3. Tax deducted at source concept was introduced by The Income Tax Department in the year 2004. It is based on the system “pay as you earn” also known as “Withholding Tax” in many other countries like USA. It means that, Government shall get a part of your total tax, as soon as you have earned it. 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 the deducted amount is remitted to the Government account. National Securities Depository Limited (NSDL) started its process for forming the nationwide Tax Information Network,i.e TIN on behalf of the department. It ensures regular inflow of cash resources to the Government. Introduction

4. There were many reasons behind introduction of TDS by the Department. Some of them are covered below:  The Govt. gets revenue round the year.  Once tax is deducted & return is filed, the information about the person whose tax is deducted is already with the Dept. So, in order to avoid any consequences, that person files his Income Tax Return.  To curb the fake & bogus expenditure claimed by assesses. This is because if tax is not deducted and paid to the Govt., the expenditure is disallowed & tax has to be paid by the person claiming that expenditure.  To expand the tax base in the nation.

6. Deductor : The person responsible to deduct the tax is called as deductor. Deductor is the person who shall deduct the tax from the payments eligible for TDS and pay it to the Govt Deductee : The person whose tax is deducted and paid to the government is called as deductee. For the payments eligible for TDS, the deductee doesn't get full payment against his invoices. The amount is paid net of TDS. Terminologies Used

7. TAN : TAN is Tax deduction Account Number. Every deductor has to apply for TAN and on successful allotment of TAN he has to pay the tax so deducted on account of his TAN. It is unique for each deductor. TDS Return : After deduction of tax and payment thereof to the government, the deductor has to file quarterly statements giving the details of the deductees and payments made to them. TDS certificate : After filing quarterly statements, the deductor has to issue TDS certificate to the deductee mentioning therein the details of amount paid and tax deducted.

8. Payment net of TDS TDS How does the mechanism work? Deductor DeducteeGovernment Deductor files TDS Return with NSDL with following details – Name of Deductee, PAN, TDS rate etc Deductee files his IT return with Govt. Upon Validation and Matching the deductee gets credit from the Govt.(TDS Receivable)

10. Sec 192 - Salary Basic exemption applicable to Individuals As applicable to the individual EmployeeAll persons who are employers Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

11. Special Points:  Employees includes Non – Resident Employees.  Inclusion of income from other heads - based on a declaration statement filed by the employee. But any loss other than loss under the head “House Property” should not be considered.  Tax is to be deducted at source from salary only at the time of payment and not at the time of credit.  It is the liability of the employer to deduct & pay tax regularly.

12. Case Law: CIT vs M/s Larsen & Toubro Ltd (2009) 313 ITR 1 SC Case Details:  The company paid leave facility to its employees & considered exemption u/s 10(5), based on the self – declaration furnished by the employees.  The AO held that the company as employer ought to have verified the genuineness of the claim of exemption by verifying the details of actual expenditure incurred for availing leave travel facility by the employees.  Accordingly AO treated company as assessee in defaults. Legal Decision:  It was held that Sec 192 does not cast any obligation on the Employer to collect & examine supporting evidence to establish declaration given by individual employees for having availed the facility.

13. Sec 193 – Interest on Securities Exempted for certain listed securities u/s 193. Listed Debentures – Rs.5,000/- Domestic Companies & Resident Non – Corporate Assesses – 10% Any Resident in India All persons Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

14. Special Points:  Int. on listed securities of a Company, if such securities are in Dematerialized form (w.e.f. 01.06.2008). – NO TDS  Payment to New Pension Trust – NO TDS  Deep Discount Bonds – Tax is deductible at the time of redemption.  Deemed Credit – TDS apply

15. Sec 194A – Interest other than Interest on Securities Rs. 10,000 – if pmt made by Banking Co, Co –op Scty, Post Ofz Rs. 5,000 – if pmt made by other person Interest on Zero Coupon Bond – Paid by Infra. Co/Fund/Bank Domestic Companies & Resident Non – Corporate Assesses – 10% Any Resident in India All assessees (except Indvl & HUF who are not subject to audit u/s 44AB during prior PY) Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

16. Section 44AB “Under the existing provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed Rs. 1crore. Similarly, a person carrying on a profession is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed Rs. 25 Lacs.”

17. Special Points: Definition of Interest u/s 2(28A):  Interest payable for money borrowed/debt incurred (including deposit, claim or other similar obligation) & includes service fee or other charge in respect of such debt/ borrowing/ other credit facility not utilized.  Interest credited to be ascertained Assessee wise and not deposit wise.  Deposit in Joint Names – TDS deductible on first holder  TDS on Gross Interest  Trust assessed as Individual – 194A does not apply

18. Sec 206A – Return filing obligation of payers in respect of payment of interest u/s 194A without deduction of tax at source Payers Covered:  Interest is payable by Banking Company or Co – operative Society or Public Company or a person notified in the official gazette to a resident u/s 194A. Interest Payment: Where the interest payable does not exceed –  a) Rs. 10,000, where the payer is a Banking Company/ Co – operative Society  b) Rs. 5,000, in any other case. they shall be liable to file the return. Maintenance of particulars:  The particulars in respect of deposits on which the interest has been paid without TDS in Form 26QA on computer readable media.

19. Quarterly Return:  Due Date: The return should be filed within one month from the end of the quarter (except for the last quarter) in which such payments are made as under –  Form: The return shall be in Form 26QAA verified in the prescribed manner.  Penalty u/s 272A(2): Non – compliance will attract a penalty of Rs.100 for every day during which the default continues, leviable by JDIT, JCIT or Higher Authority. Opportunity of being heard shall be given to the assessee. Quarter ending 30 th June30 th Sep31 st Dec31 st Mar Due Date31 st July31 st Oct31 st Jan30 th June

20. Sec 194B – Winning from lottery/cross – word puzzle Rs. 10,000. If pymt > Rs.10,000, entire winnings liable. 30% All personsAny persons Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

21. Special Points: Essentials of a Lottery:  A prize or some advantage in the nature of a prize  Distribution thereof by chance &  Consideration paid or promised for purchasing the chance  Each instalment payment is liable for TDS

22. Sec 194BB – Winning from Horse Race Rs. 5,000 If pymt > Rs. 5,000, entire winnings liable. 30% Any personAny person being a licensed book maker Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

23. Special Points:  The limit u/s 194BB should be applied to each payment as is provided and not entire winnings made by a punter throughout a year. [Royal Calcutta Turf Club 114 Taxman 82 (Mag.)]

24. Sec 194C – Payment to Contractor / Sub Contractor Rs. 30,000 per contract value or Credit less than Rs. 75,000 p.a in aggregate Individual & HUF – 1% Others – 2% Any Resident Contractor/ Sub Contractor for any work including supply of labour. All assessees including Foreign Enterprises & Govt. Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

25. Material Value vs Invoice Value  Where any sum is paid or credited with respect to a work relating to manufacturing or supplying a product according to the requirement or specification of a Customer by using material purchased from the customer, TDS shall be made on the amount as under – Value of Material separately mentioned in the Invoice TDS on Invoice Value less Material Value Value of Material not separately mentioned in the invoice TDS on Full Invoice Value

26. Contract vs Work  Any sum payable for carrying out any “ Work” in pursuance to a contract is liable u/s 194C.  Contract includes Sub – Contract.  Work includes Advertising, Broadcasting & Telecasting including production of programmes for such broadcasting & telecasting.  Manufacturing or supplying a product according to the requirement or specification of a customer, by using material purchased from such customer is included in “Works” u/s 194C.  If the contractor purchases such materials from a person other than the customer, then such “manufacture or supply” is not work, for TDS purpose. (Such Contract is a Contract of Sale)

27. Special Points:  Cable TV operator is liable to deduct TDS on Payments made to TV Channels [Kurukshetra Darpans (P) Ltd vs CIT 2008 TIOL 207 (P&H)  Payments made to Airlines or Travel Agents for purchase of Tickets for Air travel of Individuals – NO TDS  Advance payments made – TDS should be deducted.  Materials supplied by Contractee – TDS should be deducted on Gross Payment without excluding the cost of materials.  Reimbursement of Actual Expenses to be included – Sec 194C & 194J refer to “any sum” paid.  Inclusive of Service Tax.

28. Sec 194D – Insurance Commission Amount of payment in aggregate not exceeding Rs. 20,000 during FY Domestic Company & Non – Corporate Assesses – 10% Any Resident in India (Eg. Insurance Agents) Insurance Companies Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

29. Sec 194E – Payment to Non – Resident Sportsmen/ Sports Association NIL10% Non Resident Sportsmen/ Sports Association Any person Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

30. Special Points:  Amendment proposed by Finance Bill 2012  The Finance Bill 2012 proposes to extend the scope of Section 194E to cover payments made to 'entertainer' within its ambit. The rate of deduction of tax for all payments covered under Section 194E of the Act is proposed to be increased to 20%. This amendment will take effect from 01 July 2012.

31. Sec 194G – Commission on sale of Lottery tickets Rs. 1,000 p.a. If aggregate Pmts > Rs. 1,000, entire payment liable. For All assessees – 10% Person stocking, purchasing or selling lottery tickets Stockist, Distributor, etc. of lottery ticket Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

32. Case Law: MS Hameed vs Director of State Lotteries 249 ITR 186 (Ker.) Discount on Purchase of Lottery – Not Commission:  Where an agent of Lottery Tickets received Lottery Tickets in bulk from the State Govt and he was given discount on slab basis depending on his off – take, such Discount is not a Commission, and not liable for TDS.

33. Sec 194H – Commission or Brokerage Aggregate payments do not exceed Rs. 5,000/- 10% Any Resident in India All assessees (Except 44AB) Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

34. Special Points:  Any commission or brokerage payable by BSNL/MTNL to their Public Call Office Franchisees – No TDS.  Amount on which TDS has to be made is payment inclusive of Service Tax.  Commission retained by the Consignee is subject to TDS.

35. Case Law: Vodafone Essar Ltd vs Asst CIT  Sale of SIM Cards and recharge coupons at discounted price to distribution and the discount given is nothing but a commission.  Therefore liable for TDS u/s 194H.

36. Sec 194I - Rent Rs. 1,80,000 in a FY in aggregate. P&M, Equipment – 2% Land & Building, Furniture/Fitting – 10% Any person (Exempt for Govt/Local Authorities) All assessees (Except 44AB) Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

37. Special Points:  Rent means any payment by whatever name called, under any lease, sub – lease, tenancy or any other agreement or arrangement for the use (either separately or together) of any-  Land  Building (including Factory Building)  Land appurtenant to a Building (including Factory Building)  Machinery  Plant  Equipment  Furniture  Fittings  Whether or not any or all of the above are owned by the payee.

38. Special Points:  Rooms taken in hotel on a regular basis, whether a room or set of rooms are earmarked or not, under such contract – Sec 194I shall apply  Agreement merely in the nature of a rate contract – Sec 194I shall not apply  Cooling charges paid by the customers of the cold storage – Sec 194I is not applicable. Such an arrangement is basically contractual in nature, so 194C shall be applicable  Rental Arrears are also subject to deduction of tax at source u/s 194I [Leema Resorts P Ltd vs CG Suryakant 215 ITR 618 (Mad)]  Payments made for landing and parking charges would be deemed to be rent and liable for TDS u/s194I [CIT vs Asiana Airlines (2009) 175 Taxman 177 (Del.)]

39. Sec 194J – Professional or Technical Fees Rs. 30,000 in a FY for each nature of payment. 10% Any Resident in India All assessees (Except 44AB) Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

40. Special Points:  Payments Covered:  Fees for Professional Services  Fees for Technical Services  Royalty  Payments referred u/s 28 (1) (va) i.e. sum received for not carrying out any activity or not sharing any know – how, patent etc.  Sum paid by Individual/HUF towards professional service exclusively for their personal purposes – NO TDS  Payment to Recruitment Agency – TDS apply  Payment to hospital for rendering medical services – TDS apply  Providing Cellular mobile telephone facility to subscriber is not a technical service – NO TDS [Sky Cell Cellular Services 251 ITR 53 (Mad)]

41. Amendment proposed by Finance Bill 2012  Finance Bill 2012 proposes to insert another clause under sub-section (1) of Section 194J, whereby any remuneration or fees or commission payable to a director of a company, other than those on which tax is deductible under section 192, shall also be liable for tax deduction under the provisions of Section 194J. This amendment will take effect from 01 July 2012. Impact of the amendment:  By insertion of the new clause, now any amount payable to a director of a company, by way of remuneration or fees or commission, which is not in the nature of salary, shall be liable for tax deduction under Section 194 at the rate of 10%.  Accordingly, any payment to a director (whether whole-time or not) including sitting fee made by a company would be liable for tax deduction at source. This would levy an extra compliance burden and responsibility on the companies for deducting taxes on payment made to its directors.

42. Sec 194LA – Compensation/ Enhanced compensation on compulsory acquisition Aggregate of such payments during the FY does not exceed Rs. 1,00,000/- 10% ResidentAny person Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

43. Special Points:  Nature of Payment:  Paying compensation or enhanced compensation or consideration or enhanced consideration on account of compulsory acquisition under any law for any immovable property other than agricultural land.  Agricultural Land includes Urban Agricultural Land also.  In State of Kerala vs Mariamma 280 ITR 225 (Ker), it was held that  In case of compulsory acquisition of land, tax is deductible at source on compensation and interest on the date of payment.  The liability to deduct tax at source u/s 194LA arises only on the date of payment even though the acquisition may have been made much before.  Amendment proposed by Finance Bill 2012  Finance Bill 2012 proposes to increase the exemption limit from Rs 100,000 to Rs 200,000. This amendment will take effect from 01 July 2012.

44. Sec 194LB – Interest by Infrastructure Debt fund to Non - Resident NIL5% Non – Resident Infrastructure Debt Fund Person Responsible to deduct Tax Type of Payee Exemption Limit Rate of TDS

45. TDS on payments to Non – Residents u/s 195  Payments in respect of which tax is to be deducted:  A) any interest, including interest on securities or  B) any other sum chargeable to income – tax in India, not being salaries  Intimation to the Board  Person making the payment shall furnish information relating to the payment of any sum in the form & manner prescribed.  TDS rate: TDS rate as prescribed in the Income Tax Act or DTAA (Double Taxation Avoidance Agreement), whichever is beneficial to the assessee.  Surcharge: Non Domestic Companies – 2% on whole payment if the payment exceeds Rs. 1crore, For others – NIL  EC: 2% of the tax payable after surcharge  SHEC: 1% of the tax payable after surcharge

47. Nature of payments made to Residents Threshold Company, Firm, Co – operative Society, Local Authority, Individuals, HUF SecDescriptionAmount (Rs) Rate (%) 194A Interest – payable by Banks10,00010 Interest – payable by Others5,00010 194BWinning from Lotteries/ Crossword Puzzle 10,00030 194C Payment to Contractors – Single Transaction 30,0001% for Individuals & HUF 2% for others Payment to Contractors – Aggregate during FY 75,0001% for Individuals & HUF 2% for others 194DInsurance Commission20,00010 194HCommission/Brokerage5,00010 194I Rent1,80,00010 Rent – Plant & Machinery1,80,0002 194J Professional Fees30,00010 Director’s Fees (w.e.f July 1, 2012) -10

48. Surcharge, Education Cess & Secondary & Higher Education Cess Salary – Basic Rate + EC@2% + SHEC@1% Other Payments – Only Basic Rate Payments to Residents (including Domestic Companies) Basic Rate + EC@2% + SHEC@1% Payments to Non Residents

50. Time of Deduction TDS shall be deducted at the time of payment 192194B194BB194LA TDS shall be deducted either at the time of payment or at time or credit, whichever falls earlier 193,194A,194C194D,194G,194H194I,194J,195,194LB196B,196C,196D

52. Time of Remittance to the Govt. Sec 200/ Rule 30 TDS to be deposited into the Credit of Government by the Deductor in the following manner:

53. Tax Deducted by or on behalf of the Government: SituationTime of Deposit of TDS Payment of tax without production of Income Tax Challan On the same day when tax is deducted Payment of tax accompanied by an Income Tax Challan On or before 7 days from the end of the month in which the deduction is made or income tax is due u/s 192(1A)

54. Tax deducted by other persons: SituationTime of Deposit of TDS Income or amount is credited or paid in the month of March On or before the 30 th of April In any other caseOn or before 7 days from the end of the month, in which – Deduction is made, or Income Tax is due u/s 192(1A)

55. Quarterly Remittance of TDS:  The Assessing Officer, may in special cases, with the approval of JCIT, permit the payment of TDS on quarterly basis as under - Applicable Sections192, 194A, 194D & 194H Payment Date7 th July, 7 th October, 7 th January and 30 th April

57. Sec 203 - Forms for Certificate of TDS furnished by the Deductor to the Deductee: For Salary – Sec 192 Annual By 31 st May of the FY immediately following the FY in which the income was paid & tax deducted. Form 16 For all other sections Quarterly Within 15 days from the due date for furnishing the Statement of TDS u/r 31A, i.e. 30 th July, 30 th Oct, 30 th Jan & 30 th May. Form 16A

58. Issuance of Form 16A from TIN Website – for returns filed before 31.10.2012 Income Tax Website – for returns filed after 01.11.2012 NaturePerson InvolvedAuthentication MadatoryCompanies including Banking Company, Co – operative Society engaged in carrying the business of Banking. By using Digital Signature/ Manual Signature OptionalOthers1.If Form 16A is downloaded from TIN website – by using Digital Signature/Manual Signature 2.Other Modes – Manual Signature only.

60. Sec 197A – Self Declaration by Payee for Non - Deduction For all assessees u/s 193,194,194A,194EE,194K Form 15G For Senior Citizens (Resident in India) Form 15H Self Declaration for non – deduction of tax by a person other than companies/firms – the Deductor shall forward a copy of the declaration to the CCIT/CIT within 7days from the end of the month in which such declarations are furnished.

62. Sec 197 – “Lower rate of dedcution/ No deduction” Certificate from AO Sec 192,193,194,194A, 194C,194D,194G,1 94H,194I,194J,194 K,194LA Application in Form 13 Sec 195 Application in Form 15C or 15D For lower rate of deduction of tax or no deduction of tax, the payee shall file an application & get a certificate from the AO & submit to the payer. Certificate is valid only for the Assessment Years specified therein.

64. Quarterly Statement / Return & Due Date Sections192193 to 196D Form No.24Q - Salary 27Q – For payments made to Non – Resident, not being a Company, or Foreign Company, or RNOR 26Q – For all other deductees Due Date, if the deductor is an Office of Government Qtr I – 31 st July, Qtr II – 31 st Oct, Qtr III – 31 st Jan, Qtr IV – 15 th May Due Date, for other persons Qtr I – 15 st July, Qtr II – 15 st Oct, Qtr III – 15 st Jan, Qtr IV – 15 th May Form 27AThe above forms shall be accompanied by declaration in Form 27A

65. Duties of Deductees with respect to declaration of his PAN  Non – furnishing of PAN by deductee  TDS shall be highest of  Rate in the Act  Rate in force (Finance Act)  20%  Non – furnishing in Self Declaration  If PAN not given in Form 15G/15H, TDS shall be made at rates mentioned above and not at lower rates.  Quoting of PAN  To be made in all correspondences & other documents between deductor & deductee.  Invalid PAN  TDS shall be as specified above.

67. Sec 191 - Assessee deemed to be in Default – Deductor: Non – Deduction of TDS (or) Non – Payment of tax payable u/s 192 (1A) (or) Non – Payment of TDS in whole or in part Note: Short deduction of TDS does not entitle the assessee to be assesse in default & such expense is not disallowed.

68.  No order shall be passed deeming an assessee as an assessee in default for non – deduction of tax from a Resident after the expiry of –  2years from end of the FY in which the Statement u/s 200 is filed (Statements in Form 24Q/ 26Q).  4years from end of the FY in which the payment is made.  Exception: The above provision not applicable for orders passed to give effect to any finding/direction in any Appeal/Revision.  Interest:  Simple Interest @ 1% p.m. or part of the month from the date on which tax is to be deducted to the date it is paid.  Penalty:  Failure to deduct whole or part of the tax shall be liable for penalty of Rs.100 per day of default upto tax not deducted.  Prosecution:  Rigorous imprisonment for minimum 3 months and maximum of 7 years.

70. INTEREST  Any person responsible for deduction tax at source shall be deemed to be assessee in default & is liable to pay interest if he –  Does not deduct the whole or part of the tax  After deducting the tax, fails to remit the tax to the Govt.  Does not pay tax u/s 192 (1A)  Rate of Interest: From the date on which tax was deductible To the date of deduction 1 % p.m. or part thereof for Delayed Deduction of TDS From the date of deduction of tax To the date of actual payment 1.5 % p.m. or part thereof for Delayed Payment of TDS

71. Eg: Payment has been made to Mr. Arjun for his professional service.  Amount paid Rs. 60,000  Payment Date 01.07.2012  TDS has not been deducted  This has been found on 20.02.2013 & TDS has been deducted on 20.02.2013.  Remittance has been made on 20.04.2013. Computation of Interest u/s 201(1A)  Date of payment/credit: 01.07.2012  TDS Rate: (Fee for professional service) 10%  TDS Amount: Rs. 6,000 (Rs. 60,000 * 10%)  Date of Tax deductible: 01.07.2012  Date of Actual Deduction: 20.02.2013  Delay of Actual Deduction: July to Feb (8 months)  Date of actual remittance: 20.04.2013  Delay of Actual Remittance: March to Apr (2months)  Interest: For delay in deduction – 6,000 * 8 months * 1% = Rs. 480 For delay in remittance – 6,000 * 2 months * 1.5% = Rs.180  Total Interest to be paid Rs. 660

72.  Time Limit for Payment:  It shall be paid before furnishing the quarterly statement for each quarter.  Failure to remit:  Failure to pay tax deducted along with interest shall be a charge upon all the assets of the person or the company who is liable to deduct & remit tax.

74. PENALTY SectionNature of DefaultPenalty 271CFailure to deduct the whole or any part of tax at source Sum equal to the amount of tax which he failed to deduct 272A(2) Failure to file return of TDS – Rs. 200 per day w.e.f. 01.07.2012 Rs. 100 for every day during which the failure continues but the penalty shall not exceed the tax deductible Failure to issue TDS Certificates Failure to deliver declaration in Form 15F/H u/s 197A Failure to deduct & pay tax as required u/s 226(2) Failure to furnish the statement u/s 192 (2C) Rs. 100 per every day of default

76. Sec 203A - Tax Deduction Account Number (TAN)  Who must apply for TAN  Every person deducting or collecting tax at source, if he has not been allotted any TAN  Time Limit for submitting application and Form No  Within 1 month from the end of the month in which the tax was deducted or collected – Application in Form No. 49B  Person to whom application is to be submitted  A) In cases where the function of allotment of TAN has been assigned to any particular AO, to that AO  B) In any others case, to the AO having jurisdiction to assess the applicant.  Failure to apply for or quote TAN  Penalty u/s 272BB of Rs. 10,000 levied by AO  Quoting of TAN  Challans of payment of tax u/s 200 TDS  Certificates issued u/s 203  Returns filed in coordance with Sec 206B or 206C  E – TDS returns, all other documents pertaining to such transaction as may be prescribed.  All Quarterly statements prepared and delivered u/s 200(3)

77. Sec 203AA. Rule 31AB – Annual Statement of TDS  Person Issuing Statement of TDS:  DGIT (Systems) or the person authorized by him.  Prescribed Form:  The annual statement of TDS shall be in Form 26AS.  Due Date:  The Form 26AS shall be issued on or before 31 st July of the Asst. Yr following the financial year of deduction of tax at source.  The Statement of TDS shall be issued to the following persons:  Person whose income tax has been deducted  Buyer from whom tax has been collected at source  Every other person in respect of whose income, tax has been paid.  TDS Credit (Sec 199):  TDS deducted & remitted to the credit of CG shall be deemed to be tax payment on behalf of the person from whom it was deducted. Credit shall be given to such person in accordance with the rules prescribed by the board.

79. E – Filing of TDS Returns Deductors / Collectors responsible for e – filing of quarterly returns (Rule 31A & Rule 31AA) Government Company Assessees subject to Tax Audit u/s 44AB(a) & 44AB (b) in the immediately preceding FY No. of deductee’s/Collectees’ records in a quarterly statement for any quarter of the immediately preceding financial year is equal to or more than 50. Persons responsible for furnishing Returns Non – Corporate Assessees – Person responsible for collecting/ deducting tax Corporate Assessees – Principal Officer

81. TDS IS NOT REALLY TEDIOUS  Theoretically, it is completely right.  But practically, it has not been proved so.  Practically, TDS has actually become very tedious.  This is not because of the provisions of the law, but because of lack of the efficiency of people to follow the procedural aspects properly.

83. Obtaining of TAN :  First of all the person who is liable for deduction of tax has to obtain a Tax deduction Account number. Identification of Transactions for TDS :  Next step is to identify transactions which are eligible for TDS(Section wise is covered in previous slides).  This is not a onetime process, but an ongoing process.  These should be identified keeping in mind the provisions given under The Income Tax Act with respect to various expenditures. Deduction of Tax :  Once an eligible expenditure is identified and the rate is determined, tax has to be deducted and paid to the central Govt within the duedate. Procedural Aspects of TDS

84. Payment of TDS – Aspects relating to challan : The challan has to be paid through ITNS 281. There are various aspects as regards to the Payment. a) The challan should be preferably paid online to avoid the data entry mistakes that happen by the bank employees. b) Ensure that accurate assessment year on the challan is mentioned. In case of wrong AY the deductee will not get credit. c) Separate challan has to be used for corporate and non corporate deductees. d) Make sure to mention the accurate TAN in challan. e) Separate challan has to be used for each section In case of any discrepancies in the above, there will be a mismatch and deductee will not get the credit. Procedural Aspects of TDS

85. Obtaining of Deductee details The deductor shall obtain the details from the deductees whose tax has been deducted. The details required are Name, Address and PAN. It is advised that rather than obtaining just details, if the copy of PAN is also obtained it will be helpful in case of any disputes in future. Filing of Quarterly Returns After the deduction and payment of tax and obtaining details from the deductees, quarterly statements as regards to tax deducted in the respective quarter should be filed with NSDL which in turn shall report it to Government. These statements are to be filed electronically. Care has to be taken that the following details are mentioned accurately in the statements. a) Name and address of deductee b) PAN of the deductee c) Amount credited or paid d) Nature of payment e) Section of Deduction f) Rate of deduction g) Details of challan for tax paid Procedural Aspects of TDS

86. Issue of Quarterly Certificates After the filing of returns, the deductor shall issue Certificate of Deduction to the deductee in the proper form i.e, 16/16A as applicable It has to be noted that no 2 quarters’ TDS returns can be combined & filed together. Separate return has to be filed for each quarter. Responsibilty of the Deductee a) The deductee should provide accurate details about his PAN so that there is no problem in claiming of the credit. a) Even it is the requirement by law to the deductor to issue a Certificate, it is the responsibility of the deductee to claim for the TDS certificate if the deductor fails to issue. a) At the time of filing of his own Income Tax return, it is the responsibilty of the deductee to make sure that he has included and reported the income in respect of the TDS certificates. b) Further, while filing the details as to TDS in the ITR, the details of the deductor and the deduction should be mentioned accurately. The details required are TAN of the deductor, Name and Address of the deductor, section of deduction, date of deduction, Rate of deduction, gross amount, TDS amount and TDS claimed in the return Procedural Aspects of TDS

87. There are numerous mistakes taking place in TDS, the major reasons of which are summarised below. a) Wrong details in challan b) Deduction of Tax and Non payment thereof. c) Wrong furnishing of PAN by the deductee. d) Data entry errors while filing the TDS return. There may be mistakes as regards to section code, challan details, PAN of deductee, etc. e) Non filing of TDS return despite of proper deduction of Tax and payment thereof to the Government. f) Data entry errors while filing the TDS Returns by the deductee as regards to TAN of deductor, section code.etc. Errors

88. a) There remains darkness in certain areas so far as the TDS laws are concerned. Inspite of issuing clarificatory circulars and notifications, one cannot take crystal clear decision whether TDS on certain transaction is attracted or not and even if TDS is attracted, on what amount TDS needs to be made and at what rate. One such case is mentioned in the next slide. b) There are many instances where the vendors issue invoices on a gross basis i.e, bifurcation for particular items or enough details in the invoice is not provided. Thus to be on a safer side TDS is made on the gross amount instead of a particular amount related to the invoice. Advice is given these days to vendors to issue separate invoices for separate transactions so as to avoid the need to deduct excess TDS. c) Also progressive decisions given by Tribunal, Courts etc throws some more light on issues where there is no clarity. Suddenly, one fine day, an unfavorable decision by Court/Tribunal is delivered, and the tax payers are caught in the net to deduct TDS and suddenly a decision reversing the unfavorable decision is delivered and tax payers stop deducting TDS. Thus, one cannot distinguish between black and white where TDS is concerned. d) The threshold limits provided in the provisions are not practical and inflation linked. So if you are paying rent to someone providing home/office space of more than Rs.15000/- per month, don’t be surprised if you receive a notice stating there is default regarding non deduction. Anomaly in Law

89. TDS on Interconnection/Port Charges In CIT vs Bharti Cellular Ltd 175 Taxman 573, Delhi High Court held that  “Fees for Technical Services” would have reference to only Technical service rendered by a human. It would not include any service provided by machines or robots. Hence Interconnect charges/port access charges cannot be regarded as fees for technical service. On contrary, In Hutchison Telecom East Ltd vs ACIT 16 SOT 404 (ITAT – Kol), it was held that  payment of port charges & interconnectivity charges to BSNL are liable to TDS. Hereby, we can understand that there is no proper decision as to accepting

90. How tax payers should ensure compliance part: a) Compliance part to be ensured by the tax payers is a different ball game itself. b) Deductors take a great pain to follow up with the deductees tp provide their correct PAN and other details. c) Think of huge companies which have thousands of deductees every quarter, the chances of errors in any details provided cannot be ruled out. d) Now imagine the deductee whose credit was not entered or was incorrectly entered by a deductor. He will have to request the deductor to revise the return only for him. Procedural poison

91. a) By and large, in most of the assessees’ cases, there is always a mismatch between the amount of TDS claimed and the TDS shown in books as per the TDS certificates received. b) The mismatch of TDS credit as per computation and as per books now has become an inherent part and parcel of life. In such case the deductee has many difficulties convincing the tax authorities that the claim made in the computation is correct inspite of incorrect TDS certifcates. c) It is also generally seen that the TDS amount as reflected between ETDS returns, TDS certificates and Form 26AS never go hand in hand. Such instances arise due to inefficiency of either deductor or the bank which uploads the CIN. Deductee feels the brunt of these cumbersome procedures. d) Luckily effective from FY 2011-12, the TDS certificates have to be generated online on the basis of ETDS returns filed reducing the chances of mismatch. e) The tax authorities should take into consideration the pain the taxpayers are going through. TDS credit should not ideally be withheld just because it is not reflected in 26AS or ETDS returns. And finally dedcutee doesnot become free by discharging his roles ; he should enquire and follow up with the deductor whether correct details are provided in the ETDS returns on a regular basis. f) In light of the above, it can be concluded that the procedures related to ETDS returns should not be taken lightly by both deductors & deductees for their own good. Other issues