Tds overview final

OVERVIEW OF TDS
• What is TDS
• Who shall deduct tax at source
• What a Deductor must do
• TAN
• Nature of payments attracting TDS and rates
• Non deduction or deduction at lower rate in certain cases
• What is TCS
• Provisions relating to TCS and rates
• Due date to deposit TDS and TCS
• Persons required to file e-TDS/e-TCS returns
• Due dates for e-TDS/e-TCS returns
• Issuance of TDS certificates (Form-16 and Form-16A)
• TDS defaults
• Consequences of Defaults
• General Information
2

What is TDS
 Tax Deduction at Source or best known as TDS is one of the modes of collecting
Income-tax.
 In simple terms, TDS is the tax getting deducted from the person receiving the
amount (Employee/Deductee) by the person paying such amount
(Employer/Deductor).
 The tax so deducted at source by the payer, has to be deposited in the
Government treasury to the credit of Central Govt, within the specified time.
 The tax so deducted from the income of the recipient is deemed to be payment of
Income-tax by the recipient at the time of his assessment.
 Presently this concept of TDS is also used as an instrument in enlarging the tax
base.
 Some of such income subjected to TDS are salary, interest, dividend, interest on
securities, winnings from lottery, horse races, commission and
brokerage, rent, fees for professional and technical services, payments to non-
residents etc.
 It is always considered as an Advance tax which is paid to the government.
3

Who shall deduct tax at source
 Every person responsible for making payment of nature covered by TDS provisions
of Income Tax Act shall be responsible to deduct tax.
 However in case of payments made under sec. 194A, 194C, 194H, 194I and 194J in
respect of individual and HUF, only if the turnover or professional receipt exceeds
Rs.100 Lakhs or Rs. 25 Lakhs respectively in previous year, he is required to deduct
tax at source.
 These persons are mainly:
 Principal Officer of a company for TDS purpose including the employer in case of private
employment or an employee making payment on behalf of the employer.
 DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as
such.
 In the case of "interest on securities" other than payments made by or on behalf of the
Central govt. or the State Government, it is the local authority, corporation or
company, including the Principal Officer thereof.
 Such person is called Deductor while the person from whom the tax is deducted is
called Deductee.
 Tax must be deducted at the time of payment in cash or cheque or credit to the
payee's account whichever is earlier. Credit to payable account or suspense
account is also considered to be credit to payee's account and TDS must be made
at the time of such credit.
4

What a Deductor must do
 To apply for Tax Deduction Account Number (TAN) in form 49B, in
duplicate at the designated TIN facilitation centers of, within one
month from the end of the month in which tax was deducted.
 To quote TAN (10 digit reformatted TAN) in all TDS/TCS
Challans, certificates, statements and other correspondence.
 To deduct/collect tax at the prescribed rates at the time of every credit
or payment, whichever is earlier, in respect of all liable transactions.
 To remit the tax deducted/collected within the prescribed due dates by
using Challan no. ITNS 281 by quoting the TAN and relevant section of
the Income-tax Act.
 To issue TDS/TCS certificate, complete in all respects, within the
prescribed time in Form No.16(TDS on salaries), 16A(other TDS) and
27D( TCS).
 To file TDS/TCS quarterly statements within the due date.
 To mention PAN of all Deductees in the TDS/TCS quarterly statements.
5

TAN
 Tax Deduction Account Number TAN is a unique identification
number for person deducting the tax.
 TAN is a 10 characters alpha numeric string comprising of 4
Alpha - 5 Numeric - 1 Alpha. [Eg: MUMR02933A]. The first 3
characters consists of Income Tax Region Code (MUM =>
Mumbai) and the Fourth digit comprises of 'First Character' of
deductor name (R => Relyon Softech Ltd). Remaining
characters form an unique combination to get identified at
Income Tax Department.
6

Nature of payments attracting TDS and rates
Sl.
No.
Section Nature of Payment Cut Off Amount Rate %
01.04.2012 01.07.2012 HUF/IND Others
1 192 Salaries Salary income must be
more than exemption limit
after deductions.
Average Rate
2 193 Interest on debentures 2500 5000 10 10
3 194 Deemed dividend - - 10 10
4 194A Interest other than Int. on securities (by Bank) 10000 10000 10 10
4A 194A Interest other than Int. on securities (By others) 5000 5000 10 10
5 194B Lottery / Cross Word Puzzle 10000 10000 30 30
6 194BB Winnings from Horse Race 5000 5000 30 30
7 194C(1) Contracts 30000 30000 1 2
8 194C(2) Sub-contracts/ Advertisements 30000 30000 1 2
9 194D Insurance Commission 20000 20000 10 10
10 194EE Payments out of deposits under NSS 2500 2500 20 -
11 194F Repurchase of units by MF/UTI 1000 1000 20 20
12 194G Commission on sale of lottery tickets 1000 1000 10 10
13 194H Commission or Brokerage 5000 5000 10 10
7

14 194I Rent (Land & building) furniture & fittings) 180000 180000 10 10
Rent (P & M , Equipment 180000 180000 2 2
15 194J Professional/Technical charges/Royalty &
Non-compete fees
30000 30000 10 10
16 194J(1)(ba) Any remuneration or commission paid to
director of the company(Effective from 1
July 2012)
NA NIL 10 10
17 194LA Compensation on acquisition of immovable
property
100000 200000 10 10
18 194LLA Payment on transfer of certain immovable
property other than agricultural
land (Withdrawn on 07/05/2012)
(a) INR 50 lakhs in case
such property is situated in
a specified urban
agglomeration; or(b) INR 20
lakhs in case such property
is situated in any other
area)
(Withdrawn on
07/05/2012) no tds on such
transactions
8

Exceptions/Notes:
 TDS at higher rate (i.e., 20%) has to be made if the deductee does not provide PAN to the
deductor
 Surcharge on Income-tax is not deductible/collectible at source in case of individual/ HUF
/Firm/ AOP / BOI/Domestic Company in respect of payment of income other than salary.
 In the case of Company other than Domestic Company, the rate of surcharge is @ 2% of
Income-tax, where the income or the aggregate of such income paid or likely to be paid
exceeds Rs.1,00,00,000.
 No Cess on payment made to resident: Education Cess is not deductible/collectible at source
in case of resident Individual/HUF/Firm/ AOP/ BOI/ Domestic Company in respect of payment
of income other than salary.Education Cess @ 2% plus secondary & Higher Education Cess @
1% is deductible at source in case of non-residents and foreign company.
 No TDS on Goods Transport :No deduction shall be made from any sum credited or paid or
likely to be credited or paid during the previous year to the account of a contractor during
the course of business of plying, hiring or leasing goods carriages on furnishing of his
Permanent Account Number, to the person paying or crediting such sum.
 Where the aggregate of the amounts paid/credited or likely to be paid/credited to Contactor
or Sub-contractor exceeds Rs.75,000 during the financial year, TDS has to be made u/s 194C
TDS by Individual and HUF (Non Audit) case not deductible :
An Individual or a Hindu Undivided Family whose total sales, gross receipts or turnover
from business or profession carried on by him does not exceed the monetary
limits(Rs.100,00,000 in case of business & Rs.25,00,000 in case of profession) under Clause
(a) or (b) of Sec.44AB during the preceding financial year shall not be liable to deduct tax
u/s.194A,194C, 194H, 194I & 194J.So no tax is deductible by HUF/Individual in first year of
operations of business even sales/Fees is more than 100/25 Lakhs.
9

Non deduction or deduction at lower
rate in certain cases
• No Tax has to be deducted for the payment made to
Government, RBI, Corporation whose income is exempt
from tax or mutual fund specified u/sec. 10(23D). Also in
case where deductee produces a non deduction certificate
or lower deduction certificate u/sec. 197 of the Income Tax
Act 1961.
• Self declaration in Forms 15G and 15H can be filed by the
Deductee if his income doesn't exceed the amount
chargeable to tax. This self declaration can be filed for
dividends, interest and mutual fund income only. In these
cases no tax has to be deducted. However the tax Deductor
is required to furnish copies of this self declaration to the
concerned CCIT or CIT as per the rules.
10

What is TCS
• Section 206C of the Act.
• Provides that 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 issue of a
cheque or draft or by any other mode , whichever
is earlier , collect from the buyer of any of the
goods of nature specified , a sum equal to the
percentage as specified of such amount as
income tax.
11

Who shall collect TCS
• The Central And State Government.
• Local authority
• Statutory corporation or Authority
• Company
• Firm
• Co-operative society
• Individual or Hindu undivided family(HUF) if
covered under section 44AB (mandatory
Audit)
12

Buyer under the scope of TCS
Buyer Means a person who obtains in any sale, by way of
auction, tender or any other mode, specified goods ,or right to receive any
such goods
but does not include the following :
• Public sector company,
• Central/state Government,
• Embassy,a high commission,consulate and the trade representation of a
foreign state
• A club
• A buyer in the retail sale of such goods purchased for personal
consumption
Thus, goods purchased by consumers are not covered under TCS.
13

Goods specified under the scope of TCS
• Alcoholic liquor for human consumption
• Tendu leaves
• Timber obtained under a forest lease
• Timber obtained by any mode other than under a forest lease
• Any other forest produce not being timber or tendu leaves
• Scrap
• Parking lot
• Toll plaza
• Mining and quarrying
• Minerals , being coal or lignite ore
• Bullion or Jewellery (if the sale consideration paid in cash
exceeding Rs. Five lakhs in jewellery and Rs. two lakh in case
of Bullion)
14

TCS rates
Sl.No. Nature of Goods Rates in %
1 Alcoholic liquor for human Consumption 1
2 Tendu leaves 5
3 Timber obtained under forest lease 2.5
4 Timber obtained by any mode other than a forest
lease
2.5
5 Any other forest produce not being timber or tendu
leaves
2.5
6 Scrap 1
7 Parking lot 2
8 Toll plaza 2
9 Mining & Quarrying 2
10 Minerals, being coal or lignite or iron ore 1 (wef 01.07.2012)
11 Bullion or jewellery (if the sale consideration is
paid in cash exceeding INR 5 lakhs in jewellery
and two lakh in case of Bullion)
1 (wef 01.07.2012)
15

Due date to deposit TDS and TCS
“Time and mode of payment to Government account of tax deducted at source or tax
paid under sub- section (1A) of section 192.
Rule :30.
(1) All sums deducted in accordance with the provisions of Chapter XVII‐B by an office
of the Government shall be paid to the credit of the Central Government ‐
(a) on the same day where the tax is paid without production of an income‐tax
challan; and
(b) on or before seven days from the end of the month in which the deduction is
made or income‐tax is due under sub‐section (1A) of section 192, where tax is paid
accompanied by an income‐tax challan.
16
Tax to be deducted by Govt Office
Tax deposited without challan Same day
Tax deposited with challan 7th of next month
Tax on perquisites opt to be
deposited by the employer
7th of next month

(2) All sums deducted in accordance with the provisions of
Chapter XVII‐B by deductors other than an office of the
Government shall be paid to the credit of the Central
Government ‐
(a) on or before 30th day of April where the income or
amount is credited or paid in the month of March; and
(b) in any other case, on or before seven days from the
end of the month in which the deduction is made or
income‐tax is due under sub‐section (1A) of section 192.
Tax deducted by other
1 tax deductible in March 30th April of next
year
2 other months & tax on perquisites
opted to be deposited by employer
7th of next month
17

(3) Notwithstanding anything contained in sub‐rule (2), in special
cases, the Assessing Officer may, with the prior approval of the
Joint Commissioner, permit quarterly payment of the tax deducted
under section 192 or section 194A or section 194D or section 194H
for the quarters of the financial year specified to in column (2) of
the Table below by the date referred to in column (3) of the said
Table:‐
Sl. No. Quarter ended On Date of payment
1 30th June 7th July
2 30the September 7th October
3 31st December 7th January
4 31st March 30Th April
18

Persons required to file e-TDS returns
Vide Notification No. 238/2007, dated 30-8-2007,
following persons are liable to file e-tds/e-tcs return:
1) All Government department/office;
2) All companies
3) All persons who are required to get their accounts
audited under section 44AB in the immediately
preceding financial year;
4) All persons where the number of Deductees’ records in
a quarterly statement for any quarter of the
immediately preceding financial year is equal to or
more than fifty.
19

Due dates for e-TDS returns
Due date e-tds return 24Q, 26Q, 27Q and Form16 ,Form 16A
Sl. No. Quarter ending From 01.11.2011 on wards
For Govt offices
For other deductors
Etds return Form 16A Etds return Form 16A
1 30th June 31st July 15th August 15th July 30th July
2 30th September 31st October 15th November 15th October 30th October
3 31st December 31st January 15th Feburary 15th January 30th January
4 31st March 15th May 30th May (31st
May for form 16)
15th May 30th May (31st May
for form 16)
20

Issuance of TDS certificates (Form-16 and Form-16A)
• Tax deducted on or after 01.04.2012, it is mandatory for all type of deductors to
issue quarterly form 16A (non salary tds certificate) only after downloaded the
same from the TIN-NSDL website. Earlier this was mandatory for only companies
,Banks and co-operative societies engaged in Banking services with effect from
01.04.2011 through circular number 3/2011.
• Form 16A downloaded from TIN-NSDL can be signed manually or can be
authenticated through digital signature only.
FY 2010-11 FY 2011-12 FY 2012-13
Download Form 16A
from TIN Web Site
Optional Mandatory for
Companies and Banks.
Optional for others
Mandatory for all type of
deductors
Digitally Sign Form
16A
Optional but only if
downloaded from TIN
Web site
downloaded from TIN
Web site
downloaded from TIN
Web site
Manually Issue TDS
Certificate(Form 16A)
All deductors can
manually issue TDS
Certificate
Companies and Banks
cannot manually issue
TDS Certificate
No deductor can issued
manually TDS certificate
Manually Issue TDS
Certificate(Form 16
salary)
All deductors can
manually issue TDS
Certificate
All deductors can
manually issue TDS
Certificate
All deductors can
manually issue TDS
Certificate
21

TDS defaults
 Failure to deduct or remit TDS /TCS(full or part)
 Interest: Interest at the rates in force (12% p.a.) from the date on which tax was
deductible /collectible to the date of payment to Government Account is chargeable.
The Finance Act 2010 amended interest rate wef 01.07.2010 and created a separate
class of default in respect of tax deducted but not paid to levy interest at a higher rate of
1.5 per cent per month, i.e. 18 per cent p.a. as against 1 per cent p.m., i.e. 12 per cent
p.a., applicable in case the tax is deducted late after the due date. The rationale behind
this amendment is that the tax once deducted belongs to the government and the
person withholding the same needs to be penalized by charging higher rate of interest
Penalty equal to the tax that was failed to be deducted/collected or remitted is leviable.
 In case of failure to remit the tax deducted/collected, rigorous imprisonment ranging
from 3 months to 7 years and fine can be levied.
 Failure to apply for TAN in time or Failure to quote allotted TAN or Wrong quoting of
TAN :Penalty of Rs.10,000 is leviable u/s.272BB(for each failure)
 Failure to issue TDS/TCS certificate in time or Failure to submit form 15H/15G in time
or Failure to furnish statement of perquisites in time or Failure to file Quarterly
Statements in time: For each type of failure, penalty of Rs.100/- per day for the period
of default is leviable. Maximum penalty for each failure can be up to the amount of
TDS/TCS.
22

 New Section for Penalty for non submission of e-TDS /eTCS return (section
271H)(applicable from 01.07.2012)
 Failure to deliver statement within time prescribed u/s 200 (3) or to the proviso
to sub-section (3) of section 206C may liable to penalty which shall not be less
than Rs. 10,000/- but which may extend to Rs. 1,00,000/-. No penalty if payment
of tax deducted or collected along with fee or interest and delivering the
statement aforesaid before the expiry of 1 year from the time prescribed for
delivering the such statement. However No penalty shall be imposed u/s 271H if
the person proves that there was reasonable cause for the failure.(section 273B)
 Assessee In default (amendment in section 201)
 The Deductor will not to be treated as assessee in Default provided the resident
payee has furnished his return u/s 139 and has taken into account such amount
for computing income in such Return of Income and has paid the Tax Due on the
income declared by him in such return of income and furnishes a certificate to
this effect, duly certified by a CA, in the prescribed form. This form is yet to
be notified.
 However, the interest for not deducting tax would be payable from the date
on which such tax was collectible till the date of furnishing of return of income by
the resident payee.
 The limit of passing orders under section 201(1) increased from 2 years to 6 years
(retrospective amendment wef 1-04-2010)
23

General Information
Deduction at lower or nil rate requires certificate
u/s.197, which will take effect from the day it is
issued. It cannot be used retrospectively.
If TDS/TCS certificate is lost, duplicate may be
issued on a plain paper giving necessary details
marking it as duplicate.
Refund can be claimed by the deductee on filing
of return of income.
Even if the recipient of payment has shown it in
his income-tax return and paid the taxes
thereon, the deductor/collector who has failed to
deduct/collect tax will be liable to pay interest
and penalty.
25

Tds overview final

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