This was a training workshop for employees of Co-operative Banks

1. Presentation on
TDS PROVISIONS & PROCEDURES
14th March, 2010
CA. Kalyan Chakravarthy Vennety

2. What is TDS?
• Is a form of Advance Tax collection
• Mechanism puts the onus of compliance on
the payer of transaction
• TDS covers major kind of Transactions
• Fairly simple provisions to comply
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3. Process flow of TDS
Payer deducts Tax
from payment
• Payer deducts Tax from payment
Payer Deposits the
same to credit of
Govt.
• Payer Deposits the same to credit of Govt.
Payer files Return of
TDS
• Payer files Return of TDS
Payer issues TDS
Certificate to the
payee
• Payer issues TDS Certificate to the payee
Payee claims refund
of the TDS in his
return
• Payee claims refund of the TDS in his return
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4. Section 192 - Salaries
• TDS @average rate of Tax payable for FY
• Salary means ‘”salary” as per Sec 17 of Act
• TDS has to be deducted @ the time of
payment every month
• Amount = Estimated Tax for FY /12 months
• Consider: Salary from previous employer
• Consider: Income from other sources
• Issue Form 16 within 1 month from end of FY
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5. Section 193 - Interest on securities
• TDS @ 10%
• At the time of Credit or payment whichever is
earlier
• Following are exempt from TDS provisions:
– National Defence, Development Bonds etc.
– NSC
– Gold Bonds
– Central or State Govt. Securities etc.
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6. Section 194A
–Interest other than on securities
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
Nature of Payment Threshold Limit to deduct tax Rate of Deduction
Interest other than interest on
securities Rs.10,000/- p.a. 10 %
Interest from Banking Company
Interest other than interest on
securities
Rs.5,000/- p.a. 10 %
Interest other than from Banking
Company
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7. Section 194A (3)
–Exemption to Co-op societies
• The provisions of sec 192(1) shall not apply to
(among other clauses)
– (v) to such income credited or paid by a co-
operative society to a member thereof or to any
other co-operative society
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8. Section 194B
- Winning from lottery
• Rate of Deduction@30%
• At the time of Winning from Lottery
– In cash
– Or kind
• Exemptions:
– If amount of Winning does not exceed Rs.5000
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9. Section 194BB
- Winning from Horse Race
• Rate of Deduction@30%
• At the time of Winning from Horse Race
– In cash
– Or kind
• Exemptions:
– If amount of Winning does not exceed Rs.5000
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10. Section 194C
– Payment to Contractors
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If amount of sum paid or credited does not exceed
Rs.20,000 and the aggregate amount does not
exceed Rs.50,000 in a FY
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11. Section 194C
– Payment to Contractors
Threshhold Limit to In case recipient is an If the recipient is other
Section Code Nature of Payment
deduct tax Individual / HUF than Individual / HUF
Rs.20,000/- Per Single
Contract or Rs.50,000/-
194-C Payment to Contractor 1% 2%
exceed during the
financial year
Rs.20,000/- Per Single
Payment to Advertising
Contract or Rs.50,000/-
194-C Contractor / Sub 1% 2%
exceed during the
Contractor
financial year
Payment to Transport
194-C contractor / sub If PAN Quoted NIL NIL
contractor
Payment to Transport 1% 2%
194-C contractor / sub If PAN not quoted *20% from *20% from
contractor 01.04.2010 01.04.2010
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12. Section 194C
– Payment to Contractors
• Important Points to note:
– Work will not include manufacturing or supplying
a product as per the specification of customer by
using material purchased from person other than
such customer
– In case the material is supplied by customer and
the same is separately mentioned on the invoice,
then TDS will not be deducted on the amount of
material
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13. Section 194 D
- Insurance commission
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed Rs.5000
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14. Section 194H
– Commission or Brokerage
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed Rs.2500
Section Code Nature of Payment Threshold Limit to In case recipient is If the recipient
deduct tax an Individual / is other than
HUF Individual / HUF
194-H Payment of Rs.2,500/- p.a. 10 % 10 %
commission or
brokerage to resident
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15. Section 194I - Rent
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed
Rs.120,000
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16. Section 194I - Rent
Threshold Limit to
Section Code Nature of Payment Rate of Deduction
deduct tax
10%
194-I Payment of Rent Rs.1,20,000/- p.a. *20% from
01.04.2010
Payment of Rent for
2%
use of Plant ,
194-I Rs.1,20,000/- p.a. *20% from
Machinery or
01.04.2010
Equipment
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17. Section 194J - Professional fees
• Non-applicable to : Ind/HUF below Tax Audit
• At the time of Credit or pmt whichever is
earlier
• Exemptions:
– If sum paid or credited does not exceed Rs.20,000
Section Code Nature of Payment Threshold Limit to Rate of Deduction
deduct tax
194-J Payment of Rs.20,000/- p.a. 10 %
professional or
technical services
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18. Due Dates of Payment
Scenario Due Date
7 days from the end of the month in
Salaries
which the Salary is paid
7 days from the end of the month in
Non-Salary for all months except
which the amount is credited or paid
entries on 31st March of the FY
whichever is earlier
Non-Salary where the amount is
31st May
credited on 31st March of the FY
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19. E-TDS Returns
• Periodicity of Returns is Quarterly
• Due in 15 days from the end of the quarter
• Returns in prescribed Forms
– Form 24Q for Salaries
– Form 26Q for other than Salaries
• Returns to be printed on CD media
• To be submitted to NSDL TIN centre
• Provisional receipt number is generated
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20. Section 201
- failure to deduct or pay
• Penalty u/s 221 if AO is not satisfied with
reasons for default
• Interest @ 1% p.m. till default continues
• Charge on assets of assessee for recovery of
TDS with interest
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21. Section 40(a) (ia)
- Following exp will be dis-allowed
• Payments under 194A, 194C, 194H, 194I, 194J
• On which Tax is deductible but
– has not been deducted or
– if deducted, has not paid before
a) in case where deduction was in last month, on or
before due date u/s 139(1)
b) in other case,
on or before the last day of previous year
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22. Section 40(a) (ia)
- When these exp will be allowed?
• In case of such payments , Tax has been
deducted
– in the subsequent year; or
– during the last month of the previous year but
paid after the due date; or
– During any month of the previous year but paid
after the end of the said previous year
• Such sums shall be allowed in the year of pmt.
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23. Reasons…
• There seems to be a system failure in the
process the Income Tax Department
• Notices are bieng generated based on the
information in their database system
• In most of the cases, the last challan paid
appears as short payment or late payment
• AO is just signing and sending the notices
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24. How to deal with it…
• No need to worry if you receive the notice
• Just reply to the letter providing all the
information regarding your return in terms of:
– Date of deduction
– Rate of deduction
– Amount of TDS section wise calculation
– Date of payment etc
– In tabulated form in appropriate format.
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25. Changes in TDS Threshold Limits
w.e.f. 1-07-2010
EXISTING PROPOSED
SEC NATURE OF PAYMENT
THRESHOLD THRESHOLD
Winning from Lottery &
194B 5,000 10,000
crossword puzzles
194BB Winnings from Horse Race 2,500 5,000
20,000
194C Payment to Contractors [for single 30,000
transaction]
50,000
194C Payment to Contractors [for aggregate 75,000
transactions]
194D Insurance Commission 5,000 20,000
194H Commission or brokerage 2,500 5,000
194I Rent 1,20,000 1,80,000
Fess for professional or
194J 20,000 30,000
technical services
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26. TDS Best practices…
• Always be alert for TDS provisions &
compliance
• Always pay TDS dues in time
• If delayed, pay challan with proper interest
• If paid via challan, get correct serial no. from
bank
• Cross verify Challan serial no. online
www.tin-nsdl.com
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27. End of Presentation.
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28. THANK YOU !
CA. Kalyan Chakravarthy Vennety
BCOM, ACA, DISA(ICAI), CISA
V R Jogeswara Rao & Co., Chartered Accountants
Phone: 99700-88669
Email: ca.vkalyanc@gmail.com
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