Some says TDS is a simple, logical and interesting area. On the other hand most of the people are of the opinion that it is Vast, difficult and complicated. For fun professionals says TDS is a TEDIOUS topic (Both TDS and tedious have same pronunciation) .
However the taste of a delicious dish (TDS) can be enjoyed only by care full cooking (understanding) and adding spices and dry fruits (updating the amendments and case laws)
As per the recent amendments W.e.f 01/04/2010, on non-submission of PAN, Tax is to be deducted @ higher of prescribed rate or 20%.
ü The Finance (No.2) Bill, 2009 had introduced a new section 206AA in the Income-tax Act, 1961 (ITA), which provides that every recipient of income is required to furnish its Permanent Account Number (PAN) i.e. tax registration number to the payer.
ü From the new financial year, Assessees will have to pay a higher income tax at source if they do not have a Permanent Account Number (PAN). Tax at higher of the prescribed rate or 20 percent will be deducted on all transactions liable to tax deduction at source (TDS), if the person liable to the tax does not possess a PAN.
ü All those liable to pay the tax, including non-residents, need to obtain a PAN by March 31, 2010. This number has to be communicated to those liable to deduct tax before the tax is actually deducted on transactions after that date.
ü As such, all financial transactions without PAN will attract tax from April 1, 2010. The Income Tax Department has already made it mandatory for employers to quote PAN of their employees and parties from whom tax is deducted while filing TDS returns.
ü According to the new provisions, declaration by a taxpayer under Section 197A for non-deduction of TDS on payments will not be valid if it is given without quoting PAN. The certificate for deduction at a lower rate or no deduction will not be given by the assessing officer under Section 197 in the absence of PAN.
ü Henceforth any person eligible for deduction fails to do so, he will have to pay 20 percent TDS instead of two percent on rental payments for plant and machinery and 10 percent on land and building.
ü To avoid disputes regarding quoting, no quoting of PAN or accuracy, all eligible for the deduction and those liable to deduct will be required to quote PAN in all correspondence, bills, vouchers and other documents sent to each other.
Implications for foreign companies / non-residents:
• The current tax rate under the domestic tax laws for royalties and fees for technical services generally is 10% (plus applicable surcharge and education cess) of the gross amount. The tax treaties also generally provide for a tax rate of 10% / 15% of the gross amount. Even in case of interest, many Indian tax treaties provide for a lower withholding tax rate of 10% / 15%. In several cases, foreign companies do not apply for a PAN in India since they earn only such passive income or they do not have business operations /Permanent Establishment in India.
• Now, with the above amendment, in the absence of PAN, notwithstanding the fact that a lower rate is provided under the ITA or the tax treaty, tax is required to be withheld @ 20% in India.
• The above provision seems to have the effect of Indian laws having an extra territorial jurisdiction whereby the foreign companies and non residents are obligated to comply with the laws of India. Questions are being raised regarding the validity of these provisions since the provision requires compliance in India overriding even the provisions of tax treaties and ignoring practical difficulties faced by foreign companies in respect of tax registration and compliance.
• In practice, it is quite unlikely, that Indian companies would consider these arguments while withholding taxes given the punitive consequences for withholding lower taxes in India.
• Credit for such excess tax withheld may not be available to the foreign company in its home country since the taxes are not withheld as per treaty provisions, Thus if foreign company does not have PAN at the time of receipt of the income, it would later have to apply for PAN and file return of income in India to claim refund of such excess tax.
• In any case, irrespective of whether a refund is due or not, technically, the Indian law requires all the foreign companies to file return of income, in case of income being earned from India – even if the applicable taxes have been paid in India. Till date, most foreign companies are practically not complying with the said provision and even the tax authorities do not have any mechanism to monitor the same. However, with the introduction of the above provision, the tax authorities can easily scrutinize the compliances by foreign companies in India based on the PAN allotted to foreign companies. Filing of return of income in India would be accompanied by host of other compliances.
• Foreign companies are required to inter alia undergo tax audit under section 44AB if turnover / gross receipts exceed INR 4 million (business) / INR 1 million (profession) and comply with the transfer pricing provisions (including maintenance of documentation and filing report from Chartered Accountant in Form 3CEB).
It is mandatory to quote PAN on return of income, all correspondence with any income tax authority and challans for any payments due to Income Tax Department. It is also compulsory to quote PAN in all documents pertaining to economic or financial transactions notified from time-to time by the Central Board of Direct Taxes.
The effort is also seen as a step by the government to increase revenue collections. The 20 percent rate on TDS will be a deterrent and compel many to obtain and furnish PAN. Otherwise, it will directly impact their cash flows in terms of higher tax payout at source.
The move of imposing penalty for not quoting PAN is aimed at strengthening the database of the revenue department and increasing tax compliance.
We are reproducing below Section 206AA for the reference of our readers.
206AA. Requirement to furnish Permanent Account number
(1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income 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 (1) or sub-section (1A) or sub-section (1C) 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 the 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 Account 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 deductor 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.”
Hi Chirag
no need to show cess seperately, deduct only 20%
u can mail me for more info @ sharma.chanchal1991@gmail.com
I have to remit GBP 4400.00 to University of Sheffield, U. K. on account if my son’s tution fees through a sanctioned education loan.What shall be the TDS
Thanks
Vivek
9404067022
Hi,
I have one query.. Doesindian company need to pay 15% tds
and if pay then can they get it back for giving services to nepal
and how to claim for it?
Service Provider by Other than Country (No PAN), Service receiver in India Rs,75000/- excessding whether TDS applicable or not u/s 194 C?
When applicable which percentage?
Dear Sir
We have remit a payment to nepal to an advertising agency against the releases of ads in Nepal on Nepal tv . Then what will be the procedure , Second is there any Tds applicable if yes then how much . Kindly suggest
Regards
Mahesh Mittal
Please confirm whether Surcharge and Education Cess has to be deducted with 20% TDS for overseas payment if PAN not available. Whether PAN number is must for the TDS deduction under DTAA.
HI, If i am deducting tds @10% or @20% under sec 195 on interest, I want to know whether ec and shec is added on 10% or 20%?
Thanks
I received Rs.35000 as comission from the employer in the year 2010-11.The employer made TDS Rs.7000 from my payament @ 20% where I have no PAN No. at that time .Cah I fill return for refund of income tax. Now I have PAN No.The income tax office refused to deposit tax return without filling PAN No..
Pls.reply.
Dear Sir,
my self is working in limited company. and we paid inspection charges to foreign party (no permanent establishment in india) and inspection is also done in foreign country for getting certification to sell in foreign county. is it witholding tax is applicable?
pls give reply urgently
thaks
please give some information about TDS:
I am professional consultant in private company my salary is Rs.7500 but its Deducted the TDS and I’ll receive the amount of Rs.6750….
please tell me it is correct or not.
why its is deducted my salary although i am not in the category of taxpayer.
Thanks
saurabh tomar
8010033312
Mukul jee if ur salary is NRs. 7500/month then ur annual salary will be rs. 90000. and u have not mentioned that whether ur married or single. i will tell u as per ur salary below.
if ur married
in total annual salary
upto 200000 – TDS 1%
from 200001-300000 TDS 15%
From 300001-2500000 TDS 25%
2500001 – above TDS 35%
IF u r single
in total annual salary
upto 160000 – TDS 1%
from 160001-260000 TDS 15%
From 260001-2500000 TDS 25%
2500001 – above TDS 35%
according to your salary whether ur married or not…ur salary is to b deducted by 1% per month.
ur salary 7500
TDS 75
Net salary receivable 7425
if tds is to be deducted on salary then only 1%,15%,25%,35% but not 20.6%
thank you
Dear Sir/Madam,
We are aware of the fact that individual who does not furnish PAN will be deducted 20% on total taxable income. Can we have any example cited so that we could have clear inforamtion on the same
what will be situation if the payment is to be made to NEPAL for the marketing and services provided in nepal for an Indian company selling their FMCG product in NEPAL?
I wnat to know that if person who is professional under lower rate deduction 194J TDS chargebal @ 2%.
in this case ECess and SCess applicable for FY 2009-10 and FY 2010-11
Avadhesh Shah.
M.Com, P.G.D.T.P.,Vadodara.
need to know though TAX is deducted @ 20% for those who dont furnish there PAN no. , but what to do at the time of filing TAX return…
excellent detail
Education cess is imposed by sub-sections (11) and (12) of section 2 of the Finance Act, 2010. Even in these sub-sections, one fails to find out a reference of section 206AA. Consequently, the rate of 20 per cent under section 206AA cannot be increased by surcharge and education cess.
I need to know if we are making remittance to the foreign agents for holiday packages, even on that we need to deduct 20% tds…………….pls reply
In case of Foreign remittance (service delivery outside Indian Jurisdisction Territory), does Cumulative Annual threshhold limit applies in purview of NO PAN number availability as per amendments in ITA wef 01 Apr 2010.
What is the TDS rates if the Payment made to NRI (foreign country of USA)under DTAA
Sir
in the case of Payment to NRI( foreign company of USA) on Technical Services Tds is 20% when PAN is not available. I want to know that wheather cess @3% to be charged or not.
Hi,
I need to know the answers for the below questions:
a) where I can claim Foreign earned income in Indian Tax return (I need under which section)
b) where I can claim Foreign withheld in Indian Tax return (I need under which section)
IAM FROM NEPAL & MY SALARY IS RS. 7,500/- PER MONTH AND I DO NOT HAVE A PAN CARD TILL NOW. MY EMPLOYER IS DEDUCTING TDS @ 20.6% ON MY SALARY. IS IT ALRIGHT, THOUGH MY INCOME FALLS UNDER BASIC EXEMPTION LIMITS AND I AM NOT LIABLE TO PAY TAX?
Please suggest if we are deducting 20% TDS incase of non availability of PAN in the case of payment to NRI , then surcharge and education cess is applicable or not?
Also we are remitting fees to governing bodies of the foreign country with out pan please suggest tax to be deposited or not. If so what is the % + others ?
Please advice if Tax is to be deducted on salary income if the employee has not provided his PAN wgeb his salary income is below the taxable income limit i.e. salary amount in less than Rs.1,55,000/-pa
Inspite of the non-obstante clause in 206AA, my personal opinion is that it will not over ride Sec.90. This is because the rate which is more beneficial, either as per IT Act or the relevant treaty can still be adopted
Yes the provision tends to overrule the DTAA’s as well . Regarding rate since this is a penal provision you may deduct TDS @20% and not add s.c. and edu.cess.For Chine case the TDS should be deducted at 20% and if you want to doubly sure then add s.c. and edu.cess.
creating so much practical difficulties to useres.
we are deducting tds on payment of technical services to italy.
also we have to bear the tax.
is it now 20% which we have to bear
Does this rule of deduction @ 20% override the DTAA rates as well. For a deductee not having PAN No. for say China, where the rate of deduction for technical services is 10%. Do we deduct 10% or 20% + s.c + e.cess i.e 21.115%
how to download calcluators
Please suggest if we are deduct 20% TDS incase of non availability of PAN, then surcharge and education cess is applicable or not?
Thanks
Chirag Shah
09860438182