Tax deduction at source.

Under the scheme of TDS, persons responsible for making payment of income, covered by the scheme are responsible to de deduct tax at source and deposit the same to the government’s treasury within the stipulated time. The recipient of income – though he gets only the net amount (after deduction of tax at source) is liable to tax on the gross amount and the amount deducted at source is adjusted against his final tax liability TDS covers payments like salary, payments other salary to residents (namely rent, interest, dividend, commission, brokerage, lottery, winnings of races, royalty, compensation, ) and payment to non residents. TDS RATE: If the recipient does not furnish his PAN number to the deductor, tax will be deducted at the normal rate or at rate of 20 % whichever is higher. PAN of the deductee should be mentioned in any correspondence and document which is exchanged between the deductor and deductee. Education cess and secondary cess and higher education cess during the financial year will be as it is in the normal calculation of tax. CONSEQUENCES OF DEFAULT – where a person who is required to deduct tax at source does not pay or does not deduct or after deducting fails to pay, the whole or any part pf tax, as required by the act, then such person shall be deemed to be an assessee in default in respect of such tax under section (201) (1). The time limit for payment is accepted as 2 years form the year it is filed by the deductor,

In case when there is no such statement is filed, within 4 years from the end of the financial year in which payment is made or given credit. DEDUCTION OF TAX FROM SALARIES Any person responsible for paying any income chargeable under the head “salaries” is required to deduct tax at source on the amount payable. Tax is to be calculated at the rates prescribed by the financial year in which the payment to employees is made. Salary will be calculated in the same manner how an employee normally calculates. HRA : the exemption limits for this allowance is decided by the governing board( maximum pm. Rs 3000). Other allowance and perquisites: Exemption available in respect of other allowances will be provided by the employer. And the value of perquisites also will be taken in to account for computing the taxable salary. Donations by employee deductible : The employer should not give any deduction in respect of donation by an employee to a notified public charitable institute. Other deductions: the employer should also take in to consideration amount deductible under sections 80C,80CC,80CCD,80CCF,80F,80D,80DD,80E,80GG AND80U. Tax dedcutible will be rounded off to the nearest rs 10by ignoring fractions. REFER SUMS on PAGE no in TAXMANN vinod and Kapil singhania.

Deduction of tax at source from interest on securities Deduction of tax at source from dividends Deduction of tax at source from interest on other than interest on securities (rate 20 %) Deduction of tax at source from winnings from horse races ( rs 2500 ) Deduction of tax at source from payments to contractors or sub-contractors (where it exceeds single payment Rs 30000) or Rs in a financial year) Deduction of tax at source from insurance commission (where the amount exceeds rs 5000) Deduction of tax at source from payments in respect of National Savings Scheme. Deduction of tax at source on payments on account of repurchase pf units by Mutual Funds or UTI Deduction of tax at source from commission or brokerage (where the amount does not exceed Rs ) Deduction of tax at source from income by way of rent

Other points for consideration Tax deducted at source is deemed as income of the deductee. Further, the same amount tax credit in the hands of deductee subject to the following prepositions Credit for tax deducted at source and paid to the Central Govt. and the income is assessable for the over a number of years credit for tax deducted at source shall be allowed across those years in the same proportions in which the income is assessable to tax. 2. Credit for tax deducted at source and paid to the Central Govt shall be given to the deductee for the assessment year for which such income is assessable 3. If the income on which tax has been deducted is assessable in the hands of a person other than the deductee then Tax credit will be given to such person if- a. The deductee files a declaration with the deductor ( it should contain in the name, address, PAN of the person to whom credit is to be given and reasons for giving credit to such person). b. the deductor shall keep the declaration in safe custrody and reports the tax deduction in the name of such other person in Form 16 A, 17, 24 c, 26 q