TDS stands for Tax Deducted at Source. This means a part of tax required to be paid by the assessee, is deducted by the person paying income to him. Thus the tax is deducted at the source of income itself.
Individuals or HUF’s carrying on a business or profession, where their gross sales or turnover exceeds Rs. 40 lacs (in case of business) or Rs. 10 lacs (in case of profession), are liable to deduct tax at source on all specified payments except for payment of royalty or payment to contractor.
Also they are not required to deduct TDS on the following :
1) Interest other than that on securities - Sec 194A
2) Payments to contractors and sub-contractors - Sec194C
3) Commission or brokerage (other than insurance commission and commission of lottery ticket)- Sec 194H
4) Rent – Sec. 194-1
5) Fees for professional or technical services – Sec. 194J
TDS has to be deducted on the following payments:
• Payment of Salary [Sec.192]
• Interest on securities ( other than exempted and Central/State Government securities [except 8% Savings Bonds,2003] to a resident [Sec. 193]
• Interests on Gold Bonds, if the value of the Bonds held during the relevant period exceed Rs. 10,000 [Sec. 193]
• Interest on listed debentures where the total exceeds Rs.2,500 p.a. [Sec.193]
• Payment of Dividends.
• Interest on deposits with housing finance companies exceeding Rs. 5,000 p.a. [Sec.194A]
• Interests on time-deposits with a banking company or a co-operative bank where the interest exceeds Rs 10,000 p.a.
• Interest on compensation awarded by the Motor Accidents Claims Tribunal where such interests exceed Rs. 50,000 p.a.
• Cash won from lotteries and crossword puzzles, card game or any other game exceeding Rs. 5000. [Sec. 194B]
• Winnings from horse races exceeding Rs. 2500 [Sec. 194BB]
• Payments credited or likely to be credited to contractors and sub-contractors by the Government, local authority, corporation, company, co-operative society, trust, university or firm, exceeding Rs. 20,000 for carrying out any work or when aggregate of such payments exceeds Rs. 50,000 in a financial year [Sec. 194C]