How to file TDS returns for payments to legal professionals?

Posted In | Finance | Accounting Software | India Accounting Tax

Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act of 1961. TDS is an essential aspect of income tax that every professional, including legal professionals, should be aware of. In this guide, we shall walk you through the steps involved in filing TDS returns for payments to legal professionals.

 

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Step 1: Understand the TDS Rules for Legal Professionals

TDS is deducted for payments made to legal professionals under Section 194J of the Income Tax Act. The TDS rate is 10% if the payment exceeds INR 30,000 in one fiscal year. However, for FY 2020-2021, the rate has been reduced to 7.5% due to the COVID-19 pandemic.

 

Step 2: Deduct TDS at the Right Time

TDS should be deducted at the time of credit of such fees to the account of the payee or at the time of payment, whichever is earlier. Ensure you deduct the TDS at the right time to avoid penalties.

 

Step 3: Deposit the TDS with the Government

Once you have deducted the TDS, it has to be deposited with the government within seven days from the end of the month in which the deduction was made. This can be done by paying it online on the Income Tax Department's website.

 

Step 4: File TDS Returns

After depositing the TDS, the next step is to file the TDS returns. This is to be done quarterly using Form 24Q for the last quarter and Form 26Q for the first three quarters. You can file the returns online using the Income Tax Department's e-filing portal.

 

Step 5: Issue TDS Certificates

Once the TDS returns are filed, you must issue a TDS certificate to the legal professional. This is to be done using Form 16 (if salary is paid) or Form 16A (for non-salary payments) within fifteen days from the due date of filing TDS returns.

 

TDS is a crucial element of the Income Tax Act that ensures the government receives its due share of income tax. By following the steps outlined above, you can efficiently manage and file TDS for payments made to legal professionals.