1. Deduction and
collection of tax
at source
(TDS/TCS)

2. Overview
To avoid cases of tax evasion.
 To collect tax at source on accrual of income.
Persons responsible for making payment to
deduct tax at source and deposit the same to
the Government‟s treasure within stipulated
time.
The recipient of income is liable to tax on the
gross amount and the amount deducted at
source is against his final tax liability.

3. Payments covered by TDS scheme
• Deduction of tax from Salaries[Sec. 192]
• Deduction of tax at source from other than
interest on securities [Sec. 194A]
• Deduction of tax at source from payment to
contractors or sub-contractors[Sec. 194C]
• Deduction of tax at source from commission or
brokerage[Sec.194H]
• Deduction of tax at source from income by way of
rent[Sec. 194I)
• Deduction of tax at source on fees for
professional or technical services[Sec. 194J)
• Tax collection at source on “Scrap”[Sec.206C]

4. When and how is to be deducted at
source from Salary?[192]
Who is the payer Employer
Who is the recipient Employee
Payment Covered Taxable salary of the employee
At what time tax has to be At the time of payment
deducted at source
Maximum amount which The amount of exemption limit(i.e. Rs.
can be paid without tax 1,90,000 in case of woman/Rs. 2,50,000
deduction in case of senior citizen/ Rs. 1,80,000
for the assessment year 2012-13
Rate of tax deduction at Normal rates applicable to an individual
source

5. How to compute taxable salary?
 Salary on “due” or “receipt” basis whichever is
earlier.
 Salary includes basic, DA, commission, bonus,
leave salary etc.
 Allowance includes all fixed quantity of money
subject to certain exemptions.
 Perquisite may be defined as any casual
emolument or benefit attached to an office such
as “Rent free accommodation, LTC, Medical
reimbursement, interest free loan etc.
 Section 80C to Section 80U, deductions would
be available from gross total income.

6. Permissible Deduction u/s 80C
 The maximum amount deductible can not exceed Rs.
1.00 lakh on following nature of payments.
1. Life insurance premium including ULIPs subject to
certain conditions.
2. Contribution towards statutory and recognized provident
fund.
3. Contribution towards 15-year public provident fund.
4. Subscription to National Saving Certificates, VIII Issue.
5. Any Sum paid as tuition fees in India for full time
education of any two children of an individual.
6. Any payment towards the cost of purchase/ construction
of a residential property.
7. Amount deposited as term deposit for a period of 5 years
or more.
8. Subscription towards notified units of Mutual Fund
(ELSS)

7. Permissible Deduction u/s 80CCF to 80D
 Deductions in respect of subscription to long-term
infrastructure bonds under section 80CCF can not
exceed Rs. 20,000.
 Deduction in respect of medical insurance premia
under section 80D as per following:
Taxpayer, spouse Parents of the Total
and dependent taxpayer
children dependent or not
Max. amt 15,000 15,000 30,000
deductible
Additional 5,000 5,000 10,000
amount for
senior citizen
Total 20,000 20,000 40,000

8. Permissible Deduction u/s 80E & 80G
 Deduction in respect of repayment of loan taken for
higher education under section 80E by way of entire
amount of interest on such loan up to 7 immediately
succeeding assessment years.
 Deduction in respect of donations under section 80G
is not given by an employee to a notified public
charitable institute except contribution made to
funds like JN memorial fund, PM Relief Fund etc.
 Compute tax liability on net income as per
prescribed income tax rate…

9. Income Tax Rates for AY 2012-13
Individual, HUF, Women Senior Citizen who Super Senior Citizen Rates
AOPs, and BOIs is 60 or above who is 80 or above
years years
Up to Rs. 1,80,000 Up to Rs. 1,90,000 Up to Rs. 2,50,000 Up to Rs. 5,00,000 Nil
Rs. 1,80,000-Rs. Rs. 1,90,000-Rs. Rs. 2,50,000.- Rs. Not Available 10%
5,00,000 5,00,000 5,00,000
Rs. 5,00,000-Rs. Rs. 5,00,000-Rs. Rs. 5,00,000.- Rs. Rs. 5,00,000- Rs. 20%
8,00,000 8,00,000 8,00,000 8,00,000
Above Rs. Above Rs. Above Rs. Above Rs. 8,00,000 30%
8,00,000 8,00,000 8,00,000
Surcharge Surcharge Surcharge Surcharge Nil
Education Cess Education Cess Education Cess Education Cess 2%
S.H.E. Cess S.H.E. Cess S.H.E. Cess S.H.E. Cess 1%

10. Other provisions tax from Salaries
[Sec. 192]
 If house rent allowance is Rs 3,000 per month (or
less than that), the employer will give exemption on
the basis of a declaration given by employee (no
need to submit rent receipt)
 The employer may, at the time of deducting tax at
source, increase or decrease the amount to be
deducted for the purpose of adjusting any previous
deficiency or excess deduction.
 The total salary should be rounded off to the
nearest multiple Rs. 10.
 Determined the average of income tax for whole
financial year.
 Deduct tax in even on monthly basis

11. Deduction of tax at source from interest
other than interest on securities[194A]
and commission or brokerage[194H)
Who is the payer Any person who is (not being
individual or a HUF)
Who is the recipient A resident Person
At what time tax has to be At the time of payment or at the
deducted at source time of credit, whichever is
earlier
Maximum amount which Tax is not deductible if payment
can be paid without tax /credit does not exceed Rs.
deduction 5,000
Rate of tax deduction at 10%(no surcharge and
source education cess)

12. Deduction of tax at source from
payment to contractors[194C]
Who is the payer Any company, firm, local authority,
trust, individual or HUF & Govt.
Who is the recipient A resident contractor
At what time tax has to At the time of payment or at the
be deducted at source time of credit, whichever is earlier
Maximum amount Tax is not deductible if single
which can be paid payment/credit does not exceed
without tax deduction Rs. 30,000 or Rs. 75,000 in the
aggregate during a financial year
Rate of tax deduction 1% if recipient is an individual/
at source HUF, otherwise 2% (no surcharge
and education cess)

13. Deduction of tax at source from
payment to contractors[194C]
Transport Payment to transport operators in the course of
Operators business of plying, hiring or leasing goods
carriages is not subject to TDS, if the recipient
furnishes their PAN to the payer
Purposes Payment/credit should be for business
purposes, not be exclusively for personal
purposes
Meaning Advertising, broadcasting and telecasting,
of Work catering, carriage of documents and passengers,
supply of labour, payment to electrician etc.
Payment On the entire consideration including service
covered tax, if any

14. Deduction of tax at source from
income by way of rent[194I]
Who is the payer Any person paying rent (not being an
individual or a HUF)
Who is the recipient A resident person
At what time tax has to be At the time of payment or at the time of
deducted at source credit, whichever is earlier
Maximum amount which If the amount of payment during a
can be paid without tax financial year is Rs. 1,80,000 or less
deduction than Rs. 1,80,000
Meaning of Rent Any lease, sub-lease, tenancy or any
other agreement or arrangement
Rate of tax deduction at 2% for the use of any machinery or plant
source or equipment, 10% for the use of any
land or building or furniture or
fittings.(No SC and cess)

15. Deduction of tax at source on fees for
professional or technical services[194J]
Who is the payer Any person paying rent (not being
an individual or a HUF)
Who is the recipient A resident person
At what time tax has to At the time of payment or at the
be deducted at source time of credit, whichever is earlier
Meaning of Professional Carrying on legal, medical, or
or technical services interior decoration or managerial,
technical or consultancy services
Maximum amount If the amount of profession fees
which can be paid during the year is Rs. 30,000 or
without tax deduction less than Rs. 30,000
Rate of tax deduction 10%(no surcharge and education
at source cess)

16. Tax collection on Scrap at source
[Sec. 206C]
 Every person, being a seller, shall collect tax from the
buyer of goods specified as “Scrap” tax at source.
 Tax has to be collected by the seller at the time of
debiting of the amount payable by the buyer to the
account of buyer or at the time of receipt of such
amount from the buyer in cash or by issue of cheque,
whichever is earlier.
 Goods utilized for manufacturing/processing/not for
the purpose of trading is not subject to tax collection,
if the buyer gives declaration in Form No. 27C to the
seller and copy of the same shall be submitted by the
seller within 7 days from the last day of month in
which it is received to the Commissioner.

17. Meaning of “Scrap”? [Sec. 206C]
• “SCRAP” has been defined as waste and scrap
from the manufacture or mechanical working of
materials which is definitely not usable as such
because of breaking, cutting up, wear and other
reasons.
• It would not include any waste or scrap-
× Which does not arise from manufacture or
mechanical working of material; or
× Which is usable as such
× Waste or scrap arising from packing materials,
newspapers, old machinery scraped etc.
× By-products generated from the manufacturing
process as the same could be used as such.

18. At Glance Rates for tax deduction at
source for AY 2012-13
Nature of Payment TDS(SC;Nil, EC;
Nil, SHEC;Nil)
•Sec. 194A-Interest other than interest on securities 10%
•Sec. 194C-Payment to contractors or sub-contractors-
a) Payment/ credit to an individual or a HUF 1%
b) Payment /credit to other than individual or a HUF 2%
• Sec. 194H- Commission or brokerage to resident 10%
• Sec. 194I- Rent to resident-
a) Rent of plant and machinery 2%
b) Rent of land or building or furniture or fittings 10%
• Sec. 194J- Fees for professional or technical 10%
• Sec.206C- Collection at source on Scrap 1%

19. Time of deposit of TDS/TCS after
April 1, 2010
Time of deposit of TDS Time of deposit of TCS
On or before 7 days from the end of On or before 7 days from the
the month in which tax is deducted end of the month in which tax
is collected
•Where income or amount is paid or
credited in the month of March:
 Tax should be deposited by April 30
•Where income or amount is paid or Within one week from the last
credited before March 1: day of the month in which tax
Tax should be deposited within 7 is collected.
days from the end of month in which
tax is deducted.

20. Quarterly statement of tax deduction/
collection after April,1 2010
Nature of Return Form No.
Tax deduction from salary under section 192 24Q
Tax deduction when deductees are non resident(not
being a company ), foreign company and persons who 27Q
are resident, but not ordinarily resident
Tax deduction in any other case (Sec 194A to 194J) 26Q
Tax collection (Sec 206C) 27EQ

21. Time-limit of Submission of Quarterly
Returns E-TDS/E-TCS after April, 1 2010
Periodicity Due date of submission
For the quarter ending June 30 of the
financial year July 15 of the financial year
For the quarter ending September 30
of the financial year October 15 of the financial year
For the quarter ending December 31
of the financial year January 15 of the financial year
For the quarter ending March 31 of May 15 of the financial year
the financial year immediately following the financial
year in which tax is deducted/
collected

22. Time Limit for issue of TDS/TCS
certificate after April,1 2010
Form No. Periodicity Due Date
Form No. 16 Annual On or before May 31 of the financial year
and 12BA immediately following the financial year in
(Salary) which tax is deducted.
Form No. 16A Quarterly Within 15 days from the due date of
(Non Salary) furnishing quarterly TDS returns as;
Form No. Quarterly Within 15 days from the due date of
27D furnishing quarterly TCS returns as;
(TCS)

23. Permanent Account Number(PAN)
[Sec. 139A]
 If the recipient does not furnish his PAN to the
deductor ,tax will be deducted at the rate of 20 per cent
for all sections in which TDS/TCS is deductible.
 PAN of the deductee should be mentioned in any
correspondence and document which is exchanged
between the deductor and the deductee.
 Every person receiving any sum or income from which
tax has been deducted shall intimate his PAN to the
deductor.
 In case of issuance of PAN number and card the
maximum period should be allowed three months from
the date of application.

24. Other points for consideration
 Amount payable to Govt./RBI/certain corporations not
subject to tax deduction.
 Non deduction of TDS or late payment of deducted TDS
attracts interest at the rate of 1.50% p.m. on TDS
amount from the date on which TDS is actually
deducted or paid.
 Goods received on „freight to pay basis‟ would also be
subject to tax deduction.
 Reimbursements cannot be deducted out of the bill
amount for the purpose of tax deduction at source.

25. Over to you

26. Thank you