1491-E-Filling Return [BCHP-S5-CC4-GE] Cover Jan25.

pdf - January 14, 2025

E-FILING OF RETURNS

[FOR LIMITED CIRCULATION]

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Department of Distance and Continuing Education

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 E-FILING OF RETURNS

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Department of Distance & Continuing Education, Campus of Open Learning,

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 Syllabus
E-Filing of Returns

Syllabus Mapping
Unit - I: Income Tax: An Overview Lesson 1: Income Tax:
Incomes taxable under different heads, deductions available from gross total An Overview
income, computation of total income and tax liability of individuals, PAN (Pages 3–21)
and due date of filing of income tax return; Provisions related to advance
payment of tax; New tax regime for individuals; Reliefs for an individual.
Unit - II: Maintenance of Accounts, Audit, and Taxation on Presumptive Lesson 2: Maintenance
Basis of Accounts, Audit and
Provisions of maintenance of accounts by certain persons carrying on Taxation on Presumptive
profession or business [Sec. 44AA]; Provisions of audit of accounts of Basis
certain persons carrying on business or profession [Sec. 44AB]; Special (Pages 25–39)
provision for computing profits and gains of business on presumptive
basis [Sec. 44AD]; Special provision for computing profits and gains
of profession on presumptive basis [Sec. 44ADA]; Special provision for
computing profits and gains of business of plying, hiring or leasing goods
carriages [Sec. 44AE].
Unit - III: e-Filing: Conceptual Framework and Filing of Income Tax Lesson 3: Conceptual
Returns Framework of E-filing
Meaning and merits of e-Filing; Filing of income tax returns in ITR-1, and Filing of Income Tax
ITR-2, ITR-3, ITR-4, ITR-5 and ITR-U. Returns
(Pages 43–65)
Unit - IV: Tax Deducted at Source Lesson 4: Tax Deduction
Provisions relating to TDS; Schedule for deposit of TDS; Schedule for at Source (TDS)
submission of TDS returns; Exemption from TDS: Forms 13, 15G and (Pages 69–101)
15H; Form 16, AIS.
Lesson 5: Exemption
Forms for TDS
(Pages 102–129)
Unit - V: e-Filing of TDS Returns Lesson 6: E-filing of
Prescribed forms for filing of TDS returns; Practical workshop on e-filing TDS Returns
of TDS returns [Form 24Q and Form 26Q]. (Pages 133–161)

Department of Distance & Continuing Education, Campus of Open Learning,

School of Open Learning, University of Delhi

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 Contents

PAGE
UNIT-I
Lesson 1: Income Tax: An Overview 3–21

UNIT-II
Lesson 2: Maintenance of Accounts, Audit and Taxation on Presumptive Basis 25–39

UNIT-III
Lesson 3: Conceptual Framework of E-filing and Filing of Income Tax Returns 43–65

UNIT-IV
Lesson 4: Tax Deduction at Source (TDS) 69–101

Lesson 5: Exemption Forms for TDS 102–129

UNIT-V
Lesson 6: E-filing of TDS Returns 133–161

Glossary 163

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 UNIT - I

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 L E S S O N

1
Income Tax: An Overview
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi

STRUCTURE
1.1 Learning Objectives
1.2 Meaning of Tax
1.3 Income Heads under the Act
1.4 Deductions
1.5 Computation of Total Income
1.6 Permanent Account Number (PAN)
1.7 Due Dates for Filing Tax
1.8 Provisions Related to Advance Payment of Tax
1.9 New Tax Regime for Individuals
1.10 Summary
1.11 Answers to In-Text Questions
1.12 Self-Assessment Questions
1.13 References
1.14 Suggested Readings

1.1 Learning Objectives

After studying this lesson, students will be able to:
‹ Describe the concept of tax and its types.
‹ Describe the various income heads under the Income Tax Act.
‹ Apply various deductions available under the Income Tax Act from 80C to 80U.
‹ Know the concept of permanent account number and various provisions related to
the advance tax payment.
‹ Discuss the new and old tax regime introduced for the individuals.
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Notes
1.2 Meaning of Tax
Tax is referred to as a compulsory monetary payment made by individuals
or firms. This payment is imposed by the government of the nation or the
state. Tax is classified into two categories: Direct-tax and Indirect-tax.
When you visit a nearby shop to purchase a bag of rice, the total amount
paid by you involves some taxes. Here the tax is being collected by the
shopkeeper at first stage and then it will be passed to the government.
These types of taxes are referred to as indirect-taxes.
The most popular example of direct taxes is income tax paid by indi-
viduals to the government. Here the middle party is not involved in the
payment of taxes.
For developing understanding in the field of income tax we should be
familiar with the following terms:
(a) Assessment Year (AY): It is the twelve months’ time period starting
from 1st April to 31st March. It is the year in which tax is paid by
the assessee.
(b) Previous Year (PY): The year immediately before the assessment year
is called the previous year. The income is taxable in AY and earned
in PY. The income is earned in this year and tax is paid in AY.
(c) Financial Year: Both previous year and assessment year are financial
years.
(d) Person: According to the Income-tax Act, person is classified into
seven categories:
‹ An individual
‹ H.U.F.
‹ Company
‹ Firm
‹ Association of Persons (AOP) or Body of Individuals (BOI)
‹ Local authority
‹ Artificial Juridical Person (AJP), not falling in any of the above-
mentioned categories.

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 INCOME TAX: AN OVERVIEW

(e) Assessee: Any person who pays the sum of money as income tax. Notes
(f) Gross Total Income: It is calculated by adding all the income
received from below mentioned heads.

1.3 Income Heads under the Act

While computing the total income of assessee, income can be classified
under these heads:
‹ Salaries
‹ Income from house property
‹ Profit and Gains from Business and Profession (PGBP)
‹ Capital-gains
‹ Income from other sources
(a) Income under the Head ‘Salaries’: Income is termed as salary
when there exists a relationship of employee and employer (master)
between the payer and payee. It is to be noted that income either
received in the name of wage or salary, will be taxable under this
head. Any foregone salary will also be taxable under the same head.
Perquisites and allowances are also taxable under this head. This
head involves:
(i) Amount of Wages
(ii) Amount under pension and annuity
(iii) Amount of Gratuity
(iv) Perquisites, commission, any fees
(v) Advance salary
(vi) Payment received from employer
(vii) Money transfer made in recognized provident fund
(viii) Contribution done by employer in name of pension scheme, etc.
Note: Salary can be charged for tax on two basis, either when it is
due or when you have received it.
(b) Income under the Head ‘Income from House Property’: If the
following conditions are satisfied, then income is said to be taxable
under this head:
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Notes ‹ The property should consist of any buildings and land appurtenant
thereto.
‹ The assessee should be the owner of the property.
‹ The property should not be used by owner for business and
professional services.
‹ Income under this head is calculated by:
Note: “Gross Annual Value (GAV) for self-occupied house is nil and for
a let out property is the rent collected from the same house property.”
Rs. Rs.
Gross Annual Value XXX
Less: Municipal Taxes paid by the assessee during XXX
the previous year.
Net Annual Value XXX
Less: Deductions under section 24
Standard Deduction XXX
Interest on Borrowed Capital XXX XXX
Income From Let-out Property XXX
Classification of Properties:
‹ Self-Occupied (S.O.): This property is kept for one’s own residential
use. It may be occupied by the assessee, his/her parents, spouse
or children. From the year 2019-20 one can claim two houses
as self-occupied, which was earlier allowed for only one house.
‹ Let-Out: A house that has been rented is known as a let-out property.
‹ Deemed to be Let-Out: This situation arises when an owner
owns more than two house properties. The owned properties
beyond two are termed as ‘deemed to be let-out’.
(c) Profit and Gains from Business and Profession-(PGBP): The
income under this head is classified as the earnings collected from
doing a business or profession. Incomes from trading, manufacturing,
freelancing, consultancy, etc. are all considered under this third head
of income.
The following kinds of incomes come under this head:
‹ Income earned as profit and gains from a profession or business.
‹ Earnings from engaging in trade.
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 INCOME TAX: AN OVERVIEW

‹ Cash assistance received by a person for exports. Notes

‹ The value of benefits or perquisites arising from business or
performing professional practice.
‹ Amount received as interest, remuneration, commission, etc. by
partner from firm.
‹ Amount from keyman insurance policy, etc.
Some incomes appear to be business incomes, but are not taxable
under this head. These involve the following categories and are
taxable under the head income from other sources:
‹ Dividends earned on shares.
‹ Winning amount in lottery, games, etc.
‹ Interest received on compensation.
(d) Income Earned from Capital Gains: Income under this head is
the income earned by sale or transfer of any capital asset. Capital
gains arise when following conditions are satisfied:
(a) Existence of capital-asset.
(b) This above asset is transferred by the assessee.
(c) This transfer occurred in PY.
(d) Profits or gains have occurred during the transfer.
Capital asset means a property that can be movable, immovable,
fixed, circulating, etc. held by the assessee during the PY whether
connected to business or not.
Stock-in-trade, agricultural land in rural India, bonds under gold
deposit scheme-1999, personal movable property like drawings,
jewelry, sculptures, etc. may not be involved under ‘capital assets’.
Short-term Capital Asset: These are held by the assessee for not
more than 36/24/12 months. In case of unlisted shares or immovable
property time is twenty-four months. However for the following
cases the period of twelve months is considered:
‹ Preference or equity shares in listed company.
‹ Securities listed on recognized stock exchange
‹ Units of UTI

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Notes ‹ Units of equity oriented mutual funds.

‹ Zero coupon bonds, etc.
Long-Term Capital Asset: Asset that is not a short-term asset. Also,
it can be classified as an asset held by the assessee for more than
12/24/36 months (depending on the type of asset).
(e) Income from Other Sources: Some incomes are specifically taxed
under this head. And sometimes incomes not included in any other
head is also recorded here. It is also named as a ‘residuary head’.
Following are some of the incomes that are included under this head:
‹ Income from dividends.
‹ Winning amount in lotteries, puzzles, races, etc.
‹ Income earned as interest on securities.
‹ Rental income from furniture, plant, machinery let or hire. This
income will not be included under this head if it already has
been taxed under section 28 as a business income).
‹ Interest received on compensation amount.
‹ Gifts received of more than 50,000 by an individual or H.U.F., etc.

1.4 Deductions
Deductions can be referred to as the mechanisms that help in reducing the
gross income of the assessee which thereby reduces his/her tax liability.
Deductions can be based on investments, payments, incomes, etc. Using
deductions and exemptions prescribed under the act is the ethical way of
reducing the tax liability. All deductions falling under section 80C-80U
are allowed from gross total income of the assessee.
(a) Deduction under Section 80C
‹ The deduction under section 80C is available only to an individual
or HUF.
‹ Deduction related to qualifying investments, contributions,
deposits, payments made by the assessee during the previous
year are taken into account.
‹ Deductions are given on actual payments.

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 INCOME TAX: AN OVERVIEW

‹ The maximum amount deductable under section 80C is Rs. 1,50,000. Notes
‹ It is to be noted that aggregate amount of deduction under
sections 80C, 80CCC and 80CCD(1) is Rs. 1,50,000. However,
employer’s contribution towards NPS shall not be considered
under this ceiling.
‹ Nature of payment under section 80C:
→ Life insurance premium
→ Contribution made for statutory provident fund
→ Contribution done for 15 year public provident fund
→ Contribution done for an approved superannuation fund
→ Subscription performed for National-savings-certificates
→ Deposit in Sukanya Samridhi account
→ Contribution to ULIP of Unit trust of India
→ Payment done for mentioned annuity plan of L.I.C. or any
other insurer, provided under the Act
→ Subscription made for notified units of mutual fund
→ Enrolment done for any notified-bonds of NABARD
→ Money deposited for senior citizen savings scheme
→ Money deposited in five year time deposit-scheme in a post-
office, etc.
(b) Deduction under Section 80CCC: In Respect of Pension Fund
‹ It is accessible to individual.
‹ The money should be deposited under annuity plan of L.I.C. or
any other insurer for receiving pension.
‹ Maximum deduction available is the same as of 80C.
(c) Deduction under Section 80CCD: Contribution to NPS
‹ This deduction is available for individual. For the employee of
central government it is mandatory to register under this scheme.
Any other employee including the self-employed can also join
this scheme.
‹ Employer’s contribution to New Pension Scheme (NPS) is taxable
as the salary income in the year of contribution.

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Notes ‹ For the salesman dear 2016-17, section 80CCD is to provide

additional deduction for contributions made by individual assessee
under the NPS. It is to be noted that on this additional contribution
ceiling of Rs. 1,50,000 is not applicable.
(d) Deduction under Section 80CCG: Investment under Equity Savings
Scheme
‹ An individual can take benefit of this deduction.
‹ His/her gross total income does not exceed Rs. 12,00,000.
‹ He/she acquired listed shares all listed units according to a
notified scheme.
‹ These investments have been locked for a period of 3 years.
‹ The assessee satisfies any other condition mentioned in the scheme.
‹ Deduction under this section is 50% of amount invested during
the previous year or Rs. 25,000 whichever is less.
(e) Deduction under Section 80D: Medical Insurance
‹ An Individual and H.U.F. can avail this deduction.
‹ Also payment to this insurance should be made from the income
that is chargeable-to-tax.
‹ Any payment can be used except cash. However, payment for
preventive health checkup can be done in any form.
‹ Deductions under this section are given below:
(f) Deduction under Section 80DD: Maintenance/Treatment of a
Dependent with Disability
‹ It is available for resident individual and resident H.U.F.
‹ This deduction can be claimed if expenditure for medical treatment,
training, rehabilitation has been incurred for a dependent disabled
relative.
‹ This deduction can also be claimed if the assessee has deposited
any amount for the dependent individual in LIC or UTI for his
or her maintenance.
‹ “Dependent means a spouse, children, parents, brothers, sisters
who depend on the individual. And person with disability means

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 INCOME TAX: AN OVERVIEW

person who suffers from forty percent or more of blindness, low Notes
vision, leprosy-cured, hearing impairment, locomotor disability,
mental illness, etc.” (Income-tax Act)
‹ A fixed deduction amounting to Rs. 75,000 can be availed for
disability. And for severe disability cases, deduction might extend
to Rs. 1,25,000.
‹ Assessee should have a medical certificate issued by a certified
medical authority for claiming this deduction.
(g) Deduction under Section 80DDB
‹ Resident and HUF can claim this deduction.
‹ Deduction can be claimed for the expenditure incurred for
treatment of a specified disease prescribed by the board.
‹ The amount available as deduction can be, the least from the
actual payment made or Rs. 40,000. In case of senior citizens
this amount is Rs. 1,00,000.
‹ Prescription from a specialist doctor should be obtained for
claiming this deduction.
(h) Deduction under Section 80E: Payment of Interest on Loan for
Higher Education
‹ This type of deduction is available only to an individual.
‹ This deduction is availed by the person who has taken a loan
for pursuing higher-studies in India and outside India from an
approved financial institution.
‹ Entire amount of interest is available as deduction from the year
in which individual starts paying interest on loan for subsequent
seven years or until interest is fully paid.
(i) Deduction under Section 80EE: Interest on Loan (Residential
House Property)
‹ Deduction can be availed by a resident or non-resident individual.
‹ He/she might have taken a loan for residential house property.
‹ Loan should have been sanctioned by the bank between 01.04.
2016 and 31.03.2017.

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Notes ‹ The amount of loan does not exceed rupees thirty-five lakh.
‹ The residential property’s value does not exceed rupees fifty lakh.
‹ Deduction amount available under section 80EE is Rs. 50,000
or the interest paid on loan whichever is less.
(j) Deduction under Section 80G: Donations
‹ It can be availed by individual, company, firm or any other person.
‹ Payment can be made in cash/cheque and draft. However, donation
in cash is accepted upto rupees two thousand only.
‹ Cases where 100 percent of deduction can be claimed:
‹ National defence fund set up by central government
‹ Prime ministers national relief fund
‹ National children’s fund
‹ Prime ministers Armenia Earthquake relief fund
‹ National foundation for communal harmony
‹ Fund set up by Gujarat government for providing relief to
earthquake victims
‹ Any Zila Saksharta Samiti
‹ Fund set up by central government for medical relief to poor
‹ Andhra Pradesh Chief ministers cyclone relief fund
‹ National illness assistance fund
‹ Clean Ganga fund
‹ National fund for control of drug abuse
‹ Chief Minister’s Relief Fund or Lieutenant Governor’s relief
fund, etc.
‹ Cases where 50 percent deduction can be claimed:
‹ Indira Gandhi Memorial Trust
‹ Rajiv Gandhi Foundation
‹ Jawaharlal Nehru Memorial Fund
‹ Prime Minister’s Drought Relief Fund

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 INCOME TAX: AN OVERVIEW

(k) Deduction under Section 80GG: For Rent Paid Notes

‹ This deduction can be claimed by an individual who actually
pays the rent for the accommodation.
‹ He/she should have given a declaration electronically in Form
10BA.
‹ The amount of deduction available is the least of the following:
‹ Rupees five thousand each month
‹ Twenty-five per cent of the total income
‹ The excess of actual rent paid over 10 percent of total income.
(l) Deduction under Section 80GGA: Donations in Respect of
Scientific-Research or Rural-Development
‹ Assessee having no income under the PGBP head can claim this
deduction.
‹ Donation should have been provided to an approved research
association, college, university or institute.
‹ 100 percent of the donation is allowed for deduction.
‹ No deduction shall be allowed for donations done in cash
exceeding Rs. 10,000.
(m) Deduction under Section 80TTA: Interest on Deposit in Savings
Account
‹ Individual and H.U.F. can avail this deduction.
‹ Upto Rs. 10,000 in respect of savings account interest with bank,
cooperative bank or post office can be claimed.
‹ This deduction is in addition to exemption available u/s 10(15)(i),
i.e. Rs. 3500 exempt for interest received from post office
savings bank.
‹ From AY 2019-20 it is not available for senior-citizens who are
eligible for deduction mentioned in section 80TTB.
(n) Deduction under Section 80TTB: Interest on Deposits for Senior
Citizens
‹ The assessee should be a senior citizen.

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Notes ‹ His income includes interest on deposits with bank, cooperative

bank or post office.
‹ Amount of interest received or Rs. 50,000 whichever is less can
be claimed as deduction.
‹ This deduction is in addition to exemption available u/s 10(15)(i),
i.e. Rs. 3500 exempt for interest received from post office
savings bank.
(o) Deduction under Section 80U: For Person with Disability
‹ This deduction can be availed by individual.
‹ He/she suffers from 40 percent or more of any disability (blindness,
leprosy-cured, hearing impairment, locomotor disability, etc.).
‹ He/she should have a certificate issued by medical authority.
‹ Amount under this deduction is fixed at Rs. 75,000.
‹ A higher deduction can be allowed upto Rs. 1,25,000 if person
suffers from severe disability i.e. having disability of 80% or
more.

1.5 Computation of Total Income

Taxable Income Computation:
Step 1: Computation of income under different heads
Step 2: Apply the provisions of set-off of losses
Step 3: Compute the deductions under section 80
Step 4: Rounding off the balance and calculating the total income

Steps are followed to Compute Tax Payable:

Step 1: Compute tax on total income by applying special tax rates on
special incomes and normal slab rates on remaining income
Step 2: Deduct rebate u/s 87A, if applicable
Step 3: Add Surcharge amount, if applicable
Step 4: Add health and education cess
Step 5: Deduct advance taxes paid by individual and calculated amount
will be the tax payable by the assessee.

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Notes
1.6 Permanent Account Number (PAN)

Figure 1.1: PAN Card

(Source: https://www.livemint.com/)

‹ The Permanent Account Number (PAN) is a ten-digit alphanumeric

combination issued by an Assessing Officer of the Income Tax
Department in a card form. All the assessees or persons who are
required to file tax returns should have this card.
‹ According to Section 160 of the Income Tax Act, 1961, non-residents,
minors, individuals with mental disabilities, etc. can also have a
Pan card. If, they are represented by a ‘representative assessee’.
‹ Unlike in the case of Voter-Id card, PAN-number does not change
when a person moves from one state to another.
‹ Having more than one PAN-card is against the law.
‹ Form 49A is the application form filled for the allotment of a
Permanent Account Number for Indian citizens, Indian companies,
entities incorporated in India, etc.
‹ Form 49AA is filled for the allotment of a Permanent Account
Number for Non-Indian citizens and entities.
‹ This card is a necessity for filling income tax return.

1.7 Due Dates for Filing Tax

These dates in respect of their categories are mentioned below:

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Notes Category ITR Filing Due Date

st
ITR filing for individual/HUF/AOP/BOI 31 July
Business (requiring audit) 31st October
Business (requiring transfer pricing report) 30th November
Revised Return 31st December
Late Return 31st December

1.8 Provisions Related to Advance Payment of Tax

Let’s assume Kavita is a shopkeeper and every year she earns approxi-
mately 5-6 lakhs. So, instead of filing the tax returns in the end of the
year, she assumes the amount of sales she might make at the end of the
year and calculates the tax on this. Now depositing this tax or some part
of the tax in the PY makes her a payee of advance-tax.
The advance-tax-payments are usually made in installments by individ-
uals and firms.
Advance-tax payment can be made by the following:
‹ People Taking Salary or Working as Freelancers: If the total tax
liability of a person is rupees ten thousand or more in one FY, he/
she has to pay advance tax.
‹ Senior-Citizens: People who are coming under the category of
senior citizens and do not run any business are not required to
deposit advance-tax.
‹ Payment made on Presumptive Basis: Various presumptive tax
schemes have been launched by the government and people opting
for these schemes have to make payment of tax in advance. These
schemes are discussed in the next chapter.
‹ It is also to be noted that non-payment of any advance tax that
is due, will result in imposition of interest on this amount as per
section 234B.
‹ Advance-tax gets due on the following dates according to the opted
scheme.

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Assessee who opts Notes

For any assessee ex- for provisions under
Due date of paying cept those mentioned section 44AD(1) or
advance tax in the next column section 44ADA(1)
On or before 15 June Upto 15% of advance -
of P.Y. tax to be paid
On or before Upto 45% of advance -
15 September of P.Y. tax to be paid
On or before Upto 75% of advance -
15 December of P.Y. tax to be paid
On or before Upto 100% of ad- Upto 100% of ad-
15 March of P.Y. vance tax to be paid vance tax to be paid

1.9 New Tax Regime for Individuals

‹ Income tax is charged from individuals based on a framework
decided by the government. This framework involves some slab
rates and two schemes. These slabs rates are revised every year.
‹ In our country we have two tax regimes, one is termed as old
regime and other is named as new regime.
‹ Old-tax regime (resident of age less than 60 years) is mentioned
below:
Old Tax Regime
Income Tax Slab Income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,001 - Rs. 5,00,000 5% above Rs. 2,50,000
Rs. 5,00,001 - Rs. 10,00,000 Rs. 12,500 + 20% above Rs.
5,00,000
Above Rs. 10,00,000 Rs. 1,12,500 + 30% above Rs.
10,00,000
Figure 1.2: Old-Regime
(Source: https://www.incometax.gov.in/)

‹ New tax regime (resident of age less than 60 years) for the year
2023-24 is mentioned below:

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Notes New Tax Regime u/s 115BAC

Income Tax Slab Income Tax Rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,001 - Rs. 6,00,000 5% above Rs. 3,00,000
Rs. 6,00,001 - Rs. 9,00,000 Rs. 15,000 + 10% above Rs. 6,00,000
Rs. 9,00,001 - Rs. 12,00,000 Rs. 45,000 + 15% above Rs. 9,00,000
Rs. 12,00,001 - Rs. 15,00,000 Rs. 90,000 + 20% above Rs. 12,00,000
Above Rs. 15,00,000 Rs. 1,50,000 + 30% above Rs. 15,00,000
Figure 1.3: New-Tax Regime
(Source: https://www.incometax.gov.in/)

‹ New tax regime carries the following features:

→ Basic exemption limit is rupees three lakh under the new scheme.
→ A standard deduction of rupees fifty thousand was introduced
for salaried and other individuals.
→ Surcharge for amounts below five crore is reduced to 25% from
37%.
→ New-tax regime is set as default scheme for individuals, but
taxpayers still have the option to select the old tax regime.

IN-TEXT QUESTIONS
1. Surcharge for amounts below five crore is reduced to __________
from 37%.
2. Any person who pays the sum of money as income tax is called
__________.
3. Income is termed as __________ when there exists a relationship
of employee and employer (master) between the payer and
payee.
4. __________ head is also named as a ‘residuary head’.
5. Investment under Equity Savings Scheme is said to exist under
section __________.
6. Deduction related to payment of interest on Loan for Higher
Education is covered under section __________.

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 INCOME TAX: AN OVERVIEW

7. __________ is the application form filled for the allotment Notes

of a Permanent Account Number for Indian citizens, Indian
companies, entities incorporated in India, etc.
8. Revised return can be filed by __________.
9. Basic exemption limit is rupees nine lakh under the new scheme.
(True/False)
10. New-tax regime is set as default scheme for individuals, but
taxpayers still have the option to select the old tax regime.
(True/False)

1.10 Summary
Tax is referred to as a compulsory monetary payment made by individuals
or firms. This payment is imposed by the government of the nation or the
state. Tax is classified into two categories: Direct-tax and Indirect-tax.
While computing the total income of assessee, income can be classified
under these heads: Salaries, Income from house property, Profit and
Gains from Business and Profession (PGBP), Capital-gains and Income
from other sources.
Deductions can be referred to as the mechanisms that help in reducing the
gross income of the assessee which thereby reduces his/her tax liability.
Deductions can be based on investments, payments, incomes, etc. They
range from 80C to 80U.
The Permanent Account Number (PAN) is a ten-digit alphanumeric com-
bination issued by an Assessing Officer of the Income Tax Department
in a card form. All the assessees or persons who are required to file tax
returns should have this card.
New-tax regime is set as default scheme for individuals, but taxpayers
still have the option to select the old tax regime.

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Notes
1.11 Answers to In-Text Questions
1. 25%
2. Assessee
3. Salary
4. Income from other sources
5. Section 80CCG
6. Section 80E
7. Form 49A
8. 31st December
9. False
10. True

1.12 Self-Assessment Questions

1. Define the term ‘tax’. What is the difference between direct and
indirect tax?
2. Define the new and old tax regime given for individual taxpayers.
3. What are the various heads of income mentioned in the Income
Tax Act, 1961? Discuss with examples.
4. What do you mean by advance tax? Describe the provisions related
to advance tax.
5. What do you mean by permanent account number? Describe.
6. Describe the deduction under sections 80TTA and 80TTB.
7. Mention the donations covered under section 80G of the Income Tax
Act.
8. Write short notes on:
(a) Deduction under section 80DD
(b) Deduction under section 80C
(c) Deduction under section 80U

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Notes
1.13 References
‹ Mittal, N. (2022). Concept building approach to income tax law &
practice. (1st ed.). Delhi, India: Cengage Learning India Pvt. Ltd.
‹ Singhania, V. K., & Singhania, M. (2021). Students’ guide to
income tax | University Edition. (65th ed.). Delhi, India: Taxmann
Publications Private Limited.

1.14 Suggested Readings

‹ www.incometaxindia.gov.in
‹ Ahuja, G., & Gupta, R. (2021). Systematic approach to income tax.
Delhi, India: Flair Publications Pvt. Ltd.

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 UNIT - II

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 L E S S O N

2
Maintenance of Accounts,
Audit and Taxation on
Presumptive Basis
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi

STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 Provision for Maintenance of Books of Accounts Section 44AA
2.4 Provisions of Audit of Accounts of Certain Persons Carrying Business or Profession
Section 44AB
2.5 Presumptive Taxation Schemes
2.6 Section 44AD
2.7 Section 44ADA
2.8 Section 44AE
2.9 Summary
2.10 Answers to In-Text Questions
2.11 Self-Assessment Questions
2.12 References
2.13 Suggested Readings

2.1 Learning Objectives

After studying this lesson, students will be able to:
‹ Know the provision for maintenance of books of accounts under section 44AA.
‹ Describe the provisions of audit of accounts of certain persons carrying business or
profession section 44AB.
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Notes ‹ Apply the special provisions for computing profits and gains of
business on presumptive basis under section 44AD.
‹ Apply the special provisions for computing profits and gains of
profession on presumptive basis under section 44ADA.
‹ Apply the special provision for computing profits and gains of business
of plying, hiring or leasing goods carriages under section 44AE.

2.2 Introduction
Under the Income Tax Act, 1961 various businesses and professionals
are required to maintain books of accounts which might seem a tedious
process for small businesses. For fixing this difficulty the act introduced
certain presumptive taxation schemes for small businesses and professions.
Under these schemes the taxpayers are not required to maintain books
of accounts and get them audited up to certain limits.
In this lesson we will learn about various schemes and their applications
ranging from sections 44AA, 44AB, 44AD, 44ADA to 44AE.

2.3 Provision for Maintenance of Books of Accounts

Section 44AA
Income tax is to be deposited by various parties on the income earned
by them during the financial year. The assessing officers appointed by
the Department of Income Tax are engaged in verifying and conducting
investigations on the filed returns. Following are different parties that
are required to maintain accounts under this section:
‹ Professionals engaged in legal practices
‹ Professionals engaged in Medical field
‹ Professionals working in engineering field
‹ Various Architectural professionals
‹ Professionals engaged in Accounting profession
‹ Interior decorators, etc.

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 MAINTENANCE OF ACCOUNTS, AUDIT AND TAXATION ON PRESUMPTIVE BASIS

The following persons (who are not covered in the above categories) are Notes
also required to maintain accounts under this section:
‹ Individuals engaged in specific and non-specific business activities
and professional activities.
‹ Someone involved in other business or professional activities who
earns more than rupees one lakh twenty thousand.
‹ The total turnover of the business or professional activity is more
than ten lakh in any of the preceding PY.
‹ Any person who has disclosed less income than the estimated under
sections 44AE and 44AD.

2.3.1 Accounts to be Maintained under This Section

‹ Cash Book: A routine record of cash transactions taking place in
the business or profession.
‹ Journal: Some companies follow the traditional system known to
be mercantile system, for recording various transactions.
‹ Ledger: All the entries that have been first documented in the
journal are transferred to a ledger book. It helps in preparation of
final accounts of a business.
‹ Copies of original bills with their serial numbers, etc. are some
of the documents that are to be kept for maintenance of accounts.
These bills are usually kept for the items whose cost is more than
rupees twenty-five thousand.
All these records are required to be kept safe for a period of six years
after the relevant assessment year.

2.3.2 Penalties for Not Maintaining Accounts under this Section

Law advises the taxpayers to maintain proper accounts for a business
as well as professional services. If the taxpayer fails to maintain proper
accounts and fulfil the legal requirements under section 44AA, a penalty
can be imposed on him/her. The maximum penalty amount payable in
this case would be rupees twenty-five thousand.

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Notes However, if the assessee has genuine reasons or a fair cause for not
maintaining these accounts, the officers of income tax can save him/her
from this penalty.

2.4 Provisions of Audit of Accounts of Certain Persons

Carrying Business or Profession Section 44AB
Let’s assume Manan is a doctor and he runs his profession on his own.
His one-year income is rupees sixty lakhs and the limit specified under
the Income Tax Act is rupees fifty lakhs. So, Manan is required to get
his accounts audited by an accountant appointed or approved by the Act.
Law has specified various rules for auditing of accounts. It ensures that
accounts are maintained with high accuracy and in alignment with the
rules specified under the act. Let’s discuss about section 44AB:
‹ Section 44AB defines rules of tax audit for various professions and
businesses. It ensures that all accounts are well maintained and in
accordance with the rules prescribed by the act. Audit as a term
can be defined as verification and inspection of accounts prepared
by a person or entity.
‹ This section checks whether the person has presented and recorded
complete and accurate information about the business. Evaluation
of inflow of income, outflow of income, deductions applied, etc.
is performed.
‹ After completion of the whole inspection process, the CA prepares
his report and sends it to the main income tax department.
‹ This section is applicable to businesses and professions that have
gross receipts of more than one crore in a business and equal to
or more than fifty lakh in case of professional practice.

2.4.1 Categories of Persons Required to Perform a Tax Audit

Tax Audit: A tax audit involves reviewing financial accounts to confirm
their accuracy and alignment to regulations. This review is performed
by a Chartered Accountant and focuses on verifying the correctness of
income tax returns.

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Business Tax Audit Notes

Carrying on a Business (not opting Total sales, turnover or gross receipts
for a presumptive taxation scheme) exceed Rs. 1 crore in the FY (or)
If cash transactions are up to 5% of
total gross receipts and payments,
the threshold limit of turnover for
tax audit is Rs. 10 crores (w.e.f.
FY 2020-21)
Carrying on business eligible for Claims profits or gains lower than
presumptive taxation under Section the prescribed limit under the pre-
44AE, 44BB or 44BBB and opted sumptive taxation scheme
for the same in previous year
Carrying on business eligible for Declares taxable income below the
presumptive taxation under Section limits prescribed under the presump-
44AD and opted for the same in tive tax scheme and has income
previous year exceeding the basic exemption limit
(i.e., Rs. 2.5 lakhs).
Carrying on the business and is If income exceeds the basic ex-
not eligible to claim presumptive emption limit in the subsequent
taxation under Section 44AD due 5 consecutive tax years from the
to opting out for presumptive tax- financial year when the presumptive
ation in any one financial year of taxation was not opted for
the lock-in period i.e. 5 consecutive
years from when the presumptive
tax scheme was opted
Profession Tax Audit
Carrying on profession Total gross receipts exceed Rs. 50
lakh in a year
Carrying on the profession eligible 1. Claims profits or gains lower
for presumptive taxation under Sec- than 50% of the total receipts
tion 44ADA from such profession and
2. Income exceeds the basic ex-
emption limit

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Notes Business Loss Tax Audit

In case of loss from carrying on Total sales, turnover or gross receipts
of business and not opting for pre- exceed Rs. 1 crore
sumptive taxation scheme
If taxpayer’s total income exceeds In case of loss from business when
basic exemption limit but he has sales, turnover or gross receipts ex-
incurred a loss from carrying on a ceed 1 crore, the taxpayer is subject
business (not opting for presumptive to tax audit under section 44AB
taxation scheme)

2.4.2 Forms for Audit Report and Last Date for Audit Report Submission
‹ After completing the verification (auditing) process the auditor is
required to submit his/her report in the Form No. 3CA or 3CB
whichever is applicable.
‹ When the person is engaged in carrying out business or professional
practice and he/she is already mandated to get his accounts audited
under law, then the auditor is required to make the submission of
Form No. 3CA.
‹ When the person is engaged in carrying out a business or professional
practice and he/she is not mandated to get the accounts audited
under any law then Form No. 3CB is submitted.
‹ The last date prescribed for the income tax audit is 30th September.
‹ In case the assessee has to perform transfer pricing audit, the last
date prescribed for tax audit is 31st October.

2.4.3 Penalty for Non-Filing of Audit Report

If a taxpayer fails to get the tax audit done, the less from the following
two will be imposed as penalty on him/her:
‹ 0.5% of total sales, turnover or gross receipts
‹ Rs. 1,50,000 whichever is less.
Although, if there exists a reasonable cause because of which tax audit
was not performed, then no penalty is payable by the assessee under
section 271B. Following are some reasons that are acceptable for not
filing the audit report:

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‹ Natural calamities like flood, earthquake, etc. Notes

‹ Resignation by an accountant or key employee
‹ Issues of strikes, lock-outs, etc.
‹ Loss of accounts for any reason that was beyond the control of
assessee, etc.
It is to be noted that salaried persons are not required to submit a tax
audit report. Although if certain income is being earned by him/her as
professional fee, income from any business exceeding rupees fifty lakh
(for profession) and one crore (for business) then in that case he/she
should get the tax audit done.

2.5 Presumptive Taxation Schemes

There are many small businesses being run around the country. The va-
riety also involves small and medium businesses. These might not make
a lot of profit annually but due to rules prescribed by the law they were
instructed to maintain books of accounts and get them audited each year.
This is a tedious and time-consuming process as they might be engaged
in many transactions of small amount. And hiring an accountant for the
audit also involves some extra cost for them. Therefore the Income Tax
Act introduced the below-mentioned presumptive schemes for them.
To ease the burden of maintaining books of accounts, auditing of these
records, etc. for small taxpayers the Income Tax Act has introduced
‘presumptive taxation scheme’ under various sections for various business
and professional activities. The sections that work in accordance with
presumptive taxation schemes are sections 44AD, 44ADA and 44AE.

Meaning
As per the Income Tax Act, person involved in a business and profession
can declare his/her income at a pre-declared rate set by the act and pay
the income tax accordingly. If a person registers for these schemes he/she
can be relieved from maintaining heavy books of accounts and getting
them audited from a professional accountant. A prior information is to
be provided to the income tax department while going for these schemes.

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Notes
2.6 Section 44AD
Introduction to the Scheme:
‹ This scheme was designed to provide benefits to small taxpayers
engaged in small businesses except those involved in the business
of hiring and leasing of good carriages, as they are covered in
section 44AE. This scheme can be opted by any one of the following
categories except the non-residents:
‹ Resident individual
‹ Resident H.U.F.
‹ Resident partnership firm except the L.L.P. firm
‹ This scheme is not for the taxpayers who have already made claims
for deductions under sections 10A, 10AA, 10B, 10BA, 80HH to
80RRB in a relevant previous year.
‹ This scheme does not cover any person who is carrying out an
agency business or whose earnings are coming from commission
or brokerage.
‹ Persons carrying out professions listed in section 44AA(1) of the
act are also not eligible for this scheme.
‹ A business that is earning more than two crore was not allowed to
choose this scheme. However from the year 2023-24 this limit has
been revised and changed to three crore.
Computation of Income
The small businesses adopting this scheme, have to compute their income
at a predefined rate of 8% of the turnover or the gross receipts.
An amendment was made in the year 2017-18 for small and unorganised
businesses for promotion of digital transactions. The amendment said that
if a business is taking the payments in cheque, draft or electronic mode/
digital mode they can presume their income at the rate of 6% instead of 8%.
In the normal scenario, for computation of final income under the Income
Tax Act certain deductions are allowed before calculating the final in-
come of a taxpayer. But in the case of presumptive income schemes no
such deductions are allowed under the act and the rate decided by the
law will be termed as the final income of the taxpayer.

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Maintenance of Books of Accounts: As we discussed above, section Notes

44AA relates to maintenance of accounts, but this section does not apply
to businesses opting for presumptive taxation schemes. They are required
to declare their income at the pre-decided rate floated by the income tax.
Payment of Advance Tax: The taxpayer adopting section 44AD is re-
quired to pay tax in advance on or before 15th March of the PY. If in
any case he/she fails to deposit such tax, interest rate prescribed under
the act will be imposed on him/her as per section 234C.
Consequences of Opting Out of this Scheme: An assessee who goes for
presumptive taxation scheme, then he/she is required to follow the same
for next five years as prescribed under the act. In any case he fails to
follow this provision and opts out of the scheme, then this scheme will
not be available for him for next five years. Further he/she should be
brought back to the maintenance of accounts and submission of these, to
the income tax department for verification. Opting out from this scheme
will apply the provisions of sections 44AA and 44AB on the assessee.
Example: Neeru decides and opts for presumptive taxation scheme 44AD
for the AY 2022-23. Due to some reasons, she opts out of this scheme in
AY 2023-24. Then in this case she will not be allowed to claim benefits
of this scheme for the coming five years that is Ays 2024-25 to 2028-29.
And she is also required to maintain proper books of accounts and get
them audited (if income exceeds amount that is not chargeable to tax).

2.7 Section 44ADA

Introduction to Scheme
As we discussed about small businesses in the above section, various
professions are also allowed to select presumptive taxation scheme under
section 44ADA. This scheme is only for professionals (individuals and
partnership firms excluding L.L.Ps.) who are residents of India. Profes-
sions that are considered for this scheme are mentioned below:
‹ Professional providing Legal services
‹ A medical professional
‹ Individuals engaged in engineering or architectural field

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Notes ‹ Individuals engaged in accountancy, consultancy or interior decoration

profession
‹ Any other profession submitted and notified under the Act.

Computation of Income
Budget of 2023-24 increased the limit of gross income from fifty lakhs
to seventy-five lakhs. That is, if professionals involved in the above-men-
tioned categories have income equal to or less than seventy-five lakhs,
they can take advantage of presumptive scheme under section 44ADA.
Let’s take an example of a professional interior designer Ms. Isha, she
gets a lot of designing work during the festive season but, on the other
days of the year the work and the earnings are quite less. Therefore, no
regular flow of income can be seen in her case. She was advised by her
friend to opt for presumptive taxation scheme under section 44ADA.
So, let us discuss how the income of a professional is presumed under
this scheme:
An individual who goes for this scheme his/her income is declared as
50% of gross receipts. This individual is also not allowed to claim any
further deductions.
Payment of Advance Tax: The taxpayer adopting section 44ADA is
required to pay tax in advance on or before 15th March of the PY. If in
any case he/she fails to deposit such tax, interest rate prescribed under
the act will be imposed on him/her as per section 234C.
Maintenance of Books of Accounts: As we discussed above, section
44AA relates to maintenance of accounts, but this section does not apply
to professionals selecting presumptive taxation schemes. They are required
to declare their income at the pre-decided rate floated by the income tax.

2.8 Section 44AE

Introduction to Scheme
In addition to the above schemes this is the last presumptive schemes
designed for benefitting the small businesses. The variation is that it is
only applicable to small businesses engaged in hiring, plying or leasing

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of goods carriage. These businesses help in movement of goods from Notes

one place to another.
The above business should not own more than ten carriage vehicles at
any time during the year to apply for this scheme. The vehicles are di-
vided into two categories i.e. heavy goods vehicles and other vehicles.

Computation of Income
The income for this scheme is calculated at the fixed rate of rupees one
thousand per ton or rupees seven thousand five hundred per goods vehicle
per month. The scheme does not allow any deductions of further expen-
diture or use of any other deduction mentioned in the act. Computation
of income based on different categories of vehicles:
For heavy vehicles: Rs. 1,000 per ton of gross vehicle weight for
every month
For other vehicles: Rs. 7,500 every month for every vehicle

Let’s understand the above Condition with the help of Examples:

Example A: Mr. Aditya is engaged in the business of hiring and leasing
vehicles used for carrying goods. In the year 2022-23 it was noticed that
he had eight of these vehicles (other than heavy goods vehicles). Calcu-
late the taxable income from his business when he opts for presumptive
taxation scheme under section 44AE.
Solution: As per the question, Mr. Aditya owns 8 vehicles that are other
than heavy vehicles. Therefore, the amount of Rs. 7,500 will be appli-
cable in this case.
Particulars Amount (in Rs.)
Income per month per good vehicle 7,500
No. of vehicles 8
Monthly income for 8 vehicles (7,500 × 8) 60,000
Total no. of months in a year 12
Total income from business of hiring and leasing 7,20,000
of vehicles (60,000 × 12)
Therefore, as per the provisions of section 44AE the presumptive income
of Mr. Aditya for the concerned year comes out to be Rs. 7,20,000.

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Notes Example B: Mr. Arav is engaged in business of hiring and leasing of

goods carriages. He owns six heavy vehicles with the weight of 12,000
kilograms. He also owns four vehicles that are not under the category
of heavy vehicles in the PY 2022-23. What will be his taxable income
as per the provisions under section 44AE?
Solution: Mr. Arav owns 6 heavy vehicles and 4 other vehicles.
Therefore, calculation will be done as follows:
Particulars Rs.
Income per month from one heavy goods vehicle (1,000 × 12,000
12 ton)
No. of heavy vehicles 6
Monthly income from heavy vehicles (12,000 × 6) 72,000
No. of months in one year 12
A. Total income from heavy vehicles per annum (72,000 × 12) 8,64,000
Income per month for other vehicles 7,500
No. of other vehicles 4
Monthly income from other vehicles (7,500 × 4) 30,000
No. of months in one year 12
B. Total income from other vehicles per annum (30,000 × 12) 3,60,000
Total income from business of hiring and leasing goods 12,24,000
carriages as per provisions of section 44AE (A + B)
Therefore, as per the provisions of section 44AE the presumptive income
of Mr. Arav is Rs. 12,24,000 per annum from the business of hiring and
leasing of goods carriages.
The deduction related to depreciation is also not available under this
scheme. However, the written down value of assets can be calculated
and claimed as per section 32.
Maintenance of Books of Accounts: As we discussed above, section
44AA relates to maintenance of accounts, but this section does not apply
to carriage businesses selecting presumptive taxation scheme. They are
required to declare their income at the pre-decided rate floated by the
income tax.

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IN-TEXT QUESTIONS Notes

1. Section __________ denotes presumptive taxation scheme for

professionals earning more than 75 lakhs per annum.
2. Section 44AA relates to presumptive income calculations for
small businesses. (True/False)
3. Which section relates to presumptive income calculations for
goods carriage businesses? __________
4. Advance tax under section 44AD is to be paid on __________.
5. Section 44AA relates to __________.
6. The small businesses adopting this scheme, have to compute
their income at a pre-defined rate of __________ of the turnover
or the gross receipts.
7. The last date prescribed for the income tax audit is __________.
8. The business should not own more than 13 carriage vehicles at
any time during the year to apply section 44AE. (True/False)

2.9 Summary
Section 44AA requires the assessee engaged in professional practices or
business to maintain books of accounts.
A cashbook, journal book, ledger, copies of original bills, etc. should be
maintained under section 44AA.
Section 44AB pertains to conducting audit of accounts maintained by
professionals and business personnel.
To ease the burden of maintaining books of accounts, auditing of these
records, etc. for small taxpayers the Income Tax Act has introduced
‘presumptive taxation scheme’ under various sections for various business
and professional activities. The sections that work in accordance with
presumptive taxation schemes are sections 44AD, 44ADA and 44AE.
Section 44AD was designed to provide benefits to small taxpayers en-
gaged in small businesses. The small businesses adopting this scheme,
have to compute their income at a predefined rate of 8% or 6% of the
turnover or the gross receipts.

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Notes Various professions are also allowed to select presumptive taxation scheme
under section 44ADA. This scheme is only for professionals (individuals
and partnership firms excluding L.L.Ps.) who are residents of India.
Section 44AE is applicable to small businesses engaged in hiring, plying
or leasing of goods carriage. These businesses help in movement of goods
from one place to another.
All the taxpayers opting for presumptive taxation schemes are free from
conducting tax audits and maintaining books of accounts. However, if
they opt out from these schemes then they will be required to prepare
accounts and get them audited according to the law.

2.10 Answers to In-Text Questions

1. 44ADA
2. False
3. Section 44AE
4. 15th March
5. Maintenance of accounts
6. 8%
7. 30th September
8. False

2.11 Self-Assessment Questions

1. Explain the provisions mentioned under section 44AA of the Income
Tax Act.
2. Explain the concept of tax audit. Mention the categories of persons
that are required to perform a tax audit.
3. What are the various presumptive taxation schemes mentioned in
the Income Tax Act?
4. What do you mean by presumptive taxation scheme under section
44ADA? Mention how tax is calculated for individuals opting this
scheme.

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5. How is the presumptive scheme under section 44AD different from Notes
section 44AE? Give various provisions of both the schemes.
6. Write short notes on:
(a) Penalties for non-filling of audit report
(b) Computation of income under section 44AE
(c) Computation of income under section 44ADA
(d) Tax audit and its importance

2.12 References
‹ Mittal, N. (2022). Concept building approach to income tax law &
practice. (1st ed.). Delhi, India: Cengage Learning India Pvt. Ltd.
‹ Singhania, V. K., & Singhania, M. (2021). Students’ guide to
income tax | University Edition. (65th ed.). Delhi, India: Taxmann
Publications Private Limited.
‹ https://www.incometax.gov.in/iec/foportal/help/e-filing-itr4-form-
sugam-faq

2.13 Suggested Readings

‹ Income-tax Act, 1961.
‹ www.incometaxindia.gov.in
‹ Ahuja, G., & Gupta, R. (2021). Systematic approach to income tax.
Delhi, India: Flair Publications Pvt. Ltd.

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 UNIT - III

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 L E S S O N

3
Conceptual Framework
of E-filing and Filing of
Income Tax Returns
Dr. Anjali Sain
Assistant Professor
School of Open Learning
University of Delhi

STRUCTURE
3.1 Learning Objectives
3.2 ,QWURGXFWLRQ WR (¿OLQJ
3.3 Filing of Income Tax Returns
3.4 Summary
3.5 Answers to In-Text Questions
3.6 Self-Assessment Questions
3.7 Reference
3.8 Suggested Readings

3.1 Learning Objectives

After reading this chapter, you will be able to:
‹ Describe e-Filing and how it is used in income tax returns.
‹ Discuss the advantages of e-Filing income tax returns in terms of being accurate,
easy and speedy.
‹ Explain the difference ITR-2, ITR-3, ITR-4, ITR-5, and ITR-U, and know the
conditions that are suitable for every form.

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Notes
3.2 Introduction to E-filing
The e-filing of income tax returns can be defined as electronically filing
income tax returns over the internet. The popularity of this system is
primarily attributed to its convenience, speed, and accessibility as it has
replaced the traditional paper-based filing system.
E-filing refers to the system that allows computerized systems of transmitting
information to the taxation department without the need of being present.
The key features of E-filing are highlighted below:
1. Convenient and Save Time: Online tax filing can be completed
from any place that has internet connections. There is no need of
physically going to tax office to fill the forms or sending the filled
forms through the post which saves ones time and effort.
2. Work with Lesser Mistakes (Accurate and Error-Free): With the
built-in checks and validations in the system, e-filing has reduced
the possibility of human error related to calculation.
3. Effective Processing and Quick Refunds: E-filed returns are
expedited or processed faster by the tax authorities, therefore, any
resultant tax refunds is paid to the taxpayer quickly.
4. Easy Record Keeping: There is an electronic filing of your returns
which has a backup. Past returns can be accessed whenever necessary
since they are all kept safely on a digital platform.
5. Multiple Platforms: Although the Income Tax Department of India
has its own portal for e-filing, there are many other websites that
have very simple electronic filing systems with additional services
like tax-saving tips or expert help.
6. Environmentally-Friendly: This applies to all means of e-filing as
e-filing methods when employed minimize the amount of paperwork
involved in the process.
Steps to E-file Income Tax Returns
1. Register on the E-filing Portal: Go to the official E-filing portal
of the Income Tax Department (https://www.incometax.gov.in) and
register yourself by entering your PAN, other details and creating
a password.

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Notes

Figure 3.1: Login Page

2. Download or Use ITR Forms: Select the appropriate ITR form
depending on the nature of the income (salary, business income, etc.)
earned. Filling of forms can be done online or in excel/java format
and then posted back online.

Figure 3.2: Selection of Assessment Year and Mode of Filing

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Notes

Figure 3.3: Selection of Status

Figure 3.4: Selection of ITR Form

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3. Fill in the Required Details: Fill in, the personal information such as Notes
all basic information about the taxpayer, all income, all deductions
and all taxes that have been paid. Some taxpayers are able to utilize
pre-filled forms in specific pages from the Income Tax department
databank.
4. Verification and Return Upload: After entering all the information,
confirm the details, calculate the tax and submit it. An Acknowledgment
(ITR-V) will be provided, which must be e-verified through Aadhaar
OTP, Bank Account, etc. or be sent to CPC Bengaluru.
5. Refund Status: Refund Status: Once submitted, you can check the
status of your e-filed return and the refund, if any, due to you.
Benefits in E-filing of Returns:
1. E-filing is Economical: E-filing is cost-effective as many sites
provide free or inexpensive services.
2. No more Documentations: Eliminates with the need for hard copies
or physical documents.
3. Time Independent (24/7 Availability): All taxes due may be e-filed
any time and nearly up to the last minute.
4. Safety: It is safe since it transmits data using encrypted means.
E-filing of returns is most popular among taxpayers as it was quick,
accurate and accurate.

3.3 Filing of Income Tax Returns

ITR-2
In ‘ITR-2’, income earned by persons (individual) and Hindu Undivided
Families (HUF) other than income from business professions is contained.
It applies to people who receive income by way of salary or rent of more
than one house property or capital gains or through foreign assets etc.
Step by Step Instructions on how to File ITR-2:
1. File the ITR Form 2 if You Meet any of the Following Conditions:
(i) Income Sources:
‹ Salary or pension income.
‹ More than one house property income.
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Notes ‹ Capital gains (both short term and long term) income.
‹ Foreign income or any income from foreign assets.
‹ Agriculture income more than Rs. 5,000.
‹ Other incomes (for interests, dividends etc.)
(ii) Non-Eligible Income: You do not have income by way of
business or profession.
2. Steps to File ‘ITR-2’
(i) Collect Necessary Documents as ‘ITR-2’ can only be filed
upon Collection of:
‹ Form 16: As issued by employer to salaried individual.
‹ Form 26AS: A Tax Credit Statement which highlights Tax
Deducted at Source (TDS).
‹ Bank Statements: For interest income details.
‹ Capital Gains Statements: If you sold any stocks, mutual
funds or real estate in the previous financial year.
‹ Details of Investments: This is applicable in taking tax
deductions under sections like 80C, 80D etc.
‹ PAN Card and Aadhaar Card: For any verification and
personal details.
(ii) Log in to the Income Tax E-filing Portal:
‹ Go to the official e-filing website of the Income Tax
Department: www.incometax.gov.in.
‹ Login using user id (PAN), Password and Captcha code.
(iii) Download the ITR-2 Form (Excel/Java Utility)
‹ Once you have logged in, there is a menu called “Downloads”.
‹ Click on “ITR-2” form set for the relevant assessment year.
‹ Slide the utility (Excel or Java) to be filled offline Appendix A.
‹ Alternatively, you can also fill ITR-2 online direct through
the portal “incometaxindiaefiling.gov.in”.

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(iv) Fill in the Form Notes

For ITR-2 form, you may require this information:
‹ Personal Information: Provide Name, PAN, Aadhaar No.,
address, contact, etc.
‹ Income Details: Salaries based on Form 16, Earnings from
House property and capital gains.
‹ Tax Deducted at Salary Source (TDS): TDS indicated in
Form 26AS and Form 16 to be filled therein.
‹ Deductions: Deductions in section under Chapter VI-A (for
Instance, Section 80C, Section 80D related to insurance,
medical etc.).
‹ Advance Tax/Self-Assessment Tax: When applicable, furnish
the relevant details about the tax payments done in the year.
(v) Verify the Provided Information
‹ After, all relevant sections have been filled, cross-check your
entries to avoid any error.
‹ Check the accuracy of tax payable, or tax refund status if one
such pertains to you.
(vi) Validate the Form
‹ With respect to the form, once it is filled completely, then:
‹ Click on Validate: This will locate errors and inconsistencies
if such exist. Make sure you rectify such errors and then go
to the next step.
(vii) Generate the ITR XML File (For Offline Method)
‹ Proceed to click on “Generate XML” after validation in order
to create the XML file of the ITR form.
‹ Download the XML file to the computer you are currently using.
(viii) File by Uploading the XML (For Offline Filing)
‹ Click the Income Tax e-filing option and log into the portal.
‹ Click on the e-file > income tax return.
‹ Click on the “Upload XML” option and upload the XML file
that has been generated.

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Notes ‹ Select the ITR-2, the assessment year in question, and whether
you intend to file your return electronically.
(ix) E Verification of the Return
‹ This return can even be verified in electronic format by using
one of the methods below:
‹ Aadhaar OTP: A One-Time Password (OTP) sent to the
registered mobile number under Aadhaar.
‹ Net Banking: Access your bank and validate your return
electronically.
‹ Digital Signature Certificate (DSC): Required only if you
are claiming more than Rs. 50 lakhs income or foreign
income/assets.
‹ Electronic Verification Code (EVC): Obtained from a
bank account or a Demat account.
‹ As an alternative, if the electronic verification is not carried
out, the physical ITR-V (acknowledgment of return) needs to
be sent to the Centralized Processing Centre (CPC) located
in Bangalore within 120 days of the return has been filed.
(x) Track the ITR
‹ Now that it has been two days since the filing as well as
verification of your ITR, you can track the processing of your
ITR by logging into the e-filing portal and checking under
My Account> View Return/Forms.

ITR-3
ITR-3 is essentially an income tax return filed by individuals, as well as
Hindu Undivided Families (HUFs) possessing income from business or
profession. If the individual wishes to file the return using ITR-3 form, the
following steps are taken: The ITR 3 Return filing process is as follows-
(i) Gather Required Documents
Before starting the filing process, ensure you have the following
documents:
‹ PAN card
‹ Aadhaar card

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‹ Account details of the bank Notes

‹ Form 16, if any
‹ Form 26AS
‹ Profit & Loss Account and Balance Sheet
‹ Investment and Deduction information
‹ TDS certificates
‹ Advance tax and self-assessment tax payment information
(ii) Log in to the Income Tax e-Filing Portal
‹ Navigate to the Income Tax e-Filing Portal.
‹ Enter your PAN/Aadhaar number as the user ID and provide
your password and the captcha.
‹ In case you are a new user, register yourself with the required
information.
(iii) Choose the ITR Form
‹ After successful login, click on the “e-File” tab and choose “File
Income Tax Return”.
‹ Specify the assessment year for which the assessee wishes to file.
‹ Select ITR-3 from the drop-down.
‹ Select type of Return would you like to file, ‘Original or Revised
Return’ in case of amending.
‹ Choose the mode of filing as ‘Online’ or ‘Offline’ (based on
XML file upload).
(iv) Enter Required Basic Information
‹ Enter general information like name address and contact information
and status of return filing (filing of ‘original’ or ‘revised’ return).
‹ Provide your details of income such as;
‹ Income from salary or pension, if any
‹ Income from house property
‹ Income from business-oriented activity or profession
‹ Capital gain
‹ Other source of income (e.g. interest income)

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Notes (v) Give Details about Business or Professional Earnings

‹ Switch to the “Income Details” tab and give business or professional
income details.
‹ Enter details of the type of the business, business codes, and
other financial information in accordance with the profit and loss
account and balance sheet.
‹ Declare presumptive income if any.
(vi) Declare Deductions and Exemptions
‹ Click on the “Deductions” tab in order to declare deductions like
80C, 80D, 80G, etc. under appropriate sections.
‹ Since you are maximizing on the tax benefits, ensure that the
correct details of investments as well as the eligible deductions
that can be claimed are entered.
(vii) Compute Tax Payable and Pay Taxes, if Applicable
‹ The system will calculate the total tax payable or refundable
in case the taxpayer correctly fills in all income and income
allowances along with tax deductions.
‹ In such a case that there is any tax due, before submitting the
tax return, locate the “Self Assessment Tax” option to clear the
tax payer’s tax liability.
‹ Stated tax payment particulars in the tax return.
(viii) Validate and Preview the Return
‹ Thoroughly check every single detail you filled in.
‹ Click the “Validate” button and any mistakes in the completed
form will be highlighted.
‹ In case there are any mistakes highlighted, rectify them and
press the validate button.
(ix) Submit the ITR
‹ Click the “Preview and Submit” button, once it is validated.
‹ After reviewing the form finally and submit it.

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(x) Verify the Return Notes

‹ Verification is necessary to be done within 30 days after submitting
ITR.
‹ Verification can be done using:
‹ Aadhaar OTP
‹ Net banking
‹ EVC
‹ Sending ITR-V to Centralized Processing Center (CPC),
Bangalore by post after signing it in person.
(xi) Acknowledge Receipt of Submission
‹ You will be receiving an acknowledgement (ITR-V) through mail
on your registered email id after you have successfully finished
verification.
‹ Keep the copy of the said acknowledgement for future use.

ITR-4
‘ITR-4’ is for declaring the income under the presumptive income scheme
i.e., Section 44AD, 44ADA, or 44AE of the Income Tax Act. This is filed
by the ‘individuals’, ‘Hindu Undivided Families (HUFs), and ‘firms’ (other
than LLPs) who have opted to file return under this scheme. The following
is the procedure of filling return in the ITR-4 form correctly:
(i) Gather Necessary Documents
Before getting started, make sure that these documents are available.
‹ Pan Card
‹ Aadhaar Card
‹ Details of bank account
‹ Form 16, if any
‹ Form 26AS (tax credit statement)
‹ Details of income and expenses
‹ Details of investments and deduction u/s 80
‹ TDS certificates
‹ Details pertaining to advance tax or self-assessment tax paid.

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Notes (ii) Log in to the Income Tax e-Filing Portal

‹ Go to the Income Tax e-Filing website.
‹ Login using PAN/AADHAAR as user id along with entering
password and captcha.
‹ If you are yet to register on the portal, please do so by providing
the relevant information needed for registration.
(iii) Select the ITR Form
‹ After successfully logging in, go under the “e-File” tab and press
“Income Tax Return”.
‹ Select the applicable assessment year.
‹ Choose ITR-4 from the list of the forms of ITR available.
‹ Under Filing type, select status as ‘Original/Revised Return’.
‹ The first step should be to select the appropriate filing mode
which can be ‘Online’ or ‘Offline’ (XML upload in the case of
an ‘Offline utility’).
(iv) Enter the Basic Information
‹ Make sure to complete the general information which pertains
to the basic information like personal information, address, and
status of filing whether original return or a revised one.
‹ Give your residence status for the corresponding financial year.
(v) State the Details of Income
‹ In the segment of “Income Details” report your income received
from:
‹ Presumptive Business Income: Enter business income under
‘Section 44AD’, or professional income under ‘Section 44ADA’.
‹ Income or Loss arises from house property.
‹ Miscellaneous Income: Enter items of income such as interest
income, dividend income, and other income.
‹ If applicable specify any agricultural income which is reported
when it is more than Rs. 5000.

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(vi) Input the Details of Deductions, Allowances and Exemptions Notes

‹ Move to ‘Deductions’ and enter deductions sought under various
sections from 80C, 80D and 80G and more.
‹ Provide accurate investment details, insurance details, donation
details, and many more to lower your taxable amount.
(vii) Calculate Tax Liability and pay Taxes, if Applicable
‹ The total payable tax or refundable tax is calculated automatically
by the system upon the entered income and deductions provided.
‹ All self-assessment taxes, where applicable, must be paid before
submission of the return.
‹ Payment details of any advance tax or self-assessment tax paid
during the financial year must be entered.
(viii) Validate and Review the Return
‹ After filling in all the required and relevant details in the form,
use the ‘Validate’ option to validate the existing form and confirm
that there are no errors.
‹ Verify the information entered and make sure that all information
that has been entered is correct.
‹ Correct any errors that have been indicated, if any and revalidate
the form.
(ix) Submission of the Filed Return of Income
‹ As soon as the form is validated, click on the ‘Preview and
Submit’ button.
‹ Check every part of the form once more and then proceed to
submit it.
(x) Verify Returns
‹ After the submission of the form/ITR, it becomes imperative
to undertake verification of the ITR. Such verification is done
through:
‹ Aadhaar OTP
‹ Internet banking

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Notes ‹ EVC (Electronic Verification Code) – which is generated by

the IT department.
‹ Signed physical copy of ITR-V is to be sent to the Centralized
Processing Center (CPC) located at Bangalore.
(xi) Acknowledgment Receipt
‹ Following successful completion of the process for verification,
you will receive an Email on your registered email-address
acknowledging receipt of the ITR V.
‹ Make sure to print out the acknowledgment you will put to use
in the future.

ITR-5
‘ITR-5’ is for the ‘firm’, ‘Association of Persons (AOPs)’, ‘Body of
individuals’ and other entities which are not required to fill ITR-7. Here
are the steps to file ITR-5 for tax returns:
(i) Arrange Necessary Documents
Before starting, please make sure you have these documents and
information in hand:
‹ PAN card
‹ Aadhaar card (if applicable)
‹ Bank account details
‹ Financial statements (Balance Sheet, Profit & Loss account)
‹ Form 26AS (Tax Credit Statement)
‹ TDS certificates
‹ Details of income, expenses and investments
‹ Information on deductions under various sections like 80C, 80D etc.
‹ Advance tax or self-assessment tax remittance details.
(ii) Search and Select the Income Tax e-Filing Portal.
‹ Go to the Income Tax e-Filing portal.
‹ Use PAN as your user ID, log in with your password and captcha.
‹ If you are not registered, you have to give all required details
which are in the registration forms.

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(iii) Choosing the ITR Form Notes

‹ After logging in, navigate to e-File menu and click on Income
Tax Return.
‹ Identify the relevant assessment year.
‹ From the list of forms available, choose ITR-5.
‹ Choose type of return that you want to file i.e., ‘original/revised
return’.
‹ You may choose online or offline mode for filing (if utilizing
the utility for the XML upload).
(iv) Provide Basic Information of the Application
‹ Let’s start with some basic detail that needs to be completed as:
‹ The Entity’s details (firm, LLP, AOP, etc.)
‹ Country of domicile, email ID and phone number
‹ The nature of any filed return (‘original’ or ‘revised’ return)
‹ Particular section to file return (for example section 139(1)
for normal).
(v) Income Details
‹ Go to ‘Income Details’ section enter income of different heads,
like:
‹ Business or Profession: Enter amount from your Profit and
Loss account and Balance Sheet.
‹ House Property: Enter any income or loss from rented house
properties.
‹ Capital Gains: Enter details of the short-term and long-term
capital gains.
‹ Other Incomes: Enter any other income like interest, dividends
etc.
(vi) Report Deductions and Exemptions
‹ Deductions with respect to Chapter VI-A (Sections 80C to 80U)
for eligible deductions such as investment, donation, medical
insurance etc.

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Notes ‹ Deductions claimed are reasonable and backed up with adequate

supporting documents.
(vii) Compute Tax Liability and Pay Taxes, if Applicable
‹ Based on the income and deductions made by the taxpayer, the
portal will generate a tax payable/refund due amount based on
the return submitted.
‹ Before sending in the return, please ensure that any tax that is
still outstanding, if any, is paid through the “Self-Assessment
Tax” payment option.
‹ Details of tax paid can be given such as the challan number,
BSR code and date of payment.
(viii) Validate and Review the Return
‹ After you have filled all required information, you can then
click on the “Validate” option to crosscheck if you have made
any errors in the form.
‹ Make sure to go through all the details in the relevant sections
wherein you have entered information to check for accuracy with
respect to the return you have filed.
‹ Amend all the mistakes noticed during validation of the return.
(ix) Submit the ITR
‹ After validation, ‘Preview and Submit’ button is clicked now
for submission of ITR.
‹ Complete the completed form and do not forget to submit it
after the final review.
(x) ITR Verification
‹ To complete the process, ITR needs to be verified after submission.
There are different means by which verification can be:
‹ Digital Signature Certificates (DSC), this is a requirement for
companies and LLPs.
‹ EVC (Electronic Verification Code) through net banking or
Aadhaar OTP.

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‹ Sending of signed hard copy ITR-V form to ‘Centralized Notes

processing Center (CPC)’ in Bangalore. (This is discouraged
for firms/LLPs where DSC is mandatory).
(xi) Acknowledgement Receipt
‹ When verification is successful, an acknowledgment of ITR-V
forms shall be forwarded to the email provided at the time of
registration.
‹ An acknowledgment which you receive for ITR returns filed
could be kept for your future reference.
ITR-U
‘ITR-U’ (Updated Return) is one of the returns under the Income Tax
Act that allows a taxpayer who has any error, omission or any income
that has not been disclosed in his original return within 24 months from
the end of the relevant assessment year to update such return. It remains
available to every category of taxpayer whether individual HUFs, compa-
nies, firms or others except to those under search and survey operations
pending assessment of returns.
This is a basic procedure showing how ‘ITR-U’ can be filed for income
tax return:
(i) Understand the Reasons for filing ‘ITR-U’
‹ As a taxpayer, the first thing to consider is whether you need
to update your return for one or more of the following reasons:
‹ Income has been omitted or reported incorrectly.
‹ An incorrect tax rate has been applied.
‹ New deductions or exemptions have been introduced.
‹ Other corrections of error in the earlier filed ITR.
‹ You are required to file this return within the 24-month time-
period from the date of the end of the relevant assessment-year.
(ii) Collect all Necessary Documents
‹ Before starting, ensure that you have:
‹ PAN card
‹ Aadhaar card (if applicable)

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Notes ‹ Original income declarations

‹ Revised income declarations
‹ Bank account detail
‹ Original return detail (if already filed)
‹ Updated financial statements, if any
‹ TDS certificates, Form 16, Tax Credit Statement 26AS
‹ Details of deductibles and exemptions available for you
‹ Self-assessment tax or advance tax payment details, where
appropriate.
(iii) Go to the Income Tax E-Filing Portal and Log In
‹ Go to Income Tax e-Filing Portal.
‹ A user ID where you’ll use your PAN for Login, along with
your password and captcha to Login.
‹ A link is provided containing an option to register. Use it if you
are yet to register.
(iv) Choose the ITR-U Form
‹ Click on the “e-File” menu, and then choose ‘Income Tax Return’
option after successfully logging in.
‹ Provide the relevant assessment year for which the updated return
is being submitted, please.
‹ Choose ITR-U from the list of available forms.
‹ Opt for the type of filing as “Updated Return (ITR-U)”.
(v) Enter the Basic Information
‹ Enter your name, PAN, address and other contact information.
‹ Indicate why you are seeking the change, such as reporting of
incorrect income, non-disclosure of income, reduction of carried
forward loss, selection of incorrect tax rate, etc.
‹ Give the section of the law under which the return is being
updated (Section 139(8B)).
(vi) Report Updated Income Details
‹ State the particulars of the income such as:

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‹ Income from salary or pension Notes

‹ Income from house property
‹ Business income or income from profession
‹ Capital gains
‹ Income from other sources
‹ Ensure that reporting of updated income is accurate and complete.
(vii) Declare Additional Tax Liability, if any
‹ Calculate the additional tax liability, if any on the basis of
updated income.
‹ Additional tax liability should include applicable additional tax
payable, interest, and penalties (late fee).
‹ Wherever applicable, do not forget to pay “Self-Assessment Tax”
on account of additional tax, if any, that may arise prior to the
submitting of return.
‹ Fill in the payment details in the forms like challan number,
BSR code and payment date.
(viii) Validate and Review the Return
‹ Click on the ‘Validate’ button to determine whether there are
errors in the form.
‹ Go over each detail to ensure that any changes and revisions
have been made correctly.
‹ Remove any errors made that were pointed out during the
validation exercise.
(ix) Submit the ITR-U
‹ After completing most of the steps and validating, you can click
on the ‘Preview and Submit’ option.
‹ Ensure that you review the completed form in detail before
submitting.
(x) Verify the ITR
‹ After submission of ITR, verification of ITR needs to be done
using any of the following methods:
‹ A digital signature form DSC.

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Notes ‹ Electronic Verification Code (EVC) through net banking or

using Audrey OTP.
‹ Send the completed signed copy of the ITR V up to the
Centralized Processing Center (Bangalore)
(xi) Acknowledgment Receipt
‹ After successful completion, you will receive email acknowledgment
(ITR-V) on registered e-mail address.
‹ It is advisable to download the acknowledgment for your future
use.
IN-TEXT QUESTIONS
1. What is e-Filing of income tax returns?
(a) Filing tax returns via post
(b) Filing tax returns in person at the tax office
(c) Filing tax returns electronically through the internet
(d) Filing tax returns through an accountant only
2. Which of the following is NOT a merit of e-Filing income tax
returns?
(a) Faster processing of tax returns
(b) Higher chances of manual errors
(c) Convenience of filing from anywhere
(d) Enhanced data security
3. Which form should an individual with capital gains and income
from multiple properties use to file their income tax return?
(a) ITR-1 (b) ITR-2
(c) ITR-3 (d) ITR-4
4. What type of income is reported in ITR-3?
(a) Income from salary and wages only
(b) Income from business or profession
(c) Income from capital gains only
(d) Income from interest on savings accounts only

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5. ITR-4 (Sugam) is meant for individuals and Hindu Undivided Notes

Families (HUFs) who choose which type of income scheme?
(a) Presumptive income scheme under Sections 44AD, 44ADA,
and 44AE
(b) Regular income tax scheme
(c) Capital gains taxation
(d) Agricultural income only
6. For which taxpayers is ITR-5 applicable?
(a) Individual taxpayers only
(b) Trusts and institutions only
(c) Firms, LLPs, AOPs, BOIs, and local authorities
(d) Non-resident taxpayers
7. What is ITR-U used for?
(a) Filing income tax returns for senior citizens
(b) Filing returns for under-reported income
(c) Filing tax returns for the previous financial year
(d) Filing tax returns for salaried individuals
8. One of the advantages of e-Filing income tax returns is:
(a) The need to manually calculate tax liabilities
(b) High risk of losing important documents
(c) Faster refunds for early filers
(d) No requirement to sign any documents
9. Which section of the Income Tax Act in India deals with
presumptive taxation, applicable for ITR-4 filing?
(a) Section 80C (b) Section 44AD
(c) Section 234B (d) Section 54
10. Which of the following is NOT a requirement for e-filing an
income tax return?
(a) Internet access
(b) Physical submission of documents
(c) PAN number
(d) Valid email ID and mobile number
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Notes
3.4 Summary
Income tax returns can be electronically submitted via the web portal of
the Income Tax Department, this is termed as e-filing. This has made
system of reporting income and paying taxes more efficient by making
the process easier, faster and more secure. The main advantage of such
a system is the quick processing, reduced papers usage, less errors, and
filing acknowledgment within shortest possible time. Different tax re-
turn forms are used as well for various taxpayers. ‘ITR-2’ is prescribed
for Individuals (other than taxpayers with business) and HUFs having
salary or house property or capital gains income; ITR-3 is for business
occupation income taxpayers; ITR-4 for presumptive tax income payers;
ITR-5 is for organization including firms, LLPs and AOP; and ITR-U
for tax return amendments within 24 months from the assumed tax year
for correction or omission of facts. Such forms allow efficient taxpayer
services with compliance with tax laws by the use of various forms in the
streamlined digital process of revenue collection and accounting system.

3.5 Answers to In-Text Questions

1. (c) Filing tax returns electronically through the internet
2. (b) Higher chances of manual errors
3. (b) ITR-2
4. (b) Income from business or profession
5. (a) Presumptive income scheme under Sections 44AD, 44ADA,
and 44AE
6. (c) Firms, LLPs, AOPs, BOIs, and local authorities
7. (b) Filing returns for under-reported income
8. (c) Faster refunds for early filers
9. (b) Section 44AD
10. (b) Physical submission of documents

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Notes
3.6 Self-Assessment Questions
1. What is an Electronic Filing (e-filing)?
2. What are the main e-filing advantages to taxpayers and users of
the service?
3. What are the steps to be followed when filing ITR-2, ITR-3, ITR-4,
ITR-5, and ITR-U through e-Filing portal of income tax department?
4. In which cases taxpayer must lean on ITR-U, and what are the
restrictions and advantages in filing an updated return using this
form?

3.7 Reference
‹ Information retrieved from: https://www.incometax.gov.in/iec/foportal/

3.8 Suggested Readings

‹ Ahuja, Girish and Gupta, Ravi. Systematic Approach to Income
Tax. Flair Publications Pvt. Ltd., Delhi.
‹ Mittal, Naveen. Concept Building Approach to Income Tax Law &
Practice. Cengage Learning India Pvt. Ltd., Delhi.
‹ Singhania, Vinod K. and Singhania, Monica. Students’ Guide to
Income Tax. University Edition. Taxmann Publications Pvt. Ltd.,
Delhi.

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 UNIT - IV

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 L E S S O N

4
Tax Deduction at Source
(TDS)
Ms. Damini Kumari
Assistant Professor
School of Open Learning
University of Delhi

STRUCTURE
4.1 Learning Objectives
4.2 Introduction
4.3 Key Concepts of TDS
4.4 Types of Payments Subject to TDS
4.5 Provisions Relating to TDS
4.6 Schedule of Deposit of TDS
4.7 Schedule for Submission of TDS Returns
4.8 Summary
4.9 Answers to In-Text Questions
4.10 Self-Assessment Questions
4.11 Reference
4.12 Suggested Readings

4.1 Learning Objectives

After reading this chapter, you will be able to:
‹ Explain the concept and purpose of TDS.
‹ Differentiate between different types of payments subject to TDS.
‹ Analyse the provisions relating to TDS.
‹ Explain the schedule of deposit of TDS.

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Notes
4.2 Introduction
Tax Deduction at Source is known as TDS. It helps collect taxes (effec-
tively). TDS reduces tax evasion significantly. It ensures ‘timely’ revenue
for the government. TDS applies to various payments made. These include
salaries, rent, and interest. Deductors are responsible for TDS compliance.
This includes - deducting and depositing the tax. Taxpayers benefit from
easier compliance processes. TDS creates a transparent tax system. Tax
Deduction at Source (TDS) applies to various payments. This includes -
dividends, interest, and lottery winnings. TDS ensures taxes are collected
‘timely’ at the source. It reduces tax burdens at the year-end for taxpayers.
TDS minimizes tax evasion by deducting taxes beforehand. The deductor
must issue a TDS certificate to recipients. This certificate helps recipients
claim deductions - when filing taxes. Failure to deduct (or deposit) TDS
may result in penalties. Excess tax deductions can be refunded during tax
returns. Overall - TDS makes tax collection easier and more transparent.
TDS creates a record of taxable transactions yearly. Taxes are deducted
in small portions, reducing lump-sum payments. This helps individuals
manage their finances better. For businesses - TDS promotes ‘timely’
tax compliance. TDS acts as an advance tax collection mechanism. It
collects taxes during income generation, not year-end. Digital platforms
streamline the TDS process for businesses. TDS applies only - when
payments exceed a threshold ‘limit’. This prevents small payments from
unnecessary taxation. It ensures steady tax revenue for the government.

4.3 Key Concepts of TDS

‹ TDS Purpose: TDS ensures ‘timely’ and efficient tax collection.
It deducts taxes at income generation points. This prevents tax
evasion by deducting tax earlier. TDS provides continuous revenue
for public services. It simplifies tax payments by spreading them
over time. Taxpayers avoid calculating taxes manually throughout
the year. TDS creates transparent financial records for both parties.
It spreads tax payments, reducing year-end burdens. TDS benefits
both - small businesses and individuals. It eliminates the risk of
manual tax miscalculation. TDS expands the government’s tax base
(effectively). It includes - bank interest, rent, and lottery winnings.

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TDS curbs unreported income by creating transaction records. It Notes

reduces tax evasion with automatic deductions. TDS provides a
paper trail to track income sources. This helps prevent fraud and
strengthens tax compliance. TDS also aids in planning fiscal policies
‘efficiently’. Revenue collected supports developmental projects and
welfare schemes. TDS stabilizes the economy through steady tax
inflow. It makes tax compliance simpler for all involved.
‹ Deductor and Deductee: The deductor is the entity making the
payment. They must deduct tax and deposit it with authorities.
The deductor has a unique Tax Deduction Account Number (TAN).
They issue TDS certificates - that show the deducted tax amount.
The deductee is the person who receives the taxed income. TDS
certificates help deductees in claiming tax deductions (easily). Both
parties have specific roles in ensuring compliance. Failure to deduct
(or deposit) TDS may lead to penalties. TDS promotes accountability
and transparency for both - parties. Understanding deductor and
deductee roles ensures - smooth tax compliance.
‹ TDS Rates and Threshold ‘limits’: Tax Deduction at Source
(TDS) has specific rates - for different payments. These rates are
determined by the government. They can vary significantly. Each
‘type of payment’ has a corresponding rate. Common payments
include - salaries, interest, and professional fees. The government
publishes these rates in tax regulations (annually). Threshold ‘limits’
are important in the TDS system. A threshold ‘limit’ indicates the
minimum amount subject to TDS. Payments below this ‘limit’ do
not require tax deduction.
Example: A salary below a certain amount may not incur TDS.
This helps reduce the compliance burden on small payments. Dif-
ferent categories of income have - different TDS rates. Salaries
generally have a higher threshold ‘limit’ than other payments. For
instance - TDS on interest from savings accounts often has a low
threshold. The government aims to simplify compliance (especially
for - smaller taxpayers). This means that not every small payment
is taxed at source.
Understanding the applicable TDS rates is essential for deductors.
They should be aware of the specific rates for their payments.

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Notes Miscalculating the TDS rate can lead to penalties (and interest
also). Therefore- keeping updated with tax regulations is crucial
for compliance. The government reviews TDS rates (periodically).
Changes may occur based on economic conditions (or budget an-
nouncements). Taxpayers should stay informed about these changes
each year. They must also adjust their calculations accordingly. This
ensures accurate deductions and ‘timely payments’ to the government.
Threshold ‘limits’ help in promoting a fair tax system. They prevent
the taxation of low-income earners (and small - businesses). By
exempting small payments from TDS - the government supports
economic activity. This encourages compliance without burdening
taxpayers (unreasonably). Taxpayers must be diligent in tracking
their payments. They should ensure that payments exceeding the
threshold are ‘properly taxed’. Deductors must maintain accurate
records of all payments made. This will help in verifying TDS
deductions during audits.
TDS rates and threshold ‘limits’ also impact business cash flow.
Businesses need to account for these deductions in their budgets.
Proper planning helps in managing finances (and avoiding unforeseen
tax liabilities). It is essential for maintaining healthy cash flow and
financial stability. In summary- TDS rates and threshold ‘limits’ are
crucial aspects of tax compliance. Understanding these elements
ensures ‘timely’ and accurate tax deductions. Both - deductors and
deductees benefit from clear guidelines. This promotes – 1. trans-
parency and 2. efficiency in the tax system.
‹ Applicability of TDS on Various Payments: Tax Deduction at Source
(TDS) applies to a wide – “range of payments”. These payments
include – “salaries, interest, rent, and professional fees.” Each category
has specific TDS rates determined by the government. Understanding
these applications is essential for compliance. Salaries are one of the
most common payments (subject to TDS). Employers must deduct tax
from employees’ salaries (before payment). The amount deducted is
based on – 1. applicable TDS rates and 2. employee’s income. This
ensures that taxes are collected regularly throughout the year. TDS
also applies to interest income. Banks deduct tax on interest earned
from savings accounts. This deduction occurs at the time of interest

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payment. Similarly - fixed deposits and recurring deposits also incur Notes
TDS on interest. The threshold ‘limit’ for these payments can vary
based on current regulations.
Rent payments are another area - where TDS is applicable. When
a tenant pays rent above a certain ‘limit’ - TDS must be deducted.
The landlord receives the payment after the deduction. This ensures
that rental income is taxed appropriately. Landlords must account for
this deduction in their income tax returns. Professional fees are also
subject to TDS. This includes - payments made to – 1. consultants,
2. freelancers, and 3. service providers. The deductor must ensure
the correct amount of tax is deducted based on the fee. This helps in
maintaining transparency in professional transactions. TDS is applica-
ble to payments made to – 1. contractors and 2. sub-contractors. This
includes - payments for - construction work, services (or goods). The
government mandates TDS on these payments to ensure compliance.
Contractors must account for TDS (while calculating their income).
Dividends paid by companies are also subject to TDS. Companies
must deduct tax before distributing dividends to shareholders. This
ensures that the income received by shareholders is taxed at the
source. Shareholders can claim credit for this deduction - when
filing their tax returns. TDS applies to winnings from lotteries and
games as well. Any individual (or entity) receiving such winnings
must have TDS deducted. This ensures - that taxes are collected
on non-recurring income. The TDS rate for lottery winnings is
(generally) higher than for regular income. Payments for insurance
commission also incur TDS. Insurance companies must deduct tax
(before paying commissions to agents). This applies to both – 1.
life and 2. non-life insurance sectors. Agents must account for this
TDS (while filing their income tax returns). TDS is applicable to
various other payments (such as - commissions and brokerage).
Payments made to agents for selling products (or services) fall
under this category. The deductor must ensure compliance with the
applicable TDS rates. In summary- TDS is applicable to various
payments in the tax system. Each ‘type of payment’ has specific
rates and conditions. Understanding these applications is crucial for
both (deductors and deductees). This promotes - transparency and
efficiency in tax compliance.
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Notes
4.4 Types of Payments Subject to TDS
1. TDS on Salaries: Tax Deduction at Source (TDS) on salaries is
a significant aspect of income tax. Employers are responsible for
deducting TDS (from employees’ salaries). This deduction occurs
before - the salary is paid to the employee. The deducted amount
is then deposited with the government. The TDS rate on salaries
varies (based on income levels). The government provides ‘tax
slabs’ - that determine the applicable rate. Higher incomes attract
higher TDS rates - while lower incomes may not incur any tax.
This progressive taxation system ensures fairness in tax collection.
Employers must calculate TDS (based on various factors). These
include - the employee’s gross salary, deductions, and exemptions.
Common exemptions include - house rent and standard deductions.
Accurate calculation is essential to avoid penalties (for both
employer and employee). Employees must provide their employers
with necessary details. This includes - investment declarations and
eligible deductions. These details help employers calculate the correct
TDS amount. ‘Timely’ submission of this information is crucial for
accurate deductions.
The TDS deducted on salaries is credited to the employee’s tax
account. Employees can track this amount through their Form 26AS.
This form reflects all TDS deductions made against their PAN. It
serves as “proof of tax” paid - when filing annual income tax returns.
Employers must issue a TDS certificate to employees annually.
This certificate, known as Form 16, details the total salary paid.
It also shows the total TDS (that are deducted during the financial
year). Employees can use Form 16 - while filing their income tax
returns. TDS on salaries aims to ensure regular tax collection. This
system helps the government in maintaining a steady inflow of
revenue. It also reduces the tax compliance burden (for employees).
Rather than paying a lump sum at year-end, - employees pay tax
in smaller portions. If an employee’s TDS is deducted incorrectly-
then adjustments can be made. Employees can claim refunds for
excess TDS deducted (during the year). This can be done while
filing their income tax returns. It is essential for employees to

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verify the accuracy of their TDS. In summary - TDS on salaries Notes

is a vital part of the tax system. It ensures ‘timely’ collection of
taxes from employees’ earnings. Employers play a crucial role in
this process. Understanding the rules and regulations surrounding
TDS is essential for compliance.
2. TDS on Interest Payments : Tax Deduction at Source (TDS) applies
to interest payments as well. Banks and financial institutions are
required to deduct TDS on interest earned by account holders. This
includes - 1. interest from savings accounts, 2. fixed deposits, and
3. recurring deposits. The TDS is deducted before the interest is
credited to the account holder. The TDS rate on interest payments
varies based on current tax laws. Generally - the rate is set at
10% for interest exceeding the specified threshold ‘limit’. The
government updates these rates (periodically), so it’s essential to
stay informed. The threshold ‘limit’ is the minimum interest amount
before TDS applies. For savings accounts - TDS is applicable only
if the interest exceeds the threshold ‘limit’. Many individuals earn
interest below this ‘limit’ and are not subject to TDS. This helps
lower-income earners avoid unnecessary tax deductions. It ensures
that only significant interest earnings are taxed at source. Fixed
deposits also incur TDS on interest earned. Banks (typically) deduct
TDS on the interest amount at the time of payment. This ensures
that tax is collected regularly, reducing the tax burden at year-end.
Investors should keep track of their interest earnings for accurate
tax reporting.
The deductor, usually the bank, provides a TDS certificate to account
holders. This certificate shows the amount of interest earned and the
TDS deducted. It serves as “proof of tax” paid - when filing income
tax returns. Account holders can claim this TDS as credit against their
total tax liability. If the total interest earned is below the threshold,
no TDS is deducted. However, individuals must still report this
income while filing their tax returns. This ensures compliance with
tax regulations, even if TDS was not deducted. Accurate reporting
helps avoid potential penalties from tax authorities. In some cases -
the account holder can submit a declaration to avoid TDS. If their
total income is below the taxable ‘limit’, then - they may request no

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Notes TDS deduction. This is (typically) done by submitting Form 15G (or
15H) to the bank. Such forms ensure that the bank does not deduct
TDS on the interest payment. Investors must understand the impact
of TDS on their returns.
TDS reduces the “effective interest income” received. Therefore,
individuals should consider this - when planning their investments.
Awareness of TDS helps in making informed financial decisions.
In summary - TDS on interest payments is an “essential aspect of
tax compliance”. It applies to various interest sources - including
savings and fixed deposits. Understanding TDS rates and thresholds
is ‘crucial’ (for account holders). This knowledge ensures accurate
reporting and compliance with tax regulations.
3. TDS on Rent : Tax Deduction at Source (TDS) on rent is an important
aspect of the tax system. TDS applies when rent payments exceed
a specified threshold ‘limit’. Landlords – who receive rent above
this ‘limit’ must have TDS deducted. The tenant (who makes the
payment) is responsible for this deduction. The TDS rate on rent
is generally set at 10%. This rate applies to monthly (or annual)
rent payments that exceed the threshold ‘limit’. The government
establishes this ‘limit’- it may change periodically. It’s essential for
both - tenants and landlords to stay updated on these regulations.
When a tenant pays rent, they must deduct TDS before making the
payment.
Example: If the monthly rent is significant, the tenant deducts TDS
from this amount. The net amount is then paid to the landlord after
the deduction. This ensures that tax is collected at the source of
income. Landlords must provide their tenants with a - Permanent
Account Number (PAN). This number is necessary for the tenant
to deduct TDS correctly. If the landlord does not provide a PAN,
then - tenant may need to deduct TDS at a “higher rate”. This
encourages landlords to comply with tax regulations.
After deducting TDS - tenants must deposit the amount with the
government. This must be done within the stipulated time frame.
‘Timely’ deposits help avoid penalties and interest charges. Tenants
should keep a record of the TDS deducted and deposited for their tax
filings. Landlords receive a TDS certificate from tenants (annually).

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This certificate outlines the total rent received and the TDS deducted. Notes
The certificate is essential for landlords (when filing their income
tax returns). It serves as “proof of tax” paid on rental income. If
the total rent earned by the landlord is below the threshold ‘limit’,
then - no TDS applies. However, landlords must still report this
income - when filing tax returns. Accurate reporting is crucial for
compliance with tax laws. It helps in avoiding potential audits (or
penalties) from tax authorities. Tenants and landlords must maintain
clear communication regarding TDS. Both parties should understand
their responsibilities in the process. This clarity ensures smooth
transactions and compliance with tax regulations. It also promotes
transparency (in rental agreements). In summary- TDS on rent is a
vital component of the tax system. It ensures ‘timely’ tax collection
from rental income. Understanding TDS rates and compliance
requirements is essential for both - tenants and landlords. This
knowledge fosters a fair and efficient tax environment.
4. TDS on Professional Fees and Commissions : Tax Deduction at
Source (TDS) on professional fees and commissions is crucial in the
tax system. This applies - when individuals (or businesses) receive
payments for professional services. Payments for services like –
“consultancy, legal advice, and technical support” are included. TDS
ensures that tax is collected at the source before the payment is made.
The TDS rate on professional fees is “generally set at 10%”. This
rate applies to payments exceeding the specified threshold ‘limit’.
The government updates these ‘limits’ (periodically), so it’s essential
to stay informed. If the total payment is below this ‘limit’ - no
TDS is deducted. When a business (or individual) pays professional
fees, they must deduct TDS. This deduction occurs at the time of
payment to the service provider. For example, if a company hires a
‘consultant’ and pays a fee, it must deduct TDS (before disbursing
the amount). This process helps in ensuring compliance with tax
regulations. Professional service providers must provide their clients
with a Permanent Account Number (PAN). This number is necessary
for the deductor to ‘compute TDS accurately’. If the provider does
not furnish their PAN, the deductor may need to deduct TDS at
a ‘“higher rate”’. This encourages service providers to comply
with tax laws. After deducting TDS - the deductor must deposit

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Notes the amount with the government. This deposit must occur within
the prescribed timeline to avoid penalties. ‘Timely’ payments help
maintain a good compliance record with tax authorities. Deductors
should keep accurate records of all TDS deductions for ‘reference’.
Service providers receive a TDS certificate from the deductor (annually).
This certificate outlines the total professional fees received and
TDS deducted. It serves as “ “proof of tax” paid” - when filing
income tax returns. Service providers should retain this certificate
for their records. If the total professional fees earned are below the
threshold ‘limit’, then - no TDS applies. However, providers must
still report this income - when filing tax returns. Accurate reporting
ensures compliance and helps avoid audits (or penalties) from tax
authorities. Understanding the implications of TDS on professional
fees is essential for both parties. This awareness helps them manage
their overall tax liability ‘(effectively)’. Deductors must ensure
compliance to avoid potential penalties and interest. In summary-
TDS on professional fees and commissions plays a vital role in tax
compliance. It ensures ‘timely’ collection of taxes on professional
services rendered. Understanding the TDS rates and regulations is
crucial for both - deductors and service providers. This knowledge
promotes ‘transparent and efficient tax system’.
5. TDS on Dividends: Tax Deduction at Source (TDS) on dividends
is “an essential part” of the tax system. Dividends are payments
made by companies to their shareholders. These payments represent
a portion of the company’s profits. TDS ensures that tax is collected
at the source before dividends are distributed. The TDS rate on
dividends is (typically) set at 10%. This rate applies to the amount
of dividends exceeding a “specified threshold”. The government
updates this threshold periodically, so it’s important for shareholders
to stay informed. If the total dividend amount is below this ‘limit’,
then - no TDS is deducted. When a company declares dividends, it
must deduct TDS before making payments. This deduction occurs at
the time of dividend distribution. For instance- if a shareholder is
entitled to dividends, the company deducts TDS before disbursing
the payment. This ensures that tax is collected directly from the
source of income. Shareholders must provide their Permanent

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Account Number (PAN) to the company. This PAN is necessary Notes

for the company to calculate TDS (accurately). If a shareholder
fails to provide a PAN, the company may need to deduct TDS at
a “higher rate”. This encourages compliance with tax regulations.
After deducting TDS, the company must deposit the amount with
the government. This deposit should be made within the ‘specified
timeframe’ to avoid penalties. ‘Timely payment’ helps maintain good
standing with tax authorities. Companies must keep accurate records
of all TDS deductions for ‘reference’. Shareholders receive a TDS
certificate from the company annually. This certificate outlines the
total dividends received and the TDS deducted. It serves as “proof
of tax” paid - when shareholders file their income tax returns.
Shareholders have to retain this certificate. If the total dividends
received are below the ‘threshold limit’, then - no TDS applies.
Shareholders must report this income (when filing tax returns).
Accurate reporting ensures compliance and helps avoid audits (or
penalties) from tax authorities. Understanding TDS on dividends is
“important for investors”. Shareholders should consider TDS - when
evaluating the net return on their investments. This awareness helps
them in managing their overall tax liability (effectively). Companies
must ensure compliance to avoid potential penalties and interest. In
summary- TDS on dividends plays a vital role in tax compliance.
It ensures “timely collection of taxes on dividend payments” to
shareholders. Understanding TDS rates and regulations is crucial
for both - companies and investors. This knowledge promotes
transparency and efficiency in the tax system.
6. TDS on Lottery Winnings and Other Income: Tax Deduction at
Source (TDS) on lottery winnings is a – “key aspect” of the tax
system. Lottery winnings are considered as income. TDS ensures that
tax is collected at the source before the winner receives their prize.
This process helps the government - to maintain a steady revenue
stream. The TDS rate on lottery winnings is “typically set at 30%.”
This high rate reflects the government’s intention to tax non-recurring
and windfall income. It applies to any winnings above a specified
threshold ‘limit’. If the winnings are below this ‘limit’, no TDS is
deducted. When an individual wins a lottery - the organizing body

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Notes must deduct TDS. This deduction occurs at the time the prize is
claimed. For example, if a person wins a cash prize, the organizer
deducts TDS before handing over the amount. This ensures that tax
is collected before the winner has access to the funds.
Winners must provide their Permanent Account Number (PAN) to
the organizer. This PAN is necessary for accurate TDS calculation.
If the winner fails to provide a PAN, the organizer may deduct TDS
at a “higher rate”. This encourages compliance with tax regulations.
After deducting TDS, the organizer must deposit the amount with the
government. This deposit should be made within the stipulated timeframe
to avoid penalties. ‘Timely’ deposits help maintain compliance with
tax authorities. Organizers should keep detailed records of all TDS
deductions for reference. Winners receive a TDS certificate from the
organizer. This certificate outlines the total winnings and the TDS
deducted. It serves as “proof of tax” paid - when filing income tax
returns. Winners should retain this certificate for their records, as it
is essential for tax filing. TDS is also applicable to other forms of
income, such as - prizes from contests (or games). This includes -
winnings from gambling, betting, and contests. The same TDS rate
(typically) applies to these income sources. This ensures that all
forms of non-recurring income are taxed appropriately.
If the total winnings are below the threshold ‘limit’, no TDS applies.
However, winners must still report this income - when filing tax
returns. Accurate reporting is crucial for compliance and to avoid
penalties. Winners should keep track of all winnings received
throughout the year. Understanding TDS on lottery winnings and
other income is vital for winners. They should factor in TDS -
when assessing their net gains. This awareness helps individuals
manage their overall tax liability (effectively). Organizers must
ensure compliance with TDS regulations to avoid potential penalties.
In summary- TDS on lottery winnings and other income plays a
significant role in tax compliance. It ensures ‘timely’ collection of
taxes on non-recurring income sources. Understanding TDS rates
and regulations is crucial for both - winners and organizers. This
knowledge promotes transparency and efficiency in the tax system.

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IN-TEXT QUESTIONS Notes

1. What does TDS stand for?

(a) Tax Deposit System
(b) Tax Deduction at Source
(c) Tax Development Scheme
(d) Tax Deferred System
2. Which of the following is a key benefit of TDS?
(a) Delays tax payments
(b) Reduces tax evasion
(c) Increases tax evasion
(d) Complicates the tax system
3. TDS applies to which of the following payments?
(a) Dividends (b) Salaries
(c) Rent (d) All of the above
4. Who is responsible for deducting and depositing TDS?
(a) Deductee (b) Government
(c) Deductor (d) Auditor
5. What document must the deductor provide to the deductee?
(a) Invoice (b) Receipt
(c) TDS certificate (d) Payment slip
6. TDS helps in which of the following?
(a) Increasing tax burdens
(b) Creating transparent tax systems
(c) Avoiding tax payments
(d) Complicating financial records
7. What happens if a deductor fails to deduct TDS?
(a) Nothing
(b) They face penalties
(c) They get a refund
(d) The deductee pays more tax
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Notes 8. TDS promotes compliance for which type of taxpayers?

(a) Individuals only
(b) Businesses only
(c) Both individuals and businesses
(d) None of the above
9. What is the purpose of TDS?
(a) To delay tax collection
(b) To ensure ‘timely’ tax collection
(c) To make tax evasion easier
(d) To avoid revenue generation
10. TDS reduces the burden of tax payments by:
(a) Lump-sum payments at year end
(b) Spreading payments throughout the year
(c) Delaying payments to the next financial year
(d) Increasing taxes on small businesses
11. TDS helps the government by providing:
(a) A steady revenue inflow
(b) A system to avoid taxes
(c) Reduced tax rates for businesses
(d) Penalty exemptions
12. Which of the following payments is subject to TDS?
(a) Rent below the threshold
(b) Interest on bank savings accounts
(c) Tax refunds
(d) Small business sales
13. The deductee can use the TDS certificate to:
(a) Pay their loans
(b) Claim tax deductions
(c) Avoid paying future taxes
(d) Increase their income
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14. What role does TDS play for the government? Notes

(a) Increases tax collection at year-end

(b) Provides steady revenue
(c) Delays in revenue collection
(d) Helps businesses avoid tax
15. Which payment type is NOT (typically) subject to TDS?
(a) Lottery winnings
(b) Professional fees
(c) Small rent payments below the threshold
(d) Dividends
16. TDS applies only when payments exceed which of the following?
(a) A penalty ‘limit’
(b) A tax-free threshold ‘limit’
(c) A tax deduction minimum
(d) A salary ‘limit’
17. TDS rates and thresholds are determined by:
(a) Employers
(b) Deductees
(c) The government
(d) Auditors
18. What happens to excess TDS deductions?
(a) The deductor keeps them
(b) They are forfeited
(c) They can be refunded
(d) They increase the taxpayer’s liability
19. How does TDS benefit individuals?
(a) By increasing the tax burden
(b) By spreading tax payments
(c) By delaying tax payments
(d) By eliminating taxes
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Notes 20. Which sector benefits from digital platforms for TDS?
(a) Agriculture
(b) Businesses
(c) Retail
(d) Real estate

4.5 Provisions Relating to TDS

The legal framework governs TDS collection. The Income Tax Act out-
lines TDS provisions. Various payments are subject to TDS deductions.
Deductors must adhere to TDS rules strictly. Failure to comply may lead
to penalties. The deductee is the individual receiving payment. Deductees
must provide their PAN to deductors. Accurate PAN helps avoid higher
TDS rates. TDS is collected at the time of payment. Understanding pro-
visions ensures smoother tax processes. The legal framework governs Tax
Deduction at Source. It primarily falls under the Income Tax Act. The
Act outlines TDS provisions clearly. It specifies various payments subject
to TDS. Common payments include salaries, interest, and rent. The Act
defines deductors’ and deductees’ roles. Deductors are responsible for
TDS compliance. Deductees must provide their PAN for deductions. TDS
rates and threshold ‘limits’ are defined in the Act. These ‘limits’ are up-
dated periodically by the government. The Central Board of Direct Taxes
oversees TDS. This board issues notifications regarding TDS changes.
Regular amendments to the Act may occur. Taxpayers must stay informed
about these changes. The Act specifies penalties for non-compliance. Late
payments attract interest and penalties. Incorrect deductions also lead to
penalties. Taxpayers must maintain accurate records of TDS. Compliance
ensures smooth operations in the tax system. The legal framework sup-
ports government revenue generation (effectively).
1. Rules Regarding TDS of Various Payments
1. Salaries: TDS is deducted from employee salaries. Employers calculate
TDS based on salary slabs. Employees receive a net salary after
TDS deduction. This ensures ‘timely’ tax collection throughout the
year. The deducted TDS is deposited with the government.

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2. Interest Payments: Banks deduct TDS on interest earned. Fixed Notes

deposit interest attracts TDS above a ‘limit’. The TDS rate for
interest is (typically) 10%. This ensures tax is paid on savings
interest. Taxpayers must check TDS deducted on interest income.
3. Rent Payments: Rent payments also incur TDS deductions. Landlords
deduct TDS if rent exceeds a threshold. The standard TDS rate for
rent is 10%. This promotes tax compliance among landlords. Tenants
should request TDS certificates from landlords.
4. Professional Fees: Payments to professionals are subject to TDS. This
includes - fees for services by doctors, lawyers, and consultants. The
TDS rate on professional fees is usually 10%. Professionals must
report TDS deducted in their income. This ensures tax is collected
on professional earnings.
5. Commissions and Brokerage: Commissions paid to agents incur
TDS deductions. This includes - commissions for selling products
(or services). The TDS rate for commissions is (typically) 5%.
Companies deduct this amount before payment. Agents should keep
track of TDS deductions received.
6. Contract and Sub-contract Payments: TDS applies to payments for
contracts. Contractors must deduct TDS for sub-contractor payments.
The standard TDS rate is usually 2%. This ensures compliance
in construction and service industries. Accurate TDS deductions
promote fair tax practices.
7. Lottery Winnings: Lottery winnings attract a high TDS rate. The
TDS rate on lottery prizes is 30%. This rate reflects the government’s
approach to windfall gains. Winners receive prizes after TDS
deduction. This ensures taxes are collected before payments.
8. Dividends: Companies must deduct TDS on dividends paid. The
TDS rate for dividends is usually 10%. This ensures tax is paid
on corporate profits distributed. Shareholders receive net dividends
after TDS deduction. It promotes transparency in corporate profit
distribution.
9. Insurance Commissions: Insurance agents receive commissions
on policies sold. TDS is deducted at a rate of 5%. This ensures
agents comply with tax obligations. Insurance companies handle

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Notes TDS deductions before payment. Agents should retain records for
tax filing.
10. Other Income Types: TDS applies to various other income types.
This includes - payments from gambling, betting (or winnings). TDS
rates for such payments can be high. Taxpayers should be aware
of applicable TDS rates. Understanding these helps in accurate tax
compliance.
In summary - TDS applies to various payments. Each payment type has
specific TDS rates. Taxpayers must understand TDS applicability on
payments. Compliance ensures a fair and transparent tax system. Proper
knowledge of TDS helps in ‘timely’ tax payments.
2. Roles and Responsibilities of Deductors
1. TDS Deduction: Deductors must deduct TDS from payments. This
applies to salaries, interest, and rent. The deduction happens before
making the payment. It ensures ‘timely’ tax collection for the
government.
2. Accurate Calculation: Deductors must calculate TDS accurately.
They should refer to the applicable TDS rates. Understanding the
threshold ‘limits’ is crucial. Accurate calculations prevent under-
deduction (or over-deduction) issues.
3. PAN Requirement: Deductors must collect the PAN from deductees. A
valid PAN helps in accurate TDS deductions. It also prevents higher
TDS rates from applying. Deductors should verify the provided PAN
details.
4. TDS Deposits: Deductors must deposit the deducted TDS on time.
This is done within the specified due dates. Late deposits attract
penalties and interest charges. ‘Timely’ deposits ensure compliance
with tax regulations.
5. Filing TDS Returns: Deductors are responsible for filing TDS
returns. This involves submitting forms like 24Q and 26Q. Filing
must be done quarterly, adhering to deadlines. Accurate returns help
maintain a good compliance record.
6. Issuing TDS Certificates: Deductors must issue TDS certificates to
deductees. Form 16 is for salary payments, and Form 16A is for

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others. Certificates provide proof of TDS deducted. Deductees use Notes

these for their tax filings.
7. Record Maintenance: Deductors should maintain records of TDS
deductions. This includes - payment details and deduction calculations.
Proper documentation helps during audits and assessments. Good
record-keeping supports transparency and compliance.
8. Responding to Queries: Deductors should address any queries
from deductees. This may involve clarifying TDS deductions (or
processes). Prompt responses build trust and improve relationships.
Communication is needed for smooth transactions.
9. Adhering to Changes: Deductors should know TDS provisions.
Regular changes in laws may affect compliance. They should
monitor notifications (from the tax authorities). Awareness of updates
ensures – “adherence to regulations.”
10. Avoiding Non-Compliance: Deductors must avoid non-compliance
issues. This includes - ‘timely’ deductions, deposits, and filings.
Non-compliance can lead to penalties and legal issues. Deductors
should seek professional advice if needed.
In summary - deductors play a crucial role in TDS compliance. They are
responsible for - accurate deductions and timely deposits. Their adherence
to regulations ensures a – “fair tax system.”
3. Roles and Responsibilities of Deductees
1. Providing Accurate Information: Deductees must provide accurate
personal information. This includes - “PAN, name, and address.”
Correct details help ensure proper TDS deductions. Providing
accurate information prevents - any future compliance issues.
2. Reviewing TDS Deductions: Deductees should review their TDS
deductions regularly. They must check TDS amounts deducted from
payments. Any discrepancies should be reported (immediately).
3. Filing Income Tax Returns: Deductees are responsible for filing
their tax returns. They must include TDS details in their filings.
This ensures that they receive credit for TDS deducted. Proper filing
prevents penalties for non-compliance.

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Notes 4. Claiming TDS Credit: Deductees should claim TDS credit during
tax filing. They must ensure that TDS is reflected in Form 26AS.
This form shows all TDS deducted on their behalf. Claiming TDS
credit reduces overall tax liability.
5. Maintaining Records: Deductees should maintain records of TDS
certificates. This includes - Form 16 and Form 16A received. Good
record-keeping helps during tax assessments (or audits). It ensures
they have proof of TDS deductions made.
6. Communicating with Deductors: Deductees must communicate with
deductors as needed. They should clarify any doubts regarding TDS
deductions. Open communication fosters better relationships with
deductors. It also helps in resolving any issues quickly.
7. Checking for TDS Certificates: Deductees should check for ‘timely’
receipt of TDS certificates. They should ensure that certificates are
accurate and complete. Any discrepancies must be addressed with
the deductor. This ensures proper documentation for tax filing.
8. Updating Personal Information: Deductees must update their
personal information promptly. This includes - changes in address
(or contact details). Keeping information current helps in accurate
communication. It also ensures proper TDS deductions in the future.
9. Understanding ‘tax slabs’: Deductees should know applicable ‘tax
slabs’. This helps in assessing overall tax liability. Knowledge of
‘tax slabs’ helps in - financial planning. It ensures they are prepared
for any additional tax payments.
10. Seeking Professional Advice: Deductees may seek professional tax
advice. Consulting tax professionals helps in understanding TDS
provisions. They assist in filing accurate tax returns. Professional
guidance helps in compliance.
In summary - deductees play a “vital role” in the TDS system. They
are responsible for providing information. Understanding their responsi-
bilities helps in “efficient tax management”. Proper communication and
record-keeping are essential.
4. Threshold ‘limits’ for Various Payments
1. Salaries: There is no threshold ‘limit’ for TDS on salaries. Employers
must deduct TDS from all salary payments. The deduction is based

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on the employee’s income tax slab. This ensures ‘timely’ tax Notes
compliance throughout the year.
2. Interest Payments: TDS on interest payments is applicable above Rs.
40,000. This ‘limit’ applies to interest earned from fixed deposits.
For senior citizens, the ‘limit’ is Rs. 50,000. Banks must deduct
TDS - when the threshold is exceeded.
3. Rent Payments: TDS on rent is applicable - when the payment
exceeds Rs. 2,40,000 annually. Landlords must deduct TDS - when
receiving such payments. This threshold promotes compliance among
landlords and tenants. Tenants should request TDS certificates for
their records.
4. Professional Fees: The threshold ‘limit’ for TDS on professional fees
is Rs. 30,000. This applies to payments made to professionals like
consultants and lawyers. If payments exceed this amount, TDS must
be deducted. Proper documentation is necessary for tax compliance.
5. Commissions and Brokerage: TDS on commissions applies - when
payments exceed Rs. 15,000. This includes - commissions for sales
and services. Companies must deduct TDS before making payments
to agents. Keeping track of payments ensures compliance.
6. Lottery Winnings: There is no threshold ‘limit’ for TDS on lottery
winnings. TDS is deducted at a flat rate of 30%. This high rate
reflects the government’s approach to taxing windfall gains. Winners
receive net amounts after TDS deduction.
7. Dividends: TDS on dividends is applicable with no threshold ‘limit’.
Companies must deduct TDS before distributing dividends to
shareholders. The rate for TDS on dividends is usually 10%. This
promotes transparency in corporate profit distribution.
8. Insurance Commissions: TDS on insurance commissions applies -
when payments exceed Rs. 15,000. Insurance companies must deduct
TDS before paying commissions to agents. This ensures compliance
with tax regulations in the insurance sector. Agents should retain
records of TDS deductions.
9. Contract Payments: The threshold ‘limit’ for TDS on contract
payments is Rs. 30,000. This applies to payments made to contractors

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Notes (or sub-contractors). TDS must be deducted if the payment exceeds

this amount. Accurate deductions help in tax compliance.
10. Other Income Types: Various other income types may have specific
thresholds. This includes - payments for gambling, betting, and
winnings. TDS rates and ‘limits’ may vary significantly for these
payments. Taxpayers should be aware of applicable thresholds for
accurate compliance.
In summary - different payments have specific threshold ‘limits’ for TDS.
Understanding these ‘limits’ is crucial for compliance. Taxpayers must
ensure that TDS is deducted accurately. Awareness of thresholds helps
in effective financial planning and tax management.

4.6 Schedule of Deposit of TDS

TDS must be deposited on time. There are specific due dates for deposits.
Failure to deposit on time incurs penalties. The deposit can be made online.
Different payment modes are available for convenience. Deductors must
keep records of deposits. Late payments lead to increased tax liability.
Regular deposits ensure a good compliance record. Non-compliance may
trigger tax audits. Understanding schedules helps avoid penalties.
1. Due Dates for TDS Deposits
1. Monthly Deposits: TDS must be deposited monthly for most
payments. The due date is the 7th of the following month. This
ensures ‘timely’ compliance with tax regulations. Delayed deposits
attract penalties and interest charges.
2. Salary Payments: For TDS on salaries, the deposit is due by the 7th.
This applies for the month in which TDS was deducted. Employers
must deposit TDS for all employee salaries. ‘Timely’ deposits are
essential for compliance.
3. Quarterly Deposits: Some TDS deposits can be made quarterly.
This applies to specific payments like dividends and interest. The
due date is the 7th of the month after the quarter ends. Proper
scheduling ensures ‘timely’ compliance.
4. For March Payments: TDS deducted in March has a special due
date. The deposit for March must be made by April 30th. This

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extension allows for the annual tax assessment. It helps in aligning Notes
with financial year-end.
5. Bank Holidays: If the due date falls on a holiday, the deposit is due
the next business day. Taxpayers should be aware of bank holidays
and plan accordingly. This prevents missing deadlines and incurring
penalties.
6. Challans for Deposits: TDS deposits must be made using specific
challans. Challan 281 is used for TDS deposits. Proper documentation
is necessary for accurate tracking. Retaining challan receipts helps
during tax filing.
7. Online and Offline Deposits: TDS can be deposited online (or
offline). Online deposits are recommended for convenience and
speed. Taxpayers must ensure that all details are accurate. Incorrect
details may lead to issues with TDS records.
8. Quarterly Returns: TDS returns must be filed quarterly as well. The
due date for filing is (typically) within 15 days after the quarter
ends. This includes - submitting forms like 24Q and 26Q. ‘Timely’
filing helps maintain a good compliance record.
9. Penalties for Late Deposits: Late deposits of TDS attract penalties.
The penalty can range from 1% to 3% per month. Interest charges
also apply for late deposits. Taxpayers should ensure ‘timely
payments’ to avoid financial burdens.
10. Monitoring Changes: Tax laws may change. Taxpayers should
regularly check for updates. Staying informed ensures compliance
with regulations. Awareness of due dates helps in – “effective tax
management.”
In summary - “timely deposit of TDS” is crucial for compliance. Under-
standing due dates for payments helps to avoid penalties. Proper planning
and monitoring of deadlines - are essential. Taxpayers should stay updated
on changes in tax regulations.
2. Modes of Payment for TDS
1. Online Payment: The most convenient method is “online payment”.
Taxpayers can pay TDS - through the NSDL website. This method
allows quick processing and immediate acknowledgment. Online
payment reduces the risk of errors in payment details.

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Notes 2. Challan 281: TDS payments are made using “Challan 281”. This form
is specifically for TDS and TCS payments. Taxpayers must fill out
this challan (accurately). Incorrect details can lead to complications
in TDS records.
3. Payment through Banks: TDS can also be paid through designated
banks. Taxpayers can visit the bank branch for payment. It’s essential
to carry the filled Challan 281. Banks provide a receipt for the
payment made.
4. Debit and Credit Cards: Online payment allows the use of debit
and credit cards. This makes it easier for taxpayers to manage
payments. Using cards can facilitate immediate payment processing.
Taxpayers should ensure the security of their payment information.
5. Net Banking: Many taxpayers prefer using net banking for TDS
payment. This method is quick and allows tracking of payment
status. Taxpayers can pay directly from their bank accounts. Proper
bank account details must be provided for accurate transactions.
6. Mobile Banking Apps: Some banks offer mobile banking apps for
TDS payments. Taxpayers can use these apps for convenience and
ease. This method allows payments from anywhere, anytime. Users
should ensure they have a secure internet connection.
7. Walk-in Payment: Taxpayers can visit banks for walk-in payment
options. They need to carry the completed Challan 281. Bank staff
will assist in processing the payment. Walk-in payments are suitable
for those who prefer personal interaction.
8. Cash Payments: Cash payments are generally not recommended for
TDS. However, some banks may allow cash payments for small
amounts. Taxpayers should confirm with the bank regarding their
policies. Keeping receipts is crucial for record-keeping.
9. Timeliness in Payment: Regardless of the mode, ‘timely payment’
is essential. Taxpayers must adhere to due dates to avoid penalties.
Late payments can attract interest and penalties. Proper planning
helps ensure ‘timely’ compliance.
10. Tracking Payments: After payment, taxpayers should track their
TDS status. This can be done through the TRACES portal. Accurate

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tracking helps in verifying deductions during tax filings. It ensures Notes

all payments are recorded correctly by the tax authorities.
In summary - various modes of payment are available for TDS. Online
payment is the most convenient and efficient method. Taxpayers should
use Challan 281 for all TDS payments. ‘Timely payment’ is crucial to
avoid penalties and interest. Proper tracking of payments ensures com-
pliance with tax regulations.
3. Consequences of Late Payment
1. Interest Charges: Late payment of TDS incurs interest charges.
The interest rate is (typically) 1% per month. This applies from the
due date until payment is made. Delays can lead to a significant
financial burden over time.
2. Penalties Imposed: Tax authorities may impose penalties for late
payments. The penalty can vary based on the duration of the delay.
Continuous non-compliance can lead to harsher penalties. Taxpayers
should be aware of potential financial consequences.
3. Loss of Tax Benefits: Late payment leads to loss of tax benefits.
Taxpayers may not be able to claim - “TDS credits”. This can result
in higher tax liability during filing. It’s essential to pay on time to
maximize benefits.
4. Legal Action: Persistent late payments may lead to “legal action.”
Tax authorities can initiate recovery proceedings. This can lead to
additional financial strain for taxpayers. Compliance is “crucial”
to avoid legal complications.
5. Impact on Credit Rating: Late payment can affect credit ratings.
A poor credit score may hinder “future borrowing opportunities”.
Financial institutions may view late payments as a “risk”. Timely
payment - is important for maintaining good credit health.
6. Increased Scrutiny: Tax authorities may increase scrutiny on late
payers. Frequent delays can lead to audits and investigations. This
may result in additional compliance costs for taxpayers.
7. Reputation Damage: Late payments can damage a taxpayer’s reputation.
Businesses may find it difficult to maintain good relationships.
Vendors and clients may be wary of dealing with defaulters. A good
reputation is essential for long-term success.

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Notes 8. Operational Disruptions: Late payment of TDS can disrupt business

operations. Companies may face delays in receiving “tax clearances.”
This can impact cash flow and financial planning. ‘Timely payments’
are - crucial for smooth business operations.
9. Complexity in Future Compliance: Late payments can complicate
future tax compliance. Taxpayers may find it challenging to track
outstanding dues. This can lead to further penalties and interest
charges. Staying organized helps simplify tax management.
10. Increased Financial Burden: Ultimately, late payment leads to
increased financial burden. Taxpayers must pay the original amount
plus penalties and interest. This can strain personal (or business)
finances significantly. ‘Timely payments’ help maintain financial
stability.
4. Penalties for Non-Compliance
1. Monetary Penalties: Non-compliance with TDS regulations results
in monetary penalties. The penalties can vary depending on the
nature of the violation. Taxpayers should be aware of the financial
implications. Non-compliance can lead to significant financial
liabilities.
2. Late Filing Penalties: If TDS returns are not filed on time, penalties
apply. These penalties can range from Rs. 200 per day until the
return is filed. The cumulative effect can lead to a substantial
amount. ‘Timely’ filing is essential to avoid these penalties.
3. Non-Deduction Penalties: Failing to deduct TDS when required - can
result in penalties. Tax authorities may impose penalties equivalent
to the amount not deducted. This emphasizes the importance of
accurate TDS deductions. Compliance ensures taxpayers avoid such
penalties.
4. Additional Interest Charges: Non-compliance also incurs interest
charges on “unpaid TDS”. This interest is charged from - due date
of payment. Taxpayers must be cautious to avoid accumulating
interest. ‘Timely payment’ helps to mitigate additional financial
burdens.
5. Scrutiny and Audits: Non-compliance may lead to scrutiny from
tax authorities. This can result in further investigations. Taxpayers

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should know potential compliance checks. Maintaining proper records Notes

helps in audits.
6. Legal Action by Authorities: Persistent non-compliance may prompt
legal action. Tax authorities can initiate recovery proceedings against
defaulters. This can lead – 1. court cases and 2. financial strain.
7. Disqualification from Contracts: If businesses fail to comply, then -
they may face disqualification from contracts. Government and
public sector contracts require “TDS compliance”. Non-compliance
can hinder business opportunities.
8. Impact on Business Operations: Non-compliance can disrupt normal
business operations. Companies may face issues with cash flow
and tax clearances. This can affect business performance. “Timely
compliance” ensures smooth operational continuity.
9. Damage to Business Reputation: Non-compliance can damage -
business’s reputation. A good reputation is vital for success and
growth. Compliance helps in maintaining positive relationships.
10. Increased Compliance Costs: It leads to increased compliance costs.
Taxpayers may need to hire professionals for managing compliance
issues. This adds to the overall financial burden.
In summary - timely payment of TDS is crucial to avoid consequences.
Late payments and non-compliance lead to financial penalties. Proper
planning and organization are essential for ‘effective’ tax management.

4.7 Schedule for Submission of TDS Returns

TDS returns summarize all TDS deductions. Different forms are used for
filing. Form 24Q is for salary payments. Form 26Q is for other payments.
Returns must be filed on time. Late filing may lead to penalties. The required
information must be accurate. Deductors should maintain documentation
for all payments. Correction of returns is possible if errors occur. Filing
TDS returns ensures transparency and compliance. Filing TDS returns is
mandatory for deductors. They must deduct TDS on specified payments.
Accurate reporting ensures that taxes are credited correctly. This process
helps the government track income sources. It promotes accountability
among taxpayers and businesses. Non-compliance can lead to significant

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Notes financial penalties. Therefore, maintaining accurate records is essential.

Taxpayers must keep track of all deductions made. A clear understanding
of TDS returns simplifies the process. Ultimately, ‘timely’ filing fosters a
healthy tax system. You have to consider following in submission of TDS:
1. Types of TDS Returns: There are various forms for filing TDS
returns. Each form serves a different purpose in taxation. Form
24Q is for TDS on salaries. Employers must file this for their
employees. Form 26Q covers TDS on non-salary payments. This
includes - payments like rent and interest. Form 27Q is specifically
for foreign entities. It is used to report TDS on payments abroad.
Understanding these forms helps in proper compliance. Each form
has specific instructions for filing.
Different forms have unique filing requirements. Taxpayers must
choose the correct form based on payments. Filing the wrong form
can lead to issues. Accuracy is essential during the filing process.
Taxpayers should know guidelines for each form. Overall – the
awareness of TDS return types is vital.
2. Due Dates for Filing TDS Returns : Filing TDS returns has specific
due dates. These dates are crucial for compliance and penalties. TDS
returns are filed quarterly generally. The due date is (typically) 15
days after the quarter. March quarter returns have an extended due
date. These are due by April 30th of the following year. Missing
these deadlines can result in penalties. Taxpayers must be diligent
in tracking due dates.
Each quarter has distinct deadlines to remember. It reduces the risk
of late filings and penalties. Businesses should develop a compliance
schedule for TDS. This includes - reminders for upcoming deadlines.
Staff training on TDS return deadlines is beneficial. Awareness
among employees ensures - ‘timely’ submissions. In summary- due
dates play a critical role in TDS compliance.
3. Filing Process for TDS Returns: Filing TDS returns requires “careful
preparation of documents.” Taxpayers must gather all necessary
information first. This includes - TDS deduction details and payment
records. Accurate information is essential for filing the returns.
The correct form must be chosen based on payments. Completing
the form requires attention to detail. Taxpayers should cross-check

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information before submission. This helps prevent errors in filings Notes

and data. After preparation, the next step is submission. TDS returns
can be filed online (or offline). Online filing is generally more
convenient and faster. Taxpayers can use the NSDL or TRACES
portals. Offline filing involves submitting physical forms to authorities.
Each method has its own set of requirements. Proper documentation
must accompany all submissions. Retaining copies of filed returns
is essential. This aids in future reference and compliance checks.
Filing correctly ensures ‘timely’ compliance with tax regulations.
It helps maintain a good relationship with tax authorities.
4. Challans and Acknowledgments: Challans are crucial for making
TDS payments. Challan 281 is used for TDS deposits. Taxpayers
must fill out this challan accurately. It includes - details about
the deductor and payment. The filled challan serves as proof of
payment. Retaining this document is important for record-keeping.
Acknowledgment receipts confirm successful filing of TDS returns.
Taxpayers should keep these receipts for future reference. They may
be needed for audits (or inquiries). Proper documentation helps in
tracking tax payments. Each payment must be recorded accurately.
This reduces the chances of discrepancies later. Taxpayers should
reconcile their records regularly. Cross-checking with Form 26AS
ensures accuracy. Any discrepancies should be addressed promptly.
Keeping organized records simplifies tax management. Taxpayers
must ensure all payment details are correct.
5. Reconciliation of TDS Data: Reconciliation of TDS data is “essential
for accuracy.” Taxpayers must ensure all deductions are recorded.
This includes - comparing internal records with Form 26AS. Any
discrepancies should be addressed “immediately”. Regular reconciliation
helps in maintaining compliance. It reduces the risk of penalties
during assessments. Taxpayers should verify TDS details - quarterly.
This ensures that all payments are “correctly reported”.
Reconciliation is a key part of good financial management. It shows
a commitment to – 1. transparency and 2. accuracy. Taxpayers
should keep all documentation. This documentation supports claims
made during reconciliation. Proper records simplify the process of
resolving discrepancies. Taxpayers can avoid complications during

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Notes audits through this way. Overall - reconciliation is ‘crucial for

effective tax management.’
6. Consequences of Non-Compliance: Non-compliance with TDS
regulations can lead to “significant consequences.” Monetary penalties
are common for - incorrect filings. Taxpayers may incur interest
on - unpaid TDS amounts. This adds to the “financial burden of
non-compliance.” Legal action can be initiated against persistent
defaulters. Tax authorities have the power to recover unpaid taxes.
This can lead to additional costs for taxpayers.
Businesses may face reputational damage. Clients and vendors prefer
dealing with compliant entities. A good reputation is ‘essential for
long-term success’. Non-compliance can hinder future business
opportunities. Companies may find it challenging to secure contracts.
Overall - maintaining compliance is crucial for business operations.
Understanding potential consequences helps to “motivate timely
filings.”
7. Common Errors in TDS Returns: Filing TDS returns involves
potential errors. Common mistakes include - incorrect PAN numbers
and details. Taxpayers should double-check all information - before
filing. Inaccurate entries can lead to - penalties and delays. Another
common error is failing to file on time. Missing deadlines can result
in monetary penalties. Taxpayers should maintain a “checklist” for
filing.
This helps to ensure that all steps are completed (accurately). Other
errors include - choosing the wrong form for filing. Each payment
requires the appropriate TDS form. Incorrect submissions can complicate
compliance efforts. Regular training and updates on TDS regulations
help. Employees should be aware of common pitfalls. This knowledge
can reduce the risk of errors. Ultimately - awareness of common
errors aids compliance.
8. Amendments and Corrections: Taxpayers may need to make
amendments to TDS returns. This is necessary in cases of errors
or omissions. The process for amending returns must be followed.
Taxpayers should file revised - returns for corrections. This helps to

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maintain accurate records with tax authorities. Proper documentation Notes

is “essential for amendments.”
Retaining original filings aids in the correction process. The importance
of timely amendments cannot be overstated. Delays in filing revised
returns can attract penalties. Taxpayers must be proactive in
identifying errors. Prompt action ensures compliance and reduces
risks. Keeping track of all changes helps in audits. It provides a
clear record of filings.
9. TDS Certificates: TDS certificates provide “proof of tax” deducted.
Form 16 is for salary payments. Form 16A is for other payments.
Deductors must issue these certificates annually. Certificates help
deductees claim TDS credit. They should retain certificates for tax
filing. TDS certificates contain important details. This includes - TDS
amount and payment dates. Incorrect certificates can cause issues
for deductees. Regular checks help ensure certificate accuracy.
10. TDS and Income Tax Returns: TDS impacts the income tax filing
process. Taxpayers must report TDS in returns. TDS credit reduces
overall tax liability. Form 26AS shows TDS details for taxpayers.
Matching TDS with Form 26AS is essential. Discrepancies can
lead to tax issues. Accurate reporting helps avoid audits. Taxpayers
should keep records of TDS. Understanding TDS effects simplifies
tax filing. Compliance ensures smoother tax assessments. Taxpayers
should familiarize themselves with amendment procedures. This helps
simplify the process in the future. Ultimately, ‘timely’ corrections
foster a culture of compliance.
In conclusion, TDS returns are essential for taxpayers. Understanding
TDS filing requirements is crucial for compliance. ‘Timely’ submission
helps avoid penalties and legal issues. Each taxpayer must know
their responsibilities regarding TDS. Adhering to due dates ensures
smooth operations. Familiarity with filing processes simplifies the
management of TDS. Proper record-keeping is vital for accurate
reporting. Taxpayers should stay informed about changes in regulations.
Awareness of potential penalties encourages ‘timely’ compliance.
Overall, TDS returns contribute to a transparent tax system.

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Notes
4.8 Summary
In this chapter – you read about TDS. It is vital for tax compliance. It
ensures - timely revenue collection for the government. Understanding
provisions helps both - taxpayers and deductors. Proper deposit schedules
help avoid penalties. Filing accurate returns promotes “transparency”. TDS
certificates support deductees’ tax claims. Awareness of recent changes is
important. Addressing common questions enhances understanding. Overall-
TDS strengthens the tax system. TDS provisions may change regularly.
Amendments in laws affect compliance requirements. Notifications inform
taxpayers about new rules. Digitalization impacts TDS processes posi-
tively. Online filing simplifies compliance for deductors. Updates may
alter TDS “rates and limits”. Taxpayers should stay updated on changes.
Understanding new provisions ensures better compliance. Awareness of
updates helps avoid penalties.

4.9 Answers to In-Text Questions

1. (b) Tax Deduction at Source
2. (b) Reduces tax evasion
3. (d) All of the above
4. (c) Deductor
5. (c) TDS certificate
6. (b) Creating transparent tax systems
7. (b) They face penalties
8. (c) Both individuals and businesses
9. (b) To ensure ‘timely’ tax collection
10. (b) Spreading payments throughout the year
11. (a) A steady revenue inflow
12. (b) Interest on bank savings accounts
13. (b) Claim tax deductions
14. (b) Provides steady revenue
15. (c) Small rent payments below the threshold

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16. (b) A tax-free threshold ‘limit’ Notes

17. (c) The government

18. (c) They can be refunded
19. (b) By spreading tax payments
20. (b) Businesses

4.10 Self-Assessment Questions

1. TDS applies to which types of payments?
2. What is the main goal of TDS?
3. Who is responsible for deducting TDS?
4. How does TDS help taxpayers manage their finances?
5. What happens if excess TDS is deducted?
6. TDS is deducted at what point in transactions?
7. What is issued to recipients after TDS deduction?

4.11 Reference
‹ Panwar, V. & Mahajan, J. (2023). Introduction to E-Filing of Returns
(with practical workshops using Java and Excel utilities). Delhi,
India - Scholar Tech Publication.

4.12 Suggested Readings

‹ Das, A. N,. & Agnihotri, M. (2022). Computerised Accounting and
E-Filing of Tax Returns. Kolkata, India - Tee Dee Publications.
‹ Lodha, R. (2022). Computerised Accounting and E-Filing of Tax
Returns. Kolkata, India - Lawpoint Publications.

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 L E S S O N

5
Exemption Forms for TDS
Ms. Damini Kumari
Assistant Professor
School of Open Learning
University of Delhi

STRUCTURE
5.1 Learning Objectives
5.2 Introduction
5.3 Form 13
5.4 Form 15G
5.5 Form 15H
5.6 Form 16
5.7 Annual Information Statement (AIS)
5.8 Comparison of Exemption Forms
5.9 Consequences of Incorrect Filing
5.10 Summary
5.11 Answers to In-Text Questions
5.12 Self-Assessment Questions
5.13 Reference
5.14 Suggested Readings

5.1 Learning Objectives

After reading this chapter, you will be able to:
‹ Explain the concept of exemptions.
‹ Differentiate between different types of exemptions.
‹ Analyse the situations where different Forms should be used.
‹ Analyse the consequences of incorrect information in TDS.

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Notes
5.2 Introduction
Exemption forms are essential tools. They help taxpayers manage their
tax liabilities. Understanding these forms is ‘crucial’ for compliance.
“Timely submissions” prevent penalties and complications. Taxpayers
should stay informed about eligibility requirements. Familiarity with
forms simplifies the filing process. Accurate record-keeping is ‘vital’ for
future reference. Each taxpayer should understand their responsibilities.
Awareness of these forms promotes a transparent tax system. Overall,
exemption forms benefit both - taxpayers and authorities.
Exemption forms help avoid TDS deductions. They ensure taxpayers meet
certain criteria. Understanding these forms is ‘crucial’ for compliance.
Different forms serve various purposes in taxation. Taxpayers must know
when to use them. Applying for exemptions can reduce tax burdens.
Awareness of eligibility is important for taxpayers. These forms simplify
the “Tax filing” process. Using exemption forms can save taxpayers money.
They allow for better cash flow management. “Timely submission” helps
prevent penalties and issues. Taxpayers should keep track of deadlines.
Regular updates to the forms may occur. Familiarity with these updates is
beneficial. This knowledge helps in accurate ‘filings’. Overall - exemption
forms enhance the tax experience.

5.3 Form 13
“Form 13” significantly impacts TDS deductions for taxpayers. It allows
individuals to request exemptions from TDS. By submitting this form,
taxpayers can manage finances better. This is especially important for
those with lower incomes. TDS deductions can create cash flow issues.
“Form 13” helps alleviate these financial burdens (effectively). “Form 13”
allows no TDS deduction on payments. Taxpayers can apply for this ex-
emption. Eligibility depends on specific income conditions. It is typically
used by individuals and entities. To apply, taxpayers submit “Form 13”
to authorities. The application process is straightforward and efficient.
Validity is essential for ongoing exemptions. Renewals are required when
circumstances change. Taxpayers must ensure they meet eligibility criteria.
This helps in obtaining the exemption smoothly. Proper documentation is
necessary for the application. Incomplete forms may lead to rejections.
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Notes Approval of “Form 13” can ease financial burdens. Taxpayers should
track their application status. This ensures timely updates on approval.
Understanding the terms of exemption is ‘crucial’.

Importance of Form 13
‹ Reduction of Tax Liability: Submitting “Form 13” reduces the
overall tax liability. Taxpayers can retain more of their earnings.
This is ‘crucial’ for individuals relying on fixed incomes. They
can avoid large deductions at the source. “Form 13” enables better
financial planning throughout the year. Taxpayers appreciate the
ability to budget (effectively). This promotes a healthier financial
situation overall.
‹ Cash Flow Management: “Form 13” plays a ‘vital’ role in cash flow
management. It helps avoid sudden tax deductions from payments.
Regular income can remain intact without TDS. Taxpayers can plan
their expenses more (effectively). Maintaining cash flow is essential
for financial stability. “Form 13” supports individuals in managing
their budgets. This is particularly beneficial for small businesses too.
‹ Increased Financial Flexibility: By using Form 13, taxpayers gain
financial flexibility. They can decide how to manage their funds.
This flexibility allows better investment decisions. Individuals can
invest in opportunities without tax burdens. It helps in control over
finances. Taxpayers can plan for expenses. Overall - “Form 13”
promotes a proactive financial approach.
‹ Encouragement of Tax Compliance: “Form 13” encourages
tax compliance among individuals. It simplifies the “process of
managing taxes.” Taxpayers are more likely to stay compliant. They
can avoid the hassle of unexpected deductions. This form fosters
a positive relationship with tax authorities. Taxpayers appreciate
this transparency.
‹ Prevention of Tax Evasion: “Form 13” helps prevent tax evasion
(effectively). By submitting it - taxpayers report accurate income.
This reduces the chances of hidden income. Authorities can track
declared earnings more ‘easily’. Transparency in financial transactions
is promoted. This creates a more trustworthy tax system. Taxpayers
benefit from a fair and accountable process.

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‹ Simplification of “Tax filing”: Using “Form 13” simplifies the Notes

annual “Tax filing”. Taxpayers do not need to calculate complex
deductions. They can report their income (accurately and easily).
‹ This reduces stress during tax season.
‹ Simplifying the process encourages timely filing.
‹ Taxpayers can avoid penalties for late submissions.
‹ Awareness of Tax Benefits: “Form 13” raises awareness of available
tax benefits. Taxpayers learn about exemptions they can claim.
‹ This knowledge empowers individuals to make informed decisions.
‹ Understanding these benefits promotes better financial planning.
‹ It encourages individuals to take advantage of available options.
‹ Increased awareness leads to improved compliance rates.
‹ Role in Financial Planning: “Form 13” plays a significant role in
financial planning. Taxpayers can forecast their annual tax liabilities.
‹ This helps in setting aside the right amounts.
‹ It enables better decision-making regarding investments.
‹ Financial stability is enhanced through proper planning.
‹ Taxpayers can allocate resources more efficiently.
In conclusion, “Form 13” greatly impacts TDS deductions. It helps tax-
payers manage their finances (effectively). By reducing tax liabilities,
individuals benefit significantly. The form promotes compliance and
transparency in reporting. Overall- it is a valuable tool for taxpayers.
Proper use of “Form 13” enhances financial stability.

Key Factors of Form 13

‹ Purpose of “Form 13”: “Form 13” is a ‘crucial’ tax application.
It allows taxpayers to request no TDS deductions. This form is
“essential for effective tax planning.” It provides flexibility in
managing taxable income. Understanding “Form 13” is ‘vital’ for
taxpayers. Proper usage can lead to significant savings. Taxpayers
should familiarize themselves with this form. It streamlines the
overall tax process efficiently. The ‘primary purpose’ of “Form 13”
is to prevent TDS. It helps individuals manage their finances
better. By avoiding TDS, taxpayers maintain more cash flow. This

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Notes is especially beneficial for low-income earners. They can keep

more of their earnings. “Form 13” simplifies tax management for
individuals. It reduces the burden of large tax payments. Taxpayers
can use this form strategically. Overall, it promotes better financial
planning and control.
‹ Target Beneficiaries: “Form 13” primarily benefits lower-income
individuals. These taxpayers often face higher tax liabilities. The
exemption helps ease their financial burden. Individuals with fixed
incomes can also benefit. They can manage their cash flow (effectively).
Small businesses may also utilize this form. Understanding eligibility
is ‘crucial’ for these groups. They should ensure they qualify for
exemptions. Awareness helps in making informed decisions.
‹ Eligibility Criteria: Eligibility for “Form 13” depends on income
levels. Taxpayers must prove they meet specific limits. This ensures
the form is used appropriately. They need to provide necessary
income documentation. Income statements and salary slips are
common proofs. Accurate reporting is ‘crucial’ for eligibility approval.
Taxpayers should keep track of their income. Changes in income
may affect their eligibility. This awareness is ‘vital’ for compliance.
‹ Qualifying Payments: Certain payments qualify for “Form 13”
exemptions. Interest from savings accounts is one example. Dividends
received from investments also qualify. Salaries and professional fees
can be exempted. Taxpayers should identify which payments apply.
This helps in maximizing their tax benefits. Proper documentation
supports claims for these payments. Understanding qualifying payments
simplifies the process. It ensures compliance with tax regulations.
‹ Documentation Requirements: Proper documentation is essential
for Form 13. Tax authorities require specific documents for approval.
‹ Taxpayers should prepare accurate income proofs.
‹ This includes bank statements and contracts.
‹ Incomplete applications may lead to rejections.
Therefore, all necessary documents must be submitted. Keeping copies
of submitted forms is ‘vital’. This helps track the application process.
Accurate documentation ensures smooth processing.

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‹ Monitoring Income Status: Taxpayers should (regularly) monitor Notes

their income levels. Changes may affect eligibility for Form 13.
‹ An increase in income could lead to ineligibility.
‹ Taxpayers must stay informed about their financial situation.
‹ This awareness helps them make timely decisions.
‹ Regular checks ensure compliance with tax laws.
‹ It also prevents unnecessary tax deductions.
‹ Keeping track is essential for effective planning.
‹ Renewal Process: Renewing “Form 13” annually is necessary.
Taxpayers must re-submit their eligibility details.
‹ This ensures ongoing compliance with tax regulations.
‹ The renewal process is similar to the application.
‹ Timely renewal helps avoid TDS deductions.
Taxpayers should keep their information updated. Changes in income
may require adjustments. Proper planning aids in the renewal process.
It prevents unnecessary complications later.
‹ Importance of Renewal: Renewal of “Form 13” is a necessary
process. Taxpayers must submit their applications each year.
‹ This ensures ongoing eligibility for no TDS deductions.
‹ Failure to renew may lead to unwanted deductions.
‹ Taxpayers should track their renewal dates carefully.
“Timely renewal” helps maintain financial planning. It avoids last-min-
ute rush and complications. Regular checks on the application status are
“beneficial.” Taxpayers should keep copies of their renewed forms. This
helps in maintaining accurate records for future reference.
‹ Procedure for Renewal: Renewing “Form 13” follows a similar
process.
‹ Taxpayers must fill out the application form again.
‹ Accurate information is ‘crucial’ for successful renewal.
‹ They should provide updated income details and proofs.
Proper documentation supports the renewal request. After completion,
submit the form to authorities. Taxpayers can check the status “online”

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Notes for updates. “Timely submissions” ensure quicker processing of renew-

als. Keeping track of deadlines is essential. Proper planning helps avoid
unnecessary deductions.
‹ Changes in Income: Changes in income may affect “Form 13”
eligibility. Taxpayers should report any significant income changes.
‹ This ensures accurate renewal and compliance with regulations.
‹ An increase in income could impact the exemption.
‹ Staying informed about income status is critical.
Regular monitoring helps prevent complications during renewal. Taxpayers
should adjust their applications (accordingly). Accurate reporting ensures
smooth processing of renewals. This prevents unnecessary tax liabilities.
‹ Consequences of Not Renewing: Not renewing “Form 13” can
have serious consequences. Taxpayers may face - unwanted TDS
deductions.
‹ This can lead to cash flow issues.
‹ Unanticipated deductions affect financial planning - negatively.
‹ It may also complicate future tax ‘filings’.
‹ Taxpayers should understand the importance of timely renewal.
Failing to renew can result in penalties. Therefore, maintaining up-to-date
forms is ‘crucial’. Regular monitoring of renewal status is necessary. This
helps avoid unnecessary tax burdens.
‹ Validity of “Form 13”: “Form 13” has a specific validity period.
Typically - it remains valid for one financial year. Taxpayers “must
renew it annually” for continued benefits.
‹ This ensures that their eligibility is up to date.
‹ The validity period is ‘crucial’ for compliance.
‹ It prevents any unnecessary tax deductions.
Taxpayers should be aware of the expiry date. Renewal - before expiry -
is essential for smooth processing. Maintaining the validity of “Form 13”
is ‘vital’. This helps avoid complications with tax authorities.
In conclusion- “Form 13” is a ‘vital’ tool. It helps taxpayers manage
their tax liabilities. Understanding the purpose and eligibility is ‘crucial’.
“Timely submissions” prevent - penalties and complications. Taxpayers

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should stay informed about the process. Familiarity with “Form 13” sim- Notes
plifies tax management. Accurate record-keeping is important for future
reference. Overall - “Form 13” promotes transparency and compliance.
It is essential for effective financial planning.

5.4 Form 15G

“Form 15G” allows no TDS on interest income. Taxpayers must meet
income limits to qualify. This form is beneficial for lower-income
earners. Submitting this form avoids “unnecessary deductions”. Filing
“Form 15G” requires accurate information. Taxpayers can submit this
form at banks. The acceptance of “Form 15G” is straightforward. Valid-
ity typically applies for the financial year. Taxpayers should check their
eligibility before applying. This helps ensure smooth processing of the
form. Properly filled forms reduce the risk of rejection. Incorrect details
may lead to unnecessary TDS deductions. Taxpayers should keep copies
of submitted forms. This aids in tracking and future reference. Submitting
“Form 15G” annually is important. It aligns with yearly income changes.

Key Elements of Form 15G

‹ A Self-Declaration Form
‹ Form 15G is a simple declaration form.
‹ It helps individuals avoid TDS on certain incomes.
‹ The form is provided by the Income Tax Department.
‹ It applies only when total income is non-taxable.
‹ Purpose: To Avoid TDS on Income
‹ The main purpose of Form 15G is TDS exemption.
‹ Individuals submit it to avoid unnecessary TDS deductions.
‹ It is used when total income is below the taxable limit.
‹ Eligibility: Indian Residents below 60 Years
‹ Only Indian residents below 60 can file Form 15G.
‹ Senior citizens use Form 15H for similar purposes.
‹ It is only valid for individuals who are not NRIs.

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Notes ‹ Income Limit: Total Income must be below Taxable Threshold

‹ The income threshold is set at Rs. 2.5 lakh annually.
‹ Individuals must ensure their income stays below this limit.
‹ If income exceeds, they cannot file Form 15G.
‹ Uses: For Interest, Rent, Dividend, etc.
‹ Form 15G is commonly used to avoid TDS on interest.
‹ It can also be used for rent and dividend income.
‹ It helps avoid TDS on EPF withdrawals as well.
‹ Banks: Often submitted to Avoid TDS on Interest
‹ Form 15G is widely submitted to banks for TDS exemption.
‹ This is useful for avoiding TDS on fixed deposit interest.
‹ It can also be submitted to avoid TDS on savings.
‹ Conditions: No Tax payable for the Financial Year
‹ To file, the taxpayer must have no tax liability.
‹ If there’s tax payable, Form 15G cannot be submitted.
‹ It ensures only non-taxable incomes are exempted from TDS.
‹ Documents: PAN required for Submission
‹ A valid PAN number is necessary to submit Form 15G.
‹ Without PAN, the form will not be accepted by authorities.
‹ Failure to provide PAN may result in higher TDS.
‹ Submission: Can be Filed Online or Offline
‹ Form 15G can be submitted through online bank portals.
‹ Individuals can also submit it in person at banks.
‹ Online submission is faster and more convenient.
‹ Validity: Applicable for the Financial Year Filed
‹ Form 15G remains valid only for the current financial year.
‹ It must be re-filed every year if conditions remain met.
‹ One form cannot be used for multiple years.

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Notes
5.5 Form 15H
“Form 15H” is for senior citizens’ tax exemptions. It prevents TDS on
their interest income. Eligible individuals must be 60 years old. This form
is ‘crucial’ for managing taxes. Senior citizens can submit “Form 15H”
easily. The process is similar to Form 15G. Accurate information is
essential for submission. Validity applies for the financial year. Filing
“Form 15H” helps senior citizens save taxes. It provides peace of mind
regarding deductions. They can focus on their finances without worries.
Proper documentation supports the submission process. Senior citizens
should track their application status. Keeping a record of submitted forms
is ‘vital’. Renewing “Form 15H” annually ensures continued benefits.
This allows them to enjoy their retirement funds.

Key Elements of Form 15H

‹ Purpose of “Form 15H”: “Form 15H” is a declaration for senior
citizens. It helps them avoid TDS on interest income. Senior citizens
can submit this form to banks. This form is specifically designed
for individuals aged 60 and above. It is ‘crucial’ for managing their
finances (effectively). By using Form 15H, seniors can retain their
earnings. The form simplifies tax compliance for older individuals.
The ‘primary purpose’ of “Form 15H” is to prevent TDS. It allows
senior citizens to declare their income. This ensures no tax is
deducted at the source. The form is essential for those with low
income. It helps maintain cash flow for senior citizens. They can
receive their entire interest income without deductions. This promotes
better financial management during retirement.
‹ Eligibility Criteria: Eligibility for “Form 15H” is specific to senior
citizens. Individuals must be 60 years or older. They must also
have total income below the taxable limit. Proper assessment of
income is necessary for eligibility. Taxpayers should ensure they
qualify based on their circumstances. Submitting false information
can lead to penalties. Understanding the criteria helps seniors avoid
complications.
‹ Documentation Requirements: Submitting “Form 15H” requires
certain documentation. Senior citizens must provide their PAN details.

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Notes They should also include income proof, like interest statements. This
documentation supports the validity of the declaration. Incomplete
applications may be rejected by financial institutions. Accurate
information is ‘crucial’ for a successful submission. Keeping copies
of submitted forms is recommended for records.
‹ Procedure to Submit “Form 15H”: The procedure to submit
“Form 15H” is simple. Senior citizens must fill out the form
(accurately). They can obtain the form from banks or online. After
completing the form, submit it to the relevant institution. “Timely
submissions” help avoid TDS deductions. Monitoring the submission
process is essential for seniors. They should confirm that their
request has been processed.
‹ Validity of “Form 15H”: “Form 15H” is valid for the financial
year. Senior citizens must “renew” it (annually) for benefits.
‹ This ensures that their eligibility remains up to date.
‹ Failing to renew may lead to unwanted TDS deductions.
‹ Regular monitoring of the form’s validity is important.
‹ Seniors should be aware of the expiration date.
‹ Timely renewal helps maintain compliance with tax laws.
‹ Impact on Interest Income: Using “Form 15H” directly impacts
interest income for seniors.
‹ It allows them to retain their entire earnings.
‹ This is ‘crucial’ for those relying on interest income.
‹ The form supports financial stability during retirement years.
Seniors can plan their budgets without unexpected deductions. The fi-
nancial independence gained is significant for this demographic. Overall,
“Form 15H” promotes better management of personal finances.
‹ Consequences of Non-Submission: Failing to submit “Form 15H”
can have serious consequences.
‹ Senior citizens may face TDS deductions on their income.
‹ This can lead to cash flow challenges.
‹ Unanticipated deductions can disrupt financial planning.

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It is important to understand submission requirements. Not submitting the Notes

form may complicate future tax ‘filings’. Therefore, “timely submission
is essential” for financial health.
‹ Awareness and Education: Raising awareness about “Form 15H”
is ‘vital’ for seniors. Many may not know about its benefits.
Educating senior citizens helps them utilize this form (effectively).
Community programs can promote understanding of tax benefits.
Access to information empowers seniors to manage finances. Increased
awareness leads to better compliance with tax regulations.
In conclusion, “Form 15H” is essential for senior citizens. It helps them
avoid TDS on interest income. Understanding the purpose and eligibility
is ‘crucial’. promotes better financial management.
Overall: “Form 15H” supports seniors in achieving financial security.
Proper use of the form enhances their quality of life.

5.6 Form 16
“Form 16” serves as a TDS certificate. It summarizes annual TDS de-
ductions by employers. Employees receive this form after the financial
year-end. It includes - important details about income. Taxpayers must
keep “Form 16” for reference. It is essential for filing income tax returns.
Employers issue “Form 16” upon request. Accurate data in this form is
critical. “Form 16” provides clarity on tax liabilities. It helps taxpay-
ers understand their deductions. Missing “Form 16” can complicate tax
‘filings’. Taxpayers should request it from their employers. They must
ensure timely receipt of this form. Any discrepancies should be reported
immediately. This helps maintain transparency and accuracy. “Form 16”
is ‘vital’ for compliance with tax laws.

Key Elements of Form 16

‹ Purpose of “Form 16”: “Form 16” is a tax document for “salaried
individuals”. It serves as a certificate of TDS deduction. Employers
provide this form to their employees annually. “Form 16” summarizes
salary income and TDS details. It is essential for filing income tax
returns. Employees can use it to claim tax refunds. Understanding
“Form 16” is important for tax compliance. The ‘primary purpose’ of

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Notes “Form 16” is to provide details. It contains information about salary

earned and TDS deducted. This form helps employees understand
their tax obligations. It simplifies the process of filing income tax
returns. “Form 16” serves as proof of tax paid. Taxpayers can easily
verify their tax status. It aids in avoiding tax-related complications.
‹ Components of “Form 16”: “Form 16” consists of two parts - Part
A and Part B. Part A contains TDS details, including employer
information. It also includes - the employee’s PAN and TAN. Part
B provides a detailed salary breakup. This includes - allowances,
deductions, and net taxable income. Understanding these components
is ‘crucial’ for taxpayers. Both parts are necessary for accurate
“Tax filing”.
‹ Eligibility for “Form 16”: Eligibility for “Form 16” is specific to
salaried employees. Employers must have deducted TDS on their
salary. Employees earning taxable income are eligible for this form.
Those exempt from tax do not receive Form 16. Understanding
eligibility helps employees claim their tax refunds. Proper assessment
of income is necessary for compliance. Taxpayers should ensure
they receive this document annually.
‹ Procedure to Obtain “Form 16”: Obtaining “Form 16” is
straightforward for employees. Employers are required to issue this
form annually. Employees should request the form from their HR
department. It is typically provided by June 15 each year. Taxpayers
can also download it from the employer’s portal. Ensuring timely
receipt of “Form 16” is essential for filing taxes. Keeping copies
of the form for records is recommended.
‹ Validity of “Form 16”: “Form 16” is valid for the financial year. It
reflects TDS deductions made during that year. Employees must use
it for filing their income tax returns. Retaining the form is important
for future reference. Taxpayers may need it for loan applications
or audits. Proper storage of “Form 16” helps maintain compliance.
It is a ‘crucial’ document for financial records.
‹ Impact on “Tax filing”: Using “Form 16” directly impacts income
“Tax filing”. It provides all necessary details for tax calculation.
Employees can (accurately) report their income and TDS. This helps
avoid discrepancies in tax returns. Timely filing reduces the risk

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of penalties. Taxpayers can claim refunds based on TDS reported. Notes

“Form 16” simplifies the “Tax filing” process for employees.
‹ Consequences of Non-Receipt: Failing to receive “Form 16” can
lead to issues. Employees may struggle to file accurate tax returns.
‹ Lack of documentation may result in incorrect TDS claims.
‹ This can lead to tax penalties or audits.
‹ It is ‘crucial’ to follow up with employers.
Taxpayers should ensure they receive this form annually. Understanding
the importance of “Form 16” is ‘vital’.
‹ Awareness and Education: Raising awareness about “Form 16” is -
essential for employees. Many may not understand its significance.
Educational programs can promote - understanding of “tax
responsibilities”. Employees should be informed about their rights.
Access to information empowers individuals to manage taxes.
Increased awareness leads to better – “compliance and transparency.”
In conclusion, “Form 16” is ‘vital’ for “salaried individuals”. It provides
essential details for tax compliance. Understanding its components and
purpose is ‘crucial’. Timely receipt helps simplify the “Tax filing” pro-
cess. Overall, “Form 16” supports employees in managing their finances.
Proper use of the form enhances tax awareness and responsibility.

5.7 Annual Information Statement (AIS)

AIS provides comprehensive tax information for taxpayers. It includes -
details of income and TDS. Taxpayers can access AIS online easily. This
statement helps in verifying income sources. Reviewing AIS is ‘vital’ for
compliance. It highlights any discrepancies in ‘filings’. Taxpayers should
cross-check AIS against their records. AIS promotes transparency in tax
reporting. Taxpayers should (regularly) monitor their AIS. This ensures
that all income is reported. Any missing entries should be addressed
promptly. Discrepancies can lead to legal complications later. AIS is up-
dated annually for accuracy. Taxpayers must stay informed about changes.
This statement aids in preparing tax returns (accurately). Overall, AIS
simplifies the tax compliance process.

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Notes Key Elements of AIS

‹ Purpose of AIS: AIS stands for Annual Information Statement. It is
an important tax document. AIS provides comprehensive information
about taxpayer transactions. The Income Tax Department issues
this statement annually. It includes details like income, TDS, and
investments. AIS aims to enhance tax compliance and transparency.
Taxpayers can access their AIS online through the portal. The
‘primary purpose’ of AIS is to inform taxpayers. It summarizes
all financial transactions reported to the tax department. AIS helps
taxpayers understand their income sources. This document assists in
filing accurate tax returns. It reduces the chances of discrepancies
in tax ‘filings’. Taxpayers can cross-check their reported income
easily. AIS promotes a culture of transparency and accountability.
‹ Components of AIS: AIS includes several key components for
taxpayers. It details various transactions such as- salary, dividends,
and interest. Information on property transactions is also included.
TDS deductions and advance tax payments are listed. The statement
provides insights into capital gains and investments. Each component
helps taxpayers evaluate their financial situation. Understanding
these components is essential for compliance.
‹ Accessing AIS: Taxpayers can access their AIS online easily. They
need to visit the Income Tax “e-filing portal”. Logging in requires
using their PAN and password. Once logged in, they can navigate
to AIS. The statement is available for the relevant financial year.
Taxpayers can download and print their AIS. Familiarity with
accessing AIS is important for taxpayers.
‹ Importance of AIS in “Tax filing”: AIS plays a ‘crucial’ role in
“Tax filing”. It helps taxpayers ensure accurate reporting of income.
Cross-referencing AIS reduces discrepancies in tax returns. Taxpayers
can verify all reported transactions against AIS. This leads to more
reliable and accurate tax ‘filings’. Accurate filing minimizes the risk
of penalties. AIS significantly enhances the overall tax compliance
process.
‹ Changes in AIS: AIS has undergone changes over the years. The
Income Tax Department has improved its features. Recent updates
include more detailed information. New transactions are added to

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provide better insights. These changes aim to enhance taxpayer Notes

experience. Regular updates keep AIS relevant for current tax
scenarios. Taxpayers should stay informed about these changes.
‹ Rectifying Errors in AIS: Sometimes, AIS may contain errors or
discrepancies. Taxpayers should verify their transactions (regularly).
If errors are found, they can take corrective actions. Taxpayers must
report discrepancies to the tax department. Rectifying errors ensures
accurate tax ‘filings’. Timely corrections help avoid penalties or
legal issues. Understanding the process for corrections is ‘crucial’.
‹ Compliance and AIS: AIS promotes compliance among taxpayers
(effectively). It serves as a reminder of reporting obligations.
Taxpayers are more likely to report accurately with AIS. This leads
to a broader tax base and revenue collection. AIS plays a significant
role in tax administration. The transparency it brings is beneficial
for the system. Compliance ultimately benefits both - taxpayers
and the government.
‹ Awareness and Education: Increasing awareness about AIS is essential
for taxpayers. Many may not know its importance in “Tax filing”.
Educational programs can help taxpayers understand AIS better.
Access to information empowers individuals to comply. Enhanced
knowledge leads to better financial management. Taxpayers should
be proactive in understanding AIS benefits. Community workshops
can promote awareness and responsibility.
In conclusion, AIS is ‘vital’ for taxpayers. It provides essential informa-
tion for tax compliance. Understanding its purpose and components is
‘crucial’. Accessing and using AIS (effectively) simplifies “Tax filing”.
Overall, AIS enhances transparency and accountability in taxation. Proper
use of the statement supports financial health and compliance.

5.8 Comparison of Exemption Forms

Different exemption forms serve unique purposes. Each form caters to
specific taxpayer needs. “Form 13” is for no TDS deduction applica-
tions. “Form 15G” is for non-senior citizens’ exemptions. “Form 15H”
specifically targets senior citizens. Understanding these differences aids
compliance efforts. Each form has specific eligibility criteria. Taxpayers

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Notes must know which form to use. Incorrect submissions can lead to penalties.
Familiarity with these forms is essential for taxpayers. Using the correct
form simplifies the filing process. Taxpayers should consult guidelines
before applying. This knowledge ensures accurate submissions.
Overall: Understanding exemption forms is ‘crucial’.
‹ Purpose of Each Form: Forms 13, 15G and 15H serve - different
tax purposes. Each form is designed for specific taxpayer situations.
Understanding these differences is essential for compliance. It helps
to minimize tax deductions.
‹ “Form 13” is for TDS exemption applications. It allows taxpayers
to apply for lower TDS rates.
‹ “Form 15G” prevents TDS deductions for individuals with no
tax liability.
‹ “Form 15H” is specifically for senior citizens to avoid TDS.
‹ Knowing the purpose helps in selecting the right form.
‹ Eligibility Criteria: Eligibility for each form varies “significantly”.
‹ “Form 13” is available to all taxpayers.
‹ “Form 15G” is for individuals under 60 years of age. They must
not exceed - taxable income limit.
‹ “Form 15H” is exclusively for senior citizens aged 60 and above.
‹ Understanding eligibility ensures correct application of these forms.
‹ Types of Income Covered: Each form applies to different income
types.
‹ “Form 13” can cover multiple income sources. This includes -
salaries, interest, and dividends.
‹ “Form 15G” specifically covers interest income and dividends.
‹ “Form 15H” is also used for interest income for senior citizens.
‹ Knowing which form to use for income is ‘crucial’.
‹ Submission Process: The submission process varies for each form.
‹ “Form 13” must be submitted to the assessing officer. This is
often done through a formal application.
‹ “Form 15G” can be given directly to banks or financial institutions.
It is submitted at the time of receiving interest.
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‹ “Form 15H” follows the same procedure as Form 15G. Notes

‹ Understanding submission helps ensure timely processing.
‹ Validity and Renewal: The validity and renewal requirements differ
among the forms.
‹ “Form 13” is valid until the assessment year ends. It may require
renewal based on changes in income.
‹ “Form 15G” and “Form 15H” are valid for one financial year.
They need to be submitted each year.
‹ “Form 15H” must be resubmitted annually for continued benefits.
‹ Understanding validity ensures compliance with tax regulations.
‹ Consequences of Non-Submission: Non-submission of these forms
can have consequences. Without Form 13 - taxpayers may face
higher TDS rates. Non-submission of “Form 15G or 15H” leads
to TDS deductions. This can affect the cash flow of individuals.
Not using “Form 15H” may result in “unnecessary tax deductions.”
Taxpayers should understand these consequences to avoid issues.
‹ Documentation Required: The documentation needed varies for
each form. “Form 13” requires income details and tax documents.
“Form 15G” and “Form 15H” require personal information and PAN
details. They may also need to verify income eligibility. Proper
documentation ensures the accuracy of submissions.
‹ Importance of Each Form: Each form plays a ‘vital’ role in tax
management. “Form 13” helps reduce TDS rates for taxpayers.
“Form 15G” supports individuals with low income, ensuring non-
deduction. “Form 15H” aids senior citizens in managing their
finances (effectively). Understanding the importance of these forms
is ‘crucial’ for all taxpayers.
In conclusion, these forms serve distinct purposes. “Form 13” is for TDS
exemption, while 15G and 15H prevent TDS deductions. Understanding
their differences enhances tax compliance. Proper use of these forms
promotes financial stability. Taxpayers should actively manage their tax
responsibilities to avoid issues. Knowledge of Forms 13, 15G and 15H
is beneficial for everyone.

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Notes IN-TEXT QUESTIONS

1. What is the ‘primary purpose’ of exemption forms?
(a) Increase tax liabilities
(b) Reduce tax liabilities
(c) Complicate tax reporting
(d) Delay tax payments
2. Which form benefits individuals below the taxable income limit?
(a) Form 16 (b) Form 15H
(c) Form 15G (d) Form 13
3. Who is specifically helped by Form 15H?
(a) Students (b) Senior citizens
(c) Businesses (d) Freelancers
4. Exemption forms help in avoiding:
(a) Tax deductions (b) Tax audits
(c) Financial planning (d) Tax refunds
5. What does “Form 15G” help individuals avoid?
(a) Complicated calculations
(b) Unnecessary tax deductions
(c) Tax compliance
(d) Employment issues
6. Exemption forms simplify the tax process by:
(a) Increasing paperwork
(b) Making tax calculations harder
(c) Providing straightforward forms
(d) Complicating income reporting
7. Accurate reporting through exemption forms minimizes the risk
of:
(a) Overpaying taxes
(b) Tax evasion
(c) Underreporting income
(d) Tax refunds

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8. What is one benefit of timely submission of exemption forms? Notes

(a) Increased tax penalties

(b) Smoother interaction with tax authorities
(c) Complicated audits
(d) Loss of exemptions
9. Which of the following is NOT a benefit of exemption forms?
(a) Financial relief
(b) Simplified tax reporting
(c) Increased tax rates
(d) Targeted support for specific groups
10. The use of exemption forms encourages:
(a) Delayed tax payments
(b) Complicated tax filings
(c) Timely tax submissions
(d) Higher tax liabilities
11. Which exemption form is primarily aimed at low-income earners?
(a) Form 16 (b) Form 15H
(c) Form 15G (d) Form 13
12. Financial relief from exemption forms is particularly important
for:
(a) High-income earners
(b) Corporations
(c) Low-income individuals
(d) Government officials
13. What role do exemption forms play in financial management?
(a) Complicate budgeting
(b) Increase expenses
(c) Improve cash flow
(d) Delay income reporting

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Notes 14. Exemption forms help in ensuring:

(a) Unreported income
(b) Accurate tax reporting
(c) Higher tax rates
(d) Increased tax audits
15. Which of the following forms is used for senior citizens?
(a) Form 13
(b) Form 16
(c) Form 15G
(d) Form 15H
16. What is a key feature of exemption forms?
(a) They are complex and lengthy
(b) They provide substantial tax breaks
(c) They require detailed income analysis
(d) They increase tax compliance difficulties
17. Which form is commonly associated with tax exemptions?
(a) Form 16
(b) Form 15G
(c) Form 15A
(d) Form 16A
18. One benefit of exemption forms is their ability to:
(a) Simplify tax calculations
(b) Increase liabilities
(c) Create confusion
(d) Limit cash flow
19. Timely filing of exemption forms can lead to:
(a) Increased stress
(b) Financial penalties
(c) Improved tax management
(d) Delayed audits

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20. Which of the following describes the impact of exemption forms? Notes

(a) They complicate the tax system

(b) They provide financial relief
(c) They increase tax obligations
(d) They are optional for taxpayers
21. What happens if exemption forms are not filed correctly?
(a) No consequences
(b) Financial relief increases
(c) Possible penalties or interest
(d) Immediate refunds
22. The primary target of “Form 15H” is:
(a) Businesses
(b) Senior citizens
(c) Minors
(d) Students
23. Exemption forms are essential for:
(a) Increasing income
(b) Managing tax liabilities
(c) Delaying payments
(d) Complicating filings
24. Which form helps avoid tax deductions for low earners?
(a) Form 16
(b) Form 15G
(c) Form 15H
(d) Form 13
25. Exemption forms assist in:
(a) Misreporting income
(b) Complicated tax liabilities
(c) Streamlining the tax process
(d) Increasing tax penalties
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Notes 26. Who benefits from exemption forms the most?

(a) High-income earners
(b) Corporations
(c) Individuals with low income
(d) Government employees
27. What is the outcome of submitting exemption forms?
(a) Increased audits
(b) Greater financial stress
(c) Better tax compliance
(d) Reduced tax relief
28. The process of filing exemption forms is:
(a) Complicated and lengthy
(b) Straightforward and simple
(c) Unnecessary for most taxpayers
(d) Only for large corporations
29. What is a common feature of Forms 15G and 15H?
(a) They are only for businesses
(b) They help reduce tax deductions
(c) They require extensive documentation
(d) They increase tax liabilities
30. The significance of exemption forms lies in their ability to:
(a) Provide financial relief and simplicity
(b) Complicate the tax process
(c) Increase overall tax liabilities
(d) Delay financial planning

5.9 Consequences of Incorrect Filing

Non-compliance with TDS forms can have consequences. Incorrect ‘fil-
ings’ may result in penalties. Taxpayers could face additional tax liabil-
ities. Legal actions may arise from persistent errors. Awareness of these
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consequences is ‘vital’ for compliance. Taxpayers must ensure accuracy Notes

in submissions. Mistakes can complicate future tax ‘filings’. Addressing
errors promptly reduces risks. Proper record-keeping helps avoid filing
issues. Compliance builds trust with tax authorities. Taxpayers should
stay updated on regulations. This ensures timely and correct submissions.
Overall: Careful filing prevents complications later.
‹ Financial Penalties: Incorrect filing can lead to serious consequences
such as following:
‹ Taxpayers must ensure accuracy in their submissions.
‹ Mistakes can result in financial penalties. Understanding these
consequences is ‘crucial’ for compliance.
‹ Many taxpayers are unaware of the potential repercussions.
Awareness can prevent costly mistakes in the future.
‹ One major consequence is financial penalties. The tax authorities
impose fines for incorrect ‘filings’.
‹ Penalties can vary based on the severity of the error. Common
penalties include flat fees or percentage-based fines. This can
increase the overall tax liability significantly.
‹ Taxpayers may end up paying more than necessary. Penalties can
accumulate if mistakes are repeated. This makes it ‘vital’ to file
(accurately) each year.
‹ Interest on Unpaid Taxes: Incorrect ‘filings’ can lead to unpaid
taxes. Taxpayers may not report all income (accurately).
‹ This can result in both:
‹ Tax underpayment
‹ Attracting interest charges.
The interest rate is usually higher than regular rates. This increases the
overall - financial burden on taxpayers. Interest accrues on the unpaid
amount over time. This can create “a snowball effect” on debt levels. It
is ‘crucial’ to rectify errors quickly to minimize interest.
‹ Legal Consequences: Filing incorrect tax returns can lead to legal
issues. Tax evasion is a serious offense under tax laws. Intentional
misreporting can lead to – “criminal charges”. Taxpayers may face

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Notes prosecution if found guilty. Legal issues can have long-lasting

consequences for individuals. Convictions can result in fines,
community service, or imprisonment. Even unintentional errors can
lead to investigations. Legal fees can add additional financial strain.
‹ Loss of Refunds: Incorrect ‘filings’ can also result in “lost refunds.”
If errors cause - 1. tax liability underreporting, 2. refunds may be
delayed. Taxpayers may need to amend their returns for accuracy.
This process can take “time and effort.” Delays in receiving refunds
can affect cash flow.
‹ Increased Scrutiny: Filing inaccuracies can attract increased
scrutiny from authorities. Tax returns may be flagged for audits
or reviews. This means taxpayers will face a detailed examination
of finances. Increased scrutiny can lead to “stress and anxiety”.
It can also consume time and resources to resolve. An audit can
require gathering extensive documentation. Taxpayers may need to
hire professionals to assist.
‹ Damage to Credibility: Incorrect filing can damage a taxpayer’s
credibility. A history of errors can raise red flags with authorities.
This can affect future dealings with tax authorities. Taxpayers may
find it harder to obtain approvals for requests. Maintaining credibility
is – “essential” for smooth financial operations. Rebuilding trust
with tax authorities can be challenging. This may require additional
efforts in future ‘filings’.
‹ Impact on Financial Planning: Errors in “Tax filing” can disrupt
financial planning. Incorrect assessments can lead to “unanticipated
tax liabilities”. This may force taxpayers to adjust their budgets
and spending. Unforeseen expenses can strain financial resources
and savings. Accurate ‘filings’ are essential: for effective financial
management. Taxpayers need clear visibility into their tax obligations.
Planning without accurate information can lead to poor decisions.
‹ Difficulty in Obtaining Loans: “Tax filing” errors can impact
loan applications significantly. Lenders often review tax returns
(during the application process). Inaccurate ‘filings’ can lead to
loan denials or unfavorable terms. This can hinder “personal and
business financial goals”. Taxpayers must ensure correct ‘filings’

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to avoid complications. A poor credit rating can also result from Notes
these inaccuracies. This can further limit future borrowing options.
In conclusion, incorrect tax ‘filings’ have serious consequences. Financial
penalties, interest, and legal issues are - common repercussions. Taxpayers
must understand “importance of accuracy”. Taking care in tax ‘filings’
helps avoid negative outcomes. Knowledge of potential consequences
promotes better compliance. Investing time in accurate filings - pays off
in the long run. Proper tax management is key to financial stability.
Taxpayers may need to amend TDS forms. This is necessary for cor-
recting errors. Timely amendments help to maintain accurate records. A
clear process exists for making corrections. Taxpayers should file revised
forms (promptly). This ensures - compliance with tax regulations. Proper
documentation supports the amendment process.
Retaining copies of original filings is “essential”. Taxpayers should track
all changes made. Clear records help in audits and inquiries. Delays in
amendments can lead to penalties. Proactive corrections ensure smoother
tax management. Overall- these amendments foster transparency and
compliance.

5.10 Summary
In this chapter – you read about exemption forms in tax management.
They help individuals in reducing the “tax liabilities” (effectively). By
submitting these forms, taxpayers can avoid - unnecessary tax deductions.
This provides essential financial relief, especially for low-income earners
and senior citizens. For example- “Form 15G” benefits individuals below
the taxable income limit. Similarly - “Form 15H” is designed for senior
citizens. This targeted approach ensures that - specific groups receive
necessary support. Exemption forms simplify the overall tax process.
Taxpayers only need to fill out straightforward forms. This avoids the
complexities of year-end calculations.
Furthermore - using exemption forms promotes accurate tax reporting.
They help individuals report the income “correctly.” This minimizes the
“risk of underreporting or overreporting income”. Accurate reporting is
essential for maintaining compliance with tax laws. It also reduces the
chances of incurring penalties or interest. Exemption forms encourage

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Notes timely tax submissions. Taxpayers are more likely to submit forms on
time. This leads to a smoother interaction with tax authorities. Overall-
exemption forms are ‘vital’ tools in the tax system. They provide: 1.
financial relief, 2. simplify processes, and 3. promote accuracy.

5.11 Answers to In-Text Questions

1. (b) Reduce tax liabilities
2. (c) Form 15G
3. (b) Senior citizens
4. (a) Tax deductions
5. (b) Unnecessary tax deductions
6. (c) Providing straightforward forms
7. (c) Underreporting income
8. (b) Smoother interaction with tax authorities
9. (c) Increased tax rates
10. (c) Timely tax submissions
11. (c) Form 15G
12. (c) Low-income individuals
13. (c) Improve cash flow
14. (b) Accurate tax reporting
15. (d) Form 15H
16. (b) They provide substantial tax breaks
17. (b) Form 15G
18. (a) Simplify tax calculations
19. (c) Improved tax management
20. (b) They provide financial relief
21. (c) Possible penalties or interest
22. (b) Senior citizens
23. (b) Managing tax liabilities
24. (b) Form 15G

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Notes
25. (c) Streamlining the tax process
26. (c) Individuals with low income
27. (c) Better tax compliance
28. (b) Straightforward and simple
29. (b) They help reduce tax deductions
30. (a) Provide financial relief and simplicity

5.12 Self-Assessment Questions

1. What are exemption forms in tax management?
2. How do exemption forms reduce tax liabilities?
3. Who benefits from submitting Form 15G?
4. What is the purpose of Form 15H?
5. How do exemption forms simplify tax processes?
6. Why is accurate tax reporting important?
7. What risks do exemption forms help minimize?
8. How do these forms promote timely submissions?
9. What financial relief do exemption forms provide?
10. Why are exemption forms ‘vital’ in tax systems?

5.13 Reference
‹ Panwar, V. & Mahajan, J. (2023). Introduction to E-Filing of Returns
(with practical workshops using Java and Excel utilities). Delhi,
India - Scholar Tech Publication.

5.14 Suggested Readings

‹ Das, A. N,. & Agnihotri, M. (2022). Computerised Accounting and
E-Filing of Tax Returns. Kolkata, India - Tee Dee Publications.
‹ Lodha, R. (2022). Computerised Accounting and E-Filing of Tax
Returns. Kolkata, India - Lawpoint Publications.

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 UNIT - V

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 L E S S O N

6
E-filing of TDS Returns
Garima Sirohi

STRUCTURE
6.1 Learning Objectives
6.2 Tags in e-TDS Returns
6.3 Section 206AA
6.4 TDS on Salary Income (Section 192)
6.5 TDS on Premature withdrawal from EPF (under Section 192A)
6.6 TDS on Interest on Securities (Section 193)
6.7 TDS on Dividends (Section 194)
6.8 Section 194A: TDS on Interest Payments (Excluding Interest on Securities)
6.9 Section 194B: TDS on Winnings from Lottery or Crossword Puzzles
6.10 Section 194BB: TDS on Winnings from Horse Races
6.11 Section 194C: TDS on Payments to Contractors
6.12 Section 194D: TDS on Insurance Commission
6.13 Section 194DA: TDS on Maturity Payments of Life Insurance Policies
6.14 Section 194E: TDS on Payments to Non-Resident Sportsmen/Athletes
6.15 Section 194EE: TDS on Payments from National Savings Scheme
6.16 Section 194G: TDS on Commission from Sale of Lottery Tickets
6.17 Section 194H: TDS on Commission/Brokerage (Excluding Insurance Commission)
6.18 Section 194-I: TDS on Rent Payments
6.19 Section 194-IA: TDS on Transfer of Certain Immovable Properties (Excluding
Agricultural Land)
6.20 Section 194J: TDS on Professional or Technical Service Fees
6.21 Section 194LA: TDS on Compensation for Acquiring Certain Immovable Properties
6.22 Section 195: TDS on Payments to Non-Residents or Foreign Companies

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Notes 6.23 Summary

6.24 Answers to In-Text Questions
6.25 Self-Assessment Questions
6.26 References
6.27 Suggested Reading

6.1 Learning Objectives

After reading this lesson, you will be able to:
‹ Explain the TDS on payment made to residents and non-residents
having PAN.
‹ Discuss the different provisions of TDS under sections 192-195.

6.2 Tags in e-TDS Returns

These tags are used when filing electronic TDS returns. They help cat-
egorize different scenarios related to TDS deduction. For 24Q returns
(which are typically used for salaries):
‹ Tag ‘B’ is used when TDS is not deducted because the payee has
submitted Form 15G or 15H. These forms are declarations made
by certain taxpayers to receive income without TDS.
‹ Tag ‘A’ is used when TDS is deducted at a lower rate due to Form
13, which is a request for lower deduction of tax.
‹ Tag ‘C’ is used when TDS is deducted at a higher rate because
the payee hasn’t provided their PAN (Permanent Account Number).
Particulars Tags
Non-Deduction of TDS due to Form 15G/15H B
Lower Deduction of TDS due to Form 13 A
Higher Deduction of TDS due to non-availability of PAN C

For 26Q Returns (Used for Payments Other than Salaries):

‹ The same tags (B, A, C) are used as in 24Q, with the same meanings.
‹ Additionally, tag ‘Y’ is used when the amount paid is below the
threshold limit for TDS deduction.

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Particulars Tags Notes

Non-Deduction of TDS due to Form 15G/15H B
Lower Deduction of TDS due to Form 13 A
Higher Deduction of TDS due to non-availability of PAN C
Amount paid does not exceed the threshold limit as per law Y

6.3 Section 206AA

This section of the Income Tax Act deals with TDS when the payee
(deductee) doesn’t provide a PAN. Some important points are as follows:
‹ It applies to both residents and non-residents of India.
‹ If a person doesn’t provide their PAN, TDS must be deducted at
a higher rate.
‹ It covers various types of income like salary, rent, professional
fees for residents, and any India-taxable income for non-residents.
‹ There are some exceptions, particularly for certain payments to
non-residents under specific conditions.

6.3.1 Scope of Section 206AA

Section 206AA was introduced in the Financial Year 2010-11 and applies
to both residents and non-residents of India. This section mandates that
any person subject to Tax Deducted at Source (TDS) must provide their
Permanent Account Number (PAN) to the deductor. For residents, this
applies to various types of income, including but not limited to:
‹ Salary
‹ Rental income
‹ Professional fees
For non-residents, it encompasses all income sources that are taxable in
India.
However, there are specific exemptions to Section 206AA. As of the
latest updates, the provision does not apply to the following payments
made by a deductor to a non-resident deductee:
(i) Interest paid on long-term bonds under Section 194LC.
(ii) Payments made in respect of:
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Notes ‹ Interest
‹ Royalties
‹ Fees for technical services
‹ Transfer of any capital asset
These exemptions are subject to the provisions of the Double Taxation
Avoidance Agreement (DTAA) between India and the country of the
non-resident deductee.
Recent Updates:
1. The Finance Act, 2020 inserted a new Section 206AB, which
imposes a higher rate of TDS for non-filers of income tax returns.
This section works in conjunction with Section 206AA but does
not replace it.
2. The Central Board of Direct Taxes (CBDT) has clarified that in
cases where both Sections 206AA and 206AB are applicable, the
tax shall be deducted at higher of the two rates prescribed under
these sections.

6.3.2 PAN Submission

‹ Providing PAN is crucial for correct TDS deduction.
‹ Without PAN, certain tax certificates become invalid.
‹ Both the person paying (deductor) and receiving (deductee) must
include PAN in all relevant documents.

6.3.3 TDS Rates

If PAN is not provided, the deductor must apply the highest of these rates:
‹ The rate in the relevant section of the Income Tax Act
‹ The rate in the current Finance Act (Finance Act, 2024 for the
financial year 2024-25)
‹ A flat 20% rate
This system is designed to ensure tax compliance and proper documentation
of taxable transactions. The use of different tags and the emphasis on PAN
helps in categorizing and tracking various scenarios in TDS deduction,
making the overall tax collection process more efficient and accurate.

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Notes
6.4 TDS on Salary Income (Section 192)
Deductor (Who Deducts the Tax)
Any person who is an employer, including:
‹ Individuals
‹ Hindu Undivided Families (HUF)
‹ Companies
‹ Limited Liability Partnerships (LLP)
‹ Firms
‹ Other entities
Deductee (From Whom Tax is Deducted)
Any person who is an employee, whether:
‹ Resident in India
‹ Non-resident in India
Nature of Payment
Income earned by the employee in the form of salary, which includes:
‹ Basic salary
‹ Allowances
‹ Perquisites
‹ Other benefits as per the terms of employment
Time of Deduction
Tax is deducted at the time of making the salary payment.
Rate of TDS
The rate of TDS on salary is not a fixed percentage. Instead, it is cal-
culated based on the estimated annual income of the employee and the
applicable income tax slab rates. As of the financial year 2024-25, there
are two tax regimes in India: the old regime and the new regime. Em-
ployees can choose the regime that is most beneficial to them.

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Notes New Tax Regime (Default from FY 2023-24 Onwards):

Income Slab (Rs.) Tax Rate
Up to 3,00,000 Nil
3,00,001 - 7,00,000 5%
7,00,001 - 10,00,000 10%
10,00,001 - 12,00,000 15%
12,00,001 - 15,00,000 20%
Above 15,00,000 30%
Old Tax Regime:
Income Slab (Rs.) Tax Rate
Up to 2,50,000 Nil
2,50,001 - 5,00,000 5%
5,00,001 - 10,00,000 20%
Above 10,00,000 30%
Note:
1. A surcharge is applicable for higher income brackets, and a health
and education cess of 4% is levied on the total tax liability.
2. The old regime allows for various deductions and exemptions, while
the new regime offers lower tax rates but fewer deductions.
Process of Deduction
1. The employer estimates the employee’s total income for the financial
year.
2. Based on this estimation, the annual tax liability is calculated.
3. The annual tax liability is then divided into equal instalments for
the remaining months of the financial year.
4. TDS is deducted each month as per these calculated instalments.

6.4.1 Computation Estimated Income for TDS on Salary

1. Multiple Income Sources:
‹ The employer must consider income from other sources if
disclosed by the employee.
‹ TDS already deducted on these additional income sources is
taken into account.

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2. Allowable Deductions: Notes

‹ Deductions under sections 80C to 80U are permitted.
‹ Loss under the ‘House Property’ head can be set off against
salary income.
‹ Business losses cannot be set off against salary income.
Multiple Employers Scenario
When an employee has worked for more than one employer in a finan-
cial year:
1. The employee must provide details of salary received from previous
employer(s) to the current employer.
2. The current employer is responsible for considering the total salary
earned (including from previous employers) when calculating TDS.
For Example: Mukesh worked at Firm A from April to July and then
moved to Firm B. Mukesh must declare his income from Firm A to Firm
B. Firm B’s employer must include Mukesh’s income from Firm A when
calculating TDS.
TDS Rates and PAN Consideration
‹ TDS is applied as per the normal prescribed slab rates on the
computed estimated income.
‹ If the employee doesn’t have a PAN, TDS will be charged at the
higher of: a) The normal prescribed rates, or b) 20%
Exemption Threshold
‹ No TDS is deducted if the computed salary does not exceed the
maximum exemption limit.
Claiming Exemptions
Various exemptions (e.g., HRA, LTC) are allowed only if the employee
provides the necessary supporting evidence:
1. For HRA Exemption:
‹ Name and address of the landlord
‹ Rent receipts
‹ PAN of the landlord (if annual rent exceeds Rs. 1,00,000)

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Notes 2. For LTC and Other Exemptions:

‹ Relevant supporting documents as prescribed by the Income Tax
Department

Important Considerations
1. Regular Updates: Employees should regularly update their employers
about any changes in their income or investment declarations to
ensure accurate TDS calculation.
2. Documentation: Proper documentation is crucial for claiming
exemptions and deductions. Employees should maintain all relevant
records.
3. Compliance: Employers must stay updated with the latest tax laws
and regulations to ensure correct computation of estimated income
and TDS.
4. Transparency: Open communication between employees and the
payroll department is essential for accurate income estimation and
tax deduction.

6.5 TDS on Premature withdrawal from EPF (under

Section 192A)
‹ Deductor: Trustee of EPF (Employees Provident Fund) 1952, or
any other authorized person
‹ Deductee: Any person (resident or non-resident)
‹ Threshold Limit: No TDS if the amount paid from EPF balance
does not exceed Rs. 50,000
‹ Nature of Payment: Premature withdrawal from EPF that is taxable
under the Income Tax Act
‹ Time of Deduction: At the time of making the payment
‹ TDS Rate: 10% for residents (no surcharge or education cess)
‹ Form 15G/15H: Applicable

Tax Exemption Conditions

EPF withdrawals are exempt from tax if any of the following conditions
are met:

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1. The employee has rendered continuous service for 5 years or more. Notes
2. The continuous service was disrupted due to:
‹ Discontinuance or contraction of the employer’s business
‹ Employee’s ill health
‹ Any other reason beyond the employee’s control
3. The EPF amount is transferred to a new employer due to a change
in employment, and the total service with both employers exceeds
5 years.

Important Notes
1. Taxability: If none of the above conditions are satisfied, any amount
previously exempted becomes taxable.
2. Partial Taxation: Only the employer’s contribution and interest
earned on it become taxable. The employee’s contribution remains
tax-free.
3. TDS Calculation: TDS is applicable only on the taxable portion of
the withdrawal.
4. PAN Consideration: If the deductee doesn’t provide a valid PAN,
TDS will be deducted at the higher of 10% or the maximum marginal
rate.
5. Form 15G/15H:
‹ Form 15G can be submitted by individuals below 60 years if
their total income is below the taxable limit.
‹ Form 15H can be submitted by senior citizens (60 years and
above) if their total income is below the taxable limit.
6. Non-Residents: For non-resident deductees, TDS rates may vary
based on the Double Taxation Avoidance Agreement (DTAA) between
India and the deductee’s country of residence.
7. Refund: If excess TDS is deducted, the deductee can claim a refund
while filing their income tax return.
8. Reporting: The deductor must report these TDS deductions in the
quarterly TDS returns.

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Notes
6.6 TDS on Interest on Securities (Section 193)
‹ Deductor: Any person liable to pay interest on securities
‹ Deductee: Any resident person
‹ Threshold Limit:
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year
‹ Nature of Payment: Interest paid on securities (e.g., debentures, bonds)
‹ Time of Deduction: At the time of credit or payment, whichever
is earlier
‹ TDS Rate: 10% (no surcharge or education cess)
‹ Form 15G/15H: Applicable

Definition of “Interest on Securities”

As per Section 2(28B) of the Income Tax Act, “Interest on securities”
refers to the interest paid on various securities which can be debentures,
bonds, etc., issued by:
‹ Government
‹ Local authority
‹ Company
‹ Any other statutory corporation
Exemptions from TDS
No TDS is deducted in the following cases:
1. Interest paid on listed debentures of a widely held company to a
resident individual or HUF, provided:
‹ Payment is made by account payee cheque
‹ Aggregate interest during the financial year does not exceed
Rs. 5,000
2. Interest paid on specific government bonds:
‹ 8% Savings (Taxable) Bonds, 2003
‹ 7.75% Savings (Taxable) Bonds, 2018

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‹ Exemption applies only if the aggregate interest paid does not Notes
exceed Rs. 10,000
3. Interest paid to certain institutions:
‹ Banks
‹ Life Insurance Corporation of India (LIC)
‹ General Insurance Corporation of India (GIC)
‹ Other notified financial institutions
‹ Applicable for securities held by these institutions as beneficiaries
4. Interest paid on securities issued by a company and held in dematerialized
form.

Important Notes
1. Dematerialized Securities: TDS is not applicable on interest from
company securities held in demat form. However, the company
paying such interest must report these payments in their TDS return.
2. PAN Consideration: If the deductee doesn’t provide a valid PAN,
TDS will be deducted at the higher rate as per Section 206AA.
3. Form 15G/15H:
‹ Form 15G can be submitted by individuals below 60 years if
their total income is below the taxable limit.
‹ Form 15H can be submitted by senior citizens (60 years and
above) if their total income is below the taxable limit.
4. Non-Residents: This section is not applicable to non-residents. For
interest paid to non-residents, refer to Section 195.
5. Reporting: The deductor must report these TDS deductions in the
quarterly TDS returns.
6. Threshold Limit: The threshold limits are applicable per security
issuer, not cumulatively across all securities held by the deductee.

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Notes
6.7 TDS on Dividends (Section 194)
‹ Deductor: A domestic company distributing dividends on equity shares.
‹ Deductee: Any resident equity shareholder.
‹ Threshold Limit: TDS is not required if the total dividend paid to
an individual does not exceed Rs. 5,000 within the financial year.
‹ Nature of Payment: Dividend payments on equity shares.
‹ Time of Deduction: TDS should be deducted at the time of payment
or distribution, whichever occurs first.
‹ TDS Rate: Deduct TDS at a rate of 10%, with no additional
surcharge or educational cess.
‹ Form 15G/15H: Applicable

6.8 Section 194A: TDS on Interest Payments (Excluding

Interest on Securities)
‹ Deductor: Any entity, except individuals and Hindu Undivided
Families (HUFs) who are not subject to audit in the preceding
financial year.
‹ Deductee: Any resident individual receiving the interest.
‹ Threshold Limit: TDS is not required if the total interest paid to
the recipient during the financial year does not exceed:
‹ Rs. 40,000 (or Rs. 50,000 for senior citizens) for interest paid
by banks, cooperative societies, or post office deposits.
‹ Rs. 5,000 in all other cases.
‹ Type of Payment: Interest payments from banks, post offices, etc.,
excluding interest on securities.
‹ Time of Deduction: TDS should be deducted at the time of credit
or payment, whichever comes first.
‹ TDS Rate: The rate of TDS is 10%, with no additional surcharge
or educational cess.
‹ Forms: Forms 15G and 15H are applicable.

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Notes
6.9 Section 194B: TDS on Winnings from Lottery or
Crossword Puzzles
‹ Deductor: Any individual or entity.
‹ Deductee: Any person, whether resident or non-resident.
‹ Threshold Limit: TDS is not applicable if the winnings do not
exceed Rs. 10,000 during the financial year.
‹ Type of Payment: Payments related to winnings from lotteries,
crossword puzzles, card games, or similar games.
‹ Time of Deduction: TDS must be deducted at the time of payment.
‹ Rate of TDS: TDS should be deducted at a rate of 30%, with no
additional surcharge or educational cess.
‹ Forms: Forms 15G and 15H are not applicable.
Important Notes:
‹ If the prize is awarded partly in cash and partly in kind, TDS should
be deducted only from the cash portion of the prize.
‹ If the prize is entirely in kind or if the cash portion is insufficient
to cover the total TDS liability on the winnings, the deductor must
ensure that the deductee has paid the tax on the total winnings
before making any payment.

6.10 Section 194BB: TDS on Winnings from Horse Races

‹ Deductor: Any individual or entity that is licensed to organize
horse races.
‹ Deductee: Any individual, whether resident or non-resident.
‹ Threshold Limit: TDS is not required if the winnings do not exceed
Rs. 10,000 during the financial year.
‹ Type of Payment: Payments made in relation to winnings from
horse races.
‹ Time of Deduction: TDS should be deducted at the time the
payment is made.

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Notes ‹ TDS Rate: TDS must be deducted at a rate of 30%, with no

additional surcharge or educational cess.
‹ Forms: Forms 15G and 15H are not applicable.
Illustration:
Determine the TDS on winnings from horse races organized by ABC
Ltd. in the following scenarios:
1. Mr. X earns Rs. 8,500 from horse races.
2. Mr. X earns Rs. 2,00,000 from horse races.
Solution:
1. No TDS will be deducted.
2. TDS will be Rs. 60,000 (Rs. 2,00,000 × 30%).

6.11 Section 194C: TDS on Payments to Contractors

‹ Deductor: Any entity, except for individuals and Hindu Undivided
Families (HUFs) not subject to audit in the previous financial year.
‹ Deductee: Any resident contractor.
‹ Threshold Limit: TDS is not required if the payments made to the
contractor do not exceed:
‹ Rs. 30,000 in a single contract, or
‹ Rs. 1,00,000 in total for all contracts during the financial year.
‹ Type of Payment: Payments made to resident contractors for
executing work under any contract.
‹ Time of Deduction: TDS should be deducted at the time of credit
or payment, whichever occurs first.
‹ Rate of TDS:
‹ For individuals and HUFs: 1%
‹ For others: 2%
‹ Forms: Forms 15G and 15H are applicable.

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6.11.1 Deductors for Contractor Payments Notes

Under Section 194C(7)(i), the following entities are considered deductors
for contractor payments:
‹ Central or State Government
‹ Local Authorities
‹ Individuals (if their sales turnover in the previous year exceeds Rs.
1 Crore, or Rs. 50 Lakh for business professionals)
‹ HUFs
‹ Associations of Persons (AOP)/Bodies of Individuals (BOI)
‹ Trusts
‹ Firms
‹ Universities, including Deemed Universities
‹ Companies
‹ Corporations established under Central or State government
‹ Cooperative Societies and Societies registered under the Society
Registration Act, 1980 or any other applicable law
‹ Any university established or incorporated by or under a Central,
State, or Provincial Act, or an institution declared a university under
Section 3 of the University Grants Commission Act, 1956
‹ Governments of foreign states, foreign enterprises, or any association
or body established outside India
‹ Authorities established in India or under any other law for the
development of cities, towns, villages, or housing societies

6.11.2 Definition of Work Contract

According to Section 194C(7)(iv), “Work” includes:
‹ Advertising
‹ Catering
‹ Carriage of goods and passengers by any means other than railways
‹ Broadcasting and telecasting, including the production of related
programs

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Notes ‹ Manufacturing or supplying products based on customer specifications

using materials provided by the customer (but does not cover
manufacturing or supplying based on customer specifications using
materials from someone other than the customer)
Important Points to Note:
TDS is not required under the following conditions:
‹ The total payment under a single contract does not exceed Rs. 30,000.
‹ The total payments for all contracts during the year do not exceed
Rs. 1,00,000.
‹ The payment is made by an individual or HUF for a contract of a
personal nature.
‹ The contractor is engaged in the business of hiring, plying, or
leasing goods carriages and owns no more than 10 such carriages
at any time during the previous year. The contractor must provide
PAN details to the deductor.

6.12 Section 194D: TDS on Insurance Commission

‹ Deductor: Any individual or entity responsible for paying insurance
commission.
‹ Deductee: Any resident individual receiving the commission.
‹ Threshold Limit: TDS is not required if the total commission paid
to the recipient during the financial year does not exceed Rs. 15,000.
‹ Type of Payment: Payments made by insurance companies to
insurance agents as commission.
‹ Time of Deduction: TDS should be deducted at the time of credit
or payment, whichever occurs first.
‹ Rate of TDS:
‹ For Companies: 10%
‹ For All Other Cases: 5%
‹ Forms: Forms 15G and 15H are applicable.

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Notes
6.13 Section 194DA: TDS on Maturity Payments of Life
Insurance Policies
‹ Deductor: Any life insurance company.
‹ Deductee: Any resident individual receiving the maturity proceeds.
‹ Threshold Limit: TDS is not required if the total amount paid to
the recipient during the financial year does not exceed Rs. 1,00,000.
‹ Type of Payment: TDS must be deducted on the payment of life
insurance policy proceeds at maturity, unless the proceeds are exempt
under Section 10(10D).
‹ Time of Deduction: TDS should be deducted at the time of maturity
payment.
‹ Rate of TDS: TDS should be deducted at a rate of 5%.
‹ Forms: Forms 15G and 15H are applicable.
Important Points to Note:
‹ Generally, maturity proceeds from life insurance policies are exempt
under Section 10(10D).
‹ However, if the premium paid exceeds:
‹ 20% of the sum assured for policies issued before 31/03/2012,
‹ 10% of the sum assured for policies issued after 31/03/2012, or
‹ 15% of the sum assured for policies issued after 31/03/2013
specifically for handicapped persons, TDS must be deducted at
the time of payment of the maturity proceeds.

6.14 Section 194E: TDS on Payments to Non-Resident

Sportsmen/Athletes
‹ Deductor: Any person making the payment.
‹ Deductee: Any non-resident individual, including:
‹ Sports persons or athletes who are not Indian citizens.
‹ Sports associations.

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Notes ‹ Type of Payment: Income earned in India from:

‹ Advertisements
‹ Participation in games, sports, or performances
‹ Contributions to newspapers, journals, or magazines.
‹ Time of Deduction: TDS should be deducted at the time of making
the payment.
‹ Rate of TDS: TDS is to be deducted at 20%, plus any applicable
surcharge and Health and Education Cess (HEC).
‹ Forms: Forms 15G and 15H are not applicable.

6.15 Section 194EE: TDS on Payments from National

Savings Scheme
‹ Deductor: Post Office
‹ Deductee: Any individual
‹ Threshold Limit: TDS is not required if:
‹ The total amount paid to the recipient during the financial year
does not exceed Rs. 2,500.
‹ The payment is made to the legal heirs of a deceased account
holder.
‹ Type of Payment: Payments related to the National Savings Scheme,
including interest (subject to Section 80CCA).
‹ Time of Deduction: TDS should be deducted at the time of payment.
‹ Rate of TDS: TDS is deducted at 10%, excluding any surcharge
and Health and Education Cess (HEC) for non-residents.
‹ Forms: Forms 15G and 15H are applicable.

6.16 Section 194G: TDS on Commission from Sale of

Lottery Tickets
‹ Deductor: Any individual or entity
‹ Deductee: Any person, whether resident or non-resident

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‹ Threshold Limit: TDS is not required if the total commission or Notes

brokerage paid during the financial year does not exceed Rs. 15,000.
‹ Type of Payment: Commission or brokerage paid for the sale of
lottery tickets.
‹ Time of Deduction: At the time of payment or credit of commission
or brokerage.
‹ Rate of TDS: TDS is deducted at a rate of 5%.
‹ Forms: Forms 15G and 15H are applicable.

6.17 Section 194H: TDS on Commission/Brokerage

(Excluding Insurance Commission)
‹ Deductor: Any person, except individuals and HUFs not subject
to audit in the previous financial year.
‹ Deductee: Any resident individual
‹ Threshold Limit: TDS is not required if the total commission or
brokerage paid during the financial year does not exceed Rs. 15,000.
‹ Type of Payment: Commission or brokerage payments, excluding
those covered under:
‹ Section 192 (commission to employees)
‹ Section 194B (insurance commission)
‹ Section 194G (commission on sale of lottery tickets)
‹ Time of Deduction: At the time of credit or payment, whichever
occurs first.
‹ Rate of TDS: TDS is deducted at a rate of 5%.
‹ Forms: Forms 15G and 15H are applicable.

6.18 Section 194-I: TDS on Rent Payments

‹ Deductor: Any individual or entity, except individuals and Hindu
Undivided Families (HUFs) who are not subject to audit in the
previous financial year.
‹ Deductee: Any resident individual.

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Notes ‹ Threshold Limit: TDS is not required if the total rent paid to the
recipient during the financial year does not exceed Rs. 2,40,000.
‹ Type of Payment: Rent paid for lease, sublease, or tenancy of
property, including plant and machinery, furniture, and land and
buildings, whether owned by the payer or not.
‹ Time of Deduction: TDS should be deducted at the time of payment
or credit, whichever occurs first.
‹ Rate of TDS: TDS should be deducted at 2% for payments related
to plant and machinery.
‹ Forms: Forms 15G and 15H are applicable.

6.19 Section 194-IA: TDS on Transfer of Certain Immovable

Properties (Excluding Agricultural Land)
‹ Deductor: Any individual or entity, excluding those covered under
Section 194LA.
‹ Deductee: Any resident individual.
‹ Threshold Limit: TDS is not required if the total consideration
received by the recipient for transferring each immovable property
during the financial year does not exceed Rs. 50,00,000.
‹ Type of Payment: Payments received from the transfer of immovable
property, which includes land, buildings, or both, but excludes
agricultural land located in rural areas.
‹ Time of Deduction: TDS should be deducted at the time of payment
or credit, whichever occurs first.
‹ Rate of TDS: TDS should be deducted at a rate of 1% on the total
consideration received from the transfer of the immovable property.
‹ Forms: Forms 15G and 15H are not applicable.
Important Points to Note:
‹ No TDS is required if the property transferred is agricultural land
located in a rural area.

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‹ The person responsible for deducting TDS is not required to obtain Notes
a Tax Deduction Account Number (TAN) under Section 203A.

6.20 Section 194J: TDS on Professional or Technical

Service Fees
‹ Deductor: Any individual or entity, except those who are individuals
or Hindu Undivided Families (HUFs) not subject to audit in the
previous financial year.
‹ Deductee: Any resident individual or entity.
‹ Threshold Limit: TDS is not required if the total amount paid
during the financial year does not exceed:
‹ Rs. 30,000 per bill or for the total amount in the year for professional
or technical services, royalty, or non-compete fees. For instance, if
professional fees are paid 10 times a year at Rs. 5,000 each, TDS
must be deducted at 10% on Rs. 50,000 (Rs. 5,000 × 10).
‹ Payments made to directors of a company require TDS deduction
regardless of the amount.
‹ Type of Payment:
‹ Fees for professional services
‹ Fees for technical services
‹ Royalty payments
‹ Non-compete fees as per Section 28(va)
‹ Remuneration, commission, or fees paid to company directors
(excluding sitting fees or retainer fees paid to independent
directors covered under Section 192).
‹ Time of Deduction: TDS should be deducted at the time of payment
or credit, whichever occurs first.
‹ Rate of TDS:
‹ 2% for royalty or technical service fees
‹ 10% for other payments
‹ Forms: Forms 15G and 15H are applicable.

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Notes
6.21 Section 194LA: TDS on Compensation for Acquiring
Certain Immovable Properties
‹ Deductor: Any individual or entity, typically a government body
or similar agency.
‹ Deductee: Any resident individual.
‹ Threshold Limit: TDS is not applicable if the total compensation
paid in a financial year does not exceed Rs. 2,50,000.
‹ Type of Payment: Compensation for the compulsory n acquisition
of immovable property, excluding agricultural land.
‹ Time of Deduction: TDS should be deducted at the time of paying
the compensation.
‹ Rate of TDS: TDS should be deducted at 10%.
‹ Forms: Forms 15G and 15H are applicable.
Example: If the central government compensates Ms. Rani with Rs.
6,00,000 for the compulsory acquisition of his urban land, TDS at 10%
on Rs. 6,00,000 (i.e., Rs. 60,000) must be deducted before making the
payment.

6.22 Section 195: TDS on Payments to Non-Residents or

Foreign Companies
‹ Deductor: Any individual or entity.
‹ Deductee: Any non-resident individual or foreign company.
‹ Type of Payment: Payments made to non-residents, excluding salary
payments (which are covered under Section 192).
‹ Time of Deduction: TDS should be deducted at the time of credit
or payment, whichever is earlier.
‹ Rate of TDS: TDS should be deducted as per the rates specified
in the Income Tax Act.

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IN-TEXT QUESTIONS Notes

1. According to which section, if deductee does not hold a PAN,

the TDS has to be deducted at higher rates by the deductor?
(a) Section 194H (b) Section 206AA
(c) Section 194AB (d) Section 205AB
2. In a case of Non-Deduction of TDS due to form 15G/15H, Tag
__________ is used.
3. For payments from the National Savings Scheme, the applicable
TDS rate for residents is:
(a) 10% (b) 7.5%
(c) 3.75% (d) 5%
4. TDS on rental payments is deducted under Section:
(a) 194-I (b) 194B
(c) 194H (d) 195
5. For commissions on the sale of lottery tickets, the applicable
TDS rate for residents is:
(a) 10% (b) 7.5%
(c) 5% (d) 3.75%

6.23 Summary
Tags are used in electronic TDS returns to classify different TDS deduc-
tion scenarios. For 24Q returns (salaries):
‹ Tag ‘B’ denotes no TDS due to Form 15G or 15H, which allows
certain taxpayers to receive income without TDS.
‹ Tag ‘A’ indicates a lower TDS rate due to Form 13, which requests
a reduced tax deduction.
‹ Tag ‘C’ is used for higher TDS rates when the payee hasn’t provided
their PAN.

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Notes For 26Q returns (non-salaried payments):

‹ Tags ‘B’, ‘A’, and ‘C’ are used similarly as in 24Q.
‹ Tag ‘Y’ is used when the payment amount is below the TDS
threshold limit.
Section 206AA addresses TDS rates when a PAN is not provided. This
applies to both residents and non-residents, covering various income types.
TDS rates are higher without PAN, and specific exemptions apply to
non-residents under certain conditions, such as payments for interest on
long-term bonds or technical services. The Finance Act, 2020, introduced
Section 206AB, which sets a higher TDS rate for non-filers of income tax
returns, applying the higher rate from either Section 206AA or 206AB.
Providing PAN is essential for accurate TDS deductions. Without it, TDS
must be deducted at the highest applicable rate—either the normal rate,
the Finance Act rate, or a flat 20%.
For TDS on Salary Income (Section 192):
‹ Deductors include employers like individuals, HUFs, companies,
and firms.
‹ Deductees are employees, whether resident or non-resident.
‹ Payment includes salary, allowances, and other benefits.
‹ TDS Calculation depends on the employee’s estimated annual
income and applicable tax slabs. There are two tax regimes:
‹ New Regime: Lower rates with fewer deductions.
‹ Old Regime: Higher rates with various deductions and exemptions.
‹ Process: Employers estimate the total income and divide the tax
liability into monthly instalments.
For TDS on Premature EPF Withdrawals (Section 192A):
‹ Deductor: EPF trustees or authorized persons.
‹ Deductee: Any person.
‹ Threshold: 1R 7'6 LI WKH DPRXQW LV ” 5V 
‹ Rate: 10% for residents.
‹ Exemptions: Apply if the employee has completed 5 years of
continuous service or meets specific conditions.

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For TDS on Interest from Securities (Section 193): Notes

‹ Deductor: Any person paying interest on securities.
‹ Deductee: Resident individuals.
‹ Thresholds: 1R 7'6 LI LQWHUHVW RQ GHEHQWXUHV ” 5V  RU RQ
RWKHU VHFXULWLHV ” 5V 
‹ Rate: 10%.
‹ Exemptions: Include listed debentures if payments meet specific
conditions or interest on government bonds up to certain limits.
Overall, these provisions ensure accurate TDS deductions and compli-
ance with tax regulations, with various tags and rates reflecting different
scenarios and thresholds.
TDS on Dividends (Section 194):
‹ Deductor: Domestic companies paying dividends on equity shares.
‹ Deductee: Resident equity shareholders.
‹ Threshold Limit: TDS not required if dividend does not exceed
Rs. 5,000 in a financial year.
‹ Rate of TDS: 10%, with no surcharge or educational cess.
‹ Forms: Form 15G/15H applicable.
TDS on Interest Other than Securities (Section 194A):
‹ Deductor: Any person (excluding individuals and HUFs not subject
to audit).
‹ Deductee: Resident individuals.
‹ Threshold Limit: No TDS if interest does not exceed Rs. 40,000
(Rs. 50,000 for senior citizens) from banks or post offices, or Rs.
5,000 in other cases.
‹ Rate of TDS: 10%, with no surcharge or educational cess.
‹ Forms: Form 15G/15H applicable.
TDS on Winnings from Lottery or Crossword Puzzles (Section 194B):
‹ Deductor: Any person.
‹ Deductee: Any person (resident or non-resident).
‹ Threshold Limit: No TDS if winnings do not exceed Rs. 10,000.

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Notes ‹ Rate of TDS: 30%, with no surcharge or educational cess.

‹ Forms: Form 15G/15H not applicable.
TDS on Winnings from Horse Races (Section 194BB):
‹ Deductor: Any person with a license for organizing horse races.
‹ Deductee: Any person (resident or non-resident).
‹ Threshold Limit: No TDS if winnings do not exceed Rs. 10,000.
‹ Rate of TDS: 30%, with no surcharge or educational cess.
‹ Forms: Form 15G/15H not applicable.
TDS on Contractor Payments (Section 194C):
‹ Deductor: Any person (excluding individuals and HUFs not liable
for audit).
‹ Deductee: Resident contractors.
‹ Threshold Limit: No TDS if payments do not exceed Rs. 30,000
per contract or Rs. 1,00,000 in aggregate during the year.
‹ Rate of TDS: 1% for individuals and HUFs; 2% for others.
‹ Forms: Form 15G/15H applicable.
TDS on Insurance Commission (Section 194D):
‹ Deductor: Any person paying insurance commission.
‹ Deductee: Resident individuals.
‹ Threshold Limit: No TDS if total commission does not exceed
Rs. 15,000.
‹ Rate of TDS: 10% for companies; 5% for other cases.
‹ Forms: Form 15G/15H applicable.
TDS on Maturity Payments from Life Insurance Policies (Section
194DA):
‹ Deductor: Any life insurance company.
‹ Deductee: Resident individuals.
‹ Threshold Limit: No TDS if total payment does not exceed Rs.
1,00,000.
‹ Rate of TDS: 5% on maturity proceeds.
‹ Forms: Form 15G/15H applicable.

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TDS on Payments to Non-Resident Sportsmen/Athletes (Section 194E): Notes

‹ Deductor: Any person.
‹ Deductee: Non-resident sportsmen, athletes, or entertainers.
‹ Threshold Limit: No limit specified, TDS applies regardless of
the amount.
‹ Rate of TDS: 20% plus applicable surcharge and health and
education cess.
‹ Forms: Form 15G/15H not applicable.
TDS on Payments from National Savings Scheme (Section 194EE):
‹ Deductor: Post Office.
‹ Deductee: Any person.
‹ Threshold Limit: No TDS if the total payment does not exceed
Rs. 2,500 or if paid to legal heirs of a deceased account holder.
‹ Rate of TDS: 10% for non-residents, excluding surcharge and HEC.
‹ Forms: Form 15G/15H applicable.
TDS on Commission for Sale of Lottery Tickets (Section 194G):
‹ Deductor: Any person.
‹ Deductee: Any person (resident or non-resident).
‹ Threshold Limit: No TDS if commission does not exceed Rs. 15,000.
‹ Rate of TDS: 5%.
‹ Forms: Form 15G/15H applicable.
TDS on Commission/Brokerage (Other than Insurance Commission)
(Section 194H):
‹ Deductor: Any person (excluding individuals and HUFs not liable
for audit).
‹ Deductee: Resident individuals.
‹ Threshold Limit: No TDS if commission or brokerage does not
exceed Rs. 15,000.
‹ Rate of TDS: 5%.
‹ Forms: Form 15G/15H applicable.

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Notes TDS on Compensation for Acquisition of Certain Immovable Prop-

erties (Section 194LA):
‹ Deductor: Any individual or entity, typically government or similar
agency.
‹ Deductee: Resident individuals.
‹ Threshold Limit: No TDS if compensation does not exceed Rs.
2,50,000.
‹ Rate of TDS: 10%.
‹ Forms: Form 15G/15H applicable.
TDS on Payments to Non-Residents or Foreign Companies (Section 195):
‹ Deductor: Any individual or entity.
‹ Deductee: Non-resident individuals or foreign companies.
‹ Type of Payment: Any payment other than salary.
‹ Time of Deduction: At the time of payment or credit.
‹ Rate of TDS: As per prescribed rates in the Income Tax Act.
This lesson covers the TDS obligations for different types of payments
and circumstances, including the deductor and deductee responsibilities,
threshold limits, rates of TDS, and relevant forms.

6.24 Answers to In-Text Questions

1. (b) Section 206AA
2. Tag B, 24Q
3. (a) 10%
4. (a) 194-I
5. (c) 5%

6.25 Self-Assessment Questions

1. Explain the Scope of Section 206AA.
` 2. Briefly explain “Tag B” of TDS return-26Q.

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3. Write Short notes on: Notes

(a) Section 206AA
(b) Various Tags used in e-filing of TDS Returns (24Q)
4. Describe the regulations regarding TDS on salary payments as per
Section 192.
5. Explain the provisions for TDS on interest payments, excluding
interest on securities, as per Section 194A.
6. Provide short note on:
(i) TDS on rent payments under Section 194I
(ii) TDS regulations under Section 194J
7. Summarize the TDS provisions for dividend payments as specified
in Section 194.

6.26 References
‹ Panwar, V., Mahajan, J. (2023). ‘E-filing of Returns’, MKM Publishers
Pvt. Ltd.
‹ https://www.incometax.gov.in/iec/foportal/help/company/return-
applicable#taxslabs
‹ https://cleartax.in/s/income-tax-slabs
‹ www.incometaxindia.gov.in

6.27 Suggested Reading

‹ Panwar, V., Mahajan, J. (2023). ‘E-filing of Returns’, MKM Publishers
Pvt. Ltd.

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 Glossary

E-Filing: It refers to the method of paying one’s taxes via the internet and submitting
Income Tax Returns therein. This method is faster, more accurate, and more convenient
than the formerly used paper filling systems.
ITR-2: This is a return filed by an ‘individual’ or a ‘Hindu Undivided Family (HUF)’ who
do not have income from business or profession but draws an income in salary, rental,
capital gain or overseas assets.
ITR-3: This is used by individual and ‘Hindu Undivided Family (HUF)’ having profes-
sional income or income from business. It seeks special information regarding reporting
of financials, deductions and taxes incurred.
ITR-4: This is generally filed by individuals, HUFs and firms which fall under presump-
tive taxation scheme (sections 44AD, 44ADA, or 44AE), thus making the returns filing
of small businesses and professionals easier.
ITR-5: A form used for filing income tax returns by firms, LLP, Association of Persons,
Body of Individuals and other non-individuals who are not required to submit form ITR-7.

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Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi

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1491-E-Filling Return [BCHP-S5-CC4-GE] Cover Jan25.pdf - January 14, 2025