Taxmann's Deduction of Tax at Source with Advance Tax and Refunds

ABOUT THE AUTHORS
Dr. Vinod K. Singhania got his Ph.D. from the Delhi School of
Economics in 1976. His fields of special interest include all facets of
corporate legislation and corporate economics especially the tax laws.
Associated in different capacities with several professional institutes
and business houses in India and abroad, Dr. Singhania is author
of many popular books (some of which are also available on CDs)
published by Taxmann. He has to his credit more than 300 research
articles which have appeared in leading journals. He has been a
resource person in over 800 seminars in India and abroad. He can be
reached at vks@taxmann.com.
Dr. Kapil Singhania, a Fellow of the Institute of Chartered Accoun-
tants of India and belonging to the alumni of Shri Ram College of
Commerce, has got the Ph.D. for extensive research work done in the
area of corporate taxation. His fields of involvement in research work
in form of articles in various reputed journals and analytical studies
span across from corporate laws to direct taxation. He has authored
a variety of acclaimed books on direct taxes published by Taxmann.
Dr. Singhania is providing tax consultancy to a number of business
organizations, which include multinational and public sector compa-
nies.
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CONTENTS
CHAPTER-HEADS
Contents I-13
BOOK ONE : DEDUCTION OF TAX AT SOURCE
CHAPTER 1 : DEDUCTION OF TAX AT SOURCE FROM SALARY 4
CHAPTER 2 : HOW TO WORK OUT ESTIMATED SALARY AND
QUANTUM OF TAX TO BE DEDUCTED THEREFROM 46
CHAPTER 3 : TAX DEDUCTION FROM ACCUMULATED BALANCE OF
PROVIDENT FUND DUE TO AN EMPLOYEE 217
CHAPTER 4 : HOW TO COMPUTE TAXABLE PREMATURE WITH-
DRAWAL OF PROVIDENT FUND AND TAX TO BE
DEDUCTED THEREFROM 220
CHAPTER 5 : DEDUCTION OF TAX AT SOURCE FROM INTEREST ON
SECURITIES 227
CHAPTER 6 : HOW TO COMPUTE INTEREST ON SECURITIES AND
TAX DEDUCTIBLE THEREFROM AT SOURCE 239
CHAPTER 7 : DEDUCTION OF TAX AT SOURCE FROM DIVIDEND 265
CHAPTER 8 : HOW TO COMPUTE DIVIDENDS AND TAX DEDUCTIBLE
THEREFROM 269
CHAPTER 9 : DEDUCTION OF TAX AT SOURCE FROM INTEREST
OTHER THAN INTEREST ON SECURITIES 281
CHAPTER 10 : HOW TO COMPUTE INTEREST (OTHER THAN INTEREST
ON SECURITIES) AND TAX DEDUCTIBLE THEREFROM 288
CHAPTER 11 : TAX DEDUCTION FROM WINNINGS FROM LOTTERY,
CROSSWORD PUZZLE, CARD GAMES OR OTHER GAMES 307
CHAPTER 12 : WINNINGS FROM LOTTERY, CROSSWORD PUZZLE,
CARD GAME OR ANY OTHER GAME AND TAX TO BE
CHAPTER 13 : TAX DEDUCTION FROM WINNINGS FROM HORSE
RACE 319
CHAPTER 14 : WINNINGS FROM HORSE RACE AND TAX TO BE
DEDUCTED THEREON 324
CHAPTER 15 : TAX DEDUCTION FROM PAYMENT TO CONTRACTORS 327
CHAPTER 16 : WHAT CONSTITUTES A PAYMENT TO CONTRACTOR/
SUB-CONTRACTOR AND HOW MUCH TAX IS TO BE
CHAPTER 17 : TAX DEDUCTION FROM INSURANCE COMMISSION 358
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CONTENTS
CHAPTER-HEADS
I-8
CHAPTER 18 : HOW TO COMPUTE INSURANCE COMMISSION AND
TAX TO BE DEDUCTED THEREFROM 363
CHAPTER 19 : TAX DEDUCTION FROM PAYMENT IN RESPECT OF
LIFE INSURANCE POLICY 368
CHAPTER 20 : HOW TO COMPUTE TAX TO BE DEDUCTED FROM
PAYMENT IN RESPECT OF LIFE INSURANCE POLICY 373
CHAPTER 21 : DEDUCTION OF TAX AT SOURCE FROM NATIONAL
SAVINGS SCHEME 378
CHAPTER 22 : HOW TO COMPUTE AMOUNT REFERRED TO IN
SECTION 80CCA(2)(a) AND TAX TO BE DEDUCTED
THEREFROM 382
CHAPTER 23 : DEDUCTION OF TAX AT SOURCE ON ACCOUNT OF
REPURCHASE OF UNITS BY MUTUAL FUNDS OR
UNIT TRUST OF INDIA 386
CHAPTER 24 : HOW TO COMPUTE AMOUNT REFERRED TO IN
SECTION 80CCB(2) AND TAX TO BE DEDUCTED
THEREFROM 390
CHAPTER 25 : DEDUCTION OF TAX AT SOURCE FROM COMMISSION
ON SALE OF LOTTERY TICKETS 393
CHAPTER 26 : HOW TO COMPUTE COMMISSION ON SALE OF LOTTERY
TICKETS AND TAX DEDUCTIBLE THEREFROM 397
CHAPTER 27 : TAX DEDUCTION FROM COMMISSION OR BROKERAGE 400
CHAPTER 28 : HOW TO COMPUTE COMMISSION OR BROKERAGE
AND TAX TO BE DEDUCTED THEREFROM 405
CHAPTER 29 : TAX DEDUCTION FROM RENT 418
CHAPTER 30 : HOW TO COMPUTE RENT AND TAX TO BE DEDUCTED
THEREFROM 423
CHAPTER 31 : DEDUCTION OF TAX AT SOURCE FROM CONSIDERATION
PAYABLE FOR ACQUISITION OF IMMOVABLE PROPERTY
OTHER THAN AGRICULTURAL LAND IN RURAL AREA 435
CHAPTER 32 : HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF
CONSIDERATION FOR ACQUISITION OF ANY IMMOVABLE
PROPERTY 437
CHAPTER 33 : TAX DEDUCTION FROM PAYMENT OF RENT BY CERTAIN
INDIVIDUALS AND HUFs 443
CHAPTER 34 : HOW TO COMPUTE TAX DEDUCTIBLE FROM RENT
UNDER SECTION 194-IB 445
CHAPTER 35 : TAX DEDUCTION FROM PAYMENT UNDER SPECIFIED
AGREEMENT 449
CHAPTER 36 : HOW TO COMPUTE CONSIDERATION WHICH IS
SUBJECT TO TAX DEDUCTION UNDER SECTION
194-IC 451
CHAPTER 37 : DEDUCTION OF TAX AT SOURCE FROM FEES FOR
TECHNICAL OR PROFESSIONAL SERVICES OR
ROYALTY 455

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CONTENTS
CHAPTER-HEADS
I-9
CHAPTER 38 : HOW TO COMPUTE FEES FOR PROFESSIONAL AND
TECHNICAL SERVICES AND ROYALTY AND TAX
DEDUCTIBLE THEREFROM 461
CHAPTER 39 : DEDUCTION OF TAX AT SOURCE FROM INCOME IN
RESPECT OF UNITS 474
CHAPTER 40 : HOW TO COMPUTE INCOME IN RESPECT OF UNITS
AND TAX DEDUCTIBLE THEREFROM 476
CHAPTER 41 : DEDUCTION OF TAX AT SOURCE FROM PAYMENT OF
COMPENSATION ON ACQUISITION OF IMMOVABLE
PROPERTY 480
CHAPTER 42 : HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT
OF COMPENSATION ON ACQUISITION OF IMMOVABLE
PROPERTY 483
CHAPTER 43 : DEDUCTION OF TAX AT SOURCE FROM INCOME BY
WAY OF INTEREST FROM INFRASTRUCTURE DEBT
FUND 487
OF INTEREST ON INFRASTRUCTURE DEBT FUND 490
UNITS OF BUSINESS TRUST 493
OF INTEREST ON UNITS OF BUSINESS TRUST 496
CHAPTER 47 : DEDUCTION OF TAX AT SOURCE FROM INCOME IN
RESPECT OF UNITS OF INVESTMENT FUND/
SECURITISATION TRUST 499
CHAPTER 48 : HOW TO COMPUTE TAX DEDUCTIBLE FROM INCOME
IN RESPECT OF UNITS OF INVESTMENT TRUST/
SECURITISATION TRUST 502
CHAPTER 49 : DEDUCTION OF TAX AT SOURCE FROM INCOME BY
WAY OF INTEREST FROM INDIAN COMPANY UNDER
SECTION 194LC 506
CHAPTER 50 : HOW TO COMPUTE TAX DEDUCTIBLE FROM INTEREST
PAYABLE TO NON-RESIDENT/FOREIGN COMPANY 510
CERTAIN BONDS AND GOVERNMENT SECURITIES
UNDER SECTION 194LD 515
CHAPTER 52 : HOW TO COMPUTE TAX DEDUCTIBLE FROM INTEREST
PAYABLE UNDER SECTION 194LD 519
CHAPTER 53 : TAX DEDUCTION FROM PAYMENT TO RESIDENT
CONTRACTOR, BROKER OR PROFESSIONAL BY
CERTAIN INDIVIDUALS AND HUFs 522
CHAPTER 54 : HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT/
CREDIT TO CONTRACTOR, PROFESSIONAL OR BROKER
UNDER SECTION 194M 524
CHAPTER 55 : DEDUCTION OF TAX AT SOURCE FROM CASH PAYMENT
TO ACCOUNTHOLDERS UNDER SECTION 194N 528

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CONTENTS
CHAPTER-HEADS
I-10
CHAPTER 56 : HOW TO COMPUTE TAX DEDUCTIBLE FROM CASH PAY-
MENT TO ACCOUNTHOLDERS UNDER SECTION 194N 530
CHAPTER 57 : DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO
E-COMMERCE PARTICIPANTS 534
CHAPTER 58 : HOW TO COMPUTE INCOME AND TAX DEDUCTIBLE
THEREFROM 536
CHAPTER 59 : DEDUCTION OF TAX AT SOURCE FROM INCOME OF
SPECIFIED SENIOR CITIZEN 541
CHAPTER 60 : HOW TO COMPUTE INCOME OF SPECIFIED SENIOR
CITIZEN AND TAX DEDUCTIBLE THEREFROM 542
CHAPTER 61 : DEDUCTION OF TAX AT SOURCE ON PAYMENT FOR
PURCHASE OF GOODS 545
CHAPTER 62 : HOW TO COMPUTE TAX TO BE DEDUCTED UNDER
SECTION 194Q 547
CHAPTER 63 : TAX DEDUCTION FROM PAYMENTS TO NON-RESIDENTS 552
CHAPTER 64 : HOW TO COMPUTE AMOUNT PAYABLE TO NON-RESIDENT
AND TAX TO BE DEDUCTED THEREFROM 561
UNITS OF OFFSHORE FUND 590
CHAPTER 66 : HOW TO COMPUTE AMOUNT OF TAX DEDUCTION
UNDER SECTION 196B 593
CHAPTER 67 : DEDUCTION OF TAX AT SOURCE FROM INCOME FROM
FOREIGN CURRENCY BOND OR SHARES OF INDIAN
COMPANY 596
UNDER SECTION 196C 599
FOREIGN INSTITUTIONAL INVESTORS FROM
SECURITIES 602
UNDER SECTION 196D 605
BOOK TWO : ADVANCE TAX
CHAPTER 71 : INCOME LIABLE TO ADVANCE TAX 630
CHAPTER 72 : LIABILITY TO ADVANCE TAX - WHEN ARISES 631
CHAPTER 73 : DUE DATES OF PAYMENT 633
CHAPTER 74 : COMPUTATION OF ADVANCE TAX LIABILITY 636
CHAPTER 75 : INTEREST PAYABLE BY THE ASSESSEE/GOVERNMENT 643

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CONTENTS
BOOK THREE : TAX COLLECTION AT SOURCE
CHAPTER 76 : TAX COLLECTION AT SOURCE 670
BOOK FOUR : REFUND
CHAPTER 77 : REFUND FOR EXCESS PAYMENT 696
CHAPTER 78 : INTEREST ON REFUND 700
REFERENCER 705
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CHAPTER-HEADS

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CONTENTS
CONTENTS
PAGE
Chapter-heads I-7
BOOK ONE : DEDUCTION OF TAX AT SOURCE
1
DEDUCTION OF TAX AT SOURCE FROM SALARY
1.1 Who is responsible to deduct tax at source in case of income
from salary 4
1.1-1 Where salary is payable by other employers also 4
1.2 When tax is to be deducted 5
1.2-1 Private arrangement of paying salary tax-free
cannot discharge obligation of section 192 5
1.2-2 Tax deduction not required on judgment debt 5
1.2-3 Furlough pay received in foreign currency is
taxable as salary 5
1.2-4 Deduction of tax at source is mandatory from
salary 5
1.2-5 Correctness of investment 6
1.3 How to compute tax deductible at source 6
1.3-1 When tax payable on perquisites is paid by
employer 6
1.3-2 When relief under section 89 is available 6
1.3-3 When income other than salary income is
considered by employer 7
1.3-4 Statement of particulars in prescribed form 9
1.3-5 How to make adjustment of excess or deficiency 9
1.3-6 Deduction from provident fund payment 9
1.4 Tax deduction and collection account number (TAN) 9
1.5 Deposit of tax to the credit of Central Government 10
1.5-1 Where to deposit tax 10
1.5-2 Time within which tax is to be deposited 11
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1.5-3 Payment through challan 12
1.5-4 Claim for refund 13
1.6 Issue a certificate for tax deducted at source to employee 13
1.6-1 How to prepare Form No. 16 13
1.6-2 Form No. 16 with digital signature 14
1.6-3 Time limit within which the certificate should be
given 15
1.6-4 Issue of duplicate certificate 15
1.7 Statement or return of tax deduction to Government 15
1.7-1 Return of tax deduction from contribution paid
by the trustees of an approved superannuation
fund 15
1.7-2 Annual filing of return 15
1.7-3 Quarterly return 15
1.7-4 By whom return is to be filed 24
1.8 Consequences of failure to deduct or pay tax, furnish return,
etc. 26
1.8-1 Failure to deduct and/or pay tax 26
1.8-2 Failure to comply with provision of section 203A
regarding tax-deduction account number 39
1.8-3 Failure to issue certificate, or submit return,
statement, etc. 39
1.8-4 Disallowance of deduction in respect of salary
payable to resident 44
1.8-5 Disallowance of deduction in respect of salary
payable to non-resident 45
Illustration 45
2
HOW TO WORK OUT ESTIMATED SALARY
AND QUANTUM OF TAX TO BE
DEDUCTED THEREFROM
2.1 What is salary 46
2.1-1 Employer-employee relationship, a pre-requisite 46
2.1-2 Salary and wages are not conceptually different 49
2.1-3 Salary to former/present/prospective employee 49
2.1-4 Salary income must be real and not fictitious 49
2.1-5 When salary is forgone 50
2.1-6 Salary paid tax-free 50
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2.2 Basis for deduction of tax at source 50
2.3 Different forms of salary and its payment subject to tax
deduction at source 52
2.3-1 Advance salary 52
2.3-2 Arrears of salary 52
2.3-3 Leave salary 52
Illustration 55
2.3-4 Salary to a partner 56
2.3-5 Salary in lieu of notice period 56
2.3-6 Fees and commission 56
2.3-7 Bonus 56
2.3-8 Gratuity 57
Illustration 60
2.3-9 Pension 63
Illustrations 64
2.3-10 Annuity 67
2.3-11 Annual accretion to the credit balance in provident
fund 67
2.3-12 Amount transferred from unrecognised provident
fund to recognised provident fund 67
2.3-13 Retrenchment compensation 67
2.3-14 Profits in lieu of salary 69
2.3-15 Remuneration in addition to salary on the basis of
work done 71
2.3-16 Voluntary payments to employees 72
2.3-17 Compensation received at the time of voluntary
retirement or separation 73
2.3-18 Salary received by a teacher/professor from SAARC
Member States 76
2.3-19 Contribution to notified pension scheme by the
Central Government or any other employer 76
2.3-20 Decretal amount arising from suit for arrears of
salary and wrongful termination of appointment 76
2.3-21 Salary to non-resident seafarers 77
2.4 Allowances when subject to tax deduction at source 77
2.4-1 City compensatory allowance 77
2.4-2 House rent allowance 77
Illustrations 79
2.4-3 Entertainment allowance 80
Illustrations 81
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2.4-4 Special allowance 81
Illustrations 94
2.4-5 Allowance to Government employees outside India 95
2.4-6 Tiffin allowance 95
2.4-7 Fixed medical allowance 95
2.4-8 Servant allowance 95
2.4-9 Allowance to High Court 95
2.4-10 Allowance received from United Nations Organisation 95
2.4-11 Allowance to foreign technician 95
2.4-12 Allowance to other foreign citizen 96
2.4-13 Compensatory allowance under article 222(2) of the
Constitution 96
2.4-14 Sumptuary allowance 96
2.4-15 Allowances received by a teacher/professor from
SAARC Member States 96
2.5 Perquisites, amenability to tax deduction at source 96
2.5-1 What is “perquisite” 96
2.5-2 “Perquisite” as defined by the Act 98
2.5-3 Perquisites chargeable/not chargeable to tax 99
2.5-4 Valuation of perquisites 102
Illustration 104
2.6 Sums related to provident funds, amenability to deduction
of tax at source 148
2.6-1 Types of employees’ provident funds 149
2.6-2 Statutory provident fund 149
2.6-3 Recognised provident fund 149
2.6-4 Unrecognised provident fund 149
2.6-5 Public provident fund 149
2.6-6 Tax treatment 150
2.7 Contributions to and payment from approved superannuation
fund, amenability to tax deduction at source 152
2.8 Approved gratuity fund - Tax treatment of the inflow and
outflow 153
2.9 Computation of salary 153
2.9-1 Standard deduction 153
2.9-2 Entertainment allowance 153
2.9-3 Professional tax or tax on employment 153
2.10 Salaries of foreign technicians 154
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2.11 Salaries of foreign citizens 154
2.11-1 Diplomatic personnel 154
2.11-2 Foreigners on tour 154
2.11-3 Salary received by a ship’s crew 154
2.11-4 Remuneration of a foreign trainee 154
2.12 Deductions granted under sections 80C to 80U 155
2.13 Deduction in respect of life insurance premia, deferred
annuity, contributions to provident fund, subscription to
certain equity shares or debentures, etc. 155
2.13-1 Salient features of section 80C 155
2.13-2 Computation of deduction under section 80C 155
Illustrations 161
2.14 Deduction in respect of pension fund 164
2.15 Deduction in respect of contribution to National Pension
System of Central Government (NPS) 165
2.15-1 Conditions 165
2.15-2 Consequences if the above conditions are satisfied 165
Illustration 167
2.16 Deduction in respect of subscription to long-term infra-
structure bonds 167
2.17 Deduction in respect of investment made under an equity
saving scheme 168
2.18 Deduction under section 80D in respect of medical
insurance premia 169
2.18-2 Maximum deductible amount 169
Illustrations 170
2.19 Deduction under section 80DD in respect of medical
treatment of handicapped dependents 171
2.19-2 Amount of deduction 173
2.19-3 If dependent predeceases the taxpayer 173
Illustrations 173
2.20 Deduction in respect of medical treatment under section
80DDB - To what extent available 173
2.20-3 Prescribed diseases and certificate from a doctor 174
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2.21 Deduction in respect of interest on loan taken for higher
education 175
2.21-2 Amount deductible 176
2.22 Deduction in respect of interest on loan taken for resi-
dential house property 176
2.23 Deduction in respect of interest on loan taken for certain
house property 177
Illustration 177
2.24 Deduction in respect of interest on loan taken for purchase
of electric vehicle 179
Illustration 180
2.25 Deduction under section 80G in respect of donation to
national funds 181
2.25-1 Maximum limit 183
2.25-2 Other points 183
2.26 Deduction under section 80GG in respect of rent paid 183
2.26-2 Meaning of total income for the purpose of
section 80GG 184
Illustration 185
2.27 Deductions in respect of certain donations for scientific
research or rural development 185
2.28 Deduction in respect of interest on deposits in savings
accounts 186
2.28-1 Post office savings bank interest exemption under
section 10(15)(i) 187
2.29 Deduction under section 80TTB in respect of interest on
deposits in case of senior citizens 188
2.29-1 Post Office Savings Bank interest exemption under
section 10(15)(i) 188
2.30 Deduction under section 80U in case of a person with
disability 189
Illustration 191
2.31 When income other than salary income is considered for
tax deduction under section 192 191
2.32 When salary received from other employer is considered 191
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2.33 Rate of exchange for deduction of tax at source on income
payable in foreign currency 192
2.34 Rates of tax deduction at source during the financial year
2021-21 192
2.34-1 Rate of income-tax under the alternative tax
regime 193
2.34-2 If PAN is not given by employer 199
2.35 Tax rebate under section 87A 199
Illustrations 199
2.36 Tax rebate under sections 88B and 88C 200
2.37 Relief under section 89 200
2.37-1 Computation of relief when salary has been paid
in arrears or in advance 200
Illustration 201
2.37-2 Computation of relief in respect of gratuity 201
Illustration 202
2.37-3 Computation of relief in respect of compensation
on termination of employment 203
2.37-4 Computation of relief in respect of payment in
commutation of pension 203
2.37-5 Computation of relief in respect of payment of
arrears of family pension 203
2.38 When can employee reduce the incidence of tax deduction -
Certificate for deduction of tax at lower rates 204
2.38-1 How lower rate is determined 204
2.38-2 Validity of certificate 204
2.38-3 Issued to the payer 204
2.38-4 Retrospective certificate not possible 205
2.38-5 Instruction issued by Board 205
2.38-6 Concession by the Government due to outbreak of
COVID-19 pandemic 205
2.39 Rounding off of income 206
2.40 Employee gets credit of tax deducted at source 206
2.40-1 Rules framed by Board 206
2.41 Going through the real exercise - Examples on computation
of estimated salary and tax to be deducted therefrom under
section 192 207
Illustrations 207
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3
TAX DEDUCTION FROM ACCUMULATED BALANCE
OF PROVIDENT FUND DUE TO AN EMPLOYEE
3.1 Person responsible for tax deduction from accumulated
balance of provident fund 217
3.2 When tax has to be deducted 217
3.2-1 No tax is deductible if payment is less than Rs. 50,000 217
3.2-2 Private arrangement of paying accumulated balance
of provident fund tax-free is not relevant 217
3.3 Tax deduction account number 217
3.4-1 Where to deposit 217
3.4-2 Time of deposit 218
3.5 Issue of certificate of tax deduction 218
3.6 Quarterly return to the Government 218
3.7 Consequences of failure to deduct or pay tax or furnish
return 218
3.7-2 Failure to comply with the provisions of section
203A regarding tax-deduction account number 219
3.7-3 Failure to issue certificate or submit return 219
4
HOW TO COMPUTE TAXABLE PREMATURE
WITHDRAWAL OF PROVIDENT FUND AND
TAX TO BE DEDUCTED THEREFROM
4.1 When withdrawal from provident fund is subject to the tax
deduction under section 192A 220
4.2 Rates of tax 221
4.3 Payment without tax deduction or with deduction at lower
rates 221
4.4 Tax credit 221
Illustration 222
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5
DEDUCTION OF TAX AT SOURCE FROM
INTEREST ON SECURITIES
5.1 Who is responsible to deduct tax at source in the case of
interest on securities 227
5.2 When tax has to be deducted at source 227
5.2-1 Relevance of identity of deductee under TDS
provisions 227
5.2-2 Private arrangement of paying interest on secu-
rities as tax-free cannot discharge obligation under
section 193 229
5.3 How to compute tax deduction at source 229
5.5 Deposit of tax to the credit of the Central Government 229
5.5-2 Time of deposit of TDS/TCS 229
5.5-3 Challans for payment 230
5.6 Issue of certificate for tax deduction from interest on
securities 230
5.6-1 TDS certificate in Form No. 16A 230
5.6-2 Time limit within which the certificate shall be
issued 231
5.7 Return of tax deduction at source from interest on securities 231
5.7-1 Annual return 231
5.7-2 Quarterly statement TDS deposited 231
5.8 Consequences of failure to deduct or pay tax, furnish returns,
etc. 233
5.8-2 Failure to comply with the provision of section
203A regarding tax deduction account number 233
5.8-3 Failure to issue certificates, or submit returns 233
5.8-4 Forfeiture of deduction in respect of interest on
securities 233
Illustration 234
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CONTENTS
6
HOW TO COMPUTE INTEREST ON
SECURITIES AND TAX DEDUCTIBLE
THEREFROM AT SOURCE
6.1 Interest on securities - How defined 239
6.2 Interest on securities not liable for tax deduction 239
6.2-1 Notified securities 240
6.2-2 TDS on 8 per cent Savings (Taxable) Bonds, 2003
or 7.75 per cent Savings (Taxable) Bonds, 2018 252
6.3 What happens when recipient is Government - Interest
on securities payable to the Government and certain
Corporations 253
6.4 TDS on interest on securities - A few typical cases 254
6.4-1 When interest is paid to oneself - Interest on own
debentures 254
6.4-2 Interest payable to funds established for the benefits
of armed forces 254
6.4-3 Interest to provident funds 254
6.4-4 Deep discount bond 254
6.5 Rates for tax deduction at source 255
6.5-1 PAN of recipient is not available 255
6.5-2 When recipient is a non-filer of Income-tax return 255
6.6 When can a security holder reduce the incidence of tax
deduction 255
6.6-1 Certificate for tax deduction at lower rate or no
deduction 255
6.6-2 Declaration under section 197A 259
6.6-3 Payment to certain institution whose income is
exempt under section 10(23C) 261
6.7 Tax credit to one who pays 261
6.7-1 Rules to be framed by Board 262
6.7-2 Joint owners 262
6.7-3 Beneficial owner 262
7
DEDUCTION OF TAX AT SOURCE
FROM DIVIDEND
7.1 Who is responsible for tax deduction in the case of dividend 265
7.1-1 Who is “principal officer” 265
7.1-2 What makes one an Indian company 265
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7.1-3 What amounts to prescribed arrangements for
declaration and payment of dividends in India 266
7.2 What is “dividend” for the purpose of tax deduction 266
7.3-1 Private arrangement of paying dividend tax-free
cannot discharge obligation under section 194 266
7.5-2 Time within which tax is to be deposited 267
7.5-3 Filing challan for payment 267
7.6 Issue a certificate for tax deducted at source to shareholders 267
7.6-1 TDS certificate in Form No. 16A 267
7.6-2 Time-limit within which the certificate should be
given 268
7.7 Statement/returns to the Government 268
7.7-2 Quarterly return of TDS deposited 268
etc. 268
7.8-3 Failure to issue certificate, or submit return/
statement 268
8
HOW TO COMPUTE DIVIDENDS AND
TAX DEDUCTIBLE THEREFROM
8.1 Defining dividends 269
8.2 Deemed dividend under the Income-tax Act 269
8.2-1 Definition under section 2(22)(e) 269
8.2-2 Accumulated profits 269
8.2-3 Distribution of accumulated profits by way of
advance or loan 271
8.3 Rates for tax deduction at source during the financial
year 2021-22 275
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8.4 Dividends payable to Government or certain corporation 276
8.5 Deduction of tax at lower rates or at nil rate 276
8.5-1 Certificate for receiving dividend without tax
deduction 276
8.5-3 No TDS if dividend is not more than Rs. 5,000 278
8.5-4 No TDS if dividend is paid or credited to an
insurance company 278
8.6 Who gets credit for tax deducted 278
9
DEDUCTION OF TAX AT SOURCE FROM INTEREST
OTHER THAN INTEREST ON SECURITIES
9.1 Who is to discharge the responsibility to make tax deduction
at source 281
9.2 Which interest qualifies for tax deduction at source under
section 194A 281
9.3-1 When interest is credited to “Interest payable
account” or “Suspense account” 282
9.3-2 Private arrangement of paying interest tax-free
cannot discharge obligation under section 194A 282
9.4 How to compute tax deduction at source 283
9.7 Issue certificate of tax deduction from interest other than
interest on securities 284
9.7-1 Certificates are issued by downloading from TIN
website 284
9.7-2 Time limit within which certificate shall be issued 284
9.8 Return of tax deduction at source 285
9.8-2 Quarterly return of TDS deposited 285
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9.8-3 Quarterly return for payment without tax deduction 286
etc. 287
9.9-4 Forfeiture of deduction in respect of interest other
than interest on securities 287
10
HOW TO COMPUTE INTEREST (OTHER THAN
INTEREST ON SECURITIES) AND TAX
DEDUCTIBLE THEREFROM
10.1 When a payment can be regarded as “interest” 288
10.1-2 When a payment is deemed to be payment of
interest for the purpose of tax deduction 288
10.2 Rates for tax deduction at source during the financial year
2020-21 289
10.2-3 When adjustment are called for 290
10.3 Treatment of interest other than interest on securities
payable to Government or certain corporation 290
10.4 Interest other than interest on securities not liable to tax
deduction under section 194A(3)/197A 291
10.4-1 If interest does not exceed a specified amount 291
10.4-2 Paid/credited to banks/financial institutions 291
10.4-3 Interest by firm 294
10.4-4 Co-operative society 294
10.4-5 Interest under notified schemes 296
10.4-6 Interest by bank 296
10.4-7 Interest by co-operative society/bank 296
10.4-8 Interest by Government 297
10.4-9 Interest credited on compensation 297
10.4-10 Interest paid on compensation 297
10.4-11 Zero coupon bonds 297
10.4-12 Interest referred to in section 10(23FC) 297
10.4-13 Interest by offshore banking unit 297
10.4-14 Interest to Tirumala Tirupati Devasthanams 297
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10.4-15 Interest to securitisation trust 298
10.5 Interest without tax deduction or with deduction at lower
rates 298
10.5-1 Certificate for tax deduction at lower rate under
section 197(1) 298
10.5-3 Payment to certain institutions whose income is
exempt under section 10(23C) 299
10.6 To deduct or not - Treatment of some typical cases 300
10.6-1 Interest on deposits in joint names - Manner of tax
deduction 300
10.6-2 Interest payment under Land Acquisition Act 301
10.6-3 Interest payable on hundi by buyer to supplier in
case of outstation sale of goods - Whether tax to
be deducted by the buyer 301
10.6-4 Interest payable by consignors to their commission
agent 301
10.6-5 Payment under a hire purchase agreement 302
10.6-6 Who is an individual 302
10.6-7 Interest payable by retail finance service company 302
10.6-8 Cheque discounting charges 302
10.6-9 Payment under a hire purchase agreement 302
10.6-10 Interest on delayed payment of insurance
compensation 302
10.6-11 Personal loan of directors routed through company 303
10.6-12 Discounting charges 303
10.6-13 Chit fund 303
10.6-14 Judgment debtor 303
10.6-15 Interest on overdue purchase bills is not ‘interest’ 303
10.6-16 Loan processing fees 303
10.6-17 Tax deduction on the deposits in banks in the name
of the registrar to the Supreme Court/High Court
during pendency of litigation 303
10.6-18 Tax deductible even in the case of loss 304
10.6-19 TDS on interest on deposits made under Capital
Gains Accounts Scheme where depositor has
deceased 304
10.7 Giving credit for tax deducted 304
10.7-1 Rules to be framed by Board 305
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11
TAX DEDUCTION FROM WINNINGS FROM
LOTTERY, CROSSWORD PUZZLE, CARD
GAMES OR OTHER GAMES
11.1 Who is responsible for tax deduction in the case of winnings
from lottery, crossword puzzle, card game or other game 307
11.2 Payments from which deduction is to be made 307
11.3-1 Private arrangement of paying income tax-free
cannot discharge obligation under section 194B 307
11.5 Deposit of tax in the credit of Central Government 307
11.6 Issue a certificate for tax deducted at source 308
11.6-1 Certificate is issued by downloading from TIN
website 308
11.6-2 Time limit 308
11.7 Annual/quarterly return to the Government 309
return, etc. 310
11.8-3 Failure to issue certificate, or submit return 310
11.8-4 Disallowance of expenditure 310
12
WINNINGS FROM LOTTERY, CROSSWORD PUZZLE,
CARD GAME OR ANY OTHER GAME AND
TAX TO BE DEDUCTED THEREFROM
12.1 What can be termed as winnings from lottery, crossword
puzzle and card game 311
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12.1-1 One has to fall back on dictionary meanings and
judicial pronouncement 311
12.1-2 Preliminary conditions subject to which tax
deduction can be made 313
12.1-3 Some typical situations - How to deal with them 314
12.2 Rates for deduction of tax at source during the financial
year 2021-22 315
12.3 No deduction at source from payments to Government or
certain corporation 316
12.4 Giving credit for tax deducted 317
13
TAX DEDUCTION FROM WINNINGS
FROM HORSE RACE
13.1 Who is responsible for tax deduction 319
13.1-1 Bookmaker - Meaning of 319
13.2 When winnings from horse racing are subject to tax
deduction at source 319
13.3-1 Private arrangement of making payment tax-free
cannot discharge the obligation 320
13.6 Issue of certificate for deduction from winning from horse
races 321
website 321
issued 321
13.7 Annual/quarterly return of winning from horse race to the
Government 322
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etc. 323
14
WINNINGS FROM HORSE RACE AND
TAX TO BE DEDUCTED THEREON
14.1 Meaning of horse race 324
14.1-1 When winnings from horse race are subject to tax
deduction 324
14.2 Rates at which deduction of tax is to be made at source
during the financial year 2021-22 324
14.3 No deduction of tax from winnings payable to the
Government/certain corporation 325
14.4 Credit for tax deducted 325
15
TAX DEDUCTION FROM PAYMENT
TO CONTRACTORS
15.1 Person responsible for making deduction at source under
section 194C 327
15.1-1 Payment to a resident contractor 327
15.2-1 When amount is transferred to “Suspense account” 329
15.2-2 Private arrangement of making payment to
contractor/sub-contractor without tax deduction
cannot discharge the obligation under section 194C 329
15.3 How to compute the amount of tax deduction 329
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website 330
15.6-2 Time limit within which certificate shall be issued 330
15.7 Annual and quarterly returns of tax deducted at source 331
etc. 332
15.8-4 Forfeiture of deduction in respect of payment to
contractors/sub-contractors 332
16
WHAT CONSTITUTES A PAYMENT TO CONTRACTOR/
SUB-CONTRACTOR AND HOW MUCH TAX IS
TO BE DEDUCTED THEREFROM
16.1 Payment to contractors/sub-contractors 333
16.1-1 When such payments are subject to tax deduction 333
16.1-2 When such payments to contractors are not subject
to tax deduction at source 333
16.2 “Work contract” and “contract for supply of labour for works
contract” - Meaning of 335
16.2-1 “Work” as defined in section 194C 335
16.2-2 Work contract or sale of goods 336
16.2-3 Tests to determine whether a contract is work
contract 336
16.2-4 Emerging conclusion 338
16.2-5 Examples of “work contracts” and “contracts for
sale of goods” 339
16.3 Judicial pronouncements 345
2021-22 348
16.5 Clarifications from the Board 349
16.5-1 Advertising contract 349
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16.5-2 Broadcasting/telecasting contracts 351
16.5-3 Payment made to travel agent/or an airline 351
16.5-4 Does catering include serving food in restaurant 352
16.5-5 Payment of hire charges 352
16.5-6 Payment to an electrician 353
16.5-7 Maintenance contracts 353
16.5-8 Fixed deposit commission 353
16.5-9 Procurement of orders 353
16.5-10 Reimbursement 353
16.5-11 Bidi manufacturing 353
16.5-12 National Rural Employment Programme 353
16.5-13 Bus contractor 353
16.5-14 Road transporters 354
16.5-15 Tax deduction when material is supplied to
contractor 354
16.5-16 Contract on piece rate basis 355
16.6 Payment to Government and certain corporations 355
16.7 Certificate for tax deduction at lower rates 356
16.7-1 Time limit for soliciting the favour 356
16.8 Credit for tax deduction 356
17
TAX DEDUCTION FROM INSURANCE
COMMISSION
17.1 Person responsible for tax deduction from insurance
commission 358
17.2-1 No tax is deductible if payment during a financial
year does not exceed Rs. 15,000 358
17.2-2 Private arrangement of paying commission tax-
free is not relevant 358
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website 360
17.5-2 Time-limit within which certificate shall be issued 360
etc. 362
17.7-3 Failure to issue certificates or submit return 362
18
HOW TO COMPUTE INSURANCE COMMISSION
AND TAX TO BE DEDUCTED THEREFROM
18.1 What qualifies as insurance commission for the purpose of
tax deduction at source 363
18.1-1 Conditions to attract section 194D 363
18.2 Rates at which tax is to be deducted at source during the
financial year 2021-22 364
18.2-1 No tax deduction when payments are to Govern-
ment and certain corporation 364
18.3 Circumstances in which no deduction or deduction at lower
rate is possible 365
section 197(1) 365
18.4 Credit given to person on whose behalf tax is deducted 366
19
TAX DEDUCTION FROM PAYMENT
IN RESPECT OF LIFE INSURANCE POLICY
19.1 Person responsible for tax deduction 368
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year is less than Rs. 1,00,000 368
19.2-2 Private arrangement of paying commission
tax-free is not relevant 368
website 369
etc. 371
19.7-3 Failure to issue certificates or submit return 372
20
HOW TO COMPUTE TAX TO BE DEDUCTED
FROM PAYMENT IN RESPECT OF LIFE
INSURANCE POLICY
20.1 What qualifies as payment in respect of life insurance
policy for the purpose of tax deduction at source under
section 194DA 373
20.1-1 When exemption is available under section 10(10D) 373
20.2 Rates at which tax is to be deducted at source during the
financial year 2021-22 374
Illustrations 375
20.3 Circumstances in which no deduction or deduction at lower
rate is possible 375
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20.4 Credit given to person on whose behalf tax is deducted 376
21
NATIONAL SAVINGS SCHEME
21.1 Who is responsible to deduct tax 378
21.3 How to compute amount of tax deducted at source 378
21.6 Issue of certificate for tax deduction 379
website 379
issued 379
21.7 Annual and quarterly return to the Government 379
21.7-1 Annual returns 380
return 381
22
HOW TO COMPUTE AMOUNT REFERRED TO
IN SECTION 80CCA(2)(a) AND TAX TO BE
DEDUCTED THEREFROM
22.1 Payments referred to in section 80CCA(2)(a) 382
22.1-1 What is the scheme of section 80CCA 382
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22.1-2 Payments subject to tax deduction under section
194EE 382
22.2 Rate of tax in force during the financial year 2021-22 383
22.3 Payment without tax deduction under section 197A 383
22.3-1 Mode of submission of Form No. 15G/15H by
payer of income to income-tax authorities 384
22.4 Tax credit 384
23
DEDUCTION OF TAX AT SOURCE ON ACCOUNT
OF REPURCHASE OF UNITS BY MUTUAL
FUNDS OR UNIT TRUST OF INDIA
23.2-1 Private arrangement to pay income free of tax 386
23.3 How to compute amount of tax deducted 386
23.5 Deposit of tax to the credit of the Central Government 386
website 387
23.6-2 Time-limit within which the certificate shall be
issued 387
23.7 Annual and quarterly returns to the Government 388
23.7-2 Quarterly returns 388
return 389
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24
HOW TO COMPUTE AMOUNT REFERRED TO
IN SECTION 80CCB(2) AND TAX TO BE
DEDUCTED THEREFROM
24.1 Payments affected by section 194F 390
24.1-1 What is the scheme of section 80CCB 390
24.1-2 Payments subject to tax deduction under section
194F 390
24.1-3 Illustration 390
24.2 Rate of tax in force during the financial year 2021-22 391
24.3 Deduction of tax at lower rate 391
24.4 Tax credit 391
25
COMMISSION ON SALE OF
LOTTERY TICKETS
25.1 Who is responsible to deduct tax at source 393
25.2 When tax is deducted at source 393
25.2-1 When amount is credited to “suspense account” 393
25.2-2 Private arrangement to pay commission free of tax 393
25.3 How to compute tax deduction at source under section 194G 393
website 394
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return 396
26
HOW TO COMPUTE COMMISSION ON SALE
OF LOTTERY TICKETS AND TAX
DEDUCTIBLE THEREFROM
26.1 When a payment is affected by section 194G 397
26.2 Rates for tax deduction 397
26.4 Tax credited 398
27
TAX DEDUCTION FROM COMMISSION
OR BROKERAGE
27.1 Person responsible for tax deduction from commission/
brokerage 400
year does not exceed Rs. 15,000 400
27.2-2 Private arrangement of paying commission tax-
free is not relevant 400
website 402
issued 402
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return 404
27.7-4 Forfeiture of deduction in respect of commission/
brokerage 404
28
HOW TO COMPUTE COMMISSION OR
BROKERAGE AND TAX TO BE
DEDUCTED THEREFROM
28.1 When commission/brokerage is subject to the tax deduction
under section 194H 405
28.2 Brokerage/commission covered by section 194H 405
28.2-1 Professional services excluded 405
28.2-2 “Commission” judicially defined 406
28.2-3 Brokerage judicially defined 407
28.2-4 Commission and service are two essential elements 408
28.2-5 Commission retained by consignee - Is it subject to
tax deduction 411
28.2-6 Turnover commission by RBI 411
28.2-7 Trade discount is different 411
28.2-8 Discount on SIM offered by cellular telephone net-
work provider to distributors 412
28.2-9 Other judicial rulings 412
28.2-10 Conclusions 414
28.4 No tax deduction when recipient is Government and certain
corporations 415
rates 415
section 197(1) 415
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28.5-2 Turnover commission payable by Central Govern-
ment 416
28.6 Tax credit 416
29
TAX DEDUCTION FROM RENT
29.1 Person responsible for tax deduction from rent 418
year does not exceed Rs. 2,40,000 419
29.2-2 Private arrangement of paying rent tax-free is not
relevant 419
website 420
issued 420
return 422
29.7-4 Forfeiture of deduction in respect of rent 422
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30
HOW TO COMPUTE RENT AND TAX TO BE
DEDUCTED THEREFROM
30.1 When rent is subject to the tax deduction under section
194-I 423
30.2 Rent covered by section 194-I 423
30.2-1 Rent as defined in section 194-I 423
30.2-2 Broad inferences 425
30.4 No tax deduction when recipient is Government and certain
corporations 431
30.4-1 No tax deduction if recipient is exempt under
section 10(23C) 432
30.4-2 No tax deduction if recipient is real estate invest-
ment trust 432
30.5 Deduction of tax at lower rates 432
30.5-1 Certificate for receiving rent without tax deduction 432
30.6 Tax credit 433
31
CONSIDERATION PAYABLE FOR ACQUISITION
OF IMMOVABLE PROPERTY OTHER THAN
AGRICULTURAL LAND IN RURAL AREA
31.1 Who is responsible for tax deduction at source under section
194-IA 435
31.5-1 Certificates are issued by downloading from
TRACES Portal 436
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given 436
31.7 Consequences of failure to deduct or pay tax, furnish
returns, etc. 436
statement 436
31.7-3 Forfeiture of deduction 436
32
HOW TO COMPUTE TAX DEDUCTIBLE FROM
PAYMENT OF CONSIDERATION FOR
ACQUISITION OF ANY IMMOVABLE
PROPERTY
32.1 Income subject to tax deduction under section 194-IA 437
32.1-1 Immovable property 437
32.1-2 Agricultural land 437
32.1-3 Rural area in India 438
32.2 Rate for tax deduction at source during the financial year
2021-22 439
32.3 Consideration payable to Government or certain corporation 441
32.4 Certificate of tax deduction at lower rate 441
33
TAX DEDUCTION FROM PAYMENT OF RENT
BY CERTAIN INDIVIDUALS AND HUFs
33.1 Person responsible for tax deduction under section 194-IB 443
33.2-1 No tax is deductible if rent does not exceed
Rs. 50,000 per month 443
33.2-2 Private arrangement of paying tax-free rent is
not relevant 443
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33.6 Return to the Government 444
return 444
34
HOW TO COMPUTE TAX DEDUCTIBLE
FROM RENT UNDER SECTION 194-IB
34.1 Rent subject to tax deduction under section 194-IB 445
34.2 Rates of tax deduction during the financial year 2021-22 445
Illustrations 445
rates 447
34.5 Tax credit 447
35
TAX DEDUCTION FROM PAYMENT UNDER
SPECIFIED AGREEMENT
35.1 Person responsible for tax deduction from payment under
specified agreement 449
35.2-1 Private arrangement to pay consideration free of
tax 449
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return 450
36
HOW TO COMPUTE CONSIDERATION WHICH
IS SUBJECT TO TAX DEDUCTION
UNDER SECTION 194-IC
36.1 When payment under specified agreement is subject to
tax deduction under section 194-IC 451
36.1-1 Specified agreement under section 45(5A) 451
Illustration 452
rates 453
36.4 Tax credit 453
37
DEDUCTION OF TAX AT SOURCE FROM FEES
FOR TECHNICAL OR PROFESSIONAL
SERVICES OR ROYALTY
37.1 Who is responsible for tax deduction in the case of fees
for technical or professional services or royalty 455
37.1-1 Director’s fees subject to TDS under section 194J
from July 1, 2012 455
37.1-2 When payment/credit by an individual/HUF is
subject to TDS under section 194J 455
37.2-1 When fees is credited to “suspense account” 456
37.2-2 Private arrangement of paying fees for technical
or professional services or royalty tax-free cannot
discharge obligation under section 194J 457
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website 458
given 458
returns, etc. 460
statement 460
37.7-4 Forfeiture of deduction in respect of technical/
professional fees/royalty 460
38
HOW TO COMPUTE FEES FOR PROFESSIONAL
AND TECHNICAL SERVICES AND ROYALTY
AND TAX DEDUCTIBLE THEREFROM
38.1 Professional/technical services 461
38.1-1 What is professional services 461
38.1-2 Technical services 462
38.1-3 “Royalty” as defined in Explanation 2 to section
9(1)(vi) 463
38.2 When payments for professional/technical fees, royalty,
director’s fees are covered by section 194J 466
2021-22 470
38.3-1 Reimbursement of expenditure - Whether subject
to TDS 471
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38.4 Fees for professional services/technical services or royalty
payable to Government or certain corporation 471
38.5 Certificate of tax deduction at lower rate 472
38.5-2 Concession by the Government due to outbreak
of COVID-19 pandemic 472
39
INCOME IN RESPECT OF UNITS
39.1 Who is responsible for tax deduction at source under
section 194K 474
39.2-1 Credit of income to “suspense account” 474
39.4-2 Time within which tax has to be deposited 474
39.5 Issue a certificate for tax deducted at source to unitholders 474
TRACES Portal 474
given 475
returns, etc. 475
39.7-3 Failure to issue certificates or submit return/
statement 475
40
HOW TO COMPUTE INCOME IN RESPECT OF
UNITS AND TAX DEDUCTIBLE THEREFROM
40.1 Income subject to tax deduction under section 194K 476
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2021-22 476
40.3 Income in respect of units payable to Government or certain
corporation 477
40.4-1 Certificate for receiving such sum without tax
deduction or with deduction at lower rate 477
40.5 Who get credit for tax deducted 478
41
PAYMENT OF COMPENSATION ON
ACQUISITION OF IMMOVABLE
PROPERTY
section 194LA 480
website 480
41.5-2 Time-limit 480
41.6 Statement/return to the Government 481
41.7 Consequences of failure to deduct or pay tax, etc. 482
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42
PAYMENT OF COMPENSATION ON
ACQUISITION OF IMMOVABLE
PROPERTY
42.1 Income subject to tax deduction under section 194LA 483
2021-22 484
42.3 Income is payable to Government or certain corporation 484
42.4-1 Certificate for receiving such without tax deduc-
tion or with deduction at lower rate 485
43
INCOME BY WAY OF INTEREST FROM
INFRASTRUCTURE DEBT FUND
section 194LB 487
website 487
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44
HOW TO COMPUTE TAX DEDUCTIBLE
FROM PAYMENT OF INTEREST ON
INFRASTRUCTURE DEBT FUND
44.1 Income subject to tax deduction under section 194LB 490
2021-22 490
45
INTEREST ON UNITS OF BUSINESS TRUST
section 194LBA 493
website 493
45.7-3 Forfeiture of deduction in respect of payment of
interest 495
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46
PAYMENT OF INTEREST ON UNITS OF
BUSINESS TRUST
46.1 Income subject to tax deduction under section 194LBA 496
2021-22 496
47
DEDUCTION OF TAX AT SOURCE FROM INCOME
IN RESPECT OF UNITS OF INVESTMENT
FUND/SECURITISATION TRUST
194LBB/194LBC 499
website 499
interest 501
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48
HOW TO COMPUTE TAX DEDUCTIBLE FROM INCOME
IN RESPECT OF UNITS OF INVESTMENT
TRUST/SECURITISATION TRUST
48.1 Income subject to tax deduction under section 194LBB/
194LBC 502
2021-22 502
48.3 Certificate for tax deduction at lower rate (applicable with
effect from June 1, 2016) 503
48.3-1 Time-limit for soliciting the favour 503
48.3-3 Concession by the Government due to outbreak
of COVID-19 pandemic 503
49
BY WAY OF INTEREST FROM INDIAN COMPANY
UNDER SECTION 194LC
section 194LC 506
website 507
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50
INTEREST PAYABLE TO NON-RESIDENT/
FOREIGN COMPANY
50.1 Income subject to tax deduction under section 194LC 510
50.1-1 Approval by Central Government 510
50.2 Time of tax deduction 512
2021-22 512
51
INTEREST ON CERTAIN BONDS AND
GOVERNMENT SECURITIES
UNDER SECTION 194LD
section 194LD 515
TRACES Portal 516
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52
INTEREST PAYABLE UNDER SECTION 194LD
52.1 Income subject to tax deduction under section 194LD 519
52.2 Time of tax deduction 519
2021-22 519
53
TAX DEDUCTION FROM PAYMENT TO RESIDENT
CONTRACTOR, BROKER OR PROFESSIONAL BY
CERTAIN INDIVIDUALS AND HUFs
53.1 Person responsible for tax deduction under section 194M 522
53.2-1 No tax is deductible if payment/credit does not
exceed Rs. 50 lakh in a financial year 522
53.2-2 Private arrangement of paying tax-free rent is not
relevant 522
return 523
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54
PAYMENT/CREDIT TO CONTRACTOR,
PROFESSIONAL OR BROKER
UNDER SECTION 194M
54.1 Payment/credit subject to tax deduction under section
194M 524
54.2 Work contract, commission or brokerage and professional -
Meaning of 524
Illustration 525
rates 525
54.6 Tax credit 526
55
DEDUCTION OF TAX AT SOURCE FROM CASH
PAYMENT TO ACCOUNTHOLDERS
UNDER SECTION 194N
55.1 Person responsible for tax deduction under section 194N 528
55.2-1 No tax is deductible if cash payment does not
exceed Rs. 1 crore in a financial year 528
55.2-2 Private arrangement of paying tax-free rent is
not relevant 528
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return 529
56
CASH PAYMENT TO ACCOUNTHOLDERS
UNDER SECTION 194N
56.1 Cash payment subject to tax deduction under section 194N 530
56.3 Payment without tax deduction or with deduction at lower rates 531
56.5 Tax credit 532
57
PAYMENTS TO E-COMMERCE PARTICIPANTS
194-O 534
TRACES Portal 534
given 535
returns, etc. 535
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statement 535
58
HOW TO COMPUTE INCOME AND
TAX DEDUCTIBLE THEREFROM
58.1 Income subject to tax deduction under section 194-O 536
58.1-1 When tax is not deductible 536
58.1-2 TDS under other sections 536
58.1-3 Removing any difficulty 536
58.2 Rates for tax deduction at source during the financial
year 2021-22 537
Illustrations 537
58.3 Income in respect of units payable to Government or
58.4-3 Validity of the certificate 539
59
OF SPECIFIED SENIOR CITIZEN
section 194P 541
etc. 541
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statement 541
60
HOW TO COMPUTE INCOME OF SPECIFIED
SENIOR CITIZEN AND TAX DEDUCTIBLE
THEREFROM
60.1 Income subject to tax deduction under section 194P 542
2021-22 542
60.5 Return under section 139(1) not required 543
61
DEDUCTION OF TAX AT SOURCE ON PAYMENT
FOR PURCHASE OF GOODS
section 194Q 545
61.5-1 Certificates are issued by downloading from TRACES
Portal 546
given 546
returns, etc. 546
61.7-3 Failure to issue certificates or submit return/statement 546
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62
HOW TO COMPUTE TAX TO BE DEDUCTED
UNDER SECTION 194Q
62.1 Income subject to tax deduction under section 194Q 547
62.1-1 When tax is not deductible 547
62.1-2 Removing any difficulty 547
2021-22 548
Illustration 548
62.3 Income in respect of amount payable to Government or
63
TAX DEDUCTION FROM PAYMENTS
TO NON-RESIDENTS
63.1 Who is required to deduct tax under sections 194E, 195
and 196A 552
63.1-1 Payer/Principal officer is person responsible for
tax deduction 552
63.1-2 In case of consideration for transfer of foreign
exchange amount 552
63.2 Payment from which deduction has to be made 553
63.3-1 Payments referred to section 115BBA 553
63.3-2 Interest of mutual fund payable to non-resident 553
63.3-3 Any other payments 553
63.3-4 Private arrangement of paying income tax-free
cannot discharge obligation under sections 194E,
195 and 196A 554
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63.6 Issue of certificate for tax deducted at source 555
website 555
return 557
63.8-3 Failure to issue certificate, or submit return 557
annual charge, interest, royalty, fees, etc. 557
Illustration 558
64
HOW TO COMPUTE AMOUNT PAYABLE
TO NON-RESIDENT AND TAX TO
BE DEDUCTED THEREFROM
64.1 Payments subject to tax deduction under section 194E 561
64.1-1 Payments covered by section 115BBA 561
64.1-2 Other points pertaining to section 194E 562
64.2 Payment subject to tax deduction under section 196A 562
64.2-1 No tax deduction if UTI’s units are purchased in
foreign currency 562
64.3 “Other sum” subject to tax deduction under section 195 563
64.3-1 Meaning of non-resident 563
64.3-2 Withdrawal of Circular Nos. 23, 163 and 786 and
its impact on taxability of export commission in
India 563
64.3-3 Payment made to resident agent of a non-resident 565
64.3-4 Advances to ship hirer adjustable against hire
charges 565
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64.3-5 Constructive payment of commission to non-
resident through another non-resident 565
64.3-6 Money paid into Court under decree obtained by
non-resident 566
64.3-7 Payment to non-resident for goods resold by it to
resident seller 566
64.3-8 Interest on purchase price paid to non-resident in
instalments 566
64.3-9 Customary, non-contractual payment to officers
of ship by stevedores 566
64.3-10 Payment to foreign firm whose one of the partners
is managing firm’s affairs from India 566
64.3-11 Section 195 is applicable even in the case of
regular trading operation 567
64.3-12 Payment to foreign shipping companies 567
64.3-13 Payments to non-resident at UAE 568
64.3-14 Payments of interest by a branch office to head
office outside India 568
64.3-15 Any other sum chargeable to tax 569
64.3-16 Travelling expenses 569
64.3-17 Payment for data transmission 569
64.3-18 When payee is non-resident at the time of tax
deduction but becomes resident at the time of
payment 569
64.3-19 Mere accrual of income is not sufficient 570
64.3-20 Reimbursement of salary or other expenses 570
64.3-21 When income is exempt under DTAA 570
64.3-22 Lead manager of GDR 570
64.3-23 Transfer of controlling interest in a foreign
company having assets in India 570
64.3-24 Lease rent, roaming charges, telephone services,
uplinking charges, bandwidth network charges,
interconnection/port access charges 572
64.3-25 Export contract 572
64.3-26 Remittance from India 572
64.3-27 Subscription charges 572
64.4 Tax deduction only on recipient’s chargeable income -
Provisions for ascertaining recipient’s chargeable income 573
64.4-1 Appropriation is not possible in the case of interest,
fees and royalty 575
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64.5 Grossing up of amount payable to non-resident stipulated
to be paid net of taxes 577
64.5-1 Cases when grossing up is not required 578
64.6 Rates of tax deduction at source for the financial year
2021-22 579
64.6-1 TDS when payment/credit is given to a person in
notified jurisdictional area 579
64.6-2 TDS when PAN of deductee is not available 580
64.7 Payments to non-resident without tax deduction in certain
cases 582
64.7-1 Qualifying persons and qualifying incomes 582
64.7-2 Conditions to be satisfied 582
64.7-3 Procedure for issue of certificate 583
64.8 Certificate for deduction of tax at lower rate in the case of
recipient other than a company 583
64.9 Furnishing information regarding remittance 584
64.10 Credit for tax deducted 585
64.11 Procedure for refund of tax deducted at source under
section 195 to the person deducting tax at source 586
65
INCOME OF UNITS OF OFFSHORE FUND
65.4 Tax-deduction account number 590
I-60

PAGE
CONTENTS
website 591
65.7 Quarterly returns to the Government 592
return 592
66
HOW TO COMPUTE AMOUNT OF TAX
DEDUCTION UNDER SECTION 196B
66.1 Amount covered by section 196B 593
66.1-1 Units referred to in section 115AB 593
66.1-2 Overseas financial organisation 593
66.2 Rate for tax deduction 594
66.3 When tax is deductible at lower rate 594
66.4 Tax credit 594
67
INCOME FROM FOREIGN CURRENCY
BOND OR SHARES OF INDIAN
COMPANY
I-61

PAGE
CONTENTS
website 597
return 598
68
DEDUCTION UNDER SECTION 196C
68.1 Amount covered by section 196C 599
68.1-1 Bonds/shares referred to in section 115AC 599
68.4 Tax credit 600
69
INCOME OF FOREIGN INSTITUTIONAL
INVESTORS FROM SECURITIES
website 603
I-62

PAGE
CONTENTS
return 604
70
DEDUCTION UNDER SECTION 196D
70.1 Amount covered by section 196D 605
70.1-1 Securities referred to in section 115AD 605
70.1-2 Who is a Foreign Institutional Investor 605
70.4 Tax credit 626
BOOK TWO : ADVANCE TAX
71
INCOME LIABLE TO ADVANCE TAX
71.1 Provisions applicable up to the assessment year 1988-89 630
71.2 All incomes are subject to advance tax from the assessment
year 1989-90 630
72
LIABILITY TO ADVANCE TAX - WHEN ARISES
72.1 Who is liable to pay advance tax 631
Illustration 631
73
DUE DATES OF PAYMENT
73.1 Instalments of advance tax 633
I-63

PAGE
CONTENTS
73.2 Due dates 633
Illustration 633
73.3 Tax paid after the due dates but within the financial year 634
73.4 Due dates when advance tax is payable on notice issued
by Assessing Officer 634
Illustrations 634
74
COMPUTATION OF ADVANCE TAX LIABILITY
74.1 Payment of advance tax by the assessee on his own account 636
74.1-1 No need to submit any estimate/statement 636
74.1-2 Revision of second and subsequent instalment 636
74.1-3 Computation of tax 636
74.1-4 Tax rates 636
Illustration 636
74.2 Payment of advance tax in pursuance of order of Assessing
Officer 639
74.2-1 Lower/higher estimate by assessee 639
74.2-2 Computation of tax by Assessing Officer 639
Illustration 640
74.3 Payment of advance tax in pursuance of revised order of
Assessing Officer 641
74.3-1 Lower/higher estimate by assessee 641
74.3-2 Computation of tax 641
Illustration 641
75
INTEREST PAYABLE BY THE ASSESSEE/GOVERNMENT
75.1 Interest for default in payment of advance tax 643
75.1-1 Assessed tax - Meaning of 643
75.1-2 Adjustment when tax is paid before regular
assessment under section 140A 644
75.1-3 Adjustment in the case of reassessment/recompu-
tation under section 147 or 153A 644
75.1-4 Adjustment in the case of rectification/revision/
modification under sections 154, 155, 250, 254,
260, 262, 263, 264, 245D(4) 645
I-64

PAGE
CONTENTS
75.1-5 Where an application for settlement is made under
section 245C(1) 645
75.1-6 Interest under section 234B or 234C in case of MAT 646
75.1-7 Shipping business of non-residents 646
75.1-8 Payment by cheque 646
75.1-9 Specific order 646
75.1-10 If returned income and assessed income of latest
year is nil 647
75.1-11 Collection of interest under sections 234A, 234B
and 234C is mandatory 647
75.1-12 Cash seized during search 647
75.1-13 Shortfall because of interpretation of law 648
75.1-14 When advance tax liability arises because of a
subsequent court ruling 648
75.1-15 Application of section 234B in the case of settle-
ment of cases 648
75.2 Interest for deferment of advance tax 649
75.2-1 Category A 649
75.2-2 Category B 650
75.2-3 Category C 651
75.2-4 Short payment of advance tax in case of capital
gains/casual income 652
75.2-5 What is returned income 652
75.3 Waiver or reduction of interest under sections 234A, 234B
and 234C 652
75.3-2 Period 652
75.3-3 Extent of interest to be reduced or waived 653
75.3-4 Discretion should be exercised in judicial manner 653
75.4 Chief Commissioner/Director General (Investigation) to
reduce penal interest in certain cases 653
75.5 Power of CBDT and Settlement Commission to reduce/
waive interest 654
75.6 Interest payable to assessee 654
75.6-1 Provisions applicable after amendments by the
Finance Act, 2016 and Finance Act, 2017 655
75.7 Procedure to be followed in calculation of interest 657
Illustrations 657
I-65

PAGE
CONTENTS
BOOK THREE : TAX COLLECTION AT SOURCE
76
TAX COLLECTION AT SOURCE
76.1 In which case tax has to be collected at source 670
76.2 Tax collection in Category A 671
76.2-1 Who is seller in Category A 671
76.2-2 Who is buyer in Category A 672
76.2-3 Meaning of “scrap” 673
76.2-4 When tax has to be collected in Category A 674
76.2-5 Goods utilised for manufacturing/processing or
generation power of in Category A is not subject
to tax collection 675
76.2-6 Other judicial rulings 676
76.3 Tax collection in Category B 676
76.4 Tax collection in Category C 676
76.5 Tax collection in Category D 677
76.6 Tax collection in Category E 677
Illustrations 678
76.7 Tax collection in Category F 680
76.7-1 Clarification given by the Borad in Circular
No. 17/2020 681
Illustrations 682
76.8 Requirement to furnish PAN by collectee 684
76.9 Special provision for TCS for non-Filers of Income-tax return 685
76.10 Tax collection at lower rate 685
76.11 Tax collection account number 686
76.12 Deposit of tax 686
76.12-1 e-Payment of tax 686
76.13 Issue of certificate 686
76.13-1 Due date of issuing certificate in Form No. 27D 686
76.13-2 Duplicate certificate 687
I-66

PAGE
CONTENTS
76.14-3 Mode of furnishing quarterly returns 687
76.14-4 Quarterly return not possible before payment of
tax and interest 688
76.14-5 PAN data of collectee 688
76.15 Consequences of failure to collect or pay tax, furnish
return, etc. 688
76.16 Tax credit to one who pays 688
76.17 Consequences if tax is not collected or paid 688
76.18 There is no ambiguity in the provisions of section 206C 689
BOOK FOUR : REFUND
77
REFUND FOR EXCESS PAYMENT
77.1 Right to claim refund - When arises 696
77.2 Who can claim refund 696
77.3 How to claim refund 696
77.3-1 Claim after the statutory time-limit 696
77.4 Refund on appeal 697
77.4-1 In case assessment is set aside or cancelled 697
77.4-2 In case assessment is annulled 698
77.5 Correctness of assessment not to be questioned 698
77.6 Set off of refunds against the tax remaining payable 698
78
INTEREST ON REFUND
78.1 Interest on refund on excess payment of advance tax and
tax deduction at source 700
78.2 Interest on refund of tax other than advance tax/tax
deducted at source 700
78.3 Refund which arises out of appeal effect 700
78.4 Interest along with refund is a must 700
78.5 Delay attributable to the assessee is not considered 701
78.6 Automatic revision of interest in case of appeal, reassess-
ment, etc. 702
I-67

PAGE
CONTENTS
78.7 Interest on excess refund 702
78.7-1 Interest under section 234D(1) 702
78.7-2 Computation of interest 703
Illustration 703
REFERENCER
Referencer 1 : Tax rates 707
u Tax deduction at source 707
Referencer 2 : Withholding tax rates 715
Referencer 3 : Rates for tax collection at source 721
Referencer 4 : Advance tax rates 725
Referencer 5 : Calendar for tax deduction/Collection at source and
advance payment of tax 733
I-68

Deduction of tax at source on payment for purchase
of goods
Who is responsible for tax deduction at source under section 194Q
61.1 Under section 194Q, tax is deductible by buyer of goods. “Buyer” for
this purpose, means a person whose total sales, gross receipts or turnover
from the business carried on by him exceed Rs. 10 crore during the finan-
cial year immediately preceding the financial year in which the purchase
of goods is carried out. However, “buyer” does not include a person noti-
fied by the Central Government (subject to such conditions as may be
specified therein).
Any person (being a buyer) who is responsible for paying any sum to any
resident seller for purchase of any goods of the value (or aggregate of
such value) exceeding Rs. 50 lakh in any previous year, is required to de-
duct tax at source under section 194Q with effect from July 1, 2021.
When tax has to be deducted at source
61.2 Tax should be deducted by the buyer, at the time of credit of such
sum to the account of the seller or at the time of payment thereof by any
mode, whichever is earlier. Where, however, the above sum is credited to
any account (whether called “suspense account” or by any other name) in
the books of account of the person liable to pay such income, such credit
of income shall be deemed to be the credit of such income to the account
of the payee and the provisions of this section shall apply accordingly.
Tax deduction account number
61.3 See para 1.4.
Deposit of tax to the credit of Central Government
61.4 Tax is to be deposited to the credit of the Central Government as
follows –
61.4-1 Where to deposit - See para 1.5-1.
61.4-2 Time within which tax has to be deposited - See para 37.4-2.
Issue a certificate for tax deducted at source to unitholders
61.5 Every person deducting tax from income in respect of units is re-
quired to issue certificate in Form No. 16A.
61
545

61.5-1 Certificates are issued by downloading from TRACES Portal -
See para 7.6-1.
61.5-2 Time limit within which the certificate should be given - See
para 7.6-2.
61.5-3 Issue of duplicate certificate - See para 1.6-4.
Statement/returns to the Government
61.6 Quarterly return of income in respect of tax deducted under section
194Q is to be filed within the prescribed time-limit in Form No. 26Q [see
para 37.6-2].
Consequences of failure to deduct or pay tax, furnish returns, etc.
61.7 The following are consequences of different defaults :
61.7-1 Failure to deduct and/or pay tax - See para 1.8-1.
61.7-2 Failure to comply with the provisions of section 203A regarding
tax deduction account number - See para 1.8-2.
61.7-3 Failure to issue certificates or submit return/statement - See
para 1.8-3.
546
Para 61.7 DEDUCTION OF TAX AT SOURCE ON PAYMENT Book One

How to compute tax to be deducted under section 194Q
Income subject to tax deduction under section 194Q
62.1 If the following conditions are satisfied, then tax is deductible under
section 194Q –
1. Payer is “buyer” of goods.
2. Payment/credit is on or after July 1, 2021.
3. Payment/credit pertains to purchase of goods from seller.
4. Aggregate payment/credit during the financial year exceeds Rs. 50 lakh.
If the above conditions are satisfied, the buyer is required to deduct tax at
source under section 194Q.
62.1-1 When tax is not deductible - Tax is not deductible under section
194Q if the following cases –
Cases when TDS under Comments
section 194Q not applicable
Case 1 - If tax is deductible If tax is deductible under any other section, then
under any other section tax shall be deducted under that section and not
under section 194Q. Even when tax is deductible
under any other section (but not actually de-
ducted by the payer), TDS provisions of that sec-
tion will apply and not TDS under section 194Q.
Case 2 - If tax is collectible If a particular transaction is covered by TCS pro-
under the provisions of visions of section 206C [other than sub-section
section 206C [but other (1H)], then tax will be collected by the seller (and
than sub-section (1H)] tax is not deductible by the buyer under section
194Q).
If a particular transaction is covered by section
194Q as well as section 206C(1H), then TDS un-
der section 194Q will apply and not TCS under
section 206C(1H).
62.1-2 Removing any difficulty - If any difficulty arises in giving effect to
the provisions of this section, the Board may, with the approval of the
Central Government, issue guidelines for the purpose of removing the dif-
ficulty. These guidelines shall be laid before each House of Parliament
62
547

and shall be binding on the income-tax authorities and on the e-commerce
operator.
Rates for tax deduction at source during the financial year 2021-22
62.2 Tax is deductible under section 194Q with effect from July 1, 2021.
Tax is deductible by buyer at the rate of 0.1 per cent of the amount paid or
payable exceeding Rs. 50 lakh.
➢ If the recipient does not furnish his PAN to the deductor, tax will be
deducted at the rate of 5 per cent by virtue of section 206AA. PAN of the
deductee should be mentioned in any correspondence and document
which is exchanged between the deductor and deductee.
➢ If recipient is a non-filer of income-tax return, tax is deductible (by
virtue of section 206AB) at the rate of 5 per cent [for detailed discussion,
see para 10.2-2].
ILLUSTRATION
The following information is given pertaining to purchase of goods. TDS liability
under section 194Q for the financial year 2021-22 is given in the last column.
Buyer Turnover of Turnover of Seller Consideration for purchase Require-
buyer during buyer in of goods during – ment of TDS
financial financial year under sec-
year 2020-21 2021-22 April 1, 2021 July 1, 2021 tion 194Q by
and June and March buyer
30, 2021 31, 2022
X Rs. 10 crore Rs. 14 crore C Ltd. Rs. 40 lakh Rs. 90 lakh No TDS
Y Rs. 10.001 Rs. 8 crore D Ltd. Rs. 10 lakh Rs. 40.2 lakh TDS : 0.1% of
crore Rs. 20,000
Z Rs. 15 crore Rs. 9 crore E Ltd. Rs. 40 lakh Rs. 80 lakh TDS : 0.1% of
Rs. 70 lakh
A Ltd. More than More than F Ltd. Rs. 1 crore Rs. 2 crore TDS : 0.1% of
Rs. 10 crore Rs. 10 crore Rs. 2 crore
B Ltd. Rs. 17 crore Rs. 8 crore G Ltd. Rs. 1.7 crore Rs. 10 lakh TDS : 0.1% of
Rs. 10 lakh
Notified More than More than H Ltd. Rs. 10 lakh Rs. 4.9 crore No TDS
person† Rs. 10 crore Rs. 10 crore
† It is a person notified by the Central Government under the Explanation to section 194Q(1).
The following points should be noted –
1. If PAN of seller is not available, tax will be deducted under section 194Q at the
rate of 5% (not at the rate of 0.1%).
2. In the case of sale of goods by C Ltd. to X, TDS provisions of section 194Q is not
applicable (in the preceding year turnover of the buyer is not more than Rs. 10
crore). If turnover of C Ltd. (i.e., seller) in the preceding year exceeds Rs. 10 crore,
then C Ltd. is required to collect tax under section 206C(1H) at the rate of 0.1% of
548
Para 62.2 HOW TO COMPUTE TAX TO BE DEDUCTED Book One

the consideration received during the financial year 2021-22 in excess of Rs. 50
lakh.
3. In the case of sale of goods by D Ltd., E Ltd., F Ltd. and G Ltd., TCS under section
206C(1H) will not be applicable even if turnover of the seller is more than Rs. 10
crore in the preceding year. If, however, tax is not actually deducted by buyer in
these cases, seller will have to collect tax at source within the parameters of sec-
tion 206C(1H).
4. Disallowance provisions of section 40(a)(ia) will be applicable even in the case of
non-deduction of TDS under section 194Q. For instance, if A Ltd. fails to deduct
tax from payment/credit to F Ltd. (i.e., seller), then 30% of Rs. 2 crore will be
disallowed under section 40(a)(ia) for the previous year 2021-22.
Income in respect of amount payable to Government or certain corpora-
tion
62.3 No tax is deductible at source from income in respect of units pay-
able to the following –
a. the Government [sec. 196(i)]; or
b. the Reserve Bank of India [sec. 196(ii)]; or
c. a corporation established by or under a Central Act which is, under any
law for the time being in force, exempt from tax on its income [sec.
196(iii)]; or
d. a mutual fund specified under section 10(23D) [sec. 196(iv)].
➢ Section 197A(1F) - Tax is not deductible from a specified payment to a
notified institution, association or body or class of institutions, associa-
tions or bodies [see para 6.3].
Deduction of tax at lower rates [Sec. 197(1)]
62.4 If the Assessing Officer is satisfied that the total income of the recipi-
ent justifies tax deduction at lower rate or no deduction of tax, as the case
may be, he should on an application [Form No. 13] made by the recipient
of income from units, may issue him a certificate for tax deduction at
lower rate.
62.4-1 Time-limit for soliciting the favour - Since no time-limit is pre-
scribed for making an application to the Assessing Officer, application can
be filed at any time before deduction of tax at source. Further, in absence
of any time-limit for the Assessing Officer for taking an action on such
application, the Assessing Officer is expected to take a decisions on such
application within a reasonable period of time.
62.4-2 How lower rate is determined - See para 6.6-1b.
62.4-3 Validity of the certificate - See para 6.6-1d.
62.4-4 Other points - See para 6.6-1c.
549
Ch. 62 DEDUCTION OF TAX AT LOWER RATES Para 62.4

Who get credit for tax deducted
62.5 Any tax deducted from income from units in accordance with the
provision of section 194Q and paid to the Central Government is treated
as a payment of tax on behalf of unitholder. Tax credit is, therefore, given
to him for the amount so deducted at the time of assessment.
550
Para 62.5 HOW TO COMPUTE TAX TO BE DEDUCTED Book One

551
CHAPTERS 63 & 64
Deduction of tax at source from payments to non-residents as
required under sections 194E, 195 and 196A
HOW TO PROCEED
➢ Ascertain whether you are a person responsible for paying to a non-
resident (not being a company), or to a foreign company any interest, not
being “interest on securities”, or any other sum not being salary - see
para 63.1.
➢ Find out whether the payment you are making is covered by the expres-
sion “other sums” used in section 195, for determining the meaning of
the expression “other sums” - see para 64.1.
➢ Find out the rate of income-tax in force at the relevant time - see para
64.6.
➢ Deduct tax at the rates in force - see paras 64.7 and 64.8 for certain
exceptions.
➢ Deposit the tax deducted to the credit of the Central Government, for the
place of payment, time of payment and the number of challan form for
payment - see para 63.5.
➢ Issue a certificate of deduction at source to payee - see para 63.6.
➢ File returns of tax deducted at source to the concerned Assessing Officer
- see para 63.7.
RELATED ISSUES
➢ Tax deduction account number - see para 1.4.
➢ Certificate for tax deduction at lower rate - see para 64.8.
➢ Consequences of failure to deduct or pay tax, furnish return, etc. - see
para 63.8.

Taxmann's Deduction of Tax at Source with Advance Tax and Refunds

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