TDS deduction inclusive of Service tax.

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CA Aravind I (Querist)
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29 March 2011 There is a practice of deducting tax at source inclusive of Service tax component is it correct doing so? whether such a deduction amounts to double taxation as what will be the tax bifurcation in such a case?

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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29 March 2011 Only in case of Rental payment under 194I : The department has clarified that TDS should be deducted only on the rent (excluding service tax), whereas in all other cases TDS is applied on the gross amount(including service tax)

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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29 March 2011 Regarding double taxation : I don't think it amounts to double taxation as its only a collection of advance tax (on deductee's behalf), for which he will get due credit in his final ITR. The customer will be assessed on the base of his income (which is based on his net turnover).

This can only leads to cash flow problem for an assessee as he will get lesser amount in hand from the customer resulting a working capital woes.

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CA.ViVeK M ACA

CA.ViVeK M ACA (Expert)
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29 March 2011 other than rent, TDS have to be deducted inclusive of service tax and for rent transaction TDS have to be calculated other than service tax figure

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