CA SHIRISH VYAS / CA INTER DT IMP QUESTIONS / TDS
TAX DEDUCTION AT SOURCE
Question 1:
Examine the applicability and the amount of TDS to be deducted
in the following cases for F.Y. 2023-24:
(i) S and Co. Ltd. paid ` 25,000 to one of its Directors as sitting
fees on 02-02-2024.
(ii) ` 2,20,000 paid to Mr. Mohan, a resident individual, on 28 -
02-2024 by the State of Haryana on compulsory acquisition
of his urban land.
(iii) ABC LLP paid job charges to XYZ, a partnership firm for
doing embroidery work on the fabric supplied by the ABC
LLP during the previous year 2023-24 as under
BILL NO. DATE AMOUNT `
1 30-04-2023 27,000
57 30-06-2023 25,000
105 30-09-2023 28,000
151 30-12-2023 22,000
(iii) Mr. Purushotham, a resident Indian, dealing in hardware
goods has a turnover of ` 12 crores in the previous year
2022-23. He purchased goods from Mr. Agarwal a resident
seller, regularly in the course of his business. The aggregate
purchase made during the previous year 2023-24 on various
dates is ` 80 lakhs which are as under:
10-06-2023 ` 25,00,000
20-08-2023 ` 27,00,000
12-10-2023 ` 28,00,000
He credited Mr. Agarwal's account in the books of accounts
on the same date and made the payment on the 28-02-2022
` 80 lakh. Mr. Agarwal's turnover for the financial year 2023-
24 is ` 20 crores.
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CA SHIRISH VYAS / CA INTER DT IMP QUESTIONS / TDS
(v) Miss Tara, resident individual aged 32 years, is a social media
influencer. She makes videos reviewing various electronic
items and posts those videos on social media. On 1st
December 2023, XYZ Ltd., an Indian company manufacturer
of electronic cars gave her a brand new car having fair
market value of ` 6 lakhs to promote on her social media
page. She used that car for 7 months for her personal
purposes, recorded a video reviewing the car and then
returned the car to the company. You are required to discuss
the applicable provisions in the Income-tax Act regarding
the deduction of tax at source in respect of such transaction.
(vi) Mr. Ketan, a wholesale trader whose turnover was ` 4 crores
in PY 2022-23 paid ` 80 lakhs in February 2024 to a contractor
for reconstruction of his residential house.
(vii) Samrat, a salaried individual, pays rent of ` 63,000 p.m. to Nasir
from August 2023.
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CA SHIRISH VYAS / CA INTER DT IMP QUESTIONS / TDS
Answer 1:
(i) Tax @10% has to be deducted by S and Co. Ltd. under
section 194J on directors sitting fees of ` 25,000. The
threshold limit of ` 30,000 is not applicable in respect of sum
paid to a director. The amount of tax to be deducted at
source = ` 25,000 x 10% = ` 2,500
(ii) There is no liability to deduct tax at source under section
194LA, since the payment to Mr. Mohan, a resident, by State
of Haryana on compulsory acquisition of his urban land
does not exceed ` 2,50,000.
(iii) In this case, the individual contract payments (through the
bills dated 30.4.2023, 30.6.2023 and 30.9.2023) made by
ABC LLP to XYZ does not exceed ` 30,000. However, since
the aggregate amount paid to XYZ during the P.Y. 2023-24
exceeds ` 1,00,000 (on account of the last payment of `
22,000, due on 30.12.2023, taking the total from ` 80,000
to ` 1,02,000), the TDS provisions under section 194C would
get attracted on the entire sum of ` 1,02,000. Tax has to be
deducted @ 2% (since payment is to a firm, XYZ) on the
entire amount of ` 1,02,000, from the last payment of `
22,000 on 30.12.2023. Hence, TDS u/s 194C = ` 2,040.
(iv). Since Mr. Purushotham’s turnover for F.Y.2022-23 exceeds `
10 crores, and value of goods purchased from Mr. Agarwal,
a resident seller, exceeds ` 50 lakhs in the P.Y.2023-24, he is
liable to deduct tax@0.1% on ` 30 lakhs (being the sum
exceeding ` 50 lakhs), at the time of credit or payment,
whichever is earlier.
On 10.6.23, TDS = Nil (No tax is to be deducted u/s 194Q on
the purchases made on 10.6.2023 since the purchases made
till that date has not exceeded the threshold of ` 50 lakhs.
On 20.8.2023, TDS = 0.1% of ` 2 lakhs (amount exceeding `
50 lakhs) = ` 200
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CA SHIRISH VYAS / CA INTER DT IMP QUESTIONS / TDS
On 12.10.2023, TDS = 0.1% of ` 28 lakhs = ` 2,800.
(v) Under section 194R, the person who is responsible for
providing to a resident, any benefit or perquisite whether
convertible into money or not, arising from business or the
exercise of a profession by such resident, has to first ensure
deduction of tax@10% of the value of such benefit or
perquisite, if the same exceeds ` 20,000.
However, in case of benefit or perquisite being a product like
car, mobile etc. if the product is returned to the
manufacturing company after using for the purpose of
rendering service, then it will not be treated as a
benefit/perquisite for the purposes of section 194R.
Accordingly, in the present case, since Miss Tara has
returned the car to XYZ Ltd., TDS provisions under section
194R would not apply.
(vi) Since the payment to contractor for repairs of residential
house is a payment for personal transaction, it not subject
to TDS u/s 194C. Such payments are subject to TDS u/s
194M if the aggregate payment during the year exceeds `
50 lakhs. Since the payment by Jagdeep for works contract
does not exceed ` 50 lakhs, it is not subject to TDS u/s
194M also.
(vii) Since Samrat is a salaried individual, he has no turnover in
preceding year and Ind/HUFs with no/low turnover in
preceding year are exempted from TDS on rent u/s 194-I
(Sec. 194 A CHIJ). However, the same is liable for TDS @ 5%
u/s 194IB because the rent exceeds ` 50,000 p.m.
