Professional Documents
Culture Documents
INDEX
Introduction
To avoid cases of tax evasion, the Income-Tax Act has made provisions to collect tax at source on accrual of income. Cases included in the scheme are, generally, those where income can be computed at the time of accrual of income. Under this scheme, persons responsible for making payment of income covered by the scheme are responsible to deduct tax at source and deposit the same to the Governments treasury within the stipulated time. The recipient of incomethough he gets only the net amount (after deduction of tax at source)is liable to tax on the gross amount and the amount deducted at source is adjusted against his final tax liability. The details of the scheme of tax deduction and collection at source are briefly discussed in this presentation. To conclude one can say that the scheme of TDS is only payment of tax on adhoc basis by the payer of income on behalf of recipient.
TAN
Every deductor is required to obtain a unique identification number called TAN (Tax Deduction Account Number) which is a ten digit alpha numeric number. This number has to be quoted by the deductor in every correspondence related to TDS
Contd
Contd
Salary (Sec.192)
Who is the payer
Who is the recipient Payment Covered At what time TDS to be deducted Maximum amount which can be paid without tax deduction Rate at which tax to be deducted. When the provisions are not applicable Is it possible to get the payment without tax deduction or with lower tax deduction
Employer
Employee Taxable Salary of the employee At the time of payment The amount of exemption limit (i.e.,Rs.160000/190000/240000 for A.Y. 2011-12) As per Calculation -The employee can make application in Form No.13 to the Assessing Officer to get the certificate of lower tax deduction or no tax deduction.
If the payee are Insurance companies or financial institutions including co-operative societies etc.
Declaration to the payer in Form 15G or 15H as applicable
Is it possible to get the payment without tax deduction or with lower tax deduction
Any person paying winnings from lotteries/crossword puzzles/card games/other games Any Person Winnings from lotteries/crossword puzzles/card games/other games At the time of Payment If the amount payment is Rs. 10000/- or less than Rs. 10000/30% -Not Possible
Who is the recipient Payment covered At what time TDS to be deducted. Maximum amount which can be paid without tax deduction Rate at which TDS to be deducted When the provisions are not applicable Is it possible to get the payment without tax deduction or with lower tax deduction
Payment Covered
At what time TDS has to be deducted Maximum amount which can be paid without tax deduction
Is it possible to get the payment without tax deduction or with lower tax deduction
-The recipient can make an application in Form No. 13 to the Assessing Officer to get the certificate of lower tax deduction or no tax deduction.
Payment covered
Maximum amount which can be paid without If the amount of payment is Rs.2500 or less tax deduction than Rs.2500
20%
(Sec. 194F)
Mutual Fund or UTI
Who is the payer Who is the recipient Payment covered At what time TDS to be deducted.
Any person paying commission of sale of lottery tickets Any person Commission on sale of lottery tickets At the time of payment or at the time of credit, whichever is earlier
-The recipient can make an application in Form No. 13 to the Assessing Officer to get a certificate of lower tax deduction or no tax deduction
Any person paying commission or brokerage Any resident person Commission or brokerage (not being insurance commission)
Rent (Sec.194-I)
Who is the payer Any person paying rent (not being an individual or HUF whose books of account are not required to be audited under section 44AB in the immediately preceding financial year) A Resident Person Rent At the time of payment or at the time of credit, whichever is earlier Rs. 180000/For Plant and Machinary Rent 2% and for For Use of and Land or Building including Furniture etc. Individual Huf 10% For any other 20% The recipient can make application in Form No. 13
Who is the recipient Payment covered At what time TDS to be deducted. Maximum amount which can be paid without tax deduction Rate at which TDS to be deducted
Is it possible to get the payment without tax deduction or with lower tax deduction
Who is the recipient Payment covered At what time TDS to be deducted. Maximum amount which can be paid without tax deduction Rate at which TDS to be deducted Is it possible to get the payment without tax deduction or with lower tax deduction
Different Payments
In case the person deducting tax is a company or a Government department or a person whose books are required to be audited u/s. 44AB in the immediately preceding year or in whose case number of deductees in any of the quarterly statements in the immediately year is 20 or more Form No. 24Q in Electronic format and Form No. 27A
Salary
Within 15 days from the end of each quarter (31st May in case of last quarter) Within 15 days from the end of each quarter (31st May in case of last quarter)
Form No. 27Q in Electronic format and Form No. 27A (quarterly)
Within 15 days from the end of each quarter (31st May in case of last quarter)
Sr. No. 1
Periodicity Cut off Date Annual 31st May of following financial year Within 15 days from due date of furnishing the TDS statement under rule 31A
Deductor
For MARCH
Government On or before 7th of next month for salary Other than On or before 30th Government April
Special Cases
30th April
Furnishing of quarterly returns for payment of interest to residents without Deducting Tax (Sec. 206A)
Banking company, Cooperative societies, & Public Companies shall furnish quarterly return to department in respect of payments of Interest (other than Interest on Securities) in any computer readable media.
Collection of Tax
Who is the payer Who is the recipient Payment covered At what time TDS to be Collected. Maximum amount which can be paid without tax collection Seller Buyer As per Details in next slide At the time of receipt or at the time of debiting the account, whichever is earlier Nil
Sr. No. 1.
Effects The expenditure for which TDS to be deducted gets DISALLOWED & penal interest @1% for every month or part of month from the date on which such tax was deductible to the date of deduction The expenditure for which TDS deducted but not paid gets disallowed
2. 3. 4.
The amount less deducted is required to be paid by the deduct or along with penalty
Late Payment of The deductor should have to pay penal interest TDS @1.5% for every month or part of month from date of deduction to the date of payment.
Penal Provisions
Practical Issues
Contents
Uniform deduction of tax Exempt allowances Payments by way of adjustment Contract for Sale Printing Charges Contractor & Sub contractor payments Reimbursement to C & F Agents
33
Contents
Internet Connectivity charges Technical Services? Reimbursement of Expenses
Tax paid by Payee non/short deduction Time Limit under section 201
34
Case Study 1
ISSUES
Whether the Assessing Officer has rightly levied interest on non-uniformity of TDS deducted?
CASE LAWS
Case Study 2
FACTS
The assessee company (employer) deducted tax under section 192 treating leave travel expense as exempt on the basis of declarations filed by the employee. The assessee did not obtain any documentary evidence to treat LTA as exempt. AO passed order under section 201(1) treating assessee in default having regard to nonverification of travel payments proof. 37
Case Study 2
ISSUES
Is the AOs order justified in treating the assessee as assessee in default and levy interest u/s 201(1A)?
CASE LAWS DCIT v. HCL Infosystems Ltd. 282 ITR 263
Savani Financials Ltd. v. ITO, 1 SOT 111 Lintas India Ltd. v. Ass. CIT, 5 SOT 310 DCIT v. Excel Industries Ltd., 5 SOT 235
38
Case Study 3
ISSUES
Is the contention of assessee correct? Whether tax is required to be deducted at source under section 194A- Interest other than interest on securities? What are the other implications of such nondeduction?
CASE LAWS
40
Reimbursement of freight paid to shipping companies or airlines. Reimbursement of freight on local transportation. Reimbursement of import or export clearing expenses like payments to Port Trust, Airport Authorities of India, miscellaneous charges, etc. Reimbursement of bonded warehousing charges. Reimbursement of Customs duties and Octroi. Reimbursement for Crane and Machinery charges to Port Trust etc. Agency service charges.
41
Case Study 4
ISSUES
Whether any tax is liable to be deducted on any of the above payments to C&F agents? If the agent has already deducted TDS on freight payment to the Indian Shipping Co., then whether the importer/exporter also needs to deduct tax on the payments made to the agents and if so then on what amount? When C&F agent deduct tax and pays it to the exchequer, the payment would be on his own TDS account or his clients account number?
42
Case Study 4
CASE LAW
CIT v. Industrial Engineering Projects Pvt. Ltd., 202 ITR 1014 (Del.) CIT v. Dunlop Rubber Co. Ltd, 142 ITR 493 (Cal.) Raymond Ltd. 86 ITD 791 (Mum.) Associated Cement Co. Ltd.(SC) 201 ITR 435
43
Case Study 5
FACTS
The assessee is a pharmaceutical company, engaged in manufacturing and selling business. It procures packing material like plastics wrappers, containers, cardboard boxes etc from the vendors (manufacturers) as per assessees desired specifications viz. brand name, name & address, designs, trademarks etc. Similarly, payments are also made to printing and stationary vendors who supply printed letterheads, business cards, sales and other printed literature where the printing is done as per the assessees specifications. Vendors charge excise duty and sales tax on such items.
44
Case Study 5
ISSUES
Whether TDS is required to be deducted under section 194C for payments made as printing charges?
CASE LAWS
Case Study 6
ISSUES
Whether the payments made by G Ltd should be treated as payments for main contract or as sub-contract for deduction of tax at source u/s 194 C?
CASE LAWS
Datta Digamber Sahakari Kamgar Sanstha Ltd. V. ACIT 83 ITD 148 (Pune) ITO V. Rama Nand & Co. And Others 163 ITR 702 47
Case Study 7
Assessee, a Govt. establishment procured milk from various Sanghs etc and sold it in the market through milk centres run by the appointed agents. Agents sold the goods at the price fixed by the assessee. Assessee used to reimburse these agents @ Re.0.90 per litre towards transport cost, container cost and chilling charges. Assessee had given the nomenclature as Commission for such payments. AO held to deduct tax u/s 194H as payments for commission. 48
FACTS
Case Study 7
ISSUES
Is the said transaction based on principal-agent relationship? Whether any TDS is required to be deducted u/s 194H?
Case Study 8
ISSUES
Is the AOs claim justified in treating it as commission? Whether provisions of section 194H gets attracted??
CASE LAWS
ACIT v. Bharti Cellular Ltd. 105 ITD 129 (Cal.) Hindustan Coca-Cola Beverages (P.) Ltd. v. ITO [2005] 97 ITD 105 (Jp.)
51
Case Study 9
ISSUES
Is the stand taken by the AO is correct?
Case Study 10
ISSUES
Is PQR Ltd. required to deduct tax under section 194I or whether the co. is justified in deducting under section 194C?
CASE LAWS
Krishna Oberoi and another v. UOI [2002] 257 ITR 105 (AP) Circular No. 5/2002 dtd. 30-7-2002, 194I does not 55
Case Study 11
FACTS
G Ltd. is a manufacturer. Company has made payments to an Indian entity towards the Internet connectivity, Vo-Data card charges and Domain registration charges. No TDS is deducted on such payments made. Company has a view that the payments made are not in terms with payment for technical services as covered under section 194J. However, CCIT treats the payments made as fees received for providing technical services and deduct tax at source.
56
Case Study 11
Is G Ltd correct in its stand that the payments made to providers of internet connectivity, facility of Vo-Data card or domain registration charges are out of the purview of fees for technical services? Whether TDS should be deducted on such payments?
CASE LAW
ISSUES
Case Study 12
ISSUES
Whether TDS will be deductible on gross value of bill or on net? Will the answer be different if separate bills are raised for both?
CASE LAW ITO v. Dr. Willmar Schwabe India (P) Ltd. , 3 SOT 71.
59
Case Study 13
FACTS
A Ltd., the assessee, entered into a lease agreement with B Ltd. for taking premises on lease with a separate agreement on hire of furniture. A Ltd. fails to deduct tax at source under section 194-I on the lease payments made to the payee. However B Ltd. while filing his return of income declared the said receipt of income and paid taxes thereon. Assessing officer issued notice under section 201(1) & 201(1A) levying interest for non deduction of TDS.
60
Case Study 13
ISSUES
Whether the AO can issue such a notice on A Ltd.? If yes, is he liable to pay tax? If not, is he liable to pay interest? If yes, what is the period for which interest is payable?
CASE LAWS CIT v. Adidas India Marketing Pvt. Ltd. , 288 ITR 379
CIT v. Rishikesh Apartments Co-op Housing Soc. Ltd. 61 253 ITR 310,316 (Guj.)
Raymond Woollen Mills Ltd. 57 ITD 536 (Mum.) Century Textiles & Industries Ltd. 13 SOT 507 (Mum.)
63
Questions?
64
Thank You!
65