Modes of Tax Recovery

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March 4, 2009
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AD - Tax
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2
Tax Deducted at
Source
TDS is one of the
TDS is one of the
several modes of
several modes of
recovery of Tax for the
recovery of Tax for the
Government
Government
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March 4, 2009
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Importance of TDS
Q
Growing source of revenue
Q
World wide experience
Q
Brings more income in tax
net
Q
New tax payers
Q
Low cost of collection
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March 4, 2009
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AD - Tax
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4
Duty of the Tax Deductor
×
Get TAN – One TAN for each
RO
×
Deduct tax
×
Remit tax within due dates
×
File quarterly e-TDS return
×
Issue TDS certificate
×
Send 15H / 15G Forms etc.
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Consequence in case of default
A
Responsible for payment of tax
amount due
A
Disallowance u/s 40a(ia) of the IT
Act
A
TRO can initiate recovery
proceedings
A
Interest u/s 201(1A) @ 1% p.m.
w.e.f 01 April 2008
A
Penalty u/s 271 C - Amount of
tax
A
Prosecution u/s 276 B
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March 4, 2009
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TDS - Major Heads
TDS on Salary [Sec 192]
TDS on Interest paid on Securities [Sec
193]
TDS on Deposits [Sec 194A]
TDS on Contract [Sec 194C]
TDS on Prof. & Tech. Service [Sec 194J]
TDS on Rent [Sec 194I]
TDS on payment made to Non Residents
[Sec 195]
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March 4, 2009
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7
Due Date for Deposit of TDS
v
When Tax is deducted by
Government or on behalf of
Government – Same Day
v
Tax Deducted by any other person:
{
u/s 192 – within 7 days from the end of the
month in which tax is deducted
{
In all cases tax has to be remitted within 7
days from the end of the month in which
the deduction is made
{
Except u/s 192, in all other cases if Tax is
deducted on the last day of the FY i.e 31
March, then the due date will be 2 months
from that date i.e 31 May,
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Surcharge for the AY 2009-10
*
Surcharge is applicable @ 10% on Tax
*
Education Cess is applicable @3% on Tax
plus Surcharge [2% EC and 1% SHEC]
*
Surcharge is not applicable in the following
cases:

If the recipient is an individual, HUF, BOI or AOP
and the aggregate of payment made during the
financial year does not exceed Rs.10 lakh, or

If the recipient is a co-operative society, local
authority, firm or a domestic company and the
aggregate of payment made during the
financial year does not exceed Rs.1crore
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March 4, 2009
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TDS on Salary [Sec
192]
To be deducted by employer at average
rate for each employee
Eligible deductions and exemptions under
the IT Act to be considered
Perquisites to be added to the income
Other Income declared by the employee
including TDS thereon and Loss from HP
shall be considered
Tax on NMP can be borne by the employer
u/s 192(1A) of the IT Act
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Important Deductions and
Exemptions
House Rent Allowance
Leave Travel Concession
Transport Allowance
Traveling / Transfer Allowance
Medical Facility
Uniform Allowance
Deduction under Chapter VI A
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Certificates given by the
employer
Form 16AA – If the employee is
Resident and his Income under the head
“Salary” does not exceed Rs. 1,50,000/-
Form 16 – If the Income under the head
Salary is in excess of Rs. 1,50,000/-
Form 12BA – If the salary payable to an
employee is more than Rs. 1,50,000/-
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Interest on Security [Sec
193]
+
Tax to be deducted on interest paid on
securities [Bonds, Debentures etc.]
+
Deduction to be made either at the time of
payment or at the time of credit in the books
whichever is earlier
+
Tax need not be deducted if the aggregate
interest paid to the individual during the FY is
Rs.2500/- or less provided the interest is paid
byway of “a/c payee” crossed cheque
+
TDS certificate to be issued within one month
[Form 16A]
+
Corporate Bonds issued in demat form and
listed on recognized stock exchanges are
exempted from TDS from 01 June 2008
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TDS on Interest other than
Interest on Securities [Sec
194A]
v
Payer – Other than individual and HUF
whose books are not required to be
audited u/s 44AB of the IT Act 1961
v
Payee – Any resident
v
Applicability – Where Interest paid to any
person exceeds Rs. 5000/- (Rs. 10000/- in
case of Interest paid by Banks, Post
Office and Co-op society) during the FY
v
Rate of TDS – 20% for corporate and 10%
for others
v
Deposit in Joint name
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Exempted u/s 194A
Aggregate interest paid does not exceed Rs.
5000/- or Rs. 10000/- as the case may be
Interest paid to Banking Company, Co-op
Bank, PFI, LIC, UTI, Insurance company or
notified institutions
Interest paid by the Firm to its partners
Interest paid by Co-op society to its members
Interest paid on instruments issued by Post
office, KVP, NSC and IVP
Interest paid on deposits with PACs and
PCARDBs
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March 4, 2009
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TDS on Contract [Sec 194C]
+
Nature – Payment made to any resident
contractor for “work contract” including
supply of labour for carrying out any
work
+
Applicability – Where a single payment
exceeds Rs. 20000/- or aggregate
payment during the FY exceeds Rs.
50000/-
+
Rate of TDS – 2% [1% in case of
Advertising contract and payment to
subcontractor]
+
When to deduct – At the time of
payment or at the time of credit,
whichever is earlier
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Sec 194C – Contd…..
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Section 194C applies for carrying out
any work including, transport contracts,
service contracts, advertisement
contracts, broadcasting contracts,
telecasting contracts, labour contracts,
material contracts and works contracts.
If advance payments made to the
contractor, tax to be deducted on such
advance also
Sec 194C – Contd…..
Payment towards the following
attracts TDS u/s 194C:
I
Printing office stationery
I
Taxi hiring charges
I
Advertisement
I
Catering services
I
Courier service
I
Maintenance including security
contract
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March 4, 2009
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TDS on Rent u/s 194I

Nature – Payment of ‘Rent’ to any
resident person

Applicability – Where the payment of
Rent exceeds Rs. 1,20,000/- during
the FY

Rate of TDS (P&M) – 10% for all
recipients

Rate of TDS (Other than P&M) – 15% if
the recipient is individual or HUF, 20%
in any other case

When to deduct – At the time of
payment or at the time of credit,
whichever is earlier
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March 4, 2009
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Rent – Definition
Rent means any payment by whatever name called, under
any lease, sublease, tenancy or any other agreement or
arrangement for the use of (either separately or together) any:
(a) Land; or (e) Plant; or
(b) Building; or (f) Equipment; or
(c) land appurtenant to a building
(including factory building); or
(g) Furniture; or
(d) machinery; or (h) Fittings
whether or not any or all of the above are owned by the payee
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Section 194I ……..
h
Payment to Hotel
h
If taken on regular basis – Attracts
(Holiday Home)
h
If rent paid by the employee – Does not
attract
h
Rate Contract – Does not attract
h
If rent paid separate for building and
separate for furniture, Tax to be
deducted on the composite payment
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March 4, 2009
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Section 194I ……..
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Where there are multiple ownership of
asset, the exemption limit of Rs.
1,20,000/- is applicable for each of the
owner
TDS is applicable on deposit of Rent
Advance, if the same is non refundable
Interest on Deposit of Advance Rent, if
any should be subjected to TDS u/s 194A
Subletting of rented land / building will
also be covered u/s 194I
TDS – Professional and
Technical Services [Sec 194J]
×
Nature – Payment made towards
“professional and technical services”
×
Applicability – Where the aggregate
payment made during the FY exceeds
Rs. 20000/-
×
Rate of TDS – 10% w.e.f 01 June 2007
×
When to deduct – At the time of
payment or at the time of credit,
whichever is earlier
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March 4, 2009
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TDS – Professional and
Technical Services [Sec 194J]
¿
Professional services includes legal,
medical, engineering, architectural,
accountancy, technical consultancy,
interior decoration, advertising, film
artistes
¿
Technical services- rendering any
managerial, technical, consultancy
services
¿
w.e.f 13 July 2006, 194J is also
applicable to Royalty and payment in
the nature of non-compete fees and
exclusivity rights
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194J – Fees paid
H
Advocates, Lawyers, Retainers,
Legal Consultants
H
Chartered Accountants, Cost
Accountants
H
Engineers, Chartered Engineers,
Architects
H
Surveyors, Approved Valuers
H
Interior Decorators, Decoration
Consultants
H
Gross payments to hospitals &
nursing homes
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194J – Fees paid Contd….
Merchant Bankers, Registrars, Credit
rating agencies
Pagers, Internet, Database / Data mail
services
Port charges, Interconnect charges
Consultants (TQM, ISO-9002etc.)
Event Management, Marketing Research,
Celebrity Endorsement
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194J – w.e.f 21.08.2008
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Sports Persons
Umpires and Referees
Coaches and Trainers
Team Physicians and Physiotherapists
Event Managers
Commentators
Anchors and
Sports Columnists
Reimbursement – 194C &
194J
B
Reimbursement – If Consolidated Bill given,
then Tax is to be deducted on the gross bill
B
If Separate Bill is given for Reimbursement,
Tax need not be deducted for the
reimbursement
B
Service Tax - ???
B
Should be considered for TDS since Service
Tax is a part of the Bill and it cannot be
claimed separately
B
Service Tax need not be considered for
TDS u/s 194I as per CBDT Circular No.4
dated 28 April 2008
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March 4, 2009
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Payment to Non Resident
[Sec 195]
Nature – Covers all types of payment
made to Non Residents / Foreign
companies (Except Salary)
Applicability – Any sum which is taxable in
India in the hands of the recipient
When to deduct – On actual payment for
PFIs, PSBs and Government
Interest paid on CGB, Rural Bonds to NRIs
covered under this section
Rate of TDS varies for each type of
payment and also depends on DTAA
TDS rate for interest paid u/s 195 is 20%
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Cert. for deduction at lower rate –
Sec 197
Sections Covered:
192 194A 194G 194J
193 194C 194H 194K
194 194D 194I 195
Y
Recipient to make an application with AO in
Form 13 for no deduction or deduction at lower
rate
Y
Based on the Certificate by the AO TDS may be
deducted at a lower rate or no TDS deducted
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Declaration by Recipient –
Sec 197A
E
Section covered:

Any person not being a company or Firm - 193,
194A or 194K
E
Recipient to furnish declaration in Form 15G / 15H
E
Conditions:

Recipient is a person as given above

Tax on the estimated income of the Recipient
for the FY will be Nil

The amount of income covered by sections
193,194,194A, does not exceed Rs.1,50,000/-
(Being the maximum amount not chargeable to
tax for the AY 2009-10)
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TDS on Income of NABARD
The provisions explained above are
equally applicable when others make
payment to NABARD
Action Points:
+
Account the Gross amount received including
the TDS.
+
Follow up with the Deductor to get the TDS
certificate in Form 16A
+
Forward the Form 16A to Tax Cell immediately
on receipt.
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March 4, 2009
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E-TDS Returns
¤
Mandatory filing of e-TDS u/s 200(3) of the
IT Act, 1961 read with Rule 37, 37A and
37B of the IT Rules 1962
¤
e-TDS return to be filed for every quarter.
¤
The scheme is effective from the AY 2005-
06 onwards
¤
Quoting of PAN – Mandatory
¤
From the quarter ending 31 March 2008,
atleast 95% of the records in Form 24Q
and 85% of the records in Form 26Q should
contain valid PAN. Else the return will not
be accepted
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Due Date - Salary
Form No. Particulars Dute date
24Q For quarter ending
June 30
July 15
24Q For quarter ending
September 30
October 15
24Q For quarter ending
December 31
January 15
24Q For quarter ending
March 31
June 15
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Payment other than salary to
resident
Form No. Particulars Dute date
26Q For quarter ending
June 30
July 15
26Q For quarter ending
September 30
October 15
26Q For quarter ending
December 31
January 15
26Q For quarter ending
March 31
June 15
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Payment other than salary to
Non- Resident
Form No. Particulars Dute date
27Q For quarter ending
June 30
July 14
27Q For quarter ending
September 30
October 14
27Q For quarter ending
December 31
January 14
27Q For quarter ending
March 31
June 14
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Computation of Interest (w.e.f 01
April 2008)
º
Section 201 of the IT Act – Interest to be paid
on delayed remittance of TDS @1% p.m
º
Interest is to be computed for the period from
the date of tax deductible till the date of
remittance
º
As per Rule 119A of the IT Rules, the period of
delay has to be rounded off to a whole month
and any fraction of the month shall be treated
as a complete month.
º
For the aforesaid purpose a month consist of
30 days
º
The amount on which Interest is computed is
to be rounded off to the nearest Rs. 100 and
any fraction shall be ignored
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Interest - Example
Tax Deducted – Rs. 9585
Date of deduction – 10 November 2007
Due Date – 07 December 2007
Date of Remittance – 25 December 2007
No of days delay – 45 days
Interest Calculation:
-
9500*1%*2 = Rs. 190/-
-
Interest payable = Rs. 190/-
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Rounding off of Tax
º
As per Section 288B of IT Act, any
payment to the IT Dept. shall be
rounded off to the nearest Rs. 10/-.
º
The amount of Rs.5 and above
should be rounded off to the higher
Rs.10/- and less than Rs. 5 shall be
rounded off to the lowest Rs. 10/-.
º
The Difference resulting in the
rounding off shall be adjusted in the
Tax component
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March 4, 2009
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AD - Tax
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39
QUESTIONS
PLEASE
Phone – 022
26539327
Mobile -
09324404591
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March 4, 2009

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