Who Is Liable to Deduct and Pay TDS Under Income Tax Act?


Who Is Liable to Deduct and Pay TDS Under Income Tax Act?

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If you receive income from various sources then you might have noticed that your payer deducts a certain percentage of this amount as tax and deposits it to the government. This process is known as 'Tax deduction at source' or TDS and it ensures that the correct amount of taxes gets deposited with the government without any error.

The Income tax act imposes that an entity that is liable to deduct and pay tds under income tax act, will do so before making any payment to the payee. The deposited tax will reflect in the payslip of the payee as 'tax deducted' or TDS and it also shows up in the Form 26AS/AIS of individuals who have been the recipients of incomes from this source.

Some of the payments that come under this category include:

Insurance commission: The persons who are liable to deduct and pay tds on insurance commission include individual & HUF and entities like companies/firms. The rate of TDS is 5% for these persons if their PAN is furnished and otherwise it is 20%. Individuals & HUF who are receiving income from this source can avoid having TDS deducted by filing their returns on time.

Rental income: Individuals & HUF who are paying rent to co-owners of a property can avoid TDS by submitting their Form 15G/H on time. The same can be done by a company if it is generating rental income from its commercial properties.

 

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