Direct Tax Advance Tax, Tax Deduction At Source and Introduction to Tax Collection at Source & (TDS)Tax Deduction at Source
CA online classes : For CA Intermediate Article I have given an attempt to build an understanding of the Tax Deduction at Source. I have tried to cover the Scope of Nature of Payments on which TDS, has to be made and further when and how much it can be deducted. I hope this will help a lot to all the CA Intermediate student to get an understanding of it.
Meaning:
TDS or Tax Deduction at Source means the tax withheld at the time of making a different kind of payment which is notified in the Income Tax Act, 1961 and Rules as well. How much tax has to be deducted is depend on the nature of the payment. There are different kinds of rates are specified in the Income Tax Act, 1961 covered under the provisions of different sections. Payments may be in the nature of contractual fees, salaries professional service, brokerage and Speculation income.
Who is liable to deduct tax at source?
The payer is required to deduct tax at source. This is one of the ways opted by the Government or Income Tax Department to block Tax Evasion. Mode of payment is immaterial. The person who deducts tax at source is called Deductor, a person of whom tax is deducted is called deductee.
I am tabulating the thresh hold limit of payment, the rate of TDS with the related important remarks and details, which are as under:-
| Deduction Under Section. | Nature of Payment | Rate of TDS | Conditions of deduction and nondeduction of Tax at Sources. | |||||||||||||||||||||||||||||
| Section 192 | Deduction of Tax from Salary | As per slab rate applicable | No tax is required to be deducted at source unless the taxable salary exceeds the amount not chargeable to tax. This rule is applicable even if the employee does not have PAN.
For determination of tax deduction amount tax on salary is to be calculated as per prescribed rates for the financial year in which payment to employees is made. For example after calculating taxable salary and detail of other taxable income as provided by the employee if tax comes under the 5% slab than 5% tax to be deducted and so on. |
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| Section193 | Deduction of tax at source from interest on securities | At the rate of 10% | Person responsible for paying any interest on securities to a resident is required, at the time of credit of such income to the account of the payee or interest payable account or suspense account or at the time of payment of interest by any mode like cash, cheque or draft whichever is earlier to deduct tax at the given rate.
In the case where payee has applied in form 13 for lower deduction or no deduction. Give declaration in form 15G or 15H for non-deduction of tax at source. If the amount of interest does not exceed Rs. 5000.00 (In some cases this limit is Rs. 10000.00 in a financial year) in the financial year. Or interest is paid on debentures to a resident individual or HUF from 01.07.2012 if debenture is issued by a company in which public is substantial interest. Or debentures are listed on a recognized stock exchange and interest is paid by the company by an account payee cheque. In case of deep discount bond TDS is deducted at the time of redemption of bonds and in case of 8% Saving (Taxable) Bonds 2003 TDS will be made when payment of interest will exceed from an amount of ₹10000.00.
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| Section 194 | Deduction of Tax at source from dividends | 10% | Authority of Indian Company which has made an arrangement for declaration and payment of dividend within India is required to deduct tax at source at the prescribed rate if a shareholder is a resident in India.
Cases where Tax at Sources is required to be deducted at a lower rate or no TDS to be made: a. If dividend covered by Section 115-O no deduction of tax at source. b. Application in form no. 13 for lower deduction is made. c. Form No. 15G or 15H is submitted. d. Dividend payment does not exceed Rs. 2500.00 in a financial year. e. Dividend must be paid by an account payee cheque. |
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| Section 194A | Deduction from Tax at source from interest other than interest on securities. | 10% | Any person not being an individual or HUF who is responsible for paying any income by way of Interest and to a resident at the time of credit such income to the account of payee or interest payable account or suspense account or at the time of payment whichever is earlier by cash, cheque or by any other mode will deduct tax at source from such interest at prescribed rate.
There are some conditions where tax is not required to be deducted at source from interest payment. 1. Amount of payment in a financial year does not exceed from Rs. 5000 or Rs. 10000.00 as the case may be. 2. Where is interest is paid or credited to a banking company, cooperative societies engaged in banking business, public financial institutions, the life insurance corporation, the unit trust of India, company or cooperative society carrying business of insurance or notified institution. 3. Interest paid or credited by a firm to its partners. 4. Interest is paid or credited by a cooperative society to its members. 5. Where interest is paid or credited in respect of deposits under the schemes of post office time deposit, MIS, KVP, NSC, and IVP. 6. Where interest is credited or paid in respect of deposits by nonmembers with a primary agricultural credit society or cooperative land mortgage bank or cooperative land development bank. 7. Interest is credited or paid by the Central Government under different provisions of direct taxes. 8. In case of motor accident claim up to the aggregate amount of Rs. 50000.00 9. Interest is payable in relation to zero coupon bonds. 10. No tax deduction if interest amount does not exceed a specified amount.
All other provision regarding lower deduction and non-deduction of Tax at source will remain same as mentioned in previous provisions. |
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| Section 194B | Deduction of tax at source from winning from lotteries or crossword puzzles | 30% | Any amount of payment of income in excess of ₹ 10000.00 in a financial year it is required to deduct tax at source at a rate in force. | |||||||||||||||||||||||||||||
| Section 194BB | Deduction of tax at source form winning from horse races | 30% | Provision of tax deduction at source will remain same as above i.e. 194 B. The obligation to deduct tax at source applies only where such winnings are paid by a books maker or person to whom a license has been granted by Government under any law for time being in force. | |||||||||||||||||||||||||||||
| 194C | Deduction of tax at source from payments to contractors or subcontractors | 1%
2% |
Tax is deductible as and when payment to a contractor or subcontractor is made more than Rs. 30000.00 in a single transaction or more than Rs. 100000.00 in aggregate in a financial year. At the rate of 1% if contractor or subcontractor is individual or HUF in status. In any other case, TDS will be made at the rate of 2%. | |||||||||||||||||||||||||||||
| 194D | Deduction of tax at source from insurance commission | 5%` | Tax has to be deducted at source if the amount of such commission exceeds Rs. 15000.00 in a financial year. In case of crediting commission in the account of agent and deducting tax at source earlier adjustment of the excess commission is not permissible.
Point to note: Reinsurance is not covered by this section for TDS. |
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| 194DA | Deduction of tax at source from Payment of Life insurance policy. | 1% | TDS is to be made in case of payment of policy to a resident including payment of bonus.
No TDS will be made if the amount of payment of such policy does not exceedRs.100000.00. |
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| 194E | Payment to the nonresident sportsman or sports associations or entertainer | 20% | Points to note
1. Nowhere requires to check whether income is taxable in India or not. 2. Payment to a nonresident umpire will be covered in this section. Payment to a resident umpire will be covered under section 194J |
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| 194EE | Deduction of tax from payments in respect of NSC | 10% | Points to Note
1. No TDS required of the amount of payment involves Rs. 2500 or less in a financial year. 2. Where payment is made to legal heir of the deceased assessee no tax shall be deducted at source. |
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| 194F | Deduction of tax from payments in respect of repurchase of units by Mutual Funds or UTI | 20% | The person responsible for paying any amount referred to in section 80CCB shall at the time of payment thereof, deduct income tax at the prescribed rate. | |||||||||||||||||||||||||||||
| 194G | Deduction of tax from commission etc. on the sale of lottery tickets | 5% | Any person is responsible for paying any income by way of commission remuneration or whatever name called on lottery tickets in excess of the amount of Rs. 15000.00 shall deduct income tax at the prescribed rate. | |||||||||||||||||||||||||||||
| 194H | Deduction of tax at source from commission or brokerage | 5% | No TDS is required to be made if the amount of Brokerage or commission does not exceed Rs. 15000 in a financial year.
This commission does not includes commission paid on insurance. |
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| 194 I | Deduction of tax at source from income by way of rent | 10% | 1. No tax is required to be deducted if the amount of rent in a financial is lower than or equal to Rs. 180000.00.
2. In case Machinery or plant or equipment is rented than Rate of TDS will be 2%. |
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| 194 IA | Deduction of tax at source from payment on the transfer of property | 1$ | 1. Buyer at the time of the making of the payment will deduct tax from the total payment involved.
2. No tax has to be deducted if the amount involved is less than Rs. 5000000.00 3. No provision of TAN is applicable to this type of transactions. |
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| 194IB | Tax deduction from payment of rent by certain individuals HUF.applicable from 1 June 2017 | 5% | Individual or HUF whose books of accounts are not required to get audited Under Section 44AB of the Income Tax Act, 1961 will make TDS of Rent for a month or part of the month is more than Rs. 50000.00. | |||||||||||||||||||||||||||||
| 194 IC | Tax deduction from payment under joint development agreement applicable form 01.04.2017 | 10% | The amount payable in the joint development agreement. Joint Development agreement means an agreement to transfer rights to develop a real estate project on land or building or both on self-occupied property in consideration of a share. | |||||||||||||||||||||||||||||
| 194J | Tax Deduction from payment of the fee for professional or technical services. | 10% | Points to note.
1. In case if the payee is engaged only in the business of operation of the call center. The rate of TDS will be 2% 2. Any some up to Rs. 30000.00 in a financial year can be paid without deduction of income tax. |
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In all cases where payee does not provide PAN No. for the purpose of tax deduction than Tax Deduction will be done at the rate of 20%.
All the above provisions of TDS will come into force on Individual as well as HUF if they have to get audit their books of accounts.
This was the maximum I tried to cover in this article for CA Intermediate students about TDS. For further and detail understanding of the same please visit the portal www.takshshilaelearning.com
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