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TAX DEDUCTED AT SOURCE

TAX DEDUCTED AT SOURCE. “PAY AS YOU EARN”. Presented By: Sowmya. TDS. Why – Tax Deducted At Source ? What is Tax Deducted At Source ?. Relevant Sections. Sec 192 – Salary Sec 193 – Interest on Securities Sec 194 – Dividends

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TAX DEDUCTED AT SOURCE

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  1. TAX DEDUCTED AT SOURCE “PAY AS YOU EARN” Presented By:Sowmya

  2. TDS Why – Tax Deducted At Source ? What is Tax Deducted At Source ?

  3. Relevant Sections • Sec 192 – Salary • Sec 193 – Interest on Securities • Sec 194 – Dividends • Sec 194A – Interest other than Interest on Securities • Sec 194B – Winnings from Lotteries, Crosswords, Puzzles etc. • Sec 194BB– Winnings from Horse race

  4. Relevant Sections • Sec 194C – Payment to Resident Contractors • Sec 194D – Insurance commission • Sec 194E – Payment to Non Resident Sportsmen or Sports Association • Sec 194EE – Payments in respect of Deposit under National Savings Scheme • Sec 194G – Commission on sale of Lottery Tickets

  5. Relevant Sections • Sec 194H – Commission and Brokerage • Sec 194I – Rent • Sec 194J – Fees for Professional or Technical Services • Sec 194K – Income in respect of units • Sec 194LA –Payment of Compensation on acquisition of certain immovable property

  6. Insertion 2011 • Section 194 LB ( w.e.f 01.06.2011 ) Income by way of Interest from INFRASTRUCTURE DEBT FUND

  7. Sec 192 – Salary • Person responsible to deduct tax-Employer • Tax to be deducted at rate applicable to individuals. • Inclusion of income from other heads • Payment of tax on Non Monetary Perquisites. • Salary from more than one employer. • Adjustment of amount deducted U/s192.

  8. Sec 192 – Salary Judgment: • Permits adjustment of excess or deficit. • No Interest U/s 201(1A). Case Law: • CIT Vs Venron Expat Services INC. (2010) The assesse failed to deduct tax monthly, however deducted towards the end of FY.

  9. Sec 193 - Interest on Securities • Person responsible to deduct tax – • Central or state govt. • Local authority. • Company or corporation established by govt. • Rate of tax - 10%. • Exemptions: • Debentures (Resident Individuals) • Paid by Account Payee Cheque of amount not exceeding Rs 2,500

  10. Sec 193 - Interest on Securities • List of interest payments- No TDS required • Interest on Listed Securities • Payment to New Pension Trust • National Defence Bonds • National Defence Loan • National Development Bond • 7-year NSC • Gold Bonds • LIC, GIC or any of its subsidiaries

  11. Sec 194 – Dividends • Person Liable to deduct tax is the principal officer. • Rate of tax - 10%. • Applicable only if dividend is paid u/s 2(22)(e).

  12. Sec194A– Interest other than Interest on Securities • Rate of tax – 10% • Exemption Limit – Interest by Banking company - Rs 10,000 Others - Rs 5,000 • Credit or Payment, whichever is earlier.

  13. Sec194A– Interest other than Interest on Securities • List of interest payments- No TDS required • LIC, UTI, Other Insurance Companies • To the Partner of the firm • By a Co-operative society to its members • By Primary Agricultural society • Saving, Current Account, Recurring Deposit. • Interest on compensation (Motor Accident Claim) -Does not exceed Rs 50,000 • Interest on Zero Coupon Bond.

  14. Sec 194B- Winnings from Lotteries, Crosswords, Puzzles etc. • Deductor – Any person paying the sum by way of winning • Rate of tax – 30% • At the time of payment • Exemption limit – Upto 30.06.10 - Rs 5,000 From 01.07.10 - Rs 10,000

  15. Sec 194B- Winnings from Lotteries, Crosswords, Puzzles etc. • H. Anraj Vs Government of Tamilnadu • Essential elements that constitute lottery. • A prize or some advantage in the nature of prize, • Distribution thereof by chance and • Consideration paid or promised for purchasing the chance.

  16. Sec 194B- Winnings from Lotteries, Crosswords, Puzzles etc. Judgment: • Income From Business, not winning from lottery. Hence not subject to TDS. Case Law: • ACIT Vs Director of State Lotteries, Assam. Income accruing to an agent/trader in respect of prizes on unsold/unclaimed lottery tickets in his possession.

  17. Sec 194BB– Winnings from Horse race • Deductor – Licensed by the govt. or licensed bookmaker • Rate of tax – 30% • At the time of payment • Exemption limit – Upto 30.06.10 - Rs 2,500 From 01.07.10 - Rs 5,000

  18. Sec 194BB– Winnings from Horse race Case Law: Royal Calcutta Turf Club Limit u/s 194BB is applicable for each payment or entire winning for the FY? Judgment: Limit should be applied to each payment and not the entire winnings.

  19. Sec 194C– Payment to Resident Contractors • Rate of Tax – Individuals and HUFs - 1% Others - 2% • Exemption Limit- Upto 30.06.10- Rs 20,000/50,000 From 01.07.10- Rs 30,000/75,000

  20. Sec 194C– Payment to Resident Contractors • Exemption • Hiring or Renting equipments • Sale of goods • Supply of goods- Buyers specification • Payment to airlines – Air travel of individuals • Payment to banks for Discounting Bills • Individual/HUF- exclusively for personal purposes • Works executed under NREP & RLEGP

  21. Sec 194C– Payment to Resident Contractors Judgment: • Assessee was not acting as contractor nor the other party a contractee Assessee was not required to deduct tax. Case law: • Mukta Arts Vs ACIT (2010) Assessee was engaged in Film Financing and made certain payments by way of advances to another party for production of film.

  22. Sec 194D – Insurance commission • Person responsible to deduct tax- Insurance companies. • Rate of tax – 10% • Credit or Payment, whichever is earlier. • Exemption limit – Upto 30.06.10 - Rs 5,000 From 01.07.10 - Rs 20,000

  23. Sec 194E– Payment to Non Resident Sportsmen or Sports Association • Rate of tax – 10%+SC + EC 2% + SHEC 1% • Credit or Payment, whichever is earlier. • No Provision For deduction of Tax at lower rate. • Category of payee – Income to NR by way of • Participation in India in any game (excl card or gambling) • Advertisement • Contribution of article relating to any game or sport.

  24. Sec 194EE– Payments in respect of Deposit under NSS • Rate of Tax-20% • At time of payment • Exemption Limit- Rs 2,500 • No Provision For deduction of Tax at lower rate. • No TDS if payment to legal heir.

  25. Sec 194G – Commission on sale of Lottery Tickets • Rate of tax – 10% • Exemptions – Payment not exceeding Rs 1,000. Payment to New Pension Trust. • Category of payee • Any person stocking, purchasing or selling lottery tickets

  26. Sec 194G – Commission on sale of Lottery Tickets Case Law: MS hameed Vs director of State Lotteries (2001) Discount given to an agent on bulk purchase of lottery ticket from state Govt. Judgment: Such Discount is not a commission and not liable for TDS

  27. Sec 194H – Commission and Brokerage • Rate of Tax – 10% • Exemption limit – Upto 30.06.10 - Rs 2,500 From 01.07.10 - Rs 5,000 • Exemptions – • Payable by BSNL/MTNL to their PCO franchisees. • Payment to New Pension Trust.

  28. Sec 194H – Commission and Brokerage Case Law: Vodafone Essar Cellular Limited vs ACIT. Sale of sim card and recharge coupons at discounted price to distributors Judgment: Such Discount given is a commission, hence liable for TDS

  29. Sec 194I – Rent • Rate of Tax – Land/building/ furniture/Fittings – 10% Machinery/Plant/Equipment – 2% • Exemption limit – Upto 30.06.10 - Rs 1,20,000 From 01.07.10 - Rs 1,80,000 • Exemptions – • If Payee is govt or local authority. • Payment to New Pension Trust

  30. Sec 194I – Rent Case Law: CIT Vs Asiana Airlines (2009) Landing and Parking charges collected. Is it liable for TDS u/s 194I ? Judgment: Landing and Parking charges is “Deemed” to be rent and liable for TDS

  31. Circulars and Cases U/S 194I • If a person has taken particular space on rent and sub-lets it. • Hotel Accomodation taken on regular basis. • Building is let-out along with furniture/ fittings. • Payment made for warehousing charges. • Payment made to landlord in nature of advance rent or non-refundable deposit.

  32. Sec 194J – Fees for Professional or Technical Services • Rate of Tax – 10% • Exemption Limit- Upto 30.06.10- Rs 20,000 From 01.07.10- Rs 30,000 • Exemptions – • Payment by individual/HUF Exclusively for their personal purposes • Payment to New Pension Trust. • Category of payee – Professional service or Technical service or Royalty or payments received U/s 28(1)(va)

  33. Sec 194J – Fees for Professional or Technical Services Case Law: CIT Vs Bharthi cellular ltd Interconnection/port charges paid Judgment: Fees for technical service includes only service rendered by human not robots/machines

  34. Illustrative cases of TDS u/s 194J • Advertising agency makes payment to models. • Payment made to Recruitment agency. • Payment made by a company to share registrar. • Maintenance contract involving Technical services. • Service of professional cameraman.

  35. Sec 194K – Income in respect of units • Not relevant now as income from units is exempt w.e.f. Assessment year 04-05

  36. Sec 194LA–Compensation on acquisition of immovable property • Rate of Tax- 10% • Exemption Limit- Rs1,00,000 • Exemption: Payment to New Pension Trust

  37. Sec 194LA–Compensation on acquisition of immovable property Case Law: State of Kerala Vs Mariamma Date of Deduction in case of delayed payment in compensation Judgment: Deduction to be made on the date of payment even though the acquisition may have been made much before.

  38. Sec 194LB –Income from Infrastructure Debt Fund • Rate of Tax- 5% • Payment to • Non residents other than company • Foreign Company • Credit or Payment, whichever is earlier. • W.e.f 01.06.2011

  39. Sec 195 – TDS on Non Residents • Payment to • Non residents other than company • Foreign Company • Payment or Credit – whichever is earlier • Rate of Tax • Rate as per the Finance Act • Rate U/s 90 • Rate U/s 90A

  40. Sec 195 – Verdicts • TDS liability only if income is taxable. • Soliciting exhibitors outside India for an event in India. • No TDS on income earned before PE established in India. • Managerial & Consultancy services liable to TDS. • Interest to non resident with no PE in India liable to TDS.

  41. Sec 195 A – Grossing Up • Income payable net of tax • Gross Income • Less: TDS • Net Income • Obligation to furnish certificate to the Deductee (Net Income & TDS thereon)

  42. Sec 196 – NO TDS • No TDS in case payment to • Govt • RBI • Corp established by Central Act • Mutual Fund U/s 10(23D)

  43. Sec 196 B – Income from Units purchased in Foreign currency • Income from units • U/s 115 AB • LTCG on transfer of such units • Rate of Tax – 10% + SC + EC +SHEC

  44. Sec 196 C – Foreign Currency Bonds / GDR’s • Payment to Non Resident • Income by way of • Interest/dividend on GDR’s & Bonds • LTCG on transfer of such bonds • Rate of Tax – 10% + SC + EC +SHEC

  45. Sec 196 D – Income of Foreign Institutional Investors • Income from Securities • Rate of Tax – 20% + SC + EC +SHEC

  46. Sec 197 - No Deduction or Lower Rate • Certificate for deduction at lower rate • Make application to AO • No deduction or less deduction • No Certificate to be issued if PAN is not provided

  47. Other Issues • Tax Deducted is deemed to be Income Received • TDS deducted & remitted – payment on behalf of the person from whom it was deducted • Service Tax – TDS • Where sum is used – Including Service tax • Where income is used – Excluding Service tax

  48. Other Issues • TDS to be deposited to the credit of Govt. • Tax deducted on behalf of Govt. • Without tax challan – same day • With tax challan – on or before 7days • Tax deducted by others • Credited or paid in March – on or before 30 April • Other case – on or before 7days • Form 15H/15G

  49. Other Issues • Assessee in default • Non deduction, non payment , Non payment of tax U/s 192(1A) • Interest U/s 201 • Does not deduct tax • Fails to remit tax to the Govt. • Does not pay tax U/s 192(1A) • Rate of Interest for default • DOD – Actual DOD = 1% • DOD - Date of actual payment = 1.5%

  50. Important Points • Book entry • Consolidated TDS certificate • Issue of duplicate TDS certificate • New Pension Trust

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