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CA Final Course Paper 7 Direct Tax Laws Chapter 28 Rajeev Khandelwal FCA, DISA(ICAI)
Basics of TDS/TCS
Mechanism of TDS/TCS
Duties of Deductor
Learning Objective
2
TDS or Tedious?
3
TDS or Tedious? (contd.)
4
Advance Tax
Self Assessment Tax
Payment of Income Tax
5
Tax Deduction at Source
Tax Collection at Source
Payment of Income Tax (contd.)
6
7
Objectives TDS/TCS
Part of Income not paid.
Deposited in Government a/c as tax.
On behalf of Receiver of Income.
Entire tax on income deducted?
Salary : Yes. Others : No.
Shortfall/excess tax at time of filing ITR.
8
Mechanism of TDS/TCS
Different payments under different sections.
Deduction at specified rates.
By Person Responsible for Payment.
At time of Payment or Credit.
Tax Deduction at Source (TDS) (Sec 192 to 195)
9
Collection at Specified Rates.
At time of Receipt or Dr. to Party a/c.
By Seller of Goods.
Timber under forest lease, scrap etc.
Provider of specified services.
Parking, Toll Plaza.
10
Tax Collection at Source (Sec 206C)
Deducted on Payment or Credit.
Credit to Suspense etc. Applicable on Full Amount.
(Circular 715 of 8-8-95) Even on Service Tax in bill.
Exception: Rent. (Circular 4/28-4-08)
Different Sections : Different Rates.
11
Basic Principles of TDS
Surcharge & Cess on Tax. Payable on tax on Salary as
applicable. Other payments to Residents : NA.
Deductee must have valid PAN.
No PAN : TDS @ Minimum 20% .
12
Basic Principles of TDS
TDS Deposit : 7th of next month.
Delay in deduction/ deposit : Interest.
Quarterly TDS Statements :15 days.
TDS Certificates : 15 days from due date of TDS Statements.
13
Basic Principles of TDS
An Intro.
14
Type of Payment Section Exemption limit Rate (%)
Salary 192 As per IT Slabs for AY
Average Rate of Tax
Interest on Securities 193 5,000 10
Dividend 194 2,500 10
Interest other than Interest on Securities
194A Banks : 10,000 Others : 5,000
10
Winnings from Lottery or Crossword Puzzles
194B 10,000 30
15
TDS on Different Payments
Type of Payment Section
Exemption limit Rate (%)
Winnings from Horse Race
194BB 5,000 30
Payments to Contractors and sub-contractors
194C Per payment Per Year
30,000 75,000
Individuals/ HUF Others
1 2
Insurance Commission
194D 20,000 10
16
TDS on Different Payments (contd.)
Type of Payment Section Exemption limit
Rate (%)
Payments to Non-resident Sportsmen or Sports Associations
194E -
20
Payments in respect of Deposits under National Savings Scheme etc.
194EE 2,500
20
Repurchase of units by Mutual Fund 194F -
20
Commission on sale of Lottery Tickets 194G 1,000
10
Commission or Brokerage 194H 5,000
10
17
TDS on Different Payments (contd.)
Type of Payment Section Exemption limit
Rate (%)
Rent 194-I 1,80,000 Plant& Machinery
2
Land Building 10 Fees for Professional or Technical Services
194J 30,000 10
Payment of Compensation on Compulsory Acquisition of Immovable Property
194LA 2,00,000 10
Interest from Infrastructure Debt Fund to Non-residents
194LB - 5
18
TDS on Different Payments (contd.)
Type of Payment Section Exemption
limit
Rate (%)
Interest from Indian Company to Non-residents for foreign currency approved loans/long term infrastructure bonds
194LC -
5
Other Payments to Non-residents
195 -
Different rates for different
payments
19
TDS on Different Payments (contd.)
Type of Payment Surcharge
(2%)
Education
Cess (3%) Salary No Yes
Other Payments to Residents No No
Other Payments to Foreign Co. (Payment up to 1 cr.)
No Yes
Other Payments to Foreign Co. (Payment exceeds 1 cr.)
Yes Yes
Payments to Other Non-residents (Irrespective of amount)
No Yes
20
Surcharge & Cess on TDS (AY 2013-14)
No TDS on following payments :
21
Individuals & HUFs Tax Audit * Not Applicable
Type of Payment Section Interest other than Interest on Securities 194A Payments to Contractors /sub-contractors (Exemption to AOP/BOI also)
194C
Commission or Brokerage 194H
Rent 194-I
Fees for Professional/ Technical services & other payments u/s 194J
194J
Note : TDS to be deducted in other cases like 192, 194B, 195 etc.
Type of Payment Section Payments made for personal purposes Payments to Contractors /sub-contractors
194C Fees for Professional Services
194J
Note : TDS to be deducted in other cases like 192, 194I, 195 etc.
No TDS on following payments :
22
Individuals & HUFs Tax Audit * Applicable
Note : TDS applicable on : a. Fees for Professional or Technical Services for official purposes b. other sections.
Payments made for official purposes(194J)
Royalty
Non-compete fees etc.
No TDS on following payments :
23
Individuals & HUFs Tax Audit * Applicable (contd.)
Every Responsible Person to obtain TAN.
Structure : DELW01005G
Single TAN for all payments for TDS/TCS.
Apply in Form 49B (in duplicate).
In 1 month from end of month of first TDS/TCS.
Quote TAN in all challans, certificates etc.
24
Tax Deduction & Collection Account No. (TAN)
Application to AO. (Sec 195(2))
To find out appropriate % of sum chargeable.
General or Specific Order.
TDS on that portion only.
Mandatory : CBDT notifies Class of Persons/ Cases. (Sec 195(7))
TDS on Part Payment
Applicable for payments to Non-residents.
25
Deductor may agree to bear TDS.
Amount to be grossed up.
Deductee gets income without TDS.
Government gets TDS.
Income Net of Tax (Sec 195A)
Who bears TDS normally?
26 NA on non-monetary perks u/s 192(1A)
Government.
Reserve Bank of India.
Corporations established by or under Central Act (No Income Tax)
Mutual Funds specified u/s 10(23D) .
Exempted Entities (Sec 196)
Note : In case of interest on securities, Govt. etc. may own securities or have beneficial interest in them.
27
Apply to AO in Form 13. PAN must.
AO to issue certificate if estimated total income of payee justifies TDS at a lower or nil rate.
Certificate issued electronically.
Certificate issued individually to each Deductor .
Certificate of Lower/Nil TDS (Section 197)
28
Payment Section Salary 192 Interest on Securities 193 Dividends 194 Interest, other than Interest on Securities 194A Payments to Contractors and Sub-contractors 194C Insurance Commission 194D Commission etc. on lottery tickets 194G
29
Certificate of Lower/Nil TDS (contd.)
Payment Section Commission or Brokerage 194H Rent 194-I Fees for Professional or Technical Services or Royalty or Non-compete fee
194J
Income from units of Mutual Funds or UTI 194K Compensation for Compulsory Acquisition of Immovable Property
194LA
Incomes payable to Non-resident/Foreign Co. 195
30
Certificate of Lower/Nil TDS (contd.)
No TDS in some cases
31
32
Form 15 G/ 15H
Sec 194 194EE Sec 193 194A Payee can furnish declaration?
Dividend Withdrawal from NSS
Interest on securities
Interest other than on securities
Company No No No No Firm No No No No Resident Individual
Yes Yes Yes Yes
Others No No Yes Yes
33
Declaration by Payee
Tax on Estimated Income : Nil.
NA if incomes u/s 194+194EE+193+194A > Taxable.
Restriction on Persons < 60 years.
Form 15H : Senior Citizens & 15G : Others
Submitted once for each FY in duplicate.
Payer of Income to file 1 copy with Chief Commissioner or Commissioner by next 7th.
34
Declaration by Payee
Interest on loan/ deposit (taken on or after 1-4-2005) from Non-resident/NO Resident by Offshore Banking Unit. (Sec 197A(1D))
Any payment for New Pension System Trust u/s 10(44). (Sec 197A(1E))
35
No TDS without Declaration
Payments made to notified institutions etc. (Sec 197A(1F)).
36
No TDS without Declaration (contd.)
Notification 21/2012 of 13-6-2012. • No TDS to be deducted again, • In case of subsequent sale of software, • without modification.
Notification 56/2012 of 31-12-2012 Wef 1-1-13, no TDS on certain payments made to banks (other than foreign banks) Bank Guarantee Commission Cash Management Service Charges DEMAT Charges. Charges for Warehousing Services for Commodities Underwriting Service Charges Clearing charges (MICR charges) Credit Card or Debit Card Commission
Payments made to notified institutions etc. (Sec 197A(1F)).
37
No TDS without Declaration (contd.)
All TDS deemed to be Income Received. Income = 100 TDS =10 Net Receipt = 90. Income =90+10=100 Exception : TDS on non-monetary perks by employer.
38
TDS= Income Received (Sec 198)
CBDT makes rules for giving credit of TDS
Rules for giving credit to another person.
Income Tax Assessee & Deductee not same.
Declaration by Deductee. (Rule 37BA(2)(i))
On behalf of Minor for credit to Parent.
39
Credit of TDS (Sec 199)
Specify AY for which credit to be given.
Deposit TDS by due dates.
File Quarterly TDS Statements.
40
Duties of Deductor (Sec 200)
41
Procedure for TDS Deposit
Government Deductors: Transfer Voucher / Challan.
Others: Challan. Challan 281 for all types of TDS.
Separate challan: Cos & other parties.
E-payment Mandatory: Cos & Tax Audit cases. (Rule 125)
Deposit of TDS
Deposit by Due date of Deposit
Transfer Voucher Same day
Challan By 7th of the month subsequent to the month of deduction.
No extra time for March cases.
Government
42
TDS deducted in Due Date of Deposit March By 30th April Other months By 7th of the month
subsequent to the month of deduction.
43
Others (Only Challan)
Deposit of TDS
44
Quarterly Deposit of TDS
Exceptional cases.
AO to allow Quarterly Deposit of TDS.
Prior Approval of Joint Commissioner.
45
Quarterly Deposit of TDS (contd.)
Quarter Due Date of Deposit
April- June 7 Jul
July - Sep 7 Oct
Oct - Dec 7 Jan
Jan - Mar 30 Apr
Deductor to furnish Quarterly TDS statements. DGIT(Systems) or authorized agency. Presently NSDL is authorized agency.
46
Quarterly TDS Statements
Type of Payment Form Salaries (both residents & non-residents) 24Q Payments other than salary to Residents 26Q Payments other than salary to Non-Residents 27Q
Due Dates of TDS Statements
Quarter Government Q1 (Apr-Jun) 31 Jul Q2 (Jul-Sep) 31 Oct Q3 (Oct-Dec) 31 Jan Q4 (Jan-Mar) 15 May
47
Others 15 Jul 15 Oct 15 Jan 15 May
Mandatory Companies Government Deductors Tax Audit in immediately preceding
year. Others ◦No. of deductee records >= 20 in a
Quarterly Statement of FY.
48
E-filing of TDS Statements
Others can file paper statements.
Option to e-file.
Summary of TDS Return in Form 27A (paper form) with e-TDS Return.
49
E-filing of TDS Statements
No. of deductee records in e-TDS/TCS return
Filing charges
(exclusive of Service
Tax)
Service Tax Filing charges
(inclusive of Service
Tax) 1-100 31.15 3.85 35.00
101 to 1000 178.00 22.00 200.00
More than 1000 578.50 72.50 650.00
50
Submission of TDS Statements
Submit Paper Statements also to TIN FCs.
No charges to TIN FCs for paper statements.
TIN FCs convert paper statements into e-TDS format.
51
Paper TDS Statements
Type of Payment
TDS Certificate Frequency Due Date
Salaries Form 16 Yearly 31 May of next FY
Other payments (whether to Residents or Non-residents)
Form 16A Quarterly 15 days from due date of
Quarterly TDS Statement
52
TDS Certificates
Quarter Government Q1 (Apr-Jun) 15 Aug Q2 (Jul-Sep) 15 Nov Q3 (Oct-Dec) 15 Feb Q4 (Jan-Mar) 30 May
53
Due Dates of Form 16A Others
30 Jul 30 Oct 30 Jan 30 May
TDS Certificates
Mandatory to Download from www.traces.gov.in ◦ Form 16 Part A. ◦ Form 16A Payee’s PAN MUST to download.
Deductor to prepare : ◦ Form 16 Part B. ◦ Form 12BA (details of perks) if salary > Rs. 1,50,000/-.
54
Digital Signature Optional.
Delay : Penalty Rs. 100/- per day.
Penalty <=TDS.
55
TDS Certificates (contd.)
56
No Direct Demand (Section 205)
Assessee not to pay tax
On income on which TDS deducted
57
Statement of Interest without TDS
(Section 206A) To be filed by every :
• bank • co-operative society engaged in banking • public co. providing long term finance for housing
Applicable on interest paid to Resident by : Bank & Co-operative society : up to Rs. 10,000/- Others : up to Rs. 5,000/-
Form 26QAA to be filed electronically.
Due Dates : 31 July, 31October, 31 January & 30 June after respective quarter.
Deductee to furnish PAN to deductor.
No exemption to Non-residents.
Proper credit of TDS to account of deductee.
Failure to furnish PAN to Deductor.
TDS at higher of : • Rate specified in Income Tax Act. • Rate in force i.e. mentioned in Finance Act. • 20%.
58
No PAN : Higher TDS (Sec 206AA)
No certificate of TDS at lower rate by AO. (Section 197)
Form 15G or 15H. (Section 197A)
PAN furnished to deductor :
• Invalid • Not of deductee.
No PAN : Higher TDS (contd.)
59
Computerised Processing of TDS Statements like ITRs wef 1-4-2010.
To reduce Manual Interface with ITD.
Adjustment in Processing : • Arithmetical Errors. • Incorrect Claims.
Refund/Demand determined.
Intimation in 1 year from end of FY in which statement filed.
Computerised Processing
60
Meaning of TDS /TCS.
Mechanism of TDS/TCS.
TDS Rates.
Duties of Deductor.
Due dates.
61
Lesson Summary
62
Amount of Payment = 100.
TDS Rate =10%.
TDS borne by :
Deductee : ?
Deductor : ?
Any exception?
63
Question 1
Amount of Payment = 100.
TDS Rate =10%.
TDS borne by :
Deductee : Payment= 100-10=90. Deductor : Payment=111-11=100
(100/90*100) Exception : No grossing up in case of
Tax paid u/s 192(1A)
64
Solution 1
• Sunita aged 58 years.
• Earns Rs. 3,00,000 Interest from Co.
deposits.
• TDS is applicable u/s 194A.
• Deposit in PPF : Rs. 1,00,000.
65
Question 2
• Income Tax for AY 2013-14 = Nil.
• Can A give Declaration?
• No, as income liable to TDS >
taxable limit even though tax is nil.
• Krishna Devi, a senior citizen can
give declaration in similar case.
66
Solution 2
Form 15H is applicable to ? Solution. Form 15H : Senior citizens. Form 15G : Others.
67
Question 3
Rent of Rs. 2,00,000 p.a for office paid by Aditya Haldia, a sole proprietor whose accounts are audited u/s 44 AB to Rachna Gupta? Whether TDS applicable?
What would be the position if accounts are not audited u/s 44AB?
Solution. TDS is to be deducted u/s 194-I in case of an individual or HUF only if accounts are audited in the immediately preceding financial year. So TDS is applicable only if in last year he was subject to tax audit.
.
68
Question 4
Question 5
Amitabh Bachhan paid Rs. 20 lacs to his architect for preparing layout for his new residential bunglow. Tax Audit is applicable to him. Whether TDS applicable u/s 194J? Solution. No. Payment made for personal purposes.
69
ICICI bank pays rent of Rs. 50,00,000 p.a to Delhi Government for its branch office in Civic Centre. Whether TDS is applicable ? Solution. No. TDS is exempt u/s 196, being payment made to Government.
70
Question 6
ICICI Bank credits Rs. 2.37 cr on 30-6-12, towards interest on savings accounts, in a separate account , in Core Banking Solution (CBS), interest not credited to individual accounts, done only for macro monitoring. Whether TDS applicable u/s 194A? Solution. No. Circular 3/2010 of 2-3-2010.
71
Question 7
Question 8
Kanishka Enterprises (P) Ltd. pays interest of Rs. 50,000/- to Naman, a minor.
His father Vishal requests it to issue TDS certificate in his (Vishal’s) name.
Is it possible? Solution. Yes. Rule 37BA(2).
72
Question 9
HDFC Bank credits audit fee to CA on 31-3-2013. HDFC deducts TDS u/s 194J. CA does work in FY 2013-14. CA shows income on Receipt basis in 2013-14. In which year should he claim TDS? Solution. TDS should be claimed in the year in which income offered to tax. So it should be claimed For FY 2013-14 (AY 2014-15). (Rule 37BA(3)(i)).
73
Niyati, a sole proprietor has 2-3 entries of TDS every quarter. Is e-filing mandatory for her?
Solution. No. Mandatory only if entries in a quarter exceed 19 (in cases where e-filing not mandatory otherwise).
74
Question 10
Question 11
Sandhu Bros, a Transporter does not have PAN. Is TDS to be deducted on transportation charges? If yes, at what rate? Solution . No TDS on transportation charges if PAN furnished by transporter. Otherwise @ 20%.
75