7/29/2019 9 - Chapter 6

1/56

64

i { E E E]i(]0b0B0)

|ii E V { ]0 b0 B0

v: 193:-|ii { V E v x E + E Mix Ex E B =knH, xEn { , SE V EE b}] E u E +x v B + E Mix

|{iEk E Ji V Ei = xEn ni , V { , n V E {

|k n +E E E]i EM *

]{{h:- VE |ii { V E v

7/29/2019 9 - Chapter 6

2/56

65

E ih Mix Ei , =E {I xEn Mix Ei , E

7/29/2019 9 - Chapter 6

3/56

66

E. E E v V /n n , E E v V |{i V { ]0b0B0

E E]i i+E +E x M VE E E E J u BE E nx

nk/n B V E 10,000/- { +vE x * E BE z E Ez-z J+ +M-+M v V Ji * |iE J E ]0b0B0 E]x i

+E VE =E u n V 10,000/- { +vE *

7/29/2019 9 - Chapter 6

4/56

67

4. VE B + E E E ] u +{x n E +x E ] E

|nx E V *

5. E E +i Ji + Si Ji |{i V n *

] M{ +n Vix |{i + { ]0b0B0

v194 (J):-E H E E ] M{ +n Vix |{i + { V{S V { +vE , Mix E |k n { +E E E]i E VM *

x]:- k +vx, 1997 ={v E M E B VE:-

1. Vi M

7/29/2019 9 - Chapter 6

5/56

68

+i:, ]0b0B0 E 1,56,667

7/29/2019 9 - Chapter 6

6/56

69

U. E

7/29/2019 9 - Chapter 6

7/56

70

M. E + E +x |E E {x +l E +Mx,

P. Jx-{x

]{{h 3. E B n +x{x V |nk E ={v(1) (2) E ii

E

7/29/2019 9 - Chapter 6

8/56

71

+x Jc JP E EB MB Mix { ]0b0B0

v194(c):- VE v115 (J,J,E) =Ji E + E E +x Jc, V i

E x x , +l E +x JP l E n Vx , i =E Mix Ex

H, xEn SE V EE b}] E u E +x v V { , B + E

Mix|{iEk E Ji V Ei = xEn ni , = { n |ii n +E E

E]i EM *

] ]E] E G { Ex +n { ]0b0B0

v194(S):- E

7/29/2019 9 - Chapter 6

9/56

72

V { , B + E Mix|{iEk E Ji V Ei = xEn ni , = {

xxJi n +E E E]i EM:-

E. n Mix|{iEk xn +H E] E n +l x , i15 |ii, +

J. +x 20 |ii

]{{h:- 1 il{,

7/29/2019 9 - Chapter 6

10/56

73

, i V { E] Vx E E j +E +vx E v194 "E' E u xhi

M *

|x:- 2. C hbh-| ]0b0B0 E E]i E Vi ?

=k:- v194 I E xS nB MB {]Eh(1) l {i "E-c' E + "E x

E ={Ml E {]], ={ {]], En +l E +x E l E ii

EB MB Mix , S = + E x C x {E V * +iB, v194 IE iihbh-| { E E E E]i M *

|x:-3 n E {xM{E E, Jb E +n i , i Eix ]0b0B@ E E]i

E VM?

=k:- v194 I E ii ]0b0B0 E +v "E-c' |{i + * "E-c' E v

194 I E ii {i E M , V E x E ={Ml E {]], ={-{]],

En +l E +x E l E ii E M Mix +i * +i: En

u x E M xM{E E, Jb E +n { ]0b0B0 x MM *

|x 4:- C v194 I E x E BE M Jb E ={M i SE M E-

b { M i ?

=k:- , "E ' n E E { B x E BE M Jb +i

*

E iExE --E { ]0b0B0

v194V. E

7/29/2019 9 - Chapter 6

11/56

74

i, xEn SE V EE b}] E u E +x v , V { ,

B + E Mix|{iEk E Ji V Ei = xEn ni , = { xi +E

EE { = {S |ii E M E E]i EM *

il{, xx li

7/29/2019 9 - Chapter 6

12/56

75

]{{h 2:-

7/29/2019 9 - Chapter 6

13/56

76

"x E' E { n (+)

v195 (E) :- VE, E E E +x lx,

7/29/2019 9 - Chapter 6

14/56

77

x] |{i + { ]0b0B0

v196 (J):- VE v115 (E)(J) =Ji x] E n B x] E +ih

|{i x nvv {V E n , E

7/29/2019 9 - Chapter 6

15/56

78

]0 b0 B0 E]i x Ex E B nhb

n E

7/29/2019 9 - Chapter 6

16/56

79

|x 2:-C Y{x-BV b E E M Mix { ]0b0B0 E E]i EM?

=k:- li |x 1 E =k {] Vi *

|x 3:-= li E E n { E]M, VE Y{x BV EE + +x r E E

| il =xE u b E |nk i BE Ei { E ?

=k:- E]i v194 (M) E ii1% E n M * Y{x BV E EE, +xi+,

b +n E Mix Ei v194 (j) E ii5% E n ]0b0B0 E]x i *n Mix bE]M ]E]M E |Vx xB MB EG E B E Vi , i B

Mix2% E n ]0b0B0E]i E E] +M * n B Y{x-O i Ex E

B xB MB, iiE Y{x E B x, i

7/29/2019 9 - Chapter 6

17/56

80

=k :- E

7/29/2019 9 - Chapter 6

18/56

81

Mix { ]0b0B0 E E]i E VBM * V k E {x i Mix EM, i =

]0b0B0 E E]i Ex M *

|x: 8 C n iV, {j

7/29/2019 9 - Chapter 6

19/56

82

=k:- j/E Si Ex E x |G , E j Vx {x { E M Mix

{ ]0b0B0 E]x +E x *

|x: 12C E i-BV E E M Mix v194 (M) E +xiMi +M?

=k:- v194 (M) E ={xv E E E Ex i +xv Ex E B, V = i E E

{

7/29/2019 9 - Chapter 6

20/56

83

=k:- *

|x:- 16C E{x E =i{n E Gn E |{i Ex E B {] E n M Ex E

{ v194 (M) 194 (j)E ii ]0b0B0 E]i +E ?

=k:- Gn E B ={v Ex E E v194 (M) E ={v E ii x +i * il{,

B + E B = i E Mix Ei , V E +l iExE +

E BV E M *

7/29/2019 9 - Chapter 6

21/56

84

=k:- *

|x:- 20 C E nx E EB { x E B E ] E EB MB Mix E { E

MM

=k:- xi +v { ]-v x E B H, +x HE M`x +l BS00B0

u E M Mix { v194-I E ii ]0b0B0 E ={xv M i *

|x:- 21C E {k E |iE E B1,20,000 { E E +M-+M M

M

=k:- v 194-I E ii, E E { EB MB Mix E-E]i E Vx i , n

Mix|{iEk E E nx E Vx B Mix E 1,20,000 +vE x E

x * n Mix |{iEk BE +vE , + E E {k xSi ++xSx E Vx M , i |iE Mix|{iEk/ E B +M-+M

1,20,000 { E M M * il{, MixEk+ + Mix|{iEk+ E E

E ]0b0B0 Sx E B rlE Zi x E *

|x:- 22C ExE E n M

7/29/2019 9 - Chapter 6

22/56

85

|x:- 23C E E{x, Vx E

7/29/2019 9 - Chapter 6

23/56

86

|x:- 26C SEi- nx E ={I E +{i E E M Mix v194- (j) E

ii ]0b0B0 M M?

=k: - *

|x:-27C b E Y{x-BV E |{i Ex E { v194 (j) E ii E-

E]i M?

=k:- *

|x:- 28 C +xv-+v { E xi

7/29/2019 9 - Chapter 6

24/56

87

|x:-30iE JS E B E E { v194 (M)+ 194 (j) E ii E-E]i

|i{i E xE E VM x xE ?

=k:- v194 (M) + 194 (j) E M "E E Mix {' * {]i, ]0b0B0 E

|Vx i- |i{i x E V Ei *

|x:-31x] |{i + E , ]0b0B0 { E]M x] E {x:G/{x E

ii {VMi x {?

=k:- x] |{i + { ]0b0B0 E]i E v v194 ] E ={v + E +vE

ih { M i , V E E |Ei E i * ={v {x: G/{x: E

|{i {VMi { Mx i *

|x:-32{xx +vE V { ]0b0B0 |

7/29/2019 9 - Chapter 6

25/56

88

=k:- v194-E E ii, E +vE-V |{i V { E E]i * SE {ix V

+vE-V |Ei E , +i:

7/29/2019 9 - Chapter 6

26/56

89

J: 49J v203-E E ii E-E]i Ji J E +]x i +nx {j

(E{ x114-E nJ)

|i,

xvh +vE

....................

...................

n,

/, +E +vx, 1961 E +vXVII E E "J' - "i { E E]i'

E +iMi, inx E-E]i E {j /, +

SE Z/ E

7/29/2019 9 - Chapter 6

27/56

90

5. + E/E ji

6. E VxE, n E

7/29/2019 9 - Chapter 6

28/56

91

|{j J: 26- E

(x

37nJ)

+E +vx, 1961 E v206 E ii31 S,...............E {i E B "|ii

{ V'

7/29/2019 9 - Chapter 6

29/56

92

_______________________________________________________________J.E{x

7/29/2019 9 - Chapter 6

30/56

93

TAX DEDUCTION AT SOURCE

TDS ON INTEREST ON SECURITIES

Section 193.The person responsible for paying any income b y way interest on

securities shall, at the time of credit of such income to the account of the payee

or at the time of payment thereof in cash or by issue of a cheque or draft or by

any other mode, whichever is earlier, deduct income-tax at the rates in force on

the amount of the interest payable.

Note: Where any income by way of interest on securities is credited to any

account, whether called Interest payable account or Suspense account or by

any other name, in the books of account of the person liable to pay such income,

such crediting shall be deemed to be credit of such income to the account of the

payee.

Note: However, no tax shall be deducted from any interest payable to an

individual, who is resident in India, on debentures issued by a company in

which the public are substantially interested being debentures listed on a

recognised stock exchange in India if-

a)

the interest is paid by the company by an account payee cheque;and

b) The amount of such interest or, as the case may be, the aggregateof the amounts of such interest paid or likely to be paid during the

financial year by the company to such individual does not exceed

two thousand and five hundred rupees.

Note: As per Finance Act, 1997, no TDS shall be deducted on interest payable

on any security of the Central or a State Government.

TDS ON DIVIDENDS

Section 194.The principal officer of an Indian company or a company which has

made the prescribed arrangements for the declaration and payment of dividends

7/29/2019 9 - Chapter 6

31/56

94

(including dividends on preference shares) within India, shall before making

any payment in cash or before issuing any cheque or warrant in respect of any

dividend or before making any distribution or payment to a shareholder, who is

resident of India, of any dividend within the meaning of sub-clause (a) or sub-

clause (b) or sub clause (c) or sub-clause (d) or sub-clause (e) or clause (22) of

section 2, deduct from the amount such dividend, income tax at the rates in

force.

Note: However, no such deduction shall be made in case of a shareholder being

an individual, of a company in which public are substantially interested , if-

(a) The dividend is paid by such company by an account payee cheque;and

(b) the amount of such dividend or, as the case may be, the aggregateof the amounts of such dividend distributed or paid or likely to be

distributed or paid during the financial year by the company to the

shareholder, does not exceed two thousand five hundred rupees.

Note: The Finance Act, 1997 has provided t hat no deduction of tax shall be

made in respect of dividends referred to in section 115-O.

TDS on interest other than Interest on securities

Section 194A. Any person, not being an individual or a Hindu undivided family

who is responsible for paying to a resident any income by way of interest other

than income by way of interest on securities, shall, at the time of credit of such

income to the account of payee or at the time of payment thereof in cash or by

issue of a cheque or draft or by any other mode, whichever is earlier, deduct

income-tax thereon at the rates in force. (Now as per the Finance Act, 1995,

TDS is also to be deducted from interest on Fixed Deposits with bank).

Note1: Where any income by way of interest as aforesaid is credited to any

account, whether called Interest payable account or Suspense account or by

any other name, in the books of account of the person liable to pay such

7/29/2019 9 - Chapter 6

32/56

95

income, such crediting shall be deemed to be credit of such income to the

account of the payee.

Note2: This section shall not apply where the interest is to be paid by an

individual or HUF.

Note 3: TDS is not required to be deducted in the following cases:

i) Where the amount of such income or, as the case may be, theaggregate of the amounts of such income credited or paid or likely

to be credited or paid during the financial year to the payee, does

no exceed two thousand five hundred rupees. (Rupees ten thousand

in case of interest on.

a) Fixed deposits with banks. In other words, TDS is notrequired to be deducted on interest on FDR with bank, if the

amount of such interest paid/payable during the year by a

branch of the bank does not exceed 10,000/-. It is possible to

have different FDRs in different branches of the same or

different bank. Every branch is under an obligation to deduct

TDS only if the interest payable by that branch exceeds Rs.

10,000/- TDS is not required to be deducted if the interestpayable by each individual branch is equal to or less than Rs.

10,000/- although the total interest payable by different

branches in aggregate exceeds Rs. 10,000/-.

b) Fixed deposit with co-operative society engaged in carryingon the business of banking [Same concept in case of payment

by branches as in (a) above]

C) deposits with a public company which is formed andregistered in India with the main object of carrying on the

business of providing long term finance for construction or

purchase of houses in India for residential purposes and

which is approved by the Central Government, [ Same

7/29/2019 9 - Chapter 6

33/56

96

concept in case of payment by branches as in (a) above ]

{Finance Act, 1996}.

i i) Where such income is credited or paid to a) Any banking company to which the Banking Regulation Act,

1949, or

b) any financial corporation established by or under a CentralState or Provincial Act, or

c) the Life Insurance Corporation of India, ord) the Unit Trust of India, ore) any company or co-operative society carrying on the

business of insurance.

i i i ) Where such income is credited or paid by a firm a partner of thefirm.

iv) Where such income in credited or paid by a co-operative society toa member thereof or to any other co-operative society.

v) Interest on Recurring deposits and savings account with bank.TDS on Winnings form lottery or crossword puzzle.

Section194B: The person responsible for paying to any person any income

by way of winnings form any lottery on crossword puzzle in an amount

exceeding five thousand rupees shall, at the time of payment thereof, deduct

income-tax thereon at the rates in force.

Note: The Finance Act, 1997 provides that in a case where:

i) The winnings are wholly in kind ori i) partly in cash and partly in kind but the part in cash is not

sufficient to meet the liability of deduction of tax in respect of

whole of the winnings, the person responsible for paying shall,

7/29/2019 9 - Chapter 6

34/56

97

before releasing the winnings, ensure that tax has been paid in

respect of the winnings.

For Example, Mr. X wins a Maruti car in a crossword puzzle and the

market price of the car is Rs. 2,40,000/= . The said crossword puzzle was

organised by Cadbury Ltd. Exemption of Rs. 5,000/- is available under

section 10(3). Tax rate under section 115BB is 40%. Now Cadbury Ltd.

will pay TDS as under:

x - 40% of x = 2,35,000/-

x - 3,91,667/-

Therefore TDS is Rs. 1,56,667 which shall be deposited by Cadbury Ltd.In the hands of Mr. X. the income shall be Rs. 2,40,000 plus 1,56,000

minus Rs. 5,000/-

TDS on Winnings form horse race.

Section 194BB. Any person , being a bookmaker or a person to whom a licence

has been granted by the Government under any law for the time being in force

for horse racing in any race course or for arranging for wagering or betting in

any race course, who is responsible for pa ying to any person any income by wa y

of winnings from any horse race in an amount exceeding two thousand five

hundred rupees shall, at the time of payment thereof, deduct income-tax thereon

at the rates in force.

TDS on Payments to contractors and sub-contractors.

Section 194C. (I) Any person responsible for paying any sum to any resident

(hereafter in this section referred to a the contractor) for carrying out a contractbetween the contractor and-

a) The Central Government or any State Government ; orb) Any local authority; or

7/29/2019 9 - Chapter 6

35/56

98

c) Any corporation established by or under a Central, State orProvincial Act; or

d) Any company; ore) Any co-operative society; orf) Any authority, constituted in India by or under any law, engaged

either for the purpose of dealing with an satisfying the need for

housing accommodation or for the purpose of planning,

development or improvement of cities, town and villages, or for

both; or

g)

Any society registered under the Societies Registration Act, 1960(21 pf 1860) or under any law corresponding to that Act in force in

any part of India; or

h) Any trust; ori) Any University established or incorporate by or under a Central,

State or Provincial Act and an institution declared to be a

University under section 3 of the University Grants Commission

Act, 1956 (3 of 1956)

j ) Any firm, shall at the time of credit of such sum to the account ofthe contractor or at the time of payment thereof in cash or by

issue of a cheque or draft or by any other mode, whichever is

earlier, deduct an amount equal to-

i) One percent in case of advertising.i i) In any other case two per cent of such as income tax on income

comprised therein.

Note: This section is not applicable where the contract i s between the

contractor and individual HUF.

7/29/2019 9 - Chapter 6

36/56

99

1. Any person (being a contractor and not being an individual or a Hinduundivided family) responsible for paying any sum to any resident sub-

contractor in pursuance of a contract with the sub-contractor for

carrying out, or for the supply of labour for carrying out, the whole or

any part of te work undertaken by the contractor shall, at the time of

credit of such sum to the account of the sub-contractor or at the time of

payment thereof in cash or by issue of a cheque or draft or by any other

mode, whichever is earlier, deduct an amount equal to one percent of

such sum as income tax on income comprised therein.

Note 1: For the purposes of this section, where any sum referred to in sun-

section (I) or sub-section (2) 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 crediting shall be deemed to be credit of such

income to the account of the payee.

Note 2: For the purpose of this section the expression work shall also

include-

a) advertising;b) broadcasting and telecasting including production of programs for

such broadcasting or telecasting;

c) carrying of goods and passengers by any mode of transport otherthan by railways;

d) catering..Note 3: No deduction shall be made under sub-section (I) or sub-section (2)

from any sum credited or paid in pursuance of any contract the consideration for

which does not exceed twenty thousand r upees.

Note 4: Where the Assessing Officer is satisfied that the total income of

the contractor or the sub-contractor justifies the deduction of income-tax at any

7/29/2019 9 - Chapter 6

37/56

100

lower rate or no deduction of income tax, as the case may be, the Assessing

Officer shall , on an application made by the contractor or the sub-contractor or

the sub-contractor in this behalf, give to him such certificate as may be

appropriate.

Where any such certificate is given, the person responsible for paying the sum

referred to in sub-section (I) or sub-section (2) shall, until such certificate is

cancelled by the Assessing Officer, deduct income-tax at the rates specified in

such certificate or deduct no tax, as the case may be.

CLARIFCATION FROM CBDT.

No tax has to be deducted from payments made to travel agents or airlines for

purchase of tickets for air-travel of individuals. The provisions of sections 194

C are applicable when payments are made for chartering an aircraft for carriage

of passengers or goods. (Same clarification applies to other modes of transport

also.)

TDS on Insurance commission

Section 194D. Any person responsible for paying to a resident any income

by way of remuneration or reward, whether by way of commission or otherwise,

for soliciting or procuring insurance business (including business relating to the

continuance, renewal or revival of policies of insurance) shall, at the time of

credit of such income to the account of the payee or at the time of payment

thereof in cash or by issue of a cheque draft or by any other mode, whichever

earlier, deduct income tax thereon at the rates in force.

However, no deduction shall be made under this section in a case where the

amount of such income or, as the case may be, the aggregate of the amounts of

such income credited or paid or likely to be credited or paid during the financial

year to the account of , or to, t he payee, does not exceed five thousand rupees.

7/29/2019 9 - Chapter 6

38/56

101

TDS on Payment to non-resident sportsmen or sports association.

Section 194E. Where any income referred to in section 115BBA is payable

to a non-resident sportsmen who is not a citizen of India or a non-resident sports

association or institution, the person responsible for making the payment shall,

at the time of credit of such income to the account of the payee or at the time of

payment thereof in cash or by issue of a cheque or draft or by any other mode.

Whichever is earlier, deduct income-tax thereon at the rate of ten per cent.

TDS on Commission , etc. on the sale of lottery tickets.

194C. Any person w ho is responsible for paying to any person who is or has

been stocking, distributing, purchasing or selling lottery tickets, any income by

way of commission, remuneration or prize (by whatever name called) on such

tickets in an amount exceeding one thousand rupees shall, at the time of credit

of such income to the account of the payee or at the time of payment of such

income in cash or by the issue of a cheque or draft or by any other mode,

whichever is earlier, deduct income tax thereon at the rate of ten percent.

Note: Where any income 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 crediting shall be deemed to be credit of such income to

the account of the payee.

TDS on Rent

Section194-I Any person, not being an Individual or a Hindu undivided

family, who is responsible for paying to any person any income by way of rent,

shall , at the time of credit of such income to the account of the payee or at the

time of payment thereof in cash or by the issue of a cheque or draft or by any

other mode, whichever is earlier, deduct income-tax thereon at the rate of

a) Fifteen per cent if the payee is an individual or a Hindu undividedfamily; and

b) Twenty per cent in other cases;

7/29/2019 9 - Chapter 6

39/56

102

Note 1: However, no deduction shall be made under this section where the

amount of such income or, as the case may be, the aggregate of the amounts of

such income credited or paid or likely to be credited or paid during the financial

year by the aforesaid person to the account of, or to, the payee, does not exceed

one hundred and twenty thousand rupees.

Note 2: For purposes of this section

i) Rent means any payment , by whatever name called, under anylease, sub-lease, tenancy or any other agreement or arrangement for

the use of any land or any building (including factory building),

together with furniture, fittings and the land appurtenant thereto,

whether or not such building is owned by the payee.

ii) Where any income is credited to any account, whether calledSuspense account or by any other name, in the books of account

of the person liable to pay such income, such crediting shall e

deemed to be credit of such income to the account of the payee.

CLARIFICATIONS FROM CBDT

Query No. 1: Whether tax is required to be deducted at source where a non-

refundable deposit has been made by the tenant?

Answer: In cases where the tenant makes a non-refundable deposit tax would

have to be deducted at source as such deposit represents the consideration for

the use of the land or the building, etc., and, therefore, partakes the nature of

rent as defined in section 194-I. If, however, the deposit is refundable, no tax

would be deductible at source. It is further clarified that if the deposit carries

interest, the tax to be deducted on the amount of interest will be governed by

section 194A of the Income tax Act.

Query No. 2: Whether the tax is to be deducted at source from warehousing

charge?

Answer: The term rent as defined in Explanation (I) below section 194-I

means any payment by whatever name called, under any lease, sub-lease,

7/29/2019 9 - Chapter 6

40/56

103

tenancy or any other agreement or arrangement for the use of any building or

land. Therefore, the warehousing charges will be subject to deduction of tax

under section 194-I.

Query No. 3: On what amount the tax is to be deducted at source if therentals include municipal tax, ground rent, etc.?

Answer: Teh basis of tax deduction at source under section 194-I is income by

way of rent. Rent has been defined, in the Explanation (I) of section 194-I, to

mean any payment under any lease, tenancy, agreement, etc. for the use of any

land or building. Thus, if the municipal taxes, ground rent, etc., are borne by

the tenant, no tax will be deducted on such sum.

Query No. 4: Whether section 194-I is applicable to rent paid for the use of

only a part or a portion of any land or building?

Answer: Yes, the definition of the term any land would include a part or a

portion of such land or building.

*****************

7/29/2019 9 - Chapter 6

41/56

104

TDS ON FEES FOR PROFESSIONAL OR TECHNICAL

SERVICES

Section 194j. Any person not being an individual or a HINDU UNDIVIDED family, who is

responsible for paying to a resident any sum by way of.

(a) fees for professional services, or(b) fees for technical services.Shall at the time of credit of such sum to the account of the payee or at the time of payment

thereof in cash or by issue of cheque or by any other mode. Whichever is earlier, deduct and

amount equal to five percent of such sum as income-tax on income comprised therein.

However, no deduction shall be made under this section

(A) from any sums as aforesaid credited or paid before the 1st

day of

July,1995, or

(B) Where the amount of such sum or as the case may be the aggregate of the amounts ofsuch sums credited or paid or likely to be credited or paid during the financial year by

the aforesaid person to the account of or to the payee, does not exceed.:

(i) Twenty thousand rupees, in the case of fees for professional services refered toin clause (a), or

(ii) Twenty thousand rupees, in the cas of fees for technical services referredtoinclause (b).

Note 1: Where the Assessing Officer is satisfied that the total income of any person in

receipt of the sum referred to in this section justifies the deduction of income-tax at any lower

rate or no deduction of income-tax as the case may ne the Assessing Officer shall on an

7/29/2019 9 - Chapter 6

42/56

105

application made by that person in this behalf, give to him such certificate as may be

appropriate.

Where any such certificate is given the person responsible for paying the sum referred to in this

section shall until such certificate is cancelled by the Assessing Office, deduct income-tax at the

rates specified in such certificate or deduct no tax, as the case may be.

Note 2: For the purpose of this section

(a) professional services mans services rendered by a person in th course ofcarrying on legal, medical, engineering or atchivecutural profession or the

profession of accountancy opr technical consultancy or interior decoration or

advertising or such other professionas is notified by the Board for the purposes

of section 44AA or of this section;

(b) fees for technical services means fees for rendering of any managerial,technical or consultancy services (including provision of services of technical or

other personal).

Note 3: Where any sum referred to in this section is credited to any account whether called

suspense account or by any other name, in the books of account of the persona able to pay

such sum, such crediting shall be deemed to be credit of such sum to then account of the payee

and the provisions of this section shall apply accordingly.

CLARIFICATION FROM CBDT

Practical difficulties when firms of chartered accountants and lawyers are receiving fees from

foreign clients outside India, since it is difficult for these foreign clients to deduct TDS and pay

to the Indian Government. It has therefore been provided in a recent circular that if any fees is

paid through regular banking channels to any chartered accountant, lawyer, advocate or solicitor

who is resident in India by the non-resident who do not have any agent opr business connection

in India, then such fees shall not be subjected to provisions of section 194j, i.e., no TDS is

required to be deducted on such fees.

7/29/2019 9 - Chapter 6

43/56

106

However, such foreign clients should send a quarterly statement to CBDT indicting the name and

addresses of the persons to whom such payments are made.

Income payable net of tax

Section 195a. Where under an agreement or other arrangement, the tax chargeable on any

income refered to in the foregoing provision of thisChapter is to be borne by the person by whom

the income is payable, them, for the purposes of tax under those provisions such income shall be

increased to such amountnas would, after deduction of tax thereon at the rates in force for the

financial year in which such income is payable, be equal to the net amount payable unde such

agreement or arrangement.

Interest or dividend or other sums payable to Government, Reserve Bank or certain corporations.

Section 196. Notwithstanding anything contained in the foregoing provisions of this Chapter, no

deduction of tax shall be made by any person from any sums payable to-

(i) the Government, or(ii) the Reserve Bank of India, or(iii) a Corporation established by o9r under a Central Act which is, under any law for the time

being in force, exempt from income-tax on its income, or

(iv) a Mutual Fund specified under clause (23D) of section 10,Where such sum is payable to it by way of interest or dividend in respect of any securities on

shares owned by it or in which it has full beneficial interest, or any other income accruing or

arising to it.

TDS on Income in respect of units of non-residents.

Section 196A. Any person responsible for paying to a non-resident, not being so company, or to

a foreign company, any income in respect of units of Mutual Fund specified under clause (23D)

of section 10 or of the to, me of payment thereof in cash or by the issue of a cheque or draft or by

any other mode whichever is earlier, deduct income-tax thereon at the rate of twenty percent.

TDS on Income from units.

7/29/2019 9 - Chapter 6

44/56

7/29/2019 9 - Chapter 6

45/56

108

PENALTY FOR FAILURE TO DEDUCT TDS

If any person fails to deduct the whole or part of the tax as required under the various provisions,

then such person shall be liable to pay a penalty equal to the amount of TDS he has failed to

deduct.

PROSECTUION

If any person fails to pay to the credit of the Central Government, the tax deducted at source by

him, then he shall be punishable with rigorous imprisonment for a term which shall not less than

3 months but which may exceed to 7 years and with fine.

CIRCULAR NO. 715

Clarification on various provisions relating to tax deduction at source regarding changes

introduced through Finance Act, 1995.

The Finance Act, 1995 has enlarged the scope of income-tax deduction at source by making

various amendments. In regard to the changes introduced through the Finance Act, 1995, a

number of queries have been received from the various associations and professional bodies on

the scope of tax deduction at source. It would be desirable to clarify the doubts by issuing a

public circular in the form of question answer as under:

Q 1: What would be the scope of an advertising contract for the purpose of section 194C of the

Act?

Answer: The term advertising has not been defined in the Act. During the course of the

consideration fo the Finanace Bill, 1995, the Finance Minster calrified on the floor of the House

that the amendment provisions of tax deduction at source would apply when a client makes

payment to an advertising agency and not when advertising agency makes payment to the media,

which includes both print and electronic media. The deduction is required to be made at the rate

of 1 per cent. It was further clarified that when an advertising agency makes payments to their

models, artists, photographers, etc. the tax shall be deducted at the rate of 5 per cent as applicable

to fees for professional and technical services under Section 194J of the Act.

Q 2: Whether the advertising agency would deduct tax at source of payments made to the media?

7/29/2019 9 - Chapter 6

46/56

109

Answer: The position has been clarified in the answer to the question No. 1 above.

Q 3: At what rate is tax to be deducted if the advertising agencies give a consolidated bill

including charges for art work and other related jobs as well as payments mades by then to

media?

Answer: The deduction will have to be made under SSEction 194C at the rate of 1 pe cent. The

advertising agencies shall have to deduct tax at source at the rate of 5 per cent under section 194J

while making payments to artists, actors, models, etc. If payments are made for production of

programmes for the purpose of broadcasting and telecasting, these payments will be subjected to

TDS @ 2 per cent. Even if the production of such programmes is for the purpose of preparing

advertisement material, not for immediate advertising, the payment will be subject to TDS at the

rate of 2 per cent.

Q 4: Whether the taxis required to be deducted at source on payment made directly tot the print

media/Doordarshan for release of advertisements?

Answer: The payments made directly to print and electronic media would be covered under

section 194C as these are in the nature of payments for purpose of advertising. Deduction will

have to be made at the rate of 1 percent. It may, however, be clarified that the payments made

directly to Doordarshan may not be subjected to TDS as Doordarshan, being a Government

agency, is not liable to income-tax.

Q 5: Whether a contract for putting up a hoarding would be covered under Section 194C or 194-I

of the Act?

Answer: The contract for putting up a hoarding is in the nature of advertising contract and

provisions of section 194C would be applicable. It may, however, be clarified that if a person.

Has taken a particular space on rent and thereafter sub-lets the same fully or in part for putting up

a hoarding, he would be liable to TDS under Section 194-I and not under Section 194C of the

Act.

Q 6: Whether payment under a contract for carriage of goods or passengers by any mode of

transport would include payment made to a travel agent for purchase of a ticket or payment made

to clearing and forwarding agent for carriage of goods?

7/29/2019 9 - Chapter 6

47/56

110

Answer: The payment made to travel agent or and airline for purchase of a ticket for travel

would not be subjected to tax deduction at source as the privity of the contract is between the

individual passenger and the airline/travel agent, now withstanding the fact that

the payments is made by an outity mentioned in section 194C(I). The provision of section 194C

shall, however, apply when a plane on a bus or any other made if transport is chartered by one or

the entities mentioned in section 194C of the Act. As regards payments made to clearing and

forwarding agents for carriage of goods, the same shall be subjects to tax deduction at source

under section 194C of the Act.

Q 7: Whether a travel agent/clearing and forwarding agent would be required to deduct tax at

source from the sum payable by the agent to an airline or other carrier of goods or passengers?

Answer: The travel agent, issuing tickets on behalf of the airlines for travel of individual

passengers, would not be required to deduct tax at source as he acts on behalf of the airlines. The

position of clearing and forwarding agents is different. They act as independent contractors. Any

payment made to them would, hence, be liable for deduction of tax at source. They would also be

liable to deduct tax at source while making payments to a carrier of goods.

Q 8: Whether section 194C would be attracted in respect of payments made to couriers for crying

documents, letter, etc.

Answer: The carriage of documents, letters, etc., is in the nature of carriage of goods and,therefore, provision of section 194C would be attracted in respect of payments made to the

couriers.

Q 9: In case of payments to transporters, can each GR be said to be a separate contract, even

though payments for several GRs are made under one bill?

Answer: Normally, each GR can be said to be a separate contract, if the goods are transported at

one time. But if the goods are transported continuously in pursuance of a contract for a specific

periods or quantity, each GR will not be a separate contract and all GRs relating to that period or

quantity will be aggregated for the purpose of the TDS.

Q 10: whether there is any obligation to deduct tax at source out of payment of freight when the

goods are recovered on freight to pay basis?

7/29/2019 9 - Chapter 6

48/56

111

Answer; yes. The provision of tax deduction at source are applicable irrespective of the actual

payment.

Q 11: Whether a contact for catering would include serving food in a restaurant/sale of eatables?

Answer: TDS is not required to be made when payment is made for serving food in a restaurant

in the normal course of running of the restaurant/cade.

Q 12: Whether payments to a recruitment agency can be covered by section 194C?

Answer: Provisions of section 194C apply to a contract for carrying out any work including

supply of labour for carrying out any wok. Payments to recruitment agencies are in the nature of

payments for service rendered. Accordingly, provisions of section 194C shall not apply. The

payment will, however, be subject to TDS under section 194J of the Act.

Q 13: Whether section 194C would cover payments made by a company to a share registrar?

Answer: In view of answer to the earlier question, such payments will not be liable for tax

deduction at source under section 194C. But these will be liable to tax deduction at source under

section 194J.

Q 14: Whether FD commission and brokerage can be covered under section 194C?

Answer: No.

Q 15: Whether section 194C would apply in respect of supply of printed material as over

prescribed specifications?

Answer: No.

Q 16: Whether taxis required to be deducted at source under section 194C or 194J on payment of

commission to external parties for procuring orders for the companys product?

Answer : Rendering of services for procurement of orders is not covered under the provisions

of section 194C. However, rendering of such services may involve payment of fees forprofessional or technical services, in which case tax may be deductible under the provisions of

section 194J.

7/29/2019 9 - Chapter 6

49/56

112

Q 17: Whether advertisement contracts re covered under section 194C only to the extent of

payment of commission to the person who arrange sales of advertisement, etc., or whether

deduction is to be made on the gross amount including bill of media?

Answer : Taxis to be deducted at the rate of 1 percent of the gross amount of the Bill.

Q 18: Whether deduction of tax is required to be made under section 194C for sponsorship of

debates, seminars and other functions held in colleges, schools and associations with a view to

earn publicity through display of banners, etc., put up by the organisers?

Answer: The agreement of sponsorship is, in essence, an agreement for carrying out a work of

advertisement. Therefore, provision of section 194C shall apply.

Q 19: Whether deduction of tax is required to be made on payments for cost of advertisement

issued in the souvenirs brought out be have rious organisations?

Answer : Yes.

Q 20 : Whether payments made to a hotel for rooms shirred during the year would be of the

nature of rent?

Answer : Payments made by persons, other individuals and HUFs for hotel accommodation

taken on regular basis will be in the nature of rent subject to TDS under section 194-I.

Q 21 : Whether the limit of Rs. 1.20.000 per annum would apply separately for each co-owner

of a property?

Answer : Under section 194-I the tax from payment byway of rent, if such payment to the payee

during the year is likely to be Rs. 1.20.000 or more. If there are a number of payees, each having

definite and ascertainable share in the property the limit of Rs.1.20.000 will apply to each of the

payee a/c-owner separately. The payers and payeesare, however, advised not to enter into sham

agreements to avoid TDS provisions.

Q 22: Whether the rent paid should be enchanced for notional income in respect of deposit given

to the landlord?

Answer: The tax is to be deducted from actual payment and there is no need of computing

national income in respect of a deposit given to the landlord. If the deposit is adjustable against

future rent, the deposit is in the nature of advance rent subject to TDS.

7/29/2019 9 - Chapter 6

50/56

113

Q 23: Whether payments made by company taking premises on rent but staling the agreement as

a business center agreement would attract the provisions of section 194-I?

Answer : The tax is to be deducted from rent paid, by whatever name called, for hire of a

property. The incidence of deduction of tax at source does not depend upon the nomenclature,but on the content of the agreement as mentioned in clause (1) of Explanation to section 194-I.

Q 24: Whether in a case of composite arrangement for user of premises and provision of

manpower for which consideration is paid as a specified percentage of turnover, section 194-I of

the Act would be attracted?

Answer : If the composite arrangement is in essence the agreement for taking premises on rent

the tax will be deduction under Section 194-I from payments thereof.

Q25: Whether the receipts prior to 1-7-1995 are to be aggregated to determine limit of Rs.

20.000 for each financial year?

Answer: Clause (B) of provision to section 194J (1) makes it clear that tax shall be deducted at

source if the aggregate sums credited or paid or likely to be credited or paid during the financial

year are likely to exceed Rs.20,000/-. Therefore, in regard to financial year 1995-96 the limit of

RS.20,000 will have to be worked out taking into account all the payments from 1.4.95 to

31.3.96. But the deduction of tax at source would be made at the specified rate only from the

payment made on or after 1.7.95.

Q 26: Whether payments made to a hospital for rendering medical services will attract deduction

of tax at source under section 194J?

Answer: Yes.

Q 27 Whether commission received by the advertising agency from the media would require

deduction of tax at source under Section 194J of the Act?

Answer: Yes.

Q 28: Whether the services of a regular electrician on contract basis will fall in the ambit of

technical services to attract the provisions of section 194J of the Act? In case the services of the

electrician are provided by a contractor, whether the provisions of Section 194C or 194J would

be applicable?

7/29/2019 9 - Chapter 6

51/56

114

Answer: The payments made to an electrician or to a contractor who provides the service of an

electrician will be in the nature of payment made in pursuance of contract for carrying out any

work. Accordingly provisions of Section 194C will apply in such cases.

Q 29: Whether a maintenance contract including supply of spares would be covered underSection 194C or 194J of the Act?

Answer: Routine, normal maintenance contracts which include supply of spares will be covered

under Section 194C. However, technical services are rendered, the provisions of section 194J

will apply in regard to tax deduction at source.

Q 30: Whether the deduction of tax at source under Section 194C and 194J has to be made out of

the gross amount of the bill including reimbursements or excluding reimbursement for actual

expenses?

Answer: Section 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be

deducted our of the bill amount for the purpose of tax deduction at source.

Q 31: Whether TDS from income in respect of units is applicable to dividend or is to applicable

to capital appreciation distributed at the time of re-purchase/redemption of the units?

Answer: The provisions of section 194K regarding deduction of tax at source from income in

respect of units are applicable to periodical distribution of income, which is in the nature of

dividend. These provisions do not apply to capital of gains arising at the time of repurchase or

redemption of the units.

Q 32: Whether TDS on reinvestments term deposit should be made on accrual basis, which is

quarterly, or once in a financial year?

Answer: Tax has to be deducted at source at the time of credit of interest to the account of the

payee or at the time of payment thereof, whichever is earlier. If credit is given to the account of

the payee or payment is made to him annually, the tax may be deducted annually. It may be

clarified that a credit to interest payable account or suspense account, etc. is also taken as credit

to the account of the payee, even though this credit is not reflected separately in the payees

account.

Q 33: Whether variable deposit schemes are liable to deduction of tax at source from interest?

7/29/2019 9 - Chapter 6

52/56

115

Answer: Under Section 194A, tax is to be deducted from interest from banks on time deposits.

As variable deposit are in the nature of time deposits, tax is deductable at source from interest on

such deposits.

Q 34 Whether tax has to be deducted from principal on renewal of deposits made after 1-7-1995but which matured on or before 30.6.1995 when the renewal is made retrospectively?

Answer: Tax ahs to be deducted from interest credited or paid, whichever is earlier, on time

deposits with a bank made on or after 1.7.1995. When a time deposit is renewed retrospectively,

the relevant date for deducting the applicability of section 194A would be that date of renewal.

Thus, if the time deposit is renewed after 1.7.1995, the tax deduction at source will have to be

made from interest paid or credited in respect of such a time deposit.

7/29/2019 9 - Chapter 6

53/56

116

AMEDMENT BYN FINANCE ACT, 1996

Where any property, deposit, security, unit or share disowned jointly but two or more persons not

constituting a partnership, the payment of rent/interest/income/divident shall be deemed to have

been made on behalf of each such person and credit of tax shall be given to each such person in

the same proportion ion which rent, interest on deposit or security or income in respect of unit or

divident on share is assessable in his income.

Therefore in view of the above, if the property is jointly owned, then the joint owners has get the

credit of TDS in the same proportion in which they are entitled to income.

AMENDMENT BUYDINANCE ACT, 1997

Section 206 of the I.T. Act provides that every person responsible for deduction tax at source,

shall within the prescribed time prepare and deliver to the prescribed Assessing Officer, the

return of Tax Deducted at Source. The Finance Act, 1997 provided that:

Notwithstanding anything contained in any other law for the time being in force, a return filed on

a floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media asmay be specified by the Board (hereinafter referred to as the computer media) shall be deemed to

be return for the purpose of this section and the rules made thereunder. It shall be admissible in

any proceedings under the I.T. Act, without further proof of production of the original, as

evidence of any contents of the original or of any fact stated therein.

A return filed as above shall fulfil the following conditions, namely:-

(a) While receiving returns on computer media necessary checks by scanning the documentsfile don computer media will be carried out and the media will be duly authenticated by

Assessing Officer;

(b) The Assessing Officer shall also take due care to preserve the computer media buyduplicating, transferring, mastering or storage without loss of data.

7/29/2019 9 - Chapter 6

54/56

117

To

The (Assessing Office)

..

..

Sir,

Whereas I/We am/are liable to deduct tax in accordance with Chapter XVII under the heading

B.- Deduction at source of the Income tax Act. 1961:

And whereas no tax deduction account number has been allotted to me us ; I/We hereby request

that a tax deduction account number be allotted to me/us

I/We give below the necessary part0iculars:

1. Full name and address2. Status (whether individual. HUF. Company. Etc.)3. If an individual

(a)Name of father (or husband)(b)Age

4. If firm / HUF / AOP / BOI / Company the name and addresses ofpartners/members/directors.

5. Source (s) of income.6. Particular of business. If any:

Name Address Nature of

business

(i) Head office(ii) Branch (es)

7/29/2019 9 - Chapter 6

55/56

118

7. Date on which the tax was last deducted in accordance with Chapter XVII under the

heading (6) Deduction at source of the Income tax Act. 1961

8. The nature of payments from which tax has been or will be deducted.

9. Whether permanent account number has been allotted or not if so state the number.

__________________________

Signed Applicant

Annual return of decilation of tax from interested other than Interest on Securities

under/section 206 of the Income-tax Act. 1961 for the year ending 31st march, 19.

Permanent Account No. Tax Deduction AccountNo..

1. Name and address of the person . Responsiblepaying any income by the way of Interest other than Interest. On securities:

2. Amount of tax deducted Income-tax Surcharge..

Total..

3. Detail of a Interest credited/paid .. during theyear and of tax deducted at source:

Name and

Address of the

payee

P A No.

A.O. where

payee is

assessable

Amount of

interest

credited/pai

d during the

year

Date on

which

interest

credited

paid

Amount

of tax

deducted

Date on

which tax

deducted

TDS

Certific

ate No.

(a)Companies

__________

__________

7/29/2019 9 - Chapter 6

56/56

Total (a)

(b)Personsother than

companies

Total (b)

Grand total

(a)+(b)

__________

__________

4 Detail of tax paid to the credit of the Central Government :Sr No. Amount of tax Date of

payment

Challan No. Name &

Address of the

bank

I certify that :

(i) This return ____ list of persons to whom interest of aggregate interest exceedingRs._______ any received from them was paid during the period 1st April _____ to 31st

March ___________ .

(ii) All the parties given above are correct and completeName and Signature of the persons

Signature for deducting tax at source.

Pl