Form 24Q – TDS return and submission
Form 24Q Return and Submission: A Complete Guide to TDS Compliance
The TDS return is an essential procedure that consolidates tax deductions made by an entity. Its primary aim is to facilitate precise reporting to tax authorities. The deductor is obligated to gather valid documents supporting the income, deductions, and investments declared by the employee. This blog will explore the key aspects of TDS return and its associated pre-processes as listed below;
Let’s look at each section in detail:
What is TDS Return?
A TDS return is an encompassing procedure that consolidates information on TDS deducted and deposited within a specific period. It serves as a connection between the deductor and the Income Tax Department, fostering a transparent exchange of information. The return comprises detailed information, including the deductor’s particulars, deductee details, nature of payments, and the deducted and deposited amounts.
Declaration Form - 12BB
Form 12BB serves as a declaration of claims made by an employee for tax deduction purposes. Starting from June 1, 2016, salaried employees are mandated to furnish Form 12BB to their employers in order to avail of tax benefits or rebates related to investments and expenses. The submission of Form 12BB is required at the conclusion of the financial year.
The process to be followed by the Employer for collecting Form 12BB
The process for an employer to collect Form 12BB involves several steps to ensure accurate documentation of an employee’s claims for tax deduction. Here’s a general guide:
- Communication:
Inform employees about the requirement to submit Form 12BB for claiming tax benefits. Clearly communicate the deadline for submission, typically at the end of the financial year. - Provide Form 12BB:
Supply the prescribed Form 12BB to employees. This form is designed for employees to declare details of their investments, expenses, and other claims for tax deductions. - Guidance:
Offer guidance or instructions on how to fill out Form 12BB. Ensure that employees understand the information required and the supporting documents they need to attach. - Submission Deadline:
Specify the deadline for employees to submit Form 12BB. This deadline is usually set to allow for processing before the end of the financial year. - Verification:
Once employees submit Form 12BB, the employer should verify the details provided. Ensure that the information aligns with the supporting documents provided. - Record-Keeping:
Maintain a record of Form 12BB submissions for future reference. This can be useful for audits or inquiries from tax authorities. - Processing:
Use the information provided in Form 12BB to process tax deductions accurately in the payroll system. This ensures that the correct amount of tax is deducted from the employee’s salary. - Acknowledgement:
Optionally, provide employees with an acknowledgement of the submitted Form 12BB. This can serve as proof of submission for both the employer and the employee. - Reporting:
Include the details from Form 12BB in the TDS return filed with the Income Tax Department.
Proof of Investment
Following are few Proofs of investments that can be submitted for various declarations done in Form 12BB;
- HRA Exemption –
Monthly rent receipt or Yearly Agreement. If the annual rent is above 1 Lakh, then the PAN of the Landlord should also be enclosed - Home loan deduction –
Provisional Loan certificate from the Loan provider with the breakup in Interest and principal amount. Also, PAN of the Loan Provider. - Reimbursement –
Original bills of expense stating the nature of the expense. - LTA Exemption –
Travel Bills from Road/Rail/Air Transport. - Investments –
Copy of investment receipts, which can also be a digital copy like LIC Premium Receipt, PPF/ FD/ SSS/ NSC passbook copy, MF Digital Receipt, etc. - Pension Scheme –
Investment receipts paid during the current financial year. - Health Insurance –
Premium receipt paid during the FY for self, spouse, children and Parents. Any health checkup bills. - Education Loan –
Provisional Interest statement paid for the current FY from the loan provider. - Donation –
Receipt of donation made with details of the donee and related details. - Saving Account Interest –
Details of total interest received.
Old Tax Regime v/s New Tax Regime
The Old Tax Regime and the New Tax Regime in India refer to two different structures of income tax computation and payment. Here are the key differences between the two:
| Old Tax Regime | New Tax Regime |
| Enforce investments in specified tax-saving instruments | Reduce tax rates and compliance. |
| Lock-in period for most of the tax saving instruments. | Non-availability of certain specified deduction |
| Requires documentation and proof of investments. | The flexibility of customising the investment choice. |
| Liquidity is less. | Higher liquidity |
Considerations for Choosing Between Regimes:
- Income Levels: The choice between the old and new tax regimes depends on the individual’s income levels and the deductions they usually claim.
- Investments and Expenses: If a taxpayer has significant investments and expenses that qualify for deductions, they might find the old regime more beneficial.
- Simplicity vs Tax Savings: Some individuals may prefer the simplicity of the new tax regime, while others may prioritise maximising tax savings through deductions available in the old regime.
Computing Tax
Computing tax involves calculating the amount of tax an individual or entity owes to the government based on their taxable income. The process varies depending on the applicable tax regime, such as the old or new tax regime. The general steps for tax computation are listed below;
1.Determine Gross Income:
Include all sources of income, such as salary, business income, rental income, and investment gains.
2.Identify Exemptions:
Determine if there are any exemptions or non-taxable components, such as agricultural income or certain allowances.
3.Calculate Adjusted Gross Income (AGI):
Subtract exemptions and deductions from the gross income to arrive at the adjusted gross income.
4.Apply Deductions:
Consider eligible deductions, such as those under Section 80C (for investments like Provident Fund, insurance premiums, etc.) or 80D (for health insurance premiums).
5.Arrive at Taxable Income:
Subtract deductions from AGI to determine the taxable income.
6.Apply Tax Slabs:
Determine the applicable tax slab based on the taxable income. Different income ranges have different tax rates.
7.Calculate Tax Liability:
Apply the tax rates to the taxable income to calculate the income tax liability.
8.Include Education Cess:
Add an education cess or surcharge, if applicable, to the calculated tax liability.
9.Arrive at Final Tax Payable:
The final tax payable is the sum of the income tax liability and any applicable surcharge or education cess.
Tax Deduction
When it comes to deducting taxes, it’s important to keep a few things in mind.
- Make sure the whole tax computed is deducted from the employee’s salary before the payment of the March month salary.
- In case of a short deduction, you need to ensure that the amount is deducted and paid before the 4th quarter return filing.
- In case of any excess tax deduction, employees can claim an IT refund.
Tax Return Filing
After computing the tax, entities are required to file tax returns with the relevant tax authorities.
- The annual income and savings/investment details of the employees have to be declared in the 4th Quarter TDS return filing.
- This is applicable to all employees who have a gross income above 2.5 lakh per annum.
- One has to note that Form 16 – Part B will be generated as per the details reported in the 4th Quarter.
- Improper details furnished can lead to defaults for both employee and employee.
This is the end of our discussion on TDS Return and Submission of Proof . Let’s know your other questions and opinions on this topic. Mention below the comment box.
