A Study on Impact of Tax Decuction at Source on Manufacturing Cost

A STUDYON PERCEPTION OF TAX DEDUCTION AT SOURCE TOWARDS CORPORATE

By

R.NANDHAKUMAR(Reg.No.31709631060)

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT STUDIES

In partial fulfilment of the requirements For the award of the degree

of

MASTER OF BUSINESS ADMINISTRATION

IN

FINANCE AND HUMAN RESOURCES

St. JOSEPH’S COLLEGE OF ENGINEERING, CHENNAIANNA UNIVERSITY

CHENNAI 600 025

AUGUST 2010

A STUDY ON PERCEPTION OF TAX DEDUCTION AT SOURCE TOWARDS CORPORATE

By

R.NANDHAKUMAR(Reg.No.31709631060)

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT STUDIES

In partial fulfilment of the requirements For the award of the degree

of

MASTER OF BUSINESS ADMINISTRATION

IN

FINANCE AND HUMAN RESOURCES

St. JOSEPH’S COLLEGE OF ENGINEERING, CHENNAIANNA UNIVERSITY

CHENNAI 600 025

AUGUST 2010

ST.JOSEPH’S COLLEGE OF ENGINEERING(Affiliated to Anna University)

JEPPIAR EDUCATIONAL TRUSTJEPPIAR NAGAR ,OLD MAMALLAPURAM ROAD, CHENNAI-119

8

BONAFIDE CERTIFICATE

Certified that this project report titled “A STUDY ON PERCEPTION OF TAX

DEDUCTION AT SOURCES TOWARDS CORPORATE ” is the bonafide work of

“R.NANDHAKUMAR’’ Reg.no.31709631060 who carried out the project work under my

supervision . Certified further , that to the best of my knowledge the work reported herein

does not from part of any other project or dissertation on the basis of which a degree or award

was conferred on an earlier occasion on this or any other candidate.

SIGNATURE SIGNATURE

Dr. P. VASANTHALAKSHMI DR.JAYASHREE KRISHNAN B.Sc., M.B.A., PhD., B.Sc., M.B.A., PhD.,

INTERNAL GUIDE HEAD OF THE DEPARTMENTDepartment of Management Studies Department of Management StudiesSt.Joseph’s college of Engineering St.Joseph’s college of EngineeringRajiv Gandhi Road Rajiv Gandhi RoadChennai-600 119. Chennai-600 119.

DECLARATION

I R.NANDHAKUMAR student of DEPARTMENT OF MANAGEMENT STUDIES,

ST.JOSEPH’S COLLEGE OF ENGINEERING , CHENNAI would like to declare that the

project titled “A STUDY ON PERCEPTION OF TAX DEDUCTED AT SOURCE

TOWARDS CORPORATE” done for the partial fulfilment of M.B.A course of ANNA

UNIVERSITY is my original work.

Place:

Date: (R.NANDHAKUMAR)

ACKNOWLEDGMENT

First and foremost, I thank Almighty God for the strength and blessings showered, for

successfully completing the project

I express my sincere gratitude to the management of ST.JOSEPH’S COLLEGE OF

ENGINEERING for having provided me an opportunity to do my master degree in their

esteemed college

My sincere thanks and profound sense of gratitude goes to respected

Chairman Thiru. Jeppiar, M.A., B.L., and I also take this opportunity to thank

Dr. Babu Manohar M.A., M.B.A., Ph.D., honourable director of the esteemed institution .

My heartfelt thanks to the project Principal Jolly Abraham M.E., M.I.E., I am exceedingly

greateful to the Head Of the Department Dr. Jayashree Krishnan B.Sc, M.B.A., PhD., for

providing me necessary facilitates to complete this project work. I also thank

Dr.Vasanthalakshmi B.Sc., M.B.A., PhD., , who guided me throughout this project.

CONTENTS

S.NO. PARTICULARS PAGE NO.

1 INTRODUCTION

1.1 Need for study

1.2 Scope of the study

1.3 Company profile

1.4 Product profile

7

2 OBJECTIVES OF THE STUDY 9

3 INTRODUCTION TO TDS 10

4 RESEARCH METHODOLOGY

4.1 Research Design

4.2 Sources of Data

4.3 Sampling Design

4.4 Tools and Techniques used

21

4 REVIEW OF LITERATURE 24

5 LIMITATIONS OF THE STUDY 26

6 ANALYSIS AND INTERPRETATION 27

7 FINDINGS 40

8 SUGGESTIONS 41

9 CONCLUSION 42

10 ANNEXURE

Questionnaire 43

BIBLIOGRAPHY 44

ABSTRACT

A STUDY ON PERCEPTION OF TAX DEDUCTED AT SOURCE TOWARDS

CORPORATE

This study is conducted for the purpose of finding the awareness level of TDS

towards employees in corporate. This study was conducted using the questionnaire as the

data collection method where the questions were framed to identify the parameters of the

awareness level. This analysis was done using SPSS and it was found that employees were

highly aware of TDS.

1) INTRODUCTION

1.1) Nature of Study

All marketing research projects must start with explanatory design .This is a preliminary

phase and is absolutely essential in order to obtain a proper definition of problem at hand.

The major emphasis is on the discovery of ideas and insights. For example, a soft drinks firm

might conduct an explanatory study to generate possible explanations. The exploratory study

is particularly helpful in breaking broad and vague problem into smaller, more precise sub-

problem statements, hopefully, in the form of specific hypotheses. In a nutshell, we can say

that explanatory studies help in formulating hypotheses for the further research.

1.2) Scope of the study

The scope of TDS may be expanded to include more trades and professions. At present, the

TDS net covers income from salary, interest on securities, dividend from domestic companies

and prize money from sweepstakes among others.

1.3) Company Profile

Armstrong International Inc. is a U.S. based company with a global of sales and energy

training facilities located in 60 countries around the world. A fifth generation family owned

company. Armstrong is guided by core values including honesty, fairness, respect, trust,

loyalty, dignity, hard work, fearlessness, kindness and a firm belief in God.

We are committed to sustainability and energy conservation. For more than 108 years

Armstrong International has been a leader in steam engineering, energy conservation and

responsible environmental stewardship. Today, through of our global manufacturing and

service footprint. Armstrong is helping customers around the world conserve energy and

operate more efficiently. For instance, Armstrong customers save one ton of CO2 every 13

seconds, one ton of energy every 40 seconds, and 10 tons of water every 3 seconds.

Armstrong International has extensive expertise in the field of steam and condensate

management and we are specialists in utility optimization for process, industrial and

institutional facilities. We are very keen on sharing our expertise and experiences with

Indian customers as well.

We are currently in the process of constructing our Indian headquarters manufacturing

facility in Chennai. In the interim we are serving various Indian customers mobilizing the

production capabilities of our plants around the world.

1.4) Product Profile

Armstrong International provides an extensive range of products such as STEAM

TRAPPING STATIONS, CONDESATE RECOVERY SYSTEMS. BELOW SEALED

VALVES, MANIFOLDS, PRESSURE REDICNG VALVES and CONTROL VALVES.

SOPHISITICATED TEMPERATURE CONTROL EQUIPMENT, TRAP MONITORING

SYSTEMS and HOT WATER STATIONS.

In addition to a full product offering, Armstrong also provides a number of services.

Energy Audits :

Armstrong International has conducted thousands of system audits and has implemented the

recommendations, saving customers millions of dollars.

Turn Key Projects :

Armstrong International has implemented hundreds of turnkey energy conservation projects

where Armstrong provided the talent and manpower to install project ideas and mitigate cost.

Operation & Maintenance :

Armstrong International has operated and maintained hundreds of sites and provided service

to multiple facilities globally that have lowered operational costs at each facility.

Finance a Project :

Armstrong International has financed millions of dollars in energy projects across the globe.

Utility Ownership :

Today Armstrong International owns 20 global facilities which are operated and maintained

by Armstrong professionals.

2) Objectives of the Study

Primary Objective :

To study the profile of tax deducted at source in India.

Secondary Objective :

To analyze the functioning at TDS system in India.

To analyze the perception of corporate towards the tax deducted at source

To know the Awareness of TDS among the assesses

T o know the impact of TDS on assesses

TDS OVERVIEWIntroduction

TDS is tax deducted at source. Tax at the applicable rate is to be deducted form the salary by

the employer at the time of paying/crediting the salary. The employer will give a Tax

Deduction certificate at the end of the financial year and the employee can claim this

deduction through his income tax return for the year. Also, in case of contract or service

provided by anyone to another, above a certain amount, tax is to be deducted at the applicable

rate which are different for different types of payment. The payer of the bill will give a tax

deduction certificate in the prescribed form to the latter to claim in his tax return. The person

who deducts tax has to deposit the tax with the govt. treasury or authorised banks. A quarterly

return has to be filed with the appropriate authorities, of the tax deducted. Penalty for not

filing the return is Rs. 100/- per day of delay .

Electronic –TDS

Entities (both corporate and non-corporate deductors) making payments (specified under

Income Tax Act) to third parties (deductees) are required to deduct tax at source (Tax

Deducted at Source -TDS) from these payments and deposit the same at any of the designated

branches of banks authorised to collect taxes on behalf of Government of India. They should

also furnish TDS returns containing details of deductee(s) and challan details relating to

deposit of tax to ITD.

It is mandatory (w.e.f. June 1, 2003) for corporate deductors to furnish their TDS

returns in electronic form (e-TDS return).

From F.Y. 2004-2005 onwards furnishing TDS returns in electronic form is also

mandatory for government deductors in addition to corporate deductors.

Deductors (other than government and corporates) may file TDS return in electronic or

physical form.

National Securities Depository Ltd. (NSDL) as the e- TDS Intermediary (appointed by

ITD) receives, on behalf of ITD, the e-TDS returns from the deductors.

Deduction of tax from salaries :

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 employees is made. The person

responsible for paying that at the time of deducting tax at source, increase or decrease, the

amount to be deducted for the adjusting any previous deficiency of excess deduction.

Computation of salary and tax thereon :

Tax deducted at source from salary payable currency is to be calculated in accordance with

rule 26. For computing taxable salay, refer 10 to 23 and paras 104 to 112. At the time of

deducting tax at source during the financial year person responsible for paying salary should

keep the following points in view:

No tax is required to be deducted at source unless the estimated salary exceeds the

amount no to tax.

The amount received on account of encashment of leave due to an employee on

retirement in exemption under section 10 (10AA).

Notified allowances under section 10(14) are not subject to tax deduction at source.

House rent allowance qualifies for exemption subject to the specified limits responsible

for paying salary should ask the employee to produce proof of actual payment of purpose

of estimating his taxable salary. No deduction on account of house rent allowance is

however if the employee does not pay any rent or resides in his own house. The

disbursing authority should satisfy himself in this regard by insisting on production of

evidence of actual payment of excluding the house rent allowance from the taxable

income of the employee.

Though incurring actual expenditure on payment of rent is a prerequisite for claiming

deducted section 10(13A), the Board has been decided as an administrative measure that

salaried employee house rent allowance up to Rs. 3,000 per month will be exempted from

production of rent received however, he noted that this concession is only for the purpose

of tax deduction at source and in the assessment of the employee, the Assessing Officer

will be free to make such enquiry as he deemed purpose of satisfying himself that the

employee has incurred actual expenditure on payment of.

The value of the perquisites by way of free residential accommodation and amenities

provision of employers to their employees are determined under rule 3 and should be

taken increase for computing taxable salary.

No deduction is to be made from the salary income in respect of any donations for

charitable purpose tax relief admissible under section 80G in respect of such donations

will have to be claimed by the at the time of finalization of his assessment. However, in

cases where contributions are made by Jawaharlal Nehru Memorial Fund, the Prime

Minister’s Drought Relief Fund, the National children on the Indhira Gandhi Memorial

Trust or the Rajiv Gandhi Foundation, 50 percent of such contribution to be deducted in

computing the total income of the employee. Similarly, the donations to the National

Fund, the Prime Minister’s National Relief Fund, the Prime Minister’s Armenia

Earthquake Relief Fund, Africa (Public Contributions – India) Fund, the National

Foundation for Communal Harmony, Prime Minister’s Earthquake Relief Fund,

Maharashtra, National Blood Transfusion Council, State Blood Commission Council,

Army Central Welfare Fund, Indian Naval Benevolent Fund or Air Force Central Welfare

Minister, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996, National illness

Assistance Fund, Chief Minister/Lieutenant Governor’s Relief Fund or the notified

University of National eminence, the National Sports Fund, the National Cultural Fund,

the Fund for Technology Development and Application, National Trust for Welfare of

Persons with Autism, Cerebral Palsy, Mental Retardation and Disabilities will be eligible

for 100 percent deduction. It is to be noted that all eligible donations, with limit, will be

deductible under the provisions of section 80G.

The total salary should be rounded off to the nearest multiple of rupees ten by ignoring

the fraction than five rupees and increasing the fraction of five rupees or more.

Deduction of tax at source from interest on securities :

Any person responsible for paying any interest on securities to a resident is required at the

time of credit of such income to the account of the payee or interest payable account or

suspense account or at the time of payment of interest in cash, by cheque/draft, whichever is

earlier to deduct income-tax at the rates in force. No tax is, however, deductible at source

from the amount of interest payable.

Deduction of tax source from dividends :

The principal officer of an Indian company or a company which has made the prescribed for

the declaration and payment of dividends within India is required, before making at the

deduct tax at source from the amount of dividend at the prescribed rate deductible under

section 194 only if a shareholder is resident in India.

Cases where tax is not deductible or deductible at lower rates : - In the following cases

deducted or deducted at lower rates:

DIVIDENDS COVERED BY SECTION 115-O- No tax is deductible from June1, 1997 to

and from April 1, 2003 in the case of dividend referred to in section 115-O

APPLICATION IN FORM No. 13

DELCLARATION TO THE PAYER IN FORM NO 15G OR 15H

DIVIDEND UP TO Rs. 2500 – No tax shall be deductible after March 31, 2002, in

shareholder, being an individual if the following conditions are satisfied –

a. the dividend is paid by the company by an account payee cheque; and

b. the amount of such dividend or, as the case may be, the aggregate of the amounts of

distributed (or paid or likely to be distributed or paid) during the financial year by the

shareholder, does not exceed Rs. 2,500 (Rs. 1000 from June 1, 2002 to July 31, 2002).

Dividend To LIC/GIC – No deduction of tax at source shall be made under this section any

dividend payable to the Life Insurance Corporation of India.

Deduction of tax at source from winnings from lotteries or crossword puzzles:

A person responsible for paying to any person any income by way of winnings from lotteries,

crossword puzzles or (from June 1, 2001) winnings from card games or other games, for Rs.

5000 is required, at the time of such payment, to deduct income-tax thereon at the rates in

force. Where the prize is given partly in cash and partly in kind, tax is deductible from with

reference to the aggregate amount of the cash prize and the value of the prize in kind.

Moreover the lottery or crossword puzzle prize is paid in installments, the deduction is to be

made at the time of payment of each installment. Likewise, tax is deductible from the

amount of the prize money paid to be of lucky ticket with reference to the amount paid to

him. No tax is, however, deductible from the income way of bonus or commission paid to

the lottery agents or sellers of lottery tickets on the sale made by the Circular No. 257, dated

June 4, 1979

With effect from June 1, 1997, where the winnings are wholly in kind or where they are

partly in the partly in kind but the part in cash is not sufficient to meet the liability for tax

deduction in respect of the winnings, the person responsible for paying shall, before

releasing the winnings either in cash of ensure that tax has been paid in respect of the

winnings.

Deduction of tax at source from winnings from horse races :

Tax is deductible at source from any income by way of winnings from the horse races at

present way of winnings from horse races to be paid to a person exceeds Rs. 2500. The

obligation to deduction source applies only where such winnings are paid by a bookmaker or

a person to whom a license is granted by the Government under any law for the time being in

force for horse racing in any race for arranging for wagering or betting in any race course.

Deduction of tax at source from payments to contractors or sub-contractors :

The provisions of section 194C are given below –

Who is responsible for tax deduction – In the following two cases tax is deductible under

194C-

When payment is made by a specified person to a Resident Contractor – Any responsible

for paying any sum to any resident contractor for carrying out any work (increasing the

supply of labour for carrying out any work) in pursuance of a contract between a specified

persons and the resident contractor is required to deduct tax at source. For this purpose,

payer himself is treated as persons responsible for paying any sum to contractor. If, however,

payer is a company, the company itself inclusive of the principal officer thereof, is the person

responsible for paying to resident contractor.

Specified person – Meaning of – Tax is deductible under section 194C(1) only if payment is

made in pursuance of a contract between a specified person and a resident contractor. The

following are “Specified persons” for this purpose :

Deduction of tax at source from insurance commission :

Person responsible for paying to a resident any income by way of remuneration or revenue by

way of commission or otherwise, for soliciting or procuring insurance business income

relating to the continuance, renewal or revival of policies of insurance is required, at the time

of income to the account of the resident or the payment thereof (by whatever mode),

whichever deduct income-tax thereon at the rates in force. No deduction shall, however a

case where the amount of such income or, as the case may be, the aggregate of the amounts.

Deduction of Tax to non resident sportsman :

The person responsible for paying any income referred to in section 115BBA to a non-

resident foreign citizen-sportsman (including an athlete) or a non-resident sports

association/institution shall deduct tax at the rate of 10 percent. The tax is to be deducted at

the time of credit of such income to the tax of the payee or at the time of payment thereof in

cash or by issue of cheque or draft or by other mode, whichever is earlier.

Deduction of tax from payments in respect of National Savings Scheme :

Section 194EE has been inserted with effect from October 1, 1991. Under this section, the

person responsible for paying any amount referred to in clause (a) of sub-section (2) of

section 80CCA will income-tax thereon at the rate of 20 percent at the time of payment.

When tax is not deductible – In the following cases tax is not deductible:

PAYMENT UP TO Rs. 2,500 – Where the amount of payment or the aggregate amount of

payments in a financial year is less than Rs. 2,500, tax is not deductible under section 194EE.

Payment to Legal Heirs – Where the payment is made to the heirs of the deceased assessee

(depositor), no tax shall be deducted at source.

Declaration to the payer in form No. 15G or 15H

Deduction of tax at source on payments on account of repurchase of units by Mutual Funds or

UTI

The person responsible for paying to any person any amount referred to in section 80CCB

shall, at the time of payment thereof, deduct income-tax thereon at the rate of 20 percent.

Deduction of tax from commission, etc., on sale of lottery tickets :

The person responsible for paying any income by way of commission, remuneration or prize

(by whatever name called) on lottery ticket in an amount exceeding Rs. 1,000 shall deduct

income-tax at the rate of ten percent. Tax shall be deducted at the time of credit of such

income to the account payee or at the time of payment of such income in cash or by issue of

cheque/draft or by any other whichever is earlier.

When tax is deductible at lower rate (Sec. 197)

Section of tax at source from commission or brokerage (Sec. 194H)

Section 194H has been inserted with effect from June 1, 2001.

1. Who is responsible for tax deduction – Any person (other than an individual or Hindu

undivided family) who is responsible for paying commission or brokerage to a resident

shall deduct tax.

2. When tax has to be deducted – Tax shall be deducted at the time of credit of such

income to the account of the payee or at the time of payment of such income in cash or by

the issue of a cheque, draft by any other mode, whichever is earlier. Where my income is

credited to any account, whether by ‘suspense account’ or by any other name, in the

books of account of the person liable to pay such income, such crediting shall be deemed

to be credit of such income to the account of the payee.

Permanent in excess of Rs. 2,500 is subject to tax deduction – No tax is deductible if the

amount of commission or brokerage paid/credited during the financial year does not exceed

Rs. 2,500.

Commission or brokerage as defined in section 194H – Commission or brokerage for this

purpose includes any payment (not being insurance commission referred to in section 196D)

received or receivable, directly or indirectly, by a person acting on behalf of another person

for services rendered (not being professional services) or for any services in the course of

buying or selling of goods or in relation to any transaction relating to any asset, valuable

article or thing, not being securities. The expressed services means services rendered by a

person in the course of carrying on a legal, medicine, architectural profession or the

profession of accountancy or technical consultancy such other profession as is notified by the

Board for the purposes of section 44AA representative, film artist, company secretary and

information technology.

Deduction of tax at source from Income by way of rent :

Who is responsible for tax deduction – Any person responsible for paying rent to a resident is

required to deduct tax at source provisions of section 194-I. For this purpose, payer himself

is treated as person responsible . If, however payer is a company, the company itself,

including the principal officer there responsible for paying rent.

When tax has to be deducted – The person responsible for paying rent should deduct. Tax

is to be deducted at source either :

a. at the time of credit of such income to the account of payee; or

b. at the time of payment thereof in cash or by issue of a cheque or draft or by any other

whichever is earlier.

Where any income by way of rent is credited to any account (whether called “Suspense

account other name) in the books of account of the person liable to pay such rent, such

crediting should be credit of such income to the account of the payee.

No tax is deductible if payment during a financial year does not exceed Rs. 1,20,000 – No tax

on the amount of rent credited/paid during the financial year does not exceed Rs. 1,20,000.

Rent is defined in Section 194-I – Explanation (i) to section 194-I defines rent as

‘Rent’ means any payment, by whatever name called, under any lease, sub-lease, tenant’s

agreement or arrangement for the use of (either separately or together) any, -

(a) land; or

(b) building (including factory building); or

(c) land appurtenant to a building (including factory building) or

(d) machinery

Tax deduction at source on fees for professional or technical services :

Section 194J has been inserted with effect from July 1, 1995.

Who is liable to deduct tax at source under section 194J – Any person, who is responsible for

deducing tax to a resident any sum by way of fees for professional services, or fees for

technical services (with effect from July 13, 2006) royalty shall deduct tax at source.

Deduction of tax at source from other sums :

A person responsible for making payment to a non-corporate non-resident assessee or other

than a domestic company, of any interest (other than interest on securities) or (not being

salary) is required, at the time of payment or at the time of credit to the account of payable,

payable account, or suspense account, or suspense account, or at the time of payment,

whichever is earlier. Moreover, tax is not deductible in respect of the credited by an offshore

banking unit on deposits made after March 31, 2005 by a non-resident.

When tax is deducted at lower rate or when no tax is deducted :

Procedure in case of remittance – The Department of Economic Affairs, Ministry of Finance

a press Note dated May 17, 1988 laying down the procedure for remittances to foreign

company way of royalty and fees for technical services under approved agreements. This

procedure is applicable where income-tax @ 30 percent from such payments is deducted and

paid into “designated” branch and this procedure the remitter has to furnish to the

‘designated’ bank details of payments in the prescribed certified by a chartered accountant

long with the income tax challan payment. On payment of remitter, the designated bank

would forward a certificate regarding such payment to the Resident of India. On receipt of

the certificate of payment of tax from the concerned bank, the Reserve effect would permit

the remittance of the balance without insisting on a ‘No Objection Certificate’ from the tax

authorities.

The Reserve Bank of India insists on the production of a ‘No Objection Certificate’ from the

authorities whenever there is a claim that the rates for deduction of tax at source is lower

percent in case of royalty or fees for technical services, or if the proposed remittance is in

respect of.

In order to simplify and to bring uniformity in the form of application to be made by the

remittance authorization to be issued. The Board has considered the issue of non-statutory

forms for such payee a copy of each of these forms. These new form used while applying for

authorization and for granting authorization under section 195. The form whom the

application for authorization is made will verify the claims in the light of the Income tax.

‘Double Taxation Avoidance Agreements’ and the specific facts of the transactions, before

authorization remittance.

Payments to foreign agents of Indian exporters – Where a non-resident agent operates

outside the country, no part of his income arises in India. Further, since the payment is

usually remitted directly abroad, it cannot be held to have been received by or on behalf of

the agent in India. Such payments are, therefore, not taxable in India. Consequently, no tax

is deductible at source under section 195 in such case – Circular No. 786, dated February 7,

2000.

Furnishing information about TDS under section 195 – Section 195 is applicable in

respect of payment to a non-resident or a foreign company. The person making the

remittance is required to furnish an undertaking (in duplicate) addressed to the Assessing

Officer accompanied by a chartered accountant in a specified format. This undertaking and

certificate is submitted to authorized dealers who in turn are required to forward a copy to the

Assessing Officer. The purpose of the undertaking and the certificate is to collect taxes at the

stage when and as it may not be possible to recover the tax at a later stage from the non-

residents.

From April 1, 2008, a system of e-filling of the information in the certificate and introduced.

The information will be submitted in the manner prescribed by the Board.

Deduction of tax at source from interest or dividend or other sums payable to Government or

certain corporation

No tax is required to be deducted at source from any sum payable to the Government. Bank

or a corporation established by or under a Central Act which is under any in force, exempt

from income-tax on its income, if such sum is payable by way of interest respect of any

securities or shares owned by it or in which it has full beneficial interest accruing or arising to

it.

Deduction of tax at source from Income of Mutual Fund (Sec. 196A) :

Tax is not deductible under section 196A from April 1, 2003.

Deduction of tax at source is respect of units referred to in section 115AB (Sec. 196)

Section 196B has been inserted with effect from October 1, 1991, is payable in respect of

units referred to in section 115AB to a person responsible for making the payment shall, at

the time of credit of such income payee at the time of payment thereof in cash or by the issue

prescribed or by any other mode, whichever is earlier, deduct income-tax thereon at the rate.

Deduction of tax at source from Income from foreign currency bonds (Sec. 196C) :

Section 196C has been inserted with effect from June 1, 1992. Under this section for paying

any income (including long-term capital gain) payable in respect of depository receipts

referred to in section 115AC to a non-resident shall deduct tax at the time of such income.

The deduction is required to be made either at the time of credit of account of the payee or at

the time of payment thereof in cash or of a cheque or draft or by any other mode, whichever

is earlier.

No tax is deductible from June 1, 1997 to March 31, 2002 and from April 1, 2003, in

referred to in section 115-O.

Deduction of tax from income of Foreign Institutional Investors from securities

(Sec. 196D) :

Section 196D has been inserted with effect from June 1, 1993, to provide that or for paying

any income in respect of securities referred to in section 115A. Institutional Investor shall

deduct tax thereon at the rate of 20 percent. The deduction in either at the time of credit of

such income to the account of the payee of payment thereof in cash or at the time of issue of a

cheque or draft or by any other income earlier. No deduction of tax is to be made from any

income by way of capital gains arises of such securities.

No tax is deductible from June 1, 1997 to March 31, 2002 and from April 1, 2003 in

referred to in section 115-O.

3) RESEARCH METHODOLOGY

3.1) Research Design

Research is an original contribution to the existing stock of knowledge. It is the pursuit of

truth with the help of study, observations and experiments. As such the term ‘Research’ refers

to the systematic method consisting of enunciating the problem formulating a hypothesis ,

collecting the facts or data, analyzing the facts and reaching certain conclusions either in the

form of solutions towards the concerned problem or in certain generalization for some

theoretical formulation. The Study in this research is an exploratory study which means

exploring of facts from the respondents. The objective of exploratory research is the

development of hypothesis is to test various aspects.

3.2) Sources of Data :

Data plays a vital role for the successful completion of any research. Since , every possible

source is needed to tap information required for the study of source i.e., primary sources have

been used in this research to collect data.

Primary Data :

Primary data is the data directly collected from the respondents by using any structured

methodology. The researcher can also collect primary data using a structured questionnaire..

3.3) Sampling Design :

A sample design is a definite plan for obtaining a sample design from a given population. It

refers to the technique or the procedure the researcher would adapt in selecting items for the

sample. Sampling design in this research includes the sampling method, sampling units, and

sampling size.

Sampling Technique :

For the purpose of sampling , convenience sampling is used which belongs to the category of

non-probability sampling.

Methods of Data Collection :

The data has been collected through personally administered questionnaire. The questionnaire

was prepared and supplied to the respondents. Direct interview method is also used to get

information from some respondents.

The research methodology used in this data collection was primary data using structured

questionnaire. The data was collected from different sources from companies. The companies

are

Armstrong International pvt ltd

Visteon Automative Systems ltd

Ford India Pvt ltd

Hyundai India Pvt ltd

3.4 TOOLS AND TECHNIQUES USED FOR DATA ANLAYSIS

Simple Percentage Analysis :

The percentage analysis is mainly used to standardize the respondents. This analysis is

carried out for all the questions given in the questionnaire , mainly to access , how the

respondents are distributed in each category.

Percentage analysis uses percentage to process the data. This method uses percentage simply

as a number, reducing them into “0-100” range through percentage.

Percentage= n\N*100

n= number of respondents assured

N= Total number of respondents.

Chi-Square Test :

The chi-square test was first used by Karl Pearson in the year 1980. The quantity chi-square

test describes the magnitude of the discrepancy between theory and observation.

4) REVIEW OF LITERATURE

The Administration :

It is often argued that TDS places a special burden on tax administration. However it is worth

nothing that TDS was introduced one of its effects was the rationalization and simplification

of the direct tax system and its administration. The consolidation and incorporation of

numerous direct tax would simplify the rate structure, tax base and administration of direct

tax system, thereby eliminating the overlapping practices that had plagued those systems.

It also means reduction in the number of forms used, legislation to be applied and returns and

accounts with the business person has to contend.

Business :

It is true that TDS is collected from large number of firms than under any form of tax or

single state sales tax to the typical smaller firms the complexities of the tax and the need for

extensive records are likely to prove serious. However it is often overlooked that business

already function with considerable administrative responsibility for a number of laws

including the National Insurance Act.

Under the Income-Tax Regulations of 1980 every person without exception is required to

maintain detailed and extensive records of all its transactions. Compliance with this will

certainly ensure compliance with TDS regulations, and since there is an incentive for proper

record-keeping.

The seminal work on the subject of taxation and development was done by Burgess and

Stern (1993), who reviewed previous literature and presented what is still, 13 years later,

regarded as conventional wisdom.

The role of direct taxation in developing countries is much more limited. In contrast to

developed countries where taxation on personal income and social security contributions

raise two thirds of the total tax revenue, a narrow tax base and high enforcement costs render

direct taxation impractical for developing countries. The income tax base is mostly comprised

of wages of employees in the public sector, because all other taxpayers are self-employed or

small businesses who evade paying all, or most, of the income tax. In addition, taxation of

personal capital income is easily evaded.

Taxing the income of corporations, on the other hand, provides developing countries with a

large share of their total tax revenue (estimated in 1993 to be close to a third), compared to

only a small share, around 10%, in developed countries. Taxing large corporations does not

involve 20-Dec-06] significant administrative and compliance costs, because they are per

force required to comply with statutory accounting requirements.

Margalioth (2003) suggests that maintaining high corporate income tax rates may come at a

high cost in terms of economic growth as corporate tax rates affect FDI location, and FDI

may have significant spillover effects.

Non-tax revenue in developing countries comprised about 21% of GDP compared to 10% in

developed countries. These are aggregate figures and substantial variation exists across

countries.

The overall proportion of government expenditure of the GDP is higher in developed than

developing countries.3 This situation not necessarily optimal, because a greater need exists

for government intervention in developing countries, e.g. for building infrastructure and

education, than in developed countries. On the other hand, the costs of corruption,

administration and compliance are much greater in developing countries; hence, the outcome

of this trade-off is unclear.

The share of non-tax revenue of total revenue is, on average, larger for developing countries

than developed countries.4 Nevertheless, the main source of government revenue in

developing countries, taken as a whole, is the tax system, which is the focus of this short

paper.

The structure of taxation in developing countries is radically different from that of developed

countries. About two thirds of the tax revenue in developed countries is obtained from direct

taxes, mostly personal income tax and social security contributions. The remaining one-third

comes primarily from domestic sales tax. The situation is exactly reversed in developing

countries: about two-thirds of the tax revenue comes from indirect taxes, mostly VAT, sales

tax, excises and taxes on trade. The remaining one-third consists largely of corporate income

tax.

5) Limitations of study

Any research study will be restricted in scope by certain inherent limitations that are

participated by the choice of the research design, sampling procedure and respondent

selection. This study has following limitations

Even though the survey was conducted among the individuals of firms that are attracted

by TDS, the research may not reflect the real opinion of all the firms.

Because of time constraints, the sample size is restricted to 50 which may not reflect the

opinion of the entire population.

Since the study was restricted to individuals of firms that are attracted by TDS, majority

of findings are applicable only to those firms and cannot be generalized.

The samples may behave or give opinion differently at different times because of their

psychological temperament. This will affect survey.

6. DATA ANALYSIS

1) Analysis of awareness in age wise.

Age Respondent Percentage

20-40 25 75

40-60 11 15

60 and above 14 10

Inference

It has been seen that majority (75%) of the respondents are in the age of 20-40 age. The next

is (15%) of the respondents are in the age of 40-60) age. The next is (10%) of the respondents

are in the age of 60and above.

2) Analysis of awareness in Occupation

Occupation No.of respondents Percentage

Salaried 39 78

Self-Employed 11 22

Inference

It has been seen that most of the respondents of my research are salaried persons and they are

really TDS dealers.

3) Analysis awareness of charges in TDS

Response No.of respondents Percentage

Yes 47 74

No 3 6

Inference

Majority 94% of the respondents said that they know TDS is charged on their salary/

Remuneration. While 6% of the respondents do not know. It has been seen that there is good

awareness of TDS among respondents.

4) Analysis of awareness of calculation of TDS

Response No.of respondents Percentage

Yes 34 66

No 16 32

Inference

Majority 68% of the respondents said that they know to calculate TDS on their salary/

Remuneration. While 32% of the respondents do not know. It has been seen that most of the

respondents know to calculate TDS on their salary/ Remuneration.

5) Analysis of awareness of TDS refundable schemes

Response No.of responses Percentage

Yes 33 66

No 17 34

Inference

Majority 66% of the respondents said that they know TDS refundable schemes.

Remuneration. While 34% of the respondents do not know.

6) Analysis of awareness of process of TDS reimbursement

Response No.of Respondents Percentage

Yes 29 58

No 21 42

Inference

58% of the respondents said that they process of TDS reimbursement schemes. While 42% of

the respondents do not know.

7) Analysis of awareness about time of reimbursement of paid TDS

Response No.of Respondents Percentage

Yes 36 72

No 14 28

Inference

72% of the respondents said that they get reimbursement TDS duly.. While 28% of the

respondents do not know.

8) Analysis of awareness about reimbursement of TDS

Response No.of Respondents Percentage

Self 18 36

Through Lawyer 12 24

Through Agency 5 10

Others 15 30

Inference

36% of the respondents said that they are aware about reimbursement through self. The next

24% of the respondents said that they are aware about reimbursement through lawyer. While

next10% of the respondents said that they are aware about reimbursement through agency.

While the next (30%) through others.

9) Analysis of difficulties about reimbursement of TDS

Response No.of respondents Percentage

Delayed by tax department 25 50

Tax planning programme 13 26

Problem related to tax exemption 7 14

Others 5 10

Inference

50% of the respondents said that there are difficulties in delays by tax department. The next

26% of the respondents said that there are difficulties in tax planning programme. While the

next 14% of the respondents said that there are difficulties in problem relating to tax

exemption. While the next 10% of the respondents said that there are difficulties in other

problems.

10) Analysis of mode of TDS

Response No.of respondents Percentage

Monthly 25 50

Annually 25 50

Inference

50% of the respondents said that the mode of payment of TDS is monthly. While the next

50% of the respondents said that the mode of payment of TDS is annually.

6.2 CHI-SQUARE ANALYSIS

1. RESPONDENTS AGE VS RESPONDENTS OCCUPATION

Hypothesis

Null Hypothesis- H0- There is no significant relationship between Respondents Age and

Respondents Occupation

Alternative hypothesis-HA- There is significant relationship between Respondents Age and

Respondents Occupation

Respondents Age

Observed N Expected N Residual

20-40 7 8.3 -1.3

40-60 8 8.3 -.3

60 and above 10 8.3 1.7

Total 25

Respondents Occupation

Observed N Expected N Residual

Salaried 9 12.5 -3.5

Self-Employment 16 12.5 3.5

Total 25

Test Statistics

Respondents Age Respondents Occupation

Chi-Square .560a 1.960b

df 2 1

Asymp. Sig. .756 .162

a. 0 cells (.0%) have expected frequencies less than 5. The

minimum expected cell frequency is 8.3.

b. 0 cells (.0%) have expected frequencies less than 5. The

minimum expected cell frequency is 12.5.

Inference

Since the calculated value is less than table value Null hypothesis is accepted. Therefore is no

significant relationship between Respondents Age and Respondents Occupation.

2. Respondents awareness calculation of TDS VS Respondents Awareness of

refundable schemes

Hypothesis

Null Hypothesis- H0- There is no significant relationship between Respondents awareness calculation of TDS and Respondents awareness of refundable schemes

Alternative hypothesis-HA- There is significant relationship between Respondents awareness

calculation of TDS and Respondents awareness of refundable schemes

Analysis of calculation of TDS

Observed N Expected N Residual

Yes 10 12.5 -2.5

No 15 12.5 2.5

Total 25

Awareness of TDS Refundable Schemes

Observed N Expected N Residual

Yes 16 12.5 3.5

No 9 12.5 -3.5

Total 25

Test Statistics

Analysis of calculation of TDS Awareness of TDS Refundable Schemes

Chi-Square 1.000a 1.960a

df 1 1

Asymp. Sig. .317 .162

a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell

frequency is 12.5.

Inference

Since the calculated value is less than table value Null hypothesis is accepted. Therefore is no

significant relationship between Respondents Respondents awareness calculation of TDS and

Respondents awareness of refundable schemes.

3. Analysis awareness of TDS Reimbursement VS Analysis of difficulties in

Reimbursement

Hypothesis

Null Hypothesis- H0- There is no significant relationship between Respondents awareness of

TDS Reimbursement and Respondents awareness of difficulties in Reimbursement

Alternative hypothesis-HA- There is significant relationship between Respondents

awareness of TDS Reimbursement and Respondents awareness of difficulties in

Reimbursement

Reimbursement of TDS

Observed N Expected N ResidualSelf 10 6.2 3.8

Through Lawyer 5 6.2 -1.2Through Agency 5 6.2 -1.2

Others 5 6.2 -1.2Total 25

Reimbursement Difficulties

Observed N Expected N ResidualDelayed by tax department 4 6.2 -2.2

Tax planning problem 5 6.2 -1.2Problem related to tax

exemptions 11 6.2 4.8

Others 5 6.2 -1.2Total 25

Test Statistics

Reimbursement of TDS Reimbursement DifficultiesChi-Square 3.000a 4.920a

df 3 3Asymp. Sig. .392 .178

a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 6.3.

Inference

Since the calculated value is less than table value Null hypothesis is accepted. Therefore is no

significant relationship between Respondents awareness of TDS Reimbursement and

Respondents awareness of Reimbursement difficulties.

Findings

There is good awareness among respondents in TDS.

Most of respondents know how to calculate TDS on their salary / remuneration.

66% of respondents know TDS refundable schemes but 34% of respondents do not know

the TDS refundable scheme due to which they have to face problem.

58% of respondents know process of TDS reimbursement while 42% do not know which

is very huge number.

72% of respondents said that they get reimbursed their TDS duly while 28% of

respondents do not.

36% of respondents said that they get reimbursed of their paid TDS by themselves. 24%

of the respondents said that they get reimbursed of their paid TDS, through lawyer. 10%

of respondents said that they get reimbursed of their paid TDS through agency. While

30% of respondents said that they get reimbursed of their paid TDS by other sources.

50% of respondents said that they have to face the difficulties of delayed by tax dept.

while refund their TDS. 26% of respondents said that they have to face tax planning

problem that how can they save their amount from TDS. 14% of respondents said that

they do not know the tax exemption schemes that how can they claim for exemption

regarding reimbursement of paid TDS. While 10% of the respondents said that they have

to face problem apart from this.

50% of respondents said that made of TDS on their salary charged by their own employer

is annually. While 50% of respondents said that mode of TDS on their salary charged by

their own employer is monthly.

Suggestions

32% of respondents do not know how to calculate TDS, so there is need to make them

more aware by publishing method of TDS.

The respondents do not know the refundable schemes of paid TDS, so they have to face

the problem related to tax planning & exemption.

Due to this problem they have to take help from agencies & lawyers to get reimbursed

their TDS duly. So there is need to make them aware.

Tax slab should be increased.

Conclusion

It has been seen that there is good awareness of TDS among respondents. Yes there is need

to make more aware. The people can invest their money in different securities to save their

taxes. Through taxes, Government perform many development activities. Due to tax people

do not disclose their income. Hence, it is very vital to make all the persons earning the

taxable income pay the Tax. But, the best way to make them pay is to deduct tax at source.

PRIMARY DATA COLLECTION SCHEDULE

1) Your (Employees) age level

20 – 40 years 40 – 60 years Above 60 years

2) Your occupation type

Salaried Self employed

3) Your nature of charges of TDS

Yes No

4) Your awareness of calculation of TDS

Yes No

5) Your awareness of TDS refundable schemes

Yes No

6) Your awareness of process of TDS reimbursement

Yes No

7) Your awareness of time of reimbursement of paid TDS

Yes No

8) Your awareness of reimbursement of TDS

Self Through lawyer Through Agency Others

9) Your awareness in difficulties of reimbursement in TDS

Delayed by Tax Department Tax Planning Problem

Problem related to Tax Exemptions Others

10) Your awareness of mode of TDS

Monthly Annually

Bibliography

Singhonia, Vinod. K., Kapil Direct Taxes law & practice

Goyal S.P. Tax Planning & Management

Websites

http://www.taxmanagementindia.com

http://www.incometaxindia.gov.in