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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
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
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
Example
Tax on interest
on loan is to be
deducted at
source @ 10%.
then it must
deduct tax @
10% i.e. Rs.
3,000/- and pay
Mr. Z Rs.
27,000/-.
Example - 2
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.
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.
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.
4) TDS will be
(A)
X
X
X.B
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
@ 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
45,904
or
The employer may increase or decreas the tds amount in the later
months if salary increases or decreases.
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
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.
Rate
No T.D.S. up to
2)If dividend is paid by account payee cheque to an individual shareholder and it does
not exceed Rs. 2,500/-
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.
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)
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
Example
Example
4)Rs. 50,000/- as interest on fixed deposit to a senior
citizen who has furnished form 15H to the bank
Example
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.
Example
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/-
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.
-University
-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)
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/-
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
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.
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.
Rate
No TDS up to
Rs. 1,500/-
Rate
10% (20% if PAN not furnished)
No TDS up to
Rs. 5,000/-
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.
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.
Rate
2% on Plant and Machinery
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)
Example
Answer
Example
Answer
Example
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.
Rate
No T.D.S. Up to 50,00,000/-
Rate
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.
Answer
Example
2)ABC Ltd. has to make the following payments in the P.Y. 2013-14
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)
Rate
No T.D.S. Up to
Example
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.
Rate
Rate
Rate
5% ( Add Surcharge if
applicable and education cees)
Rate
Applicable rate i.e.
4A
194A
Bank)
Interest other than Int. on securities (By
5000
10
10
10000
5000
30
30
30
30
others)
5
6
194B
194BB
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
10
10
NIL
10
10
200000
10
10
Compensation on acquisition of
immovable property
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.
deposit by 07/05/2013
deposit by 07/06/2013
and so on....till
the month of Feb. 2014
deposit by 07/03/2014
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)
A seller will include every person except individuals and HUFs who
were not subject to tax audit in the preceding previous year.
Nature of Goods
Rates in %
Tendu leaves
2.5
2.5
2.5
Scrap
Parking lot
Toll plaza
Mining & Quarrying
Minerals, being coal or lignite or iron ore
11
1
2
2
2
1 wef
01.07.2012
1 wef
01.07.2012
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.
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
Answer
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