Tax deducted at Source(TDS)

Section 192:TDS on Salary

• Payer: Any person called as employer
• Payee: Income receiver whom income is calculated under salary head called as employee
• Tds rate: slab rate covering all deductions, exemption like HRA, LTA, deduction u/s 80c to 80u, any other incomes such as rental income from house property or bank deposits will added and any interest on housing loans are deducted .
• Salary includes all allowances, perquisites, EPF contributions, bonus, commission, gratuity, salary from previous employer etc
• Employers are required to deduct tds every month and deposit it with government within prescribed time limit.
• Tds will deduct on actual payment of salary not on accrual basis

Section 192:TDS on Salary

• From FY 2023-24, new tax regime is default tax regime so at the time of investment declaration, if you wish to opt old regime intimate to employer.
• The employer is required to provide form 16 containing the details of salary such as amount paid and tax deducted accompanied by Form 12BA to show particulars of perquisites and profits in lieu of salary.

Common provision for applicability of some tds section

• Payer is any person other than individual /HUF but individual/Huf isalsoincludeinsomecases(either such individual/hufis business person andturnover is exceed 1 crore orsuch individual/hufis professional person andgross receiptsexceed 50 lacsonpreceding financial year )
• It covers following tds section; 194A(tds on interest other than interest on securities), 194C(tds from payment to contractor or sub contracts), 194H(tds from commission or brokerage other than insurance commission), 194I(TDS from income by way of rent), 194J(tds on technical services or professional fees, royalty, directors fee), 194R(tds on benefit/ Perquisites payment to residents).
• Time limit to tax deposited to government; In case of payment by government or on behalf of government than within same day, other case April –feb months tax deduction deposited within 7thday from end of month in which tds reqiredto deduct , In march month tax deposited on or before 30thApril.

194A:tds on interest other than interest on securities

• Sec 2(28A) of income tax act, 1961 define “interest” to mean interest payable in any manner either any money borrowed or debt incurred and includes any service fee or other charge in respect of money borrowed.
• This section is only applicable to payment of interest to residents.
• Here if payer is Banking company/Co-operative society/Post office(on scheme framed by CG) than exceed 40000 tds will deduct , any other payer exceed 5000 tds will deduct.
• If payee is senior citizen than exceed 50000 tds will deduct by payer, this includes interest from deposit with bank/post office/fixed deposit scheme, recurring deposit schemes etc.

194A:tds on interest other than interest on securities

• For nil tds if no tax liability levy than payee should give declaration 15G(15h for senior citizens), investor of senior citizen saving scheme and nominee of investor after the death of investor can produce declaration for nil return.
• Rate of Tds: 10% where Pan is furnished( 7.5% from 14th may 2020 to 31st march 2021 as per covid relief); 20% if Pan is not provided .
• Tds provision of this section is not applicable to interest in saving bank account, interest on income tax refund, interest paid by firm to its partner, interest paid to bank, LIC, UTI, insurance company, interest paid by co operative society to its member or other co operative society( but if co operative society’s last year turnover is more than 50 crore than if payee is senior citizen than exceed 50000 tds will deduct, any other payee exceed 40000 tds will deduct.

194C:Tds on payment to contracts

• Any sum to any resident contractor for carrying out any work (including supply of labour for carrying out any work);where contractor -client(contractee) relation exist.
• “Work” includes advertising, broadcasting or telecasting, carriage of goods and passengers by any mode other than railways, catering, specially customized product where specially material purchased from such customer(payer) or associate(covers relatives u/s 40(a)(2)(b)) and tds will deduct after excluding material purchase from payer if such value separately mentioned in invoice, if such material purchase value is not separately mentioned in invoice than tds will deduct on total invoice value.

194C:Tds on payment to contracts

• Tds rate: if payee is individual/huf-1%(.75% from 14th may 2020 to 31st march 2021), any other person-2%(1.5% from 14th may 2020 to 31st march 2021).
• Tds will deduct on labour charges(service part) in work contract, so only material purchase contract is not cover in this section.
• Sub contract who enters into a contract with the contractor for carrying out or supply of labour in terms of contractor with any of the authorities, where wholly or partly work will done by contractor, tds will deduct at 1 %(.75% from 14th may 2020 to 31st march 2021).
• Tds will liable to deduct either at the time of payment in cash/account payment or credited in payee’s account in whatever name whichever is earlier.

194C:Tds on payment to contracts

• Where the sum paid or credited in pursuance of any contract does not exceed 30000 or aggregate of such sum credited or paid or likely to be credited or paid during the financial year does not exceed 100000 than tds will not deduct.
• Individual /huf payment for personal use to contractor than tds will not deduct.
• Contractor who is in business of plying, hiring or leasing good carriages and furnished pan than tds will not deduct.
• Contractor who is not furnishing Pan tds will deduct at 20% in any case.

Author

CA Ankita Bothra