Final Tax Doc

8/8/2019 Final Tax Doc

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1. INTRODUCTION

T.D.S stands for Tax Deducted at Source, which literally means the tax required to be paid by

the assessee, is deducted by the person paying the income to him. Thus, the tax is deducted at the

source of income itself. Although it is worth mentioning here that whole of tax is not deducted at the

source but only a certain part is deducted. In some cases it may also get excess while in other casesit may be less than the total tax liability. However, in case of salary the total tax liability can be

deducted at source itself. The intention behind T.D.S is fast collection of tax and to avoid tax evasion,

by concealing income.

Assessee pays tax in the assessment year on income earned in previous year. Due to this rule

the tax collection is delayed till the completion of the previous year. Even sometimes people conceal

their income and the tax is not paid at all. In order to overcome these problems, government started

to deduct some amount of tax from the amount which is receivable by the assessee. The amount of

tax so deducted is called as "Tax Deducted At Source" or TDS in India.

In some cases, the assessee is required to make a payment of advance tax. Such taxes paid in

advance are called prepaid taxes.

Tax deduction is mainly done to reduce ones taxable income. In a way tax deductions can

reduce the taxable income and thus provide tax relief.

Tax deducted in this manner needs to be deposited in the Government treasury and

assigned to the Central Government, within a stipulated time period. Indian Government is adhering

to the policy of TDS to broaden its tax bracket in the country. Income gained through several sources

falls under the tax deduction at source or TDS scheme.


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2. OBJECTIVES OF TDS

Tax Deducted at Source was introduced in India to facilitate the payment of tax while receiving the

income and it follows the concept of Pay as you earn. However, the purposes of tax deducted at

source are changing slowly. Now, the objectives of tax deducted at source are:

1. To enable the salaried people to pay the tax as they earn every month. This helps thesalaried persons in paying the tax in easy installments and avoids the burden of a lump sum

payment.

2. To collect the tax at the time of payment of income to various assesses such as contractors,professionals etc.

3. Government requires funds throughout the year. Hence, advance tax and tax deducted atsource help the government to get funds throughout the year and run the government

smoothly.

It helps to spread the tax net wide enough to include persons who might otherwise have evaded

taxes. The minimum thresholds are raised and the rates are reasonable and comparable with the

rates prevailing in other countries. Hence, it is very vital to make all the persons earning the taxable

income pay the tax. But, the best way to make them pay is to deduct tax at source.

Tax Deducted at Source now covers payments covering around 21 different categories.

At present, TDS plays a very important role in the collection of the Indian Income Tax. This is a very

easy method to collect from the Indian Income Tax Department point of view.


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3.APPLICABILITY OF TDSTax Deducted at Source now covers payments covering around 21 different categories.

Some of such income that is subjected to Tax Deduction at Source is as follows:

y Salary.y Interest.y Rental fee.y Interest on Securities.y Insurance commission.y Dividends from shares and UTI/Mutual Funds.y Commission and brokerage.y Prize money won from lotteries, horse races, etc.y Payments to non-resident sportsmen or sports associations.y Commission on sale of lottery tickets.y Fees for professional and technical services and the like.y Compensation for compulsory acquisition.y Income from units of an offshore fund.y Income from foreign currency bonds or shares of Indian Companies (unless specified

as tax-free).


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4.PROCEDUREUnder the scheme of Tax deduction at Source the obligation to deduct TDS lies on the person

responsible for paying the income/ amount and in which case such person has to follow the

procedure for deducting the tax which can be under lined as under:

The payer has to apply for Tax Deduction or Collection Account Number (TAN) in Form 49B.

However in case of an assessee who as per the related provisions applicable before 1st October'

2004, has already got separate TAN & TCAN allotted need not apply again for allotment of New TAN

place of old TAN & TDCAN.

Each unit or branch of the organisation which is liable to deduct tax has to obtain a separate

TAN.

Such payer is to deduct tax from the income/ payment mentioned in the various sections from

192 to 196D.

The amount so deducted should be deposited within the requisite time to the credit of Central

Government by using the appropriate challan.

TDS has to be remitted within one week from the last day of the month in which the

deduction is made. For example, if the deduction is made on February 12th

, you have time until and

inclusive of 7th

March to remit.

TDS remittance is normally made in specified branches of banks

Payee should be issued certificate of tax deduction at source on or before certain specified

date.

Lastly the payer is required to file quarterly statements as prescribed for having deductedand paid tax.

However, if the amount is credited on the last day of the financial year, i.e., on 31st

March,

then the tax deducted can be deposited within two months from the end of the financial year, i.e.,

within 31st May. But, if it was credited or paid even on 30th March, then you will have time only up to

7th

April. This extended two months time is available only in the case of the following items for

which the payees account is credited on the last day of the financial year.


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5.TAX DEDUCTIONACCOUNT NUMBER (TAN)Not everyone can deduct the tax at source. You have to apply for the Tax Deduction

Account Number(TAN). TAN or Tax Deduction and Collection Account Number is a 10 digit

alpha numeric number required to be obtained by all persons who are responsible for

deducting or collecting tax. It is compulsory to quote TAN in TDS/TCS return (including any e -

TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates. An application for

allotment of TAN is to be filed in Form 49B and submitted at any of the TIN Facilitation Centers

meant for receipt of e-TDS returns. TAN is allotted by the Income Tax Department on the basis

of the application submitted to TIN Facilitation Centers managed by NSDL. NSDL will intimate

the TAN which will be required to be mentioned in all future correspondence relating to

TDS/TCS.

Every person who has to deduct tax at source has to obtain Tax Deducted at source Number

(TAN) and it has to be quoted in all TDS challans, Returns and Certificates.

Each unit or branch of the organization which is liable to deduct tax has to obtain a separate

TAN.


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6. PROVISIONSIN DETAIL FOR DIFFERENT SECTIONS The provisions given below explain the payments, which are covered by the scheme of tax deduction

at source and how to calculate such amount:

6a. SALARY [SEC. 192]

The summarized provisions of section 192 are given below:

Who is the payer Employer

Who is the recipient Employee

Payment covered Taxable salary of the employee

At what time tax has to be deducted at source At the time of payment

Maximum amount which can be paid without

tax deduction

The amount of exemption limit i.e. Rs. 1,80,000

for resident woman; Rs. 2,25,000 for resident

senior citizen; Rs. 1,50,000 for any individual,

every HUF/AOP/BOI/artificial juridical person

Rate of tax deduction at source Normal rates applicable to an individualWhen the provisions are not applicable -

Is it possible to get the payment without tax

deduction or with lower tax deduction

The employee can make an application in Form

No. 13 to the Assessing Officer to get a certificate

of lower tax deduction or no tax deduction.

At the time of deducting tax at source, the person responsible for paying salary should keep the

following points in consideration:

a. Exemption limit The amount of exemption limit i.e. Rs. 1,80,000 for resident woman; Rs.2,25,000 for resident senior citizen; Rs. 1,50,000 for any individual, every

HUF/AOP/BOI/artificial juridical person.

b. House Rent Allowance House rent allowance qualifies for exemption, subject to thespecified limits. Incurring actual expenditure on payment of rent for claiming deduction

under section 10(13A). The employee should submit a written statement to the employer

pinpointing rent paid by him, name of the landlord and address of the property taken on

rent along with rent receipt given by the landlord. However, the Board has decided (as an

administrative measure) that if house rent allowance is Rs. 3,000 per month (or less than

that), the employer will give exemption on the basis of the declaration given by the

employee (no need to submit the rent receipt). This concession is only for the purpose of tax

deduction at source, and, in the regular assessment of the employee, the Assessing Officerwill be free to make such enquiry, as he deems fit, for the purpose of satisfying himself that

the employee has incurred actual expenditure on payment of rent.

c. Other Allowances and Perquisites exemption available under section 10 in respect of otherallowances, will be provided by the employer. The value of the perquisites by way of free

residential accommodation and other perquisites will be determined under rule 3 and

should be taken into account for computing taxable salary.


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d. Donations made by employee deductible under section 80G the employer should not giveany deduction in respect of donation given by an employee to a notified public charitable

institute. The tax relief admissible under section 80G in respect of such donations will have

to be claimed by the employee at the time of finalization of his assessment. However, wheredonations/contributions are made to other funds (e.g. the Jawaharlal Nehru Memorial Fund,

the Prime Ministers Drought Fund, the National Childrens Fund, etc.) deduction should be

allowed by the employer while calculating tax deductible from salary income.

e. Other deductions The employer should also take into consideration amount deductibleunder sections 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80GG and 80U.

f. Tax deductible The total salary should be rounded off to the nearest multiple ofRs. 10 byignoring the fraction of less than five rupees and increasing the fraction of five rupees or

more. On the estimated taxable salary, tax during the financial; year 2008-09 is to be

calculated at the rates mentioned in Appendix 1.

Tax deduction under section 192 in some special cases

1. When a person is employed by more than one employer: Section 192(2) provides the methodof tax deduction at source when a person is employed by more than one employer during

the financial year. In such case, tax will be deducted on the aggregate salary by one of the

employers (being the employer as the employee may choose, having regard to the

circumstances of his case, by submitting the information in Form No. 12B).

2. Relief under section 89: If the employee furnishes information in Form No. 10E to theemployer, relief under section 89 should be given to the concerned employee while

deducting tax at source under section 192. However, this facility is available only if theemployer is Government or public sector undertaking or company, co-operative society,

local authority, university, institution or association or body.

3. Can the employer deduct tax in respect of other incomes of employee: The provisions aregiven below

The employee may or may not declare his other incomes to the employer If the employee wants to declare his other incomes to the employer, then such

information should be given on the plain paper to the employer.

The employee may declare the details of his other income (including loss under thehead Income from House Property but not any other loss) and tax deducted there

on by others. If such information is not submitted by the employee to the employer,

then employer cannot take into consideration other incomes of the employee (even

if quantum of other income is otherwise known to the employer).

After receipt of such information, the employer should deduct (out of salarypayment) tax due on total income as follows


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Computation one [on the basis of (a) salary, and

(b) other incomes declared by the employee]

Computation two [on the basis of salary

ignoring other incomes declared by the

employee]

a. Find out salary incomeb. Add: Other incomes declared by the

employee (in case of loss, only houseproperty loss would be considered; no

other loss would be taken into

consideration)

c. Find out aggregate of (a) and (b)d. Find out tax on (c)e. Add: Surcharge, education cess and

secondary and higher education cess

f. Less: Tax deducted by others as perinformation given by the employeeg. Find out tax liability [(d) + (e) - (f)]

h. Find out salary incomei. Less: Loss under the head Income

from House Property declared bythe employee

j. Find out (h) - (i)k. Find out tax on (j)l. Add: Surcharge, education cess and


m. Less: Tax deducted from rent byothers (if there is loss of houseproperty) as per information given

by the employee

n. Find out tax liability [(k) + (l) - (m)]The tax deductible at source from salary payment is amount determined at (g) or (n) whichever is

higher.

4. Can the employer pay tax on perquisite: Sub-section (1A) provides that the personresponsible for paying any income in the nature of a perquisite (not provided for by way of

monetary payment) referred to in section 17(2), may pay, at his option, tax on the whole (or

part) of such income without making any deduction from salary payable to employee. For

this purpose, tax shall be determined at the average of income tax computed on the basis of

the rates in force for the financial year, on the income chargeable under the head Salaries.

The tax so paid by employer is not taxable in the hands of the employee as a perquisite.

Particulars of perquisite and profit in lieu of salary to be given to employees [Sec. 192(2C)]: Any

person responsible for paying salary shall furnish to the person who receives salary a statement

giveng particulars of perquisites or profits in lieu of salary provided to him in Form 12BA (if salary

exceeds Rs. 1,50,000).

Salary payment without tax deduction or with lower tax deduction: The recipient can apply in Form

No. 13 to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower ordeduct no tax as may be appropriate.


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6b. INTEREST ON SECURITIES [SEC. 193]

The provisions of section 193 are given below:

Who is the payer Payer of interest on securities

Who is the recipient A resident person holding securities

Payment covered Interest on securities

At what time tax has to be deducted at source At the time of payment or at the time of credit,

whichever is earlier

Maximum amount which can be paid without tax

deduction

-

Rate of tax deduction at source 10% in case of listed debentures and 20% in case

of non-listed debentures, if the recipient is non-

corporate assessee. 20% if the recipient is a

domestic company (these rates are subject to

surcharge, education cess and secondary and

higher education cess)

When the provisions are not applicable Interest on Central/State Government securities

and few more which are listed down.



The recipient can make an application in Form

No. 13 to the Assessing Officer to get a

certificate of lower tax deduction or no tax

deduction

Securities interest which is not subject to tax deduction: No tax is deductible at source from the

amount of interest payable on the following

a. Debentures issued by any co-operative society (including a co-operative land mortgage bankor a co-operative land development bank) or any other institution or authority or a public

sector company notified by Central Government

b. Any security of the Central/State Governments [However, from June 1, 2007, interestexceeding Rs. 10,000 payable during financial year on 8% Savings (Taxable) Bonds, 2003

(popularly known as Relief Bonds) will be subject to tax deduction at source]

c. Securities beneficially owned by the Life Insurance Corporation of India or the GeneralInsurance Corporation of India or to any of the four companies formed by the virtue of the

schemes framed under section 16(1) of the General Insurance Business (Nationalization) Act,

1972 or any other insurer

d. Any listed Demat security (with effect from June 1, 2008)Time of tax deduction

: Tax has to be deducted at source at the time of payment or at the time of

credit to the account of the payee or transfer to interest payable account or suspense account,

whichever comes earlier. However, tax cannot be deducted until identity of the person in whose

hands it is includible as income as income can be ascertained.


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When tax is not deductible at regular rates In the following cases tax is not deducted at regular

rates

1. Application to the AssessingOfficer in Form No.13: The recipient can apply in Form No. 13 tothe Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or

deduct no tax as may be appropriate.

2. Declaration to the payer in Form No. 15G: If the conditions of section 197A are satisfied notax is deductible if a declaration is submitted in duplicate in the prescribed form (Form No.

15H for a senior citizen and Form No. 15G for any other person).

3. Debenture interest up to Rs. 2,500: it is not necessary to deduct tax at source from anyinterest on debentures paid to an individual who is resident in India if the following

conditions are fulfilled, namely:

a. The debentures have been issued by a company in which the public are substantiallyinterested

b. The debentures are listed in the recognized stock exchange in Indiac. The interest is paid by the company by an account payee chequed.

The aggregate amount of interest paid or likely to be paid by the company to theholder of debentures during the financial year does not exceed Rs. 2,500

Regimental Fund The matter with regard to regimental fund or non-public fund established by

Armed Forces has been examined in the Board. Since the income of these organizations is exempt

under section 10(23AA), it has been decided that no tax may be deducted at source under sections

193 and 194-I from the income of such fund.

Deep discount bonds Tax is deductible at the time of redemption.


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6c. DIVIDENDS [SEC. 194]


Who is the payer Domestic company

Who is the recipient Resident shareholder

Payment covered Deemed dividend under section 2(22)(e)



deduction

-

Rate of tax deduction at source 20% plus surcharge, education cess and


When the provisions are not applicable Dividends covered by section 115-O






deduction

When tax is not deductible at regular rates In the following cases, tax is not deducted at source or

deducted at lower rates:

1. Dividends covered by section 115-O: no tax is deductible in respect of dividend [not beingdeemed dividend under section 2(22)(e)] payable by a domestic company.

2. Application to the AssessingOfficer in Form No.13: The recipient can apply in Form No. 13 tothe Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or


3. Declaration to the payer in Form No. 15G: If the conditions of section 197A are satisfied notax is deductible if a declaration is submitted in duplicate in the prescribed form (Form No.



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6d. INTEREST OTHER THAN INTEREST ON SECURITIES [SEC.

194A]

The provisions of section 194A are given below:

Who is the payer Any person paying interest other than intereston securities (not being an individual or a Hindu

Undivided Family whose books of accounts are

not required to be audited under section 44AB in

the immediately preceding financial year)

Who is the recipient A resident person

Payment covered Interest other than interest on securities

At what time tax has to be deducted at source At the time of payment or at the time of credit



deduction

From June 1, 2007 tax is not deductible if the

payment/credit does not exceed the amount

given below in no tax deduction

Rate of tax deduction at source 10% plus surcharge, education cess andsecondary and higher secondary education cess

if the recipient is a non-corporate assessee and

20% plus surcharge, education cess and

secondary and higher secondary education cess

if the recipient is a non-corporate assessee

When the provisions are not applicable The provisions are given below



It is stated under

When interest is not subject to tax deduction or no tax deduction In the cases given below interest

is not subject to tax deduction or tax deduction at a lower rate:

1. Interest not subject to tax deduction: By virtue of sections 194A(3) and 197(1D), tax is notdeductible in the following cases:

a. Where the amount of interest credited or paid or likely to be credited or paid duringthe financial year does not exceed the limit.

b. Where the interest is credited or paid to any banking company, co-operative bank,public financial institutions, the Life Insurance Corporation, the Unit Trust of India,

an insurance company or a co-operative society carrying on the business of

insurance or notified institutions.

c. Where the interest is credited or paid by firm to its partner(s).d. Where the interest is credited or paid by co-operative society to its members [it

covers interest on time deposits/other deposits to members holding at least one

share] or to any other co-operative society.

e. Where interest is credited or paid in respect of deposits under the schemes of PostOffice (Time Deposits), Post Office (Recurring Deposits), Post Office Monthly Income

Account, Kisan Vikas Patra, National Saving Certificate VII Issue, and Indira Vikas

Patra.


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f. Where interest is credited or paid (other than time deposit made on or after July 1,1995) with a banking company or (interest to non-members on deposit) with a co-

operative bank.

g. Where interest is credited or paid (by non-members) with a primary agriculturalsociety.

h.

Where interest is credited or paid by Central Government under different provisionsof the direct taxes.

i. Where the interest is credited or paid on compensation awarded to Motor AccidentsClaims Tribunal if the amount of payment or the aggregate amount of such payment

does not exceed Rs. 50,000.

j. Income paid/payable by an infrastructure capital/fund or public sector company inrelation to zero coupon bonds issued on or after June 1, 2005.

k. Where interest is paid or credited by an offshore banking unit on deposits made (orborrowings given) after March 31, 2005 by a person who is resident but not

ordinarily resident in India.

2. No tax deduction if interest does not exceed a specified amount Tax under section 194Ais not deductible where the aggregate amount of interest credited or paid (or likely to be

credited or paid) during a financial year does not exceed the amount given below:

From June 1,

2007 (Rs.)

Up to May 31,

2007 (Rs.)

Where the payer is the banking company and interest is

paid or payable on time deposit

10,000 5,000

Where the payer is the co-operative society engaged in

carrying on the banking business and interest is paid or

payable on time deposit

10,000 5,000

Where the payer is post office and interest is paid orpayable on notified deposit scheme with post office (i.e.

Senior Citizen Savings Scheme, 2004)

10,000 5,000

Where the payer is any other person 5,000 5,000

The aforesaid limits shall be computed with reference to the income credited or paid

by a branch of the banking company or the co-operative society, as the case may be. The

interest on time deposits made with a primary agricultural credit society or a primary credit

society or a co-operative land mortgage bank or a co-operative land development bank, will

not be subject to the requirement of deduction of income tax at source. The expression

time deposits has been defined to mean deposits, excluding recurring deposits, repayable

on the expiry of fixed period.

3. Declaration to the payer in Form No. 15G If the conditions of section 197A are satisfied notax is deductible if a declaration is submitted in duplicate in the prescribed form (Form No.



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4. Application to the Assessing Officer in Form No. 13 The recipient can apply in Form No. 13to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or


5. Adjustment in case of short deduction The person responsible for making the payment atthe time of making any deduction, may increase or reduce the amount to be deducted undersection 194A for the purpose of adjusting any excess or deficiency arising out of any

previous deduction or failure to deduct during the financial year.

6. Payment under a hire purchase agreement When part of purchase installment is paid by ahirer to the owner under a hire purchase contract; the provisions of section 194A are not

attracted.


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6e. WINNING FROM LOTTERIES OR CROSSWORD PUZZLES

[SEC. 194B]

The provisions of section 194B are given below:

Who is the payer Any person paying winnings fromlotteries/crossword puzzles/card games/other

games

Who is the recipient Any person

Payment covered Winnings from lotteries/crossword puzzles/card

games/other games



tax deduction

If the amount of payment is Rs. 5,000 or less

than Rs. 5,000


secondary and higher secondary education cess.

When the provisions are not applicable -

Is it possible to get the payment without taxdeduction or with lower tax deduction

Not possible

Prize given partly in cash and partly in kind Where the prize is given partly in cash and partly in

kind, tax will be deductible from cash prize, with reference to the aggregate amount of cash prize

and the value of prize in kind. Where the winnings wholly in kind or where they are partly in cash

and partly in kind but the part in cash is not sufficient to meet the liability for tax deduction in

respect of the whole winnings, the person responsible for paying shall, before releasing the winnings

either in cash or in kind, ensure that tax has been paid in respect of the winnings.


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6f. WINNING FROM HORSE RACES [SEC. 194BB]

The provisions of section 194BB are given below:

Who is the payer Any person paying winnings from horse races

Who is the recipient Any person

Payment covered Winning from horse races



deduction


than Rs. 2,500






Not possible


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6g. PAYMENTS TO CONTRACTORS OR SUB-CONTRACTORS

[SEC. 194C]

The provisions of section 194C are given below:

Case 1 Case 2Who is the payer A specified person A resident contractor

(not being an individual

or a Hindu Undivided

Family whose books of

accounts are not

required to be audited

under section 44AB in

the immediately

preceding financial

year)

Who is the recipient A resident person A resident sub-

contractorRate of tax deduction at source 2% plus surcharge,

education cess and

secondary and higher

secondary education

cess [1% plus

surcharge, education

cess and secondary

and higher secondary

education cess in case

of advertising contract]

1% plus surcharge,

education cess and

secondary and higher

secondary education

cess

Payment covered Consideration for any works contract

At what time tax has to be deducted at source At the time of payment or at the time of creditwhichever is earlier


tax deduction

Tax is not deductible if only single payment (or

credit) does not exceed RS. 20,000 and the

aggregate payment (or credit) during the

financial year does not exceed RS. 50,000.

Moreover, tax is not deductible in respect of

amount credited or paid or payable by a resident

contractor to an individual (being a resident

transporter sub-contractor) who does not known

more than @ trucks in the financial year



The recipient can apply in Form No. 13 to the

Assessing Officer to get a certificate authorizingthe payer to deduct tax at lower or deduct no tax

as may be appropriate.


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When section 194c is applicable: In the following two cases tax is deductible under section

194C:-

CASE 1:- When payment is made by a specified person to a resident contractor [Sec 194C(1)] Any

person responsible for paying any sum to any resident contractor for carrying out any work

(including supply of labour for carrying out any work) in pursuance of a contract between a specified

person and the resident contractor is required to deduct tax at source. For this purpose, payer

himself is treated as person responsible for paying any sum to contractor.

Meaning of specified person : tax is deductible under section 194C (i) only if payment is made in

pursuance of a contract between a specified person and a resident contractor. The following are

specified persons for this purpose:-

a. The central government or any state governmentb. Any local authorityc. Any corporation established by or under central, state or provincial actd. Any companye. Any co-operative societyf. Any authority constituted in India by or under any law, engaged either for the purpose of

dealing with and satisfying the need for housing accommodation or the purpose of planning,

development or improvement of cities. Towns or villages, or for both.

g. Any society registered under the society registration act or under any law corresponding tothat act in force in any part of India

h. Any trusti. Any university established by or under central, state or provincial act and an institution

declared to be a university under sec 3 of the University Grants Commission Act, 1956

j. Any formk. Any individual or HUF whose books of accounts are required to be audited under sec

44AB(a)/(b) during the immediately preceding financial year and sum credited or paid is not

exclusively for personal purposes

l. (w.e.f. June 1, 2008) AOP/BOI whose books of accounts are required to be audited under sec44AB(a)/(b) during the immediately preceding financial year.

It may be noted that the list does not include an individual or an HUF. In other words, if payer is

an individual, or an HUF and recipient as a resident contractor, tax is not deductible.

CASE 2:- When payment is made by a resident contractor to a resident sub-contractor section

194C(2), tax is not deductible

a. In case payment made by a resident contractor (not being an individual or HUF whose booksof accounts are not required to be audited under section under 44AB in the immediately

financial year.)

b. To a resident sub-contractorc. For carrying out (or for the supply of labour for carrying out) the whole(or any part) of the

work undertaken by the contractor or for supplying whether wholly or partly any labour

which the contractor has undertaken to supply.


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When tax has to be deducted at source Tax is to be deducted either at the time of credit of

such sum to the account of the payee, or at the time of payment thereof in case by issue of

cheque or by any other mode, whichever is earlier. For this purpose any sum credited to any

account whether called suspense account or by any other name in the books of account of the

payer is treated credit of such income to the account of the payee.

No tax deductions in a few small cases These provisions are given below:-

a. To avoid tax deductions in petty cases, tax is deductible under section 194C only where theamount credited or paid to a contractor or a subcontractor exceeds Rs.20000 in a single

payment or credit or Rs. 50000 in the aggregate during a final year. In other words, tax is not

deductible under sec194C if the following 2 conditions are satisfied

y The amount of any (single) sum credited or paid (or likely to be credited or paid) tothe contractor or subcontractor does not exceed Rs. 20000 ; and

y The aggregate of such sums credited (or likely to be credited or paid) during thefinancial year does not exceed Rs. 50000

b. Further, tax is not deductible under sec 194C if the following conditions are satisfied y Consideration for work contract is paid or payable by a resident contractor to a

resident sub-contractor

y The resident sub-contractor is an individualy The aforesaid amount is paid or payable to the sub-contractor during the course of

business of plying, hiring or leasing goods carriages

y The resident sub-contractor does not own more than 2 goods carriages at any timeduring the previous year.

y The resident sub-contractor submits a declaration to the payer in form number 15-IIf the above conditions are satisfied, the payer (ie resident contractor) will not deduct tax at source

under sec 194C. The payer shall furnish the details of above payment to the prescribed income tax

authority in form number 15-J within the specified period (ie on or before June 30 after the end of

financial year)

Who is a contractor or subcontractor A contractor is one who makes an agreement with

another to do a piece of work. Sub-contractor is one who takes portion of contract from

principal contractor or another sub-contractor. The expression contractor shall also include a

contractor who is carrying out any work (including supply of labour for carrying out any work) in

pursuance of a contract between a contractor and a Govt. of a foreign state, or a foreign

enterprise or any association of body established outside India.

Meaning ofWork Contract: Provisions of section 194C relating to tax deduction from payment

to contractors / sub contractors are applicable only where contract is either a work contract

or a contract of supply for works contract. These provisions are, therefore, not applicable for

payments made under a contract for sale of goods.


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Work as defined in section 194 C the expression work, shall also include (a) advertising,

(b) broadcasting and telecasting including production of programmes for such broadcasting or

telecasting, (c) carriage of goods and passengers by any mode of transport other than by railways,

and (d) catering.

Contract of SALE vis a vis work contract Before taking a decision on the applicability of

TDS under section 194 C on a contract , it would have to be examined whether the contract in

question is a contract for work or a contract for sale and TDS shall be applicable only where it a

contract for work. In other words, the provisions of section 194 C would apply in respect of a

contract of supply for any article or thing as per prescribed specifications only if it is a contract for

work and not a contract for sale. If the ownership in material passes to the payer only at the time of

delivery of goods and prior to that ownership vests with the manufacturer, it will be transaction of

sale and not subject to TDS under section 194C. This rule is equally applicable even if goods are

manufactured and supplied as per specification given by the payer.

Contract for purchase of plant and its erection One has to find out the primary object of

the contract. If the primary object is to purchase plant and the civil work, erection and

commissioning are only incidental to purchase of plant, tax is deductible under section 194C only in

respect of consideration payable for civil work, erection and commissioning. This is because of the

fact that the contract for supply of plant and the contract for civil work / erection are two separate

contracts, through there may be common purchase order.

Rate of tax deduction The person responsible for making payments to contractors / sub

contractors is required to deduct tax at source at the following rates during the financial year 2008-

2009. These rates are, however, not applicable in cases covered in cases covered by where tax is not

deducted ao deducted at lower rate.

Advertising contracts Other Contracts

Income Tax Income TaxPayment to contractor 1% 2%

Payment to sub contractor 1% 1%

Payment, not income comprised therein, is subject to deduction The deduction at the aforesaid rate

is with reference to the amount of payment itself (excluding service tax) and not income comprised

in the payment. The person responsible for payment is not, therefore, required to estimate the

income comprised in the payment at all.

When tax is not deducted or deducted at lower rate The recipient can apply in Form No. 13 to the

Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or deduct no tax asmay be appropriate.


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6h. PAYMENT OF INSURANCE COMMISSION [SEC. 194D]

The provisions of section 194D are given below:

Who is the payer Any person paying insurance commission


Payment covered Insurance commission




deduction


than Rs. 5,000



if the recipient in resident non-corporate

assessee



if the recipient in resident corporate assessee







deduction

Adjustment not possible At the time of deducting tax from the insurance commission credited to

an agents account, adjustment for any debits made in his account in respect of any excess

commission credited or paid to him earlier is not permissible and income tax must be deducted from

the full amount of commission credited to his account.

When tax is not deductible or deductible at lower rate In the case given below, tax is not deductible

or deductible at lower rate:

No tax is required to be deducted at source if the insurance commission credited or paid (orlikely to be credited or paid) during the financial year does not exceed Rs. 5000.

The person receiving insurance commission can make an application in Form No. 13.


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6i. PAYMENT TO NON-RESIDENT SPORTSMEN OR SPORTS

ASSOCIATION [SEC. 194E]

The provisions of section 194E are given below:

Who is the payer Any person making payment to non-residentsportsman/sports association

Who is the recipient Non-resident sportsman/sports association

Payment covered Payment to non-resident sportsman/sports

association




tax deduction

-




Is it possible to get the payment without taxdeduction or with lower tax deduction

No provision

A person responsible for paying the following income to the following persons shall deduct tax at

source-

Payee Nature of Income

1. Non-resident foreign citizen sportsman(including an athlete)

Income is by way of

a. Participation in India in any game (otherthan card game or gambling, etc.);

b. Advertising; orc. Contribution of articles relating to any

game or sport in India in newspapers,

magazines or journals

2. Non-resident sports association orinstitution

Any amount guaranteed to be paid or payable in

relation to any game (but other than card game,

etc.) or sport played in India


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6j. PAYMENT IN RESPECT OF NATIONAL SAVING SCHEME

[SEC. 194EE]

The provisions of section 194EE are given below:

Who is the payer Post OfficeWho is the recipient Any Person

Payment covered Payment (principal + interest) out of National

Saving Scheme, 1987



deduction


than Rs. 2,500



When the provisions are not applicable The payment is made to the legal heirs of the

deceased depositor



Provision under section 197A

The person responsible for paying any amount (i.e. principal + interest) out of National Saving

Scheme, 1987 should deduct tax at source. It may be noted that the payment out of National Saving

Scheme, 1992 (which was eligible for the benefit of sections 80L and 88) is not subject to tax

deduction at source.

When tax is not deductible No tax is deduction shall be made in the following cases

Payment below Rs. 2,500 Where the amount of payment or the aggregate amount ofpayments in a financial year is less than Rs. 2,500, no tax is deducted at source.

Payment to Heirs Where the payment is made to the heirs of the deceased assesse(depositor), no tax is deducted at source.

Declaration to the payer in Form No. 15G - If the conditions of section 197A are satisfied notax is deductible if a declaration is submitted in duplicate in the prescribed form (Form No.



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6k. PAYMENT ON REPURCHASE OF UNITS OF MUTUAL FUNDS

OR UTI [SEC. 194F]

The provisions of section 194F are given below:

Who is the payer Mutual fund or UTIWho is the recipient Unit holder under section 80CCB

Payment covered Payment on account of repurchase of unit

referred to in section 80CCB



deduction

-






No provision

It may be noted that section 80CCB is applicable if investment was made during the previous years

1990-91 and 1991-92 in the notified units of Equity Linked Saving Scheme of UTI or a mutual fund.


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6l.COMMISSION ON SALE OF LOTTERY TICKETS [SEC. 194G]

The provisions of section 194G are given below:

Who is the payer Any person paying commission on sale of lottery

tickets

Who is the recipient Any personPayment covered Commission on sale of lottery tickets




deduction


than Rs. 1,000









deduction

If an authorized lottery ticket agent purchases lottery tickets in bulk at a discount from the State

Government and sells the same at a price of his choice, section 194G is not applicable.


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6m. COMMISSION OR BROKERAGE [SEC. 194H]

The provisions of section 194H are given below:

Who is the payer Any person paying commission or brokerage(not

being an individual or a Hindu Undivided Family

whose books of accounts are not required to beaudited under section 44AB in the immediately

preceding financial year)

Who is the recipient Any resident person

Payment covered Commission or brokerage (not being insurance

commission)




deduction


than Rs. 2,500






The recipient can apply in Form No. 13 to the

Assessing Officer to get a certificate of lower tax

deduction or no tax deduction

When the tax has to be deducted Tax shall be deducted at the time of credit of such income to the

account of the payee or at the time of payment of such income in cash or by the issue of the cheque

or draft or any other mode, whichever is earlier. Where any income is credited to any account,

whether called Suspense Account or by any other name, in the books of account of the person

liable to pay such income, such crediting shall be deemed to be credit of such income to the account

of the payee.

Meaning of commission or brokerage Commission or brokerage for the purpose of section 194H

includes any payment which satisfies the following conditions

Condition 1 Payment is received or receivable by a person acting on behalf of the payer

Condition 2 The aforesaid payment is received for services rendered (not being professional

services) or for any service in the course of buying/selling goods or in relation to any

transaction relating to any asset, valuable article or thing, not being securities

Condition 3 The above payment may be received or receivable directly or indirectly

Condition 4 The above payment is not insurance commission covered by section 194D

Professional services The expression professional services means services rendered by a

person in the course of carrying on a legal, medical, engineering or architectural profession or the

profession of accountancy or technical consultancy or interior decoration or such other profession as

is notified by the Board for the purposes of section 44AA (i.e. authorized representative, film artist,

company secretary and information technology)


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Indirect Payment when commission is retained by agent A question may arise whether

there would be deduction of tax under section 194H where commission or brokerage is retained by

the consignee/agent and not remitted to the consignor/principal while remitting the sale

consideration. Since the retention of commission by the consignee/agent amounts to constructive

payment of the same to him by the consignor/principal, deduction of tax at source is required to be

made from the amount of commission. Therefore, the consignor/principal will have to deposit thetax deductible on the amount of commission income.


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6n. RENT [SEC. 194-I]

The provisions of section 194-I are given below:

Who is the payer Any person paying rent (not being an individual

or a Hindu Undivided Family whose books of

accounts are not required to be audited undersection 44AB in the immediately preceding

financial year)


Payment covered Rent




deduction

If the amount of payment during a financial year

is Rs. 1,20,000 or less than Rs. 1,20,000

Rate of tax deduction at source These rates are given below

When the provisions are not applicable The provisions are given below



The recipient can apply in Form No. 13

TDS Rates Rates for tax deduction at source under section 194-I are given below:

Rate ofTax deduction

Rent of machinery or plant or equipment 10% plus surcharge, education cess and


Rent of any land or building or furniture or fitting

- Where the recipient is an individual orHUF

- Where the recipient is any other person





These rates are applicable on rant of building, machinery, etc. (excluding service tax thereon). In

other words tax is not deductible on service tax component (if any).

When tax has to be deducted The person responsible for paying rent should deduct tax at source.

Tax is to be deducted at source either:

a. At the time of credit of such income to the account of payee: orb. At the time of payment thereof in cash or by issue of a cheque or draft or by any other

mode, whichever is earlier.

Where any income by way of rent is credited to any account (whether called Suspense Account or

by any other name) in the books of account of the person liable to pay such rent, such crediting shall

be deemed to be credit of such income to the account of the payee.


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Rent as defined in section 194-I The salient features of rent are as follows:

a. Payment is made under any lease, sub-lease, tenancy or any other agreement orarrangement.

b. Payment is made either for the use of only land or building (including factory building) or forthe use of any land or building (including factory building) and the land appurtenant thereto.

TDS provisions are also be applicable in respect of rent (paid or payable) of machinery, plant,

equipment, furniture or fittings.

c. It is immaterial whether or not such building or asset is owned by the person to whom rentis paid.

No tax deduction if payee is Government/local authorities There is no requirement to deduct

income tax at source on income by way of rent if the payee is the Government. In the case of the

local authorities and the statutory authorities referred to in section 10(20A)/10(20), there will be no

requirement to deduct income tax at source from income by way of rent if the person responsible

for paying the rent is satisfied about their tax exempt status under clause (20) or (20A) on the basis

of a certificate to this effect given by the said authorities.

When tax is deducted at lower rate The recipient can apply in Form No. 13 to the Assessing Officer

to get a certificate authorizing the payer to deduct tax at lower or deduct no tax as may be

appropriate.


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6(o). FEES FOR PROFESSIONAL OR TECHNICAL SERVICES

[SEC. 194J]

The provisions of section 194J are given below:

Who is the payer Any person paying fees for professional/technicalservices/royalty (not being an individual or a

Hindu Undivided Family whose books of accounts

are not required to be audited under section

44AB in the immediately preceding financial year

or not being an individual or HUF who makes

payments for personal purposes)


Payment covered Fees for professional or technical services




tax deduction

If the amount of professional fees during a

financial year is Rs. 20,000vor less than Rs.20,000. Similarly, If the amount of technical fees

during a financial year is Rs. 20,000vor less than

Rs. 20,000. Further, if the amount of royalty

during a financial year is Rs. 20,000 or less







No. 13

Time of tax deduction: tax shall be deducted at the time of credit of such sum to the account of thepayee or at the time of payment thereof in cash or by issue of a cheque or draft why any other

mode, whichever is earlier. Where any such sum is credited to any account, whether called

Suspense account or by any other name, in the books of account of the person liable to pay such

sum, such credit shall be deemed to be credit of such sum to the account of the payee.

Rate of tax deduction: Tax shall be deducted at the rate 10%v plus surcharge, education cess and

secondary and higher education cess. Tax is deductible at the above rate on total payment

(reimbursement cannot be deducted out of bill amount)

When tax is not deductible Tax is not deductible where the amount of such sum or, as the case

may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paidduring the financial year by the aforesaid person to the account of, or to the payee, does not exceed

RS. 20,000 in case of fees for professional services or Rs. 20,000 in the case of fees for technical

services or Rs. 20,000 in case of royalty.

When tax is deductible at lower rate: The recipient can apply in Form No. 13 to the Assessing

Officer to get a certificate authorizing the payer to deduct tax at lower or deduct no tax as may be

appropriate.


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Meaning ofProfessional/Technical Services: The expression professional services has been

defined to mean services rendered by a person in the course of carrying on legal, medical,

engineering or architectural profession or the profession of accountancy or technical consultancy in

interior decoration or advertising (i.e. models, artists, photographers, providing services to an

advertising agency) or such other profession as is notified by the Board for the purpose of section

44AA [i.e. authorized representative, film artist or company secretary or information technology] orof this section.

Amount paid by the non-resident: Any fees paid through regular banking channels to any chartered

accountant, lawyer, advocate or solicitor who is resident in India by the non resident who do not

have any agent or business connection or permanent establishment in India may not subject to the

provisions of tax deduction at source under section 194J.


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6p. PAYMENT ONACQUISITION OF CERTAIN IMMOVABLE

PROPERTY [SEC. 194LA]

Section 194LA provides for deduction of tax at source in the case of payment of compensation on

acquisition of immovable properties. The provisions of section 194LA are given below:

Who is the payer Any person paying compensation/enhanced

compensation/consideration/enhance

consideration on account of compulsory

acquisition of any land (not being rural

agricultural land) or building


Payment covered Compensation/enhanced

compensation/consideration/enhance

consideration on account of compulsory

acquisition of any land (not being rural

agricultural land) or building

At what time tax has to be deducted at source At the time of payment or at the time of credit,whichever is earlier


tax deduction

If the amount of payment is Rs. 1,00,000 or less

than Rs. 1,00,000 during a financial year



When the provisions are not applicable Payment/credit before October 1, 2004



The recipient can make an application in Form No.

13 to the Assessing Officer to get a certificate of

lower tax deduction or no tax deduction


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6q. PAYMENT TO NON-RESIDENT [SEC. 195]


Who is the payer Any person responsible for making payment to a

non-resident

Who is the recipient A non-resident personPayment covered Any payment to non-resident other than salary




deduction

-

Rate of tax deduction at source See Appendix

When the provisions are not applicable If in the hands of the recipients, the amount not

chargeable to tax in India



The recipient can make an application to the

Assessing Officer to get a certificate of lower tax

deduction or no tax deduction

No tax is deductible from dividend covered by section 115-O. Tax at source should not be deducted or should be deducted at lower rate, as the case may

be, where the recipient has made an application to the Assessing Officer and obtained a

certificate to that effect.

In case of interest payable by the Government or public sector bank/financial institutionwithin the meaning of section 10(23D), tax shall be deducted only at the time of payment.

No tax is deductible in respect of interest paid or credited by an offshore banking unit ondeposits made (or borrowings given) after March 31, 2005 by a person who is non-resident

in India.

The person who is making remittance to a non-resident required to furnish an undertaking(in duplicate) addressed to the Assessing Officer accompanied by a certificate from a

chartered accountant in a specified format. This undertaking and certificate I submitted to

the Reserve Bank of India or its authorized dealers who, in turn, are required to forward a

copy to the Assessing Officer. The purpose of the undertaking and the certificate is to

effectively collect taxes (by way of TDS under section 195) at the stage when the remittance

is made, as it may not be possible to recover the tax at a later stage from non-residents.

To monitor and track transactions in a timely manner, section 195 has been amended witheffect from April 1, 2008. A scheme will be formulated to introduce e-filing of the

information in the certificate and undertaking. In other words, person responsible for

deduction of income tax shall furnish the information relating to payment of any sum to the

non-resident or to a foreign company in a form and manner which will be prescribed by the


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Board. Although the amendment has been made from April 1, 2008, yet it will be effectively

implemented only after the notification of the aforesaid scheme by the Central Board of

Direct Taxes.


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6r. PAYMENT OF UNITS OR LONG TERM CAPITAL GAINS [SEC.

196B]

Where any income is payable in respect of units referred to in section 115AB or by way of

long term capital gain arising from the transfer of such units to an Offshore Fund, the person

responsible for making the payment shall, at the time of credit of such income to the account of thepayee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other

mode, whichever is earlier, deduct income tax thereon at the rate of 10 percent.


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6s. INCOME OR LONG TERM CAPITAL GAIN FROM FOREIGN

CURRENCY BONDS/GLOBAL DEPOSITORY RECEIPTS [SEC.

196C]

The provisions of section 196C are given below:

Who is the payer Any person responsible for paying income/long

term capital gain from GDR/bonds.

Who is the recipient A non-resident person

Payment covered Income/long term capital gain from GDR/bonds


whichever is earlier.


deduction

-



When the provisions are not applicable Dividend referred to in section 115-O



No provision


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6t. INCOME OF FOREIGN INSTITUTIONAL INVESTORS FROM

SECURITIES [SEC. 196D]

The provisions of section 196D are given below:

Who is the payer Any person responsible for paying income inrespect of securities referred to in section 115AD

Who is the recipient Foreign Institutional Investor

Payment covered Income in respect of securities referred to in

section 115AD




deduction

-



When the provisions are not applicable Dividend referred to in section 115-O; capital

gain arising from transfer of securities referredto in section 115AD



No provision


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7. OBTAININGA CERTIFICATE OF LOWER RATE FROM THEASSESSING OFFICER [SEC. 197]

The provisions of Sec. 197 are given below:

a.

Tax is deductible under section 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J,194K, 194LA or 195.

b. The recipient can apply in Form No. 13 to the Assessing Officer to get a certificateauthorizing the payer to deduct tax at lower or deduct no tax as may be appropriate.

c. The certificate of the lower rate shall be issued on plain paper directly to the personresponsible for paying income, under an advice to the applicant. The Assessing officer shall

obtain prior administrative approval of the Range Jt. CIT/Addl. CIT before issuing a certificate

under section 197(1).

However, in case of entities covered by rule 28AB, the Assessing Officer may issue a

certificate to the recipient authorizing payment of incomes without deduction of tax at source. The

recipient may furnish copies of such certificate to the person responsible for paying the income forthe purpose of no deduction of tax at source.

1. AdditionalConditions forCharitable Trust, Scientific Research Association, etc. [Rule 28AB]If the recipient of income is one of the two entities given below, then a few additional conditions

should be satisfied to make the above application in Form No. 13

i. It is receipt of income or deemed income derived from property held under trustwholly for charitable or religious purposes and it claims exemption under section 11

or section 12; or

ii. It is required to file a return in respect of a scientific research association, newsagency, association or institution, fund or trust or university or other educational

institution or any hospital or other medical institution or trade union referred to in

section 139(4C).

AdditionalConditions In any of the above cases, application in Form No. 13 can be

made if the following conditions are satisfied:

The person concerned has furnished the returns of income for all assessmentyears for which such return became due on or before the date on which the

above application in Form No. 13 is made;

The trust, scientific research association, news agency, association or institution,fund or trust or university or other educational institution or any hospital orother medical institution or trade union referred to above is for the time being

approved for the purpose of exemption from income tax: and

The applicant gives a list of deductors from whom amounts are to be receivedwithout deduction of tax at source every six months along with names,

addresses and the amounts received.


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2. How lower rate is determinedThe lower rate is determined on the basis of the higher of the following rates:

Average rate of the current year Current years average rate is determined on thebasis of the total income tax payable on estimated income, as reduced by the sum of

advance tax already paid and tax already deducted at source as a percentage of the

amount in respect of which the certificate of lower tax deduction is required. Average of the average rate of tax of preceding three years Average of the average

rate of tax assessed in the last three assessment years and total tax paid for each

year.

3. Provisions of Section 197AIf a declaration is submitted under section 197A by the recipient to the payer, then no tax is

deductible in a few cases. The provision of section 197A as are given in the table

Interest on

Securities [Sec.

193]

Dividend

[Sec. 194]

Interest other

than interest

on securities[Sec. 194A]

National

Saving

Scheme[Sec. 194EE]

Condition 1: Who is

recipientOther than a

company or firm

Resident

individual

Other than a

company or

firm

Resident

individual

Condition 2: What is

tax on total income of

the previous year

Nil Nil Nil Nil

Condition 3: How

much is total of

income covered by

sections 193, 194,

194A and 194EE

The amount of

exemption limit

The amount

of

exemption

limit

The amount

of exemption

limit

The amount

of

exemption

limit

Notes:

i. If the foresaid conditions are satisfied no tax is deductible if a declaration issubmitted in duplicate in the prescribed form (Form No. 15H for a senior citizen and

Form No. 15G for any other person).

ii. Condition 3 is not applicable up to May 31, 2002.iii. Condition 3 is not applicable from June 1, 2002 if the income of recipient is exempt

under section 10(20), (23AA), (23AAB), (23BB), (23BBA), (23BBC), (23BBD), (23BBE),

(23C), (23EB), (25), (25A,) (26BB) and (29A) Circular No.4/2002, dated July 16,

2002.

iv. Condition 3 is not applicable from June 1, 2003 if the recipient is a residentindividual who is 65 years or more at any time during the financial year.


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v. From April 1, 2003, no tax is deductible under section 194 in respect of dividendreferred to in section 115-O.

vi. The payer of the income is required to deliver to the Commissioner of Income Tax(to whom the Assessing Officer having jurisdiction to assess the payer is

subordinate) one copy of the aforesaid declaration on or before seventh day of themonth, next following the month in which the declaration is furnished to him.

Where payments are to be made to the same person more than once in a year, the

declaration in the relevant form may be furnished before the first payment in a year

becomes due. It may also be noted that in the declaration in Form No. 15G or 15H

particulars of only such securities are to be furnished the income from which is

payable by a person to whom declaration is furnished Circular No. 351, dated

November 26, 1982.

vii. It is the duty of the Assessing Officer to give an opportunity to rectify the defects inthe declaration in Form No. 15H.


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8. TIME LIMIT FOR PAYMENT OF TAX DEDUCTIONATSOURCE TO THE GOVERNMENT

Tax Deducted at Source is required to be paid to the Credit of the Central Government within the

time given below

Different Situations Time limit for deposit of tax Time limit for issue of

certificate to the recipient

When payer is the Government

or when payment is made on

behalf of the Government

Same Day In case of salary or insurance

commission within 30days from

the close of the financial year;

otherwise within one month

from the end of the month in

which tax I deducted at source.

When tax is deducted by a

person (other than

Government) under sections

193, 194A, 194C, 194D, 194E,194G, 194H, 194I, 194J, 195,

196A, 196B, 196C and 196D and

the amount is credited as on

the last date of the accounting

year.

Within two months from the

last date of the accounting year

Within two months and seven

day from the last date of the

accounting year

When the Assessing Officer has

permitted (with the prior

approval of the Joint

Commissioner) to make the

payment quarterly

- When such payment iscovered by sections 194A.

194D, 194H

- When such payment is

payment of salary

July 15, October 15, January 15and April 15

June 15, September 15,

December 15 and March 15

Within 14 days from the date ofpayment

Within 14 days from the date of

payment

Any other case Within one week from the last

date of the month in which tax

deduction is made

In case of salary or insurance

commission within 30 days

from the close of the financial

year; otherwise within one

month from the end of the

month in which tax is deducted

at source.


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9. ISSUE OF CERTIFICATE OF TAX DEDUCTION TO THERECIPIENT

The payer of the income is supposed to issue a certificate of tax deduction to the recipient in the

following format:

Different Payments Form No.

In case of salary payment to a resident individual where the income from salary

before deduction under section 16 does not exceed Rs. 1,50,000

16AA

In case of salary payment not covered by above 12BA and 16

In case of payment other than salary 16A


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10. QUARTERLY RETURN TO INCOME TAXDEPARTMENT

Different Payments

In case the person

deducting tax is a

Company or aGovernment

department or the

person whose books

are required to be

audited under section

44AB in the

immediately preceding

year or in whose case

number of deductees in

any of the quarterly

statement in the

immediately year is 50or more

In case the person

deducting tax is any

other person

Time-limit for

submission of return by

the person deducting

tax

Salary Form No. 24Q in

electronic format and

Form No. 27A

Form No. 24Q Within 15 days from

the end of each

quarter (76 days in the

case of last quarter)

Payment (Other than

Salary) to a resident

Form No. 26Q in


Form No. 27A

Form No. 26Q Within 15 days from

the end of each

quarter (76 days in the

case of last quarter)

Payment (Other than

Salary) to a Non-

Resident

Form No. 27Q in


Form No. 27A(Quarterly)

Form No. 27Q

(quarterly)

Within 14 days from

the end of each

quarter

In the case of a person given in Column 2 of the table (supra) the above TDS return should

be submitted in a computer readable media. For other person deducting tax at source, it is still

optional to file a paper return or return on computer media. The return is to be prepared on the

data structure provided by the NSDL and copied on a floppy. The floppy is to be affixed with a label

indicating name, permanent account number, tax deduction account number end address of the

person deducting tax, the period to which the return pertains, the form number of the return.

Separate floppy is to be used for each form of TDS (i.e. Forms 24Q, 26Q and 27Q) and each form of

floppy is to be submitted along with the statement in Form 27A.

Quarterly return cannot be submitted before deposit of TDS and (with effect from June 1,

2006) interest for late deposit of TDS (if any).


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Furnishing of quarterly returns regarding the details of non-deduction of tax by certain persons

[Sec. 206A] Section 206A has been inserted with effect from June 1, 2005. It has two sub-sections.

1. Sub-section (1) Sub-section (1) is applicable if the following conditions are satisfied a. The person who is otherwise responsible for deducting tax at source is (i) any

banking company, (ii) a co-operative society, (iii) a public company.

b. It is responsible for paying to a resident interest (other than interest on securities).c. Such interest (other than interest on securities) paid or payable during the financial

year does not exceed RS. 10,000 where the payer is a banking company or co-

operative society and Rs. 5,000 where payer is any other person.

If the above three conditions are satisfied, the person, responsible for making payment, is

not required to deduct tax at source under section 194A. However, with effect from June 1, 2005, a

banking company shall prepare quarterly returns (i.e. consolidated return for all branches) for the

period ending on June 30, September 30, December 31 and March 31 in each financial year and

deliver the same to the prescribed income tax authority (or the person authorized by such

authority). Such return should be submitted within one month from the end of each quarter in

digital format on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other compute

readable media [Form No. 26QAA].

2. Sub-section (2) Sub-section (2) is applicable if the following conditions are satisfied a. The payer is a person other than a person who is covered by sub-section (1).b. Such person is responsible for paying to a resident any income which is liable for

deduction of tax at source under section 192 to 194LA.

If the above two conditions are satisfied, the Central Government may require (by notification in the

Official Gazette) such person to prepare and delivery quarterly returns in the prescribed digital

format. Such return should be submitted within one month from the end of each quarter in digital

format on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other compute readable

media.


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11. CONSEQUENCES OF FAILURE TO DEDUCT ORDEPOSIT THE TAXAT SOURCE

The person responsible for deducting tax at source will be held as assessee in default and the tax he

ought to have deducted at source or he ought to have deposited will be collected from such person.

y If the person responsible for deducting or depositing the tax at source does not pay ordeposit the TDS then Interest u/s.201(1A) @ 12% p.a. from the date on which the tax was

deductible to the date on which such tax is actually paid will be levied on the amount of such

tax.

y The tax along with interest shall be a charge upon all the assets of the person/company,responsible for deducting tax at source.

Sec. 40(IA):

Particulars of deduction Particulars of paymentYear of deduction in

computing business income

In the month other than last

month of the previous year

Any day up to last day of

previous year

Previous Year

In the month other than last

month of the previous year

After the end of the previous

year i.e. in subsequent

previous year

Previous Year in which tax is

paid

In the last month of the

previous year

On or before due date of filing

of return of income specified

in section 139(1)

Previous Year

In the last month of the

previous year

After the aforesaid due date

of return of income

Previous Year in which tax is

paid

Penalty u/s 271C

Penalty u/s.271C is leviable if the assessee fails to deduct the tax at source within the prescribedtime. The penalty leviable is equal to the amount of tax the deductors failed to deduct.


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Failure to furnish TDS return 272A (2)(c)

If the deductor fails to furnish the TDS return within due date, he shall be liable for penalty of

Rs.100/- per day for the period of default.

Failure to furnish a copy of certificate - 272A(2)(g)

If the deductor fails to furnish a certificate to the payee within the prescribed time, he shall be

liable for penalty ofRs.100/- per day for the period of default.

The amount of penalty in relation to declaration under section 197A, shall not exceed the amount of

tax deductible or collectible.

Failure to apply for tan-272BB

If the deductors fails to apply for TAN within the prescribed time, he shall be liable for penalty ofRs.10000/-.

Prosecution u/s.276B

If the deductors fail to deposit the tax deducted by him at source, he shall be punishable with

rigorous imprisonment for a term for three months to seven years along with fine.

Non furnishing of pan

Requirement to furnish PAN is compulsory for deductor otherwise TDS shall be deducted @20%w.e.f. 01.04.2010.


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12. TDS RATESDuring the financial year 2008-09, tax is to be deducted at source at the following rates:

If the recipient is (a) an individual,

HUF, BOI or AOP (aggregate of

payment or credit) subject to taxdeduction does not exceed Rs.

10,00,000 or (b) a co-operative

society or (c) a local authority or

(d) a firm/domestic company and

aggregate payment/credit does

not exceed Rs. 1 crore

If the recipient is (a) an individual,

HUF, BOI or AOP (aggregate of

payment or credit) subject to taxdeduction does exceed Rs. 10,00,000

or (b) a co-operative society or (c) a

local authority or (d) a firm/domestic

company and aggregate

payment/credit does exceed Rs. 1

crore

Nature of Payment IT SC EC SHEC Total IT SC EC SHEC Total

1 2 3 4 5 6 7 8 9 10 11

192- Salary to a resident/non-

resident

Normal Rate

193- Interest on securities to a

resident

a. interest on (a)debentures/securities for

money issued by or on

behalf of any local

authority/statutory

corporation, (b) listed

debentures of a

company (with effect

from June 1, 2008, not

being listed securities in

demat form), (c) any

security of the Central or

State Government

security

- if the recipient is aresident other than a

domestic company

- if the recipient is adomestic company

b. any other interest onsecurities (including

interest on non-listed

debentures but

excluding interest on

securities mentioned in

proviso to section 193)

10

20

20

Nil

Nil

Nil

0.2

0.4

0.4

0.1

0.2

0.2

10.30

20.60

20.60

10

20

20

1

2

2

0.22

0.44

0.44

0.11

0.22

0.22

11.33

22.66

22.66

194- Dividend to a resident

a. deemed dividend under


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section 2(22)(e)

b. any other dividend20

Nil

Nil

Nil

0.4

Nil

0.2

Nil

20.60

Nil

22

Nil

2

Nil

0.44

Nil

0.22

Nil

22.66

Nil

194A- Interest other than

interest on securities to a

resident

- if recipient is aresident other than a

domestic company

- if recipient isdomestic company

10

20

Nil

Nil

0.2

0.4

0.1

0.2

10.30

20.60

10

20

1

2

0.22

0.44

0.11

0.22

11.33

22.66

194B- Winning from lottery or

crossword puzzle or card game

or other game of any sort to a

resident/ non-resident 30 Nil 0.6 0.3 30.90 30 3 0.66 0.33 33.99

194BB- Winning from horse

races to a resident/non-resident 30 Nil 0.6 0.3 30.90 30 3 0.66 0.33 33.99

194C- Payment to a residentcontractor/sub-contractor

a. payment to a contractorin case of advertising

contracts

b. payment to a contractoris case of other than

advertising contracts

c. payment to sub-contractor

1

2

1

Nil

Nil

Nil

0.02

0.04

0.02

0.01

0.02

0.01

1.03

2.06

1.03

1

2

1

0.1

0.2

0.1

0.022

0.044

0.022

0.011

0.022

0.011

1.133

2.266

1.133

194D- Insurance commission to a

resident

- if the recipient is aresident other than a

domestic company

- if the recipient is adomestic company

10

20

Nil

Nil

0.2

0.4

0.1

0.2

10.30

20.60

10

20

1

2

0.22

0.44

0.11

0.22

11.33

22.66

194E- Payment to a non-resident

sportsman or sports association 10 Nil 0.2 0.1 10.30 10 1 0.22 0.11 11.33

194EE- Payment in respect of

deposits under National Savings

Scheme, 1987 to a resident, non-

resident 20 Nil 0.4 0.2 20.60 20 2 0.44 0.22 22.66

194F- Payment on account of

repurchase of MF or UTI to a

resident/non-resident 20 Nil 0.4 0.2 20.60 20 2 0.44 0.22 22.66

194G- Commission on sale of

lottery tickets to a resident/non-

resident 10 Nil 0.2 0.1 10.30 10 1 0.22 0.11 11.33


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194H- Commission or brokerage

to a resident 10 Nil 0.2 0.1 10.30 10 1 0.22 0.11 11.33

194-I- Rent to a resident-

Final Tax Doc

Documents

Transcript of Final Tax Doc