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“Sec 206 AA – Issues” by  Venkat Rao Marella    on  28 July 2010

 

The circular No.1 of 2010 specifies that no tax is required to be deducted at source in any case unless the estimated salary income including the value of perquisites for the FY exceeds Rs. 160,000 or Rs. 190,000 or Rs. 240,000 (or the applicable limit for the financial years as as may be notified by the Department) as the case may be depending upon the age and gender of the employees.”

 

“It is not clear that the Board will issue similar instruction in the forthcoming TDS circulars after insertion of Sec 206AA.” Understood by  Mr. Venkat Rao Marella in his article “Sec 206 AA – Issues” on 28.07.2010 in CAClubIndia

 

He also expressed his anxiety in his words “If similar instructions are issued in the next TDS circular for the FY 2010-11, then no tax will be deducted U/s 192 if salary income is below exemption limit. In the absence of such instructions, tax will be deductible @ 20% if employee whose income is below exemption limit does not disclose PAN.”

 

It is agreed with following provisions of  Section 206AA

·         Quoting of PAN is compulsory from 1 – April – 2010.

·         Every person whose receipts are subject to TDS should furnish his PAN to the deductor.

 

Please, may I underline the words “whose receipts are subject to TDS”.   Here, the element “Receipts” does not necessarily mean that the “specified nature of following payments” like

·                                 Salary (Sec 192),

·                                 Rent ( Sec 194-I),

·                                 Fees for professional or technical services to a resident (Sec 194j) )

Among others, which would attract TDS after crossing their own threshold limits ( threshold limits are computed taking into account the gross total income of the deductee, if the ACT does not mean the otherwise)  are subjected to TDS.

 

“U/s 192 if salary income is below exemption limit. In the absence of such instructions, tax will be deductible @ 20% if employee whose income is below exemption limit does not disclose PAN.”  Is this apprehension of Mr. Venkat Rao Marella is realistic?

 

The ambiguity, sensed many among us,  like Mr.Venkat Rao Marella,  encourages to understand so.   It also seems that it confirms by its clarification The circular No.1 of 2010 specifies that no tax is required to be deducted at source in any case unless the estimated salary income including the value of perquisites for the FY exceeds Rs. 160,000 or Rs. 190,000 or Rs. 240,000 (or the applicable limit for the financial years as as may be notified by the Department) as the case may be depending upon the age and gender of the employees.”

 

Here, are we understanding the words from the intended perspective, “Every person whose receipts are subject to TDS should furnish his PAN to the deductor.”?

May not be.   

 

The “Receipts” in question are subject to TDS,  only when the same crosses prescribed threshold limits in its respective nature of  payment.

 

Are we not misinterpreting that the “Receipts” in question mean that all “Receipts” which are subject to TDS are to be subjected to TDS irrespective of threshold limits?   If that is the case, why has the Act specifically highlighted “Threshold limits” in some specific nature of payments like

·         “Rent”,

·         “Fees for professional or technical services to a resident”)

 

Mr.Venkat Rao Marella seems to find some convenient argument from The circular No.1 of 2010”, by saying that “If similar instructions are issued in the next TDS circular for the FY 2010-11, then no tax will be deducted U/s 192 if salary income is below exemption limit. In the absence of such instructions, tax will be deductible @ 20% if employee whose income is below exemption limit does not disclose PAN.”  The Revenue Department has just issued an informative explanation in this circular and also expecting us to adopt the meaning in other areas where TDS factors.

 

Again, Sec 192, (1B) says  “For the purpose of paying tax under sub-section (1A), tax shall be determined at the average of income-tax computed on the basis of the rates in force for the financial year”.    This provision carries the words “ on the basis of the rates in force for the financial year”, if the aggregate receipts of the salary, in general and the aggregate total gross income of the deductee, in particular exceeds the threshold limits, then only the income tax will be “computed on the basis of the rates in force for the financial year”.    

 

If the same component is less than the threshold limit, does it be subjected to TDS? 

Should not be.

 

I am sorry Mr.Venkat Rao Marella, as my understanding is swayed away from your perception. 

 

From

Venkateswara Rao Sapare, Hyderabad – 500 008. Dt 29.07.2010.

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Category Income Tax, Other Articles by - Venkateswara Rao Sapare 



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