TDS Update Practical Issues Speech Mr DR Venkatesh CA

11

TAX DEDUCTION AT SOURCE

UPDATE

&

PRACTICAL ISSUES

CA D R Venkatesh,

B.COM, LLB, FCA,Partner, MSSV & Co.,

Chartered Accountants

Bangalore

22

BASICSBASICS

• Status of Deductor/Payer

• Any Person …….

o Tax Payer

o Agriculturist

o Charitable/ Educational Institutions

33

BASICSBASICS

• Individual / HUF

o Whose total sales, gross receipts or

turnover

o Exceed the monetary limits specified under

clause (a) or clause (b) of Section 44AB

o During the financial year immediately

preceding financial year

44

• Status of Recipient/Payee

oRate of Deduction

oGovernment

o Applicability of surcharge

BASICSBASICS

55

BASICSBASICS

• Residential status of Recipient/Payee

oResident

oNon resident

66

BASICSBASICS

• Nature of expenditure

o In the hands of the deductor – payment /

Debit may be towards

� Capital Expenditure

� Revenue Expenditure

� Reimbursement of Expenses

77

BASICSBASICS

• When to deduct

o Payment

o Credit

88

BASICSBASICS

• Rate of Deduction

o Tax rate

99

BASICSBASICS• Remittance

• Deductor

o Government - On same day

o Without Challan

o Others

� During the year payment

� Year end provisions

o With Special Permission

� Salaries, Interest, Insurance Commission, Commission or

Brokerage – 7th July, 7th October, 7th January, 30th April

10

Quarterly Returns• Rule 31A – Statement of deduction of tax

- Form No. 24Q – Salary

- Form No. 26Q – all other deductees

- From No. 27Q – deductees non- resident

30th June On or before 15th July

30th September On or before 15th October

31st December On or before 15th January

31st March On or before 15th May

11

• E-filing compulsory

Deductor

- Government

- Company

- Person who is required gets his accounts audited U/s 44AB in the immediately preceding financial year

- Number of deductees are twenty or more in any quarter of the financial year

12

Certificates

• Form No.16 – Annual – on or before May 31,

• Form No.16A – Quarterly – Within 15 days from the due date of furnishing the Statement of TDS

13

UPDATE Finance Act, 2009

Section – 194 C (6) w.e.f. 01.10.2009

• No TDS

• During the Course of Business of plying, hiring or leasing the goods carriage on furnishing his PAN to the person paying or crediting such sum

• Section – 194 C (7)

- Prescribed form

14

NEW SECTION 206AA

• With effect from 1st April 2010

• Requirement to furnish PAN

• 206AA(1)

- Any person entitled to receive any sum or

income or amount, on which tax is

deductable under Chapter XVII-B (deductee)

shall furnish his PAN to deductor, failing which

tax shall be deducted at the higher of the

following rates, namely

1515

(i) At the rate specified in the relevant

provisions of this Act or

(ii) At the rate or rates in force or

(iii) At the rate of 20%

• Section 206AA(2)

- No declaration u/s 197A(1), 197A(1A) &

197A(1C) shall be valid unless the person

furnishes his PAN in such declaration

(Form 15G & 15H)

1616

• Subsection (3)

-In case any declaration becomes invalid

U/s 206AA(2), the deductor shall deduct

TDS in accordance with provisions of

Section 206AA(1)

• Subsection (4)

- No certificate U/s 197 shall be granted

unless the application made under that

section contains the PAN of the applicant

1717

• Subsection (5)

- The deductee shall furnish his PAN

to the deductor and both shall

indicate the same in all

correspondences,bills,vouchers and

other documents which are sent to

each other

1818

• Subsection (6)

-Where PAN provided to the deductor is

invalid or does not belong to the

deductee, it shall be deemed thatdeductee

has not furnished his PAN to the deductor

and the provision of Section 206AA(1)

shall apply accordingly

19

FINANCE ACT, 2010

• Threshold limit. w.e.f 1st July, 2010.

Section Earlier (Rs.) New (Rs.)

194 B 5000 10000

194 BB 2500 5000

194 C 20000 30000

50000 75000

194 D 5000 20000

194 H 2500 5000

194 I 120000 180000

194 J 20000 30000

20

Finance Act, 2010Interest u/s 201 – w.e.f: 01.07.2010.

. at 1% for every month or part of a month

on the amount of such tax from the date

on which such tax was deductible to the

date on which such tax is deducted; and

. at 1.5% for every month or part of a

month on the amount of such tax from

the date on which such tax was deducted

to the date on which such tax is actually

paid.

2121

Circulars/NotificationsCirculars/Notifications

• Notification No.28/2009

– Income Tax (Sixth Amendment) Rules, 2009

– W.e.f April 1, 2009

– New Rule 37BA, 37I

– Credit for tax deducted at source for the purpose of sec 199(3)

– On the basis of information relating to deduction of tax furnished by the deductor to the income tax authority or the person authorized by such authority

2222

ANNUAL TAX STATEMENTANNUAL TAX STATEMENT• Form No. 26AS

• Section 203AA

• Rule 37AB

• Statement issued on behalf of Income Tax Department

• Details of Tax indicated based on the data submitted by the deductor

• Due Date for sending this statement is July 31 every year

• Form 26AS consists of:

- General Information

- Part A : Details of TDS

- Part B : Details of TCS

- Part C : Details of Tax Paid, other than TDS/TCS

Details of Refund Granted

2323


• Notification No.30/2009

– Income Tax (Seventh Amendment) Rules, 2009

– W.e.f July 1, 2009

– New Rules 37BB

– Furnishing of information u/s 195(6)

– Form No. 15CA – Information shall be furnished

electronically to the website designated by the IT

Department prior to remitting the payment

– Form No. 15CB – Certificate of Accountant

24

• Circular No. 1/2010 dated January 11,2010

-Income tax deductions from salaries u/s 192

during the F.Y 2009-10.

• Circular No. 3/2010 dated March 02,2010.

-TDS on payment of Interest on Time Deposits u/s 194A by Banks following CBS Software.

2525


• Circular No. 4/2008 dated April 28, 2008

• Clarification regarding service tax should be

excluded for TDS u/s 194I

• Clarificatory Circular No. 275/73/2007 dated June 30,

2008

• Clarification regarding service tax should be

included for TDS u/s 194J

2626

U/s 194I U/s 194JU/s 194I U/s 194J

Rent Rs. 100,000

Service Tax Rs. 10,300

Total Rs. 110,300

TDS on Rs. 100,000

Fees Rs. 100,000

Service Tax Rs. 10,300

Total Rs. 110,300

TDS on Rs. 110,300

2727

Any income by way of Any sum by way of Any income by way of Any sum by way of

• 194A

• 194B

• 194BB

• 194D

• 194E

• 194G

• 194H

• 194I

• 194C

• 194J

• 194L

• 194LA

2828

Issues Issues -- GeneralGeneral

The entries passed in books of accounts for MIS

purposes.

Examine the applicability of chapter

XVII - B

2929

Issues Issues –– GeneralGeneral

• Excess/Short deduction

• Excess/Short Remittance - Adjustment

- With in the quarter.

- With in the financial year

• Refund of Excess tax remitted

3030


• Defaults

o Non deduction

o Short deduction

o Non remittance

o Short remittance

o Delay in remittance

3131


• Consequences

o Interest

o Penalty

o Prosecution

o Amount not deductible

3232


• M/s X Private Limited paid statutory audit fee of

Rs.1,00,000/- in cash during the accounting year

2009 – 2010 with out deduction of tax at source.

• For Assessment year 2010–11, Examine the

disallowance u/s 40(a)(ia) and u/s 40A(3) ?

3333

Issues Issues –– SpecificSpecific

• M/s A limited has given turnkey project to B Limited for setting the data centre in their premises for 3 Crore plus applicable taxes. B Limited raised the invoice which is as follows:

____________________________________________________________________________________

Invoice

Towards setting data centre - 3,00,00,000

Add: VAT @12.5%(on 75% of the value) - 28,12,500

Add: Service Tax @12.36% (33% of the value) - 12,23,640

-----------------

3,40,36,140

-----------------____________________________________________________________________________________________________________________________________

Issue – 1 : M/s A Limited propose to deduct the Tax on 33% of contract value.

Issue – 2 : Whether TDS should be made including Service Tax and VAT?

3434


• Commission Or Brokerage

o Discount/Rebate/Incentive

o Commission paid to partners on percentage of

export sales

3535


• Rent

o Advance Rent of Rs. 5 Lakhs paid for next 5

Financial years on 30.06.2009

o Rent of Rs.5 lakhs paid to 5 co-owners

o Warehousing Charges

o Cooling Charges paid to cold storage owners

3636


• M/s King fisher Airlines paid landing fee and parking fee

of Rs.10 Crores to Airport authorities during the

accounting year 2009 - 10. M/s Kingfisher Airlines

proposes to deduct tax at source:-

- 194C or 194I ?

• Rent paid to owner as a percentage of sales.

• Tenants in a commercial complex following payments

are made to the owner:-

- Rent

- Maintenance charges

- Power & Water charges re-imbursements.

3737


• M/s X Limited has paid interest free refundable

deposit of Rs.100 lakhs to M/s Y Limited. M/s Y

Limited allowed M/s X limited to use the building

without rent. Assessing Officer observed that this

arrangement is only to avoid the TDS and he

propose to invoke the provisions of Section 194A

in the case of M/s Y Limited and Section 194I in

the case of M/s X Limited.

3838


• Fees for professional services

o Is TDS to be effected U/s 194J on the gross

amount of bill including service tax and

reimbursement of expenses or the fees only?

3939


Audit Fee Rs. 1,00,000

Service Tax & Cess Rs. 10,300

Reimbursement of expenses Rs. 50,000

Total Rs. 1,60,300

40

Certificate for deduction

at lower rate

• u/s 197

• All sections covered

• Assessing officer

• Documents to be filed along with application in Form No. 13

- latest 3 years ROI filed copies

- latest 3 years financial statements

- current year provisional/estimated P & L A/c

- PAN of all deductees

- quarterly returns (Form 24Q and 26Q) for the latest 3 years (12 quarters)

41

NO DEDUCTION TO BE MADE IN

CERTAIN CASES

• u/s 197A

• Sections covered - section 194, 194EE, 193, 194A and 194K

• Persons covered – Individuals and HUFs

• Persons barred – companies and firms

• Form 15H – Senior Citizens

• Form 15G - Others

4242

ConclusionConclusion

• Duty / Responsibility under chapter

XVII – B cannot be bypassed

4343


• Method of accounting

o Cash Basis

o Mercantile Basis

o Compliance Basis

4444


GOLDEN PRINCIPLES

• Applicability

• Rate

• Deduction & Remittance

• Planning

4545

FinallyFinally

Deduct and remit Without failure

Avoid – interest,

penalty, prosecution

and disallowance

With due care

File TDS returns & Issue

the forms

Within time

4646

ThenThen……THE

DEDUCTOR

DEDUCTEE

WILL

SMILE FOREVER

4747

Thank You