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Deduction and collection of tax at source (TDS/TCS)
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Page 1: Tds2012 13

Deduction and collection of tax at source

(TDS/TCS)

Page 2: Tds2012 13

OverviewTo avoid cases of tax evasion. To collect tax at source on accrual of

income. Persons responsible for making payment to

deduct tax at source and deposit the same to the Government’s treasure within stipulated time.

The recipient of income is liable to tax on the gross amount and the amount deducted at source is against his final tax liability.

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Payments covered by TDS scheme• Deduction of tax from Salaries[Sec. 192]• Deduction of tax at source from other than interest

on securities [Sec. 194A]• Deduction of tax at source from payment to

contractors or sub-contractors[Sec. 194C]• Deduction of tax at source from commission or

brokerage[Sec.194H]• Deduction of tax at source from income by way of

rent[Sec. 194I)• Deduction of tax at source on fees for professional

or technical services[Sec. 194J)• Tax collection at source on “Scrap”[Sec.206C]

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When and how is to be deducted at source from Salary?[192]

Who is the payer Employer

Who is the recipient EmployeePayment Covered Taxable salary of the employeeAt what time tax has to be deducted at source

At the time of payment

Maximum amount which can be paid without tax deduction

The amount of exemption limit(i.e. Rs. 1,90,000 in case of woman/Rs. 2,50,000 in case of senior citizen/ Rs. 1,80,000 for the assessment year 2012-13

Rate of tax deduction at source

Normal rates applicable to an individual

Page 5: Tds2012 13

How to compute taxable salary?Salary on “due” or “receipt” basis whichever is

earlier.Salary includes basic, DA, commission, bonus, leave

salary etc.Allowance includes all fixed quantity of money subject

to certain exemptions.Perquisite may be defined as any casual emolument

or benefit attached to an office such as “Rent free accommodation, LTC, Medical reimbursement, interest free loan etc.

Section 80C to Section 80U, deductions would be available from gross total income.

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Permissible Deduction u/s 80C The maximum amount deductible can not exceed Rs.

1.00 lakh on following nature of payments.1. Life insurance premium including ULIPs subject to certain

conditions.2. Contribution towards statutory and recognized provident

fund.3. Contribution towards 15-year public provident fund.4. Subscription to National Saving Certificates, VIII Issue.5. Any Sum paid as tuition fees in India for full time education

of any two children of an individual.6. Any payment towards the cost of purchase/ construction of a

residential property.7. Amount deposited as term deposit for a period of 5 years or

more.8. Subscription towards notified units of Mutual Fund (ELSS)

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Permissible Deduction u/s 80CCF to 80D

Deductions in respect of subscription to long-term infrastructure bonds under section 80CCF can not exceed Rs. 20,000.

Deduction in respect of medical insurance premia under section 80D as per following:

Taxpayer, spouse and dependent children

Parents of the taxpayer dependent or not

Total

Max. amt deductible

15,000 15,000 30,000

Additional amount for senior citizen

5,000 5,000 10,000

Total 20,000 20,000 40,000

Page 8: Tds2012 13

Permissible Deduction u/s 80E & 80G Deduction in respect of repayment of loan taken

for higher education under section 80E by way of entire amount of interest on such loan up to 7 immediately succeeding assessment years.

Deduction in respect of donations under section 80G is not given by an employee to a notified public charitable institute except contribution made to funds like JN memorial fund, PM Relief Fund etc.

Compute tax liability on net income as per

prescribed income tax rate…

Page 9: Tds2012 13

Income Tax Rates for AY 2012-13Individual, HUF, AOPs, and BOIs

Women Senior Citizen who is 60 or above

years

Super Senior Citizen who is 80 or above

years

Rates

Up to Rs. 1,80,000 Up to Rs. 1,90,000 Up to Rs. 2,50,000 Up to Rs. 5,00,000 Nil

Rs. 1,80,000-Rs. 5,00,000

Rs. 1,90,000-Rs. 5,00,000

Rs. 2,50,000.- Rs. 5,00,000

Not Available 10%

Rs. 5,00,000-Rs. 8,00,000

Rs. 5,00,000-Rs. 8,00,000

Rs. 5,00,000.- Rs. 8,00,000

Rs. 5,00,000- Rs. 8,00,000

20%

Above Rs. 8,00,000

Above Rs. 8,00,000

Above Rs. 8,00,000

Above Rs. 8,00,000 30%

Surcharge Surcharge Surcharge Surcharge Nil

Education Cess Education Cess Education Cess Education Cess 2%

S.H.E. Cess S.H.E. Cess S.H.E. Cess S.H.E. Cess 1%

Page 10: Tds2012 13

Other provisions tax from Salaries [Sec. 192]

If house rent allowance is Rs 3,000 per month (or less than that), the employer will give exemption on the basis of a declaration given by employee (no need to submit rent receipt)

The employer may, at the time of deducting tax at source, increase or decrease the amount to be deducted for the purpose of adjusting any previous deficiency or excess deduction.

The total salary should be rounded off to the nearest multiple Rs. 10.

Determined the average of income tax for whole financial year.

Deduct tax in even on monthly basis

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Deduction of tax at source from interest other than interest on securities[194A]

and commission or brokerage[194H)Who is the payer Any person who is (not being

individual or a HUF)Who is the recipient A resident PersonAt what time tax has to be deducted at source

At the time of payment or at the time of credit, whichever is earlier

Maximum amount which can be paid without tax deduction

Tax is not deductible if payment /credit does not exceed Rs. 5,000

Rate of tax deduction at source

10%(no surcharge and education cess)

Page 12: Tds2012 13

Deduction of tax at source from payment to contractors[194C]

Who is the payer Any company, firm, local authority, trust, individual or HUF & Govt.

Who is the recipient A resident contractorAt what time tax has to be deducted at source

At the time of payment or at the time of credit, whichever is earlier

Maximum amount which can be paid without tax deduction

Tax is not deductible if single payment/credit does not exceed Rs. 30,000 or Rs. 75,000 in the aggregate during a financial year

Rate of tax deduction at source

1% if recipient is an individual/ HUF, otherwise 2% (no surcharge and education cess)

Page 13: Tds2012 13

Deduction of tax at source from payment to contractors[194C]

Transport Operators

Payment to transport operators in the course of business of plying, hiring or leasing goods carriages is not subject to TDS, if the recipient furnishes their PAN to the payer

Purposes Payment/credit should be for business purposes, not be exclusively for personal purposes

Meaning of Work

Advertising, broadcasting and telecasting, catering, carriage of documents and passengers, supply of labour, payment to electrician etc.

Payment covered

On the entire consideration including service tax, if any

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Deduction of tax at source from income by way of rent[194I]

Who is the payer Any person paying rent (not being an individual or a HUF)

Who is the recipient A resident personAt what time tax has to be deducted at source

At the time of payment or at the time of credit, whichever is earlier

Maximum amount which can be paid without tax deduction

If the amount of payment during a financial year is Rs. 1,80,000 or less than Rs. 1,80,000

Meaning of Rent Any lease, sub-lease, tenancy or any other agreement or arrangement

Rate of tax deduction at source

2% for the use of any machinery or plant or equipment, 10% for the use of any land or building or furniture or fittings.(No SC and cess)

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Deduction of tax at source on fees for professional or technical services[194J]

Who is the payer Any person paying rent (not being an individual or a HUF)

Who is the recipient A resident personAt what time tax has to be deducted at source

At the time of payment or at the time of credit, whichever is earlier

Meaning of Professional or technical services

Carrying on legal, medical, or interior decoration or managerial, technical or consultancy services

Maximum amount which can be paid without tax deduction

If the amount of profession fees during the year is Rs. 30,000 or less than Rs. 30,000

Rate of tax deduction at source

10%(no surcharge and education cess)

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Tax collection on Scrap at source [Sec. 206C]

Every person, being a seller, shall collect tax from the buyer of goods specified as “Scrap” tax at source.

Tax has to be collected by the seller at the time of debiting of the amount payable by the buyer to the account of buyer or at the time of receipt of such amount from the buyer in cash or by issue of cheque, whichever is earlier.

Goods utilized for manufacturing/processing/not for the purpose of trading is not subject to tax collection, if the buyer gives declaration in Form No. 27C to the seller and copy of the same shall be submitted by the seller within 7 days from the last day of month in which it is received to the Commissioner.

Page 17: Tds2012 13

Meaning of “Scrap”? [Sec. 206C]

• “SCRAP” has been defined as waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breaking, cutting up, wear and other reasons.

• It would not include any waste or scrap-× Which does not arise from manufacture or mechanical

working of material; or× Which is usable as such× Waste or scrap arising from packing materials,

newspapers, old machinery scraped etc.× By-products generated from the manufacturing

process as the same could be used as such.

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At Glance Rates for tax deduction at source for AY 2012-13

Nature of Payment TDS(SC;Nil, EC; Nil, SHEC;Nil)

•Sec. 194A-Interest other than interest on securities 10%•Sec. 194C-Payment to contractors or sub-contractors-a) Payment/ credit to an individual or a HUFb) Payment /credit to other than individual or a HUF

1% 2%

• Sec. 194H- Commission or brokerage to resident 10%• Sec. 194I- Rent to resident-a) Rent of plant and machinery b) Rent of land or building or furniture or fittings

2% 10%

• Sec. 194J- Fees for professional or technical 10%• Sec.206C- Collection at source on Scrap 1%

Page 19: Tds2012 13

Time of deposit of TDS/TCS after April 1, 2010

Time of deposit of TDS Time of deposit of TCSOn or before 7 days from the end of the month in which tax is deducted

On or before 7 days from the end of the month in which tax is collected

•Where income or amount is paid or credited in the month of March: Tax should be deposited by April 30•Where income or amount is paid or credited before March 1:Tax should be deposited within 7 days from the end of month in which tax is deducted.

Within one week from the last day of the month in which tax is collected.

Page 20: Tds2012 13

Quarterly statement of tax deduction/ collection after April,1 2010

Nature of Return Form No.

Tax deduction from salary under section 192 24Q

Tax deduction when deductees are non resident(not being a company ), foreign company and persons who are resident, but not ordinarily resident

27Q

Tax deduction in any other case (Sec 194A to 194J) 26Q

Tax collection (Sec 206C) 27EQ

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Time-limit of Submission of Quarterly Returns E-TDS/E-TCS after April, 1 2010

Periodicity Due date of submission

For the quarter ending June 30 of the financial year July 15 of the financial year

For the quarter ending September 30 of the financial year October 15 of the financial year

For the quarter ending December 31 of the financial year January 15 of the financial year

For the quarter ending March 31 of the financial year

May 15 of the financial year immediately following the financial year in which tax is deducted/ collected

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Time Limit for issue of TDS/TCS certificate after April,1 2010

Form No. Periodicity

Due Date

Form No. 16 and 12BA(Salary)

Annual On or before May 31 of the financial year immediately following the financial year in which tax is deducted.

Form No. 16A (Non Salary)

Quarterly Within 15 days from the due date of furnishing quarterly TDS returns as;

Form No. 27D(TCS)

Quarterly Within 15 days from the due date of furnishing quarterly TCS returns as;

Page 23: Tds2012 13

Permanent Account Number(PAN) [Sec. 139A]

If the recipient does not furnish his PAN to the deductor ,tax will be deducted at the rate of 20 per cent for all sections in which TDS/TCS is deductible.

PAN of the deductee should be mentioned in any correspondence and document which is exchanged between the deductor and the deductee.

Every person receiving any sum or income from which tax has been deducted shall intimate his PAN to the deductor.

In case of issuance of PAN number and card the maximum period should be allowed three months from the date of application.

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Other points for consideration

Amount payable to Govt./RBI/certain corporations not subject to tax deduction.

Non deduction of TDS or late payment of deducted TDS attracts interest at the rate of 1.50% p.m. on TDS amount from the date on which TDS is actually deducted or paid.

Goods received on ‘freight to pay basis’ would also be subject to tax deduction.

Reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.

Page 25: Tds2012 13

Over to you

Page 26: Tds2012 13

Thank you