2. What is TDS?
• Is a form of Advance Tax collection
• Mechanism puts the onus of compliance on
the payer of transaction
• TDS covers major kind of Transactions
• Fairly simple provisions to comply
14.3.2010 CA. Kalyan Chakravarthy Vennety 2
3. Process flow of TDS
Payer deducts Tax
from payment
• Payer deducts Tax from payment
Payer Deposits the
same to credit of
Govt.
• Payer Deposits the same to credit of Govt.
Payer files Return of
TDS
• Payer files Return of TDS
Payer issues TDS
Certificate to the
payee
• Payer issues TDS Certificate to the payee
Payee claims refund
of the TDS in his
return
• Payee claims refund of the TDS in his return
14.3.2010 CA. Kalyan Chakravarthy Vennety 3
4. Section 192 - Salaries
• TDS @average rate of Tax payable for FY
• Salary means ‘”salary” as per Sec 17 of Act
• TDS has to be deducted @ the time of
payment every month
• Amount = Estimated Tax for FY /12 months
• Consider: Salary from previous employer
• Consider: Income from other sources
• Issue Form 16 within 1 month from end of FY
14.3.2010 CA. Kalyan Chakravarthy Vennety 4
5. Section 193 - Interest on securities
• TDS @ 10%
• At the time of Credit or payment whichever is
earlier
• Following are exempt from TDS provisions:
– National Defence, Development Bonds etc.
– NSC
– Gold Bonds
– Central or State Govt. Securities etc.
14.3.2010 CA. Kalyan Chakravarthy Vennety 5
6. Section 194A
–Interest other than on securities
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
Nature of Payment Threshold Limit to deduct tax Rate of Deduction
Interest other than interest on
securities Rs.10,000/- p.a. 10 %
Interest from Banking Company
Interest other than interest on
securities
Rs.5,000/- p.a. 10 %
Interest other than from Banking
Company
14.3.2010 CA. Kalyan Chakravarthy Vennety 6
7. Section 194A (3)
–Exemption to Co-op societies
• The provisions of sec 192(1) shall not apply to
(among other clauses)
– (v) to such income credited or paid by a co-
operative society to a member thereof or to any
other co-operative society
14.3.2010 CA. Kalyan Chakravarthy Vennety 7
8. Section 194B
- Winning from lottery
• Rate of Deduction@30%
• At the time of Winning from Lottery
– In cash
– Or kind
• Exemptions:
– If amount of Winning does not exceed Rs.5000
14.3.2010 CA. Kalyan Chakravarthy Vennety 8
9. Section 194BB
- Winning from Horse Race
• Rate of Deduction@30%
• At the time of Winning from Horse Race
– In cash
– Or kind
• Exemptions:
– If amount of Winning does not exceed Rs.5000
14.3.2010 CA. Kalyan Chakravarthy Vennety 9
10. Section 194C
– Payment to Contractors
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If amount of sum paid or credited does not exceed
Rs.20,000 and the aggregate amount does not
exceed Rs.50,000 in a FY
14.3.2010 CA. Kalyan Chakravarthy Vennety 10
11. Section 194C
– Payment to Contractors
Threshhold Limit to In case recipient is an If the recipient is other
Section Code Nature of Payment
deduct tax Individual / HUF than Individual / HUF
Rs.20,000/- Per Single
Contract or Rs.50,000/-
194-C Payment to Contractor 1% 2%
exceed during the
financial year
Rs.20,000/- Per Single
Payment to Advertising
Contract or Rs.50,000/-
194-C Contractor / Sub 1% 2%
exceed during the
Contractor
financial year
Payment to Transport
194-C contractor / sub If PAN Quoted NIL NIL
contractor
Payment to Transport 1% 2%
194-C contractor / sub If PAN not quoted *20% from *20% from
contractor 01.04.2010 01.04.2010
14.3.2010 CA. Kalyan Chakravarthy Vennety 11
12. Section 194C
– Payment to Contractors
• Important Points to note:
– Work will not include manufacturing or supplying
a product as per the specification of customer by
using material purchased from person other than
such customer
– In case the material is supplied by customer and
the same is separately mentioned on the invoice,
then TDS will not be deducted on the amount of
material
14.3.2010 CA. Kalyan Chakravarthy Vennety 12
13. Section 194 D
- Insurance commission
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed Rs.5000
14.3.2010 CA. Kalyan Chakravarthy Vennety 13
14. Section 194H
– Commission or Brokerage
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed Rs.2500
Section Code Nature of Payment Threshold Limit to In case recipient is If the recipient
deduct tax an Individual / is other than
HUF Individual / HUF
194-H Payment of Rs.2,500/- p.a. 10 % 10 %
commission or
brokerage to resident
14.3.2010 CA. Kalyan Chakravarthy Vennety 14
15. Section 194I - Rent
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed
Rs.120,000
14.3.2010 CA. Kalyan Chakravarthy Vennety 15
16. Section 194I - Rent
Threshold Limit to
Section Code Nature of Payment Rate of Deduction
deduct tax
10%
194-I Payment of Rent Rs.1,20,000/- p.a. *20% from
01.04.2010
Payment of Rent for
2%
use of Plant ,
194-I Rs.1,20,000/- p.a. *20% from
Machinery or
01.04.2010
Equipment
14.3.2010 CA. Kalyan Chakravarthy Vennety 16
17. Section 194J - Professional fees
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed Rs.20,000
Section Code Nature of Payment Threshold Limit to Rate of Deduction
deduct tax
194-J Payment of Rs.20,000/- p.a. 10 %
professional or
technical services
14.3.2010 CA. Kalyan Chakravarthy Vennety 17
18. Due Dates of Payment
Scenario Due Date
7 days from the end of the month in
Salaries
which the Salary is paid
7 days from the end of the month in
Non-Salary for all months except
which the amount is credited or paid
entries on 31st March of the FY
whichever is earlier
Non-Salary where the amount is
31st May
credited on 31st March of the FY
14.3.2010 CA. Kalyan Chakravarthy Vennety 18
19. E-TDS Returns
• Periodicity of Returns is Quarterly
• Due in 15 days from the end of the quarter
• Returns in prescribed Forms
– Form 24Q for Salaries
– Form 26Q for other than Salaries
• Returns to be printed on CD media
• To be submitted to NSDL TIN centre
• Provisional receipt number is generated
14.3.2010 CA. Kalyan Chakravarthy Vennety 19
20. Section 201
- failure to deduct or pay
• Penalty u/s 221 if AO is not satisfied with
reasons for default
• Interest @ 1% p.m. till default continues
• Charge on assets of assessee for recovery of
TDS with interest
14.3.2010 CA. Kalyan Chakravarthy Vennety 20
21. Section 40(a) (ia)
- Following exp will be dis-allowed
• Payments under 194A, 194C, 194H, 194I, 194J
• On which Tax is deductible but
– has not been deducted or
– if deducted, has not paid before
a) in case where deduction was in last month, on or
before due date u/s 139(1)
b) in other case,
on or before the last day of previous year
14.3.2010 CA. Kalyan Chakravarthy Vennety 21
22. Section 40(a) (ia)
- When these exp will be allowed?
• In case of such payments , Tax has been
deducted
– in the subsequent year; or
– during the last month of the previous year but
paid after the due date; or
– During any month of the previous year but paid
after the end of the said previous year
• Such sums shall be allowed in the year of pmt.
14.3.2010 CA. Kalyan Chakravarthy Vennety 22
23. Reasons…
• There seems to be a system failure in the
process the Income Tax Department
• Notices are bieng generated based on the
information in their database system
• In most of the cases, the last challan paid
appears as short payment or late payment
• AO is just signing and sending the notices
14.3.2010 CA. Kalyan Chakravarthy Vennety 23
24. How to deal with it…
• No need to worry if you receive the notice
• Just reply to the letter providing all the
information regarding your return in terms of:
– Date of deduction
– Rate of deduction
– Amount of TDS section wise calculation
– Date of payment etc
– In tabulated form in appropriate format.
14.3.2010 CA. Kalyan Chakravarthy Vennety 24
25. Changes in TDS Threshold Limits
w.e.f. 1-07-2010
EXISTING PROPOSED
SEC NATURE OF PAYMENT
THRESHOLD THRESHOLD
Winning from Lottery &
194B 5,000 10,000
crossword puzzles
194BB Winnings from Horse Race 2,500 5,000
20,000
194C Payment to Contractors [for single 30,000
transaction]
50,000
194C Payment to Contractors [for aggregate 75,000
transactions]
194D Insurance Commission 5,000 20,000
194H Commission or brokerage 2,500 5,000
194I Rent 1,20,000 1,80,000
Fess for professional or
194J 20,000 30,000
technical services
14.3.2010 CA. Kalyan Chakravarthy Vennety 25
26. TDS Best practices…
• Always be alert for TDS provisions &
compliance
• Always pay TDS dues in time
• If delayed, pay challan with proper interest
• If paid via challan, get correct serial no. from
bank
• Cross verify Challan serial no. online
www.tin-nsdl.com
14.3.2010 CA. Kalyan Chakravarthy Vennety 26