Individuals who are looking for investments should consider tax and TDS along with risk and return of an investment. This is because returns may differ depending on the taxation of financial instruments.
Income earned from most of the investments are subject to TDS. Say, for example, salary income, interest earned on debentures attract TDS. So one should be aware of tax and TDS applicability and how it can be avoided.
Here we have mentioned some income and investments where TDS is applicable:
TDS on Salary
Individuals who have income above taxable limit, will see the employer deduct TDS on total income, including income other than salary after considering all deductions and exemptions.
TDS is applicable as per his income slab. The same can be avoided if investments are made under 80C, 80D of Income Tax Act by providing investment proof of the same.
The company will issue a TDS certificate also known as Form 16A at the end of the financial year.
TDS on Interest Income
Banks deduct TDS on interest income earned above Rs 10,000 in a year. Tax payers who fall in higher tax bracket need to pay tax as per liability.
Individuals in lower income can claim for the TDS by submitting form 15G or H, whichever is applicable.
Also, one can avoid TDS by opening a fixed deposit in the different banks where interest earned in a single bank should not exceed Rs 10,000.
Note that the TDS will be applicable on the complete amount not only on the exceeded amount.
TDS is applicable at 10 per cent, if PAN is not submitted with the bank, 20 per cent TDS will be applied.
Interest Earned on Debentures and Securities
Interest earned on debentures and Securities, will see the same taxable in the hands of the assessee under Section 193.
TDS is applicable at 10 per cent for income earned on government securities for more than Rs 10,000 and Rs 5000 on debentures.
TDS will be deducted during credit or payment which ever is earlier.
TDS on EPF Withdrawal
TDS will be applicable if Employee Provident Fund is withdrawn before five years of contribution. However, TDS will not be deducted for an amount below Rs 50,000 from June1, 2016.
TDS is not applicable when individuals transfer Provident Fund from one account to another Provident Fund Account.
TDS will be deducted at 10 per cent if Form-15G or 15H is not submitted provided PAN is submitted. In absence of PAN, it is 20 per cent of the amount.
TDS on Immovable Property
TDS is applicable at 1 per cent is applicable for all property transactions above Rs 50 lakhs under Section 194-IA. The same is same is not applicable for agricultural land.
TDS is deducted at the time of payment or at the time of giving credit to the seller, whichever is earlier. After the sale, the buyer will provide TDS certificate to the seller.
Winning From lottery
Individuals who have won a lottery should pay a huge TDS of 30 per cent. This is if the amount of lottery ticket won is more than Rs 10,000.
The same is applicable on other things such as income earned by winning crossword puzzles, card games under Section 194B.
Income earned by way of winnings from horse races will be considered under Section 194BB.
The person responsible for deduction would deduct the TDS and hand over the net amount.