TAX DEDUCTED AT SOURCE “PAY AS YOU EARN” Presented By: Sowmya

TDS Why – Tax Deducted At Source ? What is Tax Deducted At Source ?

Relevant Sections Sec 192 – Salary Sec 193 – Interest on Securities Sec 194 – Dividends Sec 194A – Interest other than Interest on Securities Sec 194B – Winnings from Lotteries, Crosswords, Puzzles etc. Sec 194BB– Winnings from Horse race

Relevant Sections Sec 194C – Payment to Resident Contractors Sec 194D – Insurance commission Sec 194E – Payment to Non Resident Sportsmen or Sports Association Sec 194EE – Payments in respect of Deposit under National Savings Scheme Sec 194G – Commission on sale of Lottery Tickets

Relevant Sections Sec 194H – Commission and Brokerage Sec 194I – Rent Sec 194J – Fees for Professional or Technical Services Sec 194K – Income in respect of units Sec 194LA –Payment of Compensation on acquisition of certain immovable property

Insertion 2011 Section 194 LB ( w.e.f 01.06.2011 ) Income by way of Interest from INFRASTRUCTURE DEBT FUND

Sec 192 – Salary Person responsible to deduct tax- Employer Tax to be deducted at rate applicable to individuals. Inclusion of income from other heads Payment of tax on Non Monetary Perquisites. Salary from more than one employer. Adjustment of amount deducted U/s192.

Sec 192 – Salary Case Law: Judgment: CIT Vs Venron Expat Services INC. (2010) The assesse failed to deduct tax monthly, however deducted towards the end of FY. Judgment: Permits adjustment of excess or deficit. No Interest U/s 201(1A).

Sec 193 - Interest on Securities Person responsible to deduct tax – Central or state govt. Local authority. Company or corporation established by govt. Rate of tax - 10%. Exemptions: Debentures (Resident Individuals) Paid by Account Payee Cheque of amount not exceeding Rs 2,500

Sec 193 - Interest on Securities List of interest payments- No TDS required Interest on Listed Securities Payment to New Pension Trust National Defence Bonds National Defence Loan National Development Bond 7-year NSC Gold Bonds LIC, GIC or any of its subsidiaries

Sec 194 – Dividends Person Liable to deduct tax is the principal officer. Rate of tax - 10%. Applicable only if dividend is paid u/s 2(22)(e).

Sec194A– Interest other than Interest on Securities Rate of tax – 10% Exemption Limit – Interest by Banking company - Rs 10,000 Others - Rs 5,000 Credit or Payment, whichever is earlier.

Sec194A– Interest other than Interest on Securities List of interest payments- No TDS required LIC, UTI, Other Insurance Companies To the Partner of the firm By a Co-operative society to its members By Primary Agricultural society Saving, Current Account, Recurring Deposit. Interest on compensation (Motor Accident Claim) -Does not exceed Rs 50,000 Interest on Zero Coupon Bond.

Sec 194B- Winnings from Lotteries, Crosswords, Puzzles etc. Deductor – Any person paying the sum by way of winning Rate of tax – 30% At the time of payment Exemption limit – Upto 30.06.10 - Rs 5,000 From 01.07.10 - Rs 10,000

Sec 194B- Winnings from Lotteries, Crosswords, Puzzles etc. H. Anraj Vs Government of Tamilnadu Essential elements that constitute lottery. A prize or some advantage in the nature of prize, Distribution thereof by chance and Consideration paid or promised for purchasing the chance.

Sec 194B- Winnings from Lotteries, Crosswords, Puzzles etc. Case Law: ACIT Vs Director of State Lotteries, Assam. Income accruing to an agent/trader in respect of prizes on unsold/unclaimed lottery tickets in his possession. Judgment: Income From Business, not winning from lottery. Hence not subject to TDS.

Sec 194BB– Winnings from Horse race Deductor – Licensed by the govt. or licensed bookmaker Rate of tax – 30% At the time of payment Exemption limit – Upto 30.06.10 - Rs 2,500 From 01.07.10 - Rs 5,000

Sec 194BB– Winnings from Horse race Case Law: Royal Calcutta Turf Club Limit u/s 194BB is applicable for each payment or entire winning for the FY? Judgment: Limit should be applied to each payment and not the entire winnings.

Sec 194C– Payment to Resident Contractors Rate of Tax – Individuals and HUFs - 1% Others - 2% Exemption Limit- Upto 30.06.10- Rs 20,000/50,000 From 01.07.10- Rs 30,000/75,000

Sec 194C– Payment to Resident Contractors Exemption Hiring or Renting equipments Sale of goods Supply of goods- Buyers specification Payment to airlines – Air travel of individuals Payment to banks for Discounting Bills Individual/HUF- exclusively for personal purposes Works executed under NREP & RLEGP

Sec 194C– Payment to Resident Contractors Case law: Mukta Arts Vs ACIT (2010) Assessee was engaged in Film Financing and made certain payments by way of advances to another party for production of film. Judgment: Assessee was not acting as contractor nor the other party a contractee Assessee was not required to deduct tax.

Sec 194D – Insurance commission Person responsible to deduct tax- Insurance companies. Rate of tax – 10% Credit or Payment, whichever is earlier. Exemption limit – Upto 30.06.10 - Rs 5,000 From 01.07.10 - Rs 20,000

Sec 194E– Payment to Non Resident Sportsmen or Sports Association Rate of tax – 10%+SC + EC 2% + SHEC 1% Credit or Payment, whichever is earlier. No Provision For deduction of Tax at lower rate. Category of payee – Income to NR by way of Participation in India in any game (excl card or gambling) Advertisement Contribution of article relating to any game or sport.

Sec 194EE– Payments in respect of Deposit under NSS Rate of Tax-20% At time of payment Exemption Limit- Rs 2,500 No Provision For deduction of Tax at lower rate. No TDS if payment to legal heir.

Sec 194G – Commission on sale of Lottery Tickets Rate of tax – 10% Exemptions – Payment not exceeding Rs 1,000. Payment to New Pension Trust. Category of payee Any person stocking, purchasing or selling lottery tickets

Sec 194G – Commission on sale of Lottery Tickets Case Law: MS hameed Vs director of State Lotteries (2001) Discount given to an agent on bulk purchase of lottery ticket from state Govt. Judgment: Such Discount is not a commission and not liable for TDS

Sec 194H – Commission and Brokerage Rate of Tax – 10% Exemption limit – Upto 30.06.10 - Rs 2,500 From 01.07.10 - Rs 5,000 Exemptions – Payable by BSNL/MTNL to their PCO franchisees. Payment to New Pension Trust.

Sec 194H – Commission and Brokerage Case Law: Vodafone Essar Cellular Limited vs ACIT. Sale of sim card and recharge coupons at discounted price to distributors Judgment: Such Discount given is a commission, hence liable for TDS

Sec 194I – Rent Rate of Tax – Land/building/ furniture/Fittings – 10% Machinery/Plant/Equipment – 2% Exemption limit – Upto 30.06.10 - Rs 1,20,000 From 01.07.10 - Rs 1,80,000 Exemptions – If Payee is govt or local authority. Payment to New Pension Trust

Sec 194I – Rent Case Law: CIT Vs Asiana Airlines (2009) Landing and Parking charges collected. Is it liable for TDS u/s 194I ? Judgment: Landing and Parking charges is “Deemed” to be rent and liable for TDS

Circulars and Cases U/S 194I If a person has taken particular space on rent and sub-lets it. Hotel Accomodation taken on regular basis. Building is let-out along with furniture/ fittings. Payment made for warehousing charges. Payment made to landlord in nature of advance rent or non-refundable deposit.

Sec 194J – Fees for Professional or Technical Services Rate of Tax – 10% Exemption Limit- Upto 30.06.10- Rs 20,000 From 01.07.10- Rs 30,000 Exemptions – Payment by individual/HUF Exclusively for their personal purposes Payment to New Pension Trust. Category of payee – Professional service or Technical service or Royalty or payments received U/s 28(1)(va)

Sec 194J – Fees for Professional or Technical Services Case Law: CIT Vs Bharthi cellular ltd Interconnection/port charges paid Judgment: Fees for technical service includes only service rendered by human not robots/machines

Illustrative cases of TDS u/s 194J Advertising agency makes payment to models. Payment made to Recruitment agency. Payment made by a company to share registrar. Maintenance contract involving Technical services. Service of professional cameraman.

Sec 194K – Income in respect of units Not relevant now as income from units is exempt w.e.f. Assessment year 04-05

Sec 194LA–Compensation on acquisition of immovable property Rate of Tax- 10% Exemption Limit- Rs1,00,000 Exemption: Payment to New Pension Trust

Sec 194LA–Compensation on acquisition of immovable property Case Law: State of Kerala Vs Mariamma Date of Deduction in case of delayed payment in compensation Judgment: Deduction to be made on the date of payment even though the acquisition may have been made much before.

Sec 194LB –Income from Infrastructure Debt Fund Rate of Tax- 5% Payment to Non residents other than company Foreign Company Credit or Payment, whichever is earlier. W.e.f 01.06.2011

Sec 195 – TDS on Non Residents Payment to Non residents other than company Foreign Company Payment or Credit – whichever is earlier Rate of Tax Rate as per the Finance Act Rate U/s 90 Rate U/s 90A

Sec 195 – Verdicts TDS liability only if income is taxable. Soliciting exhibitors outside India for an event in India. No TDS on income earned before PE established in India. Managerial & Consultancy services liable to TDS. Interest to non resident with no PE in India liable to TDS.

Sec 195 A – Grossing Up Income payable net of tax Gross Income Less: TDS Net Income Obligation to furnish certificate to the Deductee (Net Income & TDS thereon)

Sec 196 – NO TDS No TDS in case payment to Govt RBI Corp established by Central Act Mutual Fund U/s 10(23D)

Sec 196 B – Income from Units purchased in Foreign currency U/s 115 AB LTCG on transfer of such units Rate of Tax – 10% + SC + EC +SHEC

Sec 196 C – Foreign Currency Bonds / GDR’s Payment to Non Resident Income by way of Interest/dividend on GDR’s & Bonds LTCG on transfer of such bonds Rate of Tax – 10% + SC + EC +SHEC

Sec 196 D – Income of Foreign Institutional Investors Income from Securities Rate of Tax – 20% + SC + EC +SHEC

Sec 197 - No Deduction or Lower Rate Certificate for deduction at lower rate Make application to AO No deduction or less deduction No Certificate to be issued if PAN is not provided

Other Issues Tax Deducted is deemed to be Income Received TDS deducted & remitted – payment on behalf of the person from whom it was deducted Service Tax – TDS Where sum is used – Including Service tax Where income is used – Excluding Service tax

Other Issues TDS to be deposited to the credit of Govt. Form 15H/15G Tax deducted on behalf of Govt. Without tax challan – same day With tax challan – on or before 7days Tax deducted by others Credited or paid in March – on or before 30 April Other case – on or before 7days Form 15H/15G

Other Issues Assessee in default Interest U/s 201 Non deduction, non payment , Non payment of tax U/s 192(1A) Interest U/s 201 Does not deduct tax Fails to remit tax to the Govt. Does not pay tax U/s 192(1A) Rate of Interest for default DOD – Actual DOD = 1% DOD - Date of actual payment = 1.5%

Important Points Book entry Consolidated TDS certificate Issue of duplicate TDS certificate New Pension Trust

Important Points Failure to furnish PAN Highest of Rate in Finance Act Rate in force( Fin Act) 20% Deductor – 194A/194C/194H/194I/194J Any assessee(other than individual/HUF who are not subject to tax audit U/s 44AB for the preceeding financial year)

E- Filing Assesses mandatorily required to e-file Govt. Company Assessee subject to tax audit U/s 44AB Deducteess or Collectees for previous FY quarter is = or > 50

Form 26AS TIN facilitates a PAN holder to view Annual Tax Statement online Form 26AS contains Details of tax deducted on behalf of the taxpayer by deductors Details of tax collected on behalf of the taxpayer by collectors Advance tax/self assessment tax/regular assessment tax, etc. deposited by the taxpayers (PAN holders) Details of paid refund received during the financial year

Tax Collected at Source Responsibility of the receiver of payment. Presumption that buyer of goods will have taxable income.

Tax Collected at Source Rate of TCS Specified goods Rate Alcoholic liquor for human consuption 1% Tendu leaves 5% Timber obtained 2.5% Any other forest product Scrap 2% Parking lot Toll Plaza Mining And Quarring

Tax Collected at Source No TCS Buyer should be resident in India. Furnish self declaration in writing. Goods to be utilsed for manufacturing, processing or producing and not for trading. Submit copy of declaration within 7th of following month.

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