UNION BUDGET 2017-18 Hon ble Prime Minister Narendra Modi has shown his determination to come heavily on tax evaders. He has also shown his commitment to eliminate high value cash transactions from the economy. The Narendra Modi government is also toning up the tax administration. All these are adequately reflected in the Budget 2017. Attached are the highlights of the changes brought about by the Finance Act, 2017 in the Income Tax Act, 1961. We hope, we all will read the writing on the wall and arrange our affairs accordingly. Page 1
MAJOR CHANGES IN INCOME TAX ACT, 1961 1. Surgical Strike on Cash Transactions: 1.a Restrictions on Cash Transactions w.e.f. 1st April, 2017. At present, there is a restriction on acceptance or repayment of loans in cash of Rs. 20,000/- or more u/s 269SS/269T. There is also restriction on acceptance or repayment of any money in relation to transfer of an immovable property in cash of Rs. 20,000/- or more u/s 269SS/269T. In case of violation, equal amount of penalty shall be imposed u/s 271D. There was no such restriction on any type of receipts like Cash Sales, Partner s Capital Contribution, Gifts, Share Application Money etc. To restrict such type of cash receipts, a new section 269ST is inserted to provide that no person shall receive an amount of Rs.2,00,000/- or more in cash : (a) In aggregate from a person in a day; (b) In respect of a single transaction; or (c) In respect of transactions relating to one event or occasion Page 2
It means that all kind of receipts viz Sales, Fee Receipts, Partner s Contribution, Gifts, Share Application Money etc. will be covered by this section. In case of violation, equal amount of penalty shall be imposed u/s 271DA. There were lot of confusions in the minds of taxpayers regarding applicability of above section on cash withdrawn from bank. It is clarified by the CBDT vide Notification dated 5th April, 2017 that amount of cash withdrawn from Bank is not covered under the above provisions. As a consequential measure, TCS provision on cash sale exceeding Rs. 2 lakhs is withdrawn. 1.b Decrease in Threshold Limit on Cash Payments to Rs. 10,000/At present, cash payments made to a person in a day exceeding Rs. 20,000/- is disallowed u/s 40A(3) while computing the total income. This limit is now reduced to Rs. 10,000/-. 1.c Disallowance of Depreciation on Capital Expenditure At present, revenue expenditure incurred in cash exceeding Rs. 20,000/- (now Rs.10,000/-) is disallowed as above. However, there is no provision for disallowing capital expenditure incurred in cash. In order to discourage the cash mode of payment even for capital expenditure, it is provided that expenditure incurred for acquisition of asset in respect of which a payment is made in cash to a person Page 3
exceeding Rs. 10,000/- per day shall be ignored for the purposes of computing the actual cost, on which deprecation is allowed. 1.d Restriction on Cash Donations At present, deduction u/s 80G is not allowed in respect of donation exceeding Rs. 10,000/- if the same is paid by cash. The aforesaid limit is now reduced from Rs.10,000/- to Rs. 2,000/-. 2. Tax Benefit for Digital Transactions Under the existing provisions of Section 44AD, in case of small taxpayers (i.e. an individual, HUF or a partnership firm other than LLP), carrying on any business (other than transportation, agency, brokerage and commission) and having a turnover of Rs. 2 crore or less, the profit is deemed at 8% of the total turnover. In order to achieve the Government's mission of moving towards a cash less economy, the existing rate of deemed profit of 8% u/s 44AD is reduced from 8% to 6% from financial year 2016-17 itself in respect of the amount of total turnover received through the banking channel/ digital means. The existing rate of deemed profit of 8% referred to in section 44AD shall continue to apply in respect of total turnover received in cash. Page 4
3. Tax Planning Made Difficult 3.a Purchases of Property for Less than Market Value At present, purchases of an immovable property without consideration or for a consideration which is less than Stamp Duty Value by an individual or a HUF is liable for tax in the hands of purchaser for such difference amount. Similarly, purchases of a movable property without consideration or for a consideration which is less than Fair Market Value by an individual or a HUF is liable for tax in the hands of purchaser for such difference amount. The above provisions were not applicable in the case of Company or a Firm. To plug the above loopholes in the law, a new clause (x) is inserted in section 56(2) to provide that purchase of a movable or an immovable property without consideration or for a consideration which is less than Stamp Duty Value/Fair Market Value by any person (Other than Charitable Trusts, Institutions etc) is liable for tax in the hands of purchaser for such difference amount. Exceptions are provided in respect of specified situations similar to those covered in current section 56(2)(vii), such as receipt of money from relative, under will, etc. Page 5
3.b Restriction of Exemption on Long Term Capital Gain on Sale of Shares At present, long term capital gain arising on sale of equity shares is exempt if STT is paid at the time of sale of shares. This requirement of STT payment was not applicable at the time of purchase of these shares. This provision is prone to misuse for taking fictitious capital gain entries. In such cases, although sale of equity shares are made through a recognized stock exchange by paying STT, purchases of such shares are made, in many cases, without paying STT for backdating the transaction. Therefore, it is provided in section10 (38) that in case, shares are purchased on or after 01.10.2004, exemption of long term capital gain will be available only if STT on purchase of such shares is also paid. After this amendment, backdating of transaction of purchase will not be possible. Certain exceptions of above provisions are expected like acquisition of shares in IPO, FPO, bonus or rights issue by a listed company, acquisition by non-residents in accordance with FDI policy etc., through a notification. Page 6
3.c Fair Market Value of Un-quoted Shares to be Substituted as Full Value Consideration in Cases, Where Consideration is Less Than Such Fair Market Value At present, the value adopted for stamp duty purpose can be substituted as the full value of consideration for computing capital gains on transfer of immovable property u/s 50C, where the consideration received is less than such value. A similar section 50CA is introduced for transfer of shares other than quoted shares under which the fair market value of such shares will be substituted as full value of consideration in case the consideration received is less than the fair market value. 3.d Tax on Unexplained Income/Expenditure/Investment Substantially Increased At present, tax on Unexplained Income/Expenditure/Investment is charged @ 30% u/s 115BBE. In such cases, benefit of basic exemption is not given. This tax rate is now increased from 30% to 60% by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. A.Y. 2017-18 (F.Y. 2016-17). Such income shall now also attract surcharge @ 25% of such tax i.e.15%. Penalty @ 10% of such tax i.e. 6% will also be levied u/s 271AAC, if such income is not shown in the Income Tax Return filed and such tax has not been paid on or before the end of the relevant previous year. The summarised position is as under: Page 7
Tax/Penalty Rate of Tax u/s 115BBE Surcharge EC & SHEC Penalty (Not levied if tax paid st before 31 March of previous year) u/s. 271 AAC Total Rate 60% of Income 15% of Income 2.25 % (3 % of Tax & Surcharge) 6% (10% of Tax) 83.25% Thus, unexplained deposits in Bank, unexplained expenditure in marriages, unexplained investments in land or jewellery etc can attract tax and penalty as above. The Department may also charge tax and penalty u/s 115BBE in case of income from stitching, tuition income etc. shown in the return, if not proved. 4. Provisions relating to Real Estate Sector 4.a Notional Income of House Property Held as Stock-in-Trade The common view, under the existing provisions, was that no notional value of rent of house property held as stock in trade is taken under the head income from house property. However, Honb le Delhi High Court in the case of Ansal Housing, had taken a view that such house property, if vacant and held as stock in trade is also liable for notional value of rent. With a view to overcome this decision, it is provided that the notional value of rent of Page 8
such house property shall be considered to be nil if it is held as stock-in-trade, and it is not let out during the whole or any part of the year. The above benefit will be available for a period up to one year from the end of the financial year in which the completion certificate is obtained from the relevant authority. The above provision is apparently a beneficial provision. However, it confirms the Hon ble Delhi High Court view whereby notional value of rent of any house property held as stock in trade upto 31 st March, 2017 is liable for tax under the head Income from House Property. Income Tax Department may issue notices to builders to assess or reassess the income for the past years. 4.b Affordable Housing Projects: Tax Benefits Made Easier Relaxation has been provided in the conditions to qualify for 100% profit-linked deduction in the business of developing affordable housing projects. These are as follows: Size of residential unit will be measured as carpet area * and not as built-up area, Completion period of projects for claiming deduction is increased from three years to five years from the date of receipt of approval Size restriction of 30 square metres for residential units shall apply only to metro cities and not to the areas within the Page 9
distance of 25 kilometers, from the municipal limits of metropolitan cities. 4.c Clarification on Taxability of Joint Development Agreement At present, there is lot of litigation going on regarding the year in which the Capital Gain will arise in case of Joint Development Agreement. Generally, it is the year in which the possession of immovable property is handed over to developer by property owner. In order to minimise hardships faced by property owners, it is now provided that in case of property owner being Individual and HUF, capital gains on Joint Development Agreement will be taxable in the year in which the completion certificate for the whole or part of the project is issued by the competent authority. If the share of the property owner in the project is sold by the property owner prior to receipt of the completion certificate, the capital gains should be taxable in the year of actual transfer of the share in property. For the purpose of computation of capital gains, the aggregate of the stamp duty value of the relevant share of the project on the date of issue of the completion certificate and cash consideration received shall be deemed to be the total consideration. Income Tax at the rate of 10% u/s 194-IC shall be deducted by the Developer from such cash consideration paid to property owner. Page 10
4.d Shifting Base Year from 1981 to 2001 for Computation of Capital Gains At present, cost of acquisition of an asset acquired before 1st April, 1981 is taken at fair market value as on 1st April, 1981 or the actual cost of the asset, at the option of the assessee. This base year is now moved to 1st April, 2001. Thus, there will be no Income Tax on Capital Gain for appreciation in the value of assets upto 01.04.2001. 4.e Holding Period of Land and Building Reduced for Qualifying Long Term Capital Assets At present, any capital asset that is an immovable property, held for more than 36 months, is considered a long-term capital asset for the purpose of capital gains. The long term capital gain has benefit of lower tax rate of 20% instead of usual 30% and also the benefit of indexation etc. With a view to promote the real-estate sector and to make it more attractive for investment, the holding period for land or building is reduced from 36 months to 24 months to qualify as a long-term capital asset so that the benefit of long term capital gain can be availed. 4.f TDS on Rent Paid by Certain Individuals and Hindu undivided Family At present, payment of rent by a specified individual or HUF (who is liable for tax audit) is liable to deduct tax at source. However, the rent paid by the individual or HUF not covered under tax audit is not liable to deduct tax at source. Thus, large number Page 11
of salaried individuals, who are paying high rent, particularly in metro cities, are not required to deduct any tax at source. It is now provided that an individual or an HUF (other than those covered under Tax Audit) is also required to deduct tax at source @ 5% on rent payments exceeding Rs. 50,000 per month. Such tax is to be deducted at the time of credit of rent, for the last month of the previous year or the last month of tenancy or at the time of payment of such rent, whichever is earlier. Such deductor is not required to obtain any Tax Deduction Account Number. This provision shall be applicable w.e.f 1 June, 2017 onwards. 5. Provisions Relating To Search and Seizure 5.a Penalty Provisions Relating to Search Penalty provisions relating to search contained in Section 271AAB are completely revamped by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 15th December, 2016. The penalty in case of search initiated after 15th December, 2016 is as under: Particulars Rate of Tax u/s 115BBE Surcharge EC & SHEC Penalty u/s 271AAB Total If Undisclosed If Undisclosed Income Income Not Surrendered Surrendered 60% of income 60% of income 15% of Income 15% of Income 2.25 % (3 % of Tax & Surcharge) 30% of Income 2.25 % (3 % of Tax & Surcharge) 60% of Income 107.25% 137.25% Page 12
5.b Extended Period of Reassessment in Case of Search At present, reassessment in case of search is made for six assessment years prior to the date of search u/s 153A. This period is extended from six assessment years to ten assessment years if following conditions are satisfied: Undisclosed income escaping assessment is represented in the form of asset; Amount of undisclosed income is likely to Rs. 50 lacs or more in one year or in aggregate in the relevant four assessment years (falling beyond the sixth year); Asset shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account 5.c Reason to Believe - Not required to be Disclosed in Case of Search The search is initiated on the basis of reason to believe of undisclosed income. Such reason to believe is not provided to any person except to the High Court. In some of the judicial pronouncements, it was held that Income Tax Appellate Tribunal can also scrutinize reason to believe. It is now provided that Income Tax Authorities are not required to disclose the reason to believe to any person, any authority and appellate tribunal for search purpose. However, High Court or Supreme Court can still scrutinize reason to believe. Page 13
It was widely reported by media that now Income Tax Authorities can make search without assigning any reason. However, the amendment is made only to provide that such reason to believe will not be disclosed to any authority below the High Court. 6. Amendments Relating to Trusts 6.a Restriction of Corpus Donation by Exempt Entities to Other Exempt Entities At present, corpus donation made by charitable trust or other institutions registered u/s 10(23C) to other such entities is considered as application of income for charitable or religious purposes. To ensure that their income is actually expended towards charitable purposes, it is provided that any corpus contribution by a charitable trust or other institutions registered u/s 10(23C) to another charitable trust or institution registered u/s 10(23C) shall not be treated as application of income for charitable or religious purposes. 6.b Fresh Registration to be Obtained in Case of Modifications of Objects of the Trust At present, there is no specific provision for taking fresh registration in case of modification of objects of charitable trusts. It is now specifically provided that in case of a charitable trust registered u/s 12A/ 12AA, if any modification is made in the objects of the trust, it would be required to obtain fresh registration within a period of 30 days from the date of said modification. Page 14
6.c Requirement of Filing the Return of Income by the Trust Within the Prescribed Time to Claim Exemption Income of the charitable trust is exempt u/s 11/12. If charitable trust does not file the return in time, there is penalty of Rs. 100/- per day. However, income will continue to be exempt. It is now provided that a charitable trust would be required to file its Return of Income within the prescribed time to claim exemption. If return is not filed within the prescribed time, entire income of the trust will be liable to tax for that year. 6.d Power of Survey Extended to Charitable Trusts At present, Income Tax Authorities can survey any business premises. Since the premises of charitable trusts are not business premises, they cannot survey charitable trust. Now amendment is made to give power of survey against charitable trusts. There can, now, be surveys on charitable trusts. It is worthwhile to note that this power is not extended to religious trusts. Therefore, survey cannot be done at religious trusts such as Tirupati Balaji Trust, Govind Devji Mandir Trust etc. Page 15
7. Assessment, Appeals and Other Procedural Provisions 7.a Higher Depreciation Rate Reduced to 40% Currently, higher depreciation is provided on certain block of assets upto 100%. In terms of budget announcement made last year, a notification is issued to restrict the higher rate of depreciation to 40% w.e.f 01.4.2017. (i.e from F.Y. 2017-18 ). The new rate is applicable to all the assets (whether old or new) falling in the relevant block of assets. Some of such block of assets are as under: Old New Rate Rate 100 40 Computers including computer software 60 40 Renewable energy devices 80 40 100 40 60 40 Particulars Purely temporary erections Books owned by assessees carrying on a profession (a) Books, being annual publications (b)books, other than those covered by entry (a) above 7.b Corporate Tax Rate of Domestic Company having Turnover less than Rs. 50 crores in F.Y. 2015-16 - Reduced Corporate tax rate of Domestic Company having Turnover of less than Rs. 50 crores in F.Y. 2015-16 is reduced from 30% to 25% (plus applicable surcharge and education cess). In other cases, the tax rates remain unchanged at 30% (plus applicable surcharge and education cess). Page 16
7.c Reduction in Time-Limit for Revising Return of Income The existing provision allows the taxpayer to revise return of income at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. In order to expedite assessment, the above time frame for filing revised return has been curtailed to the end of the assessment year only or before the completion of assessment, whichever is earlier. The last date of revising return for different assessment years is as under: F.Y. A.Y. Time Period 2016-17 2017-18 2018-19 2017-18 2018-19 2019-20 1 Year from relevant AY Upto the end of relevant AY Upto the end of relevant AY Last date of Revised Return 31-03-2019 31-03-2019 31-03-2020 7.d Change in Time-Limit for Assessment and Reassessment Presently, the time limit for assessment is 21 months from end of the assessment year. Thus, any income tax return filed for the financial year 2015-16 is require to be assessed by 31st December, 2018. This time limit is reduced in phases from 21 months to 12 months. The income tax return filed for the financial year 2018-19 will be assessed by 31st March, 2021. Page 17
In view of above amendment, tax payer is required to obtain all the evidences required for assessment well in time like bank statements, confirmations etc. 7.e Fees for Delayed Filing of Return In order to penalize the taxpayers for non-filing of return within the due date, it is provided to levy a fee on such defaulters in respect of return of income related to AY 2018-19 onwards. The fees would be levied in the following manner: Particulars Total Income <= Rs. 5,00,000 Total Income > Rs. 5,00,000 7.f Time Period Fees After Due date Rs. 1,000 After Due date but Rs. 5,000 st before 31 December st After 31 December Rs. 10,000 Penalty on Professionals for Furnishing Incorrect Information At present, penalty is imposed on assessee in case of furnishing incorrect information. Now, penalty of Rs.10,000/- is provided u/s 271J on professionals (i.e. chartered accountant, registered valuer or merchant valuer) for furnishing incorrect information in any report or certificate furnished by them under any provision of the Act or the Rules. 7.g Rationalization of Domestic Transfer Pricing Provisions With a view to reduce transfer pricing compliance burden and facilitate the ease of doing business, payment of expenditure to specified persons, such as relatives, directors, sister companies, etc., are excluded from domestic transfer pricing provisions with Page 18
effect from Financial Year 2016 17. Thus, domestic transfer pricing provisions will only apply to intercompany transactions if one or both the parties are involved in activities eligible for tax holidays. 7.h Restriction of Set Off of Loss from House Property Under the existing provisions, loss from house property is allowed to be set off against any other income (without any limit). It is now proposed to limit such set off to Rs.2,00,000/-. Any unabsorbed loss from house property can be carried forward to set off against income from house property up to eight years. 7.i New Income Tax Return Forms The CBDT has notified the new Income Tax Return Forms for the A.Y. 2017-18. Following are the major changes in forms: A. Declaration of Cash Deposited during Demonetization Period In the new Income Tax Return Forms, a new column has been added in all ITR forms to report on cash deposited by tax payers in their bank accounts during the demonetization period from 9th November, 2016 to 30th December, 2016, if they have deposited Rs. 2 lakhs or more. B. Declaration of Value of Assets and Liabilities by Individuals/HUF earning Total Income above Rs. 50 lakhs In the last year return, the CBDT had introduced a new schedule requiring individuals/hufs to declare the value of assets and liabilities if their total income exceeds Rs. 50 lakhs. Page 19
The taxpayers were required to mention cost of immovable property, jewellery, bullion, vehicles, shares, bank and cash balance etc. Now the tax payers are also required to disclose address of immovable property and description of movable assets such as jewellery, bullion, vehicles etc in new ITR forms. C. Quoting of AADHAAR Number Aadhaar Number in now required to be mandatorily quoted in Income Tax Return Forms. This is prepared for Client s service and is for internal use only. We recommend that professional advice be sought before taking action on any specific issue. Page 20
INCOME TAX RATES A.Y. 2017-18 & A.Y. 2018-19 (A) Individuals (other than Senior Citizens) & HUF Annexure 1 Income Slabs Existing New (A.Y. 2017-18) (A.Y. 2018-19) 0 2,50,000 Nil Nil 2,50,001 5,00,000 10% 5% 5,00,001 10,00,000 20% 20% 10,00,001 & more 30% 30% (B) Resident individuals Senior Citizens (Age of 60 years or more but less than 80 years) Income Slabs Existing New (A.Y. 2017-18) (A.Y. 2018-19) 0 3,00,000 Nil Nil 3,00,001 5,00,000 10% 5% 5,00,001 10,00,000 20% 20% 10,00,001 & more 30% 30% (C) Resident individuals Super Senior Citizens (Age 80 years & above)- Income Slabs Existing New (A.Y. 2017-18) (A.Y. 2018-19) 0 5,00,000 Nil Nil 5,00,001-10,00,000 20% 20% Above 10,00,000 30% 30% A.Y. 17-18 & 18-19 Page 1
(D) Rebate u/s 87A in case of Individuals Particulars Existing New (A.Y. 2017-18) (A.Y. 2018-19) Total Income more than 3,50,000 but upto 5,00,000 5000 - Total income upto 3,50,000 5000 2500 (E) Partnerships and LLPs No change Tax Rates on whole of the Total Income 30% Note: Alternate Minimum Tax (AMT) for non-corporate assessees (including LLPs) @ 18.5%. (F) Company (Domestic) Gross Turnover Slabs Existing (A.Y. 2017-18) New (A.Y. 2018-19) Turnover or Gross Receipts is equal to or less than Rs. 50 crores in previous year 2015-16. 30% 25% Turnover or Gross Receipts exceeds Rs. 50 crores in previous year 2015-16. 30% 30% Note: Minimum Alternate Tax (MAT) for corporate assessees @ 18.5%. A.Y. 17-18 & 18-19 Page 2
(G) Surcharge- Type of Assessee Individuals/HUF/AOP/BOI (Whether incorporated or not) If net income exceeds Rate (A.Y. 2017-18) Rate (A.Y. 2018-19) 50 lakhs - 10% 1 Crore 15% 15% Firms 1 Crore 12% 12% Companies (Domestic) 1 Crore 7% 7% 10 Crore 12% 12% (H) Education Cess and Secondary Education Cess on Income Tax No change Type of Cess Rate for Rate for A.Y. 2016-17 A.Y. 2017-18 Education Cess 2% 2% Secondary & Higher Education Cess 1% 1% A.Y. 17-18 & 18-19 Page 3
TDS LAW - AN OVERVIEW A.Y. 2018-19 w.e.f. 1 st April, 2017 Annexure 2 Nature of Payment Salary u/s 192 Interest u/s 194A Payments Made to Contractors u/s 194C Rate of TDS No specific rate. Tax payable on Total Salary is to be deducted in 12 equal monthly instalments. 10% If recipient is Individual or HUF 1% If recipient is any entity other than an Individual or a HUF 2% Monetary Limits Requiring TDS/Remarks Estimated Gross Salary exceeds the exemption limit of Rs. 2,50,000/- (Individuals), Rs. 3,00,000/- (Senior Citizen) and Rs. 5,00,000/- (Super Senior Citizen). Employer is required to obtain Form 12BB from the employee. Interest credited or paid exceeds Rs. 5,000/-. In case, payer is a Banking Co. /Cooperative Bank/Post Office Rs. 10,000/-. Exceeding Rs. 30,000/- to a contractor in a single payment or Rs. 1,00,000/- in the aggregate during the financial year to a contractor. No liability of deducting tax on Individual/HUF if amount is paid/credited to contractor exclusively for personal purposes. Page 1
Plant or Machinery or Equipment 2% Rent u/s Land or building 194-I or furniture or fittings 10%. Rent u/s 194-IB 5% Amount of Rent exceeds Rs. 1,80,000/- to a single person in a financial year. Amount of Rent exceeds Rs. 50,000/- per month. Applicable to individuals/hufs not covered under Tax Audit Transfer of Immovable Property other than Agricultural Land u/s 194- IA Fees for Professional and Technical Services u/s 194J Commission or Brokerage u/s 194H 1% 10% 5% If purchase consideration is equal to or exceeds Rs. 50,00,000/-, then transferee shall deduct tax. Applicable also to individuals/hufs not covered under Tax Audit. Total payment exceeds Rs. 30,000/- in a financial year. No liability of deducting tax on Individual/HUF if amount is paid/ credited exclusively for personal purposes. 2% in case of a payee, engaged only in the business of operation of call center w.e.f. 01.06.2017 Total payment exceeds Rs. 15,000/- in a financial year. Page 2
Sale of Motor Car u/s 206C Sale of Scrap and Timber u/s 206C 1% Scrap - 1% Timber 2.5% Applicable - In case of sale of motor cars exceeding value of Rs. 10 lacs. Not Applicable - When buyer is Government/ a Local authority. Applicable - When purchased for Trading. Not Applicable - When purchased for Manufacturing or Processing. Declaration in Form No. 27C. Payment to a Non-resident for online advertising and digital advertising 6% Equalisation levy Applicable - When payment is made to a nonresident for services of online advertising, digital advertising and any other specified services Not Applicable - When non-resident has a permanent establishment(pe) in India - When total amount paid does not exceed Rs. 1 lakh in a financial year - When payment is not for the purposes of carrying out business and profession Page 3
Notes: S. No. 1. 2. 3. 4. 5. Time limit for deposition of tax deducted i. For the month of March, on or before 30th April where income is credited or paid in the month of March. ii. In case of deduction of tax u/s 194-IA, on or before 30 days from the end of the month in which the deduction is made. iii. In any other case, on or before 7 days from the end of the month in which the deduction is made. iv. In case of Equalisation levy, the amount deducted shall be paid to the credit of the Central Government by the seventh day of the month immediately following the said calendar month. Interest for late deduction/deposition of tax If no tax is deducted, simple interest @ 1% and if tax is deducted but not deposited in time then simple interest @ 1.5% per month or for part of the month during which failure continues, on such amount will be payable. Penalty for late deduction/deposition of tax If no tax is deducted or deducted but not deposited, then penalty to the extent of such tax amount can be imposed. Prosecution for late deduction/deposition of tax If the tax deducted or collected at source is not deducted/ deposited within the due date, the assessee shall be punishable with rigorous imprisonment for a minimum period of 3 months, which can extend to 7 years. This is in addition to interest & penalty. Time limit for filing of return of TDS Quarterly Statements Page 4
i. In case of IV Quarter (Jan-Mar), on or before 31st May of the financial year immediately following the financial year in which deduction is made. ii. iii. For remaining quarters, within 1 month from the end of the relevant quarter. Furnishing of statement of Equalisation Levy- Every assessee deducting Equalisation Levy shall furnish a statement in Form No. 1 on or before the 30 th June immediately following that financial year. Late fee for delay in filing of return If TDS/TCS return is not filed in time, then, a late fee of Rs. 200/- per day shall be charged for the period during which the failure in filing such return continues and penalty 6. ranging from Rs. 10,000/- to Rs. 1,00,000/- shall also be levied for not furnishing TDS/TCS return within one year from prescribed time or for furnishing incorrect statements in TDS/TCS return. 7. No TDS is required to be deducted on service tax amount. Surcharge, Education Cess and Secondary & Higher Education 8. Cess are not applicable in case of payment other than salary to a resident. i. Details of various Form i.e. 15G, 15H, are to be furnished electronically with the returns of tax deducted at source. Delay will attract penalty @ Rs. 100 per day of delay. ii. Form 27C received, is to be deposited with Commissioner of 9. Income Tax on or before the seventh day of the month next following the month in which the declaration is furnished to him. Delay will attract penalty @ Rs. 100 per day of delay. iii. 15G/ 15H Form can be issued for interest income and rental income. Page 5
10. 11. 12. 13. 14. Tax is required to be deducted at source by all types of assessees (payers) except those who are not specified Individuals and HUFs. Specified Individuals and HUFs are those Individuals and HUFs whose turnover exceeds Rs. 1 Crore (50 Lacs in case of Professionals) for the preceding financial year. Tax is not required to be deducted in case of payment made to transporters in the following case: i. A declaration of owing less than or equal to 10 goods ii. carriage at any time during the year and Furnishing of Permanent Account Number. Payments to transporters without deducting tax (as they have quoted PAN) are to be reported by deductor with PAN details in the TDS Quarterly Statements. Every deductee including transporter is required to furnish his Permanent Accountant Number to the deductor. Otherwise tax will be deducted at the rate of 20%. Nature of Payment Time Limit for issue of certificate Form No. Periodicity Salary 16 Annually Other than Salary 16A Quarterly 194-IA 16B Monthly 206C 27D Quarterly Due date of Issue On or before May 31 of the financial year immediately following the financial year in which tax is deducted. Within 15 days from the due date for furnishing the statement of TDS. Within 15 days from the due date for furnishing the statement of TDS. Within 15 days from the due date for furnishing the statement of TCS. Page 6