Chapter 11 – Advance Tax, Tax Deduction at Source and

Introduction to Tax Collection at Source A R

Tax Deduction at Source (TDS)

UM
K
S. Section Nature of Payment Threshold Rate of TDS Time of Deduction Remarks
No.
1 192 Salaries Basic Exemption Limit Average Rate Payment
2 192A Premature ≥ ₹ 50,000 10% Payment

3
Withdrawal from EPF
193 Interest on Securities Security
8% Savings
(Taxable)
Bonds, 2003
T
Threshold

N
> 10,000
10% (P/C)E

A
7.75% > 10,000
Savings

H
(Taxable)
Bonds, 2018
Floating Rate > 10,000

S
Savings

I
Bonds, 2020
(Taxable)
(From 01-10-

N
2024
Any other > 10,000
security of

A
the Central
Government
or State

C CA NISHANT KUMAR 1
 S.
No.
Section Nature of Payment Threshold

Government
as the Central
Rate of TDS Time of Deduction Remarks

A R
M
Government
may, by

U
notification in
the Official
Gazette,

K
specify in this
behalf (from
01-10-2024)

T
Interest on > 5,000
Debentures
Others No

N
Threshold
4 194 Dividends 1. Individuals: > ₹5,000 10% Before Payment

A
2. Others - No
Threshold
5 194A Interest Other Than 1. From Banks/Post 10% (P/C)E If the payer is an Individual or

H
on Securities Office/Co-Operative HUF, he is liable to deduct TDS
Banks/Mahila only if his turnover from Business
Samman Savings in the last F.Y. > ₹1 crore, or

S
Certificate, 2023: receipts from profession > ₹50

I
> ₹40,000 (₹50,000 lakhs
for Senior Citizens)
2. From Others:

N
194B Winnings from
Lotteries, etc.
> ₹5,000
> ₹10,000 30% Payment

A
7 194BA Winnings from Online No Threshold 30% 1. At the End TDS is deducted only on the
Gaming of the amount of net winnings

C CA NISHANT KUMAR 2
 S.
No.
Section Nature of Payment Threshold Rate of TDS Time of Deduction

Financial
Year, or
Remarks

A R
M
2. At the time
of

U
Withdrawa
l
8 194BB Winnings from Horse > ₹10,000 30% Payment

K
Races
9 194C Contractors 1. Single Payment: 1. 1% (For (P/C)E 1. If the payer is an
₹30,000 Payment to Individual or HUF, he is

T
2. Aggregate Payment Individuals) liable to deduct TDS only
in a Year: ₹1,00,000 2. 2% (For if his turnover from
Payment to Business in the last F.Y. >

N
Others) ₹1 crore, or receipts
from profession > ₹50
lakhs

H A 2. No TDS is required to be
deducted if the payment
is made for personal
purposes.
3. Contract includes Works

S
Contract (ABC2M) - A:

I
Advertising; B:
Broadcasting/
Telecasting; C: Catering;

N
C: Carriage of Goods or
Passengers; M:
Manufacturing as per

A
customer specifications
using material

C CA NISHANT KUMAR 3
 S.
No.
Section Nature of Payment Threshold Rate of TDS Time of Deduction Remarks

purchased
customer
A R from

M
4. No TDS on payment to
transport operators if

U
following conditions are
satisfied
a. Owns ≤ 10 goods

K
carriages in a
year;
b. Engaged in the

T
business of
plying, leasing
goods carriages;

N
c. Has furnished
declaration
along with PAN.

A
10 194D Insurance Commission > ₹15,000 1. 5% (For Non (P/C)E
Corporates)

H
2. 10% (For
Domestic
Companies)

S
11 194DA Maturity of LIC ≥ ₹1,00,000 Before 01-10- 5% Payment TDS is deducted only on the

I
2024 amount of income comprised
On or After 2% therein.
01-10-2024
12

N
194G Commission on Sale of > ₹15,000
Lottery Tickets
Before 01-10- 5%
2024
On or After 2%
(P/C)E

A
01-10-2024
13 194H Commission or > ₹15,000 Before 01-10- 5% (P/C)E If the payer is an Individual or
Brokerage 2024 HUF, he is liable to deduct TDS

C CA NISHANT KUMAR 4
 S.
No.
Section Nature of Payment Threshold Rate of TDS

On or After
01-10-2024
2%
Time of Deduction Remarks

A R
only if his turnover from Business
in the last F.Y. > ₹1 crore, or

M
receipts from profession > ₹50
lakhs

U
14 194I Rent > ₹2,40,000 1. 2% (For P&M) (P/C)E If the payer is an Individual or
2. 10% (For L&B, HUF, he is liable to deduct TDS
F&F) only if his turnover from Business

K
in the last F.Y. > ₹1 crore, or
receipts from profession > ₹50
lakhs

T
15 194IA Transfer of ≥ ₹50,00,000 1% (P/C)E 1. TDS is to be deducted
Immovable Property only if the SDV or the
(See Amendment consideration exceeds

N
after the table) ₹50 lakh.
2. Rate of TDS is applied on
the consideration or

H A SDV,
higher.
whichever

3. TDS is not deducted on

purchase of
agricultural land.
is

rural

S
16 194IB Rent by Certain > ₹50,000 per month Before 01-10- 5% (P/C)E 1. Individuals or HUFs

I
Individuals/HUFs 2024 having turnover from
On or After 2% business in the last P.Y.
01-10-2024 exceeding ₹1 crore, or

N
professional receipts
exceeding ₹50 lakhs are
not required to deduct

A
TDS under this section.
2. TDS is to be deducted
from the rent of the last

C CA NISHANT KUMAR 5
 S.
No.
Section Nature of Payment Threshold Rate of TDS Time of Deduction Remarks

A R
month only. However,
the amount of TDS

M
cannot exceed the
amount of rent for the

U
last month.
17 194J 1. Professional 1. Professional 1. Professional (P/C)E If the payer is an Individual or
Services Services: > ₹30,000 Services: 10% HUF, he is liable to deduct TDS

K
2. Technical 2. Technical Services: 2. Technical only if his turnover from Business
Services > ₹30,000 Services: 2% in the last F.Y. > ₹1 crore, or
3. Royalty (for 3. Royalty: > ₹30,000 3. Royalty (for receipts from profession > ₹50

T
Films) 4. Non-Compete Fee: Films): 2% lakhs
4. Royalty > ₹30,000 4. Royalty: 10%
(Other) 5. Directors' 5. Non-Compete

N
5. Non-Compete Remuneration: No Fee: 10%
Fee Threshold 6. Directors'
6. Directors' Remuneration

A
Remuneration : 10%
18 194K Income from Units > ₹5,000 10% (P/C)E

H
19 194LA Compulsory > ₹2,50,000 10% Payment
Acquisition of

S
Immovable Property

I
20 194M 1. Payment to > ₹50,00,0000 Before 01-10- 5% (P/C)E
Contractors 2024
(194C) On or After 2%

N
2. Commission 01-10-2024
or Brokerage
(194H)
3. Professional/

A
Technical Fees
(194J)

C CA NISHANT KUMAR 6
 S.
No.
21
Section Nature of Payment

194N Cash Withdrawals

from Bank
Threshold

1. > ₹1 Crore (for Non

Defaulter
Rate of TDS

1. 2% (on
amount
Time of Deduction

Payment
Remarks

A R
You're a defaulter if you haven't
filed the return of income for the

M
Individuals) exceeding ₹1 three years preceding the
2. > ₹20 lakhs (for crore (for non- relevant P.Y.

U
Defaulter defaulters))
Individuals) 2. 2% (on
3. > ₹3 Crore (for Co- amount from

K
operative Societies) ₹20 lakhs to
₹1 crore) and
5% (on

T
amount
exceeding ₹1
crore) (for

N
defaulters)
22 194P Pension Payments to Basic Exemption Limit Average Rate Payment Specified Senior Citizen is an
Specified Senior individual:

A
Citizens 1. Resident of India
2. Age ≥ 75

H
3. Ek hi bank me pension
and wahin se interest
Such specified senior citizen

S
need not file Income Tax Return.

I
23 194Q Purchase of Goods > ₹50,00,000 0.1% on amount (P/C)E Buyer to deduct TDS only if his
exceeding ₹50 lakh business t/o > ₹10 crore in the
last F.Y.

N
24 194R Perquisites to Non- ₹20,000 10% Before Payment If the payer is an Individual or
Salaried People HUF, he is liable to deduct TDS
only if his turnover from Business

A
in the last F.Y. > ₹1 crore, or
receipts from profession > ₹50
lakhs

C CA NISHANT KUMAR 7
 Amendment in Section 194IA – Transfer of Immovable
Property
1. TDS on Sale of Immovable Property (Section 194-IA):
a. Section 194-IA mandates that tax be deducted at source (TDS) when making a payment
for the transfer of certain immovable property, excluding agricultural land.
b. Example: If you buy a house, the buyer must deduct TDS before paying the seller.
2. TDS Calculation:
a. The buyer must deduct 1% TDS on either the sale price or the stamp duty value of the
property, whichever is higher.
b. TDS is required if either the property's sale price or stamp duty value is ₹ 50 lakh or
more.

A
c. Example: If a property is sold for ₹ 55 lakh, and the stamp duty value is ₹ 60 lakh, TDS
will be 1% of ₹ 60 lakh (₹ 60,000).
R
3. Clarification Needed for Multiple Buyers:

M
a. Some taxpayers incorrectly interpret that TDS is calculated based on each individual
buyer's payment rather than the total property value.

U
K
b. For instance, if multiple buyers each pay less than ₹ 50 lakh, they may assume no TDS
is needed, even if the total property value exceeds ₹ 50 lakh.

T
c. Example: If three buyers jointly purchase a property for ₹ 1.35 crore, and each pays
₹ 45 lakh, they might mistakenly think no TDS is required.

N
4. Proposed Amendment:
a. To clarify, the law has been amended to ensure that the TDS calculation considers the

A
total amount paid by all buyers or received by all sellers.
b. This means if the combined purchase price is ₹ 50 lakh or more, TDS must be deducted,

H
regardless of individual contributions.

IS
c. Example: In a joint purchase, if the total property value is ₹ 1 crore, TDS must be
deducted even if each buyer pays less than ₹ 50 lakh individually.
5. Effective Date:

N
a. The amendment is effective from October 1, 2024.
b. Example: From 1st October 2024 onwards, all joint property purchases must consider

A
the total value for TDS, not individual payments.

CAdditional Important Points

Section

206AA
Requirement Consequence of Non-
Compliance
Deductee must furnish PAN Deductor to deduct tax at the
Exceptions

NA
to the deductor higher of:
1. Rate in the Act;
2. Rates in force;
3. 20% (or 5% for section
194-Q)
206AB Tax to be deducted at Tax to be deducted at the Not applicable for tax
source on any sum higher of: deductible at source
under sections 192, 192A,

CA NISHANT KUMAR 8
 paid/credited to a 1. Twice the rate in the 194B, 194BA, 194BB, 194-
“specified person”. Act; IA, 194-IB, 194M11, or
2. Twice the rate in 194N.
force; c) 5%
1. Meaning of “specified person”: A person who:
a. Has not furnished the return of income for the assessment year relevant to the previous
year immediately preceding the financial year in which tax is to be deducted, for which the
time limit under section 139(1) has expired.
b. The aggregate of tax deducted at source and tax collected at source is ₹50,000 or more in
the said previous year.
However, the specified person would not include:
a. A non-resident without a permanent establishment in India.

R
b. A person exempt from furnishing the return of income for the relevant assessment year
and notified by the Central Government.
2. If section 206AA is also applicable to the specified person, tax is required to be deducted at the
higher of the two rates provided in section 206AA and section 206AB.

Question 9 – ICAI SM – Illustration 7

M A
K U
Mr. X, a salaried individual, pays rent of ₹ 55,000 per month to Mr. Y from June, 2024. Is he required to
deduct tax at source? If so, when is he required to deduct tax? Also, compute the amount of tax to be
deducted at source.

N T
Would your answer change if Mr. X vacated the premises on 31st December, 2024?

Also, what would be your answer if Mr. Y does not provide his PAN to Mr. X?

A
Solution

Since Mr. X pays rent exceeding ₹ 50,000 per month in the F.Y. 2024-25, he is liable to deduct tax at

H
source @ 5% till 30.09.2024 and thereafter @ 2%. The tax is to be deducted in the last month of the

IS
P.Y. 2024-25 i.e., March 2025 or in the last month of tenancy, if the property is vacated during the year.
Since property is not vacated during the year, ₹ 11,000 [(₹ 55,000 × 2% × 10)] has to be deducted from
rent payable for March, 2025.

N
If Mr. X vacated the premises in December, 2024, then tax of ₹ 7,700 [(₹ 55,000 × 2% × 7)] has to be
deducted from rent payable for December, 2024.

C A
In case Mr. Y does not provide his PAN to Mr. X, tax would be deductible @ 20%, instead of 2%.

In case 1 above, this would amount to ₹ 1,10,000 [₹ 55,000 × 20% × 10], but the same has to be
restricted to ₹ 55,000, being rent for March, 2025.

In case 2 above, this would amount to ₹ 77,000 [₹ 55,000 × 20% × 7], but the same has to be restricted
to ₹ 55,000, being rent for December, 2024.

Question 19 – May, 2018 – 5 Marks

Discuss the applicability of provisions of Tax Deduction at Source, the rate and amount of tax deduction
to be made in the following cases for the financial year 2024-25.

CA NISHANT KUMAR 9
 1. Mr. Bobby, a resident whose turnover during the previous financial year is ₹ 205 lakhs and for
the current year 2024-25 it is ₹ 80 lakhs.
a. Shop rent paid to Mr. Rajsekharan, a resident ₹ 20,000 per month.
b. On 1-11-2024, paid towards fee for technical services ₹ 25,000 and royalty of ₹ 20,000
to Mr. Swamy, a resident who is having PAN. No other payment made to Mr. Swamy.
c. On 01-10-2024 payment of ₹ 2,00,000 made to Mr. A, for purchase of diaries according
to specifications. However, no material was supplied for such diaries.
d. Contract payments made to Mr. Satheesan on 01-05-2024 for painting ₹ 25,000 and
another contract for interior furnishing on 22-03-2025 for ₹ 20,000.
2. Mr. Thrilok an individual not assessed to tax pays towards rent ₹ 60,000 per month.

Solution

1. As the turnover of Bobby for financial year 2023-24, i.e., ₹ 205 lakhs, has exceeded the
monetary limit of ₹ 100 lakhs, he has to comply with the tax deduction provisions during the
financial year 2023-24, subject to the exemptions provided for under the relevant sections for
applicability of TDS provisions.
A R
UM
a. Shop rent paid to Mr. Rajsekharan: Tax is to be deducted under section 194-I @ 10% if
the rental payment exceeds ₹ 2,40,000. Since the amount of shop rent does not exceed
₹ 2,40,000, tax is not required to be deducted at source.

T K
b. TDS provisions under section 194J would not get attracted, since the limit of ₹ 30,000
is applicable for fees for professional services and fees for technical services,
separately. Hence, no tax is required to be deducted at source on payment made to
Mr. Swamy.

A N
c. As per Section 194C, any person responsible for paying any sum to any resident
contractor for carrying out any work in pursuance of a contract between the contractor
and a contractee shall be liable to deduct tax at source @ 1% in case payee is individual
if the amount of contract exceeds ₹ 30,000. Work shall include manufacturing or

H
supplying a product according to the requirement or specification of a customer by

IS
using material purchased from such customer but does not include manufacturing or
supplying a product according to the requirement or specification of a customer by
using material purchased from a person, other than such customer. In this case no

N material was supplied by Mr. Bobby for diaries, hence, no tax will be deducted at
source.

C A d. TDS provisions under section 194C would not be attracted if the amount paid to a
contractor does not exceed ₹ 30,000 in a single payment or ₹ 1,00,000 in the aggregate
during the financial year. Therefore, TDS provisions under section 194C are not
attracted in this case.
2. Since Mr. Thrilok, an individual, pays rent exceeding ₹ 50,000 per month in the F.Y. 2024-25, he
is liable to deduct tax at source @ 5% till 30.09.2024 and thereafter @ 2%. The tax is to be
deducted in the last month of the P.Y. 2024-25 i.e., March 2025 or in the last month of tenancy,
if the property is vacated during the year. Since property is not vacated during the year,
₹ 14,400 [(₹ 60,000 × 2% × 12)] has to be deducted from rent payable for March, 2025.

CA NISHANT KUMAR 10
 Advance Payment of Tax
Category Criteria/Condition Due Dates/ Amount
Instalments Payable
Liability for Payment of • Tax payable in advance for Applicable during NA
Advance Tax the income of the next A.Y. the financial year
• Applicable if advance tax of income
payable ≥ ₹10,000. generation.
• Resident Individuals ≥ 60
years not earning under
"Profits and gains of
business or profession" are

R
exempt.
Instalments for Four instalments schedule:

A
Corporates & Non- Due Date Amount Payable
corporates (excluding 15th June Not less than 15% of advance tax liability.

M
presumptive basis under 15th Not less than 45% of advance tax liability (-) amount
44AD or 44ADA) September paid earlier.

U
15th Not less than 75% of advance tax liability (-) amount
December paid earlier.

Advance Tax Payment on

Presumptive Basis (u/s
15th March

K
The whole amount of advance tax liability (-)
amount paid earlier.

T
• For eligible assessees on On or before 15th Whole
presumptive basis. March amount of

N
44AD(1) or 44ADA(1)) • Payment by 31st March advance
treated as advance tax of tax.

H A
Interest u/s 234A/234B/234C
the F.Y.

Section

234A

N
Levy
IS
Reason for Interest
Rate
Conditions Calculation Basis

Late filing of 1% per From due date of On the “tax payable”

return month or return filing till
Threshold
Allowance
NA

A
part the date return is
filed

C
234B Short 1% per From 1st April of On the “tax payable” Not leviable if ≥
payment of month or the A.Y. till the 90% of total tax
advance tax part date of payment liability paid as
advance tax
234C Deferment of 1% per See 234C On shortfall in Margins provided
advance tax month or Specifics table advance tax for the first and
part payment as per second
specified instalments
percentages and
dates

CA NISHANT KUMAR 11
 234C Specifics
Specified Date Specified % Shortfall in Advance Tax Period Margin*
15th June 15% 15% of tax due on returned income (-) 3 months 12%
advance tax paid up to 15th June
15th September 45% 45% of tax due on returned income (-) 3 months 36%
advance tax paid up to 15th September
15th December 75% 75% of tax due on returned income (-) 3 months NA
advance tax paid up to 15th December
15th March 100% 100% of tax due on returned income (-) 1 month NA
advance tax paid up to 15th March
Margin means that even if the assessee has paid this much of advance tax, interest u/s 234C won’t
apply. Therefore, if, till 15th June, even if 12% of tax due on returned income is paid as advance tax,
interest u/s 234C won’t apply. Similarly, if, till 15th September, even if 36% of tax due on returned
income is paid as advance tax, interest u/s 234C won’t apply.

A R
UM
T K
A N
H
N IS
C A

CA NISHANT KUMAR 12
Tax Collection at Source (TCS)
S. Section Nature of Payment Threshold Rate of TCS Time of Remarks
A R
M
No. Collection
1. 206C(1) Sale of Certain Goods NA 1. Daru, Kabaad aur (R/D)E Buyer cannot be Governments, etc., or an individual

U
Minerals - 1% who purchases these things for personal
2. Timber (With or consumption.
Without Forest Seller can only be Governments, companies, firms,

K
Lease) - 2.5% etc. However, an individual can also be considered
3. Other Forest as a seller only if his turnover from business > ₹1
Produce - 2.5% crore or receipts from profession > ₹50 lakhs in the

T
4. Tendu Leaves - 5% last F.Y.
2. 206(1C) Licensing Parking Lot, NA 2% (R/D)E
Toll Plaza, Mine or

N
Quarry
3. 206C(1F) Sale of Motor Car ₹10,00,000 1% Receipt Seller can only be Governments, companies, firms,
etc. However, an individual can also be considered

4. 206C(1G) Overseas Remittance;

Overseas Tour Package

H
1. Ghoomne
A
a. Upto ₹7,00,000: 5%
(R/D)E
as a seller only if his turnover from business > ₹1
crore or receipts from profession > ₹50 lakhs in the
last F.Y.

S
b. Above ₹7,00,000: 20%

I
2. Education and Medical
Treatment:
a. Upto ₹7,00,000: NIL

N
b. Above ₹7,00,000: 5%
3. For other than 2:
a. Upto ₹7,00,000: NIL

A
b. Above ₹7,00,000: 20%
4. For Loan u/s 80E:
a. Upto ₹7,00,000: NIL

C CA NISHANT KUMAR 13
 S.
No.

5
Section

206C(1H)
Nature of Payment

Sale of Goods
Threshold Rate of TCS

b. Above ₹7,00,000: 0.5%

₹50,00,000 0.1% on amount exceeding
Time of
Collection

Receipt
Remarks

A R
If the buyer deducts TDS on such transaction, seller
₹50 lakh

M
is not required to collect TCS.

U
T K
A N
S H
N I
C A CA NISHANT KUMAR 14
 Additional Important Points
Section Requirement Rates Maximum Exclusions
Rate
206CC Non-furnishing of • Twice the 20% Non-resident without
PAN/ Aadhaar (for rate in the permanent establishment in
206C(1H)) by Act India
collectee • 5% (1% for
206C(1H))
206CCA Tax to be collected • Twice the 20%
from a “specified rate in the
person” Act

General
• 5%
If both 206CC and Higher of the two
206CCA apply rates from 206CC and
206CCA
A R
Specified
Person
Non-filing
income tax return
with TDS + TCS ≥
of

UM
• Non-resident
without permanent
establishment in

K
₹50,000 India
• Notified persons by
the Central

N T Government
required to file
return
not

Buy Latest
Books
H A Buy Latest
Fast Track
Buy Latest Regular
Lectures

N IS
C A
Click to Buy Click to Buy Click to Buy

CA NISHANT KUMAR 15