STUDY OF THE PROVISIONS OF

TAX DEDUCTED AT SOURCE(TDS)

& TAX COLLECTION AT SOURCE
(TCS) ALONG WITH PROVISIONS
RELATES TO CASH TRANSACTIONS
CH.KRISHNA
M.Com., L.L.B,CA Final
AGM_F&A
2
 INDEX

 Purpose of TDS
 STEPS IN TDS
 About TAN
 Basic Concepts in TDS
How to decide status of PAN Holder.
Check-list to decide TDS section and
Rate of TDS
Study of provisions of each section.
TDS Rates
Effects of violation of TDS provisions
Provisions relates to cash transactions.
Provisions of T C S
 Purpose of TDS
TDS is one of the mode 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 like USA. The concept of TDS envisages the
principle of "pay as you earn".
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.

To avoid cases of tax evasion, the Income-Tax Act has made
provisions to collect tax at source on accrual of income. Cases included in
the scheme are, generally, those where income can be computed at the
time of accrual of income. Under this scheme, persons responsible for
making payment of income covered by the scheme are responsible to
deduct tax at source and deposit the same to the Government’s treasury
within the stipulated timelines.
Setps In TDS
 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. This
number has to be quoted by the deductor
in every correspondence related to TDS
• OUR HNL TAN NO:
:HYDH04685C
• (first 4 alphabets next 5 numbers last 1 alphbet)
 Tax Deduction & Collection Account Number

 Every person deducting tax or collecting tax should

obtain a tax deduction & collection number
 Such person should quote such number in every
challan for payment, in every certificate furnished.
 In all the TDS returns delivered
 In all other documents pertaining to such transaction
as may be prescribed in the interest of revenue.
 BASIC CONCEPTS TO BE FOLLOWED WHILE APPLYING THE PROVISION OF TDS

Services/works which involves higher input cost to provide service or to

complete the work, all these are grouped under section 194 C and TDS rates are
provided at lower rate i.e 1 or 2%. Examples of services/works covered under this
groups are.
a. All works contracts: Like construction of buildings, installation of machinery ,
supply of man power, Freight Payments etc
b. Renting of Immovable properties are grouped under section 194 I and TDS
rates are provided at Higher rate i.e @10%. Examples renting of house
properties /commercial properties /Lands. Payments covered under this
group does not involve any higher input cost as compare to payments
covered U/s 194C
 Renting of Movable properties are grouped under separate category under
section 194 I and TDS rates are provided at Lower rate i.e 2%. Examples
renting of Machinery/Generators/Office equipment. Expenses covered under
this head is similar to items covered under section 194 C
 BASIC CONCEPTS TO BE KEPT IN MIND WHILE APPLYING THE PROVISION OF TDS

 Commission or Brokerage ( 194 H) : Paid to person acting on behalf of

another person for services rendered not being professional services. like
identification of properties, customers etc. Mostly these type of services are
one time services. As these services does not involve any input cost to render
the services, TDS rate is provided at 5% .(Limit 15000/-)
 Fee for Professional Services or Technical services (194 J): Difference
between services covered U/s 194H and 194 J is under 194J all professional
services are covered and persons offering these services should have
professional/technical qualifications. Examples of services are legal, medical,
engineering, architectural , consultancy and accountancy etc. To perform
these services, only professional skills and experience is required and no
other input cost is involved, TDS rates are provided at higher rate i.e 10% for
professional services and @2% for technical services (Rs.30,000/-)
 HOW TO DECIDE STATUS OF PAN HOLDER

• For easy application of TDS provisions,

status of persons are divided into two
categories i.e 1)Companies 2) Other than
companies.
• Other than companies includes only
Individuals and HUF
• Go through the following procedure to
know the status of pan holder for proper
application of TDS provisions
 In the PAN number, 4th letter will indicate the status of holder. Example if the 4th
letter is C the status of Holder is Company, below is the list of holders status decided
based on 4th letter

S.NO PAN NUMBER STATUS OF HOLDER

1 AAA PH2778K PERSON/INDIVIDUAL

2 AAA HH2778K HUF
3 AAA FH2778K Firm
4 AAA CH2778K Company

5 AAA AH2778K Association of Persons

6 AAA TH2778K Trust
 CHECK-LIST
Once the Accountant receive any invoice he should go through the check-list ( given
separately) to avoid Non or Short deduction of TDS.

Answer TDS to be
S.No Description Of Invoice (Yes/No) Deducted or Not Remarks

If it is for purchase of Yes (TDS is to be

Goods covered by
1 P.O/GRN etc.,
If it is for
2 Expenditure/Services
a) Invoice value Less Than
Rs.30,000/-
deducted U/s 194 Up to Rs.50 lakhs of purchase No
Yes Q) TDS
Yes
Yes No TDS i) Run the party account in SAP
with all location to verify
transactions with other locations.
If you find transaction in other
location and TDS code is already
assigned verify the nature of
transaction and if it is similar to
the transaction made with your
location, just pass the entry, TDS
will get deducted.
b) Invoice Than R Yes TDS to be deducted
3 If the same party is providing Yes TDS to be deducted
different services separately for each service
subject to exceeding basic
exemption limit for each
service
4 If the Invoice Contain Basic Yes
Value plus GST.
Decide the Section and TDS
rate
For Example same party is
acting as a C&F agent for
which he is getting
commission, which is subject
TDS @ 5% and the same party
is providing transport services
which is subject to TDS @ 1%,
both TDS codes to be assigned
and while passing entries
respective TDS code to be
selected.
TDS to be deducted on Basic
invoice value excluding GST
amount
STUDY OF SOME OF IMPORTANT PROVISIONS OF TDS

Payments to Contractors and Sub-contractors

(Sec.194C)
 Commission or Brokerage (Sec.194H)
 Rent (Sec.194I)
 Fees for Professional or Technical Services
(Sec.194J)
 Purchase of Goods value exceeding Rs.50 Lakhs
(Sec 194Q)
Benefit or perquisites pertaining to business or
profession exceeding Rs.20,000/-. (Sec 194R)

Contd…
 Payments to Contractors and Sub-contractors (Sec.194C)

No TDS is to be made where single sum credited or paid or likely to be credited or paid
does not exceed Rs.30000/‐. However, if aggregate of the amount of such sums credited or
paid or likely to be credited or paid in the financial year exceeds Rs.1,00,000/‐, TDS is
required to be made
No TDS is to be made where such sum is credited to the account of or paid to the
contractor
in the course of business of plying, hiring or leasing of goods carriages if the contractor
furnished his PAN and giving declaration of not having more than 10 goods carriages.
If declaration is not submitted, TDS to be ducted U/s 194C.
 Payments to Contractors And Sub-contractors
(Sec.194C)
Who is the payer Heritage Foods Ltd

Who is the recipient A resident person

Rate of TDS Individuals /HUF 1% others 2%

Payment Covered Consideration for any Work Contract

At what time TDS has to be
deducted
Maximum amount which can
be paid without tax deduction
At the time of payment or at the time of credit whichever is
earlier
If The single payment does not exceeds Rs. 30000/- or if the
aggregate payments does not exceed Rs. 100000/- per
annum
 Commission or Brokerage (Sec.194H)

Who is the payer Heritage Foods Ltd.

Who is the recipient Any resident person

Payment covered Commission or brokerage (not being

insurance commission)

At what time TDS to be deducted. At the time of payment or at the time of

credit, whichever is earlier

Maximum amount which can be paid less than Rs. 15000 in a financial year
without tax deduction

Rate at which TDS to be deducted Individuals /HUF 5%

others 5%
 Rent (Sec.194-I)

Who is the payer Heritage Foods Ltd

Who is the recipient A Resident Person

Payment covered Rent
At what time TDS to be deducted. At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be paid without Rs. 240000/- per annum
tax deduction
(Note: The exemption of Rs.240000/- is to be
verified with each individual separately, if the
building consists of two owners one is
getting rent Rs.120000/- per annum and
another one is getting 280000/- per annum
TDS to be deducted for second one only)

Rate at which TDS to be deducted For Renting of Plant and Machinery

Individual/HUF 2% ;Others 2%
For Use of Land or Building including Furniture
Individual/HUF 10% ;Others 10%
 Fees for Professional or Technical Services
(Sec.194J)
Who is the payer
Who is the recipient
Payment covered
At what time TDS to be deducted.
Maximum amount which can be paid
without tax deduction
Rate at which TDS to be deducted
Heritage Foods Ltd
Any Person
Professional services, technical services,
Royalty,
At the time of payment or at the time of credit,
whichever is earlier
If the aggregate amount of payment during the
financial year is Rs. 30000 or less than Rs.
30000
In case of Professional Services_10%
In Case of Technical Services_2%
 TDS RATES
TDS rate for TDS rate
Ind/HUF for
Others
Nature of When to
S.No. Payments Section Conditions to be fulfilled deduct TDS
1 Contractors 194C When the amount of singly sum At the time of 1% 2%
Credit
credited or paid to contract or Payment
exceed Rs.30,000/- (OR) When the Which ever is
aggregate amount of such sums earlier
credited or paid the contractor
during the financial year exceeds
Rs.1,00,000/-

2 Rent 194I a) Rent of Plant, Machinery, -Do- 2% 2%

Equipment

b) Rent of -Do- 10% 10%

Land/Building/Furniture to
Individual/HUF If the total rent
payable in a year exceeds
Rs.2,40,0000/-

3 Professional & 194J When the total amount payable in -Do- 10% 10%
Technical Fee a year exceeds Rs.30,000/-
 TDS rate for TDS rate for
Nature of Conditions to When t deduct Ind/HUF Others
S.No. Payments Section be fulfilled TDS
4 Commission 194H When the -Do- 5% 5%
or total
amount
payable in
a year
exceeds
Rs.15,000/
-

Note: 1) W.e.f.01.04.2010 If recipient does not furnish his PAN to the deductor,
tax will be deducted at the rate of 20% instead of rates provided in respective
sections (in case of 194Q 5% )
02). W.e.f 01/06/2015, every transporter who is not having more than 10 goods
vehicle, has to furnish declaration along with PAN, for non deduction of TDS
 Effects of Violation of TDS provisions (Sec 201)
Sr. Reasons Effects
No.

1. Non deduction of The expenditure for which TDS to be deducted gets

TDS DISALLOWED & penal interest wiil be levied @1% for every
month or part of month from the date on which such tax
was deductible to the date of deduction

2. Non remittance of The expenditure for which TDS deducted but not remitted
TDS gets disallowed

3. Short deduction of The amount less deducted is required to be paid by the

TDS deductor along with penalty

4. Late remittance of The deductor has to pay penal interest @1.5% for every
TDS month or part of month from date of deduction to the date of
remittance.
 PROVISIONS RALATES TO CASH TRANSACTIONS
• Cash Payment in excess of Rs.10.000/- towards expenses incurred will be disallowed.
• section 40A (3),

Where the assesse incurs expenditure in respect of which a payment or aggregate of

payments made to a person in a day, otherwise than by an account payee cheque or account
payee bank draft, exceeds Rs.10,000/-, no deduction shall be allowed in respect of such
expenditure.

 Restriction on the receipt of cash an amount of Rs.2 Lakhs or more _ Sec 269ST
“No person shall receive an amount of Rs.2 Lakhs or more
In aggregate from a person in a day, (or)
In respect of single transaction, (or)
In respect of transactions relating to one event or occasion

From a person, otherwise than by an account payee cheque or an account payee bank draft or use
of electronic clearing system through a bank account.”
“If any person receives any sum in contravention of the above provisions, he shall be liable to
pay, by way of penalty U/s 271DA, a sum equal to the amount of such receipt”
 PROVISIONS RALATES TO CASH TRANSACTIONS

• Restriction on cash withdrawal from Banks in excess of Rs.1 Crore in a year_

Sec 194N . TDS 2%

• Restriction on taking or accepting certain loans or deposits or specified

sum Rs.20,000/- or more._ Sec 269 SS ( Deposits like Deposits from
customers towards issue of freezers, Milko Analyser and Others should not
be taken in cash). Penalty for violation of the provisions of sec 269SS is
100% of amount of loan or deposit.

•
APPLICABILITY OF PROVISIONS OF TAX COLLECTED AT SOURCE (T.C.S_SEC_206C)

Sec 206C(1H): TCS on sale of goods @ 0.1%_Conditions

1. If the consideration from the buyer in a previous year
exceeds Rs.50 Lakhs

2.The turnover of the buyer is less than Rs.10 Crores in the

previous year. If the buyer given a declaration that their
turnover in the previous year is more than Rs.10 crores,
then the buyer will deduct the TDS @ 0.1 on payments
made to us. At any point their should not be both TDS
&TCS, their should be only one section either TDS or TCS.
Note: 194Q : Reverse the above provision
 SPECIFIED PERSONS
• Higher rate f tds for non filers of income tax
returns : sec 206AB
• Twice the rate
• 5%
• Specified persons:
• Not filed the returns of income for both of the two
assessment years relevant to the previous year in
which tax is to be deducted. And aggregate of TDS &
TCS is Rs.50,000 or more in each of these two years.
Thank You!

27