When a person responsible for paying any income deducts Income Tax on income at the time of payment of income/credit, it is called ‘Deduction of Tax at source-TDS’ The provisions related to TDS are covered under Chapter XVII-B of the Income Tax Act, 1961. Coverage of the Chapter Deduction of tax on specified payment at specified rate Deposit tax within the time limit as prescribed File return of tax deducted at source Issue certificate of deduction of tax at source Processing of TDS return Consequences of non-compliance Introduction to TDS The Tax on Total Income is collected in two ways 1) Deduction of Tax at Source (TDS) 2) Advance Tax /Self assessment tax 1 Rajesh Raj Gupta & Associates Chartered Accountants
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When a person responsible for paying any income deducts Income Tax on income at the time of payment of income/credit, it is called ‘Deduction of Tax at source-TDS’ The provisions related to TDS are covered under Chapter XVII-B of the Income Tax Act, 1961.
Coverage of the Chapter Deduction of tax on specified payment at specified rate Deposit tax within the time limit as prescribed File return of tax deducted at source Issue certificate of deduction of tax at source Processing of TDS return Consequences of non-compliance
Introduction to TDSThe Tax on Total Income is collected in two ways1) Deduction of Tax at Source (TDS)2) Advance Tax /Self assessment tax
The CBDT, in the light of the decision of the Hon'ble Rajasthan High Court in the case of Commissioner of Income Tax(TDS) Jaipur Vs. M/S Rajasthan Urban Infrastructure, examined the matter afresh and decided that wherever, in terms of the agreement/ contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, the tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/ payable without including the service tax component.
Clarification on TDS on service tax component(CIRCULAR NO. 1/2014, DATED 13-1-2014)
In case of resident Payee /Deductee:Payee/Deductee Applicability of Surcharge and
Education cess
1)Companies No surcharge or education cess shall be added
2)Any other assessee No surcharge or education cess shall be added to the prescribed rate of TDS except salary in which surcharge @10% and education cess @ 3% is required to be deducted if salary exceed Rs. 1 crore.
Surcharge and education cess on rates of TDS prescribed
The time of Deduction in all the Sections shall be Payment or credit (whichever is earlier) of such Income to the account of the payee except the below mentioned Section where the time of the deduction shall be payment to the payee-
Section 192 – TDS on salaries
Section 194B-TDS on winning from Lottery or Cross word puzzle
Section 194LA-TDS on payment of Compensation on Acquisition of Immovable Property
No deduction of TDS shall be made on the payments of the nature specified below, in case such payment is made by a person to a bank excluding Foreign Bank, namely-
Bank Guarantee Commission Cash Management Service Charges Depository Charges on maintenance of DEMAT Charges Charges for warehousing services for Commodities Underwriting Service Charges Clearing Charges(MICR Charges) Credit card or Debit card commission for transaction between merchant
establishment and acquirer Bank
No Deduction of TDS in certain cases(Section 197A(1F) read with Notification No. 56/2012)
Special Points to be considered- Note 1- As per Finance Act, 2013 An Assessee being an Individual Resident whose Total Taxable Income does not exceed Rs. 5 Lac shall be entitled to deduction of
Rs. 2,000/- or Tax on Total Taxable Income, Whichever is lower
Note 2- In case the employee receives the arrear of earlier years then the Tax is calculated on the income distributed according to which it relates to and if after distribution of income in relevant years the tax due of all years is less than the tax due by receipt Method then difference will allowed as
Deductor - Any PersonDeductee- Any Person being Resident only
Rate -10% on dividend referred to in section 2(22)(e).Exception to Section 194 Dividend referred to in section 115-O(Interim, Final, Deemed dividend) are
exempt in the hands of shareholder and consequently no TDS are required to be deducted
14 Section 194A- TDS on Interest other than “interest
on Securities”Deductor - Any Person not being an Individual or HUF Deductee - Any Person being Resident only Rate - 10% on Income by way of interest other than Interest on Securities
Exception to Section 194A An Individual or HUF is required to deduct TDS if he is carrying on any business or
profession and his sales , turnover or gross receipt from such business exceed 1crores and from Profession 25 lakh during the F/Y immediately preceeding F/Y in which such interest is credited or paid.
No TDS is required to be deducted if aggregate amount of such income credited or paid during F/Y to payee does not exceed Rs.5000
Deductor - Any Person Deductee - Any Person Rate - 30% on Income by way of Winning from Lottery or cross
word puzzles and other game of any sort
The amount of Income paid should exceed Rs.10,000 for deducting TDS Lucky draw schemes organized by any person shall attract TDS on distribution of prize since it is in nature of lottery.
Section 194B- TDS on Winnings from Lottery and Crosswords Puzzles
Deductor - Any Person Deductee- Any Person being Resident only Rate -1% where payment is made or credited to a person being an Individual or HUF.
-2% where payment is made or credited to a person other than an Individual or HUFException to Section 194C No TDS is required to be deducted on payment made or credited to Transport
operator during the course of business of plying, hiring or leasing goods carriage, provided he furnishing of his permanent account number. However if the PAN is not provided than tax @ 20% is required to be deducted.
Goods carriage” means any motor vehicle for carriage of goods.
No TDS is required to be deducted when the amount to be paid or credited to contractor does not exceed Rs.30,000 however if aggregate amount of payment to be made to contractor in a F/Y exceed Rs.75,000 then TDS is required to be deducted.
Section 194C- TDS on Payment to ContractorMaximum Limit for Non Deduction of TDS
S.No Situations Whether TDS deductible1 Single Contract of Rs. 30,000/- in a year No2 Two Contracts of Rs. 30,000/-each in a year No3 Three Contracts of Rs. 30,000 each in a year TDS deductible on s.90,000/-4 Single Contract of Rs. 40,000 in a year Yes5 Five Contracts of Rs. 15000 each in a year No6 Single Contract of Rs. 75,000/- Yes
Contract shall include sub-contract.General Points-
Definition of Work for the purpose of Section 194CWork shall include advertising, broadcasting, including production of
programs for such broadcasting or telecasting, carriage of goods or passengers by any mode of transport other than by railway catering, manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer but does not include if material is purchased from person other than customer.
Deductor - Any Person Deductee- Any Person being Resident only Rate - 10% on any Income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business.
No TDS is required to be deducted when aggregate amount of such Income credited or paid or likely to be credited or paid during the F/Y does not exceed Rs.20,000.
Deductor - Any Person not being an Individual or HUF Deductee- Any Person being Resident only
Rate -10% on Income by way of Commission or Brokerage not being an Insurance Commission referred to in section194D
No TDS is required to be deducted when the amount to be paid or credited does not exceed Rs.5,000 during a F/Y.
An Individual or HUF is required to deduct TDS if he is carrying on any business or profession and his sales , turnover or gross receipt from such business exceed 1crores and from Profession 25 lakh during the F/Y immediately preceeding F/Y in which such interest is credited or paid.
TDS on commission/ Supplementary commission received by Travel Agent from Airlines - The commission received by the Travel Agent from the Airline shall be subject to the TDS u/s 194 H and the TDS shall be deducted on the Commission portion i.e. difference between the airfare fixed by the airlines and the price at which agents are enabled to sell the tickets.
Commission to employees will form part of salary income and is liable to TDS u/s 192 and not under this section.
Section 194H- TDS on Commission or BrokerageSpecial Points-
An Individual or HUF is required to deduct TDS if he is carrying on any business or profession and his sales , turnover or gross receipt from such business exceed 1crores and from Profession 25 lakh during the F/Y immediately preceeding F/Y in which such interest is credited or paid.
Where the share of each co-owner in property is definite and ascertainable, the limit of Rs. 1,80,000 will be applicable to each co-owner separately.
TDS on non refundable Security Deposit- No TDS is required to be deducted at the time of payment of security deposit since it cannot be treated as advance rent however it is required to be deducted when security deposit is to be adjusted.
TDS is required to be deducted on advance payment of rent. TDS on Taxes borne by the Tenant- If Municipal tax, ground rent are born by tenant no
Deductor - Any PersonDeductee- Any Person being Resident only Rate -1% on payment made for purchase of immovable property.
It is not necessary that the property should be situated in India. In case section 194-IA is applicable the purchaser is not required to obtain TAN . Every person purchasing property of Rs. 50 lakh or more would have to deduct TDS
@1% of payment made to seller on or after 01.06.2013. Immovable property means Land (other than agricultural land) or any building or part of
building If the sellers jointly owns a property and sells for a total consideration of Rs.50 lakh
then this section applies even if each co-owners consideration is less than Rs.50 lakh
Section 194IA-Payment on transfer of certain immovable property other than agricultural land
An Individual or HUF is required to deduct TDS if he is carrying on any business or profession and his sales , turnover or gross receipt from such business exceed 1crores and from Profession 25 lakh during the F/Y immediately preceeding F/Y in which such interest is credited or paid.
However such Individual or HUF shall not be liable to deduct TDS on sum by way of fees for professional or technical services if such sum is paid exclusively for personal purpose.
Section 194J-TDS on fees for professional or technical services Maximum Limit for Non Deduction of TDSNo TDS is required to be deducted when the amount to be paid or credited does not
exceed Rs.30,000 during a F/Y other than for payment made to director of company.
No threshold limit has been provided for the payments made to the Directors, even if the sitting fees of Rs. 5,000/- is paid, the company is liable to deduct TDS on such payments.
No TDS on professional fees paid by Non-Resident to the chartered accountant, lawyers advocate or solicitor if non-resident does not have any agent or business connection in India.
Royalty includes payment for purchase of computer software.
Section 194J-TDS on fees for professional or technical services General Points-
28 Section 194J-TDS on fees for professional or technical services Exception to Section 194J(Section 197A read with Section 194J) N.No. 21/2012No TDS is required to be deducted in case payment is made by a person for acquisition of Software from other person being resident , provided following conditions are satisfied-
The software is purchased in a subsequent transfer and the transferor has transferred the software without modification and
The Tax has been deducted –• Under Section 194J on payment of previous transfer in case of resident
transferor• Under Section 195 on payment of previous transfer in case of non-resident
transferor The transferee obtains a declaration from the transferor that the tax has been deducted
either in the above 2 Sections along with the PAN of the transferor
Deductor - Any PersonDeductee- Any Person being Resident only Rate -10% of any sum being in nature of compensation or enhanced compensation on account of compulsory acquisition under any law for time being in force.
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No TDS is required to be deducted when the amount to be paid or credited does not exceed Rs.2,00,000 during a F/Y.
Section 194LA-Payment of compensation on acquisition of certain immovable property*
Maximum Limit for Non Deduction of TDS
General Points-*Immovable property means Land (other than agricultural land) or any building or part of building.
Deductor - Any PersonDeductee- Any Person being Non-Resident only Rate -5% of Income by way of Interest payable to a Non-Resident or a foreign
company.
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The Interest under this Section shall be the Income by way of Interest payable by Indian Co.Interest payable on money borrowed at any time on or after 1st July, 2012 but before 1st
day of July, 2015, in foreign currency, from a source outside India under a loan agreement or by way of issue of Long term Infrastructure bonds, as approved by Central Government in this behalf.
The interest shall be Income to the extent it does not exceed the amount of interest calculated at rate approved by Central Government in this behalf .
Section 194LC-Income by way of interest from Indian company
Deductor - Any PersonDeductee- Any Person being Non-Resident only Rate - Income by way of Interest, Royalty or any other sum payable to a foreign company or Non- Resident not being Income chargeable under head salary or interest covered under section 194LB, 194LC, 194LD shall be deductible at the rate in force.
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Any person responsible for paying to a Non-Resident or to Foreign Company Interest or any other sum shall furnish the information regarding the same in such form and manner as may be prescribed.(Form 15CA and 15CB).
Section 195-TDS on other sum(Paid to Non resident)
No TDS is required to be deducted on payment made by a person to: Government Reserve bank of India A corporation established by or under a Central Act which is, under any law for the time
being in force, exempt from income-tax on its income. A mutual fund specified under section 10(23D).Where such sum is payable by way of interest in respect of any securities owned by it or in which it has full beneficial interest, or any other income accruing or arising to it.
Section 196-No TDS on Interest or other sum payable to government, reserve bank or certain corporation
Every person, being a seller shall, at the time of debiting the amount payable by the buyer to the account of buyer or at the time of receipt of such amount from the said buyer, which ever is earlier, collect from buyer a sum equal to:Nature of goods % of purchase price Alcoholic liquor for human consumption 1%Tendu leaves 5%Timber obtained under a forest lease 2.5%Timber obtained by any mode other than under a forest lease 2.5%Any other forest produce not being timber or tendu leaves 2.5%Scrap 1%Minerals, being coal or lignite or iron ore 1%Lease or license or contract or otherwise transfers any right or interest in parking lot, toll Plaza, Mine, Quarry for use of such areas
TDS is required to be paid to credit of central government within the time given below:Different situation Time limit for deposit of taxWhen payer is the Government or when payment is made on behalf of government
TDS is deposited without challan Same dayTDS is deposited with challan On or before 7 days from the end
of the month in which-i) The deduction is made ORii) Income tax is due u/s 192(1A)
When tax is deducted by a person other than Government
Where the income or amount is credited or paid in the month of March
On or before 30th April
In any other case On or before 7 days from the end of the month in which-i) The deduction is made ORii) Income tax is due u/s 192(1A)
Credit of TDS under other Section even though the Challan related to a particular Section
Example: The challan used for payment of TDS relevant to Section 192 of the Act can also be used for the purpose of reporting tax deposited under Section 194 of the Act also.
Credit of TDS admissible in Other Quarters also and if unutilized in the current year, admissible in future years also
Example: If excess payment of Tax has been made in Quarter 1 of financial year 2013-14, the same can be used for Quarter 2, 3 &4 of F.Y. 2013-14 as well as for Q1 to Q4 of F.Y.2014-15. The excess amount of tax paid in Q1 of F.Y.2013-14 can also be used for payment of tax default of Q1 to Q4 of F.Y.2012-13.
CPC (TDS) Clarification on Deposit of TDS through multiple Challan
Quarter Ending Due Date 30th June 15th July30th September 15th October31st December 15th January31st March 15th May of F/Y immediately following F/Y in
which deduction is made.
Due date for filing TDS/TCS Return Rajesh Raj Gupta & Associates Chartered Accountants
39Consequences for default in furnishing TDS/TCS Return Fees for default in furnishing quarterly return of TDS/TCS(Sec 234E)
Penalty for default in furnishing quarterly return of TDS/TCS(Sec 271H)
Where a person fails to deliver the quarterly return of TDS within the time prescribed, then he shall be liable to pay Rs. 200/- day till the default continues.Points to be Noted Such fees shall not exceed the amount of
TDS/TCS.
The fees shall be paid before furnishing quarterly TDS/TCS return.
The penalty shall be a minimum of Rs.10,000 and it can extend upto Rs.1,00,000
Points to be NotedThe penalty shall be payable if assessee Fails to deliver quarterly return of TDS/TCS, or Furnish incorrect information in quarterly
returns of TDS/TCS.No penalty shall be payable if the return
has been delivered within 1 year from the time prescribed for filing the return along with fees for default U/s 234E and Interest u/s 201 to credit of central government
Any person who fails to deduct the whole or part of the TDS on the sum paid or credited to the account of a resident shall not be deemed to be an Assessee in default in respect of such tax if such resident – Has furnished his return of income u/s 139, Has taken into account such sum for computing income in such return of Income. Has paid the tax due on the income declared by him in such return of income.And the person furnishes a certificate to this effect from a chartered Accountant in such form as may be prescribed. Interest leviable in case of non deduction of TDS for Resident Payee
The interest @ 1% per month per month or part of the month from the date the Tax was deductible to the date of furnishing the return of income by the payee. The Interest shall be levied on the amount of TDS not deducted/ short deducted by the Deductor.
Consequences of Failure to Deduct TDS or deposit TDS(Sec201)
Interest @ 1% for every month or part of month on amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted.
Interest @1.5% for every month or part of month on amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.
Consequences of Late deduction or late deposit of TDS
Person Liable to Deduct TDS
Such interest is required to be paid before furnishing quarterly return of TDS.
Every person liable to deduct tax shall within such period as may be prescribed , furnish a certificate to the effect that tax has been deducted and specifying the amount so deducted , the rate as which tax has been deducted and such other particular as may be prescribed.
Particulars TDS on salary TDS on Non-salary Form Form 16 Form 16APeriodicity Annual QuarterlyDue date upto which TDS certificate should be issued
31st may of the following relevant F/Y
15 days from the due date of furnishing of TDS return i.e. 30th July, 30th October, 30th January, 30th May.
Processing of Quarterly Returns of TDS(Section 200A)Where a statement of tax deduction at source has been made by a person deducting any sum, such statement shall be processed in the following manner, namely:—
the sums deductible under this Chapter shall be computed after making the following adjustments, namely:—
• any arithmetical error in the statement; or• an incorrect claim, apparent from any information in the
statement; the interest, if any, shall be computed on the basis of the sums deductible as
computed in the statement;
An intimation under the Section 200A for the additional Demand or refund that arise due to the Centralized processing of returns
Justification Reports-It is a document which serves as an annexure to the intimation to be sent to the deductor. Intimation will be sent to the deductor through mail / post but a justification report will have to be downloaded from the portal.
The Justification Report specifies the bifurcation of the Demand as stated in the Intimation u/s 200A.
Conso File-
It is the consolidated data of the statements processed (regular & correction) for the relevant Financial Year, Quarter and Form Type. It can be downloaded from the Traces Website.
Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, on which TDS is deductible and such tax has not been deducted or after deduction has not been paid on or before before 30th September following the year for which the Return pertainsProvided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in Section139(1), 30% such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid(Amended by F.A. 2014) Prior to Finance Act, 2014 whole of the expenditure was disallowed if the TDS
was not deposited before 30th Sep and allowed in the year in which it was actually paid.
But Post Finance Act, 2014 only 30% of the total expenditure shall be disallowed and shall be allowed in the year in which it is actually deposited with the Department
Disallowance of the Expenditure in case of non Deposit of TDS before the due date of filing of Return u/s 139(1)(As amended by Finance Act, 2014)
