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TAX DEDUCTED AT SOURCE [INCOME TAX ACT, 1961]Prepared by:ANMOL GOYAL

Under able mentorship of:CA. R. VARADHARAJAN, PARTNERCA. B. UDAYAKUMAR, SENIOR MANAGERAtul Kulshrestha & Co.

11What is TDS?Tax Deducted at Source (TDS)aims at collection of revenue at the very source of income;an indirect method of collecting tax;combines the concepts of pay as you earn and collect as it is being earned.

TDS is one of the modes of collection of taxes, by which a certain percentage of amounts are deducted by a person at the time of making/crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government account. 2Why TDS was conceptualized?Income is earned over a period of time but the assessment/ determination of tax liability takes place much laterHence,To avoid a liquidity problem for the tax payer andto ensure a regular flow of revenue for the government The Income tax Act has provided for periodic recovery of tax from income liable to tax by requiring the tax to be deducted at source from certain income/payments as and when such income/payments are credited.

3Concept of TDSThe concept of TDS is that the person responsible for making certain specified payments is required to deduct tax at the prescribed rates from the payments made to a specified recipient in accordance with the provisions of the Income Tax Act.

It facilitates sharing of responsibility of tax collection between the deductor and thetax administration. It ensures regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion as well as expands the tax net.4Who is to deduct TDS?Every person responsible for making payment of nature covered by TDS provisions of Income Tax Act shall be responsible to deduct tax.

However in case of payments made under sec. 194A, 194C, 194H, 194I and 194J in respect of individual and HUF, only if the turnover or professional receipt exceeds sum of Rs. 1 Crore or Rs. 25 lakh respectively (w.e.f. April 1, 2012) in previous year, he is required to deduct tax at source.

These persons are mainly:Principal Officer of a company for TDS purpose including the employer in case of private employment or an employee making payment on behalf of the employer.[Cont..]

5Who is to deduct TDS?[Cont..]DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such. In the case of "interest on securities" other than payments made by or on behalf of the Central govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof.

Such person is calledDeductorwhile the person from whom the tax is deducted is calledDeductee.

6Responsibilities of the Deductor/ CollectorDeduct Tax at the time of payment/credit

Any person responsible for paying any sum, on which tax is deductible, shall deduct tax at the prescribed rates at the time of payment/credit.

Tax must be deducted at the time of payment in cash or cheque or credit to the payee's account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee's account and TDS must be made at the time of such credit.[Cont..]7Responsibilities of the Deductor/ Collector [Cont..]Deposit deducted tax within the prescribed time limits:In case of Government deductors: on the same day where the tax is paid without production of an income-tax challan; andon or before seven days from the end of the month in which the deduction is made or income-tax is due under sub-section (1A) of section 192, where tax is paid accompanied by an income-tax challan.In case of Others :on or before 30th day of April where the income or amount is credited or paid in the month of March; andfor TDS made in March : On or before 30th Aprilin any other case, on or before seven days from the end of the month in which-the deduction is made; orincome-tax is due under sub-section (1A) of section 192.

8Due dates for filing of Quarterly StatementsForm No.ParticularsDue date for furnishing statementGovernment NonGoverment24QQuarterly return ofTDS fromSalariesJuly 31st

October 31st

January 31st

May 15thJuly 15th

October 15th

January 15th

May 15th26QQuarterly return of TDSin respect of all paymentsother than Salaries27QQuarterly return in respectof payments made toNon resident27EQQuarterly Return of TCSJuly 15th, October 15th,January 15th , May 15th9Payment covered under the scheme of TDS Salary (Sec.192) Interest on Securities (Sec.193) Dividends (Sec.194) Interest other than Interest on Securities (Sec.194A) Winnings from Lotteries or crossword puzzles (Sec.194B) Winnings from Horse Races (Sec.194BB) Payments to Contractors and Sub-contractors (Sec.194C) Insurance Commission (Sec.194D) Payment to Non-resident sportsmen or sports association (Sec.194E) Payment in respect of NSC (Sec. 194EE)[Cont..]

1010Payment covered under the scheme of TDS [Cont..]Payments in respect of Repurchase of units of Mutual Funds or UTI (Sec.194F)Commission on Sale of Lottery Tickets (Sec.194G)Commission or Brokerage (Sec.194H)Rent (Sec.194I)TDS on transfer of Immovable property (Sec. 194IA)Fees for Professional or Technical Services (Sec.194J)Payment of Compensation on acquisition of certain immovable property (Sec.194LA)Other Sums (Sec.195)Long term capital gain (Sec.196B)Income or Long term capital gain from Foreign Currency bonds/Global Depository Receipts (Sec.196C)Income of Foreign Institutional Investors from Securities (Sec.196D)11Salary (Sec.192)Who is the payerEmployerWho is the recipientEmployeePayment CoveredTaxable Salary of the employeeAt what time TDS to be deductedAt the time of paymentMaximum amount which can be paid without tax deductionThe amount of exemption limit (i.e.`2,00,000/5,00,000/10,00,000 for A.Y. 2014-15)Rate at which tax to be deducted.As per CalculationWhen the provisions are not applicable--Is it possible to get the payment without tax deduction or with lower tax deductionThe employee can make application in Form No.13 to the Assessing Officer to get the certificate of lower tax deduction or no tax deduction.1212Winnings from Lotteries or Crossword Puzzles (Sec. 194B)Who is the payerAny person paying winnings from lotteries/crossword puzzles/card games/other gamesWho is the recipientAny PersonPayment coveredWinnings from lotteries/crossword puzzles/card games/other gamesAt what time TDS to be deducted.At the time of PaymentMaximum amount which can be paid without tax deductionIf the amount payment is`10000/- or less than`10000/-Rate at which TDS to be deducted

30%When the provisions are not applicable--Is it possible to get the payment without tax deduction or with lower tax deduction

Not Possible1313Winnings From Horse Races (Sec. 194BB)Who is the payerAny person paying winnings from horse racesWho is the recipientAny personPayment coveredWinnings from Horse RacesAt what time TDS to be deducted.At the time of paymentMaximum amount which can be paid without tax deductionIf the amount of payment is Rs. 5000/- or less than Rs. 5000/-Rate at which TDS to be deducted30%When the provisions are not applicable--Is it possible to get the payment without tax deduction or with lower tax deduction

Not Possible1414Payments to Contractors And Sub-contractors (Sec.194C)Who is the payerSpecified personWho is the recipientA resident personRate of TDS1% if payment made to individual or HUF or 2% in any other casePayment CoveredConsideration for any Work ContractAt what time TDS has to be deductedAt the time of payment or at the time of creditMaximum amount which can be paid without tax deductionThe tax is required to be deducted if a single payment exceeds Rs. 30000/- or if the aggregate payments exceed Rs. 75000/- per annumIs it possible to get the payment without tax deduction or with lower tax deductionThe recipient can make application to the Assessing Officer in Form No. 131515Insurance Commission (Sec.194D)Who is the payerAny person paying insurance commission.Who is the recipientA resident personPayment coveredInsurance CommissionAt what time TDS to be deducted.At the time of payment or at the time of credit whichever is earlierMaximum amount which can be paid without tax deductionIf the amount of payment is Rs. 20000/- or less than Rs. 20000/-Rate at which TDS to be deducted

10%When the provisions are not applicable--Is it possible to get the payment without tax deduction or with lower tax deduction

The recipient can make an application in Form No. 13 to the Assessing Officer to get the certificate of lower tax deduction or no tax deduction.1616Commission on Sale of Lottery Tickets (Sec.194G)Who is the payerAny person paying commission of sale of lottery ticketsWho is the recipientAny personPayment coveredCommission on sale of lottery ticketsAt what time TDS to be deducted.At the time of payment or at the time of credit, whichever is earlierMaximum amount which can be paid without tax deductionIf the amount of payment is`1,000 or less than`1,000Rate at which TDS to be deducted

10%When the provisions are not applicable--Is it possible to get the payment without tax deduction or with lower tax deduction

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 deduction1717Commission or Brokerage (Sec.194H)Who is the payerAny person paying commission or brokerageWho is the recipientAny resident personPayment coveredCommission or brokerage (not being insurance commission)At what time TDS to be deducted.At the time of payment or at the time of credit, whichever is earlierMaximum amount which can be paid without tax deductionIf the amount of payment is Rs. 5000 or less than Rs. 5000Rate at which TDS to be deducted

10%When the provisions are not applicable--Is it possible to get the payment without tax deduction or with lower tax deduction

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 deduction1818Rent (Sec.194-I)Who is the payerAny person paying rent (not being an individual or HUF whose books of account are not required to be audited under section 44AB in the immediately preceding financial year)Who is the recipientA Resident PersonPayment coveredRentAt what time TDS to be deducted.At the time of payment or at the time of credit, whichever is earlierMaximum amount which can be paid without tax deductionRs. 180000/-Rate at which TDS to be deducted

For rent of Plant andMachinary@2% and forFor rent of Land or Building including Furniture etc. @10%Is it possible to get the payment without tax deduction or with lower tax deductionThe recipient can make application in Form No. 131919Transfer of Immovable property (Sec.194-IA)Who is the payerAny person (transferee) who purchases any immovable property (whether residential or commercial) for a considerationWho is the recipientAResident seller (transferor)Payment coveredConsideration paid to acquire such fixed assetAt what time TDS to be deducted.At the time of payment or at the time of credit, whichever is earlierMaximum amount which can be paid without tax deductionRs. 50,00,000/-Rate at which TDS to be deducted

1% of the amount paid to a resident sellerIs it possible to get the payment without tax deduction or with lower tax deductionThe option of obtaining certificate from the A.O. u/s. 197 prescribing NIL rate or lower rate of TDS is not available in the above case2020Fees for Professional or Technical Services (Sec.194J)Who is the payerAny person paying professional charges (not being an individual or HUF whose books of account are not required to be audited under section 44AB in the immediately preceding financial year)Who is the recipientAny PersonPayment coveredProfessional services, technical services, Royalty,At what time TDS to be deducted.At the time of payment or at the time of credit, whichever is earlierMaximum amount which can be paid without tax deductionIf the amount of payment during the financial year is Rs. 30000 or less than Rs. 30000Rate at which TDS to be deducted

10%Is it possible to get the payment without tax deduction or with lower tax deduction

The recipient can make application in Form No. 1321Consequences of non-compliance with TDS provisionsExpenditure claimed disallowedAs per section 40(a)(ia) of the IT Act, the following expenditure will be disallowed from computation of business income of the deductor, if TDS is not made or tax deducted has not been paid on or before the due date for filing return of income.Interest (TDS u/s 194A);Commission or Brokerage (TDS u/s 194H);Rent (TDS u/s 194I);Professional/technical fee/Royalty (TDS u/s 194J);Amount paid to a contractor or sub contractor (TDS u/s 194C). The above expenditure will be allowed as a deduction in computing the income of the previous year in which such TDS has been paid. [Cont..]22Consequences of non-compliance with TDS provisions [Cont..]Assessee in default An assessee shall be deemed to be in default in respect of :Non deduction of tax at sourceNon payment, in whole or in part, of the tax deducted

Amendment to section 201w.e.f 1-7-2012, if the payer has not deducted tax, he shall not be deemed to be an assessee in default in case :The recipient has included such income in the return submitted u/s.139 and has paid tax on such income and The payee submits a certificate to this effect from a chartered accountant (Form No.26A)[Cont..]23Consequences of non-compliance with TDS provisions [Cont..]Note: The amendment is not applicable if the recipient is a Non resident.

If any deductor who is not considered as an assessee in default as per the above provision, interest u/s.201(1A) under clause(1) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income (w.e.f 01.07.2012).

[Cont..]24Consequences of non-compliance with TDS provisions [Cont..]Interest

[Cont..]

25SectionNature of defaultInterest201(1A)Non-deduction of tax atsource, either in whole orpart. After deduction,non payment of tax,either in whole or part.Non-payment of tax u/s192(1A).simple interest @ 1% per monthfrom the date on which tax wasdeductible to the date on whichtax is actually deductedsimple interest @1.5% per month from the dateon which tax was deducted to thedate on which tax is actually paidConsequences of non-compliance with TDS provisions [Cont..]Levy of fee u/s 234E (w.e.f. 01.07.2012)

Failure to file TDS/TCS quarterly statements shall be liable for a fee of Rs.200 per day of default and shall not exceed the amount of tax deductible or collectible. The fee shall be paid before delivering the quarterly statements.

[Cont..]26Consequences of non-compliance with TDS provisions [Cont..]Penalty

[Cont..]

27SectionNature of defaultPenalty271CFailure to deduct the wholeor any part of tax at sourceSum equal to the amount of taxwhich was failed to be deducted271CAFailure to collect the whole orany part of tax at source (TCS)Sum equal to the amount of taxwhich he failed to collect271H(1)(a)Failure to submit quarterly returnPenalty of Rs.10,000 to Rs.1,00,000271H(1)(b)for furnishing quarterly returnswith incorrect informationNo penalty shall be levied if therevised returns are filed within a period of one year from the due date.Consequences of non-compliance with TDS provisions [Cont..]Penalty [Cont..]

28SectionNature of defaultPenalty272BFailure to comply with provisionsof Section139A for quoting PanRs.10,000272BBFailure to obtain TANRs.10,000272A(2)1. Failure to issue TDS certificates2. Failure to deliver declaration inForm15G/15H3. Failure to file quarterlystatements (only till 30-06-2012)Rs.100 for every day during which the failure continues but the penalty shall not exceed the amount of tax DeductibleConsequences of non-compliance with TDS provisions [Cont..]Prosecution

29SectionNature of defaultProsecution276BFailure to pay Tax Deducted at SourcePunishable with rigorous imprisonment for minimum 3 months , maximum 7 years and with fine276BBFailure to pay Tax Collectedat Source (TCS)Punishable with rigorous imprisonment for minimum 3 months , maximum 7 years and with fineCertain peculiar TDS related issuesAmendment in TDS provisions do not cast a liability to deduct tax on amount already credited or paid before such amendment The Banglore branch of the Income Tax Appellate Tribunalin the case of Wifi Networks Pvt. Ltd. held that if the payment is made subsequent to an amendment in TDS provisions under the Income Tax Act, there is no obligation to deduct tax where the amount is paid or credited before such amendment.

[Cont..]30Certain peculiar TDS related issues [Cont..] An employer is under no obligation to collect and examine the supporting evidence to a declaration submitted by an employee The Supreme Court held that an employer is under no obligation to collect and examine the supporting evidence to a declaration submitted by an employee to the effect that he has actually utilised the amounts for the specified purposes in deciding the liability to TDS u/s. 192. This was decided by SC in the case of ITI Limited v CIT. Same was also confirmed in the case of CIT v Larsen & Toubro. [Cont..]31Certain peculiar TDS related issues [Cont..]S. 194J applies to payments made to non-professionals such as hospitals by TPA(Third party Administrators)

It has been decided by Delhi High Court that though a hospital by itself, being an artificial entity, is not a medical professional, yet it provides medical services by engaging the services of doctors and qualified medical professionals. These are services rendered in the course of the carrying on of the medical profession. S. 194J applies to payments made to non-professionals such as hospitals. It was decided in the case Dedicated Health Care Services TPA vs. ACIT.32

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34ANMOL GOYALCA FINALE-mail: anmol.goyal@icai.org anmol@atulkul.com

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