Tax Deduction At Source

Modes of Tax Recovery 2

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Tax 3

Deducted at Source

TDS is one of the several modes of recovery of Tax for the Government

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Importance of TDS 4

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Growing source of revenue World wide experience Brings more income in tax net New tax payers Low cost of collection - Tax

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Duty of the Tax Deductor 5

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Get TAN – One TAN for each RO Deduct tax Remit tax within due dates File quarterly e-TDS return Issue TDS certificate Send 15H / 15G Forms etc. March

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Consequence in case of default 6

✮ Responsible for payment of tax

amount due ✮ Disallowance u/s 40a(ia) of the IT Act ✮ TRO can initiate recovery proceedings ✮ Interest u/s 201(1A) @ 1% p.m. w.e.f 01 April 2008 ✮ Penalty u/s 271 C - Amount of AD - Tax March 4, 2009 tax

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TDS - Major Heads 7

TDS on Salary [Sec 192] TDS on Interest paid on Securities [Sec 193] TDS on Deposits [Sec 194A] TDS on Contract [Sec 194C] TDS on Prof. & Tech. Service [Sec 194J] TDS on Rent [Sec 194I] TDS on payment made to Non Residents [Sec 195] AD

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Due Date for Deposit of TDS 8

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When Tax is deducted by Government or on behalf of Government – Same Day Tax Deducted by any other person: ④

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u/s 192 – within 7 days from the end of the month in which tax is deducted In all cases tax has to be remitted within 7 days from the end of the month in which the deduction is made Except u/s 192, in all other cases if Tax is deducted on the last day of the FY i.e 31 March, then the due date will be 2 months March 4, 2009 from that date i.e 31 May,

Surcharge for the AY 2009-10 9

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Surcharge is applicable @ 10% on Tax Education Cess is applicable @3% on Tax plus Surcharge [2% EC and 1% SHEC] Surcharge is not applicable in the following cases:  If

the recipient is an individual, HUF, BOI or AOP and the aggregate of payment made during the financial year does not exceed Rs.10 lakh, or  If the recipient is a co-operative society, local authority, firm or a domestic company and the aggregate of payment made during the financial year does not exceed Rs.1crore AD

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TDS on Salary [Sec 192] To be deducted by employer at average rate for each employee Eligible deductions and exemptions under the IT Act to be considered Perquisites to be added to the income Other Income declared by the employee including TDS thereon and Loss from HP shall be considered Tax on NMP can be borne by the employer u/s 192(1A) of the IT Act AD

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Important Deductions and Exemptions House Rent Allowance Leave Travel Concession Transport Allowance Traveling / Transfer Allowance Medical Facility Uniform Allowance Deduction under Chapter VI A

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Certificates given by the employer Form 16AA – If the employee is Resident and his Income under the head “Salary” does not exceed Rs. 1,50,000/Form 16 – If the Income under the head Salary is in excess of Rs. 1,50,000/Form 12BA – If the salary payable to an employee is more than Rs. 1,50,000/-

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Interest on Security [Sec 193] Tax to be deducted on interest paid on securities [Bonds, Debentures etc.]  Deduction to be made either at the time of payment or at the time of credit in the books whichever is earlier  Tax need not be deducted if the aggregate interest paid to the individual during the FY is Rs.2500/- or less provided the interest is paid byway of “a/c payee” crossed cheque  TDS certificate to be issued within one month [Form 16A]  Corporate Bonds issued in demat form and AD - Tax March 4, 2009 listed on recognized stock exchanges are 

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TDS on Interest other than Interest on Securities [Sec 194A] ✈

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Payer – Other than individual and HUF whose books are not required to be audited u/s 44AB of the IT Act 1961 Payee – Any resident Applicability – Where Interest paid to any person exceeds Rs. 5000/- (Rs. 10000/- in case of Interest paid by Banks, Post Office and Co-op society) during the FY Rate of TDS – 20% for corporate and 10% for others Deposit in Joint name - Tax

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Exempted u/s 194A 15

Aggregate interest paid does not exceed Rs. 5000/- or Rs. 10000/- as the case may be Interest paid to Banking Company, Co-op Bank, PFI, LIC, UTI, Insurance company or notified institutions Interest paid by the Firm to its partners Interest paid by Co-op society to its members Interest paid on instruments issued by Post office, KVP, NSC and IVP Interest paid on deposits with PACs and PCARDBs AD

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TDS on Contract [Sec 194C] 16

Nature – Payment made to any resident contractor for “work contract” including supply of labour for carrying out any work  Applicability – Where a single payment exceeds Rs. 20000/- or aggregate payment during the FY exceeds Rs. 50000/ Rate of TDS – 2% [1% in case of Advertising contract and payment to ADsubcontractor] - Tax March 4, 2009 

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Sec 194C – Contd….. 17

Section 194C applies for carrying out any work including, transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, material contracts and works contracts. If advance payments made to the contractor, tax to be deducted on such advance also AD

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Sec 194C – Contd….. 18

Payment towards the following attracts TDS u/s 194C: ✶ Printing office stationery ✶ Taxi hiring charges ✶ Advertisement ✶ Catering services ✶ Courier service ✶ Maintenance including security contract AD

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TDS on Rent u/s 194I 19

Nature – Payment of ‘Rent’ to any resident person Applicability – Where the payment of Rent exceeds Rs. 1,20,000/- during the FY Rate of TDS (P&M) – 10% for all recipients Rate of TDS (Other than P&M) – 15% if the recipient is individual or HUF, 20% in any other case AD - Tax 4, 2009 When to deduct – At the timeMarchof

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Rent – Definition Rent means any payment by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any: (a) Land; or

(e) Plant; or

(b) Building; or

(f) Equipment; or

(c) land appurtenant to a building (g) Furniture; or (including factory building); or (d) machinery; or

(h) Fittings

whether or not any or all of the above are owned by the payee AD

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Section 194I …….. 21

❉ Payment to Hotel ❉ If taken on regular basis – Attracts

(Holiday Home) ❉ If rent paid by the employee – Does not attract ❉ Rate Contract – Does not attract ❉ If rent paid separate for building and separate for furniture, Tax to be deducted on the composite payment AD

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Section 194I …….. 22

Where there are multiple ownership of asset, the exemption limit of Rs. 1,20,000/- is applicable for each of the owner TDS is applicable on deposit of Rent Advance, if the same is non refundable Interest on Deposit of Advance Rent, if any should be subjected to TDS u/s 194A Subletting of rented land / building will also be covered u/s 194I AD

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TDS – Professional and Technical Services [Sec 194J] 23

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– Payment made towards “professional and technical services”  Applicability – Where the aggregate payment made during the FY exceeds Rs. 20000/ Rate of TDS – 10% w.e.f 01 June 2007  When to deduct – At the time of payment or at the time of credit, whichever is earlier AD - Tax March 4, 2009 

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TDS – Professional and Technical Services [Sec 194J] 24

Professional services includes legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, film artistes ➾ Technical servicesrendering any managerial, technical, consultancy services ➾ w.e.f 13 July 2006, 194J is also applicable to Royalty and payment in AD - Tax 4, 2009 the nature of non-compete feesMarchand ➾

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194J – Fees paid 25

Advocates, Lawyers, Retainers, Legal Consultants ✵ Chartered Accountants, Cost Accountants ✵ Engineers, Chartered Engineers, Architects ✵ Surveyors, Approved Valuers ✵ Interior Decorators, Decoration Consultants AD Tax March 4, 2009 ✵ - Gross payments to hospitals & ✵

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194J – Fees paid Contd…. 26

Merchant Bankers, Registrars, Credit rating agencies Pagers, Internet, Database / Data mail services Port charges, Interconnect charges Consultants (TQM, ISO-9002etc.) Event Management, Marketing Research, Celebrity Endorsement AD

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194J – w.e.f 21.08.2008 27

Sports Persons Umpires and Referees Coaches and Trainers Team Physicians and Physiotherapists Event Managers Commentators Anchors and Sports Columnists AD

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Reimbursement – 194C & 194J Reimbursement – If Consolidated Bill given, then Tax is to be deducted on the gross bill ✯ If Separate Bill is given for Reimbursement, Tax need not be deducted for the reimbursement ✯ Service Tax - ??? ✯ Should be considered for TDS since Service Tax is a part of the Bill and it cannot be claimed separately ✯ Service Tax need not be considered for TDS u/s 194I as per CBDT Circular March No.4 AD - Tax 4, 2009 dated 28 April 2008 ✯

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Payment to Non Resident [Sec 195] Nature – Covers all types of payment made to Non Residents / Foreign companies (Except Salary) Applicability – Any sum which is taxable in India in the hands of the recipient When to deduct – On actual payment for PFIs, PSBs and Government Interest paid on CGB, Rural Bonds to NRIs covered under this section Rate of TDS varies for each type of payment and also depends on DTAA TDS rate for interest paid u/s 195 is 20%

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Cert. for deduction at lower rate – Sec 197 Sections Covered: 192 193 194 ❀

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194A 194C 194D

194G 194H 194I

194J 194K 195

Recipient to make an application with AO in Form 13 for no deduction or deduction at lower rate Based on the Certificate by the AO TDS may be deducted at a lower rate or no TDS deducted

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Declaration by Recipient – Sec 197A 31

Section covered:  Any person not being a company or Firm - 193, 194A or 194K Recipient to furnish declaration in Form 15G / 15H Conditions:  Recipient is a person as given above  Tax on the estimated income of the Recipient for the FY will be Nil  The amount of income covered by sections 193,194,194A, does not exceed Rs.1,50,000/(Being the maximum amount not chargeable to tax for the AY 2009-10) 

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TDS on Income of NABARD 32

The provisions explained above are equally applicable when others make payment to NABARD Action Points: 

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Account the Gross amount received including the TDS. Follow up with the Deductor to get the TDS certificate in Form 16A Forward the Form 16A to Tax Cell immediately on receipt.

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E-TDS Returns 33

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Mandatory filing of e-TDS u/s 200(3) of the IT Act, 1961 read with Rule 37, 37A and 37B of the IT Rules 1962 e-TDS return to be filed for every quarter. The scheme is effective from the AY 200506 onwards Quoting of PAN – Mandatory From the quarter ending 31 March 2008, atleast 95% of the records in Form 24Q and 85% of the records in Form 26Q should contain valid PAN. Else the return will not be accepted - Tax

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Due Date - Salary 34

Form No. 24Q 24Q 24Q 24Q AD

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Particulars For quarter ending June 30 For quarter ending September 30 For quarter ending December 31 For quarter ending March 31

Dute date July 15 October 15 January 15 June 15 March

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Payment other than salary to resident 35

Form No.

Particulars

Dute date

26Q

For quarter ending June 30 For quarter ending September 30

July 15

26Q 26Q 26Q AD

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For quarter ending December 31 For quarter ending March 31

October 15 January 15 June 15 March

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Payment other than salary to Non- Resident 36

Form No.

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Particulars

Dute date

27Q

For quarter ending June 30

July 14

27Q

For quarter ending September 30

October 14

27Q

For quarter ending December 31

January 14

27Q

For quarter ending March 31

June 14

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Computation of Interest (w.e.f 01 April 2008) 37

Section 201 of the IT Act – Interest to be paid on delayed remittance of TDS @1% p.m  Interest is to be computed for the period from the date of tax deductible till the date of remittance  As per Rule 119A of the IT Rules, the period of delay has to be rounded off to a whole month and any fraction of the month shall be treated as a complete month.  For the aforesaid purpose a month consist of 30 days  The amount on which Interest is computed is to be rounded off to the nearest Rs. 100 and AD - Tax March 4, 2009 any fraction shall be ignored 

Interest - Example 38

Tax Deducted – Rs. 9585 Date of deduction – 10 November 2007 Due Date – 07 December 2007 Date of Remittance – 25 December 2007 No of days delay – 45 days Interest Calculation: 9500*1%*2 = Rs. 190/ Interest payable = Rs. 190/

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Rounding off of Tax 39

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As per Section 288B of IT Act, any payment to the IT Dept. shall be rounded off to the nearest Rs. 10/-. The amount of Rs.5 and above should be rounded off to the higher Rs.10/- and less than Rs. 5 shall be rounded off to the lowest Rs. 10/-. The Difference resulting in the rounding off shall be adjusted in the Tax component

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QUESTIONS PLEASE

Phone – 022 26539327 Mobile 09324404591 March

4, 2009