Tax Deducted at Source (TDS): FAQs

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.

Q.1 What is tax deducted at source?

Ans: 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.

Q.2 What are the payments covered under the TDS mechanism and the rates for deduction of tax at source?

Ans: 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 2018-19 are as follows—

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

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 balance 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 or credit (without GST, if GST is shown separately) 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, with effect from 1/6/2017 194D, 194DA, 194-I, or 194EE if the recipient makes a declaration in Form No. 15G/15H under the provisions of section 197A.

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.

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.

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.

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.

Q. 3 Is there any minimum amount upto which tax is not deducted?

Ans: The Income-tax Act has prescribed a different threshold limit for deduction of tax at source under various sections. If the expenditure incurred/payment made during the year is below the threshold limit, then there is no requirement to deduct tax at source.

The threshold limit for deduction of tax at source under various sections is as follows:

Q. 4 Can the payee request the payer not to deduct tax at source and to pay the amount without deduction of tax at source?

Ans: 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.

Q.5 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?

Ans: 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.

As per Section 58(1A) (as amended with effect from the assessment year 2018-19), the provisions of section 40(a)(ia) and 40(a)(iia) shall also apply in computing the income chargeable under the head “Income from other sources”.

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.

Q.6 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?

Ans: 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.

Q.7 What to do if tax is deducted but the ultimate tax liability of the payee is nil or lower than the amount of TDS?

Ans: 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.

Q.8 What are the duties of the person deducting tax at source?

Ans: 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.

Q.9 How can I know the quantum of tax deducted from my income by the payer?

Ans: 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

Q.10 What to do if the TDS credit is not reflected in Form 26AS?

Ans: 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.

Q.11 At what rate the payer will deduct tax if I do not furnish my Permanent Account Number to him?

Ans: 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%.

Q.12 However, the provisions of section 206AA shall not apply in the following cases:-

Ans: 1. In respect of payment of interest on long-term bonds to a non-resident under section 194LC.

2. Where deductee being a non-resident or a foreign company, shall in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset, furnish the following details and documents to the deductor, namely:—

i. name, e-mail id, contact number;

ii. address in the country or specified territory outside India of which the deductee is a resident;

iii. a certificate of his being resident in any country or specified territory outside India from the Government of that country or specified territory if the law of that country or specified territory provides for issuance of such certificate;

iv. Tax Identification Number of the deductee in the country or specified territory of his residence and in case no such number is available, then a unique number on the basis of which the deductee is identified by the Government of that country or the specified territory of which he claims to be a resident.

Q.13 I do not have PAN. Can I furnish Form 15G/15H for non-deduction of TDS from interest?

Ans: 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%.

Q.14 Would I face any adverse consequences if instead of depositing TDS in the government’s account I use it for my personal needs?

Ans: 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.

Q.15 I have not received TDS certificate from the deductor. Can I claim TDS in my return of income?

Ans: 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.

Q.16 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?

Ans: 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

Q.17 What is the difference between PAN and TAN?

Ans: 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.

Q.18 What is the amount of TDS if property belongs to NRI?

Ans: Yes, as per the rates prescribed u/s 195. TDS is to be deducted on capital gain income. In case you have any doubt regarding the amount on which TDS is to be made, you may file an application with the officer handling non-resident taxation who will pass an order determining the TDS to be made. Alternatively, if the recipient feels that the TDS is more he may file an application with his Assessing Officer for non-deduction.

Q.19 Whether limit of Rs. 50,000 per month under section 194-IB is applicable to each of the co-owners separately in case rent is paid individually to co-owners?

Ans: As per the section 194IB, an individual or HUF whose books of account are not liable for audit u/s 44AB, paying rent to a resident exceeding Rs. 50,000 per month or part of the month for land or building, liable to deduct tax @ 5% at the time of credit of rent, for the last month of the previous year or last month of the tenancy in case property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by cheque or draft or any other mode, whichever is earlier.

Therefore, limit of Rs. 50,000 is applicable for each co-owner separately, if rent is paid to co-owners of the property.

For Example: Mr. A is making payment of rent of Rs. 1,00,000 per month to Mr. B &Mr. C who are co-owners of the property, where in rent paid to Mr. B is Rs. 70,000 and to Mr. C is Rs. 30,000 ; A is liable to deduct tax @ 5% under section 194IB on rent paid to Mr. B as the amount of rent paid exceeds Rs. 50,000 and is not required to deduct tax on rent paid to Mr. C as the amount of rent paid does not exceed Rs. 50,000.

Q.20 Who is required to file Form 15CA ?

Ans: As per Rule 37BB, any person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum chargeable to tax under the provisions of Income tax Act, 1961, shall furnish such information in Form 15CA and Form 15CB:

• In case the payment or the aggregate of such payments made during the financial year does not exceed Rs. 5 lakh rupees, such information is to be furnished in Part A of Form No.15CA.
• In case the payment exceeds Rs. 5 lakh such information is required to be furnished in Part B of Form No. 15CA after obtaining a certificate from the Assessing Officer under section 197; or an order from the Assessing Officer under sub-section (2) or sub-section (3) of section 195.
• In case the payment exceeds Rs. 5 lakh such information is required to be furnished in Part C of Form 15CA after obtaining certificate in Form No.15CB from an accountant as defined in the Explanation to sub-section (2) of section 288.
• In case the payment other than the payment referred in sub-rule (3) of Rule 37BB which is not chargeable to tax under the provisions of Income tax Act,1961, such information is required to be furnished in Part D of Form No. 15CA.

Q.21 When Form 15CA is not required to be furnished?

Ans: In accordance with sub-rule (3) of Rule 37BB, Form 15CA and Form 15CB are not required to be furnished in case of following transactions:

• Remittance is made by an individual and it does not require prior approval of the Reserve Bank of India as per the provisions of section 5 of the Foreign Exchange Management Act, 1999 (42 of 1999), read with Schedule III to the Foreign Exchange (Current Account Transaction) Rules, 2000; or
• Remittance is of the nature specified as follows:

Q.22 Whether TCS can be collected on amount inclusive of GST?

Ans: As per section 206C (1) every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer. Hence, amount debited to the account of buyer or payment shall be received by seller inclusive of VAT/ excise/GST. TCS to be collected on inclusive of GST.

Q.23 How much TDS will be deducted in case of payment of Remuneration to company’s director?

Ans: Sec 194J levies TDS on technical and professional services. As per the provisions of the Companies Act, director of the company is also a manager and thus, a technical personnel. As per Section 194J(1)(ba), any payment made to director in the nature of sitting fees, remuneration or any other sum other than those on which tax deductible under section 192 is to be considered for deduction of tax at source @ 10% under section 194J. Further, there is no threshold limit for deduction of tax at source.

Q.24 What is the procedure of filing Form 15CA?

Ans: Form 15CA shall be furnished electronically online. Procedure for filing of Form 15CA at e-filing portal is given below-

Step 1 – Log on to ” E-filing ‘ portal at https://incometaxindiaefiling.gov.in/ by assessee by using his credentials

Step 2 – Go to the ” E-file” menu located at the upper side of the page and click on Income Tax Forms.

Step 3 – PAN of the assessee will be pre-filled. Select “Form 15CA” from drop down list in “Form Name” from drop down list.

Step 4 – Select relevant part from “Select relevant part from the down “

Step 5 – Fill Form 15CA of selected part and click on “submit” button.

Step 6- Fill up the verification part of relevant part of Form 15CA.

Note- It is mandatory to upload Form 15CB prior to filling Part C of Form 15CA. To fill up the details in Part C of Form 15CA, the acknowledgment number of e-Filed Form 15CB will be required.

If Form is submitted successfully, a message “successfully submitted” will appear on screen and a confirmation e-mail will be sent to the registered email account.

Before starting the filling the Form 15CA, please refer to instructions available at https://portal.incometaxindiaefiling.gov.in/e-Filing/OnlineForms/CommonFormsLink.htm

Q.25 What is the procedure of filing Form 15CB?

Ans: To file Form 15CB, taxpayer is required to Add CA in his account. CA can be added by using the following steps:

• Firstly Login to e-Filing Portal, click on “My Account” tab and select “My CA” option.
• Enter the “Membership Number” of the CA, select 15CB from “Form Name” and click on “Submit” button.

Once CA has been entered by the taxpayer, afterwards CA can file Form 15CB in behalf of the taxpayer.

However, the C.A. must be registered as C.A. on his e-filing portal. Process for Registration as Chartered Accountant is as follows:

• User can registered as “Chartered Accountant” in the e-filing portal. If not already registered, user is required to click on “Register Yourself” in the homepage.
• Select “Chartered Accountants” from “Tax Professional” and click on “Continue“.
• Enter the mandatory details and complete the registration process.

Process of filing Form 15CB by Chartered Accountants is as follows:

• Go to http://incometaxindiaefiling.gov.in/ and click on “Downloads” tab.
• Select “Forms (Other than ITR)” and then download either Excel or Java Utility as per your own convenience.
• Prepare the XML file using the above utility.
• Login to e-Filing portal account and click on “e-File” tab and select “Upload Form” from the drop down menu.
• After selecting “Upload Form“, enter PAN/TAN of the assessee, PAN of C.A., select “Form Name” as “15CB“, select “Filing Type” as “Original”. Click on submit once you have done and you will receive a success message and afterwards an email will be sent to your registered email ID.

Note: DSC is Mandatory to file Form 15CB.

For details please refer to general instruction of java utility of Form 15CB.

TDS on Rent under section 194I of Income Tax Act, 1961