2. PRESENTATION OVERVIEW
1 • OVERVIEW OF TDS PROVISIONS
2 • TDS ASPECTS ON SALARY
3 • TDS ASPECTS ON INTEREST
4 • E-FILING OF TDS RETURNS
5 • ISSUES PERTAINING TO TDS REFUNDS
6 • ISSUANCE OF TDS CERTIFICATES
3. OVERVIEW
Helps mitigate tax evasion or avoidance
Ensure regular inflow of taxes for the Revenue
Emphasizes pay as you earn/ collect as it is being earned
It is an obligation not an option
Deduct > Deposit > Declare
Tax department considers TDS as a non-obtrusive but highly efficient way of expanding tax net
In 2015-16, TDS contributed more than one-third of total gross direct tax collections
In the last fiscal, TDS was at INR 3.25 trillion, an increase of 11.6 percent from Rs.2.91 trillion in the year-ago
period
Salaries seem to be one area where the tax department thinks there is scope for more TDS collection
Why TDS?
4. SALARY
Section 192 - Tax required to be withheld on estimated income at the time of payment
Contrary to Section 15 - Salary income of an employee chargeable to tax on due or receipt basis, whichever is
earlier
Income from other heads of income declared by the employee to be considered
Furnishing of any other source of income is optional on part of the employee
Two or more employer during the Financial Year/ Successive employment under more than one employer –
Employee may furnish details in Form 12B
If the employee chooses not to furnish the details of income of other employment, employer to deduct tax only
in respect of salary paid by him – Section 192(2)
Salary includes perquisites; perquisite value to be included in arriving at taxable salary
Allowances (Section 10) and Chapter VI-A deductions to be considered - HRA, interest on housing loans, medical/
life insurance premium, NSC, PPF etc
Principles
5. SALARY
No loss however to be considered (except for Loss from House Property)
TDS at average rate of income tax computed on annual salary (as per applicable slab rates)
Education Cess/ SHEC and Surcharge to apply additionally
Payments such as Bonus, Special Allowance etc advisable to deduct tax at Maximum Marginal Rate
Employer to provide Form No 16 giving details of salary and tax withheld
Salaries paid in foreign exchange - Rule 26 + Rule 115
Whether employer can increase or decrease the amount of monthly TDS?
– Yes, employer can adjust monthly TDS in respect of the same employee
Principles
6. SALARY
Components of Salary
House Rent Allowance Medical Allowance Leave travel concession
HRA exemption as per Section
10(13A) of the Act read with Rule
2A
Only for rented house and for the
period of occupancy
Minimum Recommended
Documentation - PAN of landlord,
Rental Receipts, Agreement
(preferably registered/ notarised) etc
Reimbursement of medical expenses
incurred for self or family up to Rs
15,000 exempt from tax
Minimum Recommended
Documentation - Supporting medical
bills (preferably with doctor’s
prescription)
Exemption as per Section 10(5) of
the Act read with Rule 2B
Twice in a block of 4 calendar
years (current 2013-17) to the
extent of actual travel expenses for
self and family while proceeding
on leave to any place within India
Limited only to domestic travels
(Plans to include SAARC nations,
amendment likely) - Covers only
travel reimbursement , no food/
accommodation expenses
Actual payment of rent is a pre-
requisite for claiming HRA
7. SALARY
Components of Salary
Children Education Allowance Mobile Expenses Food Coupons
Section 10(14)(ii) of the Act read
with Rule 2BB
Exempt to the extent of Rs 100 per
month per child subject to a
maximum of 2 children
Children hostel allowance exempt up
to Rs 300 per month per child subject
to a maximum of two school going
children
Expenditure incurred by the
employer on behalf of the
employee on telephone (including
a mobile phone) not to be taxable
as perquisite in the hands of the
employee
Value of free food provided by the
employer during working hours at
office or business premises or
through paid vouchers should not
exceed Rs 50 per meal
Not to be transferable and used only
for food/ beverages on working days
during business hours
8. SALARY
Components of Salary
Laptops/ Computers Others
Any expenditure incurred by
employer on providing any
computers / laptops for use by the
employee or by any member of his
household - not considered as a
taxable perquisite
In case of asset transfer in future,
then the total cost of the asset - 50
percent of such cost for each
completed year of use by the
employer (on a WDV basis) - taxable
perquisite in the hands of the
employee
Household Assets Assistance
Contribution to superannuation
fund
Conveyance allowance
Group medical, life and personal
accident insurance coverage
Vehicle lease Arrangement
9. INTEREST - SEC 193/ 194A
Section Rate Comments
193 - Interest on
Securities
10 percent – Various exemptions provided for non deduction in respect of specified securities like
National Defense Bonds, specified issues of NSC, securities of the Central and State
Government etc
– Maximum amount which can be paid without tax deduction - Rs 5,000 on payment of
interest on debentures to individuals/ HUFs
194A - Interest
other than
interest on
securities
10 percent – Exemption: Interest to a partner by a firm, interest paid by the Central Government
under the Income Tax Act etc, interest on deposits other than time deposits (eg
interest on savings bank account)
– Maximum amount which can be paid without tax deduction: Rs 10,000 - If payer is a
bank/ co-operative bank/ Notified deposit scheme of post office (per branch limit);
Rs 5,000 - in any other case
– Form 15G/15H can be furnished for non-deduction
11. RECENT UPDATES
Circulars and Notifications
Notification No
30/2016 - April 29,
2016
– Insertion of Rule 26C to give effect to Section 192(2D)
– Form 12BB required to be submitted by employees to provide details of HRA,
leave travel allowance, interest payments on home loan, Chapter VI-A deductions
– A provisional statement that has details about employee’s proposed investments
and expenses that are income tax deductible
– Although practice of taking such deceleration is in existence from long time but
there was no standard format for the same
– At the financial year end, employees need to provide supporting investment
proofs for investments specified in Form 12BB
– Employee to provide name and PAN of landlord in cases of HRA claims
– In case of deduction of interest - Name and PAN of lender to be provided
– Previous SC rulings in the case of ITI Limited vs CIT/ CIT vs Larsen & Toubro - An
employer is under no obligation to collect and examine the supporting evidence
to a declaration submitted by an employee?
Employers to ensure that declaration in Form 12BB is obtained from employees to be compliant
(even if declaration in some other format has already obtained)
13. RECENT UPDATES
Circulars and Notifications
Circular No
26/2016 - July 4,
2016
Notification No
46/2016 - June 17,
2016
Notification No
39/2016 - May 31,
2016
Clarifies that no deduction of tax shall be made on interest paid by IFSC Banking
Units (IBUs) set up in SEZ on deposits made or borrowings from a non-resident or
person not ordinarily resident in India from April, 2005 onwards
CBDT notifies that payments of the nature specified in Section 10(23DA) received
by any Securitisation Trust would not be subject to TDS
Extends time-limit for filing of TDS challan-cum-statement in Form 26QB (challan
for payment of TDS on sale of immovable property) from 7 days to 30 days from
the end of the month in which tax is deducted
Circular No
23/2015 - Dec 28,
2015
Interest on Fixed Deposits, in the name of Registrar General of Court or the
depositor of the fund on the directions of the Court will not be subject to TDS till
matter is decided by Court
14. KEY ISSUES
Salary
• Payments arising out of employer-employee relationship (Contract of service vis-à-vis Contract for service)
• Secondment Arrangement
– TDS under Section 192 - Legal vs Economic employer? – Interplay with Section 204
– Recent judgments - Food world Supermarkets Ltd/ Reckitt Benckiser (India) Limited/ Mahanagar Gas Ltd
• Payment to skilled professionals
– Payments to Doctors – Section 194J vs Section 192 – Dilemma?
– Recent judgments - Teleradiology Solutions (P) Ltd (Karnataka High Court)/ ACIT vs Fortis Healthcare Ltd
– Job responsibilities, Right to hire/ fire, Exclusivity, Control and supervision, Reporting, Applicable policies etc
• Salary payments to hotel staff including tips
– Recent judgment - ITC Limited vs CIT (SC) – Tips does not fall within the extended definition of Salary as per Sec 17
• Taxability of salary for services rendered outside India when credit of salary is made into an Indian NRE account
– Recent judgment - Tapas Kr Bandopadhyay vs DDIT [ITA No 70/Kol/2016]
15. KEY ISSUES
Interest
• Factoring/ Discounting charges – whether interest liable for TDS under Section 194A?
– CIT vs M Sons Gems N Jewellery Pvt Ltd [ITA No 5419/Del/2012 pronounced in June 2015]
• Reimbursement of Bank Guarantee Commission – whether TDS applicable under Section 194A?
– Neo Sports Broadcast (P) Ltd vs CIT [ITA No 4010 & 4011/Mum/2014 pronounced in Feb 2016]
– From NR group company perspective, favourable rulings in the case of Capgemini SA [ITA No 7198/Mum/2012
pronounced in March 2016] and Vestas Wind Technology India (P) Ltd [2016] 69 taxmann.com 382 (Chennai - Trib)
16. OTHERS
Other updates/ issues
• Whether TDS is to be done on the component of Swachha Bharat Cess (SBC) and Krishi Kalyan Cess (KKC)?
– Calculated directly on the value of taxable services (unlike Education cess & SHE cess)
– To be indicated separately on the invoice
– TDS should not apply (same principles as enunciated by Rajasthan HC in CIT (TDS) Jaipur vs Rajasthan Urban
Infrastructure and CBDT Circular No 1/2014 dated January 13, 2014
– Clarity/ Confirmation needed from the CBDT
18. E-FILING PROCESS
New filing due dates
Quarter ending for Financial Year Revised Due Dates wef June 1, 2016
30th June 31st July of Financial Year
30th September 31st October of Financial Year
31st December 31st January of Financial Year
31st March 31st May of the Assessment Year
Notification No 30/2016 dated April 29, 2016 - to unify the due dates for submission of TDS return or statement
both by Government and Non Government deductors
Brings in 15 days' extension for filing quarterly TDS returns/ statements (Form No 24Q, 26Q and 27Q)
No change in the due dates for filing of quarterly TCS returns (Above due dates minus 15 days)
19. E-FILING PROCESS
Other Key Changes
Following needs to be reported in Annexure-II (Salary Sheet) of Form 24Q:
– HRA claim: Name and PAN of landlord (if aggregate payment exceeds INR 1 lakh during previous year)
Citing landlord’s PAN in the withholding tax returns (where employees are availing HRA exemption) would enable
the tax authorities to spot falsified claims. It could also be verified using the landlord’s PAN whether rent received
by such landlord has been offered to tax as income by that person in his/ her return of income
– Deduction of interest under the head "Income from house property": Name and PAN of the lender (if
available)
Again, intended to verify whether interest earned by the lender has been offered as income
20. E-FILING PROCESS
Provides an option for tax deductor to file e-TDS returns through Income Tax
Department’s e-filing portal or submission at TIN facilitation centres (NSDL’s
e-Gov)
Procedure for filing e-TDS returns:
Step 1: Tax deductor to register as Tax Deductor & Collector in e-filing portal
(http://incometaxindiaefiling.gov.in/)
Step 2: e-TDS/ TCS returns to be prepared using Return Preparation Utility (RPU) or any
third party software to generate the file validation utility (FVU). FVU file to be
submitted using Digital Signature or Electronic Verification Code
– In case of DSC - FVU file to be digitally signed using DSC Management Utility
– In EVC mode - EVC to be generated using the principal contact person’s net banking,
Aadhar OTP, Bank Account Number or Demat Account Number
Step 3: Tax deductor to login to the e-filing website using the Taxpayers Account
Number (TAN) and upload the zip file
Notification No 11 of 2016
Registration
Preparation
Submission
27. VIEW FILED TDS STATEMENTS
Step-by-step Guide
Step 1: Login to e-Filing, Go to TDS -> View Filed TDS
28. VIEW FILED TDS STATEMENTS
Step-by-step Guide
Step 2: Assessment Year, Form Name and Quarter to be selected from the available drop down menu
29. VIEW FILED TDS STATEMENTS
Step-by-step Guide
Step 3: Status of the TDS statements uploaded is displayed
Once uploaded, the status of TDS statement would show as "Uploaded"
Uploaded file is then processed and validated by CPC-TDS
Upon validation, the status would either be "Accepted" or "Rejected" and would be reflected within 24 hours
from the time of uploading TDS statements/ returns
30. VIEW FILED TDS STATEMENTS
Step-by-step Guide
Step 3A: If the status is “Rejected”, click on the Token Number to view the error details
If “Rejected”, the related reason would be displayed by clicking on the Token Number (please refer next slide)
31. VIEW FILED TDS STATEMENTS
Step-by-step Guide
Step 3B: Reason for rejection would be displayed as below
32. VIEW FILED TDS STATEMENTS
Step-by-step Guide
Step 3C: If the status is “Accepted”, click on the Token No to get acknowledgement details for records
34. E-FILING PROCESS
Refund of TDS
Login into TRACES
Go to ‘Request for Refund’ tab
Select Section code ie 195 challans/ other than 195 challans
Select appropriate reason for raising refund request and ‘Add Challan’
Provide challan details in respect of the challan for which refund is to be claimed
TRACES provides an option to the tax deductor to claim refund of any excess taxes paid
In cases where the challan is not utilized in the subsequent period, the following steps can be adopted
35. E-FILING PROCESS
Refund of TDS
Provide Bank account details
Validate using DSC
26B has to be submitted within 14 days to the Assessing Officer
Request can be tracker under ‘Track Refund Request’
On approval, refund would be sent by cheques
In case refund > INR 50,000, refund through Bank account
36. E-FILING
• Challan can be included only through online correction
• Currently, the ‘Matched challans’ should tie in to tax, surcharge, cess and interest amounts individually as
mentioned in the challan
• Incorrect tax and interest computation in the justification report
Issues faced by taxpayers
Process can be improved to allow offline challan correction too
Option to inter se change tax, surcharge, cess and interest should be provided
Process could be improved further by TRACES
37. E-FILING PROCESS
Quoting of wrong section
Quoting of wrong PAN of the deductee
– Therefore, verification of the PAN provided by all deductees is advisable (online verification facility available -
please see next slides)
– Rectification of more than 4 characters in PAN not permissible (2 digits & 2 letters, whether valid to valid or
invalid to valid)
– Penalty under Section 272B could be levied for quoting wrong PAN (on deductee)
Challan mismatch
Non-quoting of lower withholding tax certificate
Short deduction/ remittance
Delay in remittance
Common Errors
41. MISCELLANOUS ISSUES
In case of change of registered office - new TAN to be applied for, old needs to be surrendered
– Ensure that old TAN is surrendered and jurisdictional AO is informed
– No automatic process for cancellation of old TAN on allotment of new one with change in Reg office
– All credits and refunds under old TAN needs to be utilized before the same is surrendered
– No mechanism of linking old TAN with the new one
– Once old TAN is surrendered, any correction/ revision of TDS returns/ statements under old TAN not possible
TAN - Reg Office change
43. ISSUANCE OF TDS CERTIFICATES
Generation of Form 16 and 16A to be done within the time specified under Rule 31
– Form 16: 31st May of the relevant assessment year
– Form 16A: Quarterly; August 15th, November 15th, February 15th and June 15th (15 days from the TDS
statement/ return filing due date)
Liable to penalty under Section 272A(2)(g) of the Act - INR 100 per day for the period of default
Mandatorily to be done online and through TRACES
Online generation of TDS certificates through TRACES requires the TDS statement filed to be duly processed
In case of revision, revised return needs to be processed for issue of fresh certificate to the relevant vendors
Post processing of return, processing the request for a file to generate Form 16 and 16A is generally delayed
Provisions & Issues
45. EMPLOYEE SECONDMENT
Food world Supermarkets Ltd (TS-629-ITAT-2015)
Follows Delhi HC ruling in Centrica India Offshore Pvt Ltd to hold that services of the personnel deputed under
the secondment agreement amounts to rendering of managerial consultancy services to assessee
Expatriate would become effectively the employee of the Indian entity
Payment not in the nature of reimbursement of salary
Reckitt Benckiser (India) Limited (ITA No 1671/Kol/ 2008) (Kolkata ITAT)
Assessee deducted tax at source from the amount in question as salary income and is duly supported by TDS
certificates issued in Form No 16
Sufficient proof of payment of TDS and employer-employee relationship
Assessee was not liable to deduct tax at source towards reimbursement of salary
Does not refer/ follow Centrica Ruling
Recent Judicial Precedents
46. EMPLOYEE SECONDMENT
Mahanagar Gas Ltd (ITA No 1945/Mum/2013)
Employees deputed pursuant to a secondment agreement are not "employees" of the assessee and so the
amounts paid by way of reimbursement of their salary is not subject to TDS in the assessee's hands
Refers to CBDT Circular No 720 dated 30/08/1995 which clarifies that any sum payable shall be liable for
deduction of tax only under one section
British Gas had deducted TDS on remunerations paid to seconded employees and also deposited in the
treasury of the Government of India
Does not refer/ follow Centrica Ruling
Recent Judicial Precedents
47. CONTRACT OF SERVICE vs CONTRACT FOR SERVICE
Distinction
ContractsofService
Employer-Employee relationship
Usually a continuous relationship
Duty of care owed to employees, as
the employer
Employer generally liable for
vicarious acts of employees
Protective legislation applies to
contract
Wages/ Salary payment method
Subject of contract is to carry on
continuous work
ContractsforService
Employer-Independent Contractor
relationship
Relationship organised around
completion of a once-off piece of
work
Duty of care, arising from occupiers’
liability
Employer generally not liable for
vicarious acts of independent
contractors
In general, protective legislation
does not apply (except for Safety,
Health and welfare at work)
Various methods of payment,
including lump sum per job
Subject of contract is once-off job
48. www.bmrtax.com
This presentation provides general information existing as at the time of preparation of this presentation. This presentation is meant for general guidance and no responsibility for loss arising to any
person acting or refraining from acting as a result of any material contained in this presentation will be accepted by BMR & Associates LLP. It is recommended that professional advice be sought
based on the specific facts and circumstances. This presentation does not substitute the need to refer to the original pronouncements.
Sandeep Jhunjhunwala
Associate Director | BMR & Associates LLP
Level 3| Prestige Nebula - I| 8-12 Cubbon Road| Bangalore -560 001
E: sandeep.jhunjhunwala@bmradvisors.com
D: +91 80 4032 0011
M: +91 97401 55469
