Tax Deduction / Collection at Source (TDS/ TCS) Part 2 CA Final Course Paper 7 Direct Tax Laws Chapter 28 Rajeev Khandelwal FCA, DISA(ICAI)
Learning Objective Sectionwise TDS Issues for each section TCS 2
An Intro. 3
Salary [Sec 192] Applicable to: ALL Employers. ALL Employees. Resident. Non-Resident Taxable Salary > Exemption limit. Value of Perquisites included in salary. Salary in Foreign Currency? Convert in Rs. at prescribed rate. (Rule 26) 4
Salary [Sec 192] TDS on Salary only on Payment. (Not credit) Lower Deduction Certificate from AO. Employer may bear TDS on Non Monetary Perks. Arrears or Advance Salary? Relief u/s 89(1). Any Other Income & TDS reported by employee. No Loss other than from House Property. 5
Salary [Sec 192] Employer can give benefit of deduction u/s : Section Particulars 80C Payment of LIC, PPF etc. 80CCC Contribution to certain Pension Funds. 80CCD Contribution to Pension Scheme of Central Govt. 80D Mediclaim Premium. 80DD Maintenance of Disabled Dependent. 80DDB Medical Treatment. 80E Interest on Loan for Higher Education. 80GG Rent paid by Non-salaried. 80U Deduction for Disabled Person. 80TTA Savings Bank interest upto 10,000/- (AY 2013-14) 6
Salary [Sec 192] Deduction u/s 80G for donations : PM s National Relief Fund Chief Minister's Relief Fund etc. Claim other donations in ITR. Yearly CBDT Circular of TDS on Salary. Monthly TDS at Average Rate of Tax. Monthly TDS = Total Tax for the year/12. 7
Salary [Sec 192] Assessee changes job during FY : First Employer : To deduct TDS at Av. Rate. New Employer : To take into account for TDS (in remaining months) : Salary of Previous Employer & TDS of Previous Employer 8
Salary Details in Form 24Q 9
Interest on Securities [Sec 193] Securities : Debentures, bonds etc. Fixed Rate of Interest & Repayment secured by some tangible assets. Interest on Securities to Resident. TDS @ 10%. For Non-residents TDS u/s 195. 10
Interest on Securities [Sec 193] Exceptions No TDS on interest on : Debentures (listed or not) if : (listed till 30-6-12) Issued by a company in which public substantially interested. Interest paid/payable : to Resident Individual or HUF. (Individual till 30-6-12) By A/c payee cheque. <= Rs.5,000 p.a. (Rs. 2,500 till 30-6-12) 11
Interest on Securities [Sec 193] Exceptions No TDS on interest on : Securities of Central or State Government. Specified Bonds. Securities beneficially owned by Insurance Cos. Any Listed Security in Dematerialised Form. 12
Income from DDBs Circular 2/2002 of 15-2-2002 TDS u/s 193 or 195 only on Redemption. Interest on Deep Discount Bonds? Cash basis : No issue. Accrual Basis (Original Subscriber): Apply to AO in Form 13 for No or Lower Deduction u/s 197. Form 15H by Resident Senior Individual if Income < Taxable Limit. Form 15G by other residents if Accumulated Interest < Taxable Limit. 13
Dividends [Sec 194] Dividend income is Exempt for Shareholders. No TDS on Dividend on which Dividend Distribution Tax (DDT) paid. TDS @ 10% on Deemed Dividend u/s 2(22)(e). 14
Interest other than on Securities [Sec 194A] Intererest on Loans other than Securities. TDS @ 10%. Exceptions No TDS in following cases : Interest TO banks, LIC, UTI & other notified institutions. Interest on Savings Bank/ Recurring Deposit accounts with banks. Interest provision in banks on daily/monthly basis for macro monitoring. (CBDT Circular 3/2010 of 2-3-2010). 15
Interest other than on Securities [Sec 194A] Exceptions Bank Interest on FDs <=Rs. 10,000 pa. Other Interest <= Rs. 5,000. Interest to Partners by Firm. Interest to Members by Co-operative Society. Interest by a Co-operative Society to another. 16
Interest other than on Securities Exceptions [Sec 194A] Interest on Deposits by non-members with Primary Agricultural Credit Society etc. Interest to Depositors of various PO Schemes. Interest paid by Income Tax Department. Interest on Compensation <= Rs. 50,000/- awarded by Motor Accidents Claims Tribunal. Interest on Zero Coupon Bonds. 17
Prize Money of 5 cr? 18
Winnings from Lottery [Sec 194B] Winning from Lottery or Crossword Puzzles. Shows like Kaun Banega Crorepati, Jhalak Dikhlaja, Nach Baliye etc. TDS @ 30%. No TDS if amount <= Rs 10,000. Prize = 7 nights & 8 days tour to Mauritius. TDS can t be deducted as no amount paid. Duty of Responsible Person to ensure tax payment. 19
Winning from Horse Races [Sec 194BB] No TDS if amount <=Rs 5,000. TDS @ 30%. 20
Payment to Contractors [Sec 194C] Applicable for Payments to Resident Contractors /Sub-contractors. Payments to Non-resident Contractors u/s 195. TDS on any Contract of Work. Includes Supply of Labour. 21
Payment to Contractors [Sec 194C] Work includes : Advertising Broadcasting & Telecasting including production of programmes Carriage of Goods & Passengers by any mode of transport (other than Railways ) Catering Manufacturing a product : As per Client Specification Using Material purchased from such Client. Note : If raw material purchased from another person, not work. 22
Payment to Contractors [Sec 194C] No distinction of Contractor or Sub contractor. Individuals & HUF : 1%. Others : 2%. TDS on Total Bill Value if Value of Materials not separately mentioned. TDS applicable on Reimbursement of Expenses also. (Circular 715 of 8-8-95). 23
Payment to Contractors [Sec 194C] Exceptions No TDS in the following cases : Single payment <=Rs. 30,000. Multiple payments in a financial year <= Rs. 75,000. Payment made by Individual or HUF for Personal Purposes. Payment made to Goods Transport Contractor who has furnished PAN. (TDS @ 20% if no PAN). 24
Insurance Commission [Sec 194D] Applicable on : Insurance Commission or Other Remuneration for soliciting insurance. For New or Existing/Lapsed Policies. TDS only if amount > Rs. 20,000 p.a. TDS @ 10%. 25
Payment to Non-resident Sportsman etc. [Sec 194E] Applicable on payments made to Non-resident : Sportspersons (including athletes). Sports Association. Entertainer. (Wef 1-7-12) 26
Payment to Non-resident Sportsman etc. [Sec 194E] Applicable incomes : Taking part in any game in India. Advertisement. Contribution of Sports related articles in newspapers or magazines. Performance by Entertainer. Guarantee amount to a Sports Association for any sports played in India. TDS @ 20%. (10% till 30-6-12) 27
Payments for Deposits under NSS [Sec 194EE] Applicable on payments made from National Savings Scheme u/s 80CCA. TDS if amount > Rs. 2,500 p.a. Tax @ 10%. Exception No TDS on payments made to Legal Heirs of deceased. 28
Repurchase of Units by Mutual Fund [Sec 194F] Applicable on Payments made on Repurchase of Units u/s 80CCB(2). Tax @ 20%. 29
Commission on Sale of Lottery Tickets [Sec 194G] Applicable on Commission, Remuneration on Sale of Lottery Tickets. TDS if amount > Rs. 1,000 p.a. Tax @ 10%. 30
Commission /Brokerage [Sec 194H] TDS if amount > Rs. 5,000 p.a. TDS @ 10%. Exceptions No TDS by Individual or HUF to whom Tax Audit NA in immediately preceding FY. No TDS on Commission to PCO Operators by BSNL & MTNL. 31
Rent [Sec 194I] TDS if Rent > Rs. 1,80,000. Limit of Rs. 1,80,000/- for each Co-owner separately. No TDS on Refundable Security Deposit. TDS applicable on : Advance Rent. Warehousing Charges (as it is in the nature of rent). Hotel Accommodation taken on Regular basis. CBDT Circular 5/2002 of 30-7-2002. No TDS on rate contracts for getting lower rates if no regular hiring. 32
Rent [Sec 194I] Use of Cold Storage Facility? Contract u/s 194C. (CBDT Circular 1/2008 of 10-1-2008). TDS on Rent : Plant, Machinery or Equipment : 2%. Land & Building : 10%. No TDS on Service Tax on Rent. (CBDT Circular 4/2008 of 28-4-2008). Exception No TDS by individual or HUF to whom Tax Audit not applicable in immediately preceding FY. 33
TDS on Transfer of Property [Sec 194IA] Purchase of Property >= 5 lacs : PAN Mandatory(Rule 114B) >=30 lacs : AIR Many Buyers don t provide PAN. Sec. 194-IA Wef 1-6-2013. TDS @ 1%. On Purchase of Immovable Property. Value >=Rs. 50 lacs. 34
TDS on Transfer of Property [Sec 194IA] Resident Seller. Individuals etc. not in business. First/ Subsequent Sale. NA to Agricultural land in Rural Area. (Sec 2(14)) 35
Professional or Technical Fees [Sec 194J] Following payments are covered: Fees for Professional Services. Fees for Technical Services. Royalty. Non-compete fee etc. Any Remuneration, Fee or Commission paid to Director of Co. (not covered u/s 192). (wef 1-7-12) 36
Professions CA Medical Engineering Architecture Technical Consultancy Interior Decoration Legal Advertising 37
Notified Professions Authorised Representative Company Secretary Information Technology 38
Notified Professions Sportspersons Umpires and Referees Coaches and Trainers Team Physicians Physiotherapists. Event Managers Commentators Anchors Sports Columnists 39
Notified Professions Film Artist Actor Cameraman Director/ Assistant Director Music Director/Assistant Music Director Art Director/ Assistant Art Director Dance Director/Assistant Dance Director Editor 40
Notified Professions Singer Lyricist Story writer Screen-play writer Dialogue writer Dress designer
Professional Fees Photography, Dancing etc.? Not covered as not notified. Payments made by TPAs to Hospitals etc. covered (for medical services). Payment made for Use of Computer Software? Covered under Royalty. Sitting Fee to Director. (irrespective of amount) Other cases : TDS only if amount > Rs. 30,000 p.a. TDS @ 10%. 42
Exceptions Professional Fees No TDS by Individual or HUF to whom Tax Audit NA in immediately preceding FY. No TDS on Professional Fee for personal purposes by Individual or HUF to whom Tax Audit applicable in immediately preceding FY. No TDS on professional fee : paid by non-residents to CAs, lawyers etc. through normal banking channels if they don t have any agent or business connection in India. 43
Exceptions Professional Fees No TDS on subsequent sale of computer software if : No Modification in Software. TDS already deducted u/s 194J or 195 in any previous sale. Undertaking by Seller that TDS deducted. Seller provides PAN to Buyer. 44
Compulsory Acquisition of Immovable Property [Sec 194LA] Applicable on Compensation /Enhanced Compensation. For Compulsory Acquisition. Immovable Property : Any Land or Building or part. 45
Compulsory Acquisition of Immovable Property [Sec 194LA] No TDS for Compensation <= Rs. 2 lacs pa. (Rs. 1 lac upto 30-6-12) TDS @ 20%. Exceptions No TDS in case of Compulsory Acquisition of Agricultural Land. (Sec 2(14)(iii)) 46
Interest from Infrastructure Debt Fund [Sec 194LB] Applicable on Interest paid by Infrastructure Debt Fund. (Sec 10(47)). To Non-resident or Foreign Co. TDS @ 5%. 47
Interest from Indian Company [Sec 194LC] Applicable on Interest paid by Indian Co. To Non-resident or Foreign Co. Loan taken from 1-7-2012 to 30-6-2015. Loan borrowed in Foreign Currency. Loan Agreement or Long Term Infrastructure Bonds. Approved by Central Government. Rate of Interest <= notified rate. TDS @ 5%. 48
Other Payments to Non-residents [Sec 195] Applicable on Payments to Non-residents/ Foreign Cos. NA to Salaries(Sec 192) & other payments under specific sections. No Threshold Limit. Responsibility to deduct tax ON ANY PERSON. Both Residents & Non-residents to deduct tax. 49
Other Payments to Non-residents [Sec 195] Non-resident may not have : Residence Place of Business Business Connection in India Any other presence in any manner in India. Explanation to Sec 195 (in view of Vodafone case judgement of SC) 50
Other Payments to Non-residents [Sec 195] Income Chargeable to tax in India. CA certificate in Form 15CB E-filing details of Foreign Remittance in Form 15CA on www.tin-nsdl.com. Different Rates for Different Types of Payments. Direct Tax Avoidance Agreement (DTAA) with various countries. Applicable Rate : Lower of Rate as per Income Tax Act & Rate in DTAA. 51
Refund of Excess Tax u/s 195 Circular 7/2011 of 27-9-2011. Refund in following cases : Income does not accrue to Non-resident. No Tax is due. Tax is due at Lower Rate. TDS deducted as per DTAA but lower tax in IT Act. 52
Details in Form 26Q/27Q 53
Tax Collection at Source [Sec 206C] Every Seller at the time of debiting amount receivable or receiving payment whichever is earlier, shall collect Tax at Source From Buyers at following rates: 54
Tax Collection at Source S. No. Specified goods Rate of TCS 1. Alcoholic liquor for human consumption 1% 2. Tendu leaves 5% 3. Timber obtained under a forest lease 2.5% 4. Timber obtained by any mode other than under a 2.5% forest lease 5. Any other forest produce not being timber or tendu 2.5% leaves 6. Scrap 1% 7. Minerals being coal, lignite or iron ore Wef 1-7-12 1% 55
Tax Collection at Source (1C) Every person granting a Lease/Licence or Otherwise Transferring any Right or Interest in following shall at time of debiting amount receivable or receiving payment whichever is earlier, collect tax at source as follows : 56
Tax Collection at Source S. No. Specified rights Rate of TCS 1. Parking lot 2% 2. Toll Plaza 2% 3. Mining & Quarrying 2% Exception Licensee/ Lessee is Public Sector Co. 57
Tax Collection at Source (1D) Every Seller Shall Collect Tax at Source From Buyers in case of CASH Sale at following rates : S. No. Specified goods Rate of TCS 1. Bullion > Rs. 2,00,000/- 1% 2. Jewellery > Rs. 5,00,000/- 1% Wef 1-7-12 58
Surcharge & Education Cess on TCS (AY 2013-14) Buyer Surcharge (2%) Education Cess (3%) Residents No No Foreign Co. (Amount collected up to 1 cr.) Foreign Co. (Amount collected more than 1 cr.) Other Non-residents (Irrespective of amount ) No Yes No Yes Yes Yes 59
TCS at Lower /Nil Rate Buyer furnishes Certificate from AO. Application by Buyer in Form 13. AO to grant certificate if Total Income of Buyer justifies Lower or Nil TCS. No TCS if buyer furnishes declaration in Form 27C (in duplicate) that goods shall be utilised for : Manufacturing, Processing or Producing Articles or Things & NOT for Trading. Collector to furnish copy of declaration to ITD by 7 th of next month. 60
Deposit of TCS Government Deposit by Transfer Voucher Challan Due date of Deposit Same day By 7 th of the month subsequent to the month of deduction 61
Deposit of TCS Other Collectors Can deposit TCS by Challan only. By 7 th of month subsequent to month of collection. No extra time for tax collected during March. 62
Quarterly Statement of TCS Quarter Government Others Q1 (Apr-Jun) 31 Jul 15 Jul Q2 (Jul-Sep) 31 Oct 15 Oct Q3 (Oct-Dec) 31 Jan 15 Jan Q4 (Jan-Mar) 15 May 15 May Note : E-filing mandatory in some cases as in TDS. 63
Certificate of TCS Form 27D. Quarterly within 15 days of due date of TCS Returns. (Same as in TDS). Prepared & issued by Collector. Not downloaded from IT website. 64
Lesson Summary TDS on Different Payments. Important issues in each section. Exceptions. TCS Various compliances in TCS. 65
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MCQ 1 TDS on Salary is to be deducted at the time of : A. Credit. B. Payment. C. Earlier of Credit or Payment. D. None of the above. Solution : B 67
MCQ 2 TDS on Salary is be deducted at : A. Average Rate of Tax C. 20% B. 10% D. 30% Solution : A 68
MCQ 3 Non-Salary TDS is to be deducted at the time of : A. Credit. B. Payment. C. Earlier of Credit or Payment. D. None of the above. Solution : C 69
MCQ 4 TDS should be claimed in the year in which : A. Income is offered to tax C. Payment credited B. Payment received D. None of the above. Solution : A 70
MCQ 5 Certificate for lower or no deduction can be applied to AO for sections : A. 192 B. 194A C. 194C D. All the above Solution : D 71
MCQ 6 If deductee does not furnish PAN, TDS is to be deducted at : A. Average Rate of Tax B. 10% C. Minimum 20% D. Maximum 20% Solution : C 72
MCQ 7 Government deductor can deposit TDS/TCS by : A. Challan B. Transfer Voucher C. Either A or B D. None of above Solution : C 73
MCQ 8 TDS on Commission is covered by section : A. 194J B. 192 C. 194C D. 194H Solution : D 74
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Question 1 Is TDS liable to be deducted on prize money won in KBC contest by Naman? Is Naman liable to claim benefit of exemption limit of Rs. 2,00,000? Solution : Yes, TDS to be deducted u/s 194B. Tax is deducted at flat rate of 30% without any exemption. 76
Question 2 Sonal Haldia wins a flat in Andheri Mumbai as prize money for winning Big Boss. Is TDS applicable? Solution : Yes, TDS is liable to be deducted @30% u/s 194B. The organisers have to ensure that she pays tax on it beforehand as the prize money is in kind. 77
Question 3 Payments to Contractor Sanju during 2012-13 : 5-4-2012 25,000 26-6-2012 30,000 12-12-2012 10,000 24-01-2013 10,000 Whether TDS applicable? On which amount? Solution : TDS NA as no individual payment > 30,000 & aggregate payments don t exceed 75,000. If further payments made, then TDS @ 1 % on total. 78
Question 4 Is TDS applicable on payment received by Chris Gayle for playing T -20 matches in India? What is the threshold limit? Solution : Yes, TDS to be deducted u/s 194E. TDS is applicable irrespective of amount. 79
Question 5 Is TDS applicable on any payment made to Chris Gayle for modelling in India? What is the threshold limit? Solution : Yes TDS is applicable u/s 194E. TDS is applicable irrespective of amount. 80
Question 6 Rent paid @ Rs 30,000 for 6 months in FY 2012 2013 to Krishan Kumar. Is TDS applicable? Solution : No. TDS is liable to be deducted if rent payment exceeds Rs. 1,80,000 during FY. 81
Question 7 Is TDS applicable on Landing & Parking charge paid by Jet airways to Airport Authorities of India? Under which Section? Solution : Yes u/s 194I. CIT vs Japan Airlines Co. Ltd.(2010) 325 ITR 298. 82
Question 8 Is TDS applicable on payment made to Farhan Akhtar for directing a movie? Under which Section? Solution : Yes, TDS is liable to be deducted u/s 194J as Film Direction is a Profession notified u/s 194J. 83
Question 9 By which date TDS is be deposited by challan if it has been deducted : On 1-3-2013 On 31-3-2013 Any other date in March Solution : By 30-4-2013. 84
Question 10 Is TCS applicable on Gold Ornaments worth 10 Lacs purchased in cash by Sunita on 30-6-2012? Solution : No. TCS on gold ornaments & bullion applicable wef 1-7-2012. 85
Thank You 86