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TAX DEDUCTION AT SOURCE ROLE AND RESPONSIBILITIES

TAX DEDUCTION AT SOURCE ROLE AND RESPONSIBILITIES. Tax deduction at Source. Rationale behind Provisions Tax deduction at source Responsibility Deduction and Payment Person Responsible for deducting Tax at source Section 203A-TAN. New Method- Deferred Now.

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TAX DEDUCTION AT SOURCE ROLE AND RESPONSIBILITIES

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  1. TAX DEDUCTION AT SOURCE ROLE AND RESPONSIBILITIES Shripad Godbole & Associates

  2. Tax deduction at Source • Rationale behind Provisions Tax deduction at source • Responsibility • Deduction and Payment • Person Responsible for deducting Tax at source • Section 203A-TAN Shripad Godbole & Associates

  3. New Method- Deferred Now Circular No.2 dated 21.5.2009 • The quantity and quality of data flowing through this module is far from satisfactory. • The data is largely unverifiable. The matching of the deduction reported by the deductor and claimed by the deductee /assessee continuous to be poor for the following reasons:- Shripad Godbole & Associates

  4. (i) Non-compliance, especially by Government deductors, with TDS return filing requirement. (ii) Low quoting of PAN number in TDS returns that are filed on account of non-furnishing of PAN by deductees to their deductors and negligence by deductors. (iii) Defects noted by CBDT about compliance by Govt. Depts. both Central & State. Shripad Godbole & Associates

  5. (iv) The Central Government Ministries, departments and their sub-ordinate and attached offices are large scale defaulters in complying with the TDS information reporting requirements (v) Even the certificates issued by these organisations are often illegible and of poor quality (vi) These are unreliable. (vii) This has been a constant source of public grievance Shripad Godbole & Associates

  6. Unlike the Central Government, the State Government is required to make a consolidated payment of the TDS amount in respect of all its deductors and deductions directly into the Reserve Bank of India. This is done by the Accountant General of the State. As a result, there is no correlation between the deduction, payment and reporting. Issues- State Government Shripad Godbole & Associates

  7. Further, compliance by State Governments with the TDS information reporting requirement is no better than in the case of the Central Government The new system has been harmonized for all deductors (including Central and State Governments). Shripad Godbole & Associates

  8. Therefore, like non-governmental tax deductors, every deductor in the Central and State Government have also been made responsible for making direct payment of TDS in the bank. They are no longer allowed to make payments of the TDS and TCS by making book adjustments or consolidated payments. As a result, the TDS payment and information reporting system will be uniform across deductors. Shripad Godbole & Associates

  9. Rule 30 and Rule 37 CA of the Income-tax Rules, 1962 have been substituted to provide, inter alia, for the following: - ( a) All sums of tax deducted at source under Chapter XVII-B and of tax collected at source under Chapter XVII-BB shall, in general, be paid to the credit of the Central Government within one week from the end of the month in which the deduction, or collection, is made. The same time limit for payment will also apply for income-tax due under sub-section (1A) of section 192. Shripad Godbole & Associates

  10. (b) It is mandatory for all deductors (including Central Government and State Governments) to pay the amount by electronically remitting it into the RBI, SBI or any authorized bank. (c) It is mandatory for all deductors (including Central Government and State Governments) to make the payment by electronically furnishing an income-tax challan in Form No. 17. Shripad Godbole & Associates

  11. In the process of electronically furnishing the income-tax challan in Form No. 17, the deductor will be simultaneously required to furnish to the Taxpayer Information Network (TIN) system maintained by National Securities Depository Limited (NSDL) either through screen based upload or file upload. Three basic information relating to the deduction i.e., PAN, name of the deductee and amount of TDS/TCS Shripad Godbole & Associates

  12. Upon successful remittance of the TDS/TCS to Central Government account and the uploading of the basic information as mentioned above to the TIN system, every deduction record will be assigned a unique transaction number (UTN). NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. Shripad Godbole & Associates

  13. They will also create a facility for the deductor to download the UTN file The UTN will be required to be quoted by the deductor on the TDS/TCS certificate issued by him to the deductee. NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. Shripad Godbole & Associates

  14. Every person (including Central Government and State Government) who has obtained a Tax Deduction or Collection Account Number (TAN) shall electronically furnish a quarterly statement of compliance with TDS provisions in Form No. 24C. It is mandatory for all TAN holders to furnish this form irrespective of whether any payment liable to TDS has been made or not. Shripad Godbole & Associates

  15. This form shall be furnished on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year, respectively, and on or before the 15th June following the last quarter of the financial year. This e-form No. 24C has to be furnished at http://incometaxindiaefiling.gov.in. Shripad Godbole & Associates

  16. In order to enable the deductor to furnish the UTN to the deductee, the existing Form 16 and Form 16A have been appropriately modified The quarterly returns of TDS and TCS hitherto required to be filed in Form No. 24Q, Form No. 26Q, Form No. 27Q and Form No. 27EQ shall now be required to be filed for all quarters on or before the 15th June following the Financial Year. Effectively, the quarterly returns have now been replaced by an annual return . Shripad Godbole & Associates

  17. Relevant Sections Shripad Godbole & Associates

  18. REQUIREMENT OF PAN • Section 206AA • Every person whose receipts are subject to TDS should have PAN • If PAN is not submitted to the deductor, then the deductor will deduct tax at source at the higher of the following rates • Rate prescribed in the act • Rate mentioned in the finance act • At the rate of 20% • This PAN will have to mentioned in form 15G or 15H • Applicable to NRI also Shripad Godbole & Associates

  19. 194A-Int. other than Int. on securities • If the interest in the financial year exceeds Rs.5,000/-. • 10% IT. At the time of credit or payment whichever is earlier. • Within 1 week from the last day of the month in which deduction is made • Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee. Shripad Godbole & Associates

  20. Example- Section 194A • Section 194A • Nature of payment • Interest on delayed payment charges, delay in payment of land acquisition compensation • Interest payment:- • Limit Rs. 5,000/- • Interest paid in instalments Example:- • Interest amount Rs. 10000 • TDS @ 10% Rs. 1000 Shripad Godbole & Associates

  21. Example 194A- contd. • Section 194A • Limit of Rs. 5000 not to be considered while deducting TDS • Interest paid quarterly • Total interest Rs. 12000 • Per quarter Rs. 3000 • TDS each quarter Rs. 300 • No Education cess or Secondary & Higher Education Cess applicable on interest due after 1.10.2009 Shripad Godbole & Associates

  22. TDS on Contractors w.e.f 1.10.2009 • Rates: If recipient is an Individual or HUF, 1%. In all other cases, 2% • If recipient is a transport contractor and he furnishes his PAN to the payer, TDS rate is NIL • Tax is not required to be deducted if any single sum credited or paid does not exceed Rs. 20000/- or aggregate of such sums does not exceed Rs. 50000/- in a year Shripad Godbole & Associates

  23. TDS on Contractors w.e.f 1.10.2009 • Contract with material given for Catering/advertisement/ Broadcasting programmes/ carriage of goods or Passengers/manufacturing or supplying of material as per specification of a customer by using material purchased from such customer • a) Material value mentioned in the invoice b) Material value not mentioned in the invoice Shripad Godbole & Associates

  24. TDS on Contractors w.e.f 1.10.2009 • In case of a), on the invoice value excluding the value of the material @ 2% • In case of b), on the whole of invoice value @ 2% • Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee Shripad Godbole & Associates

  25. Example 194C • 194C- Payment to contractors • a. Amount of a contract exceeds Rs. 20000/- b. If multiple contracts with a contractor, all less than Rs. 20000 but total exceeds Rs. 50000 p.a. • 1) Single contract of Rs. 45000 TDS would be Rs. 900 @ 2% • 2) Multiple contracts a) First one Rs. 15000 b) Second Rs. 18000 c) Third Rs. 19000 Total Rs. 52000 Shripad Godbole & Associates

  26. Examples Section 194C- contd • TDS from the first payment RS. 1500, second Rs. 1800 and third Rs. 1900/- • No clarity about subsequent allotment of contracts:- first payments would be without TDS, but make up deficiency later on • Eg. First and second Payment without TDS , TDS of RS. 5200/- will have to made from the last one. Shripad Godbole & Associates

  27. Example Section 194C contd • Contract with material given for Catering/advertisement/ Broadcasting programmes/ carriage of goods or Passengers/manufacturing or supplying of material as per specification of a customer by using material purchased from such customer • a) Material value mentioned in the invoice b) material value not mentioned in the invoice Shripad Godbole & Associates

  28. Example Section 194C contd • In case of a), on the invoice value excluding the value of the material • In case of b), on the whole of invoice value • Example • Total invoice value Rs. 125000 It mentions material purchased from the customer Rs. 75000/- Tax would be deducted on Rs. 50000( i.e. Rs, 125000- 75000) Shripad Godbole & Associates

  29. Example Section 194C contd • If the invoice mentions the value as Rs. 125000 but does not mention the value of the material separately, then TDS would be made on Rs. 125000/- Shripad Godbole & Associates

  30. 194H- Commission or Brokerage • At the time of credit or payment whichever is earlier when aggregate sums credited / paid during the financial year exceeds Rs.2500/-. • At the rate of 10% • Within 1 week from the last day of the month in which deduction is made • Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee Shripad Godbole & Associates

  31. 194 I Rent • Rent means any payment by whatever name called under any lease, sub-lease, tenancy or any other agreement for the use of any land, building, machinery, Plant, equipment, furniture or fittings • At the time of credit or payment whichever is earlier when the aggregate sums credited/paid during the financial year exceeds Rs. 1,20,000/-. Shripad Godbole & Associates

  32. Rent Rates from 1.10.2009 • Use of Plant, machinery , equipment- 2% • Use of land, building furniture or fittings- 10% • Payment Within 1 week from the last day of the month in which deduction is made • Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee Shripad Godbole & Associates

  33. Examples- Section 194I • Minimum amount Rs. 120000 per annum • Rate 10% for land or building • Rate 2% for others • Total rent paid for building Rs. 240000 per annum TDS would be Rs. 24000 This has to be deducted and paid monthly Thus monthly TDS would be Rs. 2000( Rs, 24000/12) Shripad Godbole & Associates

  34. Examples- Section 194I 2) - Rent for Building Rs. 90000/ - Rent for furniture Rs. 40000/- - TDS would be Rs. 9000/- on Building and Rs. 800/- on furniture 3) Joint owners- if proved with documentary evidence Total rent Rs. 220000/- Two joint owners- individual rent Rs. 110000 TDS nil Shripad Godbole & Associates

  35. Examples- Section 194I 4) Joint owners- if proved with documentary evidence Total rent Rs. 250000/- Two joint owners- individual rent Rs. 125000 TDS Rs. 12500 per annum Shripad Godbole & Associates

  36. 194 J Fees for Professional or Tech. services • At the time of credit or payment whichever is earlier when the aggregate sums credited/paid exceeds Rs. 20,000/-. • At the rate of 10% as I T • Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee Shripad Godbole & Associates

  37. Examples- Section 194J • Professionals – Minimum amount Rs. 20000/- per year • Rate 10% • Person specific • Amount of fees Rs. 25000 TDS would be Rs. 2500/- • If on a monthly retainership basis ; - per month Rs. 5000/-. TDS would be Rs. 500/- per month and to be paid monthly Shripad Godbole & Associates

  38. Examples- Section 194J • There are multiple payments to a professional but it is not clear at the time of first or initial payments whether there would be further payments • Payments: 1) April Rs. 8000 2) June Rs. 5000 3) Oct Rs. 6000 4) Mar Rs. 8000 Shripad Godbole & Associates

  39. Examples- Section 194J • It is advised to make TDS from the first payment itself • Thus TDS would be • Payments: TDS 1) April Rs. 8000 Rs. 800 2) June Rs. 5000 Rs. 500 3) Oct Rs. 6000 Rs. 600 4) Mar Rs. 8000 Rs. 800 • If it is not done so, the entire TDS has to be paid from the last payment i.e. March eg. Rs. 2700/- Shripad Godbole & Associates

  40. Section 194LA- Compensation for acquisition • Compensation for compulsory acquisition under any law • Any property other than agricultural land • At the time of payment by any mode • Aggregate amount should exceed Rs. 1,00,000/- • Rate 10% • Agricultural land as defined in Section 2(14) of Income Tax act Shripad Godbole & Associates

  41. Section 192-TDS on Salaries • On Estimated Income from Salary for the Financial year • In equal monthly instalments • If an employee gives details of other income in Form 12B, the same will have to be considered. TDS amount can be enhanced or reduced • TDS amount to be paid on the same day if salary is by the Govt. or within seven days from the end of the month if others • Salary Certificate is to be given within 30 days from the end of the Financial year Shripad Godbole & Associates

  42. Example Salary 1 • For Assessment Year 2010-2011 • Calculation of Income Tax in the case of a male employee where medical treatment expenditure was borne by the employer. • Particulars :1.Gross Salary Rs. 3,00,000/- • 2.Medical Reimbursement by employer on the treatment of self and dependent family member Rs. 30,000/- Shripad Godbole & Associates

  43. 3.Contribution of GPF Rs. 20,000/- 4.LIC Premium Rs. 20,000/-5.Repayment of HBA Rs. 25,000/- 6.Tuition fees for two children Rs. 60,000/- 7.Investment in Unit-Linked Insurance Plan Rs. 20,000/- Shripad Godbole & Associates

  44. Computation of Tax Gross Salary Rs. 3,00,000/- Add : Perquisite in respect of reimbursement of Medical Expenses in excess of Rs. 15,000/- in view of Sec. 17(2)(v) Rs. 15,000/- Taxable Income Rs. 3,15,000/-Less : Deduction u/s 80C : GPF 20,000/- LIC 20,000/- Repayment of HBA 25,000. Tuition Fees 60,000/- Investment in Unit-Linked Insurance Plan 20,000/- Total1,45,000/- Restricted to Rs.1,00,000/- Total Income Rs. 2,15,000 Shripad Godbole & Associates

  45. Total IncomeRs. 2,15,000/- Tax PayableRs. 5,500/- Add :Education Cess @2%Rs. 110/- Secondary and Higher Education Cess @1%Rs. 55/- Total Income Tax payable Rs. 5,665/- Rounded off to Rs. 5,660/- Shripad Godbole & Associates

  46. Salary Example 2 • Particulars : • Salary Rs. 3,00,000/- • Dearness Allowance Rs. 1,00,000/- • House Rent Allow.Rs. 1,80,000/- • Special Allowance Rs. 12,000/- • Provident Fund Rs. 60,000/- • Life Ins. Premium Rs. 10,000/- • NSC VIII issue Rs. 30,000/- • Rent Paid by the employee for house hired by her Rs. 1,20,000/- • Repayment of House Building Loan (Principal)Rs. 60,000/ • Tuition Fees for three children (Rs.10,000/- per child)Rs. 30,000/- Shripad Godbole & Associates

  47. Salary Example 2 • Computation of total income and tax payable thereonGross salary(Basic + DA + HRA + SDA) Rs. 5,92,000/- • Less : House rent allowance exempt U/s 10(13A)Least of • :a. Actual amount of HRA received : 1,80,000 • b. Expenditure on rent in excess of 10% of salary (including D.A.) assuming D.A. is including for retirement benefits ( 1,20,000 – 40,000 ) : 80,000 • c 50% of Salary (including DA) • =2,00,000 Rs. • Least of the following (-)80,000/- Shripad Godbole & Associates

  48. Gross Total Income : Rs. 5,12,000/- Less : Deduction u/s 80C : Provident Fund60,000/- LIP10,000/- NSC VIII Issue30,000/- Repayment of HBA60,000/- Tuition Fees (Restricted two children)20,000/- Total1,80,000/- Restricted to Rs. 1,00,000/- Total Income : Rs. 4,12,000/- Shripad Godbole & Associates

  49. Salary Example 2 • Total Income Rs. 5,12,000/- • Tax PayableRs. 33,400/- • Add :Education Cess @2%Rs. 668/-Sec& Higher Eduess @1% Rs. 334/- • Income Tax payable Rs 34,068/-. Rounded off to Rs. 34,070/- Shripad Godbole & Associates

  50. Salary Example 2 • Supposing this person has an agricultural income of Rs. 200000/- • Tax will be calculated as under • Tax on • Taxable Income Rs. 412000 • Add: Agricultural Income Rs. 200000/- • Total Income Rs. 612000/- Tax due 87600 Shripad Godbole & Associates

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