This article lists the applicable rates for TDS for the Financial Year 2023-2024.
INTRODUCTION:
Tax Deducted at Source (TDS) is a system of tax collection that is used in India. Under this system, a person or entity who is making a payment to someone else is required to deduct a certain amount of tax at the time of making the payment. The deducted amount is then remitted to the government on behalf of the recipient of the payment. Moreover, it is an important source of revenue for the government and helps in ensuring tax compliance.
It also helps in preventing tax evasion by ensuring that taxes are deducted at the source before the payment is made. The deductor is required to deduct TDS at the applicable rates and deposit it with the government within the specified due dates. The deductee can then claim credit for the TDS amount deducted while filing their income tax returns. TDS also helps in reducing the tax burden for taxpayers by enabling them to spread their tax liability over the year.
APPLICABILITY OF TDS RATES:
TDS is applicable when a person or entity makes a payment to another person or entity and the payment falls under the specified list of payments as per the Income Tax Act, 1961. The person making the payment is required to deduct tax at the applicable rate and deposit it with the government. The threshold limit for TDS applicability varies based on the type of payment. For example, in case of payment of salary, TDS is applicable if the salary amount exceeds the basic exemption limit of Rs. 2.5 lakhs per annum. Similarly, in case of payment of rent, TDS is applicable if the annual rent amount exceeds Rs. 2.4 lakhs. The threshold limit for TDS is revised from time to time by the government.
TDS APPLICABLE RATES:
TDS Applicable Rate is the rate of tax that is required to be deducted by the payer at the time of making certain payments to the payee. The applicable rate of TDS varies based on the nature of payment, the amount of payment, and also on the tax status of the recipient.
The TDS rates are specified by the government and vary based on the type of payment and the status of the recipient. The factors affecting the TDS rate are:
- Type of payment: TDS rates vary based on the type of payment such as salary, interest, rent, commission, etc.
- Status of the recipient: TDS rates can also vary based on the status of the recipient, such as whether the recipient is an individual, a company, or a non-resident.
- Threshold limit: The threshold limit for TDS applicability also affects the TDS rate. For example, if the payment is below the threshold limit, no TDS is required to be deducted.
Furthermore, the calculation of the TDS rate is done by multiplying the payment amount by the applicable TDS rate.
Note: There have been very few changes in the applicable TDS rates for Financial Year 2023-24 compared to Financial Year 2022-23. Take a look at the amendments introduced by Budget 2023 below.
Due date for TDS return:
| Quarter | Quarter Period | Quarter Ending | Due Date |
| 1st Quarter | April – June | 30th June | 31st July 2023 |
| 2nd Quarter | July – September | 30th September | 31st Oct 2023 |
| 3rd Quarter | October – December | 31st December | 31st Jan 2024 |
| 4th Quarter | January – March | 31st March | 31st May 2024 |
AMENDMENTS IN THE 2023 BUDGET ON APPLICABLE TDS RATES:
- Section 194BA – TDS on Winnings from Online Games
Section 194BA, has been added to the IT Act to cover the gaming sector in 2023, by the Union Budget. This provision will take effect on July 1st, 2023.
The TDS rate for winners is 30%, and the deduction threshold cap of INR 10,000 has been eliminated. A quarterly TDS return on Form 26Q must be submitted by the payer before the deadline.
- Section 194N – TDS on cash withdrawal
With effect from 1 April 2023, it is planned to increase the ceiling limit for cash withdrawals from cooperative societies from INR 1 crore to INR 3 crore. The applicable TDS rate is 2%.
Furthermore, with this proposed modification, the co-operative societies’ burden of having to deal with farmers and people with low incomes on a regular basis in cash will be lessened.
- Section 192A- TDS on EPF withdrawal
In the past, the TDS rate that applied was 30% if the individual did not furnish the PAN number when withdrawing EPF (within 5 years). But from April 1, 2023, the rate has been lowered to 20%.
TDS certificate:
A TDS certificate is a document that is issued by the deductor to the deductee as proof of the tax deducted at source. Some of the common types of TDS certificates are:
- Form 16: Form 16 is a TDS certificate issued by the employer to the employee, that contains details of the tax deducted from the salary income of the employee.
- Form 16A: Form 16A is a TDS certificate issued for non-salary payments such as rent, professional fees, commission, etc.
- Form 16B: Form 16B is a TDS certificate issued for tax deducted at source on the sale of the property.
- Form 16C: Form 16C is a TDS certificate issued for tax deducted at source on rent paid for plant and machinery.
Illustration:
For example, if the TDS rate on professional fees is 10%, and the payment amount is Rs. 10,000, then the TDS amount deducted will be Rs. 1,000 (i.e. 10% of Rs. 10,000). Therefore, the net payment to the recipient will be Rs. 9,000 after deducting TDS.
CONCLUSION:
In conclusion, Tax Deducted at Source (TDS) is a crucial system for collecting income tax in India. It applies to various types of payments and the TDS rate varies based on the type of payment, the status of the recipient, and the threshold limit for TDS applicability. It is important for taxpayers to comply with TDS regulations to ensure tax compliance, prevent tax evasion, and reduce the tax burden. Non-compliance with TDS regulations can lead to penalties and interest charges, which can have a significant impact on the financials of both the payer and the deductee. By complying with TDS regulations, taxpayers can contribute to the development of the country and help in building a better future for all.
