2. Fees for Professional Services
& Technical Services 194J
1. Section 194J requires deduction of tax at source @10% from the amount credited or
paid by way of fees for professional services.
2. 2% in case of fees for technical services (not being professional services) or royalty in
the nature of consideration for sale, distribution or exhibition of cinematographic films;
and
3. 10% in other cases
4. Fees for technical services and payment to call centers is 2%
5. The deduction is to be made at the time of credit.
6. Tax has to be deducted in case the payment is greater than 30,000 during the year.
7. Non-Compete fees @10%
3. Payment of Certain sum for
purchase of goods 194Q
1. Purchase of any goods (including capital goods), where the value or aggregate of
such values, exceeds ₹50 lakhs in any P.Y., shall deduct TDS.
2. Rate of TDS: 0.1% (5% in case PAN is not furnished) of the purchase value
exceeding ₹50 lakhs.
3. Time of deduction: Earlier of the following: At the time of credit of such sum to the
account (even if Suspense A/c) of the seller
4. At the time of payment by any mode
4. Payment to Contractors
194C
1. The Central Government or any State Government & Any company are responsible
for deduction of TDS.
2. the consideration for which does not exceed ₹ 30,000; and Tax point: The limit of ₹
30,000 is on individual contract.
3. Taxpoint: Tax is not required to be deducted even if amount of payment exceeds
Rs. 1,00,000/-
4. A. 1%, if payment is made to an Individual or HUF (0.75% w.e.f. 14.05.2020 to
31.03.2021) B. 2%, if payment is made to any other person (1.5% w.e.f. 14.05.2020
to 31.03.2021)
5. Rant of Land, building and
Furniture 194I
1. Renting of Machinery / Plant / Equipment is 2%.
2. Renting of Land or Building is 10%.
3. The TDS on Rent is not required to be deducted if the aggregate amount during
the Financial Year doesn’t exceed INR 2,40,000.
6. What is PF?
An Employee Provident Fund is a scheme that has been put in place for
all salaried employees working in a corporate organization with 20 or
more employees.
Employee contribution to EPF: 12% of salary. Employer contribution to
EPF: 3.67% of salary. Employer contribution to EPS: 8.33% of salary subject
to a ceiling of Rs. 15,000 salary, i.e. Rs. 1,250.
7. What is Gratuity?
Gratuity is a financial component offered by an employer to an employee in
recognition of his/her service rendered to an organization. It is a part of the salary an
employee receives and can be viewed as a benefit plan designed to aid an individual
in his/her retirement.
The Gratuity calculation formula is: Gratuity = (15 × last drawn salary × working
tenure)/26.
8. What are the Eligibility Criteria
for Payment of Gratuity?
To receive the gratuity, you must meet the following eligibility criteria:
You should be eligible for superannuation.
You should have retired from service.
You should have resigned after continuous employment of five years with the company.
In case of your death the gratuity is paid to the nominee, or to you on disablement on
account of a sickness or an accident.
9. What are the Taxation Rules for
Gratuity?
The tax treatment of the gratuity amount depends on the type of employee who has
to receive the gratuity.
The amount of gratuity received by any government employee (whether
central/state/local authority) is exempt from the income tax.
Any other eligible private employee whose employer is covered under the Payment of
Gratuity Act. Here, the least of the following three amounts will be exempt from
income tax:
Rs 20 lakh.
The actual amount of gratuity received.
The eligible gratuity.
Companies usually deduct 4.81% of your basic plus dearness allowance towards gratuity payment. This
4.81% is computed as (15/26)/12. Effectively, it is half a month's salary on a base of a year's salary."
10. For example, your employer had paid you a gratuity of Rs 12 lakh.
As per the gratuity calculation in the earlier example, you are
eligible for a gratuity amount of Rs 2,59,615. The government has
set Rs 20 lakh as the upper tax-free limit. The lowest of the three
figures is Rs 2,59,615, which is exempt from tax. You must pay tax
on the remaining amount of Rs 9,40,385 as per your income tax
slab.
the amount of gratuity paid by a company cannot exceed Rs 20 lakh, irrespective of the
number of years of service.
11. What is Leave Encashment?
Leave encashment refers to an amount of money received in exchange for a
period of leave not availed by an employee. Encashment of accumulated leave can
availed by an employee at the time of retirement, during the continuation of service
or at the time of leaving the job.
12. Example:
(1) Leave Account
Balance Earned Leaves (EL): 250
Balance half pay leaves (HPL): 150
Maximum leaves allowed for encashment: 300
EL authorized for encashment: 250
HP authorized for encashment: 50
Total leaves authorized for encashment: 300
13. (2) Last salary detail
Last basic pay (BP): ₹ 70,000
DA 17%: ₹ 11,900
Total emoluments (BP and DA): ₹ 81,900
Half of emoluments: ₹ 40,950
Calculation of earned leaves (EL) encashment
EL or earned leaves authorized for encashment: 250
Total emoluments (BP and DA): ₹ 81,900
EL encashment: (total emoluments / 30) x number of earned leaves
= (81900 / 30) x 250
= ₹ 6,82,500
14. Calculation of half pay leaves (HPL) encashment
HPL authorized for encashment: 50
Half of emoluments: ₹ 40,950
HPL encashment = (half emoluments / 30) x number of HPL
= (40950 / 30) x 50
= ₹ 68,250
Total encashment = EL encashment + HPL encashment
= ₹ 7,50,750
