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Tds on bonus

bhargavi ( Finance manager) (90 Points)

22 May 2012

Hi,

we had provided for 5 lacs as bonus payment for 2 of our sales managers as on 31st March 2012. Their individual share of bonus was finalised in May 2012. Now we want to make the payment after deducting TDS. kindly clarify on the below points:

1. I understand that the TDS has to be computed at last year rates. The bonus and the TDS will be included in the Form 16 of the associates. My question is, as a company do we have to bear the interst on the delayed payment of TDS?

2. how can we avoid the interest payment.

Thanks a lot in advance.

Regards// Bhargavi

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9 Replies

PRITAM JAIN, CA , CS (Practising CA CS) (398 Points)
Replied 22 May 2012

Originally posted by : bhargavi
	Hi, we had provided for 5 lacs as bonus payment for 2 of our sales managers as on 31st March 2012. Their individual share of bonus was finalised in May 2012. Now we want to make the payment after deducting TDS. kindly clarify on the below points: 1. I understand that the TDS has to be computed at last year rates. The bonus and the TDS will be included in the Form 16 of the associates. My question is, as a company do we have to bear the interst on the delayed payment of TDS? 2. how can we avoid the interest payment. Thanks a lot in advance. Regards// Bhargavi

It is clearly mentioned u/s192 of the income tax act, that the tds should be deducted "AT THE TIME OF PAYMENT".

This liberty is available only u/s. 192 i.e. payment of salaries and no other payments.

In other sections it is payment or credit to account whichever is earlier.

So according to me there should not be any interest as tds is liable to be dedcuted only on the occation of payment and not earlier. A.Y. in challan should be A.Y. 2013-14

Please confirm with your consultant

bhargavi ( Finance manager) (90 Points)
Replied 23 May 2012

Thanks a ton for your reply.

I am not clear on the point that the AY year in the challan should be 13-14. The AY in the form16 that will be issued to the employee will be 12-13. and the TDS will be computed based on the rates specified for AY 12-13. Then how will we match the total amount of TDS remitted to government with our eTDS forms. Further, how will it reflect in the form 26AS of the concerned employee. please clarify.

Regards//Bhargavi.

PRITAM JAIN, CA , CS (Practising CA CS) (398 Points)
Replied 23 May 2012

Hi Bhargavi,

I am not really sure about the A.Y. but if u put A.Y. 2012-13 then u will get notice of Interst on late paymt. Please confirm these facts with some other expert and let me know the exact answer.

Obliged

CA Pritam R. Jain

PRITAM JAIN, CA , CS (Practising CA CS) (398 Points)
Replied 23 May 2012

Hi Bhargavi,

I am not really sure about the A.Y. but if u put A.Y. 2012-13 then u will get notice of Interst on late paymt. Please confirm these facts with some other expert and let me know the exact answer.

Obliged

CA Pritam R. Jain

CHINTANKUMAR PRAVINCHANDRA SHA (proprietor) (32 Points)
Replied 23 May 2012

In my Opinion in case of such bonus you have to go for payment basis. Hence you have file e TDS Return for A.Y.2012-13 and you have to pay interest on late payment.

CA Chintan Shah

CHINTANKUMAR PRAVINCHANDRA SHA (proprietor) (32 Points)
Replied 23 May 2012

In my Opinion in case of such bonus you have to go for payment basis. Hence you have file e TDS Return for A.Y.2012-13 and you have to pay interest on late payment.

CA Chintan Shah

PRITAM JAIN, CA , CS (Practising CA CS) (398 Points)
Replied 23 May 2012

Originally posted by : bhargavi
	Hi, we had provided for 5 lacs as bonus payment for 2 of our sales managers as on 31st March 2012. Their individual share of bonus was finalised in May 2012. Now we want to make the payment after deducting TDS. kindly clarify on the below points: 1. I understand that the TDS has to be computed at last year rates. The bonus and the TDS will be included in the Form 16 of the associates. My question is, as a company do we have to bear the interst on the delayed payment of TDS? 2. how can we avoid the interest payment. Thanks a lot in advance. Regards// Bhargavi

Hi Bhargavi,

There is another alternate solution to your problem....

If you dont deduct tax on such bonus and you ask ur deductee to pay tax on such income then u dont have to face any proceedings under section 201(1) i.e. you dont have to pay interest on it. CIT v. DEWAN CHAND [2009] 178 Taxman 173 (Delhi)
.

Further non deduction of TDS on salary is not covered by sec. 40(a)(i)(a) i.e. such expenditure will not be disallowed under Income Tax Act, 1961.

So this is how u can save interest and escape disallowance under IT act

Please do refer this case to sum other experts and also consider thier view

Tried my best....

hope it works....

Happy to Help....

Regards

bhargavi ( Finance manager) (90 Points)
Replied 24 May 2012

Thanks a lot Pritam and Chitankumar.

I guess we can not avoid the interest payment.

Pritam, thanks for your inputs.but I am afraid the second option will work. we can not ask the assoicates to pay the tax in which case we will b violating sec 192 as a employer.

Regards//Bhargavi.