With the new financial year (FY) underway, it’s time to do the necessary planning to manage income and investments. An important task on this list is to evaluate your expected total income for this financial year, FY17. If you expect it to remain above the taxable limit, you should invest in tax-saving products according to your requirements. If your income is below taxable limits or in a lower tax slab, avoid situations in which unnecessarily tax is deducted at source (TDS) on your income.
If you follow the correct procedures, which will depend upon the nature and source of income, you can avoid paying TDS to an extent. For instance, in the case of interest income from bank deposits, one can use forms 15G and 15H, as applicable, to avoid TDS. In fact, in Budget 2016, the government has extended the provision of furnishing these forms in case of rental income as well.
Let’s take a closer look at instances where you may be unnecessarily paying TDS, and how to avoid doing this.
What is TDS?
TDS is the process of collecting tax as and when income is generated. It streamlines the process of collecting taxes for the tax department. TDS is applicable on several incomes such as salary, interest, commission, rent, brokerage, professional fees, royalty, and others. It is deducted at the prescribed rate by the tax department if permanent account number (PAN) is provided by the recipient of the income or at the rate of 20% in absence of PAN, whichever is higher. The deductor is liable to remit the collected tax into the account of the central government.
