INTRODUCTION

1. The Indian Income Tax Act provides for chargeabiity of tax on the total income of a person on an annual basis. The quantum of tax determined as per the statutory provisions is payable as :

a)       Advance Tax

b)       Self Assessment Tax

c)       Tax Deducted at Source (TDS)

d)       Tax Collected at Source

e) Tax on Regular Assessment

Tax deducted at source (TDS), as the very name implies aims at collection of revenue at the very source of income. It is essentially an indirect method of collecting tax which combines the concepts of “pay as you earn” and “collect as it is being earned.” Its significance to the government lies in the fact that it prepones the collection of tax, ensures a regular source of revenue, provides for a greater reach and wider base for tax. At the same time, to the tax payer, it distributes the incidence of tax and provides for a simple and convenient mode of payment.

The concept of TDS requires that the person on whom responsibility has been cast, is to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The deducted sum is required to be deposited to the credit of the Central Government. The recipient from whose income tax has been deducted at source, gets the credit of the amount deducted in his personal assessment on the basis of the certificate issued by the deductor.

While the statute provides for deduction of tax at source on a variety of payments of different nature, in this booklet, an attempt is being made to discuss various provisions relevant only to the salaried class of taxpayers.

OVER VIEW OF THE TDS PROVISIONS

2.1 Introduction:

Section 192 of the I.T. Act, 1961 provides that every person responsible for paying any income which is chargeable under the head ‘salary’, shall deduct income tax on the estimated income of the assessee under the head salaries. The tax is required to be calculated at the average rate of income tax as computed on the basis of the rates in force. The deduction is to be made at the time of the actual payment. However, no tax is required to be deducted at source, unless the estimated salary income exceeds the maximum amount not chargeable to tax applicable in case of an individual during the relevant financial year. The tax once deducted is required to be deposited in government account and a certificate of deduction of tax at source (also referred as Form No.16) is to be issued to the employee. This certificate is to be furnished by the employee with his income tax return after which he gets the credit of the TDS in his personal income tax assessment. Finally, the employer/deductor is required to prepare and file quarterly statements in form No.24Q with the Income-tax Department.

2.2 Who is to deduct tax

The statute requires deduction of tax at source from the income under the head salary. As such the existence of “employer-employee” relationship is the “sine-qua-non” for taxing a particular receipt under the head salaries. Such a relationship is said to exist when the employee not only works under the direct control and supervision of his employer but also is subject to the right of the employer to control the manner in which he carries out the instructions. Thus the law essentially requires the deduction of tax when;

(a)     Payment is made by the employer to the employee.

(b)      The payment is in the nature of salary and

(c) The income under the head salaries is above the maximum amount not chargeable to tax.

For the various categories of employers, the persons responsible for making payment under the head salaries and for deduction of tax are as below:

In the case of Persons responsible for making payment
Central/State Government/P.S.U The designated drawing & disbursing officers.
Private & Public Companies The company itself as also the principal officer thereof.
Firm The managing partners/partner of the firm.
HUF Karta of the HUF
Proprietorship concern The proprietor of the said concern.
Trusts Managing trustees
thereof.

In case of a company, it is to be noted, that though the company may designate an officer /employee to make payments on the behalf of the company, still the statutory responsibility to deduct tax at source rests with the company and its principal officer thereof. In respect of companies, the I.T.Act Section 2(35) has specified principal officer to mean:

(a)      Secretary, Treasurer, Manager or agent of the company.

(b)      Any person connected with the management or administration of the company or upon whom the assessing officer has served the notice of his intention to treat him as a principal officer.

As per sub section 4 of Sec 192, the trustees of a recognised provident fund are required to deduct tax at source at the time of making payment of the accumulated balance due to an employee. The TDS is to be made in a case where sub-rule(1) of rule 9 of part – A of Fourth Schedule of the Act applies and the deduction is to be made as per rule 10 of part A of Fourth Schedule.

2.3 TDS on simultaneous employment with more than one employer or on change of employment

Sub-Section 2 of Section 192 provides that where a person is simultaneously employed with more than one employer, he may furnish the particulars of salary payments and TDS to the employer of his choice. Similarly, on change of employment the particulars of salary and TDS of earlier employment may be furnished to the subsequent employer. These particulars are to be furnished in Form 12 B in accordance with Rule 26A of the I.T.Rules. The employer on receipt of such information is required to take into account the particulars of salary and TDS and then deduct tax at source considering the aggregate salary from all sources.

2.4 When is tax to be deducted

Section 192 casts the responsibility on the employer, of tax deduction at source, at the time of actual payment of salary to the employee. Unlike the provisions of TDS, pertaining to payments other than salary where the obligation to deduct tax arises at the time of credit or payment, which ever is earlier, the responsibility to deduct tax from salaries arises only at the time of payment. Thus, when advance salary and arrears of salary has been paid, the employer has to take the same into account while computing the tax deductible.

2.5 Rate of deduction of tax

As per Section 192, the employer is required to deduct tax at source on the amount payable at the average rate of income tax. This is to be computed on the basis of rates in force for the financial year in which payment is made.

The Finance Act of each financial year specifies the rates in force for deduction of tax at source. For F.Y.2011-2012 rate of TDS is specified in Part-3, Schedule of Finance Act 2011. The same is as follows :-

I In case of individual & HUF (other than II , III and IV below) :-

(i)   Where the total income does not exceed Rs. 1,80,000/-. Nil
(ii)         Where the total income exceeds Rs. 1,80,000/- but does not exceed Rs.5,00,000/-. 10% of the amount in excess of Rs.1,80,000/-.
(iii)       Where the total income exceeds Rs.5,00,000/- but does not exceed Rs.8,00,000/-. Rs.32,000/- + 20% of the amount by which total income exceeds Rs.5,00,000/-.
(iv)     Where the total income exceeds Rs.8,00,000/-. Rs.92,000/- + 30% of the amount by which total income exceeds Rs.8,00,000/-.

 II In case of individual being a woman resident in India and below 60 years at any time during the previous year :-

Where the total income does not exceed Rs. 1,90,000/-. Nil
Where total income exceeds Rs.1,90,000/- but does not exceed Rs.5,00,000/-. 10% of the amount by which the total income exceeds Rs.1,90,000/-.
(iii)     Where the total income exceeds Rs.5,00,000/- but does not exceed Rs.8,00,000/-. Rs.3 1,000/- + 20% of the amount by which total income exceeds Rs.5,00,000/-.
(iv)  Where the total income exceeds Rs.8,00,000/-. Rs.91,000/- + 30% of the amount by which the total income exceeds Rs.8,00,000/-.

 

III In case of an individual resident who is of the age of 60 years or more but less then 80 Years at any time during the previous year :-

Where the total income does not exceed Rs.2,40,000/- Nil
Where the total income exceeds Rs.2,40,000/- but does not exceed Rs.5,00,000/- 10% of the amount by which the total income exceeds Rs.2,40,000/-
Where the total income exceeds Rs.5,00,000/- but does not exceed Rs.8,00,000/- Rs.26,000/- + 20% of the amount by which the total income exceeds Rs.5,00,000/-
Where the total income exceeds Rs.8,00,000/- Rs.86,000/- + 30% of the amount by which the total income exceeds Rs.8,00,000/-

IV In case of an individual resident who is of the age of 80 years or more  at any time during the previous year :-

Where the total income does not exceed Rs.5,00,000/- Nil
Where the total income exceeds Rs.5,00,000/- but does not exceed Rs.8,00,000/- Rs.26,000/- + 20% of the amount by which the total income exceeds Rs.5,00,000/-
Where the total income exceeds Rs.8,00,000/- Rs.86,000/- + 30% of the amount by which the total income exceeds Rs.8,00,000/-

 2.5.1 Surcharge and cess on tax

The amount of income tax computed as per rates specified above is to be reduced by the amount of rebate of income tax calculated under chapter VIII A of the I.T. Act 1961 (in case of individuals, HUF, AOP & BOI). The income tax so arrived at is to be increased by a surcharge calculated at the rate of 10% on such income tax. Uptill the Finance Act 2008 surcharge was levied only when the total income exceeded Rs. 10,00,00/-. However no surcharge is to be levied as per the Finance Act, 2011 in case of individuals HUF, AOP & BOI even where the total income exceeded Rs. 10,00,000/-.

The amount of income tax (as increased by surcharge, if any), shall be further increased by an Education and higher Education Cess of 3% on the income tax and surcharge, which is payable by Resident as well as Non-Resident assessees. The deduction of tax at source is then to be made after also taking into account the Cesson tax so calculated.

2.5.2 Average rate of deduction

The statute enjoins the employer to compute the tax liability of the employee on the basis of the rates in force and to deduct the tax at the average rate computed on the basis of the same. Thus, the employer is required to compute at the beginning of the financial year, the total salary income payable to an employee during the financial year. Further, the employer should also take into account any other income as reported by the employee. After considering the incomes exempt, deductions and relief, the tax liability of the employee should be determined on the basis of the rates in force for the financial year. Every month, 1/12 of this net tax liability as computed above is required to be deducted.

2.5.3 Payment of tax by employer on non monetary perquisite

W.e.f. 1.6.2002 the employer has an option to pay the tax on the non-monetary perquisite given to the employee. Sections 192( 1A) & 192 (1B) of the Income Tax Act, enable the employer at his option, to make payment of the entire tax or a part of the tax due on non monetary perquisites. The tax payable is to be determined at the average rate of the income tax computed on the basis of rates in force and the payment will have to be made when such tax was otherwise deductible, i.e. at the time of payment of income chargeable under the head salaries, to the employee. Further, the tax so paid shall be deemed to be the TDS made from the salary of the employee. However as per proviso to section 198, this tax paid will not be deemed to be income of the employee.

2.5.4 Revision of estimate of tax liability

As per Sub-Section 3 of Section 192 a deductor can make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in the subsequent deductions. For instance, in the case where payment of advance salary, arrears of salary, or increase of salary, commission, bonus, etc. has taken place, the tax liability of the employee will increase. Deduction of tax at source is accordingly required to be increased. Similarly, if the employee makes certain investments which qualify for deduction or rebate and furnishes the required proof which reduces the tax liability, then the employer can accordingly reduce the quantum of TDS.

2.5.5 Deduction at a lower rate or non-deduction of tax

Section 197 enables a tax payer to make an application to his Assessing Officer for deduction of tax at a lower rate or non deduction of tax. The application has to be made in Form No.13 (vide Rule 28(1)). If the Assessing Officer is satisfied that the total income of a tax payer justifies the deduction of income tax at any lower rate or no deduction of income tax, he may issue a certificate in Form No. 15AA (relevant Rule 28AA) providing for deduction of tax at lower rate or no deduction of tax.

The certificate is valid only for the assessment year as specified therein. On expiry of the validity period, a fresh application may be made. A certificate is issued directly to the person responsible for deducting tax/DDO with a copy to the applicant. In absence of such a certificate from the employee, the employer should deduct income tax on salary payable at normal rates (Circular No.147 dt.28- 10-1974).

2.5.6 TDS where the salary paid is net of tax

Where the employee enters into an agreement or an arrangement as per which the tax chargeable on the income is borne by the employer then for the purpose of deduction of tax, the income is to be increased to such an amount as would, after deduction of tax thereon be equal to the net amount payable as per the agreement or arrangement (Section 195A). However, this provision is not applicable where the employer has made payment of tax on non-monetary perquisites as provided in section 192(1A).

2.5.7 Refund of TDS

In case of excess deduction of tax at source, claim of refund of such excess TDS can be made by the deductor. The excess amount is refundable as per procedure laid down for refund of TDS vide Circular No.285 dt.21-10-1980.

The difference between the actual payment made by the deductor and the tax deducted at source or deductible, whichever is more will be treated as the excess payment made. This amount is to be first adjusted against any existing tax liability under any of the Direct Tax Acts. After meeting such liability, the balance amount is to be refunded.

2.6 Deposit of tax in Government account

As per Section 200 of the IT Act, the person responsible for deducting tax from payment made to an employee is also required to deposit the tax so deducted in Government account within the prescribed time and in the manner prescribed vide Rule 30. Vide I.T. 6th Amendment Rules 2010 (notification dt. 31/5/2010 the Rule 30 has been amended and the following is now provided for deductions made w.e.f. 1.4.2010 :

2.6.1 Time limit for deposit

1.      Where deduction is made by or on behalf of the Government, without the production of challan, the payment has to be made on the day of tax deduction itself.
2.        In other cases of deposition by the Government vide a challan, the payment has to be made within seven days (7 days) of the last day of the month in which the deduction is made or income-tax is due under section 192(1A).
3.        In case of a deductor other than Government, the payment is to be made before 30th day of April where income or amount is credited or paid in the month of March.
4.        In other cases of deduction by non-government deductors, payment has to be made within seven days from the end of month in which deduction is made or Income-tax is due under sub-section 1-A of Sec. 192.5. However, vide Rule 30(B), the Assessing Officer can, in special cases with the prior approval of joint Commissioner of Income Tax, allow payment of TDS quarterly, i.e. by 7th of July for the quarter ending 30th of June, by 7th of October for the quarter ending 30th September, by 7th of January for the quarter ending 30th of December and by 30th of April for the quarter ending 31st of March.

2.6.2 Place of deposit of tax

Tax has to be deposited to the credit of the Central Government in any of the branches of RBI, SBI or any authorised bank. The payment can be made either in cheque or cash or draft drawn on local banks. In case of payment made by cheque, the date of encashment of the cheque will be the date of payment of tax (Circular No.141 dt.23-7-1974).

It has been clarified vide circular No.306 dt. 19-6-1961 that payment of tax deducted at source should be made at the place where the DDO/the person responsible for TDS is required to file annual/periodical statement of TDS.

2.6.3 Challan of Payment

Where a deduction is made by or on behalf of the Government, the amount is to be credited in the manner specified above without the use of challan (See Rule 30). In case of other deductors, the deposition of TDS is to be made vide challan No. ITNS 281. The deductor must ensure that the details like employer’s name and address, PAN, TAN, the Assessing Officer having jurisdiction, the amount of tax and surcharge and cess, the date of payment, the salary from which TDS has been done and the tax which is being paid, are correctly filled. Where TDS is credited to Government account through book adjustments, care should be taken by the DDOs to ensure that the correct amount of income tax is reflected therein.

For deductions made after 1 .4.2010 the I.T. 6th Amendment rules 2010 (notification dt. 31/5/2010) provide the following (Rule 30(4)).

1. In case of deduction by the office of a Government without the production of challan, the pay and Accounts officer or the Treasury officer or the chequeDrawing and Disbursing officer, to whom the deductor reports the deduction and who is responsible for crediting the sum to the Central Government, is required to;

(a) Submit a statement in form 24G within ten day from the end of the month, in respect of the tax deducted and reported to him for that month. This statement is to be furnished to an agency authorized by DGIT (Systems).

(b) Such agency will generate a number called Book Identification Number in respect of tax deducted and credited. This number is to be intimated to the respective deductors by the PAO/DDO/Treasury officers.

2.     For the aforesaid purpose the responsibility of specifying the procedures format, and standard for ensuring secure capture and a transmission of data and for day to day administration will be of DGIT (Systems).
3.     Where tax has been deposited accompanied by an Income-tax challan the amount tax deducted or collected shall be deposited to the crdit of the Central Government by remitting it within the time specified in above (Rule 30).2.6.4 Electronic payment of taxes

An optional scheme of electronic payment of taxes for income-tax was introduced in 2004. However with a view to expand the scope of electronic payment of taxes, the scheme of electronic payment of taxes has been made mandatory (vide notification No. 34/2008 dt. 13.3.2008 of CBDT) for the following categories of tax-payers (referred in rule 125(1)).

(i)       All corporate assessees;

(ii)     All assessees (other than company) to whomprovisions of section 44AB of the Income Tax Act are applicable.

2. The scheme of mandatory electronic payment of taxes for income-tax payers is to be made applicable from 1st April, 2008 and shall also be applicable to payment of taxes to Government account where tax has been deducted at source.

3. The Income-tax (6th Amendment Rules) 2010 (Notification dt. 31/5/2010 provides that for category of assessees as mentioned above who are compulsorily to make electronic payment of TDS; such payment is to be remitted into R.B.I., S.B.I. or any autorized bank accompanied by an electronic Income-tax challan. The electronic remittance can be made :

(a)     By internet banking facility of RBI, SBI or the authorized Bank.

(b)     By Debit Card.

However for payments deducted prior to 1/4/2010 the provisions of rule prior to this amendment will apply.

2.7 Issue of T.D.S. Certificate

2.7.1 Every person deducting tax at source is required as per Section 203 to furnish a certificate to the payee to the effect that tax has been deducted along with certain other particulars. This certificate is usually called the TDS certificate. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. In case of employees receiving salary income including pension, the certificate has to be issued in form No.16. The certificate is to be issued in the deductor’s own stationery. However, there is no obligation to issue TDS certificate in case of tax at source is not deducted /deductible by virtue of claims of exemptions/ deductions.

• Vide Income-tax (6th Amendment) Rules 2010, a new Form No. 16 has been notified which will be applicable for tax deductions after 1/4/2010.

  • The deductor is also to provide relevant information of tax deduction and deposition vide book entry or challan vide Annexure A and Annexure B of this new form 16.
  • Besides the deductor is also required to specify the following in Form No. 16

(a)     Valid Permanent account number (PAN) of the deductee;

(b)     valid tax deduction and collection account number (TAN) of the deductor;

(c)     (i) book identification number or numbers where deposit of tax deducted is without production of challan in case of an office of the Government;

Challan identification number or numbers in case of payment through bank.

(d)     (i) receipt number of the relevant quarterly statement of tax deducted at source which is furnished in accordance with the provisions of rule 31A;

(ii) receipt numbers of all the relevant quarterly statements in case the statement referred to in clause(i) is for tax deducted at source from income chargeable under the head “Salaries”.

2.7.2 Time limit for issue of TDS certificate

Subsequent to the Income-tax(6th amendment) for deduction made after 1/4/2010, such a certificate is now to be issued by 31stMay of the Financial Year(F.Y.) immediately following the F.Y. in which income was paid and tax deducted. For deductions made prior to 1/4/20 10 the Form 16 was to be issued by the 30th of April.

In case of employment by more than one employer, Form 16 pertaining to the respective period of employment may be issued by each employer or the employee may his option report the income and deduction to the last employer and Form 16 may be issued by the last employer.

2.7.3 Statement of deduction of tax-Form 26AS

As per section 203AA the prescribed income-tax authority or the person authorized by the such authority (as referred in section 200(3)) is required to deliver to the person from whose income the tax has tax has been deducted/paid a statement of deduction of tax in the prescribed form. Such statement as per rule 3 1AB is to be furnished in form no 26AS by the 31st July following the Financial Year during which the taxes were deducted/paid (also refer Notification no. 928 E dt. 30.6.2005 of CBDT)

2.7.4 Furnishing of details of perquisites and profits in lieu of salary

As per section 192(2C) every person responsible for paying any income chargeable under the head salaries, shall furnish to the employee a statement giving correct and complete particulars of perquisites or profits in lieu of salary, provided to him and the value thereof in :- [Relevant rule 264 (2)(b)]

(a)     Relevant columns provided in Form No. 16, if the amount of salary paid or payable to the employee is not more than one lakh and fifty thousand rupees, or

(b)   In Form No. 12BA :- if the amount of salary paid or payable to the employee is more than one lakh and fifty thousand rupees (as per notification no. S.O. 1062 dt. 04.10.2002 proforma for Form 12BA has been provided).

Where the employer has paid any tax on non-monetary perquisite on behalf of the employee as provided in section 192(1A), then he must furnish to the employee concerned a certificate to the effect that tax has been paid to the Central Government and specify the amount so paid, the rate at which tax has been paid and other particulars in the amended Form 16.

2.7.5 Issue of duplicate certificate

Where the original TDS certificate is lost, the employee can approach the employer for issue of a duplicate TDS certificate. The employer may issue a duplicate cetificate on a plain paper giving the necessary details as contained in Form No. 16 (Relevant Rule-31(4)). However such a certificate has to be certified as duplicate by the deductor. Further the assessing officer before giving credit of the tax on basis of duplicate certificate is required to get payment certified from the assessing officer concerned and also obtain an indemnity bond from the assessee employee.

2.7.6 Credit of the tax where TDS is by book adjustments

In case of deduction of tax at source by any department of the Central Government, payment of the same to the credit of the Income Tax Department by means of book adjustments is permitted. In such a case, in the certificate of TDS (Form No. 16) issued to the employee the DDO must specify that credit of TDS has been afforded to the Income tax department by book adjustment and also the date of such book adjustment. Where the aforesaid details have been given in TDS certificate, the assessing officer should accept them and give credit of the TDS in the personal assessment of the employee. In such cases, the TDS certificate should not be rejected by the assessing officer if they do not contain details like Challan No. or date of payment in Government account. However, the assessing officer is free to verify the genuineness of such certificate by corresponding with the DDO’s of Central Government department. The DDOs are bound to offer facility of examination of their payment to Central Government (Circular No. 749 dt.27-12-1996).

In case of credit of tax by book adjustments, for tax deductions made after 1/4/2010, the provision as incorporated vide I.T. (6th Amendment) Rules notification dt. 31/5/2010 will be applicable, these are;

  • The office of the Government is to give credit to the Central Government on the same day where tax is paid without production of challan/by book adjustment (Rule 30(1)).
  • The Pay and Accounts offices/DDO/Treasury officer who is crediting the sum to Central Government is to submit a statement in form 24G (Rule 31(4) (a)).
  • The PAO/DDO/Treasury officer is also to intimate Book Identification Number to each of Deductors (Rule 31(4)(b)).
  • Along with Form 16 details of Tax deducted and deposited by Book entry in respect of the employee has to be provided in Annexure A.

2.7.7 Issue of TDS certificates by way of digital signatures

As per circular No. 2/2007 dt.2 1.5.2007, the deductors may at their option, in respect of the tax to be deducted at source from income chargeable under the head Salaries, use their digital signatures to authenticate the certificates of deduction of tax at source in form No.16. However the deductors will have to ensure the following;

(a)     that TDS certificates in Form No. 16 bearing digital signatures have a control No. with log to be maintained by the employer (deductor).

(b)   thedeductor is to ensure that its TAN, PAN of the employee, Book Indentification Number/Challan Identification No. are correctly mentioned in such Form No. 16 issued with digital signatures.

(c)      that once the certificates are digitally signed, the contents of the certificates are not amenable to change by anyone.

The income-tax authorities are required treat such certificate with digital signatures as a certificate issued in accordance with rule 31 of the income-tax Rules, 1962. (Circular No. 2/2007, dated 21.5.2007).

RETURN/STATEMENTS OF T.D.S. 2.8 Return of TDS

A return of TDS is a comprehensive statement containing details of salary paid and taxes deducted thereon from the employees along with other prescribed details. Earlier, every deductor, for deductions made prior to 01.04.2005 was required as per the provisions of Section 206 (read with Rule 36A and 37) to prepare and deliver an annual return of tax deducted at source in form no. 24. Such a return was to be prepared and signed by the following – (a) the DDO or the prescribed officer in case of a government office; (b) the principal officer in the case of every company; (c) the managing partner/ partners in the case of a firm;

(d)   managing trustee in the case of trust; (e) Karta in the case of HUF; (f) prescribed person in the case of a local authority/public body/association. However w.e.f. 01.04.2006 there is no requirement to file annual returns and instead Quarterly statements of T.D.S. are to be submitted in form 24Q by the deductors specified above. The quarterly statement of the last quarter in form 24Q as amended by notification no. 119 dated 12.05.2006, S.O. 704(E), shall be treated as annual return of T.D.S.

2.8.1 Quarterly statement of TDS

As per sec.200(3), every person responsible for deducting tax, is required to file statements of TDS for such period and in such form as may be prescribed. Further it is to be delivered to the specified Income-tax authority within a prescribed time.

As per Rule 3 1A( 1) such statements have to be furnished quarterly i.e for the quarter ending on 30th June, 30th September, 3 1st December & 3 1st March in each financial year which is to be delivered to the prescribed Income-tax authority [Director General of Income tax (System)] or the persons authorized by such authority [M/s National Securities Depositories Ltd. (NSDL)].

This statement is to be filed in Form No.-24Q (relevant rule 3 1A). It must be furnished on or before the 15th July, the 15th October and the 15th January in respect of the first three quarters of the financial year and on or before the 15th June following the last quarter of the financial year (also refer Notification no. 928(E) dt.30.6.2005 of CBDT). However vide I.T. (6th Amendment Rules, 2010) the date of filing of statement for last quarter has been changed to 15th of May immediately follwing the financial year.

With respect to the quarterly statements of TDS, the following points are noteworthy : –

  • Every deductor is required to file the quarterly statement of TDS in form No. 24Q for each quarter as per the dates specified above.
  • The statement may be furnished in any of the following manners namely :

(a)  Paper form

(b) Electronically in accordance with procedures, formats and standards specified under rule 31(A)(5) along with verification of the statement in form 27A.

  • In case of the following :

(a) Every Government deductor

(b)  Corporate deductor

(c) The deductor is a person required to get his accounts audited under sec. 44 AB in the immediately preceding financial year or

(d)     The number of deductee’s records in a statement for any quarter of the financial year is twenty or more; such quarterly statements are to be delivered electronically on computer media (3.5″ 1.44 MB floppy diskette or CD-Rom of 650 MB capacity). The statement in computer media is to be prepared as per data structure provided by the e-filing Administrator (DGIT Systems) designated by the Board for purposes of e-TDS Scheme : 2003. Further, a declaration in Form 27A is also to be submitted in paper format. Quarterly statements are also to be filed by such deductors in electronic format with the e-TDS Intermediary at any of the TIN Facilitation Centres, particulars of which are available at www.incometaxindia.gov.in and at http://tin.nsdl.com.

  • A person other than a deductor specified above may at his option deliver the quarterly statements electronically in computer media as provided above. However, it is not mandatory for it to do so.
  • The quarterly statements are to be furnished in accordance with the provisions of rule 37A and rule 37B.
  • It is mandatory for the deductor to quote the following in quarterly statements

(a)        TAN

(b)        PAN of the deductor

(c)        PAN of all the deductees

(d)        Particulars of tax paid to the Central Government including Book Identification Number or Challan Identification Number as the case may be.

However where the deduction has been made by or on behalf of the Government, PAN shall not be required to be quoted in the quarterly statement.

  • For a statement of tax deducted at source to be furnished for TDS done before 1/4/2010, the provisions of Rule 3 1A and 37A before their amendment(by I.T. 6th Amendment Rules 2010), will be applicable.

2.8.2 Processing of statements of Tax deducted at

source: The Finance (No.2) Act of 2009 has introduced a new section 200A which provides for processing of the statements of tax deducted at source which have been furnished by the deductor. Such processing has to be done by the Income-tax Department in the manner specified and it is to compute any arithmetical error, incorrect claim in the statements, payment of interests, sum payable by or refundable to the deductor. An intimation of such processing is to be sent on or before the expiry of on one year from the end of financial year in which the statement is filed.

The relevant provisions of section 200A as follows;

(1) Where a statement of tax deduction at source has been made by a person deducting any sum (hereafter referred in this section as deductor) under section 200, such statement shall be processed in the following manner, namely –

(a) The sums deductible under this Chapter shall be computed after making the following adjustments, namely:-

(i)           any arithmetical error in the statement; or

(ii)         an incorrect claim, apparent from any information in the statement;

(b) the interest, if any, shall be computed on the basis of the sums deductible as computed in the statements;

(c)       the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause(b) against any amount paid under section 200 and section 201, any amount paid otherwise by way of tax or interest;

(d)      an intimation shall be prepared or generated and sent to the deductorspecifying the sum determined to be payable by, or the amount of refund due to, him under clause(c); and

(e) the amount of refund due to the deductor in pursuance of the determination under clause(c) shall be granted to the deductor;

Provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed.

Explanation- For the purpose of this sub-section, “an incorrect claim apparent from any information in the statement” shall mean a claim, on the basis of an entry, in the statement‑

(i)           of an item, which is inconsistent with another entry of the same or some other item in such statement;

(ii)         in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act.

(2) For the purpose of processing of statements under sub­section(1) the Board may make a scheme for centralized processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said sub-section.

TAX DEDUCTION AND COLLECTION ACCOUNT NUMBER

2.9 Introduction: T.A.N. or tax deduction and collection account number is a unique number alloted to the deductorcollector of tax at source for the purpose of identification of every deductor.

2.9.1 Who shall apply for TAN: Every person deducting

tax at source is required as per Section 203(A) to apply to the assessing officer for allotment of TAN. The application has to be made in duplicate in form 49B (Rule 114A). Such application has to be either furnished to the Assesssing Officer (AO) specifically assigned the function of allotment of TAN by the CCIT/CIT or in any other case to the AO having jurisdiction to assess the applicant.

2.9.2 Responsibility to quote TAN: Section 203(A)(2)

casts a statutory responsibility on the deductor to quote TAN in the following places once it has been alloted :-

(i)       In all challans for the payment of any sum in accordance with the provisions of Section 200

(ii)    In all certificates issued pertaining to deduction of tax in accordance with the provisions of Section 203

(iii) In all statements submitted in accordance with the provisions of sub section (3) of section 200 (quarterly statements).

(iv)  In all returns filed pertaining to deduction of tax at source in accordance with the provisions of Section 206.

(v) In all other documents pertaining to such transactions as may be prescribed in the interest of revenue.

2.9.3 QUOTING OF PAN BY EMPLOYER/

DEDUCTOR – The deductor of tax at source is required as per section 139A(5B) to quote the PAN of the person from whose income TDS has been done in ;

(a)     Statement furnished u/s 192(2C) (statement of particulars of profit in lieu of salary)

(b)      Certificate furnished u/s 203 (TDS Certificate)

(c)      Return of TDS prepared & delivered u/s 206.

(d)     Quarterly statements submitted in accordance with the provisions of sub section (3) of section 200 (quarterly statements)

It is pertinent to note that for quarter ending 30.9.2007 and thereafter form No. 24Q with less than 90% of correct PAN

data will not be accepted and penal consequences under the I.T. Act will follow (circular No. 8/2007 dated 15/12/2007). Further this limit has been enhanced to 95% for and from the quarter ending 3 1.3.2008.

2.9.4 Requirement to furnish Permanent Account Number.

The Finance Act, 2010 has introduced sec. 206AA(w.e.f. 1/4/20 10) requiring the deductee to quote his PAN,failing which, tax at a higher rate shall be deducted. It provides the following :

(1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or amount, on which tax is deductible under Chapter XVIIB(hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax(hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely‑

(i)           at the rate specified in the relevant provision of this Act; or

(ii)         at the rate or rates in force; or

(iii) at the rate of twenty per cent.

(2) No declaration under sub-section (1A) or sub-section (1 C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at source in accordance with provisions of sub-section(1).

(4)      No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

(5)    The deductee shall furnish his Permanent Accont Number to the deductor and both shall indicate the same in all the correspondence, bills vouchers and other documents which are sent to each other.

(6) Where the Permanent Account Number provided to the deductors is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of sub-section(1) shall apply accordingly

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Tags : Section 192 (34) TDS (1039) tds on salary (54)

3 responses to “Overview of TDS Provisions related to Salary”

  1. surajit chanda says:

    whether tds to be made on monthly basis or on yearly basis?

  2. pankaj pandya says:

    person made the payment to employee or any person miens employer should be deduct the tds amount from payment. over all liabilities to deduct tax by the employer

  3. Pankaj says:

    How to deduct TDS in case of payment to be made on hourly basis because monthly payment may be fluctuating month by month ? It is also unknown whether a person would remain in employment through out the year and whether his emoluments would be crossing Rs.1,80,000/- p.a.?

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