Presentation on theme: "Chapter XVIIA & B F.Y 2013-14 Prepared by : CA Janki Tiwari."— Presentation transcript:
Chapter XVIIA & B F.Y 2013-14 Prepared by : CA Janki Tiwari
There are two manners by which tax on income of Previous year is payable in the Previous year itself 1)TDS/TCSS 2)Advance Tax What is TDS:-. 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. It is similar to "pay as you earn" scheme also known as Withholding Tax in many other countries, one of the countries is USA.. Who is Responsible to deduct TDS:- a Company AND. a Person(other than a company) to whom provisions of section 44AB are applicable. A person is liable to get its accounts audited u/s 44AB if during the relevant financial year its gross sales, turnover or gross receipts exceeds Rs. 1 Crore (Rs.60 lacks for A.Y.2012-13) in case of a business, or Rs. 25 lacks (Rs. 15 lacks for A.Y. 2012-2013) in case of a profession.
When there is no Liability of deductor to deduct TDS:- On declaration furnished by payee on Form 15G* or 15H** as the case may be On certificate issued by ITO*** Payment to Government/RBI/Statutory Corporation etc.**** Exempt Incomes***** Interest Payment by Offshore Banking Unites Payment to New Pension System Trust Notified payment to Notified Institutions/Associations *****- *Form 15G- Can be submitted by Individual who are less than 60 years of age and who satisfy the following both criteria’s mentioned below:- 1)The final Tax on his estimated Total Income computed as per the provision of the Income Tax Act should be nil 2)The aggregate of the interest and other incomes received during the Financial year should not exceed the basic exemption limit as per the prevalent Income Tax Slabs. **Form 15 H- Can be Submitted by Senior citizens (Who are above 60 years of age) and satisfy the following criteria:- 1)The final Tax on his estimated Total Income computed as per the provision of the Income Tax Act should be nil. Note:-Form 15G and 15H both have a validity of 1 Financial year only.
. **** what is Statutory Corpoation:-Statutory Corporation is an autonomous form of Public sector. It is formed by passing a Special Act either at the Legislature Assembly or at the Parliament. Examples: Reserve Bank of India, State Bank of India, Life Insurance Corporation, Unit Trust of India, Employees State Insurance Corporation, Oil and Natural Gas Corporation etc. are some examples of statutory corporations. *****Exempt Income:-Chapter III of the Act deals with incomes which do not form part of total income. Link to Exempt Income.Link ***** Notified Institutions/Associations :-which are incorporated under the central/State/Provincial Act. For Examples Click on Link:Link: (Note: TDS applicable if interest paid to an NBFC)
. *** When ITO issued Certificate As Per section 197 of the Income Tax Act 1961 ITO may issue(after taking appropriate approvals) certificate of Lower deduction or non deduction at source after receiving proper application on Form 13 from deductee in respect of certain/specific payments /deductor.The certificate is to be issued in respect of certain deductor only. Blanket certificate in respect of all payment received by deductee can not be issued. A deductor can take note of such certificates for less deduction only if deductor name is given in such certificate. But in recent past it has been noticed by Income Tax department that ITOs are misusing these powers.They not only issuing blanket less TDS certificate but also issuing and denying it on their will.Now Income Tax department has issued a circular by which All such certificates can only be issued through Income Tax system so that each certificate can be verified and can be used or cross verified at the time of processing of ETDS returns uploaded by the Deductor. you will need to submit along with form 13----- 1. Provisional & Projected Profitability Statement, 2. Brief on the business of the company 3. Logic for seeking certificate for lower deduction 4. List of parties from whom payments are expected along with the sum likely to be received 5. Copies of Income tax returns. You can download form 13 from below mentioned link--- http://www.incometaxindia.gov.in/forms/13.pdf
Steps Taken By Deductor for Timely and Systematic deduction and Payment of TDS are:- Step 1- Obtain TAN No A person responsible for deducting tax at source, if not already allotted a T AN(or a tax deduction and collection account number) should apply for allotment of T AN in F o r m No. 49B. The application has to be made in duplicate to the Assessing Officer (A O) or to an y particular Assessing Officer where this duty is assigned b y the Chief Commissioner or the Commissioner to that A.O. The application should be made within one month from the end of the month in which the tax is deducted for the first time. T AN should be quoted in all the TDS Certificates, challans, quaterly statements, correspondance, etc. 49B Non Compliance with the provisions of Section 203A may lead to rigorous imprisonment for a term not less than 3 months but which ma y extend to 7 years and with a fine of Rs.10,000/-. Reference Section 203 A, Rule 114 A and Rule 114AA.
.. Step 2- Know your Due Date for TDS Payment The Due date for TDS payement is séparâtes for Govt & Non Govt Assessee Due Date for TDS Payment in case of Govt. Assessee Due date for TDS payment in case of Non-Govt Assessee It is mandatory for all corporate assesses and all other assessee liable for Tax audit under Section 44AB of the Income Tax Act to deposit the TDS online. Assessee who do not fall in the above 2 categories are at the option of either making online payment or by depositing the Same with the prescribed banks. S.NoParticularsDue Date 1Tax Deductible in March30h April of Next Month 2Other Months7 th of Next Month S.NOParticularsDue Date 1Tax Deposited without ChallanSame Day 2Tax Deposited with challan7th of Next Month 3Tax on perquisites opted to be deposited by the employer 7 th of Next Month
. Procedure for TDS Payment Online Visit https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsphttps://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp Select challan no –ITNS 281 for TDS payment. A copy of the Challan has been shown below If the TAN entered by the taxpayer is found to be valid, the taxpayer would be allowed to fill up other challan details like the accounting head under which the payment is to be made, Name and Address of TAN etc.
On submission of data, a confirmation screen would be displayed, if the taxpayer confirms the data entered in the challan,the page routed to the net banking page of the bank as mentioned by you in the challan through which the payment is to be made.
. The taxpayer would now be required to login to the net banking page of the bank with user-id and the password as allocated by the banker and make the TDS payment. Note:-If any problem encountered at th NSDL website while entering non financial date then contact the TIN call center at 020-27218080,email them at email@example.com. if any problem encountered while entering the financial details at the net –banking webpage of your bank, then you should contact your banker for firstname.lastname@example.org
. Procedure for TDS Payment offline Download the form 281 from http://law.incometaxindia.gov.in/dittaxmann/incometaxrules/pdf/challanitns- 281.pdf then fill it and submit to the Bank. http://law.incometaxindia.gov.in/dittaxmann/incometaxrules/pdf/challanitns- 281.pdf
Consequences for Non deposit of TDS on Time 1)Interest 2)Penalty RateFor 1% for every month or every part of the month From the date the tax was deductible to the date on which such tax is deducted 1.5% for every month or every part of the month From the date on which such Tax is deducted to the date on such tax is actually paid Under Section Nature of demand Default/FailureQuantum of demand/penalty 271cPenaltyFailure to deduct Tax at source Sum equal to the amount of tax which it failed to deduct 276BProsecutionFailure to deposit TDSRigorous Imprisonment for a term which shall not be less then 3months but which may extend to 7 years with fine.
. After payment of TDS, Deductor reqiure to File TDS Return For which following steps need to follow: 1) Know the respectiveForms No. :- 2) Know the Due date S.NoForm NoFor 124QStatement of deduction of tax under section 192 226QStatement of deduction of tax under section 193 to 196D-in respect of other than non resident deductees 327QStatement of deduction of tax under section 193 to 196D-in respect of non resident not being a company or a foreign company or resident but not ordinarily resident Date of ending of the qtr of the F.Y Due date, if deductor is an office of the Govt Due date for others 30 th June31 st July of the F.Y15 th July of the F.Y 30 th September31 st Oct of the F.Y15 th Oct of the F.Y 31 st December31 st January of the F.Y15 th Jan of the F.Y 31 st March15 th May of the F.y immediately following the F.Y in which deduction is made
. 3)Submission TDS returns are required to filled electronically. with the help of Return Preparation utility(RPU).To facilitate easy preparation of returns, the Govt has launched a TDS Return Preparation Utility (RPU). This utility Free of cost from here.here. There are Various other 3 rd Party private return preparation utilities as well through which the TDS returns can be filled electronically. The list of private return preparation utilities through which the return can be filled are mentioned in this Link.s Link
There are 3 pages we have to fill in RPU. 1) Form 2)Challan 3)Annexure
. In Form Page We have to give information like 1)F.Y, A.Y, Form No 2)Deductor Basic Information Like Name, Address, PAN, TAN, Phone no, E-Mail Id, Type of Deductor 3)Person responsible for deduction of tax Basic Information Like Name, Address, PAN, TAN, Phone no, E-Mail Id, Type of Deductor In Challan Page We have to give details of all challans pertaining to that quarter return Challan no, Section code of payment,TDS,Interest & other amount figure, BSR code of Bank and date on which Tax deposited In Annexure page We have to give information like Name, PAN of deductee (on which payment TDS deducted),deductee code(1-for company,2- for other),date & amount of paid /credited(whichever is earlier), Date of deduction and Reason for non /lower/higher deduction of Tax.
. After Properly filling of all pages, click on Create file buttons on which the following page open In the input file we have to upload the(.csi)file i.e. challan status enquiry file which is import from link by giving TAN no & Period for verifying the challan details.link In second, we give the path address of that folder where any error or return file successfully create. In third, it selected the file automatically. If any error occur, then a error report occur,corret that error in RPU and again try to create a return and when there is no error, return fill created sucessfully.
. Each e-TDS return file should be in a separate CD/Pen Drive. Each e-TDS return file should be accompanied by a duly filled & signed(by an authorized signatory) form no 27A in physical form. Form No. 27A- It is a summary of e-TDS returns which contains control totals of 'amount paid' and 'income tax deducted at source'. The control totals of 'amount paid' and 'income tax deducted at source' mentioned on Form No. 27A should match with the corresponding control totals in e-TDS/TCS return. Following are the charges for furnishing e-TDS return Category of e-tds returnUpload charges Returns having up to 100 deductee recordRs 30/- Returns having 101 to 1000 deductee recordRs 182/- Returns having more then 1000 deductee recordsRs.606/-
. Note-More then 1 Tds Return filed in the same computer media The reurn can also filed in compressed from using WinZip a single return should not be broken into parts and filled in 2 separate media. It has to be in a single media After accepting of the e-tds return, the computer media would be returned to the deductor. Correction of TDS return A corrected TDS return can be filled multiples times to incorporate any changes. Consequences for delay or late filling of TDS Return Under Section Nature of demand Default/FailureQuantum of demand/penalty 234EPenaltyLate filling of ReturnRs 200/-per day till the time the default continue, however it should not exceed to total amount of TDS 271HPenaltyNo filling of return for more than 1year or furnishes incorrect details Rs.10,000/- to Rs. 1,00,000
. After filling the TDS return, now deductor take steps to issue TDS certificate What is TDS certificate It is the certificate to prove that such amount of TDS deducted and deposited by dedutor and deductee is able to take credit of such amount from his tax liability of that previous year. Time limit for issue of TDS certificate Consequences for Late/non issuing of TDS certificate Form noTime limitFor 16Annual by 31 st day of May of the F.Y immediately following the F.Y Salary 16AQuarterly within 15 days from the due date for furnishing the ‘statements of TDS’ Non Salary Under SectionNature of demandDefault/FailureQuantum of demand/penalty 272A(2)(g)PenaltyLate issueRs 100/-per day but not exceed to TDS amount
. How to download the TDS certificate TDS certificate download form (www.tdscpc.gov.in)www.tdscpc.gov.in after login. Login with your User-id and Password In the main menu,click Downloads->Form 16A You can either download file for all PANs or for selected PANs. For all PANs,you need to select FY and Quarter. For Selected PANs, you have to select PANs from the given list. Validation Screen will appear. Enter validation details. This will also generate an authentication code. Details of authorized signatory will be picked up from “profile” and displayed Click Submit, File will be available in Download->Requested Downloads Entering Validation details 1. Enter Token Number for the Form type displayed on the screen. For this you must have acknowledgement copy ready. 2. Non-Government Deductors must enter Challan Identification Details. The details must pertain to the selected FY, Quarter and Form. 3. Amount must be entered in 2 decimal places. Government deductors must enter BIN details. 4. Enter any three PAN and Amounts from the CIN/ BIN details. If the number of PANs in the given CIN/BIN is less than three, then enter all such details i.e. one or two 5. Click Proceed. An authentication code will be generated. 6. If for some reason, you need to submit request for download again, you will not be asked to enter validation details again. In such case, you can simply enter “authentication code” and proceed.
. Here are the Rates and cut off for the F.Y 2013-14 Sl. No. Section Of Act Nature of Payment in briefCUT OFFRate % HUF/INDOthers 1192SalariesAverage Rate 2193Interest on debentures500010 3194Deemed dividend-10 4194AInterest other than Int. on securities (by Bank) 1000010 4A194AInterest other than Int. on securities (By others) 500010 5194BLottery / Cross Word Puzzle1000030 6194BBWinnings from Horse Race500030 719C(1)Contracts3000012 8194C(2)Sub-contracts/ Advertisements3000012 9194DInsurance Commission2000010 194EEPayments out of deposits under NSS 250020- 11194FRepurchase of units by MF/UTI100020 12194GCommission on sale of lottery tickets 100010 13194HCommission or Brokerage500010 14194IRent (Land & building) furniture & fittings) 18000010 Rent (P & M, Equipment)18000022 15 194 IATDS on transfer of immovable property other than agriculture land (wef 01.06.13) 50 Lakh11 16194JProfessional/Technical charges/ Royalty & Non- compete fees 3000010 17194J(1)(b a) Any remuneration or commission paid to director of the company (Effective from 1 July 2012) NIL10 18194LACompensation on acquisition of immovable property 20000010
. Note:- Yearly Limit u/s 194C: Where the aggregate of the amounts paid/credited or likely to be paid/credited to Contractor or Sub-contractor exceeds Rs.75,000 during the F.Y.TDS has to be deducted u/s 194c TDS at higher rate ie., 20% has to be deducted if the deductee does not provide PAN to the deductor.(read detail u/s 206AA)read detail u/s 206AA No TDS on Goods Transport :No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages on furnishing of his Permanent Account Number, to the person paying or crediting such sum. Varoius situations and Surcharge/Cess applicable on TDS Payment ToPaymentSurchargeCess ResidentNon-Corporatesalary(up to 1 crore)Noyes(3%) Non-Corporatesalary(> I crore)yes (10%)yes(3%) Non-Corporateother than salaryNo Corporateother than salaryNo Non ResidentNon-Corporatesalary(up to 1 crore)Noyes (3%) Non-Corporatesalary(> I crore)Yes (10 %)yes (3%) Non-Corporateother than salary up to 1 Crore Noyes (3%) Corporateother than salary (> 1 Crore to 10 crore) yes(2%)yes (3%) Corporateother than salary > 10 Croreyes(5%)yes (3%)
. Let us Analyze and Discussed all Sections of TDS one by one. Section 192-Salary Every person who is responsible for paying any income chargeable under the head "Salaries" shall deduct income-tax on the estimated income of the assessee under the head "Salaries" for the financial year 2013-14. The income-tax is required to be calculated on the basis of the rates given below, subject to the provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at the time of each payment. As per the Finance Act, 2013, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head "Salaries" for the financial year 2013-14 (i.e. Assessment Year 2014-15) at the following rates: 1) Normal Rates of Tax S.NoTotal IncomeRate of Tax 1Where the total income does not exceed Rs. 2,00,000/-.Nil 2Where the total income exceeds Rs. 2,00,000 but does not exceed Rs. 5,00,000/-. 10 per cent of the amount by which the total income exceeds Rs. 2,00,000/- 3Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. Rs. 30,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-. 4Where the total income exceeds Rs. 10,00,000/-.Rs. 1,30,000/- plus 30 Per cent of the amount by which the total income exceeds Rs. 10,00,000/-
. 2)Rates of tax for every individual, resident in India, who is of the age of sixty years or more but less than eighty years at any time during the financial year: 3)In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the financial year: S.NoTotal IncomeRate of tax 1Where the total income does not exceed Rs. 2,50,000/- Nil 2Where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000/- 10 per cent of the amount by which the total income exceeds Rs. 2,50,000/- 3Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/- Rs. 25,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-. 4Where the total income exceeds Rs. 10,00,000/- Rs. 1,25,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/- S.NoTotal IncomeRate of tax 1Where the total income does not exceed Rs. 5,00,000/-Nil 2Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000/- 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/- 3Where the total income exceeds Rs. 10,00,000/-Rs. 1,00,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-
. Payment of Tax on Perquisites by Employer: An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at its option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee. However, the employer will have to pay the tax at the time when such tax was otherwise deductible i.e. at the time of payment of income chargeable under the head "salaries" to the employee. Computation of Average Income Tax: The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee. Salary From More Than One Employer: The employee is required to furnish to the present/chosen employer details of the income under the head "Salaries" due or received from the former/other employer and also tax deducted at source there from, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). Income Chargeable under the head "Salaries" inclusive of all perquisitesRs. 4,50,000/- Tax on Total Salary (including Cess)Rs. 25,750/- Average Rate of Tax [(25,750/4,50,000) ×100]Rs. 5.72% Tax payable on Rs.50,000/= (5.72% of 50,000)Rs. 2,861/- Amount required to be deposited each month240 (Rs. 238.4) =2881/12)
. Relief When Salary Paid in Arrear or Advance: Under section 192(2A) where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under Section 89(1) he may furnish to the person responsible for making the payment, such particulars in Form No. 10E duly verified by him, and thereupon the person responsible, as aforesaid, shall compute the relief on the basis of such particulars and take the same into account in making the deduction With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year. Information regarding Income under any other head: Section 192(2B) enables a taxpayer to furnish particulars of income under any head other than "Salaries" ( not being a loss under any such head other than the loss under the head "Income from house property") received by the taxpayer for the same financial year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which is properly signed and verified by the taxpayer in the manner as prescribed under Rule 26B(2) of the Rules and shall be annexed to the simple statement. The form of verification is reproduced as under: I, …………………. (name of the assessee), do declare that what is stated above is true to the best of my information and belief. It is reiterated that the DDO can take into account any loss only under the head "Income from house property". Loss under any other head cannot be considered by the DDO for calculating the amount of tax to be deducted.
. Sec 193 Interest On Securities Where any payment is made in the nature of “Interest on Securities,” the person responsible for making such payment of income or crediting the income has to make deduction of tax at source before making such payment or crediting which ever is earlier. However, payments from certain categories of bonds, debentures etc. is exempt from TDS. These include the following : National Defence Bonds 1972 (4.1/4%), ia) National Defence Loan 1968, or National Defence Loan1972 (4.3/4%), ib) National Development Bonds, 7year (IV Issue) National Saving Certificates, Any interest payable on debentures issued by any institution or authority or any Public Sector Company or any Co- operative Land Mortgage Bank or Co-operative Land Development Bank, as may notified by Central Government in Gazette, Gold Bonds 1977 (6.1/2%), Gold Bonds 1980 (7%), Interest on any Security of Central Government or State Government,(However, w.e.f. 1.6.07 exemption will not be available if interest payment exceeds rupees ten thousand during the F.Y. on 8% savings (Taxable) Bonds, 2003. Any interest payable to an individual, resident of India, on debentures issued by a Public Limited Company where the debentures issued by a Public Limited Company where the debentures are listed in a recognized stock exchange, if the interest is paid by an account payee cheque and its amount does not exceed Rs. 2500/- during the financial year, Any interest payable to LIC, Any interest payable to GIC or any of its four companies. Any interest payable to any insurer in respect of any securities owned by it or in which it has full beneficial interest. No TDS to be made from any Regimental Fund or non-public fund established by any Armed forces since income of these organizations is exempt u/s 10(23AA)
. Sec 194 Dividend Where any amount is payable in the nature of “Dividends” by an Indian Company or a Company that has made arrangement for declaration and payment of dividend within India (including dividend on preference shares ) the said company has to deduct tax at source. The deduction has to be done as per rates in force before the payment is made in cash or issue of cheque or dividend warrant or before making any distribution or payment to the share holder of any dividend u/s 2(22). Sec 2(22) defines dividends as including inter alia distribution by a company to its share- holder of various sums like accumulated profits (whether Capitalized or not) by realizing all or part of company’s assets or debentures, debenture stock deposit certificates, or bonus shares to preference share-holders to the extent of accumulated profits, or payments by a Private Limited Company of any advance or loan to a share-holder being beneficial owner holding not less than 10% of voting power, or loan or advance to a concern in which such share- holder is a member or partner Exemption (a) -Exemption from T.D.S. is granted in case of a share-holder who is an individual and the company pays dividend of Rs.2500/- or less in one financial year and it is paid by account payee cheque(Form No.14 is submitted under Rule 28). (b) Further, if the Assessing Officer gives a certificate in writing in prescribed form that total income of the share-holder is below taxable limit then the person paying the dividend to share holder is not to deduct tax at source (Form 15 under Rule 29). (c) Further no TDS to be done in respect of dividends referred to in Section 115-O.
. Sec 19A Interest Income other than interest on securities The ‘Interest’ other than ‘Interest on Securities’ is subject to tax deduction at source as per rates in force. However, an individual or Hindu Undivided family whose total sales gross receipts or turnover from the business or profession, carried on by him exceeded monetary limit specified in clause (a) or clause (l) of section 44AB(Rs. 1 core) for business and Rs. 25lakh for profession are liable to deduct tax under this Section. However, any other person (i.e company, firm, Association of person, Trust etc.) who is responsible for paying Interest (other than ‘Interest of Securities’) is responsible for deduction of tax at source. This tax is to be deducted, as usual, at the time of credit of interest to the account of payee (i.e. Assessee) or actual payment in cash or by issue of cheque, draft, or any other mode of payment, whichever is earlier. Even if the amount of interest is credited to any account whether called “interest payable account” or “Suspense Account”, or by any other name, in the books of the person who is paying such income(i.e. “Payer” of the interest), these provisions of Section 194A will apply. Exemption if interest, or aggregate of interest during the financial year, does not exceed Rs. 5000/-. However, where the payer is a banking company, a co-operative society engaged in the business of banking or a post office the exemption limit shall be Rs. 10,000 (applicable w.e.f. 1.6.2007). Such interest income is credited or is paid to a banking company or co-operative Society engaged in banking or a Financial Corporation or LIC, or UTI, or company or co-operative society carrying on insurance business or any other institution, association or body notified by the Central Government in official Gazette for reasons recorded in writing.
. The interest is paid or credited by the firm to its partner’s account Interest income credited or paid by cooperative society to its members account or to another co- operative society. Interest income on deposits under any scheme framed and notified in Gazette by Central Government. Income credited or paid in respect of deposits other than time deposits, such time deposits made on or after 1-7-1995, with banking company including any bank nor banking institution referred to in Section 51 of the Banking Regulation Act,1949. Any interest credited or paid by the Central Government under the Income-tax Act or other allied Acts like Wealth-Tax, Estate Duty, Super Profit, Sur-tax or Interest Tax Act. Interest earned on deposits with - a primary agricultural credit society. - a primary credit society. - a Co-operative land mortgage bank. - a Co-operative land development bank. - a Co-operative society engaged in banking business (other than time deposits on or after 1-7- 1995). Income credited or paid by way of interest on compensation awarded by the Motor accidents cause tribunal. However, the aggregate amount of income paid/credited should not exceed fifty thousand rupees Income paid/payable by infrastructure capital company /fund or public sector company in relation to zero coupon bond issued after1.6.05.
. Sec 194B Winnings from lotteries or crossword puzzle etc. Under Section 194B, winnings from lottery or crossword puzzle or card game and other game of any sort exceeding Rs. 10000/- are subject to deduction of tax at source as per rates in force. The deduction is to be done at the time of payment of the winnings. In cases where the winnings are wholly in kind or where they are partly in cash and partly in kind but the part in cash is not sufficient to meet the tax liability for tax deduction in respect of the whole of the winning, the person responsible for paying shall before releasing the winning either in cash or in kind ensure that tax is paid in respect of the winnings. Sec 194BB Winning from horse race Section 194BB enjoins any person, who is a bookmaker or a licensee for horse racing in a race course or arranger for wagering or betting in any race course, and is responsible for paying to any person the winning from such horse race, to deduct income-tax at source. The deduction is to be done as per rates in force. The only exemption is for winnings of Rs.5000/- or below.
. Sec 19c Payments to contractor Any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the bodies mentioned therein shall, at the time of credit of such sum to the account of the contractor or payment thereof in cash or by issue of a cheque or draft by any other mode, whichever is earlier, deduct TDS on amount Rate of TDS under section 194C Threshold Limit-It is R s30000 Rs for a single Transaction and Rs 75000 for aggregate amount during the Financial year Sec 194 of I.T act says payment for carrying out any work will attract TDS. Work for Sec 194C will include; Catering Service Advertisement broadcasting & telecasting including production of programmes for such broadcasting or Telecasting. Carriage of Goods or passengers by any mode of transport other then by Railways. manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. RatePayee 1%Individual or a HUF 2%Other ten a Individual or a HUF.
. TDS in case of JOB work according to specification(brief) In case of work contract being manufacturing or supplying product according to specification(by using material from such customer),tds shall be deducted on the invoice value excluding the value of material purchased from such customer, if such value is mentioned separately in the invoice. where the material component has not been separately mentioned in the invoice, tds shall be deducted on the whole value of the invoice.
. The payments made directly to print and electronic media would be covered under section 194C as these are in the nature of payments for purposes of advertising. Deduction will have to be made at the rate of 1 per cent. It may, however, be clarified that the payments made directly to Doordarshan may not be subjected to TDS as Doordarshan, being a Government agency, is not liable to income-tax. The payments made to a travel agent or an airline for purchase of a ticket for travel would not be subjected to tax deduction at source as the privity of the contract is between the individual passenger and the airline/travel agent, notwithstanding the fact that the payment is made by an entity mentioned in section 194C(1). The provisions of section 194C shall, however, apply when a plane or a bus or any other mode of transport is chartered by one of the entities mentioned in section 194C of the Act. As regards payments made to clearing and forwarding agents for carriage of goods, the same shall be subjected to tax deduction at source under section 194C of the Act. The carriage of documents, letters etc., is in the nature of carriage of goods and, therefore, provisions of section 194C would be attracted in respect of payments made to the couriers. TDS is not required to be made when payment is made for serving food in a restaurant in the normal course of running of the restaurant/café. Payment to recruitment agencies are in the nature of payments for services rendered. Accordingly, provisions of section 194C shall not apply. The payment will, however, be subject to TDS under section 194J of the Act. If the composite arrangement is in essence the agreement for taking premises on rent, the tax will be deducted under section 194-I from payments thereof.
. payments made to a hospital for rendering medical services will attract deduction of tax at source under section 194J section 194C would apply in respect of supply of printed material as per prescribed specifications There is an obligation to deduct tax at source out of payment of freight when the goods are received on "freight to pay" basis,because The provisions of tax deduction at source are applicable irrespective of the actual payment. 1)Applicable Section 194C,Clarified by CBDT Vide Circular No.715,dated 08.08.1995 2)Gist of circular:- Payments made to clearing and forwarding agents for carriage of goods are subjected to deduction of tax at source under section 194C, since unlike the travel agents, they are independent contractors. They would also be liable to deduct tax at source while making payments to a carrier of goods. 3)So TDS Applicable under Section 194C @ 2% or 1% depends on Status of Payee Wher the contractor is engaged in plying,hiring or leasing goods carriage, any freight charges paid to such contractor will not be subject to TDS U/S194C if such provides PAN to the person responsibe for deducting TDS Any advance payment for executing a contract covered under section 19c will attract TDS.
. Sec 194D Insurance commission Any person, who is responsible for paying to a resident any remuneration or reward, whether called commission or by any other name, for soliciting or procuring insurance business (including continuance, renewal or revival of policies of insurance), is enjoined upon to deduct tax at source @10% at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft, whichever is earlier. Deduction is to be done as per rates in force. However, if the aggregate of such account, credited or paid during one financial year is Rs.20000/- or less, than no tax is required to be deducted at source. Sec 194E Payments to Non-resident sportsmen or sports association If a payment is to be made to a non-resident sportsmen (including an athlete) who is not citizen of India or non resident sports association and the income is covered by Section 115BBA, then income-tax is to be deducted at source @ 20% +3%(edu+shec)of such payment. Section 115BBA applies to any tax-payer (assessee) who is not a citizen of India and who is a non-resident and income is received, or receivable, for participation in India in any game or sport or income from advertisement or income from contribution or articles in Indian Newspapers, magazines and journals or a nonresident sports association or institution which receives guarantee money for games or sports played in India
. Sec 194EE Payment in respect of National Saving Scheme Where any payment is made by a person of an amount referred to in clause (a) of sub section (2) of sec 80CCA, then such person is required to deduct tax @20% there on at the time of making such payment. The amount standing to the credit of an assessee under National Saving Scheme, 1987 and the interest accrued thereon is covered under this provision. (Note: There is no provision u/s 19EE for deduction of tax at a lower then the rate prescribed above) However, in following cases no tax is deductible: where amount so payable in a financial year is less than Rs.2500/- or where payment is made to heirs of a deceased assessee or where a self declaration under Form No 15G is furnished by a particular person However the assessee cannot furnish the declaration under this clause if the aggregate amount of the following incomes during the previous year exceeds the maximum amount which is not chargeable to tax even though the tax on total income of such person is NIL: Interest on securities Dividend. Such income other then the income referred to in Sec 2(22)(e)is now exempt. Interest other than interest on Securities Payment in respect of deposit under National Saving Scheme Income in respect of units. such income is now exempt.
. Sec 194G Commission etc. on sale of lottery tickets Any person who is responsible for paying and who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called) on such tickets in an amount exceeding Rs.1000/- shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10%.. Sec 194 H Tax deduction from commission or brokerage Any person, not being an individual or a Hindu undivided family(who is not covered under clause (a) or clause (l) of section 44AB), who is responsible for paying to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10%.section 194D Exemption- no tax is deductible if the amount during the financial year does not exceed Rs.5000/-. “commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; “professional services” means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA;section 44AA
. Sec 194I Rent Any person, not being an individual or a Hindu undivided family( covered under sec 44AB), who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax As rent on plant & machinery and rent on property & furniture attracted different rate of TDS, there was lot of confusion which resulted in incorrect deductions leading to unintentional defaults. Section 194I (Rent Payment) has been bifurcated into two sections as under: 194I(a) – Rent for Plant & Machinery – 2% 194I(b) – Rent for land, building & furniture – 10% Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed Rs. 180000/- i) “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,— (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;]
. Note: If your owner is charging your service tax on rent then such service tax has to be excluded while calculating TDS.TDS will be charged on the rent part not not on the the service tax amount. If rent is paid to government entities, government department, or any entities whose income are exempt from income tax U/S 10, then TDS will not be deducted from its rent Charitable trust, political party and such party has given you the certificate of non deduction of TDS,then TDS will not be deducted from its rent Citation of Circulars/ Case Laws (1) Departmental Clarifications regarding advance rent etc. – CBDT has clarified that: (a) Where tax is deducted on advance rent spread over more than one year, credit shall be allowed in the same proportion in which such income is offered for taxation for different assessment years based on the single certificate furnished for tax so deducted on the entire advance rent. (b) Where rent gets terminated/ cancelled resulting in refund of balance amount of advance rent to the tenant, or the rented property is transferred by way of sale, lease, gift etc. with the tenant in occupation or otherwise resulting in refund of balance of advance rent to the transferee or the tenant, credit for the entire balance of tax deducted at source, which has not been given credit so far, shall be allowed in the assessment year relevant to the financial year during which the rent agreement gets terminated/ cancelled or rented property is transferred and balance of the advance rent is refunded to the transferee or the tenant as the case may be. [Circular No. 5/2001 dated 2.3.2001].
. 2) Municipal Taxes and Ground Rent borne by the tenant Where Municipal Taxes, Ground Rent etc. are borne by the tenant, no tax will be deducted at source on such payments. [Circular No. 718 dated 22.8.1995 (215 ITR (St) 68)] 3) Subletting of Land Where a person has taken a particular space on rent and thereafter sublets the same fully or in part for putting up a hoarding, he would be liable to deduct TDS u/s 194I and not u/s 194C. [Circular No. 715 dated 8.8.1995 (215 ITR. (St) 13)] (4) Hotel accommodation taken on regular basis regular Where payments made by persons other than individuals and H.U.F. (not covered by section 44AB) for hotel accommodation taken on regular basis will be in the nature of rent subject to TDS. Circular No. 715 dated 8.8.1995 (215 ITR (St) 13] (Where earmarked rooms are let out for a specified rate and specified period, it would be constructed to be an accommodation on regular basis. However where a rate contract is made with a hotel to ensure lower room rent over a specified period and there is no obligation on the part of the hotel to let out earmarked rooms at a specified rate for a specified period, such case fall to outside the scope of TDS provisions and it cannot be said that the accommodation is hired on regular basis (Circular no 5 dated 3 July 2002).) 5) Warehousing Charges considered as rent Warehousing Charges are subject to TDS. [Circular No. 718 dated 22.8.1995 (215 ITR (St) 68] (6) Rent paid to Government etc. whose income is exempt under section 10(20) or 10(20A) Rent paid to Government or Local Authorities and statutory Bodies whose income is exempt u/s 10 (20) and 10 (20 A) is outside the purview of TDS. Circular No. 699 dated 30.1.1995] (7) Rental income assessable as Business Income Rent from leasing out a factory building though assessable as business income, will be liable to deduct at source u/s 194-I. [F.N.275/108/95-IT (B) dated 27.2.1997] (
. 9) Deposit given to Landlord – notional interest not to be considered :In response to a query whether rent paid should be enhanced for notional income in respect of Deposit given to the landlord, CBDT has clarified that the tax is to be deducted from actual payment and there is no need for computing notional income in respect of a deposit given to the landlord. If the deposit is adjustable against future rent, the deposit is in the nature of advance rent subject to TDS. Circular No. 715 dated 8.8.1995] 10).Section 194-I Shall not applicable on cooling charges paid by the various customers to the owners of cold storages.cold storages. (The matter has been examined. The main function of the cold storage is to preserve perishable goods by means of a mechanical process, and storage of such goods is only incidental in nature. The customer is also not given any right to use any demarcated space/place or the machinery of the cold store and thus does not become a tenant. Therefore, the provision of 194-I is not applicable to the cooling charges paid by the customers of the cold storage. However, since the arrangement between the customers and cold storage owners are basically contractual in nature, the provision of section 194-C will be applicable to the amounts paid as cooling charges by the customers of the cold storage. This may be brought to the notice of the Assessing Officers under your charge. Section 194 I is many time overlapping the section 194 c,like if person takes a car on a hire than there are different view for applicability of section 194c/194I,i hope CBDT will be kind enough to issue more clarification on this issue.) 12.SECTION 194-I TDS ON RENT PAYEE MUST HAVE CONTROL OVER ASSET:[ Chattisgarh State Electricity Board vs. ITO (ITAT Mumbai) ](There is a distinction between the use of an asset and the benefit derived from an asset. In a transaction of hire/ leasing, the possession of the goods and its effective control is given to the customer and the customer has the freedom and choice of how to use the asset. On the other hand, if the customer entrusts to the assessee the work of achieving a certain desired result and that involves the use of goods belonging to the owner, the control of the asset remains with the owner and there is no use by the customer (Asia Satellite 332 ITR 340 (Del) followed, Japan Airlines 325 ITR 298 (Del) & Krishna Oberoi )ASSET
. On facts, the transmission lines were under the possession & control of Power Grid. The assessee was merely enabled to use the services of transmission of electricity and not the use of transmission wires per se. The assessee was not involved in the in the actual operations of the transmission lines. The transmission wires were also used by other customers of Power Grid. Consequently, the payments were not rent u/s 194-I; 8) Property owned by co-owners Tax is deductible from payment by way of rent, if such payment to the payee during the year is likely to be Rs. 1,20,000/- or more. If there are more than one payees, each having a definite and ascertainable share in the property, the limit of Rs. 1,20,000/- will apply to each of the payee/ co-owners separately. The payers and payee are, however, advised not to enter in to shame agreement to avoid TDS provisions. The Limit of Rs. 120000/- has been increased to Rs 1,80,000 w.e.f 01.07.2010. Circular No. 715 dated 8th August, 1995] (iii) Under the Explanation to s. 191, a person can be treated as an assessee in default u/s 201(1) only when, apart from the lapse in deduction of tax at source, the recipient of income has failed to pay such tax directly. S. 201(1) imposes vicarious (and not penal) liability on the payer to make good the shortfall in tax collection. If the tax liability is discharged by the recipient of income, the vicarious liability cannot be invoked.) 13. TDS on Taxi Charges u/s 194 I is applicable if user has control over Taxi: It is depended on contract details. Few point has been discussed in link here -Few point has been discussed in link here - 14. composite arrangement under franchises agreement not liable for TDS as rent :Delhi High court. CIT v NIIT Ltd. (Taxpayer) [2009-TIOL-533-HC-DEL-IT], (The HC held that the Agreement, when read as a whole, indicated that the main intention of the parties to the Agreement, was to carry on the business and share the revenues there from and not to let out the premises and infrastructure therein, in isolation. Hence, the payments made cannot be considered in the nature of rent and are not liable for TDS. ) (Note-U/S 194C &194H the words used “any sum” mean TDS u/s 194C & 194H includes Service tax amount. U/S194D/H/I the word used “income rather then any sum "means TDS deducted only on the Income & not on service tax amount)
. U/s 194-I, Income Tax is required to be deducted at source at the time of payment of any income by way of rent @’ 10% for the use of any machinery or plant or equipment. U/s 194C, tax is required to be deducted @’ 2% for carrying out any work which, inter alia, includes carriage of goods and passengers by any mode of transport other than by railways. Though generally speaking all types of machinery, plant and equipment given on hire get covered u/s. 194-I but hiring of transport vehicles get specifically covered u/s. 194-C as far as Tax Deduction at source is concerned. Transport vehicles used for carriage of goods and passengers are to be subjected to TDS provisions as per clause (c) of Explanation III of sub-section (2) of section 194C of the I.T. Act. INCOME TAX APPELLATE TRIBUNAL, DELHI ITA No. 4913/Del/2011 – A.Y. : 2008-09 The payment of roaming charges by the taxpayer to the other service providers cannot be considered as rent for the use of telecom equipments in accordance with Section 194-I of the Act and therefore, there was no liability on the part of the taxpayer to deduct tax from the same. However, on the alternative proposition of the tax department that the payment would constitute ‘Fees for Technical Services’ under Section 1 94J of the Act, (SOURCE:- Vodafone Essar Limited v. DCIT (ITA No. 6058,6059,6060/Mum/2009) Vodafone Rent reimbursement not liable for TDS u/s. 194I
. Sec 194IA The Indian Finance Minister P. Chitambram while announcing the Budget 2013-14 introduced TDS on Property @ 1% on all Immovable Property Transaction over Rs. 50Lakh U/S 194IA, however sale of Agriculture land would be exempted. Although the FM has introduced TDS on Property @ 1%, the corresponding provision of Sec 54 have not been amended Property are usually undervalued and under reported and almost half of the transactions don’t even carry the PAN card no of parties concerned so With a view to improving the reporting of such transactions and the taxation of capital gains, Sec 194IA has introduced, this would tighten screws on corruption and black money is being circulated in the Real Estate Market. A person deducting TDS on property is not mandatorily required to possess a TAN No TDS Should be deposited within a period of 7 days from the end of the month in which deduction has been made. Form 26QB has been prescribed for making such payments and such payments can be done at any authorised bank branchesand can also be done online. After depositing TDS,the buyer of the property would be required to issue Form 16B to the seller of the property There is no need to File the TDS Return. In case PAN Card no is not given by the buyer to the seller,TDS would be required to be deducted @20%. Irrespective of the date of transfer,the TDS required to be deducted at the time of payment. In case more then 1 Buyer or 1 Seller and each purchase price is less then RS 50L, but the aggregate value of the transactions exceed Rs 50Lakh, Section 194IA would be applicable.
. Sec 194J Fees for professional or technical services ‘Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of— (a) fees for professional services, or (b) fees for technical services, or (c) royalty, or (d) Non competent fees*as referred U/S 28(va) of the I.T Act, (e) W.E.F 1sy July 2012,It also applicable to remuneration, fees or commission paid to a Director of a Company which is not considered under the head salary, (for such payments threshold limit of Rs 30000is not applicable). shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 10% of such sum as income-tax on income comprised therein.... Further as per Explanation (a)to section 194J "professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession etc.’ Threshold limit Rs 30000/-as applicable to above all payment except (e) clause. Following professional services will be notified as professional services U/S 194J of I.T act: All such person professionals as notified for the purpose of Sec 44A of the I.T act 1. Sports person 2. Umpires & referees. 3. Coaches & trainers 4. Event manager 5. Commentators 6. Anchors & sports columnists. 7. Team physicians & physiotherapists.
. Technical services considered Managerial Technical Consultancy But does not include consideration for any construction assembly, minning or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries. Royalty- means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property the use of any patent, invention, model, design, secret formula or process or trade mark or similar property the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill *Non competent fees-any sums received or receivable in cash or kind under an aggrement for not sharing any know-how,patent,copyright,trademark,licence,franchise or any other business or commercial rights of similar nature or informations or techniques likely to assist in the manufacure of goods or provisions for services. It also include any fee received for not carrying out any activity in relation to any business.
. TDS on Software is not applicable as per NOTIFICATION NO. 21/2012 [F.No.142/10/2012-SO(TPL)] S.O. 1323(E), DATED 13-6-2012 subject to certain conditions. But if a software is purchased from Developer of Software, then TDS is applicable or not and under section 194C or 194J? TDS on software maintenance,,,..194J will be applicable no tds on purchase of software. NOTIFICATION NO. 21/2012 No TDS deduction ( Payment by a person (hereafter referred to as the transferee) for acquisition of software from another person, being a resident, (hereafter referred to as the transferor), where- (i) the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification, ( In case any modification is made by the transferor, the benefit under this notification would not be available) (ii) tax has been deducted- (a) under section 194J on payment for any previous transfer of such software; or (b) under section 195 on payment for any previous transfer of such software from a non-resident, and (iii) the transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor. 2. This notification shall come in to force he 1st day of July, 2012.) f the Software is purchased without any customization, then there is no liability to deduct TDS. Such transaction shall be treated as pure purchase by the buyer. Whereas, if the Software is supplied as per the specifications of the customer, then TDS shall be applicable. As per my knowledgeTDS shall be deductible u/s 194C. Read more at: http://www.caclubindia.com/forum/tds-on-software-248933.asp#.Ur5uUhdHIbAhttp://www.caclubindia.com/forum/tds-on-software-248933.asp#.Ur5uUhdHIbA
. Status of Advertising Professionals Payment for Advertising have been covered under section 194C as well as u/s 194J. In this connection C.B.D.T. has clarified that section 194C will apply to payments made to the advertising agency in connection with services rendered by such agency in the area of advertising. When payments are made by advertising agency to professionals engaged by such agency in connection with the execution of advertising jobs, the payments to these professionals e.g. film artist, an actor, a cameraman etc. would attract the provisions of section 194J. (1) Payments to hospital liable to TDS Payments to a hospital for rendering medical services liable to TDS u/s 194J. [Circular No. 715 dated 8.8.1995 (215 ITR (St) 17)] Payments to an electrician attracts the provisions of section 194C Payments to an electrician or to a contractor who provides services of an electrician will be in the nature of payment made in pursuance of a contract for carrying out any work, and therefore attract the provision of section 194C. [Circular No. 715 dated 8.8.1995] No TDS if fee for professional services is for the personal purpose of the Individual or HUF. By applying the above provisions neither professional service nor the fee for technical charges are exceeding the limit of Rs 30,000/-individually.
. Sec 194 LA Payment of compensation on acquisition of certain immovable property Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 10% of such sum as income-tax thereon: Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed Rs 2 Lakh. Explanation.—For the purposes of this section,— (i) “agricultural land” means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;section 2 (ii) “immovable property” means any land (other than agricultural land) or any building or part of a building.] Sec 194LB Income by way of interest from infrastructure debt fund. Where any income by way of interest is payable to a non-resident, not being a company, or to a foreign company, by an infrastructure debt fund referred to in clause (47) of section 10, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 5%+3%(edu+SHEC).".
. Sec 194LC Income by way of interest from Indian company Where any income by way of interest referred to in sub-section (2) is payable to a non-resident, not being a company or to a foreign company by a specified company, the person responsible for making the payment, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct the income-tax thereon at the rate of 5%+3%(edu+SHEC) The interest referred to in sub-section (1) shall be the income by way of interest payable by the specified company,— (i) in respect of monies borrowed by it at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2015 in foreign currency, from a source outside India under a loan agreement approved by the Central Government in this behalf ; and (ii) to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment. "specified company" means an Indian company "foreign currency" shall have the meaning assigned to it in clause (m) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999) ;
. Sec 194 LD INCOME BY WAY OF INTEREST ON CERTAIN BONDS AND GOVERNMENT SECURITIES - NOTIFIED RATES OF INTEREST ON RUPEE DENOMINATED BOND OF AN INDIAN COMPANY(W.E.F 1june 2013) Any person who is responsible for paying to a person being a Foreign Institutional Investor or a Qualified Foreign Investor any income by way of interest referred to in sub-section (2), shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode. whichever is earlier deduct income-tax thereon at the rate of 5%+3%(edu+SHEC) The income by way of interest referred to in sub section (1) shall be the interest payable on or after the 1st day of June, 2013 but before the 1 st day of June, 2015 in respect of investment made by the payee in (i) a rupee denominated bond of an Indian company or (ii) a Government security: In exercise of the powers conferred by the proviso to sub-section (2) of section 194LD of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies (by notification no 56 /2013/F.No.149/81/2013-TPL] the following rates of interest in respect of rupee denominated bond of an Indian company, namely :- (i) in case of bonds issued before the 1st day of July, 2010, the rate of interest shall not exceed 500 basis points (bps) over the Base Rate of State Bank of India as on the lst day of July, 2010. (ii) in case of bonds issued on or after the 1st day of July, 2010, the rate of interest shall not exceed 500 basis points (bps) over the Base Rate of State Bank of India applicable on the date of issue of the said bonds. Explanation- For the purpose of this section- (a) “Foreign Institutional Investor” shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD: (b) “Government security” shall have the meaning assigned to it in clause (b) of section 2 of the Securities Contracts (Regulation) Act, 1956(42 of 1956). (c) “Qualified Foreign Investor” shall have the meaning assigned to it in the Circular, No. Cir/IMD/DF/14/2011, dated the 9th August, 2011, as amended from time to time, issued by the Securities and Exchange Board of lndia, under section 11 of the Securities and Exchange Board of India Act, 1992’ (15 of 1992)
. Sec 195 Other sums Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this act shall at the time of credit of such income to the account of payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force.“ Who is liable to deduct tax? Any person as defined in section 2(31) shall deduct tax, which would include residents as well as non residents. This means that non-residents are also obliged to deduct tax. This has also been provided by way of clarificatory retrospective amendments in Finance Act, 2012. Who shall be the recipient? The section covers all non residents in its ambit as others have been covered under other sections. At what rate tax shall be deducted? The tax shall be deducted at the rate or rates in force as defined u/s 2(37A) i.e. the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in an agreement entered into or notified by Central Government u/s 90 and 90A. When the tax should be deducted? As is evident from above tax shall be deducted at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. Further, the payer is bound to deduct tax at source only if the tax is assessable in India. If tax is not so assessable, there is no question of tax at source being deducted.
. What is the threshold limit for deduction of tax? There is no such threshold limit and tax is deductible even if payment is negligible. At what amount tax shall be deducted ? This point has been effectively dealt with by the Apex Court in Transmission Corporation of A.P. Ltd. and Another v. CIT reported in - (2002-TII-01-SC-INTL) in which SC opined as under :(2002-TII-01-SC-INTL) 1. Tax is deducted on ' any sum' on which income tax is leviable. That sum may be income or income hidden or otherwise embedded therein. 2. Scheme of TDS just not only applies on amount paid which wholly bears � income" character such as salaried, dividend, interest on securities but also to gross sums the whole of which may not be income or profits of recipient, such as payment to contractors 3. The said TDS provisions are meant for tentative deduction of income-tax subject to regular assessment. ( Note-New sub section (7) has been inserted in section 195 w.e.f. 1.7.2012 wherein it has been provided that CBDT may, by notification specify a class of persons or cases, where the person responsible for paying any sum to a non-resident, whether taxable or not, shall make an application to the Assessing Officer to determine appropriate proportion of sum chargeable to tax.) Section 195 of the Act takes it essence itself from the following sections of the act and articles of DTAA. Of DTAA.
. What is meant by Non-Residents? Under Income Tax Act, non-residents or non-resident in India can be of two types:- (a) Non-resident Indian - "Non- resident Indian" means an individual, being a citizen of India or a person of Indian origin who is not a "resident". (b) Any other non-resident person � It will include Foreign Nationals or foreign companies. Sec 5(2) Scope of Total Income of Non-Resident It covers any income which is received or is deemed to be received in India or any income which accrues or arises or is deemed to accrue or arise in India u/s 9 of Income Tax Act, 1961. Taxability of Income of Non Resident under ITA, 1961 vis- � -vis DTAA
. To prevent double taxation of the same income in the source and home country, Double Taxation Avoidance Agreements have been entered into with several countries for granting double taxation relief. The position of law is that the DTAA entered into by GOI overrides the domestic law. This has been clarified by CBDT vide Circular No. 333 dated April 2, 1982. Therefore, the income will be chargeable as per the provision of Income Tax or DTAA whichever is more beneficial to the assessee, if there is treaty between India and other country. If there is no treaty available then it shall be taxed in India as per the provisions of the ITA, 1961. Section 195 as regards the payer of any sum chargeable to tax applies to any person unlike certain other sections relating to TDS and covers Individuals Hindu Undivided Families Firms and AOPs Non Residents Foreign Companies Persons having exempt income in India eg trusts and Non profit Organisations claiming exemption under sections 10 and 11 of the Income Tax Act Any other juristic person irrespective of whether such person has an income chargeable to tax in India or not payment by an Indian Branch of a Foreign Company to its overseas Head Office In this context CBDT Circulars 649/31.3.1993 and 740 /17.4.1996 give some clarification. Further the landmark Kolkota Tribunal judgment of ABN Amro Bank reported in 280 ITR 117 (Kol) also lays down the law that if a deduction for interest payment by a branch to overseas head office is sought, then it is obligatory to deduct tax, since it presupposes a distinct Payer and Payee with separate identities and makes section 195 applicable.
. Whether TDS needs to be affected on mere reimbursement of expenses This is a question on which no clear direction is available and keeping in line with the general trend of tax judgments there are conflicting views held by the various courts and Tribunals in the country. In the case of mere reimbursement of expenses, TDS need not be effected as ruled in the case of reimbursement of out of pocket expenses to a noted Law firm.Clifford Chance 82 ITD 106(Mum). The most important recent Judgement in Mahindra & Mahindra’s case reported in 10 SOT 896 Mumbai ITAT has also held that reimbursement of expenses not having the character of income chargeable to tax under the provisions of the IT Act cannot be subject to WHT However where the cost of services is charged and recovered by way of reimbursement, even without any profit element TDS will be applicable as ruled in the case of Arthur Andersen & Co by the Mumbai tribunal reported in 94 TTJ 736 (Mum) There are also judgements which reflect that TDS under Section 195 will be applicable even on mere reimbursement of expenses. This view finds support in the decisions given by Cochin Refineries 222 ITR 354 (Kar) and HNS VSAT Inc 95 ITD 157 (Del ITAT) and also in Hindalco 278ITR 125 ( AT)
. Sums Covered under the scope of Section 195(1) All sums bearing the character of Income chargeable to tax under the provisions of the Income Tax Act 1961 are covered All sums in which income can reasonably be expected to be embedded are covered. This rule follows the judgement in Transmissions corporation’s case 239ITR 587SC where the apex court has categorically ruled that a payer cannot sit in judgement as to what proportion of the amount paid to the payee constitutes the income of the payee. A Corollary to the above rule is that if it cannot be determined with any certainty as to what part of the payment constitutes the income of the payee, then the payer is obliged to deduct tax on such gross amount. There are mitigation provisions by application to the respective assessing officer by both the payer as well as the payee in certain circumstances within the section itself Even payments made in kind are subject to TDS under Section 195 as ruled in Kanchenjunga Sea Foods reported in 265ITR 644 (AP) There is no obligation to deduct TDS on a payment made under the Decree of a court by a judgement debtor to a decree holder as decided in L P Gupta v Biratnagar Jute Mills reported in 48ITR 653 There is no clear ruling on TDS in respect of Capital gains and one must take it up on a case to case basis.If no mitigation is available even after application by either the payer or the payee, after disclosing the quantum of Capital gains likely to be embedded in the payment, then TDS on the gross amount is advisable on the principle of ex abundant Cautela ie by way of abundant caution to mitigate the consequences of non deduction to the payer. TDS has to be effected even on net payments (TDS applicable on the gross amount) as decided in Raymond Ltd (86 ITD 791 Mum ITAT) or even on adjustment of dues (J B Boda & Co 223 ITR 271 SC) There is no liability to deduct TDS on a payment made under a void agreement (absence of a contract) as held in Ericcson Communications case 81 ITD 77 (Del ITAT)
. Further as per Sec 195(6) the person responsible for payment to a non resident shall furnish the information relating to payment of any sum in Form No 15CA after obtainning a certificate from a chartered accountant in Form 15CB. But in Below cases Form 15CA & 15 CB not applicable Sl.No.Purpose code as per RBI Nature of payment 1S0001Indian investment abroad -in equity capital (shares) 2S0002Indian investment abroad -in debt securities 3S0003Indian investment abroad -in branches and wholly owned subsidiaries 4S0004Indian investment abroad -in subsidiaries and associates 5S0005Indian investment abroad -in real estate 6S0011Loans extended to Non-Residents 7S0202Payment- for operating expenses of Indian shipping companies operating abroad. 8S0208Operating expenses of Indian Airlines companies operating abroad 9S0212Booking of passages abroad -Airlines companies 10S0301Remittance towards business travel. 11S0302Travel under basic travel quota (BTQ) 12S0303Travel for pilgrimage 13S0304Travel for medical treatment 14S0305Travel for education (including fees, hostel expenses etc.) 15S0401Postal services 16S0501Construction of projects abroad by Indian companies including import of goods at project site 17S0602Freight insurance – relating to import and export of goods 18S1011Payments for maintenance of offices abroad 19S1201Maintenance of Indian embassies abroad 20S1 202Remittances by foreign embassies in India 21S1301Remittance by non-residents towards family maintenance and- savings 22S1302Remittance towards personal gifts and donations 23S1303Remittance towards donations to religious and charitable institutions abroad 24S1304Remittance towards grants and donations to other Governments and charitable institutions established by the Governments 25S1305Contributions or donations by the Government to international institutions 26S1306Remittance towards payment or refund of taxes. 27S1501Refunds or rebates or reduction in invoice value on account of exports 28S1503Payments by residents for international bidding
. Form 15CA & Form 15CB not required for Import Payments Payments made against Import Purchases constitutes Business Income of the Overseas Supplier and is taxable in India only if it is attributable to a Business connection/Permanent Establishment in India as per Section 9(1)(i) and respective Double Tax Avoidance Agreement. Thus, in absence of any income chargeable to tax in India there cannot be any application of Section 195 & form 15CA and Form 15CB is not applicable for remittances towards import payments.Section 9(1)(i) Few banks are taking a declaration from Importers in their forwarding letter that given Import payment amount is non chargeable to tax in India and carrying out transaction without Form 15CA and Form 15CB. Revised Forms and Amendments shall come into force on the 1st October, 2013. Part A of Form 15CA(Form 15CB not required) Who Shall Fill It To be filled up if the remittance to non- resident or to a foreign company does not exceed Rs. 50000 per transaction and aggregate of such payments made during the financial year does not exceed Rs. 2,50,000 What information has to be filled 1. Particulars of Remitter, Remittee, Remittance made and TDS 2. Mandatory to furnish PAN of Remitter, if tax is deducted then TAN of the Remitter also needs to be provided 3. Form prescribes mandatory application of provisions of Section 206AA, if remittance is chargeable to tax and PAN of remittee is not available.Section 206AA 4. E-mail and Phone Number of remittee to be furnished, if available
. Part B of Form 15CA***(Form 15CB required) *** Part B of Form 15CA is to be filled after obtaining either of the below a certificate in form no. 15cb from an accountant (chartered accountant) or a certificate from the Assessing Officer (AO) under Sec 197 or an order from Assessing Officer under sub-sec (2) or sub-section (3) of sec 195 Who Shall Fill It To be filled up for remittances other those specified in Part A (If the Remittance is chargeable to tax and exceed Rs. 50000 per transaction and aggregate of such payments made during the financial year exceeds Rs. 2,50,000) What information has to be filled 1. Forms prescribe mandatory application of provisions of Section 206AA, if PAN of remittee is not available;Section 206AA 2. Other Details Secion A: Details of Remitter, Remittee and Accountant to be specified in this section Secion B: Particulars of Remittance and TDS (as per certificate of accountant), namely: a. Remittance details b. Taxability under the Income Tax Act c. Taxability under the relevant DTAA. Details of TRC (Tax Residency Certificate)DTAATRC (Tax Residency Certificate) d. TDS details
. Process for Filling Form 15CA Login on the e-filing portal at the following link – https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html Visit the link – e-file → Prepare and Submit Online Form(Other than ITR) → Select Form 15CA and Assessment year. CA Certificate in Form 15CB: One of the important changes made by the notification 2013 was to reduce the requirement of a Chartered Accountant (CA) certificate in Form 15CB for certain payments. From October 1, 2013, CA Certificate in Form 15CB will not be required for payments in first 2 categories. It means No CA Certificate for any payment that does not exceed Rs. 50,000 or aggregate Rs. 250,000 during a financial year or if it is covered in the specified list. The specified list specifies 28 nature of payments and also mentions the purpose code for each nature. For any other payment, CA certificate in Form 15CB, which is completely revamped, would be required. While Form 15CB kept the basic information the same, such as name, address, country of remittance, amount of remittance, bank details, nature of remittance, etc., it changed other important sections and would require Chartered Accountants to determine taxability of the remittance as per Income Tax Act and DTAA, relevant section of the IT Act or Article of DTAA, TDS rate and tax liability under both IT Act and DTAA, basis of determination or reasons if not taxable.
. The duly signed Form 15CA & 15CB shall be submitted in dublicate to the RBI /Authorized Dealer.The RBI /Authorized Dealer will then forward a copy of the certificate and undertaking to the Assessing Officer concerned.
. Thank You Hope this file help you in understand the Concepts & Procedures of TDS, send any suggestions and comments on email Id – janki@sarcmailin