TDS under Income Tax, India

1

TECHNICAL ISSUES RELATING TO E-FILING OF

TDS & INCOME TAX RETURNS AND OTHER RECENT AMENDMENTS

BY

C A S ANDESH MUNDRAFCA, DISA, DIRM

SANDESH MUNDRA & ASSOCIATESChartered Accountants

TAX POEMTAX POEMby the Income Tax Departmentby the Income Tax Department

Tax his land, tax his wage,Tax his land, tax his wage,Tax his bed in which he lays.Tax his bed in which he lays.

Tax his tractor, tax his mule,Tax his tractor, tax his mule,Teach him taxes is the rule.Teach him taxes is the rule.

Tax his ties, tax his shirts,Tax his ties, tax his shirts,Tax his work, tax his dirt.Tax his work, tax his dirt.

Tax his chew, tax his smoke,Tax his chew, tax his smoke,Teach him taxes are no joke.Teach him taxes are no joke.

If he hollers, tax him more,If he hollers, tax him more,Tax him until he's good and sore.Tax him until he's good and sore.

Tax his coffin, tax his grave,Tax his coffin, tax his grave,Tax the sod in which he lays.Tax the sod in which he lays.

Put these words upon his tomb,Put these words upon his tomb,"Taxes drove me to my doom!""Taxes drove me to my doom!"And when he's gone, we won't relax,And when he's gone, we won't relax,We'll still be after the inheritance TAX!We'll still be after the inheritance TAX!

1. Brief about the recent changes in the TDS Regime

2. Highlights of the PROPOSED new system.a) “Then and Now” regarding TDS/TCS

payment schemeb) “Then and Now” regarding TDS/TCS

Returns filing schemec) “Then and Now” regarding Certificates

issuance schemed) Filing up Form No. 24Ce) Amendments in Form Nos.

24Q/26Q/27Q/27EQ3. New notifications with regard to Income TAX E-Filing

4. Recent Amendments in Finance Budget effective for F.Y. 2009-10 related to TDS

5. TDS and Direct Tax code6. Exercise

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SYNOPSIS FOR THE SESSION

1

Notification No - Notification No - 31/200931/2009 dated 25dated 25thth March, 2009. March, 2009.

These rules may be called the These rules may be called the Income-tax (8th Amendment) Rules, 2009 which sought Income-tax (8th Amendment) Rules, 2009 which sought to amend Rules 30, 31, 31A, 31AA of the Income Tax to amend Rules 30, 31, 31A, 31AA of the Income Tax Rules.Rules.

Clarification’s circular issued by CBDT on 21Clarification’s circular issued by CBDT on 21stst May, 2009. May, 2009.

They shall come into force on the They shall come into force on the 1st day of April, 2009.1st day of April, 2009.

HIGHLIGHTS

OF THE NEW

SYSTEM

5

THE NEW SYSTEM ESTABLISHES 3 BROAD PRINCIPLES FOR ALLOWABILITY OF TDS / TCS CLAIMS:

• Amount has been deposited by the deductor / collector into the credit of the Government

• Information relating to the deductee has been furnished by the deductor / collector to the Tax Information Network

•Claim by the deductee matches the information furnished by the deductor / collector.

“THEN AND NOW”

REGARDING TDS/TCS PAYMENT SCHEME

PRESENT PRESENT PROPOSEDPROPOSED

TDS/TCS payment in TDS/TCS payment in electronic mode was electronic mode was mandatory only for mandatory only for Corporate deductors Corporate deductors and such deductors and such deductors liable for Tax Audit liable for Tax Audit U/s. 44 ABU/s. 44 AB

TDS/TCS payment in TDS/TCS payment in electronic mode now electronic mode now made mandatory for made mandatory for all type of all type of deductors.deductors.

Challan No. 281 was Challan No. 281 was used for payment of used for payment of TDS/TCS (electronic TDS/TCS (electronic and physical and physical payment mode)payment mode)

Form No. 17 is to be Form No. 17 is to be used for payment used for payment of TDS/TCS and the of TDS/TCS and the payment has to be in payment has to be in electronic mode electronic mode only.only.

6

PRESENTPRESENT PROPOSEDPROPOSED

No question of UTNs. No question of UTNs. Upon making the Upon making the payment, a Challan payment, a Challan Identification No. was Identification No. was allotted by the bank allotted by the bank accepting the Tax. accepting the Tax.

Unique Transaction Unique Transaction Number will be issued Number will be issued upon payment of the upon payment of the tax in addition to the tax in addition to the Challan Identification Challan Identification Number. Such UTNs Number. Such UTNs will be issued for will be issued for every transaction every transaction record furnished in record furnished in the form.the form.

The above referred The above referred CINs were used to be CINs were used to be quoted in TDS/TCS quoted in TDS/TCS Returns Form No. Returns Form No. 24Q/26Q/27Q/27EQ 24Q/26Q/27Q/27EQ and also on and also on Certificates in Form Certificates in Form 16/16A/27D.16/16A/27D.

The above referred The above referred UTNs will now be UTNs will now be required to be quoted required to be quoted in Form No. 24C, in Form No. 24C, TDS/TCS Returns in TDS/TCS Returns in Form No. Form No. 24Q/26Q/27Q/27EQ 24Q/26Q/27Q/27EQ and also on and also on Certificates in Form Certificates in Form 16/16A/27D.16/16A/27D.

“THEN AND NOW”


7

8


No details (like the No details (like the deductee, amount deductee, amount paid etc.) of paid etc.) of deductions were deductions were required while required while payment. Such payment. Such details were details were required while filing required while filing the TDS/TCS the TDS/TCS Returns.Returns.

Details like the PAN Details like the PAN of the deductee, of the deductee, Name of the Name of the deductee, TDS/TCS deductee, TDS/TCS done are required to done are required to be filled up in Form be filled up in Form No. 17 while making No. 17 while making the payment itself.the payment itself.

“THEN AND NOW”


8

“THEN AND NOW”

REGARDING TDS/TCS RETURNS

FILING SCHEME

9


TDS/TCS Returns TDS/TCS Returns were required to be were required to be filed quarterly (due filed quarterly (due dates being 15dates being 15thth July, July, 1515thth October, 15 October, 15thth January and 15January and 15thth June for the last June for the last quarter) in Form No. quarter) in Form No. 24Q/26Q/27Q/27EQ. 24Q/26Q/27Q/27EQ.

TDS/TCS Returns in TDS/TCS Returns in Form No. Form No. 24Q/26Q/27Q/27EQ 24Q/26Q/27Q/27EQ are now required to are now required to be filed for all the be filed for all the four quarters, all at four quarters, all at once, by 15once, by 15thth June June following the last following the last quarter of the quarter of the financial year.financial year.

Other than the Other than the above referred Form above referred Form No. No. 24Q/26Q/27Q/27EQ, 24Q/26Q/27Q/27EQ, no other forms were no other forms were required to be required to be submitted.submitted.

Instead a TDS/TCS Instead a TDS/TCS compliance compliance statement is statement is required to be filed required to be filed in Form 24C on a in Form 24C on a quarterly basis (due quarterly basis (due dates being 15dates being 15thth July, July, 1515thth October, 15 October, 15thth January and 15January and 15thth June.)June.)

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“THEN AND NOW”


FILING SCHEME

“THEN AND NOW”


FILING SCHEME


The TDS/TCS The TDS/TCS returns were returns were required to be required to be furnished furnished electronically (at a electronically (at a TIN FC Centre) in TIN FC Centre) in the case of a the case of a corporate deductor corporate deductor or where the or where the deductor is liable for deductor is liable for Tax Audit u/s. 44AB Tax Audit u/s. 44AB and physically in the and physically in the case of other case of other deductors deductors /collectors./collectors.

The TDS/TCS The TDS/TCS compliance compliance statement in Form statement in Form No. 24C is required No. 24C is required to be furnished to be furnished electronically at the electronically at the website of the website of the Income tax Income tax Department directly Department directly i.e. i.e. www.incometaxindiawww.incometaxindiaefiling.gov.inefiling.gov.in Such e-filing is Such e-filing is mandatory for all mandatory for all types of deductors.types of deductors.

http://www.incometaxindiaefiling.gov.in/

http://www.incometaxindiaefiling.gov.in/

PRESENTPRESENT PROPOSEDPROPOSED In case the In case the

deductor/collector is deductor/collector is not liable for any not liable for any TDS/TCS on the TDS/TCS on the payments, though he payments, though he holds a valid TAN, holds a valid TAN, he is not required to he is not required to file any TDS/TCS file any TDS/TCS Returns for that Returns for that period.period.

E-filing of Form 24C E-filing of Form 24C is mandatory for all is mandatory for all the assessees the assessees holding a valid TAN, holding a valid TAN, irrespective of irrespective of whether any whether any payment liable to payment liable to TDS/TCS has been TDS/TCS has been made or not.made or not.

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“THEN AND NOW”


FILING SCHEME

12

“THEN AND NOW”

REGARDING TDS/TCS

CERTIFICATE ISSUANCE


The TDS/TCS The TDS/TCS Certificates issued Certificates issued earlier didn’t earlier didn’t provided for the provided for the quoting of the UTNs, quoting of the UTNs, since the scheme of since the scheme of UTNs was not in UTNs was not in existence earlier.existence earlier.

The amended The amended TDS/TCS TDS/TCS Certificates in Form Certificates in Form No. 16/16A/27D No. 16/16A/27D provide for the provide for the quoting of UTNs quoting of UTNs alongwith the CINs. alongwith the CINs.

The local bar was so sure that his son was the strongest man around The local bar was so sure that his son was the strongest man around that they offered a standing Rs 1 Lac bet. The son would squeeze a that they offered a standing Rs 1 Lac bet. The son would squeeze a lemon until all the juice ran into a glass, and hand the lemon to lemon until all the juice ran into a glass, and hand the lemon to others. Anyone who could squeeze one more drop of juice out would others. Anyone who could squeeze one more drop of juice out would win the money.win the money.

Many people had tried over time - weightlifters, strongmen, etc. - but Many people had tried over time - weightlifters, strongmen, etc. - but no one could do it. One day a little man came into the bar wearing no one could do it. One day a little man came into the bar wearing thick glasses and simple dress, and said in a tiny voice "I'd like to try thick glasses and simple dress, and said in a tiny voice "I'd like to try the bet." After the laughter had died down, the son said OK, grabbed the bet." After the laughter had died down, the son said OK, grabbed a lemon, and squeezed away. Then he handed the same to the tiny a lemon, and squeezed away. Then he handed the same to the tiny man.man.

But the crowd's laughter turned to total silence as the man clenched But the crowd's laughter turned to total silence as the man clenched his fist around the lemon and six drops fell into the glass. As the his fist around the lemon and six drops fell into the glass. As the crowd cheered, the bar owner paid Rs 1 Lac, and asked the little man, crowd cheered, the bar owner paid Rs 1 Lac, and asked the little man, "What do you do for a living? Are you a wrestler, a weightlifter, what?""What do you do for a living? Are you a wrestler, a weightlifter, what?"

The man replied I am an

__________________

16

“THEN CAME A

DEFERMENT WHICH

POSTPONED THE

CHANGES

No.402/92/2006- MC (11 of 2009)No.402/92/2006- MC (11 of 2009)

The Central Board of Direct Taxes have The Central Board of Direct Taxes have decided to defer the implementation of decided to defer the implementation of

Notification No.31/2009 dated Notification No.31/2009 dated 25.3.2009 amending or substituting 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Rules 30, 31, 31A and 31AA of the

Income Tax Rules, 1962. The amended / Income Tax Rules, 1962. The amended / substituted Rules will now come into substituted Rules will now come into effect on 1st July 2009 instead of 1st effect on 1st July 2009 instead of 1st

April 2009.April 2009.

THEN CAME

ANOTHER

MAJOR

RELIEF FOR

EVERYONE

17

PRESS RELEASENew Delhi dated 30th June 2009The Central Board of Direct Taxes have further decided that the Notification No. 31 of 2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962 shall be kept in abeyance for the time being.

Taxpayers filing their income tax returns for assessment year (AY) 2009-10, or any other earlier AY, may continue to file their returns without mentioning the Unique Transaction Number (UTN) as required under the said Notification. The filing of such returns shall be treated as valid and in compliance to the requirements under section 139 of the Income Tax Act, 1961.

MAJOR RELIEF

18

Further, the date from which the Notification No. 31 / 2009 shall become applicable on tax deducted at source (TDS) or tax collected at source (TCS) and deposited during the current financial year shall be notified by the Central Board of Direct Taxes subsequently.

All deductors / collectors of TDS / TCS may continue to deposit their TDS / TCS and file their quarterly TDS / TCS returns as per procedure existing prior to issuance of Notification No.31 / 2009 dated 25.3.2009.

NEW CHANGES FOR e-FILING IT RETURN FOR AY 09-NEW CHANGES FOR e-FILING IT RETURN FOR AY 09-1010

[180 TAXMAN (ST)34] [180 TAXMAN (ST)34]

New users can register their Digital Certificate during New users can register their Digital Certificate during registration process.registration process.

After successful registration of user, User Activation After successful registration of user, User Activation URL sent through e-mail & user have to click on the URL sent through e-mail & user have to click on the activation URL & login…..activation URL & login…..

……Within 10 DAYS of time period otherwise the account Within 10 DAYS of time period otherwise the account will get expire and user will need to register again.will get expire and user will need to register again.

Secret Question & Answer has been added as part of Secret Question & Answer has been added as part of registration for more security.registration for more security.

Existing users can update their secret Q&A after the Existing users can update their secret Q&A after the login.login.

If the user wants to upload with the Digital Certificate, If the user wants to upload with the Digital Certificate, the user needs to go to MY ACCOUNT Menu-Update the user needs to go to MY ACCOUNT Menu-Update Digital Certificate page.Digital Certificate page.

NEW CHANGES FOR e-FILING IT RETURN FOR AY 09-NEW CHANGES FOR e-FILING IT RETURN FOR AY 09-1010

[180 TAXMAN (ST)34] [180 TAXMAN (ST)34]

Password- strength & confirmation indicator Password- strength & confirmation indicator provided for the registration, change password, provided for the registration, change password, forget password functionalities.forget password functionalities.

During XML file upload any error with the XML During XML file upload any error with the XML file will be displayed to the user at one shot. file will be displayed to the user at one shot. More than 5 errors will be given as a “CSV” file More than 5 errors will be given as a “CSV” file to the user for download.to the user for download.

After successful upload, the user can download After successful upload, the user can download the ITR vs. ITR Acknowledgement pdf in the the ITR vs. ITR Acknowledgement pdf in the success page itself.success page itself.

Zipped file needs to be saved in the user's Zipped file needs to be saved in the user's computer to open the file.computer to open the file.

Users can download the utilities/ Scheme for all Users can download the utilities/ Scheme for all the years.the years.

ITR-V TO BE FURNISHED AT ITR-V TO BE FURNISHED AT BANGALOREBANGALORE

ITR-V is to be furnished to the IT department, CPC, ITR-V is to be furnished to the IT department, CPC, Post Box No. 1, electronic city post office, Post Box No. 1, electronic city post office, Bangalore- 560100, KarnatakaBangalore- 560100, Karnataka

By ordinary post onlyBy ordinary post only Within 60 days of transmitting the data Within 60 days of transmitting the data

electronically or 30electronically or 30thth Sept, 09 whichever is later. Sept, 09 whichever is later. ITR-V sent by Speed post, Register post or courier ITR-V sent by Speed post, Register post or courier

will not be accepted.will not be accepted. No form ITR-V will be received in any other offices No form ITR-V will be received in any other offices

of the IT department or in any manner.of the IT department or in any manner. You will then get the e-acknowledgement of ITR V.You will then get the e-acknowledgement of ITR V.

The difference between the short and The difference between the short and long income tax forms is simple. If long income tax forms is simple. If you use the short form, the you use the short form, the government gets your money. If you government gets your money. If you use the long form, the tax advisor use the long form, the tax advisor gets your money.gets your money.

A man, was to appear at IT Dept for Assessment, asked his A man, was to appear at IT Dept for Assessment, asked his accountant for advice on what to wear. "Wear your shabbiest accountant for advice on what to wear. "Wear your shabbiest clothing. Let him think you are a pauper." clothing. Let him think you are a pauper." Then he asked his lawyer the same question, but got the Then he asked his lawyer the same question, but got the opposite advice. "Do not let them intimidate you. Wear your opposite advice. "Do not let them intimidate you. Wear your most elegant suit and tie.most elegant suit and tie. Confused, the man went to his wisdom guru, told him of the Confused, the man went to his wisdom guru, told him of the conflicting advice, and requested some solutionconflicting advice, and requested some solution

. . "Let me tell you a story," replied the wise man. "A woman, "Let me tell you a story," replied the wise man. "A woman, about to be married, asked her mother what to wear on her about to be married, asked her mother what to wear on her wedding night. 'Wear a heavy, long, flannel nightgown that goes wedding night. 'Wear a heavy, long, flannel nightgown that goes right up to your neck.' But when she asked her best friend, she right up to your neck.' But when she asked her best friend, she got conflicting advice: 'Wear what you are most comfortable at?got conflicting advice: 'Wear what you are most comfortable at? The man protested, "What does all this have to do with my The man protested, "What does all this have to do with my problem with the IRS?" problem with the IRS?"

"No matter what you wear, you are "No matter what you wear, you are going to get screwed." going to get screwed."

CHANGES MADE BY THE FINANCE CHANGES MADE BY THE FINANCE BILL, 2009 IN THE PROVISIONS WITH BILL, 2009 IN THE PROVISIONS WITH REGARD TO TDS UNDER THE INCOME REGARD TO TDS UNDER THE INCOME TAX ACT, 1961TAX ACT, 1961

W.e.f 1W.e.f 1stst April, 2009 – April, 2009 – The levy of surcharge has been withdrawn on The levy of surcharge has been withdrawn on

tax deduction at source in all cases.tax deduction at source in all cases.

Education Cess and Higher Education cess are Education Cess and Higher Education cess are to be included only in case of deductions on to be included only in case of deductions on payment to salary.payment to salary.

Please note that the Surcharge (only in case of Please note that the Surcharge (only in case of Companies) and SEC / HSEC (in all cases) Companies) and SEC / HSEC (in all cases) continue to be applicable for the purpose of continue to be applicable for the purpose of Advance Tax and Self Assessment Tax.Advance Tax and Self Assessment Tax.

W.e.f 1W.e.f 1stst April, 2009 – April, 2009 –

194 A-: Interest Payments194 A-: Interest Payments

Earlier rates:Earlier rates: To Company = 20% To Company = 20%

Revised RatesRevised Rates To company = 10% To company = 10%

W.e.f 1W.e.f 1stst October, 2009 – October, 2009 –

194-I: Rental Payments194-I: Rental Payments

Earlier rates:Earlier rates: Plant and Machinery = 10% Plant and Machinery = 10% Land or building or furniture or fittings to Land or building or furniture or fittings to

Individual/HUF = 15% Individual/HUF = 15% Land or building or furniture or fittings to Land or building or furniture or fittings to

Others = 20% Others = 20% Revised RatesRevised Rates w.e.f 1 w.e.f 1stst October, 2009 October, 2009 Plant and Machinery = 2% Plant and Machinery = 2% Land or building or furniture or fittings to Land or building or furniture or fittings to

anyone = 10% anyone = 10%

194-C: Contracts194-C: Contracts

Earlier rates:Earlier rates: Contracts = 2% Contracts = 2% Sub-Contracts = 1% Sub-Contracts = 1% Advertisement Contracts = 1% Advertisement Contracts = 1%

Revised RatesRevised Rates w.e.f 1 w.e.f 1stst October, 2009 October, 2009

Contracts to Individuals/HUF = 1% Contracts to Individuals/HUF = 1% Contracts to others = 2% Contracts to others = 2%

Surcharge and CessSurcharge and Cess No surcharge or Cess is applicable for TDS. Only No surcharge or Cess is applicable for TDS. Only the specified TDS rates should be considered for the specified TDS rates should be considered for deduction deduction Applicable for AY 2010-11 (FY 2009-10). Applicable for AY 2010-11 (FY 2009-10).

Payment to Transporters (w.e.f 1-10-09):Payment to Transporters (w.e.f 1-10-09): For any Transporters, if they Provide the PAN For any Transporters, if they Provide the PAN

number, the TDS on contract payments is NIL. number, the TDS on contract payments is NIL. But, if they do not provide the PAN during the But, if they do not provide the PAN during the

payment, 1% TDS has to be made for payment, 1% TDS has to be made for Individuals/HUF and at 2% for others. Individuals/HUF and at 2% for others.

Payments to transporters without deducting Payments to transporters without deducting TDS (as they have quoted PAN) should be TDS (as they have quoted PAN) should be reported by Deductor with PAN details to the reported by Deductor with PAN details to the Income Tax Department in the prescribed Income Tax Department in the prescribed format. format.

Further w.e.f 01-04-10 rate would be 20% if Further w.e.f 01-04-10 rate would be 20% if PAN No. is not quoted.PAN No. is not quoted.

1.1. SALARYSALARY Surcharge is not applicable Surcharge is not applicable

however already paid can be however already paid can be adjusted.adjusted.

With immediate Effect, for TDS / With immediate Effect, for TDS / TCS purpose, SEC / HSEC on salary TCS purpose, SEC / HSEC on salary payments made to resident payments made to resident taxpayers is still applicabletaxpayers is still applicable

Nature of Payment Section

RATES

(wef 1-10-2009)

Payment to (Recipient)

Individual / HUF

All other Cases

Interest

194A

10% 20%

Interest (by Bank) 10% 10%

Contractor

194 C

1% 2%

Sub Contractor 1% 2%

Advertisement Contract 1% 2%

Transporter

- If PAN Given NIL NIL

- If PAN not given 1% 2%

Commission & Brokerage 194 H 10% 10%

Rent –

- Plant, Machinery

194 I

2% 2%

- Land, Build. Furn. etc 10% 10%Professional / Technical Fees 194J 10% 10%

Compulsory PAN (Section 206AA)Compulsory PAN (Section 206AA)

It is mandatory to quote PAN in all correspondence, It is mandatory to quote PAN in all correspondence, bills and vouchers exchanged between Deductor and bills and vouchers exchanged between Deductor and deductee. deductee.

TDS shall be made at a flat rate of 20% (or actual TDS shall be made at a flat rate of 20% (or actual rate, whichever is higher) for any payments, where rate, whichever is higher) for any payments, where assessee has not quoted the PAN during the assessee has not quoted the PAN during the payment. payment.

This is applicable even in case where assessee gives This is applicable even in case where assessee gives Form 15G/15H u/s 197A. Form 15G/15H u/s 197A.

This is also applicable for Non resident Payments. This is also applicable for Non resident Payments. Assessing officer shall not issue the letter for Assessing officer shall not issue the letter for

lower/no deduction, If assessee doesn’t quote a PAN. lower/no deduction, If assessee doesn’t quote a PAN. Applicable for AY 2011-12 (FY 2010-11). Means the Applicable for AY 2011-12 (FY 2010-11). Means the

payments made on or after 01st April 2010. payments made on or after 01st April 2010.

TDS reconciliation (Section 200A)TDS reconciliation (Section 200A) A new section 200A is introduced. A new section 200A is introduced.

TDS return filed by the deductor will be processed TDS return filed by the deductor will be processed by the following way: by the following way: TDS deductible will be computed on the basis of data in TDS deductible will be computed on the basis of data in

TDS statement, after adjusting any arithmetic error or an TDS statement, after adjusting any arithmetic error or an incorrect claim. incorrect claim.

The interest, if any, shall be computed on the basis of the The interest, if any, shall be computed on the basis of the sums deductible on the basis of data in TDS statement. sums deductible on the basis of data in TDS statement.

Any amount payable by / refund to Deductor shall be Any amount payable by / refund to Deductor shall be determined. determined.

Intimation shall be sent to Deductor on Amount payable / Intimation shall be sent to Deductor on Amount payable / refundable. refundable.

The amount refundable, if any shall be granted to The amount refundable, if any shall be granted to Deductor. Deductor.

TDS returnsTDS returns Currently returns have to be filed Quarterly in Currently returns have to be filed Quarterly in

Form 24Q/26Q/27Q/27EQ Form 24Q/26Q/27Q/27EQ Currently government is not allowed to decide Currently government is not allowed to decide

the Periodicity of TDS returns, as the power is the Periodicity of TDS returns, as the power is limited only for structure of forms and the limited only for structure of forms and the manner. manner.

In order to provide administrative flexibility in In order to provide administrative flexibility in deciding the periodicity of such TDS related deciding the periodicity of such TDS related statements, the existing provisions are statements, the existing provisions are modified, so as to allow the Government to modified, so as to allow the Government to prescribe periodicity of such TDS statements prescribe periodicity of such TDS statements besides prescribing their form and manner. besides prescribing their form and manner.

Applicable from 01st October 2009. Applicable from 01st October 2009.

Computerized processing of TDS returnsComputerized processing of TDS returns

Currently every TDS return involves manual-cum-Currently every TDS return involves manual-cum-computerized processing inside the department. computerized processing inside the department.

To make the process efficient, department will To make the process efficient, department will computerize whole process, where statements regard to computerize whole process, where statements regard to TDS will be processed. TDS will be processed.

This will be on the same lines, how IT returns processing This will be on the same lines, how IT returns processing has been computerized in Income Tax Department. has been computerized in Income Tax Department.

This processing will allow manual interference for Any This processing will allow manual interference for Any arithmetical error in the statement. arithmetical error in the statement.

An incorrect claim, if such incorrect claim is apparent An incorrect claim, if such incorrect claim is apparent from any information in the statement, for example, in from any information in the statement, for example, in respect of rate of deduction of tax at source where such respect of rate of deduction of tax at source where such rate is not in accordance with the provisions of the Act. rate is not in accordance with the provisions of the Act.

A Centralized Processing Center may be established in A Centralized Processing Center may be established in this regard. this regard.

Applicable for AY 2011-12 (FY 2010-11). Applicable for AY 2011-12 (FY 2010-11).

Time Limit prescribed for verification of Time Limit prescribed for verification of TDS Return Statement and holding a TDS Return Statement and holding a person in default. As per the changes, no person in default. As per the changes, no order can be passed after a period of two order can be passed after a period of two years from the end of the Financial year in years from the end of the Financial year in which the statement of TDS is filed. which the statement of TDS is filed.

And if no return filed then four years from And if no return filed then four years from the end of the year in which payment the end of the year in which payment /credit is made./credit is made.

Direct Tax code – TDS Related Direct Tax code – TDS Related ProvisionsProvisions

Payments which are made without Payments which are made without deducting tax at source are disllowed. In deducting tax at source are disllowed. In case deductee has failed to furnish his PAN case deductee has failed to furnish his PAN number, then Tax would be deducted at number, then Tax would be deducted at Penal rate of 20% if the presribed rate is less Penal rate of 20% if the presribed rate is less than 20%.than 20%.

U/s 195 Payment of Income shall be deemed U/s 195 Payment of Income shall be deemed to have been made, if paid by a) Cash b) to have been made, if paid by a) Cash b) Cheque c) Credit to the account d) Other Cheque c) Credit to the account d) Other prescribed mode.prescribed mode.

Both the deductor and the deductee Both the deductor and the deductee can make applications to AO for can make applications to AO for certificate of no deduction of Income certificate of no deduction of Income Tax.Tax.

No exemption for payments to No exemption for payments to Government exemption on the basis Government exemption on the basis of self declaration forms 15G, 15H of self declaration forms 15G, 15H etc.etc.

RentRent Def’n of rent has been changed to Def’n of rent has been changed to

include any income derived directly or include any income derived directly or indirectly from letting out of the indirectly from letting out of the property.property.

Rate on P&M reduced to 1% and others Rate on P&M reduced to 1% and others kept at 10%. kept at 10%.

Overall ceiling kept at Rs. 1.20 Lacs.Overall ceiling kept at Rs. 1.20 Lacs.

InterestInterest Interest for residents at 10% and non residents Interest for residents at 10% and non residents

at 20%.at 20%. No distinction between interest on securities No distinction between interest on securities

and other interest.and other interest. Exemption for interest payments to financial Exemption for interest payments to financial

corporations, banks, insurance companies, corporations, banks, insurance companies, mutual funds and other notified institutions.mutual funds and other notified institutions.

Rejection to the exemption of interest paid by Rejection to the exemption of interest paid by co-operative bodies to co-operative societies.co-operative bodies to co-operative societies.

Rejection of exemption of interest payment Rejection of exemption of interest payment exceeding Rs. 10,000/- by co-operative banks exceeding Rs. 10,000/- by co-operative banks to its members.to its members.

Exemption is granted for interest on income Exemption is granted for interest on income tax refund.tax refund.

Fees for Professional or technical services, Fees for Professional or technical services, Royalty and Non-compete FeesRoyalty and Non-compete Fees Tax rate defined at 10%.Tax rate defined at 10%. Royalty includes transfer of rights in case of Royalty includes transfer of rights in case of

live coverage, cinematographic films, right to live coverage, cinematographic films, right to use of transmission by satellite, cable, fibre use of transmission by satellite, cable, fibre optic.optic.

No definition for Professional and Technical No definition for Professional and Technical ServicesServices

No exemption limit as earlier of Rs.20,000/-.No exemption limit as earlier of Rs.20,000/-.

Brokerage / CommissionBrokerage / Commission No definition.No definition. Exemption limit increased to Rs.5,000.Exemption limit increased to Rs.5,000. No exemption for brokerage in relation No exemption for brokerage in relation

to the securities transaction.to the securities transaction. Rate fixed at 10%Rate fixed at 10%

For all other payments rate would be For all other payments rate would be 10% for residents and 30% for non 10% for residents and 30% for non residents.residents.

Other IssuesOther Issues

Following Expenses not eligible for deduction in Income Following Expenses not eligible for deduction in Income Tax Return if TDS not deducted / PaidTax Return if TDS not deducted / Paid

If any expenditure is incurred on account of:-If any expenditure is incurred on account of:-payment of Interest, Commission or Brokerage, Fees for payment of Interest, Commission or Brokerage, Fees for Technical Services, Fees for Professional Services and Payment Technical Services, Fees for Professional Services and Payment to Contractors/Sub contractors and;to Contractors/Sub contractors and;

If TDS is not deducted as per rules or after deduction not paid

The expenditure shall not be eligible for deduction in any year.

If TDS deducted and Paid during the year within time allowed or late but before closure of year

The expenditure shall be eligible for deduction in the year to which it relates.

If TDS deducted in month of March and Paid after closure of year but before due date of filing of return of income

The expenditure shall be eligible for deduction in the year to which it relates.

If deducted TDS is paid after the closure of the year and after the permissible time/date

the expenditure shall be eligible for deduction in the year of payment

Issue 1Issue 1

Certain Issues :-Certain Issues :-

Whether TDS is required to be Whether TDS is required to be deducted when I have outsourced a deducted when I have outsourced a manufacturing activity to someone ?manufacturing activity to someone ?

There was a clarification in the recent There was a clarification in the recent budget on this issue which said undertaking budget on this issue which said undertaking manufacturing as per the specification of manufacturing as per the specification of the customer by using raw material the customer by using raw material purchase from person other than the purchase from person other than the customer would not amount to “Work”.customer would not amount to “Work”.

Issue 2Issue 2 Whether TDS is deducted on the service tax Whether TDS is deducted on the service tax

portion of the bill?portion of the bill?

As per CBDT circular No. 4 /2008, dated As per CBDT circular No. 4 /2008, dated 28-4-2008, no tax is deductible on the 28-4-2008, no tax is deductible on the service tax portion as it does have the service tax portion as it does have the nature of the income.nature of the income.

Issue 3Issue 3 Whether payments made to Hotel for room Whether payments made to Hotel for room

rent would get covered u/s 194 I where rent would get covered u/s 194 I where TDS has to be deducted at higher rates ?TDS has to be deducted at higher rates ?

Only if the rooms have been taken on rent Only if the rooms have been taken on rent under an agreement on a regular basis.under an agreement on a regular basis.

Where the payment is first made by the Where the payment is first made by the employee and is subsequently reimbursed, employee and is subsequently reimbursed, the question of TDS would not arise.the question of TDS would not arise.

Rate contracts entered into by agents are Rate contracts entered into by agents are not covered.not covered.

Issue 4Issue 4 What if you have won a Mercedes Car in What if you have won a Mercedes Car in

Lottery? Is tax required to be deducted?Lottery? Is tax required to be deducted?

The payer is bound to pay tax. In such a The payer is bound to pay tax. In such a case he needs to ensure that the receiver case he needs to ensure that the receiver of the lottery pays the tax and furnishes of the lottery pays the tax and furnishes the proof and only then he should release the proof and only then he should release the prize in Kind.the prize in Kind.

Issue 5Issue 5 In a case where interest compensation is In a case where interest compensation is

awarded by the court under compulsorily awarded by the court under compulsorily land acquisition matters? Who is land acquisition matters? Who is responsible to deduct TDS?responsible to deduct TDS?

It is the land acquistion collector who It is the land acquistion collector who is responsible for deduction of TDS as is responsible for deduction of TDS as he is responsible for making the he is responsible for making the payment and not the court which is payment and not the court which is just an enforcement agency.just an enforcement agency.

Section 198, 199 do not determine year of chargeability to tax – Sections 4, 5, Section 198, 199 do not determine year of chargeability to tax – Sections 4, 5, 28, 145 are charging sections and determine the year of chargeability to tax. 28, 145 are charging sections and determine the year of chargeability to tax. Income as per method of accounting regularly followed, credit of TDS is Income as per method of accounting regularly followed, credit of TDS is attached to it. attached to it. Smt. Varsha G. Salunke vs. DCIT (2006) 281 ITR (AT Sec) (Bom.) 55 (TM)Smt. Varsha G. Salunke vs. DCIT (2006) 281 ITR (AT Sec) (Bom.) 55 (TM)

Issue 6Issue 6

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http://www.acclaimimages.com/_gallery/_pages/0269-0703-0420-4918.html

Labells sold after the printing logo, trademark as per directions of the customer, is a Labells sold after the printing logo, trademark as per directions of the customer, is a sale and not a works contract which contrary to Circular No. 715 dated 08/08/95 sale and not a works contract which contrary to Circular No. 715 dated 08/08/95 Question No. 15Question No. 15 DBA Ltd. vs. ITO (2006) 281 ITR (Bom.) 99DBA Ltd. vs. ITO (2006) 281 ITR (Bom.) 99 CIT vs. Dabur India Ltd. (2006) 283 ITR (Del) 197CIT vs. Dabur India Ltd. (2006) 283 ITR (Del) 197

Issue 7Issue 7

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Landing fee and parking fee at the airport for aircraft is Landing fee and parking fee at the airport for aircraft is rent within the definition of section 194I liable for TDS.rent within the definition of section 194I liable for TDS.

United Airlines vs. CIT (2006) 287 ITR (Del) 281United Airlines vs. CIT (2006) 287 ITR (Del) 281

Issue 8Issue 8

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Specific provision will override the general provision – contractors’ payment specifically covered u/s.194C, will not be covered under Specific provision will override the general provision – contractors’ payment specifically covered u/s.194C, will not be covered under general provisions of section 194J.general provisions of section 194J. CIT vs. Prasar Bharti (2007) 208 CTR 317 (Del)CIT vs. Prasar Bharti (2007) 208 CTR 317 (Del)Glaxo Smithkline Healthcare Services Ltd. vs. ITO (2007) 12 SOT 221 (Del)Glaxo Smithkline Healthcare Services Ltd. vs. ITO (2007) 12 SOT 221 (Del) Each section regarding TDS under Chapter XVII deals with the particular kind of payment to the exclusion of all other sections in this Each section regarding TDS under Chapter XVII deals with the particular kind of payment to the exclusion of all other sections in this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one sectionChapter. Thus, payment of any sum shall be liable for deduction of tax only under one section Ref: CBDT Circular No. 720 dated 30Ref: CBDT Circular No. 720 dated 30thth August 1995. August 1995.

Issue 9Issue 9

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THANK YOU

A nervous taxpayer was unhappily conversing with the TAX officer who had come to review his records. At one point the officer exclaimed, “As a citizen you have an obligation to pay taxes, and we expect you to eagerly pay them with a smile.""Thank God," returned the taxpayer. “Take as many smiles as you want but don’t ask for cash."

Economy & Finance

TDS under Income Tax, India