Tds ~ Is deductor beneficial. A loophole?

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Jagannathan (Querist)

21 December 2016 As all know tds is to be deducted when payment/Credit whichever is earlier.. Now assume a big shot company say 'X1' deducts amount something in crores. And what it does is it gives for a rotation on the tds amt which has to be remitted to gvt within due date say 7 of sub month. So company does for a maximum gain i.e from the date of deduction (much closer to previous payment due date) to the actual payment of tds it gains interest from rotation and enjoys.. So my question is, earning income out of tax liability should be brought under tax right.. (Strictly speaking to be punished)... Any views on this ?....

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Mukul Giria

Mukul Giria (Expert)

21 December 2016 Considering that half the expenditure is on payment basis and half on due basis. and cosidering deduction on 1st day and last day of the month as well. On average a deductor enjoys a credit period of 0.25 month (i.e. 7 days) . This being an immaterial amount has been given in the favour of the deductor. I hope this answers your query. And more over there can't be a tax on notional income. Tax can be levied only on real income. The income earned on account of interest for rotation of funds is merely a notional benefit and hence cannot be taxxed.

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Jagannathan

Jagannathan (Querist)

21 December 2016 It's nearly coming to 37 days.. And I'm speaking it as a material amount in favor of income tax department.. Here no scope of materiality exists..

Jagannathan

Jagannathan (Querist)

21 December 2016 And bro .. Thanks for your views.. Highly appreciatable!!

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