Sub : Directions to improve and perfect the system of Deduction and Payment of Tax u/s 192 to 194 LA and section 206 C of INCOME TAX ACT,1961.
The additional Commissioner of Income tax (TDS) has issued a notice showing the discrepancies observed by them in TDS compliance by us. This circular is issued to address these discrepancies.
Please note that the primary responsibility to deduct the tax at source and payment of it and filling the quarterly returns of TDS lies with the Department head in whose name the TAN is allotted. Failure to comply with these provisions may attract interest, Penalties and imprisonment under the ACT.
Now, let’s see the related provisions of financial Year 2008-09 and application of such provision one by one to avoid any further problems.
(1) SECTIONS 192 FOR “TAX DEDUCTION AT SOURCE FROM SALARY” -: Any Person responsible for paying any income chargeable under the head Salaries is required to deduct tax at source on the amount payable. Tax is to be calculated at the rates prescribed for the financial year in which the payment to employee is made. The person responsible for paying the salary may, at the time of deducting tax at source, increase or decrease the amount to be deducted for the purpose of adjusting any previous shortfall or excess deduction.
(I)TAX RATE TABLE
FOR FINANCIAL YEAR 2008-09
Tax Rate Sr.Citizen Women Others
Nil Taxable Salary upto 2,25,000 Taxable Salary upto 1,80,000 Taxable Salary upto 1,50,000
10% + Edu. Cess 3% 2,25,001-3,00,000 1.80.001-3,00,000 150001-3,00,000
20% + Edu. Cess 3% 3.00.001-5,00,000 3,00,001-5,00,000 3,00,001-5,00,000
30% + Edu. Cess 3% 5,00,001-10,00,000 5,00,001-10,00,000 5,00,001-10,00,000
30 %+ 10% Surcharge + Education Cess 3% 10,00,001 & Above 10,00,001 & Above 10,00,001 & Above
For this Purpose Senior Citizen (Man or women) means person who is 65 or 65+ years of age during the financial year 2008-09.
Following Example will clear the provisions further,
(II) ILLUSTRATION TABLE -: This Is Just an Example for clear understanding of provision.
(Amount in Rupees)
Particular’s Sr.Citizen Women Others
Monthly Pension/Salary after considering exemptions u/s 10 and deduction u/s 80C,80CCC,80CCD,80D,80DD,80E,80GG,80U 70,000 1,05,000 1,05,000
Month 12 12 12
Total Salary (Including 1 month’s Bonus) 9,10,000 13,65,000 13,65,000
(1)Upto 2,25,000/1,80,000/1,50,000 as per table I 0 0 0
(2)Next slab as per table I 7,500 12,000 15,000
(3)Next Slab as per table I 20,000 20,000 20,000
(4)Next Slab as per table I 1,23,000 1,50,000 1,50,000
(5)Next slab as per table I 0 1,09,500 1,09,500
(6)Total Tax=(1+2+3+4+5) 1,50,500 2,91,500 2,94,500
(7)Add -: 10% surcharge (6 * 10%) As salary of Sr.citizen is less than 10,00,000 no surcharge is applicable, hence taken as Nil. 0 29,150 29,450
(8)Total tax & Surcharge (7+8) 1,50,500 3,20,650 3,23,950
(9)Add -: 3 % Education cess on Tax + Surcharge=(8 * 3%) 4,515 9,620 9,720
(10) Total Estimated Tax (6+7+9) 1,55,015 3,30,270 3,33,670
Divide it by 12 month 12 12 12
Monthly deduction to be made from respective monthly salary payment is 12,918 27,523 27,806
What if such deduction has not been made so far
Continuing with the above Illustration
Table III – Adjustment of Excess/Shortfall of Tax deduction at source
Particular’s Sr.Citizen Women Others
STATUS TDS NOT AT ALL DEDUCTED FOR FIRST 6 MONTHS TDS IS DEDUCTED FOR FIRST 6 MONTHS BUT THERE IS A SHORTFALL EXCESS TDS DEDUCTED IN FIRST 6 MONTHS
(A)Total Estimated Tax as per Table II Row (10) 1,55,015 3,30,270 3,33,670
(B)Total deduction for first 6 month Apr. to sep. 08 0 1,95,000 3,35,000
(C)Total Estimated Tax Payable at the end of September = (A-B) 1,55,015 1,35,270 Nil
(D) Remaining month oct. – mar., i.e. remaining 6 Months, in this case divide the remaining estimated salary by 6 months 6 6 6
(E) Monthly Deduction from salary from Oct-Mar 2008 = (C/D) 25,836 22,545 Nil
(2) SECTION 194 C – Payment to Contractor’s
Any person responsible for paying any sum to any resident contractor for carrying out any work ( including supply of labour) in pursuance of a contract between payer and receiver, in this case payer is required to deduct and pay taxes at the rates specified. Such tax is deducted at the time of payment or credit whichever is earlier.
However no tax is deductible, if amout paid or credited do not exceed Rs.20,000 or more in a single payment or Rs.50,000 or more in that Financial year.
Important to note that there should be a contract between payer and receiver.
From the above it can be seen that , if payment exceeds Rs.20,000 or more in a single payment or Rs.50,000 in Financial year then , TDS shall be deducted at the rate of 2% + 3% Education cess and surcharge is applicable if Payment exceeds Rs. 1,00,00,000 and Surcharge is 2.5% of total tax. However if contract is for Advertisement the rate applicable for the same is 1% instead of 2%.
TABLE (IV) Let’s see one example to clear the provisions.
Particular’s Payment is 20,000 or more in a single payment but does not exceed the 50,000 total limit of a year Payment is less than Rs20,000 in a single payment but exceed’s the 50,000 total limit of a year Payment made to Advertisement contractor’s
Contractual Payment 25,000 18,000 25,000
Tax to be deducted 2% TDS + 3% Education cess on TDS i.e. 2.06 % of Rs.25,000/- 2% TDS + 3% Education cess on TDS i.e. 2.06 % of Rs.18,000/- 1% TDS + 3% Education cess on TDS i.e 1.03% if Rs. 25,000/-
(3) SECTION 194 I “RENT” Any person responsible for making any payment under the head Rent shall, if Rent payable exceeds Rs. 1,20,000 in a year, that means Rs. 10,000/- per month, then Tax shall be deducted as per following Table.
TABLE (V) Rate Of Tax Deduction from RENT.
Rent Payment to Individual/HUF 15% +3% Education cess on TDS and if payment Exceeds Rs 1,00,00,000 then 15% +2.5% surcharge + 3% education cess of TDS & Surcharge.
Rent Payment to Other’s 20% +3% Education cess on TDS and if payment Exceeds Rs 1,00,00,000 then 20% +2.5% surcharge + 3% education cess of TDS & Surcharge.
Machine & Equipment Rent to any person 10% +3% Education cess on TDS and if payment Exceeds Rs 1,00,00,000 then 10% +2.5% surcharge + 3% education cess of TDS & Surcharge.
(4) SECTION 194LA FOR “TAX DEDUCTION AT SOURCE FROM PAYMENT OF COMPENSATION FOR COMPULSARY AQUSITION OF LAND”
Any person responsible for paying any person any compensation or enhanced compensation or consideration or enhanced consideration on account of compulsory acquisition of any immovable property ( Other than agriculture land) is responsible for deduction of tax at source. Such tax is deducted at the time of payment or credit whichever is earlier.
However no tax is deductible if such compensation does not exceed Rs. 1,00,000/-.
From the above, it can be seen that at the time of payment of compensation, if compensation is more than Rs. 1,00,000/- then TDS shall be deducted at the rate of 10% + 3% Education cess and surcharge is applicable if Payment exceeds Rs. 1,00,00,000 and Surcharge is 2.5 % of total tax
TABLE (VI) Let’s see one example to clear the provisions
Particular’s Payment is less than Rs. 1,00,000 Payment is less than Rs. 1,00,00,000 Payment is more than Rs. 1,00,00,000
Compensation (Example) 70,000 67,00,000 1,05,67,000
Tax To be Deducted Nil 10% + 3% Education cess on tax (i.e. 10. 30%) 10%+ 2.5% Surcharge + 3% education cess on Tax and surcharge. (i.e. 10.56%)
Q1. What if Compensation is given in the form of TDR (Transferable Development Rights ) Or in the form of (Additional FSI)?
Ans. The tax should be deducted on the Value of TDR or FSI given.
For Example PMC has acquired land for road widening and gave the owner ,TDR or additional FSI as compensation valuing Rs. 50,00,000/-. Then on this 50,00,000/-, Tax is to be deducted at the applicable rates discussed above and to be paid to government.
So far we have discussed the TDS Provisions i.e. Tax to be recovered and paid on Payment under these heads.
Now let us familiarise ourselves with TCS Provisions I.E. Tax to be recovered and paid on Income received, If such income falls under Good/services mentioned in the Following Table.
(5) Tax Collection at source u/s 206C
TABLE (VII) TAX COLLECTION AT SOURCE U/S 206 C OF INCOME TAX ACT,1961.
Sr.No Nature Of Goods Rate
1 Scrap 1.0% + Surcharge 2.5 %, if Income exceeds Rs. 1 Crore and + 3% Education Cess On Tax and Surcharge.
2 Parking Lot 2.0% + Surcharge 2.5 %, if Income exceeds Rs. 1 Crore and + 3% Education Cess On Tax and Surharge.
3 Toll Plaza 2.0% + Surcharge 2.5 %, if Income exceeds Rs. 1 Crore and + 3% Education Cess On Tax and Surcharge.
Please Note that Scrap means, Waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons.
Let’s clear the provision by one example.
PMC has given person X to run the Parking lot on PAY AND PARK BASIS for RS. 50,00,000 in this case PMC will quote 50,00,000 + TCS=(2% Tax+3% Education Cess on Tax). i.e. 50,00,000 as operating parking lot price + Rs 1,00,000 as TCS and Rs. 3000 as Education cess) Please note that Surcharge is not applicable in this case as Income(50,00,000), does not exceed RS. 1Crore.
Let’s See, How the Act is administered.
- Obtain TAN Number
- File Quarterly Retuns as per following table
Quarter Period 24Q/26Q 27Q 27EQ
Q1 01/04 To 30/06 15/07 14/07 15/07
Q2 01/07 To 30/09 15/10 14/10 15/10
Q3 01/10 To 31/12 15/01 14/01 15/01
Q4 01/1 To 31/03 15/06 14/04 30/04
FORM 24Q is for Salaries.
FORM 26Q is for Payment Other Than Salaries.
FORM 27Q is for Payment to Non-residents
FORM 27EQ is for TAX COLLECTION AT SOURCE u/s 206C
Please Note that Non-payment of TDS on or before due date will attract Interest, Penalties and possible prosecution. To avoid this unnecessary hardship, please do the needful immediately.
I hope this clarifies the related provision and administration of the ACT.