Tds provisions [income tax act, 1961]

Prepared by:
ANMOL GOYAL
Under able mentorship of:
CA. R. VARADHARAJAN,
PARTNER
CA. B. UDAYAKUMAR,
SENIOR MANAGER
Atul Kulshrestha & Co.
1

What is TDS?
Tax Deducted at Source (TDS)
 aims at collection of revenue at the very source of income;
 an indirect method of collecting tax;
 combines the concepts of
 pay as you earn and
 collect as it is being earned.
TDS is one of the modes of collection of taxes, by which a certain
percentage of amounts are deducted by a person at the time of
making/crediting certain specific nature of payment to the other
person and deducted amount is remitted to the Government
account.
2

Why TDS was conceptualized?
 Income is earned over a period of time but the assessment/
determination of tax liability takes place much later
Hence,
 To avoid a liquidity problem for the tax payer and
 to ensure a regular flow of revenue for the government
The Income tax Act has provided for periodic recovery of tax from
income liable to tax by requiring the tax to be deducted at source from
certain income/payments as and when such income/payments are
credited.
3

Concept of TDS
 The concept of TDS is
that the person responsible for making certain specified payments is
required to deduct tax at the prescribed rates from the payments made
to a specified recipient in accordance with the provisions of the Income
Tax Act.
 It facilitates sharing of responsibility of tax collection between the
deductor and the tax administration. It ensures regular inflow of cash
resources to the Government. It acts as a powerful instrument to
prevent tax evasion as well as expands the tax net.
4

Who is to deduct TDS?
 Every person responsible for making payment of nature covered by
TDS provisions of Income Tax Act shall be responsible to deduct tax.
 However in case of payments made under sec. 194A, 194C, 194H, 194I
and 194J in respect of individual and HUF, only if the turnover or
professional receipt exceeds sum of Rs. 1 Crore or Rs. 25 lakh
respectively (w.e.f. April 1, 2012) in previous year, he is required to
deduct tax at source.
These persons are mainly:
 Principal Officer of a company for TDS purpose including the
employer in case of private employment or an employee making
payment on behalf of the employer.
[Cont..]
5

Who is to deduct TDS?[Cont..]
 DDO (Drawing & Disbursing Officer), In case of Govt. Office any
officer designated as such.
 In the case of "interest on securities" other than payments made by
or on behalf of the Central govt. or the State Government, it is the
local authority, corporation or company, including the Principal
Officer thereof.
 Such person is called Deductor while the person from whom the tax is
deducted is called Deductee.
6

Responsibilities of the Deductor/
Collector
 Deduct Tax at the time of payment/credit
 Any person responsible for paying any sum, on which tax is
deductible, shall deduct tax at the prescribed rates at the time of
payment/credit.
 Tax must be deducted at the time of payment in cash or cheque or
credit to the payee's account whichever is earlier. Credit to payable
account or suspense account is also considered to be credit to
payee's account and TDS must be made at the time of such credit.
[Cont..]
7

Responsibilities of the Deductor/
Collector [Cont..]
 Deposit deducted tax within the prescribed time limits:
 In case of Government deductors:
 on the same day where the tax is paid without production of
an income-tax challan; and
 on or before seven days from the end of the month in which
the deduction is made or income-•tax is due under sub-•section
(1A) of section 192, where tax is paid accompanied by an
income-•tax challan.
 In case of Others :
 on or before 30th day of April where the income or amount is
credited or paid in the month of March; and for TDS made in
March : On or before 30th April
 in any other case, on or before seven days from the end of the
month in which-
the deduction is made; or
income-tax is due under sub-•section (1A) of section 192.
8

Due dates for filing of Quarterly
Statements
Form No. Particulars Due date for furnishing statement
Government Non Goverment
24Q Quarterly return of
TDS from “Salaries”
July 31st
October 31st
January 31st
May 15th
July 15th
October 15th
January 15th
May 15th
26Q Quarterly return of TDS
in respect of all payments
other than “Salaries”
27Q Quarterly return in respect
of payments made to
Non resident
27EQ Quarterly Return of TCS July 15th, October 15th,
January 15th , May 15th
9

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)
[Cont..]
10

Payment covered under the
scheme of TDS [Cont..]
 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)
 TDS on transfer of Immovable property (Sec. 194IA)
 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)
11

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
without tax deduction
The amount of exemption limit (i.e. `
2,00,000/5,00,000/10,00,000 for A.Y.
2014-15)
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 deduction or with lower tax
deduction
The employee can make application in
Form No.13 to the Assessing Officer to
get the certificate of lower tax
deduction or no tax deduction.
12

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
tax deduction
If the amount payment is ` 10000/- or less than
` 10000/-
Rate at which TDS to be deducted 30%
Is it possible to get the payment without tax
deduction or with lower tax deduction
Not Possible
13

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
tax deduction
If the amount of payment is Rs. 5000/- or less
than Rs. 5000/-
Not Possible
14

Payments to Contractors And
Sub-contractors (Sec.194C)
Who is the payer Specified person
Who is the recipient A resident person
Rate of TDS 1% if payment made to individual or HUF or 2% in any other
case
Payment Covered Consideration for any Work Contract
At what time TDS has to be
deducted
At the time of payment or at the time of credit
Maximum amount which can
be paid without tax deduction
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
payment without tax
deduction or with lower tax
deduction
The recipient can make application to the Assessing Officer in
Form No. 13
15

Insurance Commission (Sec.194D)
Who is the payer Any person paying insurance commission.
Who is the recipient A resident person
Payment covered Insurance Commission
At what time TDS to be deducted. At the time of payment or at the time of credit
whichever is earlier
tax deduction
If the amount of payment is Rs. 20000/- or less
than Rs. 20000/-
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.
16

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,
tax deduction
If the amount of payment is ` 1,000 or less than
` 1,000
The recipient can make an application in Form
No. 13 to the Assessing Officer to get a
deduction
17

Commission or Brokerage
(Sec.194H)
Who is the payer Any person paying commission or brokerage
Who is the recipient Any resident person
Payment covered Commission or brokerage (not being
insurance commission)
At what time TDS to be deducted. 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
The recipient can make an application in
Form No.13 to the Assessing Officer to get a
deduction
18

Rent (Sec.194-I)
Who is the payer 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)
Who is the recipient A Resident Person
Payment covered Rent
Rs. 180000/-
Rate at which TDS to be deducted For rent of Plant and Machinary @2% and for
For rent of Land or Building including Furniture
etc. @10%
deduction
The recipient can make application in Form No. 13
19

Transfer of Immovable property
(Sec.194-IA)
Who is the payer Any person (transferee) who purchases any
immovable property (whether residential or
commercial) for a consideration
Who is the recipient A Resident seller (transferor)
Payment covered Consideration paid to acquire such fixed asset
Rs. 50,00,000/-
Rate at which TDS to be deducted 1% of the amount paid to a resident seller
deduction
The option of obtaining certificate from the A.O.
u/s. 197 prescribing NIL rate or lower rate of TDS
is not available in the above case
20

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,
If the amount of payment during the financial
year is Rs. 30000 or less than Rs. 30000
tax deduction or with lower tax deduction
The recipient can make application in Form No.
13
21

Consequences of non-compliance
with TDS provisions
 Expenditure claimed disallowed
As per section 40(a)(ia) of the IT Act, the following expenditure will be
disallowed from computation of business income of the deductor, if
TDS is not made or tax deducted has not been paid on or before the
due date for filing return of income.
 Interest (TDS u/s 194A);
 Commission or Brokerage (TDS u/s 194H);
 Rent (TDS u/s 194I);
 Professional/technical fee/Royalty (TDS u/s 194J);
 Amount paid to a contractor or sub contractor (TDS u/s 194C).
The above expenditure will be allowed as a deduction in computing the
income of the previous year in which such TDS has been paid. [Cont..]
22

with TDS provisions [Cont..]
 Assessee in default
An assessee shall be deemed to be in default in respect of :
 Non deduction of tax at source
 Non payment, in whole or in part, of the tax deducted
Amendment to section 201
w.e.f 1-7-2012, if the payer has not deducted tax, he shall not be deemed to
be an assessee in default in case :
 The recipient has included such income in the return submitted
u/s.139 and has paid tax on such income and
 The payee submits a certificate to this effect from a chartered
accountant (Form No.26A) [Cont..]
23

Note: The amendment is not applicable if the recipient is a Non resident.
 If any deductor who is not considered as an assessee in default as per
the above provision, interest u/s.201(1A) under clause(1) shall be
payable from the date on which such tax was deductible to the date of
furnishing of return of income (w.e.f 01.07.2012).
[Cont..]
24

 Interest
[Cont..]
25
Section Nature of default Interest
201(1A) Non-deduction of tax at source,
either in whole or part. After
deduction, non payment of tax,
either in whole or part. Non-
payment of tax u/s 192(1A).
simple interest @ 1% per
month from the date on which
tax was deductible to the date
on which tax is actually
deducted
simple interest @1.5% per
month from the date on which
tax was deducted to the date
on which tax is actually paid

 Levy of fee u/s 234E (w.e.f. 01.07.2012)
Failure to file TDS/TCS quarterly statements shall be liable for a fee of
Rs.200 per day of default and shall not exceed the amount of tax
deductible or collectible. The fee shall be paid before delivering the
quarterly statements.
[Cont..]
26

 Penalty
[Cont..]
27
Section Nature of default Penalty
271C Failure to deduct the whole
or any part of tax at source
Sum equal to the amount of tax
which was failed to be deducted
271CA Failure to collect the whole or
any part of tax at source (TCS)
Sum equal to the amount of tax
which he failed to collect
271H(1)(a) Failure to submit quarterly
return
Penalty of Rs.10,000 to Rs.1,00,000
271H(1)(b) for furnishing quarterly returns
with incorrect information
No penalty shall be levied if the
revised returns are filed within a
period of one year from the due
date.

 Penalty [Cont..]
28
Section Nature of default Penalty
272B Failure to comply with provisions
of Section139A for quoting Pan
Rs.10,000
272BB Failure to obtain TAN Rs.10,000
272A(2) 1. Failure to issue TDS certificates
2. Failure to deliver declaration in
Form15G/15H
3. Failure to file quarterly
statements (only till 30-06-2012)
Rs.100 for every day during
which the failure continues but
the penalty shall not exceed the
amount of tax Deductible

 Prosecution
29
Section Nature of default Prosecution
276B Failure to pay Tax Deducted
at Source
Punishable with rigorous
imprisonment for minimum 3
months , maximum 7 years and with
fine
276BB Failure to pay Tax Collected
at Source (TCS)
Punishable with rigorous
imprisonment for minimum 3
months , maximum 7 years and with
fine

Certain peculiar TDS related issues
 Amendment in TDS provisions do not cast a liability to deduct
tax on amount already credited or paid before such amendment
The Banglore branch of the Income Tax Appellate Tribunalin the case
of Wifi Networks Pvt. Ltd. held that if the payment is made
subsequent to an amendment in TDS provisions under the Income Tax
Act, there is no obligation to deduct tax where the amount is paid or
credited before such amendment.
[Cont..]
30

[Cont..]
 An employer is under no obligation to collect and examine the
supporting evidence to a declaration submitted by an employee
The Supreme Court held that an employer is under no obligation to
collect and examine the supporting evidence to a declaration
submitted by an employee to the effect that he has actually utilised the
amounts for the specified purposes in deciding the liability to TDS u/s.
192.
This was decided by SC in the case of ITI Limited v CIT. Same was also
confirmed in the case of CIT v Larsen & Toubro.
[Cont..]
31

[Cont..]
 S. 194J applies to payments made to non-professionals such as
hospitals by TPA(Third party Administrators)
It has been decided by Delhi High Court that though a hospital by
itself, being an artificial entity, is not a “medical professional”, yet it
provides medical services by engaging the services of doctors and
qualified medical professionals. These are services rendered in the
course of the carrying on of the medical profession. S. 194J applies to
payments made to non-professionals such as hospitals. It was decided
in the case Dedicated Health Care Services TPA vs. ACIT.
32

34
ANMOL GOYAL
CA – FINAL
E-mail: anmol.goyal@icai.org
anmol@atulkul.com

Tds provisions [income tax act, 1961]

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