TDS means Tax Deducted at Source. The concept of TDS was introduced in the Income Tax Act, 1961, with the objective of deducting the tax on an income, at the source of income. It is one of the methods of collecting Income Tax, which ensures regular flow of revenue to the Government.
TDS Process
- Deductee (Seller) provides Services and Bill to the Deductor (Buyer).
- Deductor makes the payment after deducting TDS.
- Deductor remits the TDS amount into Bank (Treasury).
- Bank (Treasury) remit the amount to the Government Account.
- Deductor Issues Form 16A to Deductee for the TDS amount deducted.
- Deductor Files the e-TDS to NSDL.
- NSDL uploads the e-TDS information to Income Tax Department.
- Deductee Files the Return with Form 16A to Income tax Department.
Enable TDS Feature
To enable TDS in Tally.ERP 9
Go to Gateway of Tally> F11: Features> F3: Statutory & Taxation
In the Company Operations Alteration screen,
- SetEnable Tax Deducted at Source (TDS) to
- EnableSet/Alter TDS Details to
Enter the TDS deductor details in Company TDS Deductor Details screen.
A brief description on the fields that appear in the Company TDS Deductor Details screen is given below.
- Tax Deduction and Collection Account Number: Enter the Tax Deduction and Collection Account Number (TAN) in this field. The Tax Deduction and Collection Account Number (TAN) is a ten-digit alphanumeric number, issued by the Income Tax Department (ITD) to the deductors.
One Tax Deduction and Collection Account Number is adequate for different types of deductions. TAN must be quoted properly on all Challans: Payment for TDS, Returns, All Certificates – Issue in Form No.16/16A and in all documents and other correspondences with Income-tax Department.
If the format of the TAN number provided is not correct, then Tally.ERP 9 will display you the error message as shown below:
Issue of TDS Certificate
TDS certificate is a proof that deductor has deducted the tax and paid the same to the government. This proof is essential to the deductee to claim the credit of tax in his Income Tax returns.
U/s 203 of Income Tax Act, any person deducting the tax as per the provisions of:
- Section 192 (Salary)shall furnish a certificate of Deduction of tax in Form 16 or Form 16AA within one month from the close of Financial year in which such deduction was made.
Filling of e-TDS
The Income Tax department has now notified ‘Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003’. It is applicable to all deductors furnishing their TDS return in electronic form. As per this scheme,
- It is mandatory for corporate deductors to furnish their TDS returns in electronic form (e-TDS return) with effect from June 1, 2003.
- For government deductors it is mandatory to furnish their TDS returns in electronic form (e-TDS return) from financial year 2004-2005 onwards.
- Deductors (other than government and corporates’) may file TDS return in electronic or physical form.
Deductors furnishing TDS returns in electronic form (e-TDS) have to furnish Form 27A. Form 27A is a control chart to be furnished in physical form along with CD/ Floppy containing the e-TDS returns. Form No 27A is required to be furnished separately for each TDS return.
Form 27A is a summary of e-TDS returns which contains control totals of ‘Amount paid‘ and ‘Income tax deducted at source’. The control totals mentioned on Form 27A should match with the corresponding control totals in e-TDS returns.
