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Surcharge and Edu Cess on TDS

Ankur (Work) (70 Points)

07 October 2009

Dear all,

I have a few confusions about the new TDS rates effective from 01.10.2009.

1. Whether the education cess of (2+1)% still applicable while deducting TDS? If no, can you please let me know the exact section that talks about it?

2. I understand from various communications that surcharge of 10% is not applicable on Individuals and HUF. What is the status of surcharge on Partnership firms and Domestic Companies while deducting TDS?

3. TDS u/s 194C for contractors (General) in case of Individuals and HUF has been reduced to 1%. Does it mean that if TDS u/s 194C is to be deducted of a partnership firm, we need to do it at 2%? If yes, how to identify on the basis of a PAN number whether the PAN is of Individual or a Partnership?

Many thanks in advance,

Ankur

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13 Replies

Sumit (Software Developer) (34 Points)
Replied 07 October 2009

For details about Surcharge and Edu Cess on TDS and payroll management system, please log on to the below site link

https://www.sagarinfotech.com/Payroll.aspx

Shyam Lal Naik (Service) (6156 Points)
Replied 07 October 2009

1. Surcharge & Education Cess need not be deducted. The provision is applicable w.e.f. 01.04.09 as per the finance act. Education Edn Cess on TDS from Salary and payment to non resident applicable. Surcharge appicable in case of payment to non resident company.

2. The answer applies to your 2nd query.

3. The 4th character of the PAN represents the assessable status. If it is "P" or "H", the deductee is indivisual/huf.

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 07 October 2009

Hi Ankur,

Here are answers to your questions, with a hope that they will satisfy curiosity

1) Surcharge & Education Cess will not be levied on TDS except

TDS on Salary payment and

Payment to Non-Resident and Non-Domestic Company.

In these two cases ONLY, surcharge & e.cess will be levied, otherwise NOT. For your reference, you can go through the proposals of Finance Act, 2009. Also, I guess, under TDS sections viz. 194C, 194J or 194H etc. you will get some clue.

2) Surcharge & Education Cess will not be levied on payment (except above two) to any PERSON. Let it be Individual, HUF or Firm, Company. Flat rate of TDS will be there without Surcharge and E. Cess.

3) Your guess is right. For 194C, in respect of any deductee other than Individual & HUF, rate will be 2%.

4) The fourth character of the PAN must be one of the following, depending on the type of assessee:

C — Company

P — Person

H — Hindu Undivided Family (HUF)

F — Firm

A — Association of Persons (AOP)

T — AOP (Trust)

B — Body of Individuals (BOI)

L — Local Authority

J — Artificial Juridical Person

G — Govt

CA. Sunil Kumar (Audit Manager) (1608 Points)
Replied 07 October 2009

Originally posted by :Ankur
"	Dear all, I have a few confusions about the new TDS rates effective from 01.10.2009. 1. Whether the education cess of (2+1)% still applicable while deducting TDS? If no, can you please let me know the exact section that talks about it? 2. I understand from various communications that surcharge of 10% is not applicable on Individuals and HUF. What is the status of surcharge on Partnership firms and Domestic Companies while deducting TDS? 3. TDS u/s 194C for contractors (General) in case of Individuals and HUF has been reduced to 1%. Does it mean that if TDS u/s 194C is to be deducted of a partnership firm, we need to do it at 2%? If yes, how to identify on the basis of a PAN number whether the PAN is of Individual or a Partnership? Many thanks in advance, Ankur	"

No Surcharge, Education or Higher Secondary Education cess is applicable for F.Y. 2009-10

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 07 October 2009

Mr. Sunil Kumar,

I don't get what do you mean by - "There is no Surcharge and Cess for FY 2009-10" ?

I guess, with reference to my earlier reply, in above two exceptions there will be both the items for levy.

CA. Sunil Kumar (Audit Manager) (1608 Points)
Replied 08 October 2009

Originally posted by :CA. Sunil Kumar

Dear Ankur,

please find the attach file for your reference

Attached File : 25 tds.xls downloaded: 516 times

(Guest)

thanks sunil sir for tds chart

Ankur (Work) (70 Points)
Replied 08 October 2009

Thanks to all of you for your replies. Can you please tell me as to which section or which line of the Finance Bill 2009 (2) says that no education cess needs to be deducted while deducting TDS? Your kind attention would be highly appreciated.

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 08 October 2009

Hi Ankur,

In respect of section, in all the TDS related sections viz. "amendments to 194C or 194J" etc. you will find that no surcharge & cess to be included.

Even if you want to see, you can go to following link --

https://indiabudget.nic.in/ub2009-10/fb/bill31.pdf

Refer point no. 60 in above link. In that, they have only mentioned basic rate & not surcharge & cess.

Juzer Sadikot (CA - innovative solutions for Imports and Exports) (1309 Points)
Replied 08 October 2009

Dear Mr. Ankur,

Read Section 2(11) of Finance Act No. 2 of 2009 along with section 2(5) and 2(6) of said Act.

For your reference;

Chapter II

Rates of Income-tax

Income-tax.

2. (5) In cases in which tax has to be deducted under sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the Income-tax Act, at the rates in force, the deductions shall be made at the rates specified in Part II of the First Schedule and shall be increased by a surcharge, for purposes of the Union, calculated in cases wherever prescribed, in the manner provided therein.

(6) In cases in which tax has to be deducted under sections 194C, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 194LA, 196B, 196C and 196D of the Income-tax Act, the deductions shall be made at the rates specified in those sections and shall be increased by a surcharge, for purposes of the Union, in the case of every company, other than a domestic company, calculated at the rate of two and one-half per cent of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees.

(11) The amount of income-tax as specified in sub-sections (1) to (10) and as increased by the applicable surcharge, for purposes of the Union, calculated in the manner provided therein, shall be further increased by an additional surcharge, for purposes of the Union, to be called the “Education Cess on income-tax”, calculated at the rate of two per cent of such income-tax and surcharge so as to fulfil the commitment of the Government to provide and finance universalised quality basic education :

Provided that nothing contained in this sub-section shall apply to cases in which tax is to be deducted or collected under the sections of the Income-tax Act mentioned in sub-sections (5), (6), (7) and (8), if the income subjected to deduction of tax at source or collection of tax at source is paid to a domestic company and any other person who is resident in India.

Do revert if you are not satisfied.

Juzer