Deduction andcollection of tax at source (TDS/TCS)
OverviewTo avoid cases of tax evasion. To collect tax at source on accrual of income.Persons responsible for making payment to deduct tax at source and deposit the same to the Government‟s treasure within stipulated time.The recipient of income is liable to tax on the gross amount and the amount deducted at source is against his final tax liability.
Payments covered by TDS scheme• Deduction of tax from Salaries[Sec. 192]• Deduction of tax at source from other than interest on securities [Sec. 194A]• Deduction of tax at source from payment to contractors or sub-contractors[Sec. 194C]• Deduction of tax at source from commission or brokerage[Sec.194H]• Deduction of tax at source from income by way of rent[Sec. 194I)• Deduction of tax at source on fees for professional or technical services[Sec. 194J)• Tax collection at source on “Scrap”[Sec.206C]
When and how is to be deducted at source from Salary?Who is the payer EmployerWho is the recipient EmployeePayment Covered Taxable salary of the employeeAt what time tax has to be At the time of paymentdeducted at sourceMaximum amount which The amount of exemption limit(i.e. Rs.can be paid without tax 1,90,000 in case of woman/Rs. 2,50,000deduction in case of senior citizen/ Rs. 1,80,000 for the assessment year 2012-13Rate of tax deduction at Normal rates applicable to an individualsource
How to compute taxable salary? Salary on “due” or “receipt” basis whichever is earlier. Salary includes basic, DA, commission, bonus, leave salary etc. Allowance includes all fixed quantity of money subject to certain exemptions. Perquisite may be defined as any casual emolument or benefit attached to an office such as “Rent free accommodation, LTC, Medical reimbursement, interest free loan etc. Section 80C to Section 80U, deductions would be available from gross total income.
Permissible Deduction u/s 80C The maximum amount deductible can not exceed Rs. 1.00 lakh on following nature of payments.1. Life insurance premium including ULIPs subject to certain conditions.2. Contribution towards statutory and recognized provident fund.3. Contribution towards 15-year public provident fund.4. Subscription to National Saving Certificates, VIII Issue.5. Any Sum paid as tuition fees in India for full time education of any two children of an individual.6. Any payment towards the cost of purchase/ construction of a residential property.7. Amount deposited as term deposit for a period of 5 years or more.8. Subscription towards notified units of Mutual Fund (ELSS)
Permissible Deduction u/s 80CCF to 80D Deductions in respect of subscription to long-term infrastructure bonds under section 80CCF can not exceed Rs. 20,000. Deduction in respect of medical insurance premia under section 80D as per following: Taxpayer, spouse Parents of the Total and dependent taxpayer children dependent or not Max. amt 15,000 15,000 30,000 deductible Additional 5,000 5,000 10,000 amount for senior citizen Total 20,000 20,000 40,000
Permissible Deduction u/s 80E & 80G Deduction in respect of repayment of loan taken for higher education under section 80E by way of entire amount of interest on such loan up to 7 immediately succeeding assessment years. Deduction in respect of donations under section 80G is not given by an employee to a notified public charitable institute except contribution made to funds like JN memorial fund, PM Relief Fund etc. Compute tax liability on net income as per prescribed income tax rate…
Income Tax Rates for AY 2012-13 Individual, HUF, Women Senior Citizen who Super Senior Citizen Rates AOPs, and BOIs is 60 or above who is 80 or above years yearsUp to Rs. 1,80,000 Up to Rs. 1,90,000 Up to Rs. 2,50,000 Up to Rs. 5,00,000 NilRs. 1,80,000-Rs. Rs. 1,90,000-Rs. Rs. 2,50,000.- Rs. Not Available 10%5,00,000 5,00,000 5,00,000Rs. 5,00,000-Rs. Rs. 5,00,000-Rs. Rs. 5,00,000.- Rs. Rs. 5,00,000- Rs. 20%8,00,000 8,00,000 8,00,000 8,00,000Above Rs. Above Rs. Above Rs. Above Rs. 8,00,000 30%8,00,000 8,00,000 8,00,000Surcharge Surcharge Surcharge Surcharge NilEducation Cess Education Cess Education Cess Education Cess 2%S.H.E. Cess S.H.E. Cess S.H.E. Cess S.H.E. Cess 1%
Other provisions tax from Salaries [Sec. 192] If house rent allowance is Rs 3,000 per month (or less than that), the employer will give exemption on the basis of a declaration given by employee (no need to submit rent receipt) The employer may, at the time of deducting tax at source, increase or decrease the amount to be deducted for the purpose of adjusting any previous deficiency or excess deduction. The total salary should be rounded off to the nearest multiple Rs. 10. Determined the average of income tax for whole financial year. Deduct tax in even on monthly basis
Deduction of tax at source from interestother than interest on securities[194A] and commission or brokerage[194H)Who is the payer Any person who is (not being individual or a HUF)Who is the recipient A resident PersonAt what time tax has to be At the time of payment or at thededucted at source time of credit, whichever is earlierMaximum amount which Tax is not deductible if paymentcan be paid without tax /credit does not exceed Rs.deduction 5,000Rate of tax deduction at 10%(no surcharge andsource education cess)
Deduction of tax at source from payment to contractors[194C]Who is the payer Any company, firm, local authority, trust, individual or HUF & Govt.Who is the recipient A resident contractorAt what time tax has to At the time of payment or at thebe deducted at source time of credit, whichever is earlierMaximum amount Tax is not deductible if singlewhich can be paid payment/credit does not exceedwithout tax deduction Rs. 30,000 or Rs. 75,000 in the aggregate during a financial yearRate of tax deduction 1% if recipient is an individual/at source HUF, otherwise 2% (no surcharge and education cess)
Deduction of tax at source from payment to contractors[194C]Transport Payment to transport operators in the course ofOperators business of plying, hiring or leasing goods carriages is not subject to TDS, if the recipient furnishes their PAN to the payerPurposes Payment/credit should be for business purposes, not be exclusively for personal purposesMeaning Advertising, broadcasting and telecasting,of Work catering, carriage of documents and passengers, supply of labour, payment to electrician etc.Payment On the entire consideration including servicecovered tax, if any
Deduction of tax at source from income by way of rent[194I]Who is the payer Any person paying rent (not being an individual or a HUF)Who is the recipient A resident personAt what time tax has to be At the time of payment or at the time ofdeducted at source credit, whichever is earlierMaximum amount which If the amount of payment during acan be paid without tax financial year is Rs. 1,80,000 or lessdeduction than Rs. 1,80,000Meaning of Rent Any lease, sub-lease, tenancy or any other agreement or arrangementRate of tax deduction at 2% for the use of any machinery or plantsource or equipment, 10% for the use of any land or building or furniture or fittings.(No SC and cess)
Deduction of tax at source on fees forprofessional or technical services[194J]Who is the payer Any person paying rent (not being an individual or a HUF)Who is the recipient A resident personAt what time tax has to At the time of payment or at thebe deducted at source time of credit, whichever is earlierMeaning of Professional Carrying on legal, medical, oror technical services interior decoration or managerial, technical or consultancy servicesMaximum amount If the amount of profession feeswhich can be paid during the year is Rs. 30,000 orwithout tax deduction less than Rs. 30,000Rate of tax deduction 10%(no surcharge and educationat source cess)
Tax collection on Scrap at source [Sec. 206C] Every person, being a seller, shall collect tax from the buyer of goods specified as “Scrap” tax at source. Tax has to be collected by the seller at the time of debiting of the amount payable by the buyer to the account of buyer or at the time of receipt of such amount from the buyer in cash or by issue of cheque, whichever is earlier. Goods utilized for manufacturing/processing/not for the purpose of trading is not subject to tax collection, if the buyer gives declaration in Form No. 27C to the seller and copy of the same shall be submitted by the seller within 7 days from the last day of month in which it is received to the Commissioner.
Meaning of “Scrap”? [Sec. 206C]• “SCRAP” has been defined as waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breaking, cutting up, wear and other reasons.• It would not include any waste or scrap-× Which does not arise from manufacture or mechanical working of material; or× Which is usable as such× Waste or scrap arising from packing materials, newspapers, old machinery scraped etc.× By-products generated from the manufacturing process as the same could be used as such.
At Glance Rates for tax deduction at source for AY 2012-13Nature of Payment TDS(SC;Nil, EC; Nil, SHEC;Nil)•Sec. 194A-Interest other than interest on securities 10%•Sec. 194C-Payment to contractors or sub-contractors-a) Payment/ credit to an individual or a HUF 1%b) Payment /credit to other than individual or a HUF 2%• Sec. 194H- Commission or brokerage to resident 10%• Sec. 194I- Rent to resident-a) Rent of plant and machinery 2%b) Rent of land or building or furniture or fittings 10%• Sec. 194J- Fees for professional or technical 10%• Sec.206C- Collection at source on Scrap 1%
Time of deposit of TDS/TCS after April 1, 2010Time of deposit of TDS Time of deposit of TCSOn or before 7 days from the end of On or before 7 days from thethe month in which tax is deducted end of the month in which tax is collected•Where income or amount is paid orcredited in the month of March: Tax should be deposited by April 30•Where income or amount is paid or Within one week from the lastcredited before March 1: day of the month in which taxTax should be deposited within 7 is collected.days from the end of month in whichtax is deducted.
Quarterly statement of tax deduction/ collection after April,1 2010Nature of Return Form No.Tax deduction from salary under section 192 24QTax deduction when deductees are non resident(notbeing a company ), foreign company and persons who 27Qare resident, but not ordinarily residentTax deduction in any other case (Sec 194A to 194J) 26QTax collection (Sec 206C) 27EQ
Time-limit of Submission of QuarterlyReturns E-TDS/E-TCS after April, 1 2010 Periodicity Due date of submission For the quarter ending June 30 of the financial year July 15 of the financial year For the quarter ending September 30 of the financial year October 15 of the financial year For the quarter ending December 31 of the financial year January 15 of the financial year For the quarter ending March 31 of May 15 of the financial year the financial year immediately following the financial year in which tax is deducted/ collected
Time Limit for issue of TDS/TCS certificate after April,1 2010Form No. Periodicity Due DateForm No. 16 Annual On or before May 31 of the financial yearand 12BA immediately following the financial year in(Salary) which tax is deducted.Form No. 16A Quarterly Within 15 days from the due date of(Non Salary) furnishing quarterly TDS returns as;Form No. Quarterly Within 15 days from the due date of27D furnishing quarterly TCS returns as;(TCS)
Permanent Account Number(PAN) [Sec. 139A] If the recipient does not furnish his PAN to the deductor ,tax will be deducted at the rate of 20 per cent for all sections in which TDS/TCS is deductible. PAN of the deductee should be mentioned in any correspondence and document which is exchanged between the deductor and the deductee. Every person receiving any sum or income from which tax has been deducted shall intimate his PAN to the deductor. In case of issuance of PAN number and card the maximum period should be allowed three months from the date of application.
Other points for consideration Amount payable to Govt./RBI/certain corporations not subject to tax deduction. Non deduction of TDS or late payment of deducted TDS attracts interest at the rate of 1.50% p.m. on TDS amount from the date on which TDS is actually deducted or paid. Goods received on „freight to pay basis‟ would also be subject to tax deduction. Reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.