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Tax Deducted at Source

BALU.... (CCI STUDENT....) (44614 Points)

14 July 2010  

Tax Deducted at Source or best known as TDS is one of the modes of collecting Income-tax from the assessees in India. This is governed under Indian Income Tax Act, 1961, by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by indian revenue service, under the ministry of finance, Govt.of india.

Overview

In simple terms, TDS is the tax getting deducted from the person receiving the amount (Employee/Deductee) by the person paying such amount (Employer/Deductor). This is applicable for certain types of payments, as applicable under the Act.

In the process of TDS, deduction of tax is effected at the source when income arises or accrues. Hence where any specified type of income arises or accrues to any one, the Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of Income-tax and pay only the balance amount to the recipient of such income.

The tax so deducted at source by the payer, has to be deposited in the Government treasury to the credit of Central Govt, within the specified time. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment.

Income from several sources is subjected to tax deduction at source. Presently this concept of TDS is also used as an instrument in enlarging the tax base. Some of such income subjected to TDS are salary, interest, dividend, interest on securities, winnings from lottery, horse races, commission and brokerage, rent, fees for professional and technical services, payments to non-residents etc. It is always considered as an Advance tax which is paid to the government.

 

Tax Deduction Account Number

TAN is a unique identification number for person deducting the tax. The person who is liable to deduct the Tax should obtain a TAN before deducting such Tax. TAN should applied through Form No 49B (prescribed under Income Tax Law). Such form can be submitted online at NSDL website. OR can also be submitted at Tax Information Network Facilitation Center (TIN-FC). These centers are established by NSDL (which is an appointed intermediary by the Government) across India.

TAN Application should accompany a 'proof of identity' and a 'proof of address' (photocopies) of the deductor. In case, the application is made online, these documents need to be sent over mail (post/courier) to NSDL - TAN Application division.

Once NSDL receives the TAN application along with said documents (either through TIN FC / Online), the details are verified and then sent to Income Tax Department. Once approved, Income Tax Department will allocate an unique number, and indicate the applicant through NSDL.

TAN will be 10 characters' alpha numeric string comprising of 4 Alpha - 5 Numeric - 1 Alpha. [Eg: BLRR02933A]. The first 3 characters consists of Income Tax Region Code (BLR => Bangalore) and the Fourth digit comprises of 'First Character' of deductor name (R => Relyon Softech Ltd). Remaining characters form an unique combination to get identified at Income Tax Department.

 

Deductor

Under the process of TDS, Deductor is a person/company who is liable to deduct the Tax at source, from the payment being made to the party. Deductor is also termed as Employer in cases where the payments are under Salaries

Deductee

Deductee is the person, from whom the tax is being deducted or accrued for deduction. Depending on the nature of the deduction being made, deductees and respective submission forms are categorized to 4 types:

  1. Salaries: In case of salaries, the deductee is termed as an Employee. All the information of deductions and payments in this category should be submitted in Form 24Q to the government.
  2. Non-Salaries - Resident: In case of non-salaries and the payment is made to a resident in India, the deductee is termed as a Deductee or a Party. All the information of deductions and payments in this category should be submitted in Form 26Q to the government.
  3. Non-Salaries – Nonresident: In case of non-salaries and the payment is made to a non-resident of India, the deductee is termed as a Deductee or a Party. All the information of deductions and payments in this category should be submitted in Form 27Q to the government.

TDS Certificates

A tax deductor is also required to issue TDS certificate to the deductee within specified timed under section 203 of the I T Act. The certification from the deductor, for the deduction and payment of the respective TDS amount to the bank, issued to the deductee is a TDS certificate

The deductee should produce the details of this certificate, during the regular assessment of income tax, to adjust the amount of TDS against the Tax payable by the Deductee [assessee].

Types of TDS certificates

Salaries - Form 16: In case of Salaries, the certificate should be issued in FORM 16 containing the Tax computation details and the Tax deducted & Paid details. This refers to the details submitted over Form 24Q.

Non-salaries - Form 16A: In case of Non-Salaries, the certificate should be issued in FORM 16A containing the Tax deducted & Paid details. Separate certificates should be prepared for each Section [nature of payment]. This refers to the details submitted over Form 26Q and 27Q.


 23 Replies

BALU.... (CCI STUDENT....) (44614 Points)
Replied 14 July 2010

TDS rates for Financial Year 2009-10 (After 01st October 2009)

Form 24Q:

Male Female Senior Citizen Tax (%)
 For Income Between 0 to 1,60,000  For Income Between 0 to 1,90,000  For Income Between 0 to 2,40,000 0
 For Income Between 1,60,001 to 3,00,000  For Income Between 1,90,001 to 3,00,000  For Income Between 2,40,001 to 3,00,000 10
 For Income Between 3,00,001 to 5,00,000  For Income Between 3,00,001 to 5,00,000  For Income Between 3,00,001 to 5,00,000 20
 For Income above 5,00,001  For Income above 5,00,001  For Income above 5,00,001 30
     
Surcharge   0
Education Cess   3

Form 26Q:

Section Nature of Payment Status Tax (%)
       
193 Interest on Debentures & Securities   10
194
Deemed Dividend
  10
194A
Other Interest
  > Aggregate sum exceeding Rs. 10,000 for Banking Co’s , etc.per person during the financial year.
  > Aggregate sum exceeding Rs. 5,000 per person during the financial year
  10
194B Lottery/Crossword Puzzle > Rs.5,000   30
194BB Winnings from Horse Race > Rs. 2,500   30
194C Contracts to Transporter, who has provided a valid PAN   0*
Contracts to Individuals/HUF   1
Contracts to others   2
194D Insurance Commission > Rs.5,000   10
194EE Withdrawal from NSS > Rs.2,500   20
194F Repurchase of Units by MF/UTI   20
194G Commission on Sale of Lottery Tickets > Rs.1,000   10
194H Commission or Brokerage > Rs.2,500   10
194I Rent > Rs.1,20,000 p. a.
           Rent of Plant & Machinery
  2
           Rent of Land, Building, Furniture, etc   10
194J Professional or Technical Fess > Rs.20,000   10
194LA Compensation on Compulsory Acquisition of immovable property >Rs.1,00,000 during the financial year   10
Surcharge   0
Education Cess   0
 
* If there is no PAN details, then @ 1% or @ 2%. From 1st April 2010 it is 20%.

Form 27Q:

Section

Nature of Payment

Status

Tax (%)

       
194E Payment to nonresident sportsmen or sports association   10
195(a) Income from foreign exchange assets payable to an Indian citizen   20
195(b) Income by way of long-term capital gain referred to in sec. 115E   10
195(c) Income by way of Short-term capital gains u/s. 111A   15
195(d) Income from other long-term capital gains   20
195(e) Income by way of interest payable by Government/Indian concern on money borrowed or debt incurred by Government or Indian concern in foreign currency   20
195(f) Royalty payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern after March 31, 1976, where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to section 115A(1A) to the Indian concern or in respect of computer software referred to in the second proviso to section 115(1A), to a person resident in India -    
1.Where the agreement is made before June 1, 1997   30
2.Where the agreement is made after May 31, 1997 but before June 1, 2005   20
3.Where the agreement is made on or after June 1, 2005   10
195(g) Royalty (not being royalty of the nature referred to in (e) sub para) payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to matter included in the industrial policy, the agreement is in accordance with that policy    
1.Where the agreement is made after March 31, 1961 but before April 1, 1976 COMPANY 50
OTHERS 30
2.Where the agreement is made after March 31, 1976 but before June 1, 1997   30
3.Where the agreement is made after May 31, 1997 but before June 1, 1997   20
4.Where the agreement is made on or after June 1, 2005   10
195(h) Fee for technical services payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to matter included in the industrial policy, the agreement is in accordance with the policy -    
1.Where the agreement is made after February 29, 1964 but before April 1, 1976 COMPANY 50
OTHERS 30
2.Where the agreement is made after March 31, 1976 but before June 1, 1997   30
3.Where the agreement is made after May 31, 1997 but before June 1, 2005   20
4.Where the agreement is made on or after June 1, 2005   10
195(i) Any other income COMPANY 40
OTHERS 30
196A Income in respect of Units of Non-residents   20
196B Income and Long-term Capital gain from units of an Off shore fund   10
196C Income and Long-term Capital Gain from Foreign Currency Bonds or shares of indian companies   10
196D Income of Foreign Institutional Investors for Securities   20
Surcharge ( On Tax) Applicable for Foreign Companies if payment/credit exceeds Rs.1 crore of such companies 2.5
Education Cess on Tax deducted Plus Surcharge 3

Form 27EQ:

Collection Code

Nature of Purchase

Tax (%)

6CA Alcoholic liquor for human consumption 1
6CB Timber obtained under a forest lease 2.5
6CC Timber obtained under any mode other than forest lease 2.5
6CD Any other forest product not being timber or tendu leave 2.5
6CE Scrap 1
6CF Parking Lot 2
6CG Toll plaza 2
6CH Mining and quarrying 2
6CI Tendu leaves 5
Surcharge
(On Tax)
Applicable for Foreign Companies if collections exceeds Rs.1 crore of such companies 2.5
Education Cess Applicable for Foreign Companies 3
5 Like

BALU.... (CCI STUDENT....) (44614 Points)
Replied 14 July 2010

TDS rates for Financial Year 2010-11

Form 24Q:

Male Female Senior Citizen Tax (%)
 For Income Between 0 to 1,60,000  For Income Between 0 to 1,90,000  For Income Between 0 to 2,40,000 0
 For Income Between 1,60,001 to 5,00,000  For Income Between 1,90,001 to 5,00,000  For Income Between 2,40,001 to 5,00,000 10
 For Income Between 5,00,001 to 8,00,000  For Income Between 5,00,001 to 8,00,000  For Income Between 5,00,001 to 8,00,000 20
 For Income above 8,00,001  For Income above 8,00,001  For Income above 8,00,001 30
     
Surcharge   0
Education Cess   3

Form 26Q:

Section Nature of Payment Status Tax (%)
       
193 Interest on Debentures & Securities   10
194
Deemed Dividend
  10
194A
Other Interest
  > Aggregate sum exceeding Rs. 10,000 for Banking Co’s , etc.per person during the financial year.
  > Aggregate sum exceeding Rs. 5,000 per person during the financial year
  10
194B Lottery/Crossword Puzzle > Rs.10,000   30
194BB Winnings from Horse Race > Rs. 5,000   30
194C Contracts to Transporter, who has provided a valid PAN   0*
Contracts to Individuals/HUF   1
Contracts to others   2
194D Insurance Commission > Rs.20,000   10
194EE Withdrawal from NSS > Rs.2,500   20
194F Repurchase of Units by MF/UTI   20
194G Commission on Sale of Lottery Tickets > Rs.1,000   10
194H Commission or Brokerage > Rs.5,000   10
194I Rent > Rs.1,80,000 p. a.
           Rent of Plant & Machinery
  2
           Rent of Land, Building, Furniture, etc   10
194J Professional or Technical Fess > Rs.30,000   10
194LA Compensation on Compulsory Acquisition of immovable property >Rs.1,00,000 during the financial year   10
Surcharge   0
Education Cess   0
 
* If there is no PAN details, then it is 20%. (or at actual, whichever is higher)

Form 27Q:

Section

Nature of Payment

Status

Tax (%)

       
194E Payment to nonresident sportsmen or sports association   10
195(a) Income from foreign exchange assets payable to an Indian citizen   20
195(b) Income by way of long-term capital gain referred to in sec. 115E   10
195(c) Income by way of Short-term capital gains u/s. 111A   15
195(d) Income from other long-term capital gains   20
195(e) Income by way of interest payable by Government/Indian concern on money borrowed or debt incurred by Government or Indian concern in foreign currency   20
195(f) Royalty payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern after March 31, 1976, where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to section 115A(1A) to the Indian concern or in respect of computer software referred to in the second proviso to section 115(1A), to a person resident in India -    
1.Where the agreement is made before June 1, 1997   30
2.Where the agreement is made after May 31, 1997 but before June 1, 2005   20
3.Where the agreement is made on or after June 1, 2005   10
195(g) Royalty (not being royalty of the nature referred to in (e) sub para) payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to matter included in the industrial policy, the agreement is in accordance with that policy    
1.Where the agreement is made after March 31, 1961 but before April 1, 1976 COMPANY 50
OTHERS 30
2.Where the agreement is made after March 31, 1976 but before June 1, 1997   30
3.Where the agreement is made after May 31, 1997 but before June 1, 1997   20
4.Where the agreement is made on or after June 1, 2005   10
195(h) Fee for technical services payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to matter included in the industrial policy, the agreement is in accordance with the policy -    
1.Where the agreement is made after February 29, 1964 but before April 1, 1976 COMPANY 50
OTHERS 30
2.Where the agreement is made after March 31, 1976 but before June 1, 1997   30
3.Where the agreement is made after May 31, 1997 but before June 1, 2005   20
4.Where the agreement is made on or after June 1, 2005   10
195(i) Any other income COMPANY 40
OTHERS 30
196A Income in respect of Units of Non-residents   20
196B Income and Long-term Capital gain from units of an Off shore fund   10
196C Income and Long-term Capital Gain from Foreign Currency Bonds or shares of indian companies   10
196D Income of Foreign Institutional Investors for Securities   20
Surcharge ( On Tax) Applicable for Foreign Companies if payment/credit exceeds Rs.1 crore of such companies 2.5
Education Cess on Tax deducted Plus Surcharge 3

Form 27EQ:

Collection Code

Nature of Purchase

Tax (%)

6CA Alcoholic liquor for human consumption 1
6CB Timber obtained under a forest lease 2.5
6CC Timber obtained under any mode other than forest lease 2.5
6CD Any other forest product not being timber or tendu leave 2.5
6CE Scrap 1
6CF Parking Lot 2
6CG Toll plaza 2
6CH Mining and quarrying 2
6CI Tendu leaves 5
Surcharge
(On Tax)
Applicable for Foreign Companies if collections exceeds Rs.1 crore of such companies 2.5
Education Cess Applicable for Foreign Companies 3
4 Like

BALU.... (CCI STUDENT....) (44614 Points)
Replied 14 July 2010

Due Date Table for TDS and TCS quarterly returns:

Quarter
Form 24Q
Form 26Q
Form 27Q
Form 27EQ
First July 15th July 15th July 14th July 15th
Second October 15th October 15th October 14th October 15th
Third January 15th January 15th January 14th January 15th
Fourth June 15th June 15th June 14th April 30th
2 Like

Vikas Gupta (CHARTERED ACCOUNTANT) (16295 Points)
Replied 14 July 2010

THANKS BALU


(Guest)

thanks for share......................

Prasad R (CA Final) (2123 Points)
Replied 14 July 2010

Thanx for sharing sir

CMA KNVV Sri Vidya - Sri Kanth (C.A.Final (New) ICWAI FINAL (New))   (11254 Points)
Replied 15 July 2010

Thanks Balu 

really very useful 

S.K.Bapna (Student) (187 Points)
Replied 15 July 2010

very informative


(Guest)

THANX BALU SIR.

k. vidyasagar (Artical student) (39 Points)
Replied 15 July 2010

thank u balu,

pls continu to share with me

chakradhar (Articled Student) (33 Points)
Replied 15 July 2010

Thanx for sharing Valuable Information

Prashant Deo Pandey (MBA-Finance) (372 Points)
Replied 15 July 2010

R/Sir

A very nice explanation about TDS u have given

Nivedita Manoj Desai (CA Final) (242 Points)
Replied 15 July 2010

thanku sir


(Guest)

thanx ..........................................................................................................................................................................................


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