HOW TO COMPLY TDS PROVISIONS

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 Business Mantra : Faridabad

Tax deducted at source is one of the modes of collecting Income-tax from the assessees in India. When a person earns specified income then while making payment of income, he should deduct tax at source at the prescribed rates and pay only the balance amount to the recipient of such income.

The tax so deducted at source by the payer has to be deposited to the Central Govt. account within the specified time. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment.

Income from several sources is subjected to tax deduction at source. Some of the incomes which are liable to TDS are salary, interest, dividend, interest on securities, winnings from lottery, horse races, commission and brokerage, rent, fees for professional and technical services, payments to non-residents etc. TDS paid to the government is always treated as an Advance tax when we are being paid for provision made by us in the form of products or services.

Amount on which tax to be deducted

Tax is deductible on the entire income or the bill amount or gross receipts less taxes. If service tax is levied on the bill amount then TDS is not to be deducted on service tax amount as it is not income of the recipient.

Time of Deduction

For Salary payments TDS has to be deducted at the time of such payment to the employee.

For all payments other than salary TDS has to be deducted at the time of :

  • Credit of such income to the account of the recipient or
  • Payment of such amount by any mode to the recipient,

Whichever is earlier.

 

If an assessee earns Gross receipts from a source of income and if no income tax is to be deducted then assessee will get full payment of  Gross receipts  from its source.

tds diagram 1

If tax is to be deducted from Gross receipts then assessee will get payment of gross receipts less TDS and amount of TDS to be deposited to Central Govt account.

tds

TDS Rate Chart Financial Year 2014-15
If Deductor / Recipient is
Nature of Payment Made To Residents Income limit upto which TDS is not deductible (Rs.)  Company / Firm / Co-operative Society / Local Authority Individual / HUF If No PAN / Invalid PAN
Section – Description Rate (%) Rate (%) Rate (%)
192 – Salaries NA Average rates 30
193 – Interest on securities 10 10 20
194 – Dividends 10 10 20
194A – Interest other than interest on securities – Others 5000 10 10 20
194A – Banks 10000 10 10 20
194B – Winning from Lotteries 10000 30 30 30
194BB – Winnings from Horse Race 5000 30 30 30
194 C – Payment to Contractors
– Payment to Contractor – Single Transaction 30000 2 1 20
– Payment to Contractor – Aggregate During the F.Y. 75000 2 1 20
– Contract – Transporter who has provided valid PAN 20
194D – Insurance Commission 20000 10 10 20
194DA-Pament of Taxable Life Insurance Policy wef 01.10.2014 100000 2 2 20
194G – Commission – Lottery 1000 10 10 20
194H – Commission / Brokerage 5000 10 10 20
194I – Rent – Land and Building 180000 10 10 20
194I – Rent – Plant / Machinery 180000 2 2 20
194IA-Transfer of immovable property other than agricultural land 5000000 1 1 20
194J – Professional Fees 30000 10 10 20
194LA – Compensation of acquisition of Immovable Property 100000 10 10 20

 

Deposit of TDS. 

The tax deducted/collected by a person shall be deposited to government as follows :

  • On or before 7 days from the end of the month in which tax is deducted.
  • For the month of March, tax should be deposited by 30th

 

 

Due date ETDS return 24Q, 26Q 27Q and Form16 ,Form 16A
Sl. No. Quarter ending  For Govt offices  For other deductors
E tds return Form 16A E tds return Form 16A
1 30th June 31st July 15th August 15th July 30th July
2 30th September 31st October 15th November 15th October 30th October
3 31st December 31st January 15th Feburary 15th January 30th January
4 31st March 15th May 30th May (31st May   for form 16) 15th May 30th May (31st May for form 16)

CONSEQUENCES OF DEFAULT

 

The following chart indicates the nature of default and its consequences which range from penal interest, penalty to prosecution:

 

Default/ Failure Section Nature of Demand Quantum of demand or penalty
Failure to deduct tax at source 201(1) Tax demand Equal to tax amount deductible but not deducted
201(1A) Interest @1 % p.m. of tax deductible
271C Penalty Equal amount of tax deductible but not deducted
Failure to deposit tax at source 201(1) Tax demand Equal to tax amount not deposited
201(1A) Interest @1.5% p.m. of tax not deposited
276B Prosecution Rigorous imprisonment for a term for a minimum of 3 months which may extend to 7 years and with fine
Failure to file TDS return in time 234E Fine Rs 200 per day will be levied on the deductor, as long as TDS statement is not filed upto the maximum of TDS  amount.
If deductor exceeds one year time limit to file TDS statement.If deductor furnishes incorrect details like PAN, TDS amount, payment of challan etc. 271H Penalty Deductor has to pay penalty ranging from Rs. 10000/- to One Lac rupees.
Failure to issue TDS certificate u/s 203 272(A)(g) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount.
Failure to furnish prescribed statements u/s 200(3) 272A(2)(k) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount
Failure to mention PAN of the deductee in the TDS statements and certificates 272B Penalty Rs. 10000
Failure to apply for TAN No. u/s 203A 272BB Penalty Rs. 10000

 

 

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C.A Canchal :, Author is a practicing chartered accountant and may be reached at info@businessmantranews.com

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