TAX DEDUCTED AT SOURCE

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 INDEX

 Introduction
 Payments covered
under the scheme of TDS.
 Provisions for filing
Returns to the Income Tax
Department.
 Effects of Tax Evasion
 Introduction

To avoid cases of tax evasion, the Income-Tax Act has made

provisions to collect tax at source on accrual of income. Cases
included in the scheme are, generally, those where income can
be computed at the time of accrual of income. Under this
scheme, persons responsible for making payment of income
covered by the scheme are responsible to deduct tax at source
and deposit the same to the Government’s treasury within the
stipulated time. The recipient of income—though he gets only
the net amount (after deduction of tax at source)—is liable to
tax on the gross amount and the amount deducted at source is
adjusted against his final tax liability. The details of the scheme
of tax deduction and collection at source are briefly discussed in
this presentation. To conclude one can say that the scheme of
TDS is only payment of tax on adhoc basis by the payer of
income on behalf of recipient.
Setps for TDS
 TAN

• Every deductor is required to obtain a

unique identification number called TAN
(Tax Deduction Account Number) which is
a ten digit alpha numeric number. This
number has to be quoted by the deductor in
every correspondence related to TDS
 Tax Deduction & Collection Account Number

Every person deducting tax or collecting tax should

obtain a tax deduction & collection number
Such person should quote such number in every
challan for payment u/s 200 or 206C(3), in every
certificate furnished u/s 203 or u/s 206C(5)
In all the TDS returns delivered
In all other documents pertaining to such transaction
as may be prescribed in the interest of revenue.
Payment covered under the scheme of TDS.

 Salary (Sec.192)
 Interest on Securities (Sec.193)
 Dividends (Sec.194)
 Interest other than Interest on Securities (Sec.194A)
 Winnings from Lotteries or crossword puzzles (Sec.194B)
 Winnings from Horse Races (Sec.194BB)
 Payments to Contractors and Sub-contractors (Sec.194C)
 Insurance Commission (Sec.194D)
 Payment to Non-resident sportsmen or sports association
(Sec.194E)

 Payment in respect of NSC (Sec. 194EE)

Contd…
Payment covered under the scheme of TDS.

 Payments in respect of Repurchase of units of Mutual

Funds or UTI (Sec.194F)
 Commission on Sale of Lottery Tickets (Sec.194G)
 Commission or Brokerage (Sec.194H)
 Rent (Sec.194I)
 Fees for Professional or Technical Services (Sec.194J)
 Payment of Compensation on acquisition of certain
immovable property (Sec.194LA)
 Other Sums (Sec.195)
 Long term capital gain (Sec.196B)
 Income or Long term capital gain from Foreign Currency
bonds/Global Depository Receipts (Sec.196C)
 Income of Foreign Institutional Investors from Securities
(Sec.196D)
Contd…
 Salary (Sec.192)

Who is the payer Employer

Who is the recipient Employee

Payment Covered Taxable Salary of the employee

At what time TDS to be deducted At the time of payment

Maximum amount which can be paid The amount of exemption limit

without tax deduction (i.e.,Rs.160000/190000/240000 for A.Y.
2011-12) NOW 300000 FOR SENIOR
CITIZEN
Rate at which tax to be deducted. As per Calculation

When the provisions are not applicable --

Is it possible to get the payment without tax The employee can make application in
deduction or with lower tax deduction Form No.13 to the Assessing Officer to get
the certificate of lower tax deduction or no
 Interest on Securities (Sec. 193)
Who is the payer
Who is the recipient
Payment covered
At what time TDS to be deducted.
Maximum amount which can be paid
without tax deduction
Rate at which TDS to be deducted
When the provisions are not applicable
Is it possible to get the payment without tax
deduction or with lower tax deduction
Payer of interest on securities
A resident person holding securities
Interest on securities
At the time of payment or at the time of
credit, whichever is earlier
Rs. 2500
10%
Interest on Central/State Government
securities
The recipient can make application to the
Assessing Officer in Form No. 13 or
declaration to the payer in Form 15G or
15H as applicable
 Dividends (Sec. 194)

Who is the payer Domestic company

Who is the recipient Resident shareholder

Payment Covered Deemed dividend under section 2(22)(e)

At what time TDS to be deducted At the time of payment

Maximum amount which can be paid Rs.2500

without tax deduction
Rate at which TDS to be deducted 20%

When the provisions are not applicable Dividend covered by section 115-O

Is it possible to get the payment without tax The recipient can make application to the
deduction or with lower tax deduction Assessing Officer in Form No. 13 or
declaration to the payer in Form 15G or
15H as applicable
 INTEREST OTHER THAN INTEREST ON
SECURITIES (Sec 194A)
Who is the payer
Who is the recipient
Payment covered
At what time TDS to be deducted.
Maximum amount which can be paid without
tax deduction
Rate at which TDS to be deducted
When the provisions are not applicable
Is it possible to get the payment without tax
deduction or with lower tax deduction
Any person paying interest other than interest
on securities
A Resident person
Interest other than interest on securities
At the time of payment or at the time of credit,
whichever is earlier
If payer is banking company, co-operative
engaged in banking business or Rs 10000/- if
Payer is any other person Rs 5000/-
10% if the recipient is resident non-corporate
assessee and 20% if the recipient is resident
corporate assessee
If the payee are Insurance companies or
financial institutions including co-operative
societies etc.
Declaration to the payer in Form 15G or 15H
as applicable
 Winnings from Lotteries or Crossword Puzzles
(Sec. 194B)

Who is the payer Any person paying winnings from

lotteries/crossword puzzles/card games/other
games
Who is the recipient Any Person
Payment covered Winnings from lotteries/crossword
puzzles/card games/other games
At what time TDS to be deducted. At the time of Payment
Maximum amount which can be paid without If the amount payment is Rs. 10000/- or less
tax deduction than Rs. 10000/-
Rate at which TDS to be deducted 30%

When the provisions are not applicable --

Is it possible to get the payment without tax Not Possible
deduction or with lower tax deduction
 Winnings From Horse Races (Sec. 194BB)

Who is the payer Any person paying winnings from horse

races
Who is the recipient Any person

Payment covered Winnings from Horse Races

At what time TDS to be deducted. At the time of payment

Maximum amount which can be paid If the amount of payment is Rs. 5000/- or
without tax deduction less than Rs. 5000/-
Rate at which TDS to be deducted 30%

When the provisions are not applicable --

Is it possible to get the payment without tax Not Possible

deduction or with lower tax deduction
 Payments to Contractors And Sub-contractors
(Sec.194C)

Who is the payer Specified person

Who is the recipient A resident person

Rate of TDS 2%

Payment Covered Consideration for any Work Contract

At what time TDS has to be
deducted
Maximum amount which can
be paid without tax deduction
At the time of payment or at the time of credit
The tax is required to be deducted if a single payment exceeds
Rs. 30000/- or if the aggregate payments exceed Rs. 75000/-
per annum

Is it possible to get the The recipient can make application to the Assessing Officer in
payment without tax Form No. 13
deduction or with lower tax
deduction
 Insurance Commission (Sec.194D)
Who is the payer
Who is the recipient
Payment covered
At what time TDS to be deducted.
Maximum amount which can be paid without
tax deduction
Rate at which TDS to be deducted
When the provisions are not applicable
Is it possible to get the payment without tax
deduction or with lower tax deduction
Any person paying insurance commission.
A resident person
Insurance Commission
At the time of payment or at the time of credit
whichever is earlier
If the amount of payment is Rs. 20000/- or
less than Rs. 20000/-
10% if the recipient is resident non-corporate
assessee and
20% if the recipient is resident corporate
assessee
--
The recipient can make an application in
Form No. 13 to the Assessing Officer to get
the certificate of lower tax deduction or no tax
deduction.
 Payment to Non-resident sportsmen or
sports association (Sec.194E)

Who is the payer Any person making payment to non-resident

sportsman/sports association
Who is the recipient Non-resident sportsman/sports association

Payment covered Payment to non-resident sportsman/sports

association
At what time TDS to be deducted. At the time of payment or at the time of credit
whichever is earlier
Maximum amount which can be paid without Nil
tax deduction
Rate at which TDS to be deducted 10%+ Education cess etc and Surcharge as
applicable
When the provisions are not applicable --
Is it possible to get the payment without tax No Provision
deduction or with lower tax deduction
 Payments in respect of NSC (Sec.194EE)

Who is the payer Post Office

Who is the recipient Any Person

Payment covered Payment (Principal+Interest) out of National

Saving Scheme, 1987.

At what time TDS to be deducted. At the time of payment

Maximum amount which can be paid without If the amount of payment is Rs.2500 or less
tax deduction than Rs.2500

Rate at which TDS to be deducted 20%

When the provisions are not applicable The payment is made to legal heirs of the
deceased depositor
 Payments on account of repurchase of units of Mutual Funds
or UTI (Sec. 194F)

Who is the payer Mutual Fund or UTI

Who is the recipient
Payment covered
At what time TDS to be deducted.
Maximum amount which can be paid without
tax deduction
Rate at which TDS to be deducted
Unit holder under section 80CCB
Payment on account of repurchase of units
referred to in section 80CCB
At the time of payment
--
20%

When the provisions are not applicable --

Is it possible to get the payment without tax No Provision
deduction or with lower tax deduction
 Commission on Sale of Lottery Tickets
(Sec.194G)

Who is the payer Any person paying commission of sale of

lottery tickets
Who is the recipient Any person

Payment covered Commission on sale of lottery tickets

At what time TDS to be deducted. At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be paid without If the amount of payment is Rs. 1000 or less
tax deduction than Rs. 1000
Rate at which TDS to be deducted 10%

When the provisions are not applicable --

Is it possible to get the payment without tax The recipient can make an application in
deduction or with lower tax deduction Form No. 13 to the Assessing Officer to get a
certificate of lower tax deduction or no tax
deduction
 Commission or Brokerage (Sec.194H)
Who is the payer
Who is the recipient
Payment covered
At what time TDS to be deducted.
Maximum amount which can be paid
without tax deduction
Rate at which TDS to be deducted
When the provisions are not applicable
Is it possible to get the payment without tax
deduction or with lower tax deduction
Any person paying commission or
brokerage
Any resident person
Commission or brokerage (not being
insurance commission)
At the time of payment or at the time of
credit, whichever is earlier
If the amount of payment is Rs. 5000 or
less than Rs. 5000
10% (up to may 31, 2007 : 5%)
--
The recipient can make an application in
Form No.13 to the Assessing Officer to get
a certificate of lower tax deduction or no tax
deduction
 Rent (Sec.194-I)
Who is the payer
Who is the recipient
Payment covered
At what time TDS to be deducted.
Maximum amount which can be paid
without tax deduction
Rate at which TDS to be deducted
Is it possible to get the payment without
tax deduction or with lower tax
deduction
Any person paying rent (not being an individual
or HUF whose books of account are not
required to be audited under section 44AB in the
immediately preceding financial year)
A Resident Person
Rent
At the time of payment or at the time of credit,
whichever is earlier
Rs. 300000/-
For Plant and Machinary Rent 2% and for
For Use of and Land or Building including
Furniture etc.
Individual Huf 10%
For any other 20%
The recipient can make application in Form No.
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 Fees for Professional or Technical Services
(Sec.194J)

Who is the payer Any person paying professional charges (not

being an individual or HUF whose books of
account are not required to be audited under
section 44AB in the immediately preceding
financial year)
Who is the recipient Any Person
Payment covered Professional services, technical services,
Royalty,
At what time TDS to be deducted. At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be paid If the amount of payment during the financial
without tax deduction year is Rs. 30000 or less than Rs. 30000

Rate at which TDS to be deducted 10%

Is it possible to get the payment without The recipient can make application in Form No.
tax deduction or with lower tax deduction 13
 Provisions for Filing Returns

Different Payments In case the person deducting tax is a In case the person Time-limit for submission
company or a Government deducting tax is of return by the person
department or a person whose books any other person deducting tax
are required to be audited u/s. 44AB
in the immediately preceding year or
in whose case number of deductees
in any of the quarterly statements in
the immediately year is 20 or more

Salary Form No. 24Q in Electronic format Form No. 24Q Within 15 days from the
and Form No. 27A end of each quarter (31st
May in case of last
quarter)
Payment (other Form No. 26Q in Electronic format Form No. 26Q Within 15 days from the
than salary) to a and Form No. 27A end of each quarter (31st
resident May in case of last
quarter)
Payment (other Form No. 27Q in Electronic format Form No. 27Q Within 15 days from the
than salary) to a and Form No. 27A (quarterly) (quarterly) end of each quarter (31st
non-resident May in case of last
quarter)
 Issue TDS Certificates Sec. 203

Sr. Form no Periodicity Cut off Date

No.
1 16 For Annual 31st May of following financial
Salary year

2 16A Other Quarterly Within 15 days from due date

than of furnishing the TDS
salary statement under rule 31A
 Dates for Payment of TDS

Deductor For MARCH For April to February

Government On or before 7th On the same day for other than

of next month for salary & on or before 7th of
salary next month for salary
Other than On or before 30th On or before 7th of next month
Government April

Special 30th April Quarterly payment on or before

Cases 7th of the month succeeding
quarter
 Furnishing of quarterly returns for payment of interest
to residents without Deducting Tax (Sec. 206A)

• Banking company, Cooperative societies, &

Public Companies shall furnish quarterly
return to department in respect of payments of
Interest (other than Interest on Securities) in
any computer readable media.
 Collection of Tax
Who is the payer Seller

Who is the recipient Buyer

Payment covered As per Details in next slide

At what time TDS to be Collected. At the time of receipt or at the time of

debiting the account, whichever is earlier
Maximum amount which can be paid Nil
without tax collection
Rate at which TDS to be deducted As per Details in next slide

Is it possible to get the payment without tax The recipient can make an application in
deduction or with lower tax deduction Form No. 13 to the Assessing Officer to get
a certificate of lower tax deduction or no tax
deduction
Rates for Collection of TAX
 Effects of Evasion of TDS (Sec 201)

Sr. Reasons Effects

No.
1. Non deduction The expenditure for which TDS to be
of TDS deducted gets DISALLOWED & penal interest
@1% for every month or part of month from
the date on which such tax was deductible to
the date of deduction
2. Non payment of The expenditure for which TDS deducted but
TDS not paid gets disallowed

3. Less deduction The amount less deducted is required to be

of TDS. paid by the deduct or along with penalty
4. Late Payment of The deductor should have to pay penal interest
TDS @1.5% for every month or part of month
from date of deduction to the date of
payment.
Penal Provisions
 Latest changes
• The rebate under Section 87A of the Income
tax Act, 1961, has been raised to Rs. 12,500
• proposed exemption from notional rent in
respect of two self-occupied house
properties. It is only applicable for those
with net taxable income of up to ₹5 lakh.
• in the next fiscal year, if an assessee has a net
taxable income of up to ₹5 lakh, he/she is allowed
to claim the entire tax payable as tax rebate. For
instance, if an assessee has a gross income of ₹6.5
lakh for the financial year 2019-20, and makes an
investment of ₹1.5 lakh under Section 80C, his/her
net taxable income comes down to₹5 lakh, on
which his/her tax liability will be ₹12,500 (5%
of₹2.5 lakh), excluding cess (income up to ₹2.5
lakh is exempt from tax).
• Standard deduction increased from ₹40,000
to ₹50000. A standard deduction reduces
your taxable income, thereby reducing your
tax liability. Standard deduction was re-
introduced last year
• The benefit of enhanced tax exemption of up to ₹5
lakh has been provided in the form of a rebate and
will only benefit resident taxpayers having total
income up to ₹5 lakh.
• A good relief for the lower income group
earning income in the range of ₹6.5-7 lakh
(before 80C and 80D benefits
 Contents
Uniform deduction of tax
Exempt allowances
Payments by way of adjustment
Contract for Sale – Printing Charges
Contractor & Sub contractor payments
Reimbursement to C & F Agents
Reimbursement under Agency
Element of Agency
Rent on Plant & Machinery
Regular Contract vis-à-vis Rate Contracts 36
 Contents
Internet Connectivity charges – Technical Services?
Reimbursement of Expenses
Tax paid by Payee – non/short deduction
Time Limit under section 201

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 Practical Issues

Based on TDS Proceedings

 Case Study 1
FACTS

• An assessee employer is liable to deducted tax at source

under section 192.

• Deduction of tax of the employees was not uniform

during the year; very negligible in the initial months and
high amount in the last months.

• AO passed order levying interest under section 201(1A)

on the grounds that tax was not properly deducted.

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 Case Study 1

ISSUES
• Whether the Assessing Officer has rightly levied
interest on non-uniformity of TDS deducted?

CASE LAWS

 Vinsons v. ITO, 89 ITD 267 (Mum)

 Grasim Industries Ltd. v. ITO, 92 TTJ 944 (Jodh)
 Secy. Board Of Secondary Education, Rajasthan v. ITO, 93
TTJ 256 (Jaipur)
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 Case Study 2
FACTS

• PQR Ltd., the assessee, is engaged in the business of

providing airline services.
• Co. frequently requires hotel rooms for accommodation of
its pilots and crew members.
• Co. books rooms and makes payments for hire of rooms.
• PQR Ltd. has entered into ‘rate-contracts’ with some and
with others the nature of contract is such that hotels are
under an obligation to provide accommodation to PQR Ltd.
• TDS is deducted under section 194C.

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 CASE STUDY 3
• AN EMPLOYEE CLAIMING
EXEMPTION OF RENT FOR RS. 20,000
 CASE STUDY 4
• AN EMPLOYYE DEDUCTION OF TDS
IS CORRECT AS PER EMPLOYER.
• NOTICE ISSUED FOR DEMAND.
• WHAT ACTION BY EMPLOYEE AND
EMPLOYER?
Questions?

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Thank You!

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