Tax Deducted at Source

Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act of 1961. Any payment covered under these provisions shall be paid after deducting prescribed percentage. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS). It has a great importance while conducting tax audits. Assessee is also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to government during the Quarter to which it relates.

Objectives of Tax Deducted at Source

• To enable the salaried people to pay the tax as they earn every month. This helps the salaried persons in paying the tax in easy instalments and avoids the burden of a lump sum payment.
• To collect the tax at the time of payment of income to various assessees such as contractors, professionals etc.
• Government requires funds throughout the year. Hence, advance tax and tax deducted at source help the government to get funds throughout the year and run the government smoothly.

TDS on Dividends

Section 302of Income Tax Act, 1961 by law notes.^[1]

• TDS provisions under this section are attracted only in respect of deemed dividend u/s 2(22)(e), If such dividend exceeds 2500 in year.
• Rate of deduction of tax in respect of such dividend is 10%.
• Provisions will not apply to dividend receivable by SADHA, GIC(General Insurance Corporation), its subsidiaries or any other insurer provided shares are owned by it or in which it has full beneficial interest :] [Provided also that no such deduction shall be made in respect of any dividends referred to in section 115-O.]

TDS on immovable property

Section 194I of Income Tax Act by Freakans.^[2][3]

• This provision is applicable in respect of transactions wwe.comeffected on or after June 1, 2014
• It seeks deduction of tax at source on transfer of certain immovable property other than agricultural land
• Any person being a transferee who is liable to Pay to a resident by way of consideration for transfer of any immovable property exceeding 50 Lakhs shall at the time of credit of such sum to the account of the transferor or at the time of payment in whatever manner, has to deduct tax at source at 1% only

This TDS on property is required to be deposited in 30 days from the end of the month in which deduction is made for all payments to be made on or after 01st June 2016. Before 01.06.2016 time limit to deposit TDS on property is 7 days from the end of the month in which deduction is made^[4]

Section 194C of Income Tax Act ^[5]

Section 194C of Income Tax Act - Tax need to be deducted 1% (for individual, HUF)/ 2% (for others) of payment where payment is made for carrying out any work (including supply of labour for carrying out any work and advertisements) by a contractor/sub-contractor. Such work must be in pursuance of a contract (including sub contract) between the contractor and payer. TDS is to be made at the time of credit to the account of contractor or at the time of payment in cash or by cheque or draft or by any other mode whichever is earlier.

Tax Collected at Source

Tax Collected at Source (TCS) is income tax collected by seller in India from payer on sale of certain items. It is provided in section 206C of Income Tax Act 1961. The seller has to collect tax at specified rates from the payer who has purchased these items : category a

• Alcoholic liquor for human consumption 1%
• Tendu leavest 5%
• Timber obtained under a forest lease 2.5%
• Timber obtained by any mode other than under a forest lease 2.5%
• Any other forest produce not being timber or tendu leaves2.5%
• Scrap 1%
• Minerals being coal or lignite or iron ore 1%
• Scrap Batteries

category b (grant of lease\license of the following

• parking lot,toll plaza,mining and quarrying

category c

• bullion exceeding 2 lakhs,jewellry exceeding 5 lakhs,other goods& services exceeding 2l akhs

category d

• motor vechicle exceeding 10 lakhs

Example:- Sale of scrap by X to Y for Rs 500000

• X is a seller
• Y is Purchaser

Y Pay amt of 500000 for scrap + VAT + TCS@1%

• Calculation

Sale Amt 500000

VAT Amt@5% 25000

TCS Amt@1% 5000

Total Amt 530000

This is the amount paid by buyer and buyer will get the TCS Paid Certificate from seller. Buyer take the credit of TCS at the time of filling of return of their income. Seller has to pay the amt to govt with the due date and file return of the TCS paid quarterly.

TDS Certificates

A deductor is required to issue a TDS certificate called form 16 for salaried employees and form 16A for non salaried employees within a specified time.^[6]

He has to issue TDS Certificates within two month of the next financial year

TO BIKASH SRIVASTAV

Impact of non-compliance to TDS

Income Tax Act, 1962^[7]

• Disallowance u/s. 40(a) (ia) of Income Tax Act, 1962 (Act)
• Raising of demand u/s. 201(1) of the Act
• Charging of Interest u/s (1A) of the Act
• Levying penalty u/s. 271C of the Act

TDS rate chart for FY 2014-15

TDS rate chart for FY 2015-16 & AY 2016-2017. Tax is deductible chart is available from Section 192 to Section 206.dip

TDS rate chart for FY 2016-17 & AY 2017-2018 TDS rate chart for FY 2017-18 & AY 2018-2019

References

External links

• Indian Income Tax Department