In this Article we have discussed about payments covered under the TDS mechanism and TDS rates,minimum amount upto which TDS is not deductible, Non deduction of TDS on request of deductee, Consequence of non deduction and Payment of TDS, when deductor will not be in-default despite non-deduction of TDS, due dates for filing of TDS Return, furnishing of TDS certificate, Applicability of TDS on Various Types of Payment, TDS in case of non-furnishing of PAN, Non reflection of TDS in form 26AS, Non-receipt of TDS Certificate, TDS on Land & Building Purchase and other related issues.

What is tax deducted at source?

For quick and efficient collection of taxes, the Income-tax Law has incorporated a system of deduction of tax at the point of generation of income. This system is called as “Tax Deducted at Source”, commonly known as TDS. Under this system tax is deducted at the origin of the income. Tax is deducted by the payer and is remitted to the Government by the payer on behalf of the payee.

The provisions of deduction of tax at source are applicable to several payments such as salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc. In respect of payments to which the TDS provisions apply, the payer has to deduct tax at source on the payments made by him and he has to deposit the tax deducted by him to the credit of the Government. The following illustration will explain the TDS mechanism.

Illustration 

Mr. Raja has made a fixed deposit with XYZ Bank. Annual interest on the deposit is Rs. 8,40,000. Will the bank be liable to deduct any tax from the interest paid to Mr. Raja?

**

Interest on fixed deposit is covered under the TDS mechanism and, hence, the bank has to deduct tax from interest and has to pay the net interest to Mr. Raja.

The rate of TDS on interest is 10% and, hence, the bank will deduct tax of Rs. 84,000 from the interest and will pay the net interest of Rs. 7,56,000 (i.e., Rs. 8,40,000 – Rs. 84,000) to Mr. Raja.

The TDS of Rs. 84,000 will be paid by the bank to the Government and Rs. 84,000 will be treated as prepaid tax of Mr. Raja and he can claim tax credit of Rs. 84,000 just like advance tax at the time of filing his return of income.

The above mechanism of deducting the tax at the point of generation of income is called TDS mechanism.

What are the payments covered under the TDS mechanism and the rates for deduction of tax at source?

Tax is deductible at source at the rates given in table (infra). If PAN of the deductee is not intimated to the deductor, tax will be deducted at source by virtue of section 206AA either at the rate given in the table or at the rate or rates in force or at the rate of 20 per cent, whichever is higher. Further, under section 94A(5), if payment or credit is made or given to a deductee who is located in a notified jurisdictional area, tax is deductible at the rate given in the table or at the rate of 30 per cent, whichever is higher. TDS rates for the financial year 2016-17 are as follows—

CATEGORY A – WHEN RECIPIENT IS RESIDENT
Nature of paymentTDS

(SC : Nil,

EC : Nil,

SHEC : Nil)

Sec. 192 – Payment of salary [normal tax rates are applicable – SC : 15% (if net income exceeds Rs. 1 crore), EC : 2% and SHEC : 1%]15%
Sec. 192A – Payment of taxable accumulated balance of provident fund10
Sec. 193 – Interest on securities—
 a.  interest on (a) debentures/securities for money issued by or on behalf of any local authority/statutory corporation, (b) listed debentures of a company [not being listed securities in demat form], (c) any security of the Central or State Government [i.e., 8% Savings (taxable) Bonds, 2003, but not any other Government security]10
 b.  any other interest on securities (including interest on non-listed debentures)10
Sec. 194 – Dividend—
 a.  deemed dividend under section 2(22)(e)10
 b.  any other dividendNil
Sec. 194A – Interest other than interest on securities10
Sec. 194B – Winnings from lottery or crossword puzzle or card game or other game of any sort30
Sec. 194BB – Winnings from horse races30
Sec. 194C – Payment or credit to a resident contractor/sub-contractor—
 a.  payment/credit to an individual or a Hindu undivided family1
 b.  payment/credit to any person other than an individual or a Hindu undivided family2
Sec. 194D – Insurance commission10
 –  payment/credit to an individual or a Hindu undivided family5
 –  payment/credit to any person other than an individual or a Hindu undivided family10
Sec. 194DA – Payment in respect of life insurance policy (applicable from October 1, 2014)2%
Sec. 194EE – Payment in respect of deposits under National Savings Scheme, 198720
Sec. 194F – Payment on account of repurchase of units of MF or UTI20
Sec. 194G – Commission on sale of lottery tickets10
Sec. 194H – Commission or brokerage10
Sec. 194-I – Rent—
 a.  rent of plant and machinery2
 b.  rent of land or building or furniture or fitting10
Sec. 194-IA – Payment/credit of consideration to a resident transferor for transfer of any immovable property (other than rural agricultural land)1
Sec. 194J – Professional fees, technical fees, royalty or remuneration to a director10
Sec. 194LA – Payment of compensation on acquisition of certain immovable property10
Sec. 194LBA(1) – Payment of the nature referred to in section 10(23FC) or section 10(23FC)(a) (with effect from June 1, 2016) or section 10(23FCA) by business trust to resident unit holders10
Sec. 194LBB – Payment in respect of units of investment fund specified in section 115UB10
Sec. 194LBC(1) – Payment in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA (with effect from June 1, 2016)
 –  if recipient is an individual or a Hindu undivided family25
 –  if recipient is any other person30

CATEGORY B – WHEN RECIPIENT IS NON-RESIDENT OR FOREIGN COMPANY

Aggregate payment or credit subject to TDS during the financial year 2016-17
If recipient is non-resident non-corporate person
If recipient is non-domestic company
Rs. 1 crore or less
More than Rs. 1 crore
Rs. 1 crore or less
More than Rs. 1 crore but not more than Rs. 10 crore
More than Rs. 10 crore
If recipient is non-resident individual/HUF/AOP/BOI/artificial judicial person
If recipient is non-resident co-operative society/firm
Nature of payment
TDS (inclusive of SC : Nil, EC : 2%, SHEC : 1%)
TDS (inclusive of SC : 15%, EC : 2%, SHEC : 1%)
TDS (inclusive of SC : 12%, EC : 2%, SHEC : 1%)
TDS (inclusive of SC :Nil, EC : 2%, SHEC : 1%)
TDS (inclusive of SC : 2%, EC : 2%, SHEC : 1%)
TDS (inclusive of SC : 5%, EC : 2%, SHEC : 1%)
Sec. 192 – Payment of salary [normal tax rates are applicable – SC : 10% (if net income exceeds Rs. 1 crore), EC : 2% and SHEC : 1%]
Sec. 192A – Payment of taxable accumulated balance of provident fund
10.3
11.845
Sec. 194B – Winnings from lottery or crossword puzzle or card game or other game of any sort
30.9
35.535
34.608
30.9
31.518
32.445
Sec. 194BB – Winnings from horse races
30.9
35.535
34.608
30.9
31.518
32.445
Sec. 194E – Payment to a non-resident foreign citizen sportsman/entertainer or non-resident sports association
20.6
23.69
23.072
20.6
21.012
21.63
Sec. 194EE – Payment in respect of deposits under National Saving Scheme, 1987
20.6 (10.3% from June 1, 2016)
23.69 (11.845% from June 1, 2016)
23.072 (11.536% from June 1, 2016)
NA
NA
NA
Sec. 194F – Re-purchase of units of MF or UTI
20.6
23.69
23.072
NA
NA
NA
Sec. 194G – Commission on sale of lottery tickets
10.3 (5.15% from June 1, 2016)
11.845 (5.9225% from June 1, 2016)
11.536 (5.768% from June 1, 2016)
10.3 (5.15% from June 1, 2016)
10.506 (5.253% from June 1, 2016)
10.815 (5.4075% from June 1, 2016)
Sec. 194LB – Payment/credit by way of interest by infrastructure debt fund
5.15
5.9225
5.768
5.15
5.253
5.4075
Sec. 194LBA(2) – Payment of the nature referred to in section 10(23FC) by business trust to unit holders (applicable from October 1, 2014)
5.15
5.9225
5.768
5.15
5.253
5.4075
Sec. 194LBA(3) – Payment of the nature referred to in section 10(23FCA) by business trust to unit holders
30.9
35.535
34.608
41.2
42.024
43.26
Sec. 194LBB – Payment in respect of units of investment fund specified in section 115UB
10.3 (30.9% from June 1, 2016)
11.845 (35.535% from June 1, 2016)
11.536 (34.608% from June 1, 2016)
10.3 (41.2% from June 1, 2016)
10.506 (42.024% from June 1, 2016)
10.815 (43.26% from June 1, 2016)
Sec. 194LBC(2) – Payment in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA (with effect from June 1, 2016)
30.9
35.535
34.608
41.2
42.024
43.26
Sec. 194LC – Payment/credit of interest by an Indian specified company on foreign currency approved loan/long-term infrastructure bonds (with effect from October 1, 2014, any bond) from outside India
5.15
5.9225
5.768
5.15
5.253
5.4075
Sec. 194LD – Interest on a rupee denominated bond of an Indian company or Government security (from June 1, 2013)
5.15
5.9225
5.768
5.15
5.253
5.4075
Sec. 195 – Payment/credit of other sum to a non-resident —
 –
 –
 –
 –
 –
 –
a. income of foreign exchange assets payable to an Indian citizen
20.6
23.69
23.072
NA
NA
NA
b. income by way of long-term capital gains referred to in section 115E or section 112(1)(c)(iii)
10.3
11.845
11.536
10.3
10.506
10.815
c. short-term capital gains under section 111A
15.45
17.7675
17.304
15.45
15.759
16.2225
d. any other long-term capital gains [not being covered by 196D section 10(33), 10(36) and 10(38)]
20.6
23.69
23.072
20.6
21.012
21.63
e. income by way of interest payable by Government/Indian concern on money borrowed or debt incurred by Government or Indian concern in foreign currency (not being interest referred to in section 194LB or 194LC or
20.6
23.69
23.072
20.6
21.012
21.63
f. royalty [see Note 5]
10.3
11.845
11.536
10.3
10.506
10.815
g. royalty [not being royalty of the nature referred to in (f) supra] [see Note 6] –
 –
 –
 –
 –
 –
 –
□ where the agreement is made after March 31, 1961 but before April 1, 1976
10.3
10.845
11.536
51.5
52.53
54.075
□ where the agreement is made on or after April 1, 1976
10.3
10.845
11.536
10.3
10.506
10.815
h. fees for technical services [see Note 7] –
 –
 –
 –
 –
 –
 –
□ where the agreement is made after February 29, 1964 but before April 1, 1976
10.3
10.845
11.536
51.5
52.53
54.075
□ where the agreement is made on or after April 1, 1976
10.3
10.845
11.536
10.3
10.506
10.815
i. any other income
30.9
35.535
34.608
41.20
42.024
43.26
Sec. 196B – Payment/credit of income from units (including long-term capital gains on transfer of such units) to an offshore fund
10.3
10.845
11.536
10.3
10.506
10.815
Sec. 196C – Payment/credit of interest of foreign currency bonds or GDR (including long-term capital gains on transfer of such bonds) (not being dividend referred to in section 115-O)
10.3
10.845
11.536
10.3
10.506
10.815
Sec. 196D – Payment/credit of income from securities (not being dividend, short-term or long-term capital gain) to Foreign Institutional Investors
20.6
23.69
23.072
20.6
21.012
21.63

Notes :

  1. Under sections 192 tax is deductible from salary. The payer shall calculate salary taxable in the hands of recipient. The amount so determined is subject to tax deduction under sections 192. Under sections 192A, tax is deductible on taxable accumulated balnce of provident fund. Under section 195, tax is deductible only if income is taxable in the hands of recipient in India. In any other case, gross payment is subject to tax deduction.
  2. In Category B, tax is deductible at the above rates or the rates specified in ADT agreements entered into by the Central Government under section 90 (whichever is lower) [ section 2(37A)(iii)].
  3. Tax is not deductible under section 192A, section 193, 194, 194A, 194DA, 194-I, or 194EE if the recipient makes a declaration in Form No. 15G/15H under the provisions of section 197A.
  4. Under section 197 the recipient can apply the Assessing Officer in Form No. 13 to get a certificate of lower/no tax deduction. This benefit is, however, not available if tax is deductible under section 192A, section 194B, 194BB, 194E, 194EE, 194F, 194-IA, 194LBA, 194LB, 194LC, 196B, 196C or 196D.
  5. Royalty payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern after March 31, 1976, where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to section 115A(1A) to the Indian concern or in respect of computer software referred to in the second proviso to section 115A(1A), to a person resident in India.
  6. Not being royalty of the nature referred to above, payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to matter included in the industrial policy, the agreement is in accordance with that policy.
  7. Fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to matter included in the industrial policy, the agreement is in accordance with that policy.

Is there any minimum amount upto which tax is not deducted?

In respect of various items liable to TDS, the Income-tax Law has prescribed a threshold limit. If the expenditure incurred/payment made during the year is below the threshold limit, then there is no requirement to deduct tax at source. Following list gives the threshold limit in respect of various items covered by TDS provisions:

S. No.ParticularSectionThreshold limist
1.No deduction of tax at source from salaries192If net taxable income is less than maximum amount which is not chargeable to tax (Rs. 2,50,000 for an individual, Rs. 3,00,000 for Senior Citizens and Rs. 5,00,000 for Super Senior Citizens)
1A.No TDS from payment of provident fund account of an employee192AIf amount paid is less than Rs. 30,000. (Rs. 50,000 w.e.f. 1-6-2016)
2.No TDS from interest paid on debentures issued by a company in which public are substantially interested. Provident interest is paid by account payee cheque to resident individual or HUF193If amount paid or payable during the financial year does not exceed Rs. 5,000
3.No TDS from interest on 8% Saving (Taxable) Bonds 2003 paid to a resident persons193If amount paid or payable during the financial year does not exceed Rs. 10,000
3A.No TDS from interest on 6.5% Gold bonds, 1977 or 7% Gold bonds, 1980 paid to resident individual193If a declaration is made that the nominal value of such bonds did not exceed Rs. 10,000 at any time during the previous year
4.No TDS from dividend paid by account payee cheque to resident persons194If amount paid or payable during the financial year does not exceed Rs. 2,500
5.No TDS from interest other than on securities paid by a banking company or co-operative bank on time deposits194AIf amount paid or payable during the financial year does not exceed Rs. 10,000
6.No TDS from interest on deposit with a post office under Senior Citizens Saving Scheme Rules, 2004194AIf amount paid or payable during the financial year does not exceed Rs. 10,000
7.No TDS from interest other than on securities (in any other case)194AIf amount paid or payable during the financial year does not exceed Rs. 5,000
8.No TDS from interest on compensation awarded by Motor Accident Claims Tribunal194AIf amount paid or payable during the financial year does not exceed Rs. 50,000
9.No TDS from Lottery / Cross Word Puzzles194BIf amount paid or payable during the financial year does not exceed Rs. 10,000
10.No TDS from winnings from horse races194BBIf amount paid or payable during the financial year does not exceed Rs. 5,000 (Rs. 10,000 w.e.f. 01/06/2016)
11.No TDS from sum paid or payable to contractor194Ca) If sum paid or payable to a contractor in a single payment does not exceed Rs. 30,000

b) If sum paid or payable to contractor in aggregate does not exceed Rs. 75,000 during the financial year (Rs. 1,00,000 w.e.f. 01/06/2016)

12.No TDS from insurance commission paid or payable during the financial year194DIf amount paid or payable during the financial year does not exceed Rs. 20,000 (Rs. 15,000 w.e.f. 01/06/2016)
12ANo TDS from sum payable under a life insurance a police (including bonus) to a resident (w.e.f. 01-10-2014) person194DAIf amount paid or payable during the financial year does not exceed Rs. 1 lakh
13.No TDS from payments made out of deposits under NSS194EEIf amount paid or payable during the financial year does not exceed Rs. 2,500
14.No TDS from commission paid on lottery tickets194GIf amount paid or payable during the financial year does not exceed Rs. 1,000 (Rs. 15,000 w.e.f. 01/06/2016)
15.No TDS from payment of commission or brokerage194HIf amount paid or payable during the financial year does not exceed Rs. 5,000 (Rs. 15,000 w.e.f. 01/06/2016). Further no tax to be deducted from commission payable by BSNL/ MTNL to their PCO Franchisees.
16.No TDS from payment of rent in respect of land &building, furniture or fittings or plant and machinery194-IIf amount paid or payable during the financial year does not exceed Rs. 1,80,000
17.No TDS from payment of consideration for purchase of an immovable property (other than agriculture land)194-IAIf amount paid or payable during the financial year does not exceed Rs. 50 Lakhs
18.No TDS from payment of professional fees, technical fees, royalty and directors’ remuneration194JIf amount paid or payable during the financial year does not exceed Rs. 30,000
19.No TDS from payment of compensation on compulsory acquisition of immovable property (other than Agricultural Land)194LAIf amount paid or payable during the financial year does not exceed Rs. 2,00,000 (Rs. 2,50,000 w.e.f. 01/06/2016)
20.Furnishing of quarterly return in respect of payment of interest (other than interest on securities) to residents without deduction of tax206AIf amount paid or payable during the financial year does not exceed:

a) Rs.10,000 where payer is banking company or co-operative society;

b) Rs.5,000 in other case

Can the payee request the payer not to deduct tax at source and to pay the amount without deduction of tax at source?

A payee can approach to the payer for non-deduction of tax at source but for that they have to furnish a declaration in Form No. 15G/15H, as the case may be, to the payer to the effect that the tax on his estimated total income of the previous year after including the income on which tax is to be deducted will be nil.

Form No. 15G is for the individual or a person (other than company or firm) and Form No. 15H is for the senior citizens.

The following assessee who is in receipt of the specific incomes can approach to the payee for non-deduction of tax at source:-

a) A resident individual who is in receipt of income as referred to in 192A, 194 or 194EE if the amount of  such income does not exceed the maximum amount which is not chargeable to income-tax.

b) Any person (other than a company or a firm) who is in receipt of income as referred to in section 193, 194A, 194DA or 194-I if the amount of such income does not exceed the maximum amount which is not chargeable to income-tax.

c) A resident senior citizen ( i.e., an individual resident in India who is of the age of sixty years or more at any time during the previous year) who is in receipt of income as referred to in section 192A, 193, 194, 194A, 194EE, or 194-I or 194DA

Alternatively, a payee who is in receipt of income referred to in section 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194LA, 194LBB, 194LBC, or 195 can apply in Form No. 13 to the assessing officer to get a certificate authorizing the payer to deduct tax at lower rate or deduct no tax as may be appropriate.

On receiving such an application, the AO may issue appropriate certificate in this regard if he is satisfied that the total income of the payee justifies the deduction of income-tax at any lower rate or nil deduction of income tax.

As per Income-tax (Ninth Amendment) Rules, 2014, Certificate for non-deduction of income-tax shall be issued directly to the person responsible for deducting the tax under an advice to the payee (i.e. who made an application for issue of such certificate).Whereas, certificate of lower deduction of income-tax shall be issued to payee itself.

 If AO has issued certificate for no deduction of tax or lower deduction of tax, as the case may be, then payer should deduct tax accordingly.

What are the consequences a deductor would face if he fails to deduct TDS or after deducting the same fails to deposit it to the Government’s account?

A deductor would face the following consequences if he fails to deduct TDS or after deducting the same fails to deposit  it to the credit of Central Government’s account:-

a) Disallowance of expenditure

As per section 40(a)(i) of the Income-tax Act, any sum (other than salary) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.

However, if tax is deducted or deposited in subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.

Similarly, as per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.

However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.

b) Levy of interest

As per section 201 of the Income-tax Act, if a deductor fails to deduct tax at source or after the deducting the same fails to deposit it to the Government’s account then he shall be deemed to be an assessee-in-default and liable to pay simple interest as follows:-

(i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and

(ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

c) Levy of Penalty

Penalty of an amount equal to tax not deducted or paid could be imposed under section 271C.

Under what circumstances a deductor would not be deemed as an assessee-in-default even after he fails to deduct TDS or after deducting the same fails to deposit it to the Government’s account?

A deductor who fails to deduct the whole or any part of the tax on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee-in-default in respect of such tax if such resident—

(i) has furnished his return of income under section 139;

(ii) has taken into account such sum for computing income in such return of income; and

(iii) has paid the tax due on the income declared by him in such return of income,

and the deductor furnishes a certificate to this effect in Form No.26A from a chartered accountant.

What to do if tax is deducted but the ultimate tax liability of the payee is nil or lower than the amount of TDS?

In such a case, the payee can claim the refund of entire/excess amount of TDS (as the case may be) by filing the return of income.

If the payer does not deduct tax at source, will the payee face any adverse consequences by means of action taken by the Income-tax Department?

It is the duty and responsibility of the payer to deduct tax at source. If the payer fails to deduct tax at source, then the payee will not have to face any adverse consequences. However, in such a case, the payee will have to discharge his tax liability. Thus, failure of the payer to deduct tax at source will not relieve the payee from payment of tax on his income.

What are the duties of the person deducting tax at source?

Following are the basic duties of the person who is liable to deduct tax at source.

  • He shall obtain Tax Deduction Account Number and quote the same in all the documents pertaining to TDS.
  • He shall deduct the tax at source at the applicable rate.
  • He shall pay the tax deducted by him at source to the credit of the Government (by the due date specified in this regard*).
  • He shall file the periodic TDS statements, i.e., TDS return (by the due date specified in this regard*).
  • He shall issue the TDS certificate to the payee in respect of tax deducted by him (by the due date specified in this regard*).

*Refer tax calendar for the due dates.

How can I know the quantum of tax deducted from my income by the payer?

To know the quantum of the tax deducted by the payer, you can ask the payer to furnish you a TDS certificate in respect of tax deducted by him. You can also check Form 26AS from your e-filing account at https://incometaxindiaefiling.gov.in

You can also use the “View Your Tax Credit” facility available at www.incometaxindia.gov.in

What to do if the TDS credit is not reflected in Form 26AS?

Non-reflection of TDS credit in Form 26AS can be due to several reasons like non-filing of TDS statement by the payer, quoting incorrect PAN of the deductee in the TDS statement filed by the payer. Thus, in case of non-reflection of TDS credit in Form 26AS, the payee has to contact the payer for ascertaining the correct reasons for non-reflection of the TDS credit in Form 26AS.

At what rate the payer will deduct tax if I do not furnish my Permanent Account Number to him?

As per section 206AA , if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax at the higher of the following rates :

  • At the rate specified in the relevant provision of the Act.
  • At the rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.

However, the provisions of section 206AA shall not apply to a non-resident, not being a company, or to a foreign company, in respect of—

i) payment of interest on long-term bonds as referred to in section 194LC; and

ii) any other payment subject to such conditions as may be prescribed.

I do not have PAN. Can I furnish Form 15G/15H for non-deduction of TDS from interest?

As per section 206AA , a declaration in Form No. 15G or Form No. 15H is not a valid declaration, if it does not contain PAN of the person making the declaration. If the declaration is without the PAN, then tax is to be deducted at higher of following rates :

  • At the rate specified in the relevant provision of the Act.
  • At the rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.
  • Would I face any adverse consequences if instead of depositing TDS in the government’s account I use it for my personal needs?

Yes, failure to remit tax deducted by me in the government’s account within stipulated time-limit would attract interest, penalty and rigorous imprisonment of upto seven years.

I have not received TDS certificate from the deductor. Can I claim TDS in my return of income?

Yes, the tax credit in your case will be reflected in your Form 26AS and, hence, you can check Form 26AS and claim the credit of the tax accordingly. However, the claim of TDS to be made in your return of income should be strictly as per the TDS credit being reflected in Form 26AS. If there is any discrepancy in the tax actually deducted and the tax credit being reflected in Form 26AS then you should intimate the same to the deductor and should reconcile the difference. The credit granted by the Income-tax Department will be as per Form 26AS.

If I buy any land/building then is there any requirement to deduct tax from the sale proceeds to be paid by me to the seller?

Yes, Finance Act, 2013 has introduced section 194-IA which provides for deduction of tax at source in case of payment of sale consideration of immovable property (other than rural agricultural land) to a resident. Section 194-IA is not applicable if the seller is a non-resident. Tax is to be deducted @ 1%. No tax is to be deducted if the consideration is below Rs. 50,00,000. If the sale consideration exceeds Rs. 50,00,000, then tax is to be deducted on the entire amount and not only on the amount exceeding Rs. 50,00,000.

If the seller is a non-resident then tax is be deducted under section 195 and not under section 194-IA. Thus, in case of purchase of property from non-resident TDS provisions of section 195 will apply and not of section 194-IA

What is the difference between PAN and TAN?

PAN stands for Permanent Account Number and TAN stands for Tax Deduction Account Number. TAN is to be obtained by the person responsible to deduct tax, i.e., the deductor. In all the documents relating to TDS and all the correspondence with the Income-tax Department relating to TDS one has to quote his TAN.

PAN cannot be used for TAN, hence, the deductor has to obtain TAN, even if he holds PAN.

However, in case of TDS on purchase of land and building (as per section 194-IA) as discussed in previous FAQ, the deductor is not required to obtain TAN and can use PAN for remitting the TDS.

Clarifications to issues some of the issues relating to TDS:

Whether capitalization of interest payable attracts TDS U/S 194A?

A) Yes, Capitalization of interest payable attracts the provisions of TDS.

TDS is to be made on interest payment regardless of the fact whether borrower uses funds for acquiring fixed assets, capital assets or stock-in-trade or for making payments of trading debts.

How TDS U/S 194B is deducted in case where gift (prize by way of winnings from lottery) is given in kind?

A) Generally we come across two types of situations in case gift is given in kind-

(i) If prize is given partly in cash and partly in kind- Tax will be deducted from cash prize with reference to the aggregate amount of the cash prize and the value of price in kind. And where in the part of cash is not sufficient to meet the liability for tax deduction in respect of whole of the winnings then payer has to collect the balance from the payee.

(ii) Where the prize is wholly in kind- The payer has to collect the liability for tax deduction from payee.

Example – Mr.” X “wins a Maruthi-Zen value of Rs.3,70,000/- on August 20, 2014, in a draw of lot organized by Maruthi Udyog. Tax liability on prize in kind comes to Rs.1,14,330/- (i.e., 30.9% of Rs.3,70,000/-) which may be recovered by the Maruthi Udyog from Mr. “X” and the same can be deposited with the government on account of tax deduction.

Whether payment made to Disk jokey (DJ) is covered under 194C or 194J, explain briefly?

A) Artistic performances and services provided by persons are covered U/S 194J. Even though a contract is entered with him, he is rendering professional services only and hence it is subjected to TDS u/s 194J.

Whether definition of profession U/S 194J is inclusive or exclusive?

Exclusive, almost all the definitions in the act which are favorable to the revenue is not inclusive in nature.

Whether TDS U/S 194J is to be made inclusive of reimbursement of expenditure or exclusive?

 TDS on reimbursement is not required to be made if separate bills are raised one is for professional fee and the other is for reimbursement of expenditure.

If a single bill is raised for the professional fee inclusive of reimbursement of expenditure, in such a case TDS is to be made on gross amount.

The above view is supported by a case law ITO v. Dr. Willmar Schwabe (2005) 3 SOT 71 (ITAT).

Where as per CBDT circular No. 715 dated 8-8-1995, TDS should be on total payment including reimbursement of expenses. But ITAT in the above decision it was held that reimbursement of expenses for which bill is separately raised did not attract the provisions of section 194J, the above circular attracts only in case bill is raised inclusive of reimbursement of expenditure.

Whether contract U/S 194C must be in writing?

A contract may be written or oral. Even implied contracts are also attract provisions of section 194C. Circular: No. 433 [F.No. 275/30/82-IT(B)], dated 25-9-1985.

Whether order of visiting cards, scribbling pads, letter heads in the name of company attracts TDS provisions?

section 194C will not apply in respect of supply of printed material as per prescribed specifications.

Whether TDS U/S 194I to be made on rent is inclusive of maintenance or exclusive?

TDS U/S 194I on maintenance charges is not required to be made if separate bills are raised one is for rent and the other is for maintenance charges .

How ever payments made towards maintenance charges attracts sec 194C.

What are the due dates for filing quarterly TDS Returns?

The due dates for filing quarterly TDS returns, both electronic and paper are as under with effect from 01.06.2016

Table

Sl. No.

Date of ending of quarter of financial year

Due date wef 01.06.2016 for Government and Non-Government Deductors.

(1)

(2)

(3)

1.

30th June31st July of the financial year

2.

30th September31st October of the financial year

3.

31st December31st January of the financial year

4.

31st March31st May of the financial year immediately following the financial year in which the deduction is made”.

What is due date for remittance of TDS certificates? (Form-16 and Form-16A)

In this regard, your attention is invited to the CBDT circulars 04/2013 dated 17.04.2013, No. 03/2011 dated 13.05.2011 and No. 01/2012 dated 09.04.2012 on the Issuance of certificate for Tax Deducted at Source in Form 16/16A as per IT Rules 1962. It is now mandatory for all deductors to issue TDS certificates after generating and downloading the same from “TDS Reconciliation Analysis and Correction Enabling System” or http://www.tdscpc.gov.in (hereinafter called TRACES Portal).

In view of above circulars, it may kindly be noted that the TDS Certificates downloaded only from TRACES Portal will be valid. Certificates issued in any other form or manner will not comply to the requirements referred in the Income-tax Act 1961 read with relevant Rules and Circulars issued in this behalf from time to time.

Please be advised that under the provisions of section 203 of the Income Tax Act, 1961 read with rule 31A, Certificate of tax deducted at source is to be furnished within fifteen (15) days from the due date for furnishing the statement of tax deducted at source. Failure to comply with the provisions of the Act will attract penalty under the provisions of section 272A of the Act, a sum of one hundred rupees for every day during which the failure continues.

Whether plant include vehicle? Whether payment of hire charges attracts Sec 194I (TDS on rent)?

A) (i) Yes, plant includes vehicle. According to Sec.43 (3) Plant includes-

  • Ships,
  • Vehicles,
  • Books,
  • Scientific apparatus and
  • Surgical equipment used for the purpose of business or profession.

But it excludes-

  • Tea bushes,
  • Livestock,
  • Buildings,
  • Furniture and fittings.

(ii) Yes, payments made towards hire charges of vehicles attracts Sec194I

W.e.f. A.Y.2007-08, rent means any payments by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for use of (either separately or together) any-

  • Land, or
  • Building (including factory building), or
  • Land appurtenant to a building (including factory building), or
  • Machinery, or
  • Plant, or
  • Equipment, or
  • Furniture, or
  • Fittings,
  • Whether or not any or all of the above are owned by the payee.

Difference between TDS and TCS?

TDS is Tax deducted at source and TCS is tax collected at source. The meaning can be understood from its definition itself. TDS is for expense and where as TCS is for revenue (Ex- scrap sale).

Difference between Form-15G and Form-15H?

Form-15G: It is declaration given by an individual or other person (not being a company or firm) to the person responsible for deducting tax at source not to deduct tax, since the total income including the current receipts will not exceed the maximum amount which is not chargeable to income tax.

Form-15H: It is declaration given by an individual who is the age of 60 years or more to the person responsible for deducting tax at source not to deduct tax, since the total income including the current receipts will not exceed the maximum amount which is not chargeable to income tax.

Whether conversion of out standing interest on loan into loan attracts TDS?

There are two situations generally we come across while dealing the above case-

(i) Interest payment to banks/financial institutions- Any interest paid or credited to the banks/financial institutions is not subject to tax deduction U/S 194(3)(iii), hence TDS is not required to be made on interest payments.

Even the interest payments does not attract TDS provisions, hence there is no question of TDS in case of capitalization of interest on loan as loan.

(ii) Interest payments to others (other than persons those who are covered under 194(3)(iii))- According to sec-194A, TDS is to be made at the time of credit or payment which ever earlier.

So the liability to deduct TDS arises at the time of credit or payment, where as the conversion of interest out standing into loan arises after a long period from the time interest liability becomes due for payment. This is due to inability of the borrower in making the interest payments.

There is a point of timing difference between the interest due and conversion of interest into loan.

Hence the liability to deduct TDS arises only at the time the interest becomes due but not at the time of conversion of interest outstanding into loan.

(Article was First Published on 18.12.2009 and updated from time to time with Inputs from FAQ on TDS on Income Tax Website. Article is last been updated on 12.07.2016 after taking into consideration amendment made by Finance Act, 2016)

Related Posts

More Under Income Tax

Posted Under

Category : Income Tax (20682)
Type : Articles (10360) Featured (3546)
Tags : FAQs (159) Section 206AA (30) tax deductions (403) tax liability (53) TDS (772)

Search Posts by Date