firm partners of the firm may punished for imprisonment for tax evasion.
Even if a firm makes advance payment or part payment to any contractor or professional it is liable to Deduction of TAX
The rule is that TDS to be deducted either on the date of payment or credit of bill whichever is earlier.
TDS on SALARY
Salary is estimated for the 12 months then deductions are allowed as per the provisions of the Act. Now it shows the Net tax payable during the entire year which is to be divided by the figure of 12 (if it is the first month of April of any financial year) then the so arrived sum has to be deducted from the salary payable to respective employee.
If for any reason a firm had not deducted TDS from the salary for first 3 months then it should deducted TDS for 4 months from the salary payable for the fourth month.
Sec.190 of income tax act deals with deduction at source and advance payments.
Other related sections are :
193-interest on security
Section 194A– interest other than interest on securities
194B– lottery and crossword puzzles
194C-payment to contractor and sub contractor
194J-Professional and technical services
195 payments to non-residents etc.