Presentation on theme: "Tax Deducted at source Presented by :- Mohit Rastogi (2K91A70)"— Presentation transcript:
Tax Deducted at source Presented by :- Mohit Rastogi (2K91A70)
2 Introduction What is Tax Deducted at source ? Income – Tax is Collected/recovered at two stages, namely pre-assessment stage and post assessment stage. The method by which pre-assessment tax are collected is in the following manner at different stages namely, Advance Tax. Tax Deducted at source. Tax Collected at Source.
3 Objectives of introduction of Tax Deducted at Source. It helps in reporting the correct Incomes. It helps in checking Tax evasion. Early collection of revenue by the Government. It is the cheapest mode of collection of tax. It helps to widen the tax base as more and more people are covered..
4 Important Provisions of TDSSection Type of Payment 192 Payment of Salaries. 193 Interest on Securities 194Dividends 194A Payment of Interest ( other than interest on securities). 194B Winning from Lottery or Crossword puzzles 194C Payment to any contractor or Sub-Contractor. 194D Insurance commission 194E Payment to Resident Sportsman or Sports Association 194EE Payment in respect of deposits under N.S.S 194F Payment on Account of repurchase of Units by National Funds or U.T.I 194G Commission etc. on Sale of Lottery
194H Payment of Commission or Brokerage. 194I Payment of Rent. 194J Payment of any Professional fees. 195 Payment to Non Residents. 196 Non – Deduction of TDS in certain cases. 197 Obtaining a certificate of Lower rate from the Assessing Officer 206AA Requirement to furnish PAN for TDS eligible payments. 201 & 276B Consequences of Default 278B Offences by Companies Rule 30 Due date for payment of TDS. 5
6 203 & Rule 31 Certificate of Tax Deducted at source to the payee 203A Read with Rule 114A Tax Deduction Account Number – (TAN) Sec. 206 & Rule 31A Filing of Returns of tax deducted at Source
7 TDS RATES CHART TDS RATES CHART Sectio n Nature of payments up to 30.06.1 0 w.e.f 01.07.1 0 Rate in % Individual s& HUF Others 194 Deemed Dividend 250025001010 194A Interest From Bank 10000100001010 194A Other Interest 500050001010 194B Winning from Lotteries 5000100003030 194BB winning from Horse races 250050003030 194C Payment to Contractors, Pay to Sub Contractor, Payment to Transporter 20000 (50000 in a year) 30000 (75000 in year) 12 194D Insurance Commission 5000200001010
NOTE 1. Payment made to transporter *, TDS is not required if PAN is provided by the Transporter. NOTE 2. Surcharge and Cess is not applicable on TDS from 1.04.09 on any payment made to resident. NOTE 3. If PAN is not provided by the deductee then rate as per above table or 20% whichever is higher is to be charged (effective from 1.04.10 section 2006AA) Sectio n Nature of payments up to 30.06.1 0 w.e.f 01.07.1 0 Rate in % Individu als& HUF Other s 194H Commission/Brokera ge 250050001010 194IRent-property1200001800001010 194I Rent-Plant/ Machinery 12000018000022 194J Professional Fees 20000300001010 8
TIME OF TAX DEDUCTION 9 TAX DEDUCTED SECTIONS SECTIONS AT THE TIME OF PAYMENT 192,194,194B,194BB,194EE,194F AT THE TIME OF PAYMENT OR CREDIT 193,194A,194C,194D,194E,194 G, 194H, 194I,194J,195
10 Sec. – 192 – Payment of Salaries Tax is to be deducted on income chargeable under Salaries and paid by the employer The liability to deduct the tax arises only at the time of payment of salary. It means if provision for salary has been made and the same has not been paid then deduction of tax does not arise*. Any person responsible for payment of salary, is liable to deduct the tax. The status of the employer is not relevant for deduction of tax. The liability to deduct the tax arises even if the person carries on business or not. Where an employee is in employment of more than one employer, tax will be deducted at source by the employer, which the employee chooses or the present employer.
11 The employee may furnish to the employer details of income chargeable to tax under other heads of income (not being loss except loss under the head Income from House Property and tax deducted on the same). In such a case employer shall deduct tax due on total income. However, total amount of tax deducted should not be less than the amount of tax deductible from salary except where the loss under the head Income from House Property has been taken into account.
Section 193 – Interest on Securities (A.) Any person responsible for paying an interest on securities to a resident is required to deduct tax at source at the rates in force on amount of interest payable. (B.) The Tax is required to be deducted at the time of credit of such income to the payees account or at the time of payment of interest on securities whichever is earlier. 12
Section 194 – Dividends The Principal Officer of the Indian Company or a company, which has made prescribed arrangements for declaration and payment of dividend in India is responsible for deducting tax at source from dividend payable to a shareholder, who is resident in India. No tax is to be deducted at source u/s 194 from Dividend payable to any individual shareholder if the dividend is paid by the company by an account payee cheque and the aggregate amount of dividend distributed/paid or likely to be distributed/paid during the financial year does not exceed Rs.2,500/. Dividend paid by domestic companies u/s 115O are exempt from tax in the hands of the recipients’ w.e.f. April 1, 2003. Deemed dividend under section 2(22)(e) is taxable at the rate of 10% in the hands of shareholders. 13
14 Sec 194A – Interest other than Interest on Securities Any person (except on individual or a HUF) responsible for paying interest other than interest on securities to a resident is required to deduct tax at Source at the rate of 10% for the Financial year 2010- 11. However, w.e.f. 1st June, 2002, an Indian or a HUF whose total sales, gross receipts or turnover from business or profession exceeds Rs. 40 lakhs (Rs. 60 lakhs w.e.f. 01.04.2011) or Rs.10 lakhs (Rs. 15 Lakhs w.e.f. 01.04.2011) respectively, during the financial year immediately preceding the financial year in which such interest is credited or paid shall be liable to deduct tax at source. TDS is required to be deducted either at the time of credit of such income to the payees account or at the time of payment, whichever is earlier.
No tax is deducted in case where the aggregate amount of interest does not exceed Rs.5,000/-. In case of term deposits with banks or Cooperative Society and Housing Finance Companies, no tax is required to be deducted upto an aggregate interest of Rs.10,000/-. No tax is required to be deducted in case of interest paid/credited to any banking company/financial corporation, LIC, UTI, etc 15
Section 194B – Winning from Lottery or Crossword Puzzles Any person responsible for paying income by way of winning from Lottery/crossword puzzle or card game or any other game is required to deduct tax at source at the rate of 30%. No tax is deductible if the amount of payment is Rs.5,000/- (Rs. 10,000 from July 1,2010) or less. 16
SECTION 194BB – WINNING FROM HORSE RACES Any person responsible for paying income by way of winning from Horse Races is required to deduct tax at source at the rate of 30%. No tax is deductible if the amount of payment is Rs.2,500/- (Rs. 5,000 from July 1,2010) or less. 17
18 Sec. 194C – Payment to Contractors Any person (other than individual and HUF) paying any sum to any resident contractors for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the resident contractor and specified person is required to deduct tax at source. TDS rate is 1% if recipient is individual/ HUF or 2% for any other person. No Tax is deducted on credit or payment on account of contractor during the course of business of plying, hiring or leasing goods carriages on furnishing PAN to the person paying or crediting such sum.
However, an individual or a HUF whose total sales or gross receipts or turnover from business exceeds Rs. 40 lakhs (60 Lakhs w.e.f. 1.04.2011) or whose gross receipts from profession exceeds Rs.10 lakhs (15 Lakhs w.e.f. 1.04.2011) during the financial year immediately preceding the financial year which such sum is credited or paid to the account of contractor shall be liable to deduct tax at source. Tax is required to be deducted either the time of credit of the sum paid to the account of the payee or at the time of payment in cash or by cheque or by any other mode, whichever is earlier. With effect from 1st October, 2004, Section 194C has been amended to provide that tax will be required to be deducted at source where the amount credited or paid to the contractor or a sub-contractor exceeds Rs.20,000 (Rs. 30,000 from July 1, 2010) in a single payment or Rs.50,000 (Rs. 75,000 from July 1, 2010) in the aggregate during the financial year. 25 April 201519
20 “Work” shall include – (a)Advertising (b) Broadcasting and telecasting including the production of programmes for such broadcasting or telecasting including production of programmes for such broadcasting or telecasting; (c)Carriage of goods or passengers by any mode of transport other than by railways; (d)Catering (e)Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customers, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchase from a person, other than such customer.
Section 194D – Insurance Commission Any person responsible for paying insurance commission to a resident is required to deduct tax at source at the rate of 10%. No tax is deductible if the amount of insurance commission or aggregate of the amount of such income credited/paid during the financial year does not exceed Rs.5,000/-(Rs.20,000 from July,1,2010). 21
Section 194E – Payment to Non- Resident Sportsman/Sports Association Any person responsible for paying any income to a non- resident sportsman including an athlete who is not a Citizen of India or a non-resident Sports Association or Institution is required to deduct tax at source at the rate of 10%. The tax is required to be deducted at the time of credit of such income to the account of payee or at the time of payment in cash or by issue of cheque or draft or by any other mode whichever is earlier. 22
Section 194EE – Payment in respect of deposits under National Savings Scheme Any person responsible for paying to any person any amount referred to in Section 80CCA(2) is required to deduct Income Tax at the rate of 20% at the time of payment. No deduction is required to be made where the amount of such payment or the aggregate amount of such payments during the financial year is less than Rs.2,500/-. 23
Section 194F – Payment on account of Repurchase of Units by Mutual Funds or UTI Any person responsible for paying to any person any amount referred to in Section 80CCB(2) is required to deduct tax at source at the time of payment without any exemption at the rate of 20%. 24
Section 194G – Commission etc. on the sale of Lottery Tickets Any person who is responsible for paying commission, remuneration or prize to any person who is or has been stocking, distributing, purchasing or selling lottery tickets is required to deduct tax at source at the rate of 10% on such tickets on an amount exceeding Rs.1,000/-. 25
Section 194H – Commission or Brokerage Any person other than an individual or Hindu Undivided Family who is responsible for paying on or after 1st June, 2001, to a resident, any income by way of commission (other than insurance commission referred to in section 194D), or brokerage, is required to deduct tax at the rate of 10%. No deduction is required to be made where the amount of such income or the aggregate of the amounts of such income credited/paid during the financial year does not exceed Rs.2,500/-(Rs. 5,000 from July 1,2010) 26
S ection 194 I – Rent Any person (other than an individual or Hindu Undivided Family) responsible for paying rent to resident any income by way of rent is required to deduct tax. ‘Rent’ means any payment by whatever nature called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any: (i) land, or (ii) building (including factory building), or (iii) land appurtenant to a building (including a factory building), or (iv) machinery, or (v) plant, or 27
(vi) equipment, or (vii) furniture, or (viii) Fittings 28 (60 Lakhs w.e.f. 1.04.2011) (15 Lakhs w.e.f. 1.04.2011) From 1st June, 2002 an individual or a Hindu Undivided Family whose total sales or gross receipts or turnover from business exceeds Rs.40 lacs (60 Lakhs w.e.f. 1.04.2011) or whose gross receipts from profession exceeds Rs.10 lacs (15 Lakhs w.e.f. 1.04.2011) during the financial year immediately preceding the financial year in which such sum is credited or paid shall be liable to deduct tax at source.
25 April 201529 Rate of deduction of tax – Sec 194I 29 Asset on which payment is made Payee being – Individual. Payee being –other than Individual. Land or building or furniture or fixtures. 10% if Payment or Credit exceeds or likely to exceed Rs.1,20,000/- (Rs.1,80,000 from July1,2010) in aggregate in the previous year. Machinery or plant or equipment 2% if Payment or Credit exceeds or likely to exceed Rs.1,20,000/- (Rs.1,80,000 from July1,2010) in aggregate in the previous year.
30 Sec-194J – Fees for Professional or Technical Services. Any person (other than individual or HUF) responsible for paying to a resident fee for professional services or fee for technical services is required to deduct tax on the income comprised therein at the rate of 10% for financial year 2010-11. “Professional services” means 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 or interior decoration or advertising or such other profession as is notified by the Board for the purpose of section 44AA or of this section.
“Fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 – For the purpose of this clause “Fees for technical services” means: any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provisions of services of technical or other personnel), but does not include consideration for any construction, assembly, mining or like product undertaken by the recipient or consideration which would be income of the recipient chargeable under the head ‘salaries’. The tax is required to be deducted at the time of credit of such income to the account of the payee or at the time of payment in cash or by issue of cheques or drafts or by any other mode whichever is earlier. No tax is required to be deducted in case amount of such sum or aggregate of amount of such sums credited or paid during the financial year does not exceed Rs.20,000/-(Rs. 30,000 from July 1, 2010). 31
With effect from 1st June, 2003 no individual or HUF shall be liable to deduct tax on fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of HUF. 32
33 Exemption from deduction of tax at source in respect of payments made to certain persons (Section 196) Government Reserve Bank of India Corporation established by or under a Central Act whose income is exempt from Income Tax Mutual Fund u/s 10(23D)
Section 197 – Obtaining a Certificate of Lower Rate from the Assessing Office For tax-deductible u/s 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA or 195. 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. The certificate of lower rate shall be issued through the ITD application i.e. computer system of the department. Issue of manual certificates is not permitted. 34
Certificate has to be issued individually to each deductor. Only a copy of the certificate is to be given to the applicant/assessee for information. Only the original certificate addressed to the deductor and signed by AO can be acted upon by deductor and photocopy is not valid. As per CBDT circular no 774 dated 17/03/99 certificate u/s 197 is valid for the payments made after the date of issue of certificate. However in the case of entities covered by Rule 28AB, the Assessing Officer may issue a certificate to the recipient authoring payment of income without deduction of tax at source. The recipient may furnish copies of such certificate to the person responsible for paying the income for the purpose of no deduction of tax at source. 35
36 No deduction of tax at source in certain cases – Section 197A P ayment u/s 193, 194A and 194K – Form No: 15G by everybody (not being a company or a firm) and Form No: 15H by Senior Citizens. This benefit is not applicable if the total amount paid/payable is in excess of the maximum amount not chargeable to tax.
SECTION 206(AA) Furnishing PAN is compulsory for all TDS eligible payments covered, failing to which, Deductor will be deducting TDS at a higher rate. For such case, the rate of TDS should be determined at higher of below conditions: 1.TDS rate prescribed in the Act ; 2.Rate of Tax in force ; 3.At 20% The section is applicable for all payments made on or after April 1, 2010. 37
Declaration under Section sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid only if PAN is furnished. No certificate under section 197 shall be granted unless the application made under that section contains the PAN of the applicant. TAN of the deductor is mandatory without which certificate cannot be generated from the system. The deductee shall furnish his PAN to the deductor and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other. 38
Consequences of Default Liability u/s 201 Interest & Penalty – Assessee in default u/s 221 equal to the amount of tax in arrears. Interest @ 1% per month (1.5% w.e.f. 01.07.2010, in case tax deducted but deposited late). Both the above are consequences of Not deducting or Deducted and not paying to the Central Government. After deducting not paying also leads to a charge being credited on the assets of the payer. Section 271C Penalty for failure to deduct tax at source as required or under the provisions of Chapter XVII-B. Penalty Equal to Tax. 39
Section 276B If a person fails to pay to the credit of Central Government, tax deducted at source by him as required by or under the provisions of Chapter XVII-B. Imprisonment Period 3 months to 7 years and with fine. 40
41 Every person who at the time of offence was in charge of and was responsible to the company for the conduct of business of the company as well as the company shall be liable to be proceeded against. If it is established that the offence was committed with the connivance of director, manager, secretary or other officer – such persons shall also be liable to be punished In the case of imprisonment and the offence being committed by company, apart from fine on the company, officers responsible shall be liable to be proceeded against. Section 278B – Prosecution - Offences by Companies
42 Due dates for Payment of Tax deducted at Source – Rule30. Sl.No. Nature of Payment Due Date 1All Payments or Credits during the year Within one week from the end of the month in which payment is made 2Provision by way of credit to the account of person on 31st March of the Previous year. Within 2 months from the end of the month in which such amount is credited.
25 April 201543 Certificate of Tax Deducted at source to the payee – Sec203 and rule 31. In respect of cases where Salaries exceeds Minimum threshold limit in Form No. 16 and in other cases Form No. 16AA Other than Salaries - Form No. 16A The certificates issued in Form No. 16 can be issued under Digital Signature by virtue of Circular No. 2/2007 dated 21/05/2007 Due Dates by which certificate is to be submitted to the payee: Salaries - Form No. 16 /16AA - within one month from the close of the financial year Other Payments – Form No. 16A – within one month from the end of the month in which payment is made or where more than one payment is made in a year at the request of the payee with in one month from the end of the financial year.
44 Exceptions to the time limit specified for issuance of TDS certificates. In respect of cases where deduction is by virtue of credit – within one week from the expiry of two months after the month of credit Duplicate certificates can be issued on receipt of a letter on a plain paper from the payee Non Issuance of TDS certificates with in the due dates will attract a penalty of Rs.100/- per delay under Sec.272A.
45 Tax Deduction Account Number – (TAN) Sec.203A Read with Rule 114A. Every person who is liable to deduct tax at source shall obtain a TAN number within one month from the end of the month in which tax has been deducted. Penalty for failure to obtain TAN is Rs. 10,000 (Sec 272BB) An application for the allotment of a TAN shall be made in duplicate in Form No. 49B.
FORM NO. PARTICULARSPERIODICITY Form 24QQuarterly statement for tax deducted at source from "Salaries" Quarterly Form 26QQuarterly statement of tax deducted at source in respect of all payments other than "Salaries Quarterly Form 27QQuarterly statement of deduction of tax from interest, dividend or any other sum payable to non-residents Quarterly 46
Form 27A is a summary of TDS return (Form 24Q, 26Q or 27Q), which contains control totals of 'Amount Paid' and 'Income tax deducted at source'. QUARTERDUE DATEDUE DATE FOR 27Q April to JuneJuly 1514 July July to SeptemberOctober 1514 October October to DecemberJanuary 1514 January January to MarchJune 1514 June 47 Sec. 206 and Rule 31A