Shripad Godbole & Associates TAX DEDUCTION AT SOURCE ROLE AND RESPONSIBILITIES

Shripad Godbole & Associates Tax deduction at Source Rationale behind Provisions Tax deduction at source Responsibility Deduction and Payment Person Responsible for deducting Tax at source Section 203A-TAN

Shripad Godbole & Associates New Method- Deferred Now Circular No.2 dated  The quantity and quality of data flowing through this module is far from satisfactory.  The data is largely unverifiable. The matching of the deduction reported by the deductor and claimed by the deductee /assessee continuous to be poor for the following reasons:-

Shripad Godbole & Associates (i) Non-compliance, especially by Government deductors, with TDS return filing requirement. (ii) Low quoting of PAN number in TDS returns that are filed on account of non- furnishing of PAN by deductees to their deductors and negligence by deductors. (iii) Defects noted by CBDT about compliance by Govt. Depts. both Central & State.

Shripad Godbole & Associates ( iv) The Central Government Ministries, departments and their sub-ordinate and attached offices are large scale defaulters in complying with the TDS information reporting requirements (v) Even the certificates issued by these organisations are often illegible and of poor quality (vi) These are unreliable. (vii) This has been a constant source of public grievance

Shripad Godbole & Associates Issues- State Government Unlike the Central Government, the State Government is required to make a consolidated payment of the TDS amount in respect of all its deductors and deductions directly into the Reserve Bank of India. This is done by the Accountant General of the State. As a result, there is no correlation between the deduction, payment and reporting.

Shripad Godbole & Associates Further, compliance by State Governments with the TDS information reporting requirement is no better than in the case of the Central Government The new system has been harmonized for all deductors (including Central and State Governments).

Shripad Godbole & Associates Therefore, like non- governmental tax deductors, every deductor in the Central and State Government have also been made responsible for making direct payment of TDS in the bank. They are no longer allowed to make payments of the TDS and TCS by making book adjustments or consolidated payments. As a result, the TDS payment and information reporting system will be uniform across deductors.

Shripad Godbole & Associates Rule 30 and Rule 37 CA of the Income-tax Rules, 1962 have been substituted to provide, inter alia, for the following: - ( a) All sums of tax deducted at source under Chapter XVII- B and of tax collected at source under Chapter XVII-BB shall, in general, be paid to the credit of the Central Government within one week from the end of the month in which the deduction, or collection, is made. The same time limit for payment will also apply for income-tax due under sub- section (1A) of section 192.

Shripad Godbole & Associates (b) It is mandatory for all deductors (including Central Government and State Governments) to pay the amount by electronically remitting it into the RBI, SBI or any authorized bank. (c) It is mandatory for all deductors (including Central Government and State Governments) to make the payment by electronically furnishing an income-tax challan in Form No. 17.

Shripad Godbole & Associates In the process of electronically furnishing the income-tax challan in Form No. 17, the deductor will be simultaneously required to furnish to the Taxpayer Information Network (TIN) system maintained by National Securities Depository Limited (NSDL) either through screen based upload or file upload. Three basic information relating to the deduction i.e., PAN, name of the deductee and amount of TDS/TCS

Shripad Godbole & Associates Upon successful remittance of the TDS/TCS to Central Government account and the uploading of the basic information as mentioned above to the TIN system, every deduction record will be assigned a unique transaction number (UTN). NSDL will create a facility to the UTN file to the deductor if the address of the deductor is available with them.

Shripad Godbole & Associates They will also create a facility for the deductor to download the UTN file The UTN will be required to be quoted by the deductor on the TDS/TCS certificate issued by him to the deductee. NSDL will also create a facility to allow independent viewing of the UTNs by the deductee.

Shripad Godbole & Associates Every person (including Central Government and State Government) who has obtained a Tax Deduction or Collection Account Number (TAN) shall electronically furnish a quarterly statement of compliance with TDS provisions in Form No. 24C. It is mandatory for all TAN holders to furnish this form irrespective of whether any payment liable to TDS has been made or not.

Shripad Godbole & Associates This form shall be furnished on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year, respectively, and on or before the 15th June following the last quarter of the financial year. This e-form No. 24C has to be furnished at gov.in.

Shripad Godbole & Associates In order to enable the deductor to furnish the UTN to the deductee, the existing Form 16 and Form 16A have been appropriately modified The quarterly returns of TDS and TCS hitherto required to be filed in Form No. 24Q, Form No. 26Q, Form No. 27Q and Form No. 27EQ shall now be required to be filed for all quarters on or before the 15th June following the Financial Year. Effectively, the quarterly returns have now been replaced by an annual return.

Shripad Godbole & Associates Relevant Sections SectionParticulars 192Salaries 194AInterest 194CContractors 194HCommission 194IRent 194JProfessionals 194LACompensation for acquisition

Shripad Godbole & Associates REQUIREMENT OF PAN Section 206AA - Every person whose receipts are subject to TDS should have PAN - If PAN is not submitted to the deductor, then the deductor will deduct tax at source at the higher of the following rates a. Rate prescribed in the act b. Rate mentioned in the finance act c. At the rate of 20% - This PAN will have to mentioned in form 15G or 15H - Applicable to NRI also

Shripad Godbole & Associates 194A-Int. other than Int. on securities If the interest in the financial year exceeds Rs.5,000/-. 10% IT. At the time of credit or payment whichever is earlier. Within 1 week from the last day of the month in which deduction is made Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee.

Shripad Godbole & Associates Example- Section 194A Section 194A Nature of payment Interest on delayed payment charges, delay in payment of land acquisition compensation Interest payment:- Limit Rs. 5,000/- Interest paid in instalments Example:- Interest amount Rs % Rs. 1000

Shripad Godbole & Associates Example 194A- contd. Section 194A Limit of Rs not to be considered while deducting TDS Interest paid quarterly Total interest Rs Per quarter Rs TDS each quarter Rs. 300 No Education cess or Secondary & Higher Education Cess applicable on interest due after

Shripad Godbole & Associates TDS on Contractors w.e.f Rates: If recipient is an Individual or HUF, 1%. In all other cases, 2% 2. If recipient is a transport contractor and he furnishes his PAN to the payer, TDS rate is NIL 3. Tax is not required to be deducted if any single sum credited or paid does not exceed Rs /- or aggregate of such sums does not exceed Rs /- in a year

Shripad Godbole & Associates TDS on Contractors w.e.f Contract with material given for Catering/advertisement/ Broadcasting programmes/ carriage of goods or Passengers/manufacturing or supplying of material as per specification of a customer by using material purchased from such customer a) Material value mentioned in the invoice b) Material value not mentioned in the invoice

Shripad Godbole & Associates TDS on Contractors w.e.f In case of a), on the invoice value excluding the value of the 2% In case of b), on the whole of invoice 2% Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee

Shripad Godbole & Associates Example 194C 194C- Payment to contractors a. Amount of a contract exceeds Rs /- b. If multiple contracts with a contractor, all less than Rs but total exceeds Rs p.a. 1) Single contract of Rs TDS would be Rs. 2% 2) Multiple contracts a) First one Rs b) Second Rs c) Third Rs Total Rs

Shripad Godbole & Associates Examples Section 194C- contd TDS from the first payment RS. 1500, second Rs and third Rs. 1900/- No clarity about subsequent allotment of contracts:- first payments would be without TDS, but make up deficiency later on Eg. First and second Payment without TDS, TDS of RS. 5200/- will have to made from the last one.

Shripad Godbole & Associates Example Section 194C contd Contract with material given for Catering/advertisement/ Broadcasting programmes/ carriage of goods or Passengers/manufacturing or supplying of material as per specification of a customer by using material purchased from such customer a) Material value mentioned in the invoice b) material value not mentioned in the invoice

Shripad Godbole & Associates Example Section 194C contd In case of a), on the invoice value excluding the value of the material In case of b), on the whole of invoice value Example Total invoice value Rs It mentions material purchased from the customer Rs /- Tax would be deducted on Rs ( i.e. Rs, )

Shripad Godbole & Associates Example Section 194C contd If the invoice mentions the value as Rs but does not mention the value of the material separately, then TDS would be made on Rs /-

Shripad Godbole & Associates 194H- Commission or Brokerage At the time of credit or payment whichever is earlier when aggregate sums credited / paid during the financial year exceeds Rs.2500/-. At the rate of 10% Within 1 week from the last day of the month in which deduction is made Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee

Shripad Godbole & Associates 194 I Rent Rent means any payment by whatever name called under any lease, sub-lease, tenancy or any other agreement for the use of any land, building, machinery, Plant, equipment, furniture or fittings At the time of credit or payment whichever is earlier when the aggregate sums credited/paid during the financial year exceeds Rs. 1,20,000/-.

Shripad Godbole & Associates Rent Rates from Use of Plant, machinery, equipment- 2% - Use of land, building furniture or fittings- 10% Payment Within 1 week from the last day of the month in which deduction is made Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee

Shripad Godbole & Associates Examples- Section 194I Minimum amount Rs per annum Rate 10% for land or building Rate 2% for others Total rent paid for building Rs per annum TDS would be Rs This has to be deducted and paid monthly Thus monthly TDS would be Rs. 2000( Rs, 24000/12)

Shripad Godbole & Associates Examples- Section 194I 2) - Rent for Building Rs / - Rent for furniture Rs /- - TDS would be Rs. 9000/- on Building and Rs. 800/- on furniture 3) Joint owners- if proved with documentary evidence Total rent Rs /- Two joint owners- individual rent Rs TDS nil

Shripad Godbole & Associates Examples- Section 194I 4) Joint owners- if proved with documentary evidence Total rent Rs /- Two joint owners- individual rent Rs TDS Rs per annum

Shripad Godbole & Associates 194 J Fees for Professional or Tech. services At the time of credit or payment whichever is earlier when the aggregate sums credited/paid exceeds Rs. 20,000/-. At the rate of 10% as I T Form No. 16A to be issued within 30 days from the date of payment or consolidated TDS certificate to issued if so asked by payee

Shripad Godbole & Associates Examples- Section 194J Professionals – Minimum amount Rs /- per year Rate 10% Person specific Amount of fees Rs TDS would be Rs. 2500/- If on a monthly retainership basis ; - per month Rs. 5000/-. TDS would be Rs. 500/- per month and to be paid monthly

Shripad Godbole & Associates Examples- Section 194J There are multiple payments to a professional but it is not clear at the time of first or initial payments whether there would be further payments Payments: 1) April Rs ) June Rs ) Oct Rs ) Mar Rs. 8000

Shripad Godbole & Associates Examples- Section 194J It is advised to make TDS from the first payment itself Thus TDS would be Payments:TDS 1) April Rs. 8000Rs ) June Rs. 5000Rs ) Oct Rs. 6000Rs ) Mar Rs. 8000Rs. 800 If it is not done so, the entire TDS has to be paid from the last payment i.e. March eg. Rs. 2700/-

Shripad Godbole & Associates Section 194LA- Compensation for acquisition Compensation for compulsory acquisition under any law Any property other than agricultural land At the time of payment by any mode Aggregate amount should exceed Rs. 1,00,000/- Rate 10% Agricultural land as defined in Section 2(14) of Income Tax act

Shripad Godbole & Associates Section 192-TDS on Salaries 1. On Estimated Income from Salary for the Financial year 2. In equal monthly instalments 3. If an employee gives details of other income in Form 12B, the same will have to be considered. TDS amount can be enhanced or reduced 4. TDS amount to be paid on the same day if salary is by the Govt. or within seven days from the end of the month if others 5. Salary Certificate is to be given within 30 days from the end of the Financial year

Shripad Godbole & Associates Example Salary 1 For Assessment Year Calculation of Income Tax in the case of a male employee where medical treatment expenditure was borne by the employer. Particulars : 1.Gross Salary Rs. 3,00,000/- 2.Medical Reimbursement by employer on the treatment of self and dependent family member Rs. 30,000/-

Shripad Godbole & Associates 3.Contribution of GPF Rs. 20,000/- 4.LIC Premium Rs. 20,000/-5.Repayment of HBA Rs. 25,000/- 6.Tuition fees for two children Rs. 60,000/- 7.Investment in Unit- Linked Insurance Plan Rs. 20,000/-

Shripad Godbole & Associates Computation of Tax Gross Salary Rs. 3,00,000/- Add : Perquisite in respect of reimbursement of Medical Expenses in excess of Rs. 15,000/- in view of Sec. 17(2)(v) Rs. 15,000/- Taxable Income Rs. 3,15,000/-Less : Deduction u/s 80C : GPF 20,000/- LIC 20,000/- Repayment of HBA 25,000. Tuition Fees 60,000/- Investment in Unit-Linked Insurance Plan 20,000/- Total1,45,000/- Restricted to Rs.1,00,000 /- Total Income Rs. 2,15,000

Shripad Godbole & Associates Total IncomeRs. 2,15,000/- Tax PayableRs. 5,500/- Add :Education 110/- Secondary and Higher Education 55/- Total Income Tax payable Rs. 5,665/- Rounded off to Rs. 5,660/-

Shripad Godbole & Associates Salary Example 2 Particulars : Salary Rs. 3,00,000/- Dearness Allowance Rs. 1,00,000/- House Rent Allow.Rs. 1,80,000/- Special Allowance Rs. 12,000/- Provident Fund Rs. 60,000/- Life Ins. Premium Rs. 10,000/- NSC VIII issue Rs. 30,000/- Rent Paid by the employee for house hired by her Rs. 1,20,000/- Repayment of House Building Loan (Principal)Rs. 60,000/ Tuition Fees for three children (Rs.10,000/- per child)Rs. 30,000/-

Shripad Godbole & Associates Salary Example 2 Computation of total income and tax payable thereon Gross salary(Basic + DA + HRA + SDA) Rs. 5,92,000/- Less : House rent allowance exempt U/s 10(13A)Least of :a. Actual amount of HRA received : 1,80,000 b. Expenditure on rent in excess of 10% of salary (including D.A.) assuming D.A. is including for retirement benefits ( 1,20,000 – 40,000 ) : 80,000 c 50% of Salary (including DA) =2,00,000 Rs. Least of the following (-)80,000/-

Shripad Godbole & Associates Gross Total Income : Rs. 5,12,000/- Less : Deduction u/s 80C : Provident Fund60,000/- LIP10,000/- NSC VIII Issue30,000/- Repayment of HBA60,000/- Tuition Fees (Restricted two children)20,000/- Total1,80,000/- Restricted toRs. 1,00,000/- Total Income :Rs. 4,12,000/-

Shripad Godbole & Associates Salary Example 2 Total Income Rs. 5,12,000/- Tax PayableRs. 33,400/- Add :Education 668/-Sec& Higher Rs. 334/- Income Tax payable Rs 34,068/-. Rounded off to Rs. 34,070/-

Shripad Godbole & Associates Salary Example 2 Supposing this person has an agricultural income of Rs /- Tax will be calculated as under Tax on Taxable Income Rs Add: Agricultural Income Rs /- Total Income Rs /- Tax due 87600

Shripad Godbole & Associates Salary Example 2 Tax due on Agiculltural Income Rs /- Basic Limit Rs /- Total Rs /- Tax due on Rs /- Rs Tax due of Rs Rs /- minus tax due of RS Rs /- :- Rs. 61,600/- This would be tax due.This would be enhanced by 2% Edu cess and 1% Sec and High. Edu. Cess Rs. 1848/- Total tax due Rs /-

Shripad Godbole & Associates Estimation of Salary Income Salary Details of other income and TDS given in form 12B to be considered Allowances- Proofs for allowances spent Proofs for Investments

Shripad Godbole & Associates Income from House Property One Self Occupied House – Income Assessed NIL Two Houses- Both Self Occupied- One House Income Assessed NIL. Another House- Sum for which a house might be reasonable expected to be let out from year to year. Interest on Housing Loan for construction/purchase of House Property

Shripad Godbole & Associates Income from House Property Deduction for such interest eligible only if the house is complete Interest for the period up to the previous year in which Property is acquired / construction is completed – five equal installments from the year of completion, EMI and deduction not related Interest on HBA allowable on accrual basis

Shripad Godbole & Associates Deductions from Gross Total Income - 80C a) Life Insurance Premium b) PF/PPF c) Housing Loan Instalment of a completed house d) Tuition Fees/ Mutual Funds e) Specific Term deposit in Bank or Bonds of NABARD f) Specified mutual funds

Shripad Godbole & Associates Deductions from Gross Total Income If House is transferred within 5 years from the end of the financial year in which possession is obtained If the insurance policy is terminated within 2 years of insurance If ULIP is terminated within five years of commencement of plan due to non payment of contribution Then deduction will not be allowed in the year of such termination and aggregate of deduction so far allowed shall be deemed to be income of the previous in which such termination takes place.

Shripad Godbole & Associates Deductions from Gross Total Income 80CCC- Pension Fund The total deduction of 80C,80CCC and 80CCD not to exceed Rs. 1,00,000/- 80D- Medical Insurance Maximum amount Rs.15,000/- Additional deduction upto Rs. 20,000/- if it is taken for the dependent parents who are senior citizens. -

Shripad Godbole & Associates Deductions from Gross Total Income 80DD Deduction in respect of maintenance including medical treatment of a dependent person with disability -Actually incurred expenditure and for medical treatment ( Including nursing), training and rehabilitation of such dependent or - has made a deposit in a scheme framed by LIC or any other insurer Should attach a certificate issued by a appropriate medical authority

Shripad Godbole & Associates Deductions from Gross Total Income 80 DDB Medical Treatment of a dependent - Actually paid an amount for the medical treatment of specified disease or ailment - Maximum amount Rs Should attach a certificate in form 10I - 80 E Interest on Education Loan Only in respect of Interest Self or spouse or children w.e.f Period of allowability : Initial year and seven successive assessment years or till loan is repaid whichever is earlier,

Shripad Godbole & Associates Deductions from Gross Total Income - 80G Donations to Specific Funds only like Prime Minister’s National Relief Fund Only Govt funds No Private Funds, This is for Salary TDS purposes. Deduction in respect of other donations can be claimed by while filing the return. - 80GG Rent paid where no HRA is paid, House is not owned by Spouse Child or HUF - 80U- Person with disability

Shripad Godbole & Associates Deductions from Gross Total Income 80GG Rent paid - Rent paid in excess of 10% of Salary - Rent is paid for his own residence and Assessee files declaration in Form 11B - Residential Accommodation is not owned by Himself, spouse or minor child - HRA is not paid by the employer - 25% of Total Income or Rs p.m. whichever is less

Shripad Godbole & Associates Deductions from Gross Total Income Deduction u/s 80 U - The Assessee himself suffers from disability - Should be certified by a prescribed Medical Authority - Required to attach such certificate to the return of Income - Deduction Rs. 50,000 - In case of severe disability RS. 75,000/-

Shripad Godbole & Associates Estimation of Salary Income Rates for F.Y Normal Rates Income Upto Rs. 1,60,000 NIL Income between Rs. 1,60,000 to Rs. 3,00,000 10% Income between 3,00,000 to Rs. 5,00,000 20% Income Exceeding Rs. 5,00,000 30% Basic limit is Rs. 1,90,000 for female assessees.

Shripad Godbole & Associates Other Important points Certificate for deduction at lower or nil rate Section 197 Certificate for tax deducted at source- Important w.e.f no need to issue TDS certificate Duty of person responsible for deducting tax at source Section Payment of taxes within prescribed time - Filing of quarterly statements This non-filing may result into non-credit of TDS to the payee

Shripad Godbole & Associates Other Important points Certificate for Lower Deduction of Tax at source Application to Income Tax officer in form No.13 This certificate is valid prospectively only Certificates of TDS to be issued within a month from the date of payment of TDS Consolidated certificate can be issued only if the payee informs in writing

Shripad Godbole & Associates Interest, Penalty Section 201(1A) - For Delay in payment of TDS - From the due date till the date of payment - Interest rate 1% per month Penalty u/s 271C - Fails to deduct tax at source - Sum equal to amount of tax Penalty u/s 272A(2)(c) - For non filing of return u/s Rs. 100 per day till the default continues

Shripad Godbole & Associates Interest, Penalty U/s 272A(2)(k) - Non filing of quarterly returns by the Employer -Rs. 100 per day till the default continues Penalty u/s 272BB - For non-compliance with provisions of Section 203A - Rs. 10,000/-

Shripad Godbole & Associates Prosecution u/s 276B Failure to pay the tax so deducted Fine Rigorous imprisonment for term not less than three months but which may extend to seven years

Shripad Godbole & Associates E-Filing of TDS returns Rule 31A Person responsible for deducting tax Quarterly statement - Form 24Q- TDS for salaries - Form 26Q – TDS other than Salaries Dates: 15 th July,15 th October, 15 th January and 15 th June for Last quarter Person responsible for deducting tax shall quote TAN and PAN,PAN of all deductees and details of Tax paid

Shripad Godbole & Associates E filing procedure 1. Enter deduction details in the E – TDS return form - Date of deduction - Name of the party - Section under which tax is deducted - Gross amount of the bill - Rate at which tax deducted - Amount of TDS

Shripad Godbole & Associates E filing procedure 2 nd Step Enter challan details 1. Date of payment 2. Amount paid 3. Section under which tax deducted 4. BSR code 5. Challan serial number 6. Bank details from which payment made

Shripad Godbole & Associates E filing procedure Step 3 Linking of challans and payments This step ensures that persons to whom payment is made, such payments and TDS made on those amounts are linked

Shripad Godbole & Associates E filing procedure Step 4 Generate “ E-TDS return” as mentioned in the software which is used Download Challan CSI file from NSDL site. This file comes with in.csi format. Please do not open this file. Please save it as it is and not as “ Save as—” way Run the E-TDS return as generated and csi file as downloaded by using your E- TDS software

Shripad Godbole & Associates E filing procedure If there are errors, then the same will be shown Those errors will have to be rectified. Unless these errors are rectified, fvu file for uploading on the NSDL site can not be created. If these files are run successfully, then fvu file and 27A would be generated by the software

Shripad Godbole & Associates E filing procedure If you are filing the E- TDS return by electronic form ( copying on the CD), then copy relevant form in PDF form, CSI file and FVU file on the CD. Duly printed, signed ( after affixing the rubber stamp) form 27A alongwith the CD is to be sent to the authorised service provider.

Shripad Godbole & Associates E filing procedure There could be queries from the income tax department, if there is mismatch of data This mismatch could be on account of wrong section, amounts mismatch, period/ assessment year, serial number of the challan given by the bank, There could be notices from Income Tax department for payment of interest

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