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Tds interest sec 201

Shivani (Learner) (1881 Points)

07 August 2014

Dear Friends

ABC Limited made payment to the contractor, Mr. X of Rs. 20000 on 1-Apr-14

Now the company didnt deduct any TDS because the works contract value is less than Rs. 30000.

ABC Limtied didnt apprehend any further contract with Mr. X during the rest of teh FY.

Now on 18-Jun-14, ABC limited made further payment of Rs. 60000 to Mr. X as it entered into another contract with Mr. X.

Now the combined value of both contracts has exceeded Rs. 75000.

Now company making making payment of Rs. 59200 after deducting Tds of Rs. 800 [i.e. 1% of (20000+60000)]

Now my question is then when should company deposit this TDS of Rs. 800

And how much TDS interest will company have to bear as company is depositing tds of Rs. 200 (1% of 20000) also which it didnt deducted earlier but was supposed to.

please show calculations.

thanks

shivani

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10 Replies

CA.Ankur Khandelwal (Owner) (281 Points)
Replied 07 August 2014

TDS AMOUNT = (20000+60000)x1% = 800

INTEREST AMOUNT = 200 X1.5% X No. of Month from April to Month in which TDS Deposited

F.e. if you deposit TDS in june then April to June = 3 Month Interest

Shivani (Learner) (1881 Points)
Replied 07 August 2014

Dear Ankur

thanks

but when should company deposit the tds of Rs. 200 with tds interest.

i feel company should deposit Rs. 200 along with tds interest on 18th june.

and tds of Rs. 600 on 7th jul

am i right

CA.Ankur Khandelwal (Owner) (281 Points)
Replied 07 August 2014

yes you are absolutely right

1 Like

Shivani (Learner) (1881 Points)
Replied 07 August 2014

Dear Ankur

just noticed one thing in your reply.

you have taken rate of interest as 1.5%.

1.5% rate of interest is in cases where deductor deducts tds but doesnt deposit by due date.

mine is a case where deductor hasnt deducted tds. in such cases interest rate remains 1%.

please note.

thanks

ANUBHAV VISHNOI (-) (150 Points)
Replied 07 August 2014

Hi all,

Rs. 800/- is required to be paid on or before 7th July 2014 to avoid the interest.

Company is not required to pay any interest on Rs. 200/- as there was no liability on the company at the time of credit of Rs. 20000/- (Check 1st proviso to section 194 C (3). The liability arose on 18th June 2014 when the aggregate amount exceeded Rs. 75000/- and company is required to deduct tax at source at that time only on aggregate amount of Rs. 80000/-. Hence there is no point of paying interest in both the cases but to avoid the interest, company should deposit both amount of TDS (Rs. 200 + Rs. 600) on or before the due date which is 7th July in this case. It would be undue hardship to the assessee if interest is charged on Rs. 200/-.

Check the proviso to section 194 C (3). And even practically all are doing this.

Regards

Anubhav Vishnoi

1 Like

Shivani (Learner) (1881 Points)
Replied 08 August 2014

Dear Anubhav there is no such proviso in section 194C(3) please see section 194C !!!!

CA.Ankur Khandelwal (Owner) (281 Points)
Replied 08 August 2014

194C (5) : No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed [thirty] thousand rupees

Anubhav I agree with you that practically doing the same practic but income tax department sending the notice under section 194C (5) (Likely to be credited)

Akhil Manohar (Article & Audit Assistant) (85 Points)
Replied 08 August 2014

No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees :

Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds seventy-five thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section.

While paying the amount on 1 april he is not liable to pay tds and there were no liabilities for the future payment.(no amount is likely to be paid in future at that time). So I think there is no need to deduct the tds for Rs.20000.

Shivani (Learner) (1881 Points)
Replied 08 August 2014

Dear Akhil

the company didnt deduct TDS on 20000 because it didnt knew then.

but once it entered into second contract and the value exceeded rs. 75000, the company must deposit tds on rs. 20000.

the intention of section is very clear if teh contract value is less than equal 30000, no need for tds but if the value of total contracts i likely to exceed rs. 75000 then tds has to be deducted.

the words of essence is 'likely to be credited'

ANUBHAV VISHNOI (-) (150 Points)
Replied 09 August 2014

Dear Shivani there are certain proviso to section 194C. Kindly check the bare act.

Ankur could you please quote few references of case laws regarding interest on tds from 1st credit/payment so that position can be clear and could be applied practically as well. Because i did not come accross any case where department raised demand of interest on the 1st credit. Income tax department is free to issue notices ignoring the law.

Thanks