PRESENTATION By J KRISHNA KISHORE IRS ADDL. COMMISIONER OF INCOME TAX RANGE-2, HYDERABAD. 28th JULY, 2010.

1. 1 PRESENTATION By J KRISHNA KISHORE IRS ADDL. COMMISIONER OF INCOME TAX RANGE-2, HYDERABAD. 28th JULY, 2010.

2. 2 TDS � OVERVIEW Direct Tax Collections comprising of Corporate Income-tax and Personal Income-tax, during F.Y.2009-10 is about Rs.3,78,000 crores, of which tax collection through the mechanism of TDS is about Rs.1,43,600 crores, i.e. nearly 38%. During F.Y.2010-11, Direct Taxes target of Rs.4,30,000 crores has been fixed. More than 60% of the total tax revenues of the Union Government are received by way of Direct Taxes.

3. 3 The entire expenditure on the Income-tax Department including fixed and revenue expenditure, is about 1% of the collections and the remaining 99% of the collections are utilized to fund the expenditure of the government in various sectors including rural development, poverty alleviation, literacy programmes, defence, infrastructure building etc. Thus, a large portion of the revenue goes to improving the social and human capital and create infrastructure which in turn propels the trade and commerce leading to economic development.

4. 4 From these figures, we can gauge the importance of TDS in the scheme of taxation in our country. Collection of taxes through the system of TDS and TCS, is a non intrusive mechanism, which is least painful to the taxpayers. The Trade and Industry complement the efforts of the Government in collection of Taxes through the mechanism of TDS and TCS and thus play a vital role in the scheme of taxation. In this sense, they are the extension and valuable agencies of the Union Government.

5. 5 TDS PROVISIONS IN BRIEF

6. 6 TDS PROVISIONS IN BRIEF

7. 7 TDS PROVISIONS IN BRIEF

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10. 10 Non compliance with TDS provisions can result in : Disallowance u/s. 40(a) (ia) of Income Tax Act, 1961 (Act). Raising of demand u/s. 201(1) of the Act. Charging of Interest u/s. 201(1A) of the Act. Levying penalty u/s. 271C of the Act upto the amount of tax in default.

11. 11 Levying of penalty u/s. 221 of the Act for non payment of demand raised. Prosecution u/s.276B of the Act involving rigorous imprisonment upto 7 years with fine. Penalty u/s. 271BB of the Act for failure to apply for TAN or non-quoting thereof. Penalty u/s. 272A (2)(k) of the Act for non filing of TDS returns.

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14. 14 Main reasons for TDS mismatch Deductor related reasons : Non filing of quarterly TDS statements Omission to include details of challan in TDS statement Quoting wrong CIN in challan details in the TDS statement Entering wrong amount in challan details Quoting of wrong TAN in the challan while remitting the TDS in the bank Quoting of wrong minor head in the challan while remitting the TDS

15. 15 Main reasons for TDS mismatch (Deductor related reasons cont.) Omission to include details of a deductee in the challan wise annexure in the TDS statement Non quoting of PAN of the deductee Quoting of structurally invalid PAN of the deductee Quoting of valid but non existent PAN of deductee Quoting of valid but incorrect PAN of deductee Entering incorrect amount in deductee details

16. 16 Main reasons for TDS mismatch(cont..) Deductee related reasons : Error in the TDS amount claimed in the return Claim of inflated TDS credit in the return Bogus claim of TDS credit in the return Amount paid / credited shown in the TDS certificate erroneously claimed as TDS credit in the return Erroneous claim of TDS credit pertaining to two years in the return of income for one year Quoting of incorrect TAN of the deductor in the return

17. 17 Main reasons for TDS mismatch Deductee related reasons (cont..) : Quoting of the TAN of the last DDO only in case of salary drawn from different DDOs during the year Credit for TDS claimed in a different PAN and status Credit for TDS claimed for an assessment Year other than the assessment year relevant to the year of deduction Bank related reasons : Entering wrong TAN while uploading challan data Entering wrong minor head code while uploading challan data

18. 18 Correction statements for correcting the mistakes in TDS statements

19. 19 Action to be taken by deductors for various types of errors

20. 20 Action to be taken by deductors for various types of errors (cont..)

21. 21 Other significant issues The TDS wing will be conducting regular inspections and survey operations, wherever required, to verify compliance to the provisions. Meetings, seminars, workshops would be held by the TDS wing and you are requested to participate and make use of the inputs.

22. 22 Contd� TDS wing will conduct surveys and inspections to verify various issues including the following, as applicable to the concerned assessee. The views expressed herein are personal and do not reflect the official views of the Government and are not in the nature of any kind of clarification. For doubts, please rely on the provision of the Income Tax Act and Rules: Payment of compensation for acquisition of land � Section 194LA. Payment of commission by co-operative banks to agents � daily deposit collectors � 194H Annual maintenance charges paid to service providers � 194C or 194J, as applicable. Payments made for hiring of vehicles/aircraft/helicopters, etc � to be deducted u/s 194I and not 194C.

23. 23 Contd� Payments made by hotels to owners of building � deduction to be u/s 194I. Payments made by port operators for hiring of tugs/launches for guiding ships � deduction to be u/s 194I and not 194C. Demurrage on goods loaded or unloaded and stored in warehouses � section 194I. Sale of timber, including on high seas � TCS is attracted Payment by Third Party Agencies to hospitals � cashless transactions � 194J attracted. Payments in the nature of Salary to doctors in hospitals will attract section 192 and not 194J. Payment of lease rentals in respect of transmission towers by cellular phone operators, broadband service providers etc � Sec. 194I. Payment of interest in respect of loans/funds taken from NBFCs and individuals and concerns other than banks, co-operative societies � Section 194A attracted.

24. 24 Contd� Payment made to transporters, hirers of vehicles, trucks etc where PAN is not available � 194C attracted. Payments for acquiring satellite rights/TV rights on films � 194J attracted. Payments for hire of plant/machinery/equipment � 194I attracted. Payment towards hiring of hoardings, display signs, windows of showroom etc. for display � 194I attracted. Payment of interest by builders on advance received by buyers and adjusted against sale consideration � 194A attracted. Payment of commission to credit card companies � 194H attracted. Payment by shopkeepers to owners of Malls/complexes � 194I attracted even if shown as profit sharing arrangement.

25. 25 Contd� Payments made to hotels for booking of rooms on a long term basis / regular basis � 194I attracted. Payments made to authors/printing press/artists/models etc. by book/magazine publishers and others � Section 194C /194J attracted, as applicable. Payment on hiring out of cine equipment, studios and allied services � Sec. 194I attracted. Payment made to models, event managers � Sec. 194J attracted. Payments made to pest control services � Sec. 194C. Payments made to architects, consultants � Sec. 194J. Payments made to security agencies - Sec. 194C. Payments made to artists associations for providing artists - Sec.194J.

26. 26 Contd� Payments made to landscaping and gardening consultants - Sec.194C/194J. Payments made towards film processing, graphic designs, special effects - Sec. 194J. Payment of royalty to authors/artists/musicians - Sec.194H. Payment of commission to post paid and pre-paid distributors by cellular companies - Sec. 194H. Constructive payments / reimbursement of expenses. Franchisee payments and non-compete fee and fee for exclusivity rights � Sec. 194H. Payments in the nature of lucky dip, festival bonanza where the prizes are distributed by way of lottery among eligible customers - Sec. 194B.

27. 27 Contd� Payments of lease rentals/hire charges for machinery/equipments, especially between sister concerns of group companies - Sec. 194I. Payment of salaries camouflaged as payments under professional contracts - Sec. 192. Perquisites on account of concessional loans given by companies, especially PSUs, to their employees - Sec.192 . Payment of charges for internet services, VSAT charges, Bandwith Charges etc - Sec. 194J/194I. Payment of Upfront Commission to banks/financial institutions for availing financial assistance - Sec. 194H. Charges paid by oil companies for oil testing to outside agencies - Sec. 194J. TCS on payment received on account of grant of a contract or license or lease for mining and quarrying activities.

28. 28 Contd� TDS compliance by multi-national companies in respect of salary and allowances paid to expatriate employees - Sec. 192. Payments by companies/concerns outsourcing large part of their operations. Payment of post-sale incentives by companies to dealers/distributors - Sec. 192. Payment of interest by Chit Fund Companies to their members/subscribers - Sec. 194A. Contracts between cinema theatres or multiplexes and the film distributors for supply of prints of movies on colletion-sharing basis. Payments made to outside labs for specialized diagnostic services such as D.N.A. printing, immunological assay - Sec. 194J.

29. 29 A WORD OF CAUTION All the penal provisions are mandatory. In case of unresolved doubt, better to deduct. The interpretation of the TDS provisions contained herein are personal and should not be construed as official clarification of the Government. In case of any doubt, please refer to the Income-tax Act and Rules. For any assistance, you are welcome to contact officers and staff of the TDS wing, Hyderabad.

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