TAX DEDUCTED AT SOURCE

BASICS
UPDATE
&
PRACTICAL ISSUES
Vishwanath Bhat
B.COM, FCMA,
Proprietor Vishwanath Bhat & Co, Cost
Accountants
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Bangalore`
 What is Tax Deducted at source i.e
TDS?
• TDS is one of the modes of collection of taxes, by
which a certain percentage of amounts are
deducted by a person at the time of
making/crediting certain specific nature of
payment to the other person and deducted
amount is remitted to the Government account.
It is similar to "pay as you earn" scheme also
known as Withholding Tax in many other
countries. It facilitates sharing of responsibility of
tax collection between the deductor and the tax
administration. It ensures regular inflow of cash
resources to the Government. It acts as a
powerful instrument to prevent tax evasion as
well as expands the tax net. 2
Objective of deduction of tax at source
is to collect tax in advance.

• The main object of deduction of at source

was to collect tax at the time the income
like salaries, interest on securities or
dividend are paid, so that the Government
could have a regular inflow of cash
resources, collect tax in advance, prevent
evasion of tax and also place the
responsibility of deducting and depositing
tax on the shoulders of persons other than
the payees.
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 Presentation

• Basics
• Penalties
• T D S / T C S Filings and Penalty for non
filing
• Annual Tax Statement
• Lower Deduction of Tax
• Conclusion
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 Basics
• Status of Deductor/Payer

o Any Person …….

o Tax Payer
o Agriculturist
o Charitable/ Educational Institutions

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 Basics
• 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

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 Basics

• Status of Recipient/Payee

o Rate of Deduction
o Applicability of Surcharge

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 Basics

• Residential status of Recipient/Payee

o Resident
o Non resident

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 Basics
• Nature of expenditure

o In the hands of the deductor – payment /

Debit may be towards
 Capital Expenditure

 Revenue Expenditure

 Personal Expenditure

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 Basics
• When to deduct

o Payment

o Credit

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 Basics
• Rate of Deduction

o Tax rate
o Surcharge
o Education Cess

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Non deduction, late deduction and late deposit
of TDS may lead you to face following
consequences:

• Interest on late deduction /deposit of Tax at

source.
• Dis-allowance of Expenses, on which tax has
not been deducted /deposited u/s
40(a)(ia)
• Penalty and prosecution.(271C and 276B)

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Interest on late deduction /deposit of
Tax at source.

• As per income-tax , interest is

payable under the following two
circumstances:
• Tax is not deducted , when it was
deductible
• Tax once deducted, is not paid on or
before due date

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 Interest on late deduction /deposit of
Tax at source.
• Interest is to be calculated for every month or
part of a month comprised in a period,
• Any fraction of a month shall be deemed to be a
full month
• The amount of tax, penalty or other sum in
respect of which such interest is to be calculated
shall be rounded off to the nearest multiple of
one hundred rupees and
• for this purpose any fraction of one hundred
rupees shall be ignored and the amount so
rounded off shall be deemed to be the amount in
respect of which the interest is to be calculated.

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 Rate of interest
• Non Deduction 1%
• For delayed deposit, from date of
deduction till actual date of payment,
rate of interest is 1.5% p.m
• One Day delay may charge you
Interest @ 3 %

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Dis-allowance of Expenses, on which tax has not
been deducted /deposited u/s 40(a)(ia)

• Exp not allowed if TDS is Not paid.

• Expense allowed if tax deposit before
the due date of deposit Income Tax
return.
• Expenses will be allowed in actual
year of TDS deposit.

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Penalty for failure to deduct tax at
source. 271 C
• Section 271C. If any person fails to
deduct the whole or any part of the tax as
required by or under the provisions of
Chapter XVII-B then, such person shall be
liable to pay, by way of penalty, a sum
equal to the amount of tax which such
person failed to deduct or pay as afore
said.This penalty is imposable by Joint
Commissioner.

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 Prosecution for failure to deduct
/deposit tax at source
276B

• Section 276B. If any person fails to

deduct the whole or any part of the tax as
required by or under the provisions of
Chapter XVII-B then, such person he shall
be punishable with rigorous imprisonment
for a term which shall not be less than
three months but which may extend
to seven years and with fine. This
penalty is imposable by Joint
Commissioner.
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Quarterly filing
• Quarterly Statement of Deductions of Tax or Collection
of Tax
– Form No. 24Q – Salaries
– Form No. 27Q – Other Cases – Deductees other than
company being non-residents or a foreign company
– Form No. 26Q – Other Cases – others
– Form No. 27EQ – Collection of Taxes

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Form 16, Form 16A and Form 27D to be issued

Form 16 To be issued Yearly.

Form 16 A & 27 D Quarterly.

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 ANNUAL TAX STATEMENT
• Form No. 26AS
• Statement issued on behalf of Income Tax Department
• Details of Tax indicated based on the data submitted by the
deductor.
• 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

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 Four Imp T D S Section
S No IT Section Threshold Limit* TDS Rate
As per prevailing income
1 Section 192 slab As per prevailing income slab
Proceeds from any contracts
Rs.30,000 / sub contracts
which is for each
contract, whereas
₹100,000 is for p.a Individuals or HUF @ 1%

2 Section 194C Non Individual/corporate @ 2%

3 Section 194H Rs.15,000 10% of the brokerage earnings

2% on rental amount of plant &
machinery/
10% on the rent of land &
4 Section 194I building
10% on the
5 Section 194J Rs. 30,000 p.a technical/professional services
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 T D S On What Value
• Basic Value
• Excluding All Taxes

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Lower Deduction
• Section 197 of the Income Tax Act, 1961
provides for the facility of NIL or
Lower tax rate deduction of TDS (or TDS
exemption). This section strikes a delicate
balance between the requirement of cash
flow to the taxpayer and realizing the
government dues at the earliest. We all
know that, TDS is a method of collection
of tax where a certain percentage (1%-
30%) of the total amount is payable by
the payee. 24
 procedure
• Apply to Income tax department/Assessing Officer (AO)
in Form 13 for granting the permission.
• Assessing Officer has to dispose of the applications within a
time frame of 30 days from the end of the month in which
application.
• Taxpayers are advised to file complete details required for
processing the application (in Form 13) in the first instance
itself. If the assessing officer is satisfied then, will expedite
the issuance of certificate u/s 197.
• The copy of this certificate can be attached to the invoice
raised to the client in order to claim the exemption.
• This certificate is valid until the assessing officer does not
cancel it.

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 Conclusion
• Method of accounting

o Cash Basis
o Mercantile Basis

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 Conclusion
GOLDEN PRINCIPLES

• Applicability
• Rate
• Deduction & Remittance
• Planning

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 Finally
Deduct and remit Without failure

Avoid – interest, With due care

penalty, prosecution
and disallowance

File TDS returns & Issue Within time

the forms

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Then…
THE
DEDUCTOR
DEDUCTEE
WILL
SMILE FOREVER

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Thank You

Vishwanath Bhat

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