Provisions Concerning

Advance Tax and

Tax Deducted at Source
IPCC Course Paper 4 Chapter 9: TDS
CA. Naina Sawant

What is Tax Deducted at Source and

its Importance?
Every assessee has to pay tax on his total income for the previous year at rates
applicable to the relevant assessment year. However while making certain
payments to the assessee ,a certain amount of tax is already deducted and the net
payment is made to him. The tax deducted is deposited in the Central
Government's treasury by the payer.
So if Mr. A wins a lottery of Rs. 1,00,000/- then tax will be deducted @ 30% i.e Rs.
30,000/- and he will be paid the net amount of Rs. 70,000/-.The tax of Rs. 30,000/will be deposited by the payer in the government treasury on behalf of Mr. A.
Ofcourse when A files his return of income, he will not pay tax again since the tax
amt. was already deducted at source and paid to the government.

The chapter of TDS explains the various provisions under which tax is deducted
and paid to the Government.

Importance of TDS
Recovery of tax at an early stage

Reduces tax defaults by ensuring that a certain amt. of tax is

already deducted before making payment to the assessee.

Ensures a regular cash flow to the Government.

General Points regarding TDS

Tax is to be deducted only if a particular income is chargeable to tax in
India. If a particular income is exempt, then the question of deducting tax does
not arise.

Generally, tax is to be deducted at the time of credit of income or

payment, whichever is early.

Take an e.g.. If interest on loan is credited on 31/03/2012 but actually paid in

say April 2012,then even though the payment of interest is made later on in
April ,tax should be deducted on 31st March itself i.e at the time the interest is
credited.

Exceptions
In the following cases, tax is deducted at the time of payment

Salary
Winnings from lottery and horse races
Payment under NSS (National Savings Scheme)
Compensation on compulsory acquisition

Tax is to be deducted as per the

basic rates given as per the various
provisions.
Surcharge @ 2% on the basic rate will be applicable in case of
foreign companies only if the payment exceeds one crore.
Education cess (2%) and higher education cess( 1%) so overall 3%
cess will be added to the basic rate only in the following cases:
Payment of Salary to a resident /non-resident (Pls note ,in case of payment of any
other income, education cess is not applicable)
Any payment to a non resident or a foreign company.

Consequences of Default
(Section 201)
When a person who is required to deduct tax does not do so or
after deducting tax does not deposit the same in the Government
treasury, he shall be deemed to be an assessee in default in
respect of such tax U/S 201(1).He will be liable for payment of the
tax along with interest as well as penalty and prosecution in
certain cases. Interest will be charged as under

1% per month or part of a month from the date on which tax

was deductible to the date on which tax is actually deducted.
1.5% per month or part of a month from the date on which tax
was actually deducted till the date of payment.

Consequences of Default (Section

201) Cont..
In some cases, that particular expenditure is disallowed as
per sec 40(a).

However from 01.07.2012,Section 201 has been amended.

It states that such a payer shall not be deemed to be
an assessee in default

If the resident recipient has included this income in

his return, paid tax on it and accordingly furnished a
certificate from the chartered accountant.

Example

Tax on interest
on loan is to be
deducted at
source @ 10%.

Now if XYZ Ltd.

has to pay
interest Rs.
30,000/- to Mr.
Z on
01.08.2012,

then it must
deduct tax @
10% i.e. Rs.
3,000/- and pay
Mr. Z Rs.
27,000/-.

The TDS Rs.

3,000/- should
be deposited in
the Government
treasury.

Example - 2

Now if XYZ Ltd. fails to do so, then it will be an assessee in default.

The interest expenditure will be disallowed as a deduction. Also

various penal provisions may follow.
However if Mr. Z furnishes a certificate saying that he has included
this interest income in his return and paid tax on it, then XYZ will not
be deemed to be an assessee in default.

Low TDS or No TDS - Section 197

In case the payee doesn't want

tax to de deducted because his
total income is lower than basic
exemption limit and he is not
liable to income tax, he may
make an application in Form
No. 13 to the Assessing Officer
declaring the same.

Accordingly the Assessing

Officer will give him a certificate
on the basis of which tax may
not be deducted or it may be
deducted at a lower rate.

Section 197A
Alternatively in certain cases ,the payee may
furnish a declaration U/S 197A to the payer of his
income declaring the same in Form no 15 G/15H.
This form will be submitted by the payer of the
income to the Commissioner of Income Tax and
accordingly no or low tax will be deducted.

Requirement to furnish PAN

U/S 206AA,it is mandatory for the person receiving the income (payee) to furnish his
Permanent account no. to the payer, else tax will be deducted at Higher of

1)Prescribed rate of tds

as per the provisions

or

2) 20%

This provision is to ensure that all payees have a PAN and disclose it, else their income
will be subject to tds at a higher rate.

Sec 192 -TDS on Payment of Salary

Who is liable to deduct tax?

Any employer responsible for paying salary to his employees

should deduct tax at the time of payment of salary.

Rate
No specific rate (average rate of tax on the estimated total income of the assessee).
The employer has to estimate the employee's total salary for the year. The
employee may also furnish details of other incomes (i.e income under other heads)
and the tax deducted at source on it.
In that case, the positive incomes under other heads and TDS will be considered by
the employer.
However if there are any losses under any particular head, they will be ignored by
the employer except Loss from House Property.
he employee shall also furnish details about his various investments due to which
deductions U/Ch. VI A may be claimed.

Steps to compute (this has to be

calculated by the Employer)
1)Compute taxable Salary considering all taxable allowances and perquisites.
2)Also consider employees other income but no losses except HP loss.

3)Give deductions U/Ch VIA

4) TDS will be

Tax plus education and higher education cess

Less relief U/S 89 ,if any

Less TDS on any other income

(A)

Steps to compute (this has to be

calculated by the Employer) Cont..
5) Now compute only taxable salary without considering any other
income even if details are furnished by the assessee.
6)Set off only house Property Loss
7)Give deductions U/Ch VIA
8) TDS will be
Tax plus eduction and higher education cess
Less relief U/S 89 ,if any
TDS on salary

X
X
X.B

Tax to be deducted from salary = A

or B whichever is higher

Tax to be deducted every month = Total TDS as

estimated above /No. of months for which employee
has rendered service during the financial year.

Example
Mr. Ramesh is employed in a company which pays him the following
remuneration (estimated)
Basic Rs. 50,000 P.M.
D.A. 20% of Basic
Transport Allowances Rs. 1,000 P.M.
Mr. Ramesh is expected to make the following investments:
Public provident Fund
50,000
Mediclaim
20,000
N.S.C. purchased
60,000
Mr. Ramesh has also reported the following income to his employer
HP loss
50,000
Business Loss
15,000
Interest on Fixed deposit
30,000 (tax deducted on it 3,000)
Calculate how much tax will his company deduct?

Steps

First lets calculate tds after considering other income,tds and HP loss
Basic salary
D.A.
Trp allow.
Less:
exempt u/s 10(14)
Taxable salary
HP loss
Income from other sources
Gross total income
Less Deductions
Sec 80C
PPF and NSC max.
Mediclaim max
Net Total Income
Tax on NTI
Add Education cess
Total tax liability
Less T.D.S
Balance T.D.S on salary

50,000 *12
0.2
1,000 * 12
800 * 12

@ 3%

(A)

=
=

6,00,000
1,20,000

2,400

=
=
=
=

7,22,400
-50,000
30,000
7,02,400

=
=
=
=
=
=
=

1,00,000
15,000
5,87,400
47,480
1,424
48,904
3,000

45,904

TDS Calculation
Basic salary
D.A.
Trp allow.
Less:
exempt u/s 10(14)
Taxable salary
HP loss
Gross total income
Less Deductions
Sec 80C
PPF and NSC max.
Mediclaim max
Net Total Income
Tax on NTI
Add Education cess
Total tax liability

Without employees other

income and TDS but
considering the HP loss
50,000 *12
0.2
1,000 * 12
800 * 12

@ 3%

(B)

=
=

6,00,000
1,20,000

2,400

=
=
=

7,22,400
-50,000
6,72,400

=
=
=
=
=

1,00,000
15,000
5,57,400
41,480
1,244

42,724

TDS Calculation cont

TDS on salary is A or B whichever is higher

45,904

or

42,724 whichever is higher, hence 45,904

Tax to be deducted each month from salary = 45,904/12 = approx.
Rs. 3,825/-

The employer may increase or decreas the tds amount in the later
months if salary increases or decreases.

Employment with more than one

employer
If during the previous year, an assessee is employed simultaneously with more than one employer or
he has changed his employment during the previous year,

then he may furnish to the employer of his choice or to the subsequent employer
such details of salary due or received from his other employer along with tax deducted on it ,if any in Form No.
12B.

The employer who receives such Form 12B will take into account such details while deducting tax
from salary.

Example

During the P.Y. 2013-14 Mr. Nihit works simultaneously

with two employers A Ltd. which pays him a salary of
Rs. 30,000/- p.m. and B Ltd. which pays him a salary
of Rs. 40,000/- p.m. Mr. Nihit submits Form No. 12B to
B Ltd. Calculate tax to be deducted by both employers

Answer
First lets calculate the tds on salary by A Ltd.
Total salary
30,000 * 12 = 3,60,000
Tax
= 16,000
Add Ed.cess 3%
=
480
TDS by A Ltd.
= 16,480
Now if this information is furnished to B Ltd.
B Ltd. will calculate as follows
Salary from B Ltd. 40,000 * 12 = 4,80,000
Salary from A Ltd. 30,000 *12 = 3,60,000
Gross total Income
= 8,40,000
Tax on Total Salary
= 98,000
Add Ed. cess @ 3%
=
2,940
Total tax on Salary
Less TDS by A Ltd.
Balance tax to be deducted

= 1,00,940
= 16,480
= 84,460

Note:
- No tax will be deducted if employee's total income is less than
basic exemption limit and hence no tax is payable by him.

- If Salary is payable in foreign currency, then the buying rate as adopted by

the SBI on the date of payment will be considered)

Sec 193 - TDS on Payment of

Interest on Securities

Who is liable to deduct tax?

Any person responsible for paying/crediting

interest on securities to a resident.

Rate

10% (20% if PAN not furnished by payee)

No T.D.S. up to

Rs. 5,000/Rs. 10,000/- (on 8% Govt. relief bonds)

T.D.S. not applicable in the following

cases
Interest on Central or State Govt. securities (except Govt. Relief Bonds)
Interest on Debentures of any co-operative society,co-operative land development
bank, any institution or public sector company notified by the Central Government
If interest is to be paid to the L.I.C.,G.I.C. or their subsidiaries
if interest is payable on any listed security which is held in demat form
If form No. 13 is furnished by the assessee/payee to the Assessing Officer or if
Form No. 15G/15H is furnished by the assessee /payee to the payer

Sec 194 TDS ON DIVIDEND

Who is liable to deduct tax?
Any domestic company which declares and pays deemed dividend U/S 2(22)(e) to a resident
shareholder. The principal officer of the company is responsible for deduction of tax.
Rate
10% (20% if PAN not furnished by payee)
No T.D.S. up to
Rs. 2,500/-p.a. (if paid by account payee chq to an individual)

T.D.S. not applicable in the following

cases
1)Dividend which is exempt in the hands of the shareholders U/S 10(34) including
deemed dividend from Sec.2(22)(a) to sec 2(22)(d).This is the dividend covered U/S
115O on which dividend distribution tax is paid by the company, hence not taxable again
in the hands of the shareholder.

2)If dividend is paid by account payee cheque to an individual shareholder and it does
not exceed Rs. 2,500/-

3)If dividend is payable to any shareholder who is an insurance company(e.g.

L.I.C.,G.I.C. etc) or its subsidiaries.

4)If an application is made in Form no.13 to the Assessing Officer or a declaration is

furnished to the company in Form no.15G or 15H for low or no deduction of tax.

Example
ABC Pvt. ltd. gives a loan of Rs. 10 lacs on
02/04/2012 to Mr. A who is a 20% shareholder.
This loan is repaid on 02/12/2012 along with interest
to the company.
Discuss the tax / TDS consequences in the hands of
the co. and shareholder.

Answer
Any loan granted by a pvt. ltd. co. to a min. 10% shareholder is taxed as deemed dividend u/s
2(22)(e) in the hands of the shareholder even though the loan may be repaid with or without
interest.
In the above case, since the co. is paying this dividend, it will deduct tax @ 10% before making
the payment.

So ABC Pvt. ltd. will deduct tax of 1 lac and pay him the net amt. of 9 lacs.

Mr. A will offer Rs. 10 lacs as deemed dividend under the head "Income from other sources",

he can also claim the interest as a deduction. He can adjust the TDS of 1 lac against his total tax
payable.

Sec 194 A TDS ON INTEREST OTHER

THAN INTEREST ON SECURITIES

Who is liable to deduct tax?

Any person (other than Individual or H.U.F. who are not subject
to tax audit in the preceding financial year) paying or crediting
interest (whichever is early) to a resident.
In other words, Individuals and H.U.F. are liable to deduct tax
only if they were subject to tax audit in the proceeding year. All
other assessees are liable to deduct tax irrespective of whether
their businesses are subject to tax audit or not.

Who is liable to deduct tax?

Rate
10% (20% if PAN not furnished by payee)

No T.D.S. up to
Interest of 5,000 p.a./10,000 p.a. in case of interest from
banking institutes or notified schemes of post office (as of
now Senior Citizen scheme has been notified)

T.D.S. not applicable in the following

cases
Interest payable by any person which doesn't
exceed Rs.5,000/Interest payable on time deposits by post office,
banks, cooperative societies engaged in
banking which doesn't exceed Rs. 10,000/-

Interest payable/paid by the

following institutions
1) a firm to its partners
2) A cooperative society to its members or to another co-operative
society
3)Central Government under various provisions of direct taxes.
4)A bank with respect to interest credited to Non Resident External
(NRE) account
5)Interest on time deposits payable by agricultural credit societies or
cooperative land development banks.

T.D.S. not applicable in the following

cases Cont..
6)Infrastructure capital company/fund or public sector company with respect to zero
coupon bonds
7)Banks(including cooperative banks) with respect to interest on savings a/c,
recurring a/c or any other deposit except time deposit.
8)By any person to a bank, financial institution, insurance company or similar
notified institutions
9)By the Government or Post Office under various schemes of Post Office, Kisan
Vikas Patra (KVP),Indira Vikas Patra (IVP),National Savings Certificate (NSC)
10)Motor Accidents Claims Tribunal where total interest doesn't exceed Rs. 50,000/.p.a.
Application in Form no 13 or declaration in Form 15G/15H to the payer

Example

Find the TDS amount in respect of the following interest payable by a bank
1)Rs.9,500 payable to Mr.A as Interest on Fixed deposit
Answer: No TDS since total interest doesn't exceed Rs. 10,000/-

Example

2)Rs. 23,000/- payable to

Mr.A on accont of interst on
recurring deposits

Answer: No TDS since Sec

194A is applicable only for
time/term/fixed deposits

Example

3)Rs. 80,000/- as interest

on fixed deposit to Mr. Z

Answer: Tds 10% i.e Rs.

8,000/-

Example
4)Rs. 50,000/- as interest on fixed deposit to a senior
citizen who has furnished form 15H to the bank

Answer: No since the payee has furnished a declaration

for no deduction of tax

Example

5)Interest of Rs. 10 lacs to L.I.C.

Answer No TDS since TDS provisions are not applicable if
payment is to be made to insurance companies

Sec 194B- TDS on Winnings from

Lottery,Crossword puzzles,card
games etc
Who is liable to deduct tax?
Any such winnings payable by a any person to anyone (deduct
tax at the time of payment)

Rate
30%

No T.D.S. up to

Rs. 10,000/-

Note: If winnings are partly in cash and partly in kind, and the cash
amt. is not sufficient to meet the TDS amount on entire winnings, then
the payer will ensure that entire tax has been paid by the winner
before giving him his prize/winnings.

Sec 194BB- TDS on Winnings from

Horse Races
Who is liable to deduct tax?

Any such winnings payable by a any person being a bookmaker or

person holding a license for horse racing, betting or wagering. (deduct
tax at the time of payment)

Sec 194BB- TDS on Winnings from

Horse Races Cont..
Rate
30%
No T.D.S. up to
Rs. 5,000/-

Example

Mr. Lucky won a lottery of Rs 2,00,000 in cash and a bike worth

Rs. 50,000/-.He also won Rs. 4,500 in horse races. Calculate
the tax that will be deducted before making him any payment.

Answer
Total Winnings from lottery - Cash - Rs. 2,00,000 and kind Rs. 50,000
TDS @ 30% on total winningd i.e. 30% of Rs. 2,50,000/TDS Rs. 75,000 will be deducted before making him any payment on account of
his winnings
So he will get a net cash amt. of Rs.1,25,000 (2,00,000 - 75,000) and the bike worth
Rs. 50,000/Total winnings from horse races Rs. 4,500/
No TDS since amount doesn't exceed Rs. 5,000/-

Sec 194C- TDS on Contracts

Who is liable to deduct tax?

Any person responsible for paying any sum to a resident contractor for carrying out any
work in connection with a contract or subcontract. A contract for this purpose means a
contract for supply of labour for carrying out any work. Work shall also include
advertising, broadcasting and telecasting, carriage of goods and passengers by any
mode of transport other than railways, catering, manufacturing or supplying a product as
per clients requirement by using material supplied by the client.

Sec 194C- TDS on Contracts-2

So the payer maybe
-Central/State Govt.
-Local authority
-Central/State Corporation
-Any Company
-Cooperative society
-Housing Board

Sec 194C- TDS on Contracts-3

-Trust

-University

-Any foreign enterprise

-Firm/L.L.P
-Individual, HUF,AOP,BOI only if they were subject to tax audit in the
preceding previous year.
Tax will be deducted at the time of payment or credit ,whichever is early

Rate
-1% of contract value if payee is Individual or HUF

-2% of contract value if payee is any person other than individual or HUF
(e.g.. firms, companies etc)

Note: TDS will be 20% if PAN is not furnished by payee

No TDS up to
-Rs. 30,000/- (per contract) or
-Rs. 75,000/-(total amount credited or paid to the contractor in the entire
financial year)
In other words ,TDS will be deducted on the entire contract value only if
1)Contract value exceeds Rs. 30,000/- or
2)Single contract value may not exceed Rs. 30,000/- but total amt. payable
to the contractor during the year exceeds Rs. 75,000/-

TDS is not applicable in the

following cases
1)If any contract is for personal purposes of Individual or HUF
for e.g. a businessman gets a painting job done in his factory, he will have to
deduct tax if the amount exceeds Rs. 30,000/-(assuming his business was
subject to tax audit in the preceding year and hence he is liable to deduct tax)
However if he gets the painting done in his own house, no need to deduct tax
because the contract of painting was for personal purposes.
2)If the payee contractor is in the business of plying, hiring and leasing of
goods carriages and he has furnished his permanent account number to the
payer, then no need to deduct tax with respect to his freight charges.

Example
Mr. X is a Chartered Accountant in practice. His gross receipts
from profession for the year ended 31st March 2013 are 5o
lacs. Gross receipts for the year ending on 31st March 2014
are estimated to be only 10 lacs. He makes the following
payments to a resident contractor. Calculate his TDS liability.
Contract No. and Name of
Date
Contractor

Description of
Contract

Amount

1) 02.04.2013

Mr. A

Computer
Maintenance

Rs. 35,000

2) 05.05.2013

Mr. B

Office Furnishing

Rs. 15,000

3) 07.07.2013

Mr. Z ( PAN NOT

FURNISHED)

Printing Contract

Rs. 40,000

4) 10.10.2013

Mr. B

Office Furnishing

Rs. 29,000

5) 12.12.2013

Mr. B

House Furnishing

Rs. 70,000

Answer
1)Mr A -Since contract value exceeds 30,000/- and A is an individual, tax will be
deducted @1% of contract value i.e. 1% of 35,000 = Rs. 350 and the net amount of
Rs. 34,750 will be paid to him
2)Mr.B -Each single contract doesn't exceed Rs. 30,000/- and the total contract
value doesn't exceed Rs. 75,000/-(15,000 + 29,000...the house furnishing contract
is not considered because TDS is not applicable for personal contracts).So no tax
to be deducted and entire amount will be paid to Mr.B
3)Contract value exceeds Rs. 30,000/- and the applicable TDS rate is 1% but since
the payee has not furnished his PAN, tax will be deducted @ 20% i.e. 20% of
40,000/- i.e. Rs. 8,000/- and the net amount of Rs. 32,000/- will be paid to Mr. Z.

Sec 194E - TDS on Payment to Non

resident Sportsmen/Sports
Association/Entertainer
Who is liable to deduct tax?
Any person responsible to pay/credit any income to a non resident or an
entertainer who is not a citizen of India when such income is earned by way of
1)participation in India in any game or sports
2)advertisement
3)contribution of articles relating to any game or sports in newspapers, magazines or journals
4)any performance in India (in theatre, radio, television etc) w.e.f. 01.07.2012

Any person responsible to pay/credit any income to a non resident sports

association or institution in relation to any game or sports played in India

Rate
10% (plus surcharge if applicable and
education cess @ 3%)
20% (w.e.f. 01.07.2012)

Note
All TDS rates are standard basic rates without
any surcharge or cess. However if payments
are made to a foreign co . or non resident, tax
is to be deducted at the standard rate including
surcharge if applicable and education cess.

Sec 194G - TDS on commission on

purchase and sale of lottery tickets
Who is liable to deduct tax?

Any person paying/crediting commission,

remuneration or any prize to any person stocking,
distributing, purchasing or selling lottery tickets.

Rate

10% (20% if PAN not furnished)

No TDS up to

Rs. 1,500/-

Sec 194H - TDS on Commission or

Brokerage

Commission or Brokerage means any payment

received or receivable directly or indirectly by a
person acting on behalf of another person for
services rendered (other than professional services)
or for any other services in relation to buying/selling
goods or similar related transactions.

Who is liable to deduct tax?

Any person paying/crediting any commission or

brokerage to any resident person. However an Individual
or HUF who was not liable to tax audit in the preceding
previous year is not liable to deduct tax at source.

Who is liable to deduct tax? Cont..

Rate
10% (20% if PAN not furnished)
No TDS up to
Rs. 5,000/-

T.D.S. not applicable in the following

cases
When BSNL or MTNL pays commission to their public call office
franchisees.
When RBI pays turnover commission to its banks for work done
by them.
If Form no. 13 is furnished by the assessee for low or no
deduction of tax at source.

Example
Mr. Kapoor who has a printing press secured a job
of printing 1,000 books to Resham Publications
through the contacts Mr. Desai for which he paid
Mr Desai a commission of Rs. 50,000/-.Is there any
tax required to be deducted assuming his turnover
in the preceding year was Rs. 120 lacs.

Answer
The turnover of Mr. Kapoor exceeded 100 lacs in the preceding
year.So he was subject to tax audit, hence he is liable to deduct tax
at source before making the payment to Mr. Desai.

Tax will be deducted @ 10% .Hence Rs. 5,000/- will be the t.d.s
and only the net amt. of Rs. 45,000/- will be paid to Mr. Desai.

Pls Note : if Mr. Kapoor was not subject to tax audit in the preceding
previous year, then he wouldn't have been liable to deduct tax at
source.

Sec 194I - TDS on Rent

Rent means any payment made under any lease, sub lease or
any other agreement for use of land or building including factory
building, plant and machinery, equipment, furniture or fittings
whether or not any or all of the above are owned by the payee.
Rent for the purpose of deduction of tax also includes any non
refundable deposit and advance rent or arrears of rent if any.

Who is liable to deduct tax?

Any person paying/crediting any rent to any

resident person. However an Individual or HUF
who was not liable to tax audit in the preceding
previous year is not liable to deduct tax at source.

Rate
2% on Plant and Machinery

10% on Land, Building, Furniture and fittings

(20% if PAN not furnished)

No TDS up to

Rs. 1,80,000/- (limit of Rs. 1,80,000/applies to aggregate rent charged for land,
bldg. ,plant and machinery, furniture)

T.D.S. not applicable in the following

cases
Payee is Government or local authority
which enjoys exemption U/S 10.
If Form no. 13 is furnished by the payee.
Note: - If any service tax is charged on the rent, tax is not deducted on the service
tax amount. i.e. it is deducted only on the rent amt. excluding service tax. (Pls.
note this is as per an Income tax Circular 04/2008.This circular applies only for
Sec 194 I ,so in all other payments tds will be deducted on the gross amount
including service tax.)

Example

Compute the amt. of tax to be deducted in the

following cases:
1)ABC ltd. takes a building on rent and sublets it to Mr. X
an individual who has only salary income. Mr. X pays a
rent of Rs. 2,00,000/- for the P.Y. 2012-13.

Answer

Though it is payment of rent and it exceeds the limit of

Rs. 1,80,000/-,still Mr. X is not liable to deduct any tax
because he was not subject to tax audit in the preceding
year. Hence Sec. 194I is not applicable to him.

Example

2)If in the above case, the building was sublet to another

company say XYZ Ltd. would the answer change?

Answer

Yes, because now the payer is a company,

hence he is liable to deduct tax @ 10%.So
XYZ Ltd. will deduct tax Rs. 20,000/- and pay
the net amt. of Rs. 1,80,000/- to ABC Ltd.

Example

3)Mr. A and Mr. B are equal owners of a

building which they have let out to a company
and are charging rent of Rs.3,20,000/- p.a.

Answer
Even though the total rent exceeds Rs. 1,80,000/- ,the
share of rent per co owner (A and B) is only Rs.1,60,000/each. The limit of Rs. 1,80,000/- will apply separately to
each co-owner for the purpose of deduction of tax. So,
since rent paid to each co owner doesn't exceed Rs.
1,80,000/-,no tax is required to be deducted.

Sec 194IA - TDS On Payment Of

Consideration In Respect Of Sale Of
Immovable Property. (W.E.F. 01.06.2013)

Who is liable to deduct tax?

Any person responsible for paying any consideration to a resident on

account of transfer of Immovable property (other than agricultural
land) .

Rate

1% (20% if PAN not furnished by payee)

No T.D.S. Up to 50,00,000/-

Sale Consideration does not exceed

Rs. 50,00,000/- in specified urban areas

Sec 194 J TDS ON PROFESSIONAL

FEES, ROYALTY etc.

Who is liable to deduct tax?

Any person paying/crediting any professional

services/technical services/royalty/non compete
fees/director fees to any resident person. However
an Individual or HUF who was not liable to tax audit
in the preceding previous year is not liable to deduct
tax at source.

Rate

10% (20% if PAN is not furnished)

No T.D.S. Up to
Rs. 30,000/- (limit of Rs. 30,000/- applies
separately to each of the above payments
except director fees).So TDS is liable on
director's fees irrespective of any limit.

T.D.S. not applicable in the following

cases
If Individual or HUF makes payments for professional
services which are used exclusively for personal purposes.

Note: If along with the bill of services rendered, a separate

bill is given for reimbursement of expenses, then tds is not
deductible on reimbursement of expenses. If however a
consolidated bill is given of professional/technical services
rendered along with reimbursement of expenses, then tds is
deductible on the gross amount without segregating the
expense amount.

Ex: Calculate the amount of tax to

be deducted in the following cases:

1)XYZ Ltd. has to pay Rs. 50,000/- to Mr Mafatlal

which includes Rs. 27,000/- on account of audit fees
and Rs. 23,000/- on account of technical fees .

Answer

Even though the total amount payable exceeds Rs.

30,000/-,there is no liability to deduct tax because the limit
of Rs. 30,000/- applies separately for professional fees and
technical fees. So XYZ Ltd. will pay the entire amount of
Rs. 50,000/- without deducting any tax at source.

Example
2)ABC Ltd. has to make the following payments in the P.Y. 2013-14

i)Rs. 80,000/-on account of professional fees to Mr. Sawant

ii)Rs. 20,000/- as director's fees to Mr. Desai on 01/08/2013 who is
not an employee of the company.
iii)Rs. 40,000/- as technical fees to Mr. Mehta (which includes Rs.
2,000/- as out of pocket expenses)

Answer
i)Since professional fees exceed Rs. 30,000/-,tax will be deducted @
10% i.e Rs. 8,000/ii)The limit of Rs. 30,000/- doesn't apply to director's fees. So tax will
be deducted on the director's fees @ 10% (irrespective of the amount
spent) Tax deducted will be Rs. 2,000/ (Please note ,if this payment was made prior to 01.07.2012,tax would not have been
deducted)

iii)Tax will be deducted on the entire Rs.40,000/- @ 10% i.e. Rs.

4,000/- (assuming that a consolidated bill is furnished)

Sec 194LA - TDS on Payment of

compensation on acquisition of
certain immovable property
Who is liable to deduct tax?

Any person responsible for paying such

compensation/enhanced compensation to a
resident on account of compulsory acquisition
of any land or building (other than rural or
urban agricultural land)

Rate

10% (20% if PAN not furnished by payee)

No T.D.S. Up to

Rs. 100,000/Rs. 2,00,000/- (on or after

01.07.2012)

T.D.S. not applicable in the following

cases

If Form No. 13 is furnished by the

payee for low or no deduction of tax

Example

The Govt. compulsorily acquired commercial

land of Mr.X on 01.08.2012 and paid him a
compensation of Rs. 1,50,000/-.How much tax
will be deducted before making the payment?

Answer
The limit of Rs. 1,00,000/- has been increased to Rs. 2,00,000/from 01.07.2012.Since the payment is made in August (i.e. after
01/07.2012) and the compensation doesn't exceed Rs. 2,00,000/,no tax is required to be deducted before making the payment.

Pls Note: If the payment was made prior to 01.07.2012,tax

deducted would be 10% i.e. Rs. 15,000/-

Sec 194LB - TDS on interest from

infrastructure debt fund

Infrastructure fund is a fund which is

set up for investment in infrastructure
projects referred to under Sec 10(47).

Who is liable to deduct tax?

Any person paying/crediting income from

such fund to a non-resident or foreign
company.

Rate

5% (Add surcharge if applicable and education cess)

(20% if PAN not furnished)

Sec 194LC - TDS on interest on

foreign borrowings (applicable from
01.07.2012)
Who is liable to deduct tax?
Any Indian company paying/crediting interest on money
borrowed (on or after 01.07.2012) in foreign currency
from a source outside India under a loan agreement or by
way of long term infrastructure bonds as approved by the
Central Government. Such interest is paid or payable to a
non resident or a foreign company.

Rate

5% (Add surcharge if applicable

and education cess)

Tds on interest on govt. Bonds

(Applicable from 01.06.2013) sec194ld
Who is liable to deduct tax?

Indian govt. or Indian company which pays

interest on rupee denominated bonds to
foreign companies

Rate

5% ( Add Surcharge if
applicable and education cees)

Section 195-TDS on income of a

nonresident/foreign company
Who is liable to deduct tax?
Any person paying/crediting any interest or any
other income (other than salary and other than
income mentioned above U/S 194LB and U/S
194LC) to a non-resident or to a foreign company.

Rate
Applicable rate i.e.

Rate of tax specified in the Finance Act or agreement U/S 90 or U/S

90A (i.e. double tax avoidance agreements)

(20% if PAN not furnished)

T.D.S. not applicable in the following

cases
Dividend which are subject to dividend distribution tax U/S
115O
If interest is paid/credited by an offshore banking unit on
deposits made.
Form no. 13 is furnished by the payee.

Section 196C-TDS on longterm capital

gains from Foreign Currency Bonds or
Global Depository Receipts

Who is liable to deduct tax?

Any person paying/crediting the above income to a non resident.
Rate
10%

Section 196D-TDS on income from

securities payable to F.I.Is(Foreign
Institutional Investors)
Who is liable to deduct tax?
Any person paying/crediting the above income to a F.I.I..
Rate
20%

TDS Rate Chart

TDS RATE CHART FOR THE FINANCIAL YEAR 2013-2014 (A.Y.2014-2015
Sl. Section
Nature of Payment in brief
CUT
Rate %
OFF HUF/IND Others
Of
No.
Act
1
192
Salaries
Average Rate
2
193
Interest on debentures
5000
10
10
3
194
Deemed dividend
10
10
4 194A Interest other than Int. on securities (by 10000
10
10

4A

194A

Bank)
Interest other than Int. on securities (By

5000

10

10

10000
5000

30
30

30
30

others)
5
6

194B
194BB

Lottery / Cross Word Puzzle

Winnings from Horse Race

TDS Rate Chart -2

Sl. Section
Of
No
.
Act
7 194C(1)

Nature of Payment in brief

CUT
OFF

Contracts

30000

8 194C(2)

Sub-contracts/ Advertisements

30000

9 194D
Insurance Commission
20000
10 194EE Payments out of deposits under NSS 2500

10
20

10
-

11 194F
Repurchase of units by MF/UTI
12 194G Commission on sale of lottery tickets

1000
1000

20
10

20
10

Commission or Brokerage
Rent (Land & building) furniture &

5000
180000

10
10

10
10

fittings)
Rent (P & M , Equipment)

180000

13 194H
14 194I

194I

Rate %
HUF/IND Others

TDS Rate Chart -3

15 194 IA TDS on transfer of immovable property 50 Lakh
other than agriculture
land (wef 01.06.13)
16 194J Professional/Technical charges/ Royalty 30000

10

10

NIL

10

10

200000

10

10

& Non-compete fees

17 194J(1)( Any remuneration or commission paid
ba)
to director of the company (Effective
from
1 July 2012)
18 194LA

Compensation on acquisition of
immovable property

Other Miscellaneous Provisions

Grossing up income payable net of
tax -Sec 195A
Where under any agreement, tax chargeable on any income is
borne by the payer , then the tax borne by the payer will be added
to the net income of the Payee/ recipient i.e. the income of the
payee will be grossed up by the amount of tax borne by the payer.
However, no grossing up is required in case of tax paid by
employer on non monetary perquisites provided to the employee
(because this tax paid is a non taxable perquisite)

No TDS on certain income payable to the

Government, Reserve Bank of India and
other Corporations -Sec 196
Tax shall not be deducted at source if payment of any income is
made to
The Government

The Reserve Bank of India

Mutual Fund specified U/S 10(23D)

Any other corporation established under a Central Act
whose income is exempt.

Low or no deduction of tax -Section

197/197A

(already discussed in the

beginning in General points)

Tax deducted is income received Sec 198

Any tax deducted is income deemed to be received by
the assessee.(except tax on non monetary perquisites
paid by the employer)
So an assessee's total income will always be Net
Amount received + T.D.S.

Credit for tax deducted -Sec 199

The tax deducted at source and paid to the credit of the Central government will be
treated as tax paid on behalf of the assessee / deductee /payee.

Credit for tds paid to the Government will be given on the basis of information
furnished by the deductor. In case such income is assessable in the hands of
some other person other than the deductee (for eg.clubbing of income),due credit
will be given to that other person on the basis of information filed by the deductor.
Credit for tax deducted shall be given for the assessment year for which the income
is assessable. If the income is spread over a no. of years, credit for tds will be given
proportionately.

Duty of Person/Payer deducting tax

-Sec 200
The payer/ deductor has to deposit the tax so deducted to the credit of the
Central Government in the prescribed time as mentioned below :
Tax deducted from April to February - Should be deposited within seven
days from the last day of the month in which tax is deducted
So tax deducted in
the month of April 2013
the month of May 2013

deposit by 07/05/2013
deposit by 07/06/2013

and so on....till
the month of Feb. 2014

deposit by 07/03/2014

Duty of Person/Payer deducting tax

-Sec 200
Tax deducted in the month of March -Should be deposited by 30th of April
So tax deducted in
the month of March 2014

deposit by 30/04/2014

All corporate assessees and non corporate assessees subject to tax audit
must remit the tax through electronic payment i.e through internet banking
facility of the authorised bank or debit/credit cards.
Quarterly TDS statements should be furnished to the Central Government
giving details of tax deducted at source and paid.The due dates for
furnishing these returns are 15th July,15th Oct.,15th Jan and 15th May.(In
case the payer is a Government, the due dates are 31st July,31st Oct.,31st
Jan and 15th May)

Duty of Person/Payer deducting tax

-Sec 203
TDS certificates need to be issued to the payee as a proof of tax
deducted and paid. Only one tds certificate with respect to salary
payment quarterly tds certificates with respect to other income.
Salary TDS certificate should be issued on or before 31st May of
the relevant assessment year
All other tds certificates should be issued within 15days from the
due date of furnishing the quarterly tds returns.

Duty of Person/Payer deducting tax

-Sec 203a

Every person deducting or collecting tax shall apply to the

Assessing Officer for Tax deduction and Collection Account
Number and such number will be quoted by the payer in all
returns, challans and other correspondence with the Govt.

Tax Collected At Source -Sec 206C

Introduction
In some cases, it is mandatory for a seller to collect tax at source
before selling the goods to the buyer. Just like TDS, this tax is
deposited to the credit of the Central Government and the buyer can
claim credit for the same while filing his return of income.

A seller will include every person except individuals and HUFs who
were not subject to tax audit in the preceding previous year.

Generally tax should be collected at the time of debiting the buyer's

account or receipt of income, whichever is early. However in certain
cases like lease contracts and sale of jewellery, tax is to be collected
at the time of receipt of income.

Difference between TDS and TCS

TDS is the tax which is deducted while making payments to parties

with respect to certain expenses. Out of the gross bill charged,TDS
is paid to the government and the net amount is paid to the party.
TCS is the tax which is collected on sale of specified goods by the
seller. It is charged over and above the sale price and then the tcs
is collected from the buyer and paid to the Government.
In both TDS and TCS, the person whose tax is deducted or from
whom tax is collected will get the credit of these prepaid taxes
while filing their return of income.

TCS Rates for the Financial Year

2013-2014
Sl.No.

Nature of Goods

Rates in %

Alcoholic liquor for human Consumption

Tendu leaves

Timber obtained under forest lease

2.5

Timber obtained by any mode other than a

forest lease

2.5

Any other forest produce not being timber

or
tendu leaves

2.5

TCS Rates for the Financial Year

2013-2014
6
7
8
9
10

Scrap
Parking lot
Toll plaza
Mining & Quarrying
Minerals, being coal or lignite or iron ore

11

Bullion or jewellery (if the sale

consideration is paid in cash exceeding
INR 5 lakhs in jewellery and two lakh in
case of Bullion)

1
2
2
2
1 wef
01.07.2012
1 wef
01.07.2012

Self Declaration by buyer if goods

are used for manufacturing
purposes
If a resident buyer furnishes a declaration to the seller
that the goods bought by him are to be utilised by him
for manufacturing/production/generation of power and
not for trading purposes, then no tax will collection will
be done. The person responsible for collecting tax shall
accordingly deliver to the C.I.T such declaration.

TCS with respect to Lease Contracts

As can be seen from the tcs rates table, tax is to be collected not just
while selling specified goods but also when a person grants a lease or a
licence or enters into a contract or transfers any right or interest in any
1) Parking lot
2) Toll Plaza
3) Mine
4) Quarry

to another person(other than public sector company) for the use of the
same in the business of the licensee. TCS rate is 2% of the lease amount.

TCS with respect to sale of bullion

exceeding Rs. 2,00,000/- and jewellery
exceeding Rs. 5,00,000/From 01/07/2012,tax has to collected at source by the seller on the above sale if any amount
out of the sale consideration is received in cash. tax is to be collected @1% of the sale price
and at the time of receipt of the amount in cash.
This is irrespective of whether the buyer is a manufacturer, trader or purchases it for personal use.

Up to 01/06/2013,sale of gold coins and similar articles which weigh not more than 10 gms.
were not considered for the purpose of TDS.

However, from 01/06/2013 , even such articles will be subject to tcs if sale exceeds 2,00,000/-.

Example

1)Mr. Jhaveri purchases jewellery from Pednekar

Jewellers Pvt. Ltd. on 10/07/2012 for Rs.5,50,000.On
the same day, half the amount is paid and the
balance is paid in cash in September 2012.

Answer

In this case, tax @ 1% of sale price i.e. 5,500/- will be collected

by Pednekar Jewellers from Mr. Jhaveri in September (at the
time of receipt of cash).Mr. Jhaveri can claim credit of this tcs
of Rs. 5,500/- while filing his income tax return

Consequences of Default
If any person liable to collect tax fails to collect tax or after collecting
tax fails to pay it to the Central Government, then he will be liable for
interest and even penalty and rigorous imprisonment in severe cases.
Interest charged is the same as that charged for default in collecting or
paying tds i.e. 1% per month or part of a month for not collecting tax
and 1.5% per month or part of a month for not paying TDS.
Provisions regarding payment of TCS, furnishing returns and
certificates are similar to the provisions of TDS

Thank you !!!!