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SUMMER TRAINING REPORT ON

WORKING OF TAX DEDUCTED AT SOURCE

Undertaken at

“PANASONIC INDIA”

Submitted in partial fulfilment of the requirements

For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION


2013-2015

At

FMS – WISDOM
BANASTHALI VIDYAPITH

Submitted To: Submitted By:

Mrs. Gargi Pant Arushi Agarwal

Faculty Advisor MBA II semester

Banasthali Vidyapith Roll No. 13185


ACKNOWLEDGEMENTS

As it is rightly said “The successful realization of the project is an outgrowth of a


consolidated effort of the people from disparate fronts. It is only with their support and
guidance that the developer could meet the end.” So I would like to thank all the members
of Taxation Team for their full cooperation and help during my Training.

I wish to extend my sincere gratitude towards my instructorMr. Amit Rustagi (Head


Taxation) for giving me this opportunity to undergo training in Finance Department.

I am also grateful towards Mr. Arvind Kumar, Mr. Surender Singh& all other members of
the Finance department for making me understand various aspects of Finance.

Last but not the least I am thankful to all those persons with whom I have interacted and
who directly or indirectly contributed significantly to the successful completion of my
training.

Arushi Agarwal
ABSTRACT

This project is based on the study of Tax Deducted at Source in PANASONIC INDIA
PVT LTD. An insight view of the project will encompass – what it is all about, what it
aims to achieve, what is its purpose and scope, the various rates of deducting tax,
further specifying the Indian Taxation Structure and in the last, drawing inferences
from the learning so far.

PANASONIC INDIA PVT LTD., founded in 1972, is recognized as one of the famous
Electronic goods provider in India. Panasonic makes available in India its wide range
of consumer electronics, home appliances like LCD & Plasma TVs, DVD players, Home
Theatre Systems, Smartphones, Cameras, Camcorders, Car Audio Systems, Air
Conditioners, Washing Machines, Refrigerators, Microwave Ovens, Automatic
Cookers, Vacuum Cleaners and a wide range of system products including
communication ones.

The objective of TDS is to ease the burden of tax payment by paying taxes as it is
earned, to ensure effective collection of taxes, for timely mobilization of internal
revenues.

This project tries to evaluate how the management of Tax Deducted at Source is
done in PANASONIC INDIA PVT LTD through different working sheets.
Table Of Content

1. Company Profile
1.1 Vision
1.2 Mission
1.3 Brand Promise
1.4 Sponsorship
1.5 Panasonic Group Companies In India
1.6 Division Sales Under Panasonic India
1.7 Divisional Factory Under Panasonic India
1.8 Products By Panasonic
2. Introduction to Indian Tax Structure
2.1 Direct Taxes
a) Individual Income Tax
b) Transfer Pricing
c) Wealth Tax
d) Capital Gains Tax
2.2 Indirect Taxes
a) Excise Duty
b) Customs Duty
c) Service Tax
d) Securities Transaction Tax
e) Goods & Service Tax
f) State Tax
I. Value Added Tax(VAT)
2.3 Other Keynotes
a) Filling of VAT, CENVAT, Service Tax Return
b) Permanent Account Number (PAN)
3. Tax Deducted at Source (TDS)
3.1 Who Shall Deduct Tax At Source?
3.2 What A Deductor Must Do?
3.3 TAN
3.4 Procedure To Pay TDS
3.5 Nature Of Payments And Rates
1. TDS on Salary (Section 192)
2. TDS on Interest on Securities (Section 193)
3. TDS on Dividend (Section 194)
4. TDS on Interest other than Interest on Securities(Section 194A)
5. TDS on winning from Lotteries/ Crossword Puzzles (Section 194B)
6. TDS on winning from Horse Race (Section 194BB)
7. TDS on Payment to Contractor (Section 194C)
8. TDS on Insurance Commission (Section 194D)
9. TDS on Payment to Non-Resident Sportsmen or Sport Association (Section
194E)
10. TDS on Payment in respect of Deposit Under NSS etc. (Section 194EE)
11. TDS on Payment on Account of Repurchase of Unit by Mutual Fund (Section
194F)
12. TDS on Commission (Sale of Lottery Ticket) (Section 194G)
13. TDS on Commission (Brokerage) (Section 194H)
14. TDS on Rent (Section 194I)
15. TDS on Fees for Professional/ Technical Services (Section 194J)
16. TDS on Compensation on Acquisition of Capital Asset (Section 194L)
17. TDS on Compensation Payable on Compulsory Acquisition of Immovable
Property (Section 194 LA)
18. TDS on Other Sums (Section 195)
19. Gist of Rates of TDS
20. Certificate of Lower Rate from A.O (Section 197)
21. No Deduction in Certain Cases (Section 197A)
3.6 TDS Defaults
4. TCS
5. Bibliography
COMPANY PROFILE
Panasonic Corporation formerly known as Matsushita Electric Industrial Co., Ltd. is a
Japanese multinational electronics corporation headquartered in Kadoma, Osaka, Japan.
The company was founded in 1918 by Kounosuke Matsushita, and has grown to become
one of the largest Japanese electronics producers alongside Sony,
Hitachi, Toshiba and Canon Inc. In addition to electronics, it offers non-electronic products
and services such as home renovation services. Panasonic is the world's fourth-largest
television manufacturer by 2012 market share.

Panasonic commenced its operations in India in the year 1972. In 2008, Panasonic India Pvt
Ltd was formed to integrate the different Panasonic interests in India. Daizo Ito joined as
CEO Panasonic India in April 2008 and ensured Panasonic’s aggressive focus on India with
heavy investments and expansion.
Since then Panasonic has been on an upward growth path in the country with innovative
product offerings, increased investments on business and various promotional initiatives.
Today, Panasonic India is increasingly being seen as an Indian company, though with
Japanese roots.

Panasonic makes available in India its wide range of consumer electronics, home appliances
like LCD & Plasma TVs, DVD players, Home Theatre Systems, Smartphones, Cameras,
Camcorders, Car Audio Systems, Air Conditioners, Washing Machines, Refrigerators,
Microwave Ovens, Automatic Cookers, Vacuum Cleaners and a wide range of system
products including communication ones like Mobile Phones, High Definition
Videoconferencing, Professional Audio Video products like Broadcast Cameras, Projectors
and Displays, Business Solutions including Printers, Whiteboards and Security Solutions.
Panasonic has aggressively focuses on market research, product innovation and talent hiring
in India for work in areas like energy, water, remote access and food. The company
currently has a workforce of about 12,500 in India.

Panasonic has recently been designated India as regional hub to drive growth and build
deeper inroads into the fast emerging Asiatic, Middle Eastern and Western economies.
Starting from India, the company wants to create a knowhow to address consumers who are
based out of India and then take the knowledge to emerging markets. India is the sixth
strategic region which will take care of SAARC nations, Middle East Asia and Africa.
Panasonic will aggressively and strategically invest in market research and product
innovation and will recruit/bring the best of global talent using its in-house open application
system and work in areas like energy, water, remote access and food.
VISION:
Through our business activities, we at Panasonic have long nurtured our “consumer electronics
DNA.” Making this DNA central to all of our activities and carrying it forth, we aim to continue to
provide “better living” for our customers in the various spaces and areas where our customers go
about their lives, such as their homes, communities, businesses, journeys, and automobiles.
Our four companies, “Appliances Company,” “Eco Solutions Company,” “AVC Networks Company,”
and “Automotive & Industrial Systems Company,” will play a central role in squarely addressing
“industries” which are closely related to the individual spaces, and we will establish partnerships
with key players in individual industries.
Working together with our business partners, we will actively propose products and services, which
realize new customer value. And also leveraging such expertise to make new proposals, we want to
come up with new innovation in consumer electronics.
Panasonic will make a contribution to realizing “A Better Life, A Better World” for each and every
one of our customers.

MISSION:
"Recognizing our responsibilities as industrialists, we will devote ourselves to the progress
and development of society and the well-being of people through our business activities,
thereby enhancing the quality of life throughout the world."

BRAND PROMISE:
SPONSORSHIP
Panasonic’s regional sponsorships are based on the corporate direction of enriching
people’s lives. The various sponsorships aim to tap into the excitement shared and to build
stronger relationships with the people of this dynamic region.

 Asia Champions League and AFC Cup


 27th Sea Games

Panasonic Group Companies in India


• Panasonic Appliances (PAPIN): Established in 1988 for manufacture, import, marketing and sales
of kitchen appliances and small domestic appliances. PAPIN is headquartered in Chennai, Tamil
Nadu.

• Panasonic AVC India [PAVCI]: Established in 1996, for manufacturer of CRT TVs and LCDs. PAVCI is
based in Noida, UP.

• Panasonic Energy India [PECIN]: Established in 1972, for manufacture and sales of dry cell
batteries. PECIN is based in Baroda, Gujarat.

• Panasonic Carbon India [PCIN]: Established in 1982, for manufacture and sales of carbon rods.
PCIN is based in Chennai, Tamil Nadu.

• Anchor Electricals: Headquartered in Mumbai, Anchor electrical Private Limited started nearly five
decades ago and became a subsidiary of Panasonic Electric Works (now Panasonic Corporation) in
2007. It is one of the largest domestic manufacturers of electrical construction materials with 4
manufacturing locations and boasts of 55 domestic bases and has employee strength of 10,004. Its
sales and operating profit are steadily growing and it ended the last financial year with net sales of
Rupees 13.5 billion and a stated capital of Rupees 4.8 Billion. It has a dominant market share in
wiring devices and it is constantly expanding its product range and growing market share in Circuit
Breakers, Lighting and Luminaries, Fans and Wires/Cables. Anchor aims to double this in the next
three years from the existing and some new product categories.

• Firepro Systems Pvt. Ltd: Incorporated in 1992, Firepro Systems has been at the forefront of
integrated solutions for fire protection, security and building management systems Fire Alarm and
Detection, Fire Suppression, Access Control, Video Surveillance, Intrusion Alarm, Building
Management Systems. It is present in 14 locations across India.
Divisional Sales under Panasonic India:

• Panasonic Marketing India (PMIN): CE (TV, Audio, Home Theatre), HA (AC, WM, Ref.,
MWO, Beauty Care, Vacuum cleaner, Water Purifier) & Digital Imaging (Camera & Movie)

• System Sales Division (SSD): Makes available display, projectors, telephones, PBX/KTS, fax
machines, security and networking products.

• Panasonic Industrial Devices Sales India (INDD) or making available compressors, motors
for air conditioners and refrigerators, various batteries and many other industrial
applications, components for printed circuit boards, flat and plasma panel for flat TV and
plasma TV, heat exchanger for BTS relating applications, equipment’s for manufacturing
industry.

• Panasonic Automotive Systems India(PASI): Specializes in sales and support of in-car


equipment and systems that provide comfort, such as multimedia equipment, safety,
environmental protection and power management solutions

Divisional Factory under Panasonic India:

• Appliances Company India: Factory for manufacture of kitchen appliances and small
domestic appliances

• Panasonic Welding Systems India: For manufacture of arc welding equipment’s and
related products based in Gurgaon, Haryana.

• Small appliances: Chennai

• Carbon rods: Chennai

• Batteries: Gujarat & Madhya Pradesh


PRODUCTS BY PANASONIC
 TV
 AUDIO/VIDEO
 CAMERAS & CAMCORDERS
 MOBILE PHONES
 TABLETS
 HOME APPLIANCES
 BEAUTY CARE
 PHONES & COMMUNICATION
 TOUGHBOOK
 PRINTERS
 PROJECTORS
 PROFESSIONAL DISPLAY PANELS
 SECURITY SYSTEMS
 BROADCAST
 ELECTRONIC WHITEBOARD

REGISTERED OFFICE:
No 88, 6Th Floor, Consumer Sales Div.,
Spic Building Annexe, Mount Road, Guindy,
Chennai - 600032
Phone: +91-44-61089300

HEAD OFFFICE:
First Floor, ABW Tower, IFFCO Chowk,
Sector 25, Gurgaon - 122001,
Haryana, India
+91-124-4596600
Indian Tax Structure
India has a well-developed tax structure with clearly demarcated authority between Central
and State Governments and local bodies. Central Government levies taxes on income
(except tax on agricultural income, which the State Governments can levy), customs duties,
central excise and service tax. Value Added Tax (VAT), stamp duty, state excise, land
revenue and profession tax are levied by the State Governments. Local bodies are
empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.

Indian taxation system has undergone tremendous reforms during the last decade. The tax
rates have been rationalized and tax laws have been simplified resulting in better
compliance, ease of tax payment and better enforcement. The process of rationalization of
tax administration is ongoing in India.
DIRECT TAXES
Those taxes whose burden cannot be shifted to others and the person who pays these to
the government has to bear it are called direct taxes. In other words direct tax is imposed on
an individual or a group of individuals, which affects them directly i.e., which they have to
pay to the government directly. The direct tax can be of different types:

Individual Income Tax

The tax imposed on an individual or a group of individuals on their annual incomes is known
as income tax. Every individual whose annual income exceeds a certain specified limit is
required, under the Income Tax Act, to pay a part of his income in the form of income tax.
Its rates are announced in the beginning of each financial year by the central government.

Financial Year: The period from 1st April to 31st march is taken as a financial year i.e. every
financial year begins on 1st April and ends on 31st march of the consecutive year.

Assessment Year: The year next to a particular financial year is called the assessment year
for that financial year, e.g. for financial year 2005-06, the assessment year is 2006-07.

Permanent Account Number: An individual is given a permanent account number (PAN) by


the income tax department. He or she is obliged to file an income tax return of the financial
year by a specified date of the subsequent financial year.

Transfer Pricing:

Transfer Pricing Regulations ("TPR") are applicable to the all enterprises that enter into an
'International Transaction' with an 'Associated Enterprise'. Therefore, generally it applies to
all cross border transactions entered into between associated enterprises. It even applies to
transactions involving a mere book entry having no apparent financial impact. The aim is to
arrive at the comparable price as available to any unrelated party in open market conditions
and is known as the Arm's Length Price ('ALP').Increasing participation of multi-national
groups in economic activities in India has given rise to new and complex issues emerging
from transactions entered into between two or more enterprises belonging to the same
group. Hence, there was a need to introduce a uniform and internationally accepted
mechanism of determining reasonable, fair and equitable profits and tax in India in the case
of such multinational enterprises. Accordingly, the Finance Act, 2001 introduced law of
transfer pricing in India through sections 92A to 92F of the Indian Income tax Act, 1961
which guides computation of the transfer price and suggests detailed documentation
procedures. This article aims to provide a brief overview on the applicability of transfer
pricing regulations in India, methods of determining the transfer price and the
documentation procedures.
Wealth Tax:

Wealth tax, in India, is levied under Wealth-tax Act, 1957. Wealth tax is a tax on the benefits
derived from property ownership. The tax is to be paid year after year on the same property
on its market value, whether or not such property yields any income. Similar to income tax
the liability to pay wealth tax also depends upon the residential status of the assesse. The
assets chargeable to wealth tax are Guest house, residential house, commercial building,
Motor car, Jewelry, bullion, utensils of gold, silver, Yachts, boats and aircrafts, urban land,
cash in hand (in excess of INR 50,000 for Individual & HUF only),etc. But in reality majority of
the potential tax payers do not pay this tax as most of the movable items such as jewelry,
bullion etc. are stashed away from accounting. Invariably they just pay tax for the
immovable wealth such as real estate.

Capital Gains Tax:

The central government also charges tax on the capital gains that is derived from the sale of the
assets. The capital gain is the difference between the money received from selling the asset and the
price paid for it. To restrict the misuse of this provision, the definition of capital asset is being
widened to include personal effects such as archaeological collections, drawings, paintings,
sculptures or any work of art.

Capital gain also includes gain that arises on “transfer” (includes sale, exchange) of a capital asset
and is categorized into short-term gains and long-term gains. The Long-term Capital Gains Tax is
charged if the capital assets are kept for more than three years or 12 months in the case of securities
and shares that are listed under any recognized Indian stock exchange or mutual fund. Short-term
Capital Gains Tax is applicable if the assets are held for less than the aforesaid period.

In case of the long term capital gains, they are taxed at a concession rate. Normal corporate income
tax rates are applicable for short term capital gains. In case of the short term and long term capital
losses, they are allowed to be carried forward for 8 consecutive years.

INDIRECT TAXES
Indirect taxes are those whose burden can be shifted to others so that those who pay these
taxes to the government do not bear the whole burden but pass it on wholly or partly to
others. Indirect taxes are levied on production and sale of commodities and services and
small or a large part of the burden of indirect taxes are passed on to the consumers. Excise
duties on the product of commodities, sales tax, service tax, customs duty, tax on rail or bus
fare are some examples of indirect taxes.

Excise Duty:

The central government levies excise duty under the Central Excise act of 1944 and the
Central Excise Tariff Act of 1985. Central Excise duty is an indirect tax levied on goods
manufactured in India and meant for domestic consumption. The Central Board of Excise
and Customs under the Ministry of Finance, administers the excise duty. Central Excise Duty
arises as soon as the goods are manufactured. It is paid by a manufacturer, who passes on
its incidence to the customers. Excisable goods have been defined as those, which have
been specified in the Central Excise Tariff Act as being subjected to the duty of excise.

There are three main types of excise duty -

 Basic Excise Duty is charged on all excisable goods other than salt at the rates
mentioned in the said schedule

 Additional Duties of Excise is charged on goods of special importance, in lieu of sales


Tax and shared between Central and State Governments

 Special Excise Duty is charged on all excisable goods on which there is a levy of Basic
excise Duty. Every year the annual Budget specifies if Special Excise Duty shall be or
shall not be levied and collected during the relevant financial year.

Note: Under the Cen vat (Central Value Added Tax) Scheme, introduced under The Cen vat
Credit Rules, 2004, a manufacturer of product or provider of taxable service shall be allowed
to take credit of duty of excise as well as of service tax paid on any input received in the
factory or any input service received by manufacturer of final product. Such credits can be
used to set off any excise duty tax payable.

In the recent budget, a number of tax exemptions have been initiated. Specific goods enjoy
concessional duty rates. Exemptions are allowed to tax payers engaged in the manufacture
of certain goods such as, water treatment, bio-diesel, processed food etc and certain types
of establishments such as small scale industries, cottage industries that create jobs are also
exempted.

Customs Duty:

Customs duty in India falls under the Customs Act 1962 and Customs Tariff Act of 1975.
Customs duty is the tax levied on goods imported into India as well as on goods exported
from India. Taxable event is import into or export from India. Additionally educational cess is
also charged. The customs duty is evaluated on the value of the transaction of the goods.
The Central Board of Excise and Customs under the Ministry of Finance manages the
customs duty process in the country. The rate at which customs duty is applicable on the
goods depends on the classification of the goods determined under the Customs Tariff. The
Customs Tariff is generally aligned with the Harmonized System of Nomenclature (HSL). It
should be noted that preferential/concessional rates of duty are also available under the
various Trade Agreements.
Service Tax:

Service tax was introduced in India way back in 1994 and started with mere 3 basic services
viz. general insurance, stock broking and telephone. Subsequent Budgets have expanded
the scope of the service tax as well as the rate of service tax. More than 100 services are
subjected to tax under this provision. An education cess is also charged on the tax amount.
The Central Board of Excise and Customs under the Ministry of Finance manages the
administration of service tax.

Every service provider of a taxable service is required to register with the Central Excise
Office in the concerned jurisdiction. Exemptions are available for services that are exported,
small service providers whose revenue fall below the prescribed level, services provided to
UN and International Agencies and supplies to SEZ(Special Economic Zones). Subject to
conditions, service tax is not payable on value of goods and material supplied while
providing services.

Securities Transaction Tax (STT):

Transactions in equity shares, derivatives and units of equity-oriented funds entered in a


recognized stock exchange attract Securities Transaction Tax. Service Tax, Surcharge and
Education Cess are not applicable on STT. Taxation of profit or loss from securities
transactions depends on whether the activity of purchasing and selling of shares /
derivatives is classified as investment activity or business activity. Treatment of STT also
depends upon whether the income from these securities transactions are included under
the head “Income from Capital Gains” or under the head ‘Profits and Gains of Business or
Profession’.

NOTE:Goods and Service Tax:

The Indian Government is keen on merging all taxes like Service Tax, Excise and VAT into a
common Goods and Service Tax (GST). GST system has been proposed in order to simplify
current indirect tax system which is very tedious and complicated. All goods and services
will be brought into the GST base. There will be no distinction between goods and services.
Alcohol, tobacco, petroleum products are likely to be out of the GST regime. The state and
central combined tax rate is speculated to be between 16%-20% in line with the global
trend. Originally slated for implementation by the year 2010 it has been postponed twice
and now scheduled for the year 2012. The central and state tax authorities which had
locked horns earlier are seemingly nearing a consensus. If implemented this will be the most
outstanding reform ever to the Indian tax system.

STATE TAXES
Apart from the central taxes, the states also levy taxes on various good and services. Main
state taxes consist of:

Value Added Tax (VAT):

Sales tax charged on the sales of movable goods has been replaced with VAT in most of the Indian
states since 2005. This was introduced to counter the rampant double taxation issues and resultant
cascading tax burden that occurred due to the flaws inherent in the previous sales tax system.

VAT, chargeable only on goods and does not include services, is a multi-stage system of taxation,
whereby tax is levied on value addition at each stage of transaction in the supply chain. The term
‘value addition’ implies the increase in value of goods and services at each stage of production or
transfer of goods and services. VAT is a tax on the final consumption of goods or services and is
ultimately borne by the consumer. VAT comes under the state list. Tax payers can claim credit for
the taxes paid at earlier stages and purchases known as Input Tax Credit, by producing relevant tax
invoices. The credit can be used to set off any VAT tax liability.

Different rates of VAT are charged depending on the category to which the goods belong. Rates vary
for essential commodities, bullion and valuable stones, industrial inputs and capital goods of mass
consumption, and others. Petroleum tobacco, liquor and so on are subjected to higher rate and
differ from state to state.

Notably, there is no VAT on imports and export sales are not subjected to VAT. Therefore VAT
charged on inputs purchased and used in the manufacture of export goods or goods purchased for
export, is available as a refund.

Note: The Central Sales Tax which is levied on inter-State sales would be eliminated gradually.

OTHER KEY NOTES


Filing of VAT, CENVAT, Service Tax returns

Periodic returns must be submitted by companies registered for CENVAT or VAT/CST or


Service Tax in India.

 CENVAT filings are monthly, on the 10th day following the period end.

 VAT reporting is either monthly or quarterly, depending on the particular State’s


rules.

 Service Tax filings are bi-annual.

Permanent Account Number (PAN)

PAN is an all India, unique ten-digit alphanumeric number, issued in the form of a laminated card by
the Income Tax Department.
Who Must Have a PAN?

Every person,—

 if his total income or the total income of any other person in respect of which he is
assessable, during any previous year, exceeded the maximum amount which is not
chargeable to income-tax; or

 carrying on any business or profession whose total sales, turnover or gross receipts are or is
likely to exceed INR 500,000 in any previous year; or

 who is required to furnish a return of income or

 being an employer, who is required to furnish a return of fringe benefits

PAN is increasingly being recognized as a valid Identity Proof across India and a mandatory
document for important transactions such as purchase of property, motor vehicles, share
transactions, opening of bank accounts, obtaining loans, maintaining deposits etc., therefore any
person not fulfilling the above conditions may also apply for allotment of PAN.
TAX DEDUCTED AT SOURCE (TDS)
TDS is one of the modes of collection of taxes, by which a certain percentage of amounts are
deducted by a person at the time of making/crediting certain specific nature of payment to
the other person and deducted amount is remitted to the Government account. It is similar
to "pay as you earn" scheme also known as Withholding Tax in many other countries, one of
the countries is USA. The concept of TDS envisages the principle of "pay as you earn". It
facilitates sharing of responsibility of tax collection between the deductor and the tax
administration. It ensures regular inflow of cash resources to the Government. It acts as a
powerful instrument to prevent tax evasion as well as expands the tax net.

Who shall deduct tax at source?


Every person responsible for making payment of nature covered by TDS provisions of
Income Tax Act shall be responsible to deduct tax.
However in case of payments made under sec. 194A, 194C, 194H, 194I and 194J in respect
of individual and HUF, only if the turnover or professional receipt exceeds sum of Rs. 40 lakh
or Rs. 10 lakh respectively (the limits will be Rs.60 Lakh or Rs. 15 Lakh respectively w.e.f.
01.07.2010) in previous year, he is required to deduct tax at source.
These persons are mainly:
 Principal Officer of a company for TDS purpose including the employer in case of
private employment or an employee making payment on behalf of the employer.
 DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as
such.
 In the case of "interest on securities" other than payments made by or on behalf of
the Central govt. or the State Government, it is the local authority, corporation or
company, including the Principal Officer thereof.
Such person is called Deductor while the person from whom the tax is deducted is
called Deductee.
Tax must be deducted at the time of payment in cash or cheque or credit to the payee's
account whichever is earlier. Credit to payable account or suspense account is also
considered to be credit to payee's account and TDS must be made at the time of such credit.
What a deductor must do?
1. Obtain TAN

 Every deductor is required to obtain a unique identification number called TAN (Tax
Deduction Account Number) which is a ten digit alpha numeric number
e.g.DELH90468K.
 This number has to be quoted by the deductor in every correspondence related to
Income Tax matters concerning TDS.
2. He/She should obtain PAN of the deductee.
3. He/She should deduct the tax at correct rate.

4. The tax deducted has to be deposited in the designated banks withinspecified


time. (Govt. deductor shall transfer the tax deducted through book entry in Government
account).This is detailed below:

 By or on behalf of the Government: on the same day,


 By or on behalf of any other person: before the 7th of the following month.

However, if the amount is credited in the books on 31st March then the tax should be
remitted by 31st May.

Note: w.e.f., 01.04.2008 electronic payment of tax has to be done by all corporate
assesses and all persons whose cases are auditable under section 44B.

5. Use challan no. 281 for depositing TDS amount.


6. File statements of tax deduction in the prescribed time.

The due dates for filing of TDS/TCS statement are :

15th of July for Quarter 1,


15th of October for Quarter 2,
15th of January for Quarter 3 and
15th June for last Quarter however for TCS statements the due date is 30th April.

7. Use correct form to file TDS/TCS Returns.They are:

Form 24Q for salaries

Form 26Q for non-salaries

Form 27EQ for TCS


Form 27A/27B Control sheet for electronic TDS/TCS

It may be noted that the following persons have to compulsorily file e-TDS /e-TCS
statements

 All government offices/Departments


 All companies /corporations
 All persons whose cases are auditable
 All persons whose TDS statements contain more than 50 deductees.

Dos & Dont's for filing TDS Returns


Dos

 Ensure that TDS return is filed with same TAN against which TDS payment has been
made & TDS certificate is issued.
 Ensure that correct challan particulars including CIN and amount is mentioned.
 Correct PAN of the deductee is mentioned.
 Correct section is quoted against each deductee record.
 Correct rate is quoted against each deductee record.
 File correction statement as soon as discrepancy is noticed
 Retain the original FVU file to enable future corrections
 Make use of free of charge RPU provided through TIN-NSDL.com
 Download details of challan from challan status enquiry (TAN based view) from TIN-
NSDL.com
 Registration for TAN enables you to avail additional facilities from Tax Information
System.
 Always verify status of TDS returns from Tin NSDL to ascertain the discrepancy, if
any, and/or whether your TDS return stands accepted or rejected by the system.

Dont's

 Don't file late returns as it affects deductee tax credit


 Don't quote incorrect TAN vis-à-vis TDS payments

The process of filing of e-TDS /e-TCS returns is available in detail at following


websites www.incometaxindia.gov.in or http://tin-nsdl.com.

8. Issue TDS certificates as per existing procedure and within the time prescribed as stated
below:

The certificate should be issued within one month from the end of the month in which
the income is credited however for credit entries made on 31st March, due date is
7th June, except in the case of salary where the certificate has to be issued by 30th of
April of the following financial year in which the income was credited in the prescribed
preformat i.e. Form No.16A.

9. File e-TBAF (In case of Govt. DDO's where TDS is credited in Central Govt. account
through book adjustments)

TAN(Tax Deduction Account Number)


Every deductor is required to obtain a unique identification number called TAN (Tax
Deduction Account Number) which is a ten digit alpha numeric number. This number has to
be quoted by the deductor in every correspondence related to TDS.

Format of TAN:

Procedure for getting TAN :


It can be obtained by filing an application in form no. 49B to any of the TIN facilitation
Centres (TIN-FC) namely NSDL. Addresses of the TIN-FC as well as the forms can be
downloaded from the website www.incometaxindia.gov.in or http://tin-nsdl.com. The fee
for processing TAN application is Rs. 60/-. This can be paid by:

 Cash at TIN-FC counter


 Demand draft or
 Cheque or
 Credit card

The demand draft/ cheque shall be in favour of 'NSDL-TIN'.

TAN number will be communicated to the deductor by NSDL.


Procedure To Pay TDS:
NATURE OF PAYMENTS ATTRACTING TDS AND RATES
THEREON:
TDS on Salary [Sec. 192]:-
Any person responsible for paying any income chargeable under the head “Salaries” shall, at
the time of payment, deduct income-tax on the amount payable at the average rate of
income-tax on the estimated income of the assesse under this head for that financial year.
Donations:-

The employer should not give any deduction in respect of donations given by an employee
to a notified public charitable institute. However, Prime Minister’s Drought Relief Fund,
National Children’s Fund etc. are out of the purview of above circular.

TDS on Interest on Securities [Sec. 193]:-


The person responsible for paying to a resident any income by way of interest on securities
shall, at the time of credit of such income to the account of the payee or at the time of
payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is
earlier, deduct income-tax on the amount of the interest payable.
No TDS or TDS at lower rates:-

a) Interest on Debentures:
i) Debentures are issued by a Public Limited Company
ii) Debentures are listed on a recognized stock exchange
iii) Interest is paid by an account payee cheque
iv) Interest does not exceed Rs.2, 500/- during the financial year then no TDS is required to
be deducted
b) Interest payable on any security of the Central Government or a State Government
(except interest on 8% Savings (Taxable) Bonds, 2003 exceeding Rs.10, 000/-)
c) Interest payable to the LIC, or GIC, or four subsidiary companies of GIC, or any other
insurer.

TDS on Dividend [Sec. 194]:-


The principal officer of an Indian company or a company which has made the prescribed
arrangements for the declaration and payment of dividends (including dividends on
preference shares) within India, shall, before making any payment in cash or before issuing
any cheque or warrant in respect of any dividend or before making any distribution or
payment to a shareholder, of any dividend deduct from the amount of such dividend,
income-tax at the rates in force
No TDS or TDS at lower rates:-

a) Dividend covered u/s 115-O:


b) Dividend up to Rs. 2, 500/- during the financial year by an account payee cheque
c) Dividend to LIC/GIC.

TDS on Interest other than Interest on Securities [Sec. 194A]:-


Any person, not being an individual or a HUF, who is responsible for paying to a resident any
income by way of interest other than interest on securities, shall, at the time of credit of
such income to the account of the payee or at the time of payment thereof in cash or by
issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax
thereon at the rates in force.
Individuals or HUFs whose turnover exceeded Rs.40 lakh in case of business and Rs.10 lakh in
case of profession during the preceding financial year shall be liable to deduct TDS.
No TDS or TDS at lower rates:-

a) Income, paid or payable, by a person during a financial year doesn't exceed:


i) Rs.10, 000/- where the payer is a banking company or any bank or banking institution or
co-operative society carrying on the business of banking
ii) Rs.10, 000/- on any deposit with post office under notified scheme of Central
Government
iii) Rs.5, 000/- in any other case
However, in case of interest on fixed time deposits (other than recurring deposits) with
banking company or co-operative society referred to above or interest on deposits with
housing finance companies, the aforesaid limits of Rs.5,000/- or Rs.10,000/- shall be
computed branch-wise
b) No TDS on interest credited or paid by Firm to its Partners.
c) Interest on compensation amount awarded by the Motor Accidents Claims Tribunal
where the amount thereof does not exceed Rs.50, 000/- during the financial year.

TDS on Winnings from Lotteries or Crossword Puzzles [Sec. 194B]:-


The person responsible for paying to any person any income by way of
a) Winnings from any lottery or
b) Crossword puzzle or
c) Card game and other game of any sort in an amount exceeding Rs.5,000/- shall, at the
time of payment thereof, deduct income-tax thereon at the rates in force.
Where the winnings are wholly in kind or partly in cash and the part in cash is not sufficient
to meet the liability of TDS then the person responsible for paying shall ensure that tax has
been paid in respect of the whole of the winnings.

TDS on Winnings from Horse Races [Sec. 194BB]:-


Any person, being a bookmaker or a person to whom a licence has been granted by the
Government and who is responsible for paying to any person any income by way of
winnings from any horse race exceeding Rs.2,500/- shall, at the time of payment thereof,
deduct income-tax thereon at the rates in force.

TDS on Payments to Contractors [Sec. 194C]:-


Any person responsible for paying any sum to any resident (contractor) for carrying out any
“work” (including supply of labour for carrying out any work) in pursuance of a contract
between the contractor and a “specified person” shall, deduct TDS at -
a) 1% if payee is individual or HUF
b) 2% for other payees
“Specified Person” (Payer):-

a) Central Govt. or State Govt.


b) Any local authority
c) Any company
d) A co-operative society
e) Any statutory corporation
f) A university
g) A trust
h) A firm
i) A registered society
j) Any housing board authority
k) Any Government of a foreign State or a foreign enterprise or any association or body
establishedoutside India

l) An AOP/BOI covered under audit during preceding financial year


m) Individuals or HUFs whose turnover exceeded Rs.40 lakh in case of business and Rs.10
lakh in case of profession during the preceding financial year.
“Work” shall include:-

a) Advertising
b) Broadcasting and telecasting including production of programmes for such
Broadcasting or telecasting
c) Carriage of goods or passengers by any mode of transport other than by railways
d) Catering
e) Manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from such customer (job work) (if material is
purchased from a person other than such customer then it will not fall under the purview of
“work”)
TDS on such job work will be deducted on invoice value excluding value of material if it is
mentioned separately in the invoice otherwise on entire invoice value.
Other Conditions:-

1. No deduction shall be made if sum paid or payable to contractor does not exceed Rs.20,
000/- and the aggregate of amounts of such incomes during the financial year does not
exceed Rs.50,000/-
2. In case of payments in course of goods transport business no TDS shall be deducted if
PAN is furnished by the payee. However if PAN is not furnished then the applicable rate of
TDS is 20%
3. Reimbursement of expenses liable for TDS u/s 194C.

TDS on Insurance Commission [Sec. 194D]:-


Any person responsible for paying to a resident any income by way of remuneration or
reward, commission or otherwise, for soliciting or procuring insurance business (including
business relating to the continuance, renewal or revival of policies of insurance) shall,
deduct income-tax thereon.
No deduction shall be made when amount of such commission does not exceed Rs.5, 000/-
during the financial year.
TDS on Payments to non-resident sportsmen or sports associations
[Sec. 194E]:-
Where any income referred to in section 115BBA is payable to a non-resident sportsman
(including an athlete) who is not a citizen of India or a non-resident sports association or
institution, the person responsible for making the payment shall, deduct income-tax
thereon at 10%.
According to Sec. 115BBA income by way of
a) Participation in India in any game or
b) Advertisement or
c) Contribution of articles relating to any game or sport in India in newspapers, magazines or
journals.

TDS on Payments in respect of Deposits under NSS etc. [Sec.


194EE]:-
The person responsible for paying any amount referred to in clause (a) of sub-section (2) of
section 80CCA i.e. payments in respect of deposits under National Savings Scheme will
deduct TDS at 20% at the time of payment.

TDS on Payments on account of repurchase of units by Mutual


Funds etc. [Sec. 194F]:-
The person responsible for paying to any person any amount referred to in sub-section (2)
of section 80CCB shall, at the time of payment thereof, deduct TDS at the rate of 20%.

TDS on Commission etc. on the sale of lottery tickets [Sec. 194G]:-


Any person who is responsible for paying to any person, who is or has been stocking,
distributing, purchasing or selling lottery tickets, any income by way of commission,
remuneration or prize (by whatever name called) on such tickets in an amount exceeding
Rs.1,000/- shall, deduct TDS at the rate of 10%.

TDS on Commission or Brokerage [Sec. 194H]:-


Any person, not being an individual or a Hindu undivided family, who is responsible for
paying, to a resident, any income by way of commission (not being insurance commission
referred to in section 194D) or brokerage, shall, deduct TDS thereon at the rate of 10%. No
TDS to be deducted if amount does not exceed Rs.2, 500/-.
Individuals or HUFs whose turnover exceeded Rs.40 lakh in case of business and Rs.10 lakh
in case of profession during the preceding financial year shall be liable to deduct TDS.
No deduction shall be made under this section on any commission or brokerage payable by
Bharat Sanchar Nigam Ltd. or Mahanagar Telephone Nigam Ltd. to their public call office
(PCOs) franchisees.

TDS on Rent [Sec. 194I]:-


Any person, not being an individual or a HUF, who is responsible for paying to a resident any
income by way of rent, shall, deduct income-tax thereon at the rate of :
a) 2% for the use of any machinery or plant or equipment; and
b) 10% for the use of any land or building (including factory building) or land appurtenant to
a building (including factory building) or furniture or fittings
No TDS is deductible if payment during the financial year does not exceed Rs.1, 20,000/-
“Rent”:-

'Rent' means any payment under any lease, sub-lease, tenancy or any other agreement or
arrangement for use of any –
(a) Land; or
(b) Building (including factory building); or
(c) Land appurtenant to a building (including factory building); or
(d) Machinery; or
(e) Plant; or
(f) Equipment; or
(g) Furniture; or
(h) Fittings
It is irrelevant whether or not such assets are owned by the payee.
Non-refundable deposit:-

TDS will be applicable if deposit is non-refundable as it represents consideration for the use
of land or building etc. If deposit carries interest then TDS on such interest will be covered
u/s 194A. (Circular No. 718 dated 22nd Aug, 1995)
If Rent includes municipal tax, ground rent:-
If rent includes municipal taxes & ground rent and the same has been borne by tenant then
TDS will be deducted on such sum (Circular No. 718 dated 22nd Aug, 1995)
When different payees are there

When rent is paid to different payees then the limit of Rs.1,20,000/- will apply to each payee
separately
TDS on Service Tax Component of Rent:-

According to the circular no. 4/2008 dated 28th Apr, 2008 TDS will not be deducted on the
service tax component of rent.
However the benefit of the above circular had been restricted only to Sec. 194I by Board.

TDS on fees for Professional or Technical Services [Sec. 194J]:-


Any person and individual or HUFs whose books of accounts were required to be audited
during the preceding financial year, who is responsible for paying to a resident any sum by
way of fees for professional services, or fees for technical services or royalty shall be liable
to deduct TDS at the rate of 10% of such amount.No TDS will be deducted if amount payable
does not exceed Rs.20,000/- during the financial year.

“Professional Services” means:

Services rendered by a person in the course of carrying on


a)legal, medical, engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or advertising or
b) Any other profession notified u/s 44AA; or
c) Any other profession notified for purpose of this section. The services notified u/s 194-J
are services rendered by following persons in relation to the sports activities: Sports
Persons, Umpires and Referees, Coaches and Trainers, Team Physicians and
Physiotherapists, Event Managers, Commentators, Anchors and Sports Columnists.

Reimbursement of expenses

Reimbursement of expenses for which bill is separately raised did not attract provisions of
Section 194J. That is to say if a consolidated bill is issued by a professional or consultant then TDS
will beapplicable on the entire amount of bill.

TDS on compensation on acquisition of capital asset [Sec. 194L]:-


Any person responsible for paying to a resident any sum, being in the nature of
compensation or the enhanced compensation or the consideration or the enhanced
consideration on account of compulsory acquisition, under any law for the time being in
force, of any capital asset, shall, deduct an amount equal to 10% of such sum as TDS
thereon.
However, TDS will not be deducted if amount of such compensation or consideration does
not exceed Rs.1,00,000/-.

TDS on compensation payable on compulsory acquisition of


immovable property [Sec. 194LA]:-
Any person responsible for paying to a resident any sum, being in the nature of
compensation or the enhanced compensation or the consideration or the enhanced
consideration on account of compulsory acquisition, under any law for the time being in
force, of any immovable property (other than agricultural land), shall, deduct an amount
equal to 10% of such sum as TDS thereon.
However, TDS will not be deducted if amount of such compensation or consideration does
not exceed Rs.1, 00,000/-.

TDS on other sums [Sec. 195]:-


Any person responsible for paying to a non-corporate non-resident, or to a non-domestic
company, any interest (other than interest on securities) or any other sum (not being
Salaries) shall, deduct income-tax thereon at the rates in force.
Gist of Rates of Tax Deduction at Source:-

Certificate of lower rate from A.O. [Sec. 197]:-


The recipient of income can apply in Form 13 to get certificate authorizing the payer to
deduct tax at lower or deduct no tax as may be appropriate. The recipient may apply in
respect of Sec. 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194I, 194J, 194K, 194LA & 195
i.e.but not in respect of Sec. 194B, 194BB, 194E, 194EE, 194F & 194L.

No Deduction in certain cases [Sec. 197A]:-

If the above conditions are satisfied then TDS will not be deductible if a declaration is
submitted in duplicate in Form 15H (for senior citizen) Form 15G (for others).
TDS DEFAULTS
Failure to deduct the whole or part of the Tax at source (non-deduction, short deduction or
delay in deduction)

1. Failure to deposit whole or part of the TDS (non-deposit, short deposit or late deposit)

2. Failure to apply for TAN within the prescribed time limit or failure to quote TAN on
allotment as required under section 203A.

3. Failure to furnish, in due time, TDS returns or TDS certificates or to deliver or cause to
be delivered a copy of declaration in form no. 15H/15G/27C/copy of quarterly statement.

4. Failure to mention the PAN of the deductee in all quarterly statements as well as in all
certificates furnished.

Consequences of Defaults:
The following chart indicates the nature of default and its consequences which range
from penal interest, penalty to prosecution:
TAX COLLECTED AT SOURCE (TCS)

What is TCS?
The seller has to collect tax from the payer who has purchased the following items :

 Alcoholic liquor for human consumption


 Tendu leaves
 Timber obtained under a forest lease
 Timber obtained by any mode other than under a forest lease
 Any other forest produce not being timber or Tendu leaves
 Scrap
 Parking lot
 Toll plaza
 Mining and quarrying

The TCS on the above mentioned items vary from 1% to 5%

Deposit of TCS amount- within seven days of the following month.

Issue of TCS certificate- within in one month of collection /debit (form 27D)

The rates of TCS for representative purpose (Financial Year 2010-11):


BIBLIOGRAPHY
 http://www.sbpinstitute.in/india-tax-structure-html

 http://www.incometaxindiapr.gov.in/incometaxindiacr/ppt_html20081017/TDSTutorial/TDS
trial_print.html

 http://www.slideshare.net/chandangupta2901/tds-tax-deducted-at-source?qid=8778de6b-
e9e6-4b85-8595-fbf828a03cec&v=qf1&b=&from_search=1

 http://www.indiainbusiness.nic.in/investment/taxation.htm

 http://download.nos.org/srsec311new/L.No.40-A.pdf

 http://en.wikipedia.org/wiki/Taxation_in_India

 http://www.panasonic.com/in/home/