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CA Umesh Sharma

CA Umesh SharmaArjuna (Fictional Character): Krishna, the festival of Eid is approaching. But the Taxpayers are in a rush of filing TDS returns. As the due date of TDS returns and the auspicious festival of Eid have come one after the other, Some taxpayers are facing some difficulty. Krishna please explains what is this TDS, to whom it is applicable and what one should do for it.

Krishna (Fictional Character): Arjuna, well said. Some Taxpayers have to prepare for Eid along with TDS returns. They have to give time for TDS returns also. TDS means “Tax Deducted at Source”. TDS cast responsibility for tax deducted while paying certain expenses, etc to others. According to the Income Tax Act, TDS is required to be deducted on certain types of Transactions. TDS provisions are applicable to Companys, Partnership Firms, etc. Further, generally TDS provisions are applicable to those Individuals and HUF’s to whom Tax Audit is Applicable except for some provisions. Let’s understand this. Those taxpayers who are in business and profession needs to follow it. It is like collecting tax of another person and paying it to Govt in time.

Arjuna: Krishna, When and How is TDS is required to be deducted?

Krishna: Arjuna, TDS is required to be deducted at the time of booking or payment; whichever is earlier. It means if Advance is given and Bill is not recorded in Books even then TDS is required to be deducted. In Income Tax Act TDS Rates are prescribed on payments of Professional fees, Rent, Interest etc. Accordingly TDS is required to be deducted. TDS is not required to be deducted on Service Tax. For e.g. If bill amount is Rs 100 and Service Tax is Rs. 14 then TDS is to be deducted only on Rs 100.

Arjuna: Krishna, What does the Taxpayer have to do regarding TDS and when?

Krishna: Arjuna, firstly, Taxpayer has to get his TAN (Tax Deduction and Collection Account Number). The payment of TDS is to be made on the 7th of the next month in which TDS is deducted. Due date for making TDS payment for the month of March is 30th April. TDS returns are to be filed quarterly within 15 days from the end of respective Quarter. Due date for filling TDS return for the last Quarter of Financial Year i.e. for the period from January to March is 15th May. Now the due date for filling TDS return for the Quarter April to June is 15th of July, so Taxpayers are in quite a hurry as only two to three days are left.

Arjuna: Krishna, What are the consequences of not following the TDS provisions?

Krishna: Arjuna, If a Taxpayer has not deducted TDS then he cannot avail deduction of 30% on such Expenditure. E.g. if a Taxpayer has made a payment of Professional Fees for an Amount of Rs. 1 lakh and no TDS is deducted on it then he cannot avail the deduction for Rs 30,000/-. Further if TDS is deducted and deposited after the due date then Interest as well as penalty will be levied. For late filling of TDS returns late fees @ Rs. 200 per day will be charged. Meaning that the Taxpayer has to celebrate Eid by following the law otherwise late fees will be charged. According to the Section 201 of Income Tax Act, if a Taxpayer has given CA certificate on a certain transaction, stating that he has paid the tax on income earned, only then can the Taxpayer get relaxation from TDS.

Arjuna: Krishna, What are the important transactions on which tax is deducted?

Krishna: Arjuna, Following are the important transactions on which tax is deducted:

  • Salary: If Employee’s salary is taxable then employer will have to deduct TDS on salary.
  • Professional Fees: If professional fees Exceeds Rs 30,000 then TDS @ 10% is required to be deducted.
  • Contractor: In case of a Contract if single bill exceeds Rs. 30,000 or all bills in a year Exceeds Rs. 75,000 then TDS is required to be deducted @ of 1% in case of Individual and HUF’s and @ 2% in other case.
  • Transporter: According to the recent amendment of this year if a transporter owns more than 10 vehicles and the bill amount exceeds Rs. 30,000 or the transportation charges during the year exceeds Rs 75,000 then TDS is required to be deducted @ 1% in case of individual and HUF’s and @2% in other case. PAN is required to be mentioned if Transporter owns less than 10 Vehicles.
  • Rent: If the annual rent of a land or building exceeds Rs. 1,80,000 then TDS @ of 10% is required to be deducted.
  • Interest or Commission: If an Interest or Commission is paid to any Individual for an Amount exceeding Rs. 5,000 in the Year then TDS is required to be deducted @ 10%.
  • Transaction in Immovable Property: If any Immovable property is purchased for an Amount exceeding Rs. 50 Lakhs then TDS @ 1% is required to be deducted.

Along with above provisions, there are many minute issues and other provisions which need to studied by taxpayer.

Arjuna: Krishna, What should the Taxpayer learn from these provisions of TDS?

Krishna: Arjuna, Eid cannot be celebrated until the moon is sighted, likewise TDS credit cannot be availed if it is not reflected in Form 26AS. That is why the Taxpayer should verify PAN of deducted while filling TDS return and then mention it in the return. Otherwise complications of TDS return and revision will arise. The crescent moon of Eid that is visible to us is just a part of the Moon likewise TDS is just a part of Tax. The Taxpayer whos TDS is deducted cannot just sit back and relax by paying only the TDS; he also has to pay advance tax and self-assessment tax. Thus on the occasion of Eid, taxman may say to taxpayer that “ Bhaijaan, TDS se kar lo Pehchaan”, Tax payment karne se banni rahegi shaan.” Dear readers, Enjoy knowledge sharing. Let’s Celebrate Eid with love and peace.

Author Bio

1. Central Council Member of ICAI. 2. Vice-Chairman of WIRC of ICAI for the period 2015-2021. 3. Youngest Chairman of Aurangabad Branch of WIRC of ICAI in 2002. 4. Author of Popular Tax articles series based on Krishna and Arjuna conversation i.e “KARNEETI” published in Lokmat on every View Full Profile

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  1. Jitendra says:

    I agree and happy that author or writer, consultant is making an attempt to advice clearly the provision of law,By help of Fictional Character. Respected sir is explaining the provision of law is very good and appreciated. Krishna and Arjuna samvad or discussion is GITA, Bhagwad Gita. Please do not try to compare GITA samwad with these laws samwad. We must respect the names of GODs and should not use in matter for sake of simplicity and understanding. The impact of this may not be good and this is the fact of the society. As you know that provision of law and social morality and our tradition discussion, comparison may not end. but this is my humble request not to use the words KRISHNA AND ARJUNA in these discussion.

  2. Tarunkumar D Trivedi says:

    Very excellent ant intelligent writing. Present recommendation on tax reforms is, that department should explain law in FAQ forms. But without waiting for department you have commenced tax payers, education. Thanks a lot and carryon.

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June 2024