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The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.

Any person making specified payments mentioned under the Income Tax Act is required to deduct TDS at the time of making such specified payment. But no TDS has to be deducted if the person making the payment is an individual or HUF whose books are not required to be audited. Generally, the due date for TDS payment is always the 7th day of the next month, with a few exceptions.

However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN. Your employer deducts TDS at the income tax slab rates applicable. Banks deduct TDS @10%. Or they may deduct @ 20% if they do not have your PAN information.

For most payments rates of TDS are set in the income tax act and TDS is deducted by the payer basis of these specified rates. If you submit investment proofs (for claiming deductions) to your employer and your total taxable income is below the taxable limit – you do not have to pay any tax. And therefore no TDS should be deducted from your income.

PAN is a Permanent Account Number and TAN stands for Tax Deduction Account Number. TAN should be obtained by the person responsible to deduct TDS, i.e., the deductor. The deductor is required to quote TAN in all the documents relating to TDS. However, there is an exception- in the case of TDS on the purchase of land and building under Section 194-IA, the deductor is not required to obtain TAN and can use PAN for remitting the TDS. Also, in the case of TDS on rent as per Section 194-IB, and TDS on payment of certain sums by Individuals or HUFs as per Section 194M, the deductor can use PAN instead of TAN for remitting TDS.

This Article is a Knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event, VFSL or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update, etc. if any. Decisions must be taken only after thorough consultation with our Advisors .