Deduction of Tax at Source (TDS) – Income Tax

Home   /   Deduction of Tax at Source (TDS) – Income Tax

Person responsible for making payment of income covered by the Scheme of Tax Deducted at Source (TDS) or Deduction of Tax at Source (TDS) at the prescribed Rates. Tax so Deducted should be deposited within the prescribed Time. Moreover, Returns of TDS (Tax Deducted at Source) should be submitted within the specified Time.

Although regular assessment in respect of any income is to be made in a later assessment year, but tax on such income is payable in the previous year itself in the following manner:

  1. Tax deducted at source (TDS): In case of certain incomes/payments, tax is deducted at source by the payer at the prescribed rate at the time of accrual or payment of such incomes to the payee.
  2. Tax collected at source (TCS): In certain cases, tax is collected at source by the seller from buyer or a person from his licensee/lessee, etc. at the time of debiting the amount to account of the buyer/licensee/lessee or the receipt of payment whichever is earlier.
  3. Advance Tax: The assessee, in certain cases, is under an obligation to pay tax in advance in certain instalments.

There are 31 items of income/payment from which tax is deductible at source i.e. TDS. On the other hand, there are 11 items of receipts for which tax has to be collected at source i.e. TCS.

Deduction of Tax at Source-TDS
Deduction of Tax at Source-TDS

Table of Contents

1. TDS on Salary [Section 192]

(1). TDS at Average of Income-Tax Computed on Salary [Section 192(1)]

Any person responsible for paying any income chargeable under the head ‘salaries’ shall at the time of payment, deduct income-tax on the estimated income of the employee under the head “Salaries” for that financial year. The tax is to be deducted at the average of income-tax computed on the basis of the rates in force for the financial year in which the payment is made.

TDS on Salary-Section 192
TDS on Salary-Section 192

Exemption limit –

No tax is required to be deducted at source unless the estimated salary including the value of perquisites , exceeds –

(i) ₹3,00,000 for financial year 2019-20, in case of an individual being resident in India who is of the age  of 60 years or more but less than 80 years at any time during the previous year. 

(ii) ₹5,00,000 For financial year 2019-20 in case of an individual being resident in India who is of the age  of 80 years or more at any time during the previous year. 

(iii) ₹2,50,000 for financial year 2019-20, in case of an employee other than those covered under clauses  mentioned in (i) and (ii) above. 

This rule is applicable even if the employee does not have PAN.

(2). Employer to obtain evidence/proof regarding deductions, exemptions or allowances claimed by the employee [Section 192(2D)] 

The person responsible for making the payment of salary shall, for the purposes of estimating income of the  assessee or computing tax deductible from salary, obtain from the assessee the evidence or proof or particulars of  prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as  may be prescribed. 

(3). Furnishing of Evidence of Claims by Employee for TDS on Salary U/s 192 [Rule 26C]

The assessee shall furnish to the person responsible for making payment under section 192(1), the evidence or the particulars of the claims referred to in rule 26C(2), in Form No.12BB for the purpose of estimating his income or computing the tax deduction at source as per Table given below :

SLNature of ClaimsEvidence or Particulars
1House Rent Allowance (HRA)Name, address and permanent account number of the landlord/ landlords where the aggregate rent paid during the previous year exceeds rupees one lakh (Rs. 1,00,000).
2Leave Travel Concession or Assistance (LTC / LTA)Evidence of Expenditure
3Deduction of interest under the head “Income from house property”. Name, address and permanent account number of the lender. 
4Deduction under Chapter VI-AEvidence of Investment or Expenditures.

(4). When does the Liability of TDS on Salary arise:

In the case of “Salaries”, the liability to deduct tax arises only at the time of payment.

There is no question of tax deduction in cases where the employees’ account is credited with the salary due to him, which for some reason or other was not paid.

(5). TDS on Non-monetary Perquisites can be paid by the Employer [Section 192(1A) and (1B)]:

Sub-sections (1A) provides that an employer shall have an option to pay tax on behalf of an employee, without making any deduction from his income, on the income in the nature of perquisites, where are not provided for by way of monetary payment. However, the employer shall also continue to have the option to deduct the tax on whole or part of such income. [Section 192(1A)]

Sub-section (1B) provides that , for the purpose of paying tax by the employer under sub-section (1A), tax shall be determined at the average of income-tax computed on the basis of the rates in force for the financial year, on the income chargeable under the head “Salaries” including the income referred to in sub-section (1A) (i.e. value of non-monetary perquisites), and the tax so payable shall be construed as if it were, a TDS from the income under the head “Salaries” as per the provisions of sub-section (1). [Section 192(1B)]

(6). TDS on Salary from more than one Employer [Section 192(2)]

Where during the financial year, an assessee:

  1. is employed simultaneously under more than one employer, or
  2. has changed the employment during the previous year,

he may furnish to the employer of his choice or the subsequent employer (as the case may be) such details of salaries due or received by him from other employer(s), the tax deducted at source therefrom and such other particulars as may be prescribed, in Form No. 12B [Rule 26A(1)]. In this case, the employer, so chosen, shall take into account these details while making deduction of tax at source.

(7). Furnishing particulars about Relief Under Section 89 in Form No.10E for calculating TDS on Salary [Section 192(2A]

Where the assessee is:

(A) a Government Servant, or

(B) an Employee in a:

  1. company,
  2. co-operative society,
  3. local authority,
  4. university,
  5. institution,
  6. association or body

and if he is entitled to relief under section 89, he may furnish to his employer such particulars in Form No. 10E. The employer then, shall compute the relief on the basis of such particulars and take them into account while making tax deduction at source.

No relief under section 89 shall be granted in respect of amount received or receivable by an assessee on his voluntary retirement or termination of his service, if the assessee has claimed exemption under section 10(10C).

(8). Furnishing Statement about details of ‘Other Incomes’ and any TDS thereon to Employer for calculating TDS on Salary [Section 192(2B) and Rule 26B]

Where an employee also has any income (not being a loss) for the same financial year, chargeable under any other head, he may furnish the statement of such other income and any tax deducted thereon to his employer to take them into consideration while deducting tax from his salary. However, the resultant tax deductible at source cannot be less than the amount that would have been deductible if such other income and tax deducted thereon had not been taken into account.

Loss from house property may be adjusted [Rule 26B]:

Although, as stated above, the statement for the loss under any other head cannot be furnished but a statement of loss under the head income from house property can be furnished. If the employee incurring the loss from house property furnishes the abovesaid statement of such loss to the employer, the resultant tax deductible at source can be less than the amount that would have been deductible if such loss had not been taken into account.

(9). Form 12BA along with Form 16 issued by Employer to Employee with TDS on Salary Certificate [Section 192(2C)]

A person responsible for paying any income chargeable under the head “Salaries” shall furnish to the person to whom such payment is made, a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in Form No. 12BA alongwith Form No. 16 issued by the employer. Form 12BA alongwith Form 16, as issued by the employer are required to be produced on demand before the Assessing Officer in terms of section 139C of the Income Tax Act.

Salary for this purpose shall have the same meaning as is given in rule 3 for valuation of rent-free accommodation.

(10). Adjustment in the amount of TDS on Salary [Section 192(3)]

The person responsible for making the payment may, at the time of making any deduction of tax, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.

If any tax has been deducted in excess in the earlier months, the employer is authorised to adjust such excess in the subsequent months. On the other, if the employer has deducted less tax in the earlier months, he will have to make higher deduction in the subsequent months.

The above adjustment is permissible only in respect of same employee and not for all employees. Controversy normally arises when such variation is adjusted in last quarter or last month.

(11). Where there is No TDS on Salary or TDS on Salary at a Lower Rate [Section 197 

The assessee to whom salary is payable may make an application in Form No. 13 for obtaining a certificate for deduction of tax at any lower rate or no deduction of tax, as the case may be. 

An application by a person for grant of a certificate for the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, under section 197(1) shall be made in Form No. 13 electronically, — 

  •  under digital signature; or 
  • through electronic verification code. 

Where such certificate is given, it will be valid for such period of the previous year as may be specified in the  certificate and the person responsible for paying the salary, until such certificate is cancelled by the Assessing  Officer, deduct income-tax at the rate specified in such certificate or deduct no tax, as the case may be. 

2. TDS from Interest on Securities (Section 193)

(1). Who shall deduct TDS U/s 193?

Every person who is responsible to pay interest on securities to a resident, is liable to deduct tax at source under section 193.

Section 193 TDS on Interest on Securities
Section 193 TDS on Interest on Securities

(2). When Tax shall be Deducted U/s 193?

The tax is to be deducted –

(a)      either at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, or

(b)      at the time of credit of interest to the account of the payee or to interest payable account or suspense account,

whichever is earlier.

(3). Rates of TDS for the financial year 2019-20

In the case the payee (whether a company or non-company assessee) is a resident in India 

Income by way of interest payable on— 

(A) any debentures or securities other than a security of the Central or State Government for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act;10%
(B) any debentures issued by a company where such debentures are listed on a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 and any rules made thereunder;  
(C) debentures not listed on a recognised stock exchange10%

Notes. —

  1. No surcharge, health and education cess shall be added to the above rates. Hence, tax will be deducted at source at the basic rate. 
  2. The rate of TDS shall be 20% in all the above cases, if PAN is not quoted by the deductee

(4). Exemption from Tax Deduction i.e. TDS from Interest on Securities:

No tax is to be deducted if interest on securities is payable on account of the following: 

(i)            Any such debenture, issued by an institution or authority, or any public sector company, or any cooperative society (including Co-operative Land Mortgage Bank or Co-operative Land Development Bank) as the Central Government may notify. 

(ii)           Any interest payable on any security of the Central Government or State Government. However, tax shall be deductible at source in case of 8% Saving (Taxable) Bonds 2003, or 7.75% Savings (Taxable) Bonds, 2018 provided the interest on such bonds exceeds ₹10,000 during the financial year. 

(iii)          Any interest payable to—

  • Life Insurance Corporation of India;
  • General Insurance Corporation of India or any of four companies formed under it;
  • Any other insurer, in respect of any securities owned by them, or in which they have full beneficial interest. 

(iv)          Securities which are mentioned in proviso to section 193(i), (ia), (ib), (iia) and (iii). 

(v)           The person to whom interest is payable may make an application in Form No. 13 to the Assessing Officer and obtain a certificate from him such certificate, as may be appropriate, authorising the payer not to deduct tax or to deduct tax at a lower rate. [Section 197]. No certificate under section 197 shall be granted unless the application made in Form 13 contains the Permanent Account Number of the applicant. 

3. TDS on Interest other than Interest on Securities [Section 194A] 

(1)  Who is liable to deduct TDS on Interest:

The person (other than an individual or a Hindu Undivided Family) who is responsible for paying to a resident any income by way of interest other than ‘interest on securities’, is required to deduct tax thereon at the rates in force. 

Individuals and HUF whose total sales/turnover/receipts from the business/profession carried on by him in the immediately preceding financial year exceed the monetary limit specified under section 44AB(a) or (b) for tax audit, are also required to deduct tax at source. 

(2). When TDS on Interest is to be Deducted:

Tax is to be deducted either at the time of payment of interest in cash or by issue of cheque or draft or by any other mode or credit of it to any account, whichever is earlier. 

Where any income by way of interest as aforesaid is credited to any account whether called “Interest payable  account” or “Suspense Account” or by any other name in the books of account of the person liable to pay such  income, such crediting shall be deemed to be credit of such income to the account of the payee.

(3). Rates of TDS U/s 194A for the financial year 2019-20 (AY: 2020-21)

In case the payee ( whether a company or a non-company assessee) in Resident in India10%

Note:

  1. No Surcharge, health and Education Cess shall be added. Hence, TDS shall be Deductible at basic Rates.
  2. The Rate of TDS will be 20% in the above case, if PAN is not quoted by the deductee.

(4). Where No TDS U/s 194A is to be Deducted at Source

(A) Where interest paid or credited does not exceed Rs.40,000 / Rs. 50,000 / Rs. 5,000 [Section 194A(3)(i)]

No tax is to be deducted at source, where the aggregate amount of such interest to be paid or credited to the account of payee during the financial year does not exceed:

  1. Rs. 40,000 [ Rs. 50,000 in case of a Senior Citizen], where the payer is a banking company to which the Banking Regulation Act, 1949 applies
  2. Rs. 40,000 [ Rs. 50,000 in case of a Senior Citizen], where the payer is a co-operative society engaged in carrying on the business of banking;
  3. Rs. 40,000 [ Rs. 50,000 in case of a Senior Citizen], on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf; and
  4. Rs. 5,000 in any other case.

(B) Where such Interest is paid to certain Specified Persons

Where such income is credited or paid to the following persons, no tax is required to deducted at source under Section 194A —

b.       where interest is credited or paid to any banking company, co-operative society engaged in banking business, public financial institutions, the Life Insurance Corporation, the Unit Trust of India, a company or a co-operative society carrying on the business of insurance, or notified institutions.

c.       where interest is credited or paid by a firm to its partners;

d.       where interest is credited or paid by a co-operative society (other than a co-operative bank, with effect from June 1, 2015) to its members  or to any other co-operative society;

e.       where interest is credited or paid in respect of deposits under the schemes of Post Office (Time Deposits), Post Office (Recurring Deposits), Post Office Monthly Income Account, Kisan Vikas Patra, National Savings Certificates and Indira Vikas Patra;

f.        where interest is credited or paid in respect of deposits with a banking company or with a co-operative society engaged in carrying on the business of banking;

g.       where interest is credited or paid in respect of deposits (by non-members) with a primary agricultural credit society or co-operative land mortgage bank or co-operative land development bank;

h.       where interest is credited or paid by the Central Government under different provisions of the direct taxes;

i.        where income is payable in relation to zero coupon bonds;

j.        interest referred to in section 10(23FC); and

k.       interest paid/payable by an Offshore Banking Unit on deposits or borrowing made after March 31, 2005 to a resident but not ordinarily resident.

4. TDS on Winning from Lottery, Crossword Puzzle, Card Game, etc. (Section 194B)

(1). Who is liable to Deduct TDS from winning from Lottery, Card Games etc. Under Section 194B

The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle, card game and other game of any sort in an amount exceeding Rs. 10,000 shall, deduct income-tax thereon at the rates in force.

Therefore, no tax is be deducted where the amount of winning from each lottery, crossword puzzle, card game, etc. does not exceed Rs. 10,000.

(2). When to Deduct TDS from winning from Lottery, Card Games etc. Under Section 194B

At the time of payment of such income. Where lottery or prize money, etc. is paid in instalments, the deduction of tax is to be made at the time of actual payment of each such instalment.

(3). Rate of TDS under Section 194B for financial years 2019-20 :

Rate of TDS is 30%.

No surcharge, education cess and SHEC shall be added. Hence, TDS shall be deductible at basic rates.

TDS when winnings are wholly in kind or partly in cash and partly in kind:

Where the prize is given partly in cash and partly in kind, tax will be deductible from cash prize, with reference to the aggregate amount of cash prize and the value of the prize in kind.

No TDS on Bonus or Commission payable to Lottery Agents:

If out of winning amount of lottery, etc., any bonus or commission is paid/payable to lottery agents or sellers of lottery tickets, or sales made by them, no income tax is to be deducted for that amount paid and tax will therefore be deducted after deducting such bonus and commission.

For example, Mr. A wins a lottery price of Rs. 1,00,000. A sum of Rs. 5,000 is deducted for payment to the lottery agent. Tax will be deducted on Rs. 95,000 after allowing bonus/ commission paid to agent.

5. TDS from Winnings from Horse Races [Section 194BB]

Who is liable to deduct TDS U/s 194BB:

Any person, who is responsible for paying to any person any income by way of winnings from any horse race an amount exceeding Rs. 10,000 shall deduct income-tax at the rates in force.

Rate of TDS for the financial years 2019-20:

The rate of TDS is 30%.

When TDS U/s 194BB is to be deducted:

At the time of payment of such income.

6. TDS on Payment to Resident Contractor or Sub-Contractors (Section 194C)

The provisions of Section 194C are given below: –

(1). Who is responsible to deduct TDS from payment to Resident Contractor or Sub-Contractor under Section 194C?

Any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between a specified person and the resident contractor is required to deduct tax at source.

TDS on Payment to Resident Contractor (Section 194C)
TDS on Payment to Resident Contractor (Section 194C)

Specified Person [Explanation to Section 194C] – Meaning of –

Tax is deductible under section 194C(1) only if payment is made in pursuance of a contract between a Specified Person and a Resident Contractor.

The following are “Specified Persons” for this purpose:

  1. the Central Government or any State Government; or
  2. any local authority; or
  3. any corporation established by or under a Central, State or Provincial Act; or
  4. any company; or
  5. any co-operative society; or
  6. any authority constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or
  7. any society registered under the Societies Registration Act, 1860 or under any law corresponding to that Act in force in any part of India; or
  8. any trust; or
  9. any University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956; or
  10. any foreign Government or a foreign enterprise or any association or body established outside India (applicable from October 1, 2009); or
  11. any firm; or
  12. any individual or HUF whose books of account are required to be audited under section 44AB(a)/(b) during the immediately preceding financial year and sum credited/paid is not exclusively for personal purposes; or
  13. (with effect from June 1, 2008) AOP/BOI whose books of account are required to be audited under section 44AB(a)/(b) during the immediately preceding financial year.

(2). TDS Rates under Section 194C for the financial year 2019-20

With effect from October 1, 2009, the following TDS rates will be applicable under section 194C—

If the recipient is an Individual / HUF1%
If the recipient is any other Person2%
  • The Nil Rate will be applicable if the transporter quotes his PAN
  • The Rate of TDS will be 20% in all the above Cases, if PAN is not quoted by the Deductee.
  • No Surcharge, Health and Education Cess shall be added. Hence, TDS shall be deductible at basic Rates.
  • No Tax is to be Deducted at Source on the amount of Service Tax included in the payment to Resident Contractor.

(3). “Work” as defined in Section 194C – [Explanation (iv) to section 194C (7)(iv)]

The expression “work”, shall include …

  1. advertising,
  2. broadcasting and telecasting including production of programmes for such broadcasting or telecasting,
  3. carriage of goods and passengers by any mode of transport other than by railway, and
  4. catering.
  5. With effect from October 1, 2009, the expression “work” shall also include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer.

(4). Where No TDS is to be Deducted at Source [Section 194C (5)]:

In the following cases tax is not required to be deducted at source:

(A)          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 ₹30,000. 

However, where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds ₹1,00,000, the person responsible for paying such sums shall be liable to deduct income-tax under this section. 

Thus, the tax will be required to be deducted at source where the amount credited or paid to a contractor exceeds ₹30,000 at one time or ₹1,00,000 in the aggregate during a financial year in spite of the fact that separate contracts are entered into with that person. 

(B)          No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. 

(C)          Any person to whom interest is payable may make an application in Form No. 13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorising the payer not to deduct tax or to deduct tax at a lower rate. 

As per section 206AA (4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number of the applicant. 

(5). Provisions for payments and tax deducted at source to transporters [Section 194C (6) & (7)]:

No  deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to  the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such  contractor owns 10 or less goods carriages at any time during the previous year and furnishes a declaration to  that effect along with his Permanent Account Number, to the person paying or crediting such sum. [Section 194C (6)] 

The person responsible for paying or crediting any sum to the person referred to in section 194C (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. [Section 194C (7)] 

7. TDS on Insurance Commission [Section 194D] 

(1). Who is required to make TDS on Insurance Commission?

The person responsible for paying to a resident, the income  mentioned below. 

Remuneration or reward whether by way of commission or otherwise— 

(a)           for soliciting or processing insurance business, or 

(b)          for continuance, renewal or revival of policies of insurance. 

TDS on Insurance Commission [Section 194D]
TDS on Insurance Commission [Section 194D]

(2) When TDS on Insurance Commission to be Deducted?

At the time of credit of commission income to the account of payee or the  payment thereof (by whatever mode), whichever is earlier. 

(3). Condition for Deduction TDS on Insurance Commission:

No TDS to be deducted if the amount or the aggregate amounts of such income does not exceed ₹15,000 in a financial year. 

(4).  Rate of TDS on Insurance Commission for financial year 2019-20. 

Payee whose payment will suffer TDSRate of TDS
Resident person other than company5%
Domestic company10%
  • No tax is to be deducted at source on the amount of service tax included in the insurance commission. 
  • The rate of TDS will be 20% in the above cases, if PAN is not quoted by the deductee. 

(5). Where No TDS on Insurance Commission is to be Deducted or TDS is to be Deducted at a Lower Rate:

The person receiving insurance commission can make an application in Form No. 13 to the concerned Assessing Officer and obtain from him such certificate as may be appropriate, authorising the person responsible for making such payment to deduct Tax at NIL Rate or at a lower Rate. No certificate U/s 197 shall be granted unless the application made in Form 13 contains PAN of the applicant.

8. TDS from Non-Exempt Payments made under life insurance policy [Section 194DA] 

Under the existing provisions of section 10(10D), any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt subject to fulfilment of conditions specified under the said section. Therefore, the sum received under a life insurance policy which does not fulfil the conditions specified under section 10(10D) are taxable under the provisions. 

In order to have a mechanism for reporting of transactions and collection of tax in respect of sum paid under life insurance policies which are not exempted under section 10(10D), the Act has inserted a section 194DA to provide for deduction of tax at the rate of— 

(i)            1% of the sum paid under a life insurance policy, including the sum allocated by way of bonus, which are not exempt under section 10(10D). upto 31.8.2019. 

(ii)           5% of the income comprised in the sum paid w.e.f. 1.9.2019. 

However, no deduction under this section shall be made if the aggregate sum paid in a financial year to an assessee is less than ₹1,00,000. 

Self-declaration in Form No. 15G/15H can be made for non-deduction of tax at source under section 194DA.

9. TDS on Payments to Non-Resident Sportsmen or Foreign Entertainer or Sports Associations [Section 194E] 

Where any person is responsible to pay any income to any non-resident and non-citizen sportsman (including an athlete) or non-resident and non-citizen entertainer, he is required to deduct tax at source @ 20% (plus surcharge, if applicable, plus health and education cess @ 4%). 

In the case of sportsman, the income must have been earned by way of: — 

  1. participation in India in any game (excluding any card game and other games of gambling or betting) or sports; or 
  2. advertisement; or 
  3. contribution of articles relating to any game or sport in India in newspapers, magazines or journals. 
In case of non-citizen and non-resident entertainer the tax will be deducted @ 20% plus surcharge, if applicable, plus health and education cess @ 4%).

Similarly, any person responsible to pay any income guaranteed to be paid or payable to a non-resident sports association or institution in relation to any game or sport played in India, shall deduct income-tax thereon @ 20% (plus surcharge, if applicable, plus health and education cess). 

No tax is to be deducted at source on the amount of service tax included in the payment to non-resident sportsmen or foreign entertainer or sports associations. 

(1)  When the TDS is to be Deducted:

Tax should be deducted either at the time of credit of such income to  the account of the payee or at the time of its payment thereof in cash or by issue of a cheque or draft or by any  other mode, whichever occurs earlier. 

8. TDS on Payment in respect of Deposit under National Savings Scheme, etc. [Section 194EE]

(1).  Who is liable to deduct TDS:

The person responsible for paying to any person any amount standing to the credit of such person under National Savings Scheme (to which section 80CCA was applicable) together with interest accrued thereon, shall deduct income-tax thereon on such amount at the time of its payment.

(2). Rate of TDS of Deposit under National Savings Scheme

10% of the amount paid from such Scheme.

(3). When TDS is to be Deducted

It should be Deducted at the time of its payment.

(4). When No TDS is to be Deducted U/s 194EE

However, no deduction of tax is to be made in following cases: 

(a)          where the amount or the aggregate of amount of such payment during a financial year is less than ₹2,500; or 

(b)          where the payment is made to the heirs of the deceased assessee; or 

(c)           A person, other than a company or firm may furnish a declaration in writing in duplicate in new Form No.  15G to the payer for non-deduction of tax at source provided the following conditions are satisfied: 

  1. Tax on his total income is Nil, and 
  2. Income from the following 3 sources whether credited or paid or likely to be credited or paid will not exceed the maximum amount which is not chargeable to income-tax: 
    1. Payment from accumulated balance of recognized provident fund, if taxable. 
    2. Interest on securities 
    3. Interest other than interest on securities 
    4. Payment in respect of life insurance policy, if taxable.
    5. Insurance commission 
    6. Payment in respect of deposit under National Saving Scheme. 
    7. Payment in respect of rent.

9. TDS on Commission, etc. on Sale of Lottery Tickets (Section 194G)

(1). Who is liable to Deduct TDS under Section 194G

Where any income by way of commission, remuneration or prize (by whatever name called) on lottery tickets is paid to a person who has been stocking, distributing, purchasing or selling lottery tickets, then the person responsible for paying such income, exceeding Rs.15,000 shall deduct income-tax thereon under Section 194G.

Where the payer is company, the company itself including the principal officer shall be the person responsible for paying such income.

(2). When TDS under Section 194G is to be Deducted

Tax is to be deducted either…

  1. at the time of its credit to the account of the payee (by whatever name called) or
  2. at the time of payment of such income in cash or by issue of a cheque or draft or by any other mode, 
    whichever is earlier.

(3). TDS Rate under Section 194G for the Financial Year 2019-20

Tax is to be Deducted @ 5%

Note:

  1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
  2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

(4). Where TDS under Section 194G is either Not to be Deducted or to be Deducted at Lower Rate [Section 197]:

The assessee case make an application in Form No. 13 to the Assessing Officer and obtain from him such certificate as may be appropriate authorising the payer to deduct tax at nil rate or at lower rate.

As per section 206AA (4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number (PAN) of the applicant.

10. TDS on Commission or Brokerage (Section 194H)

(1). Who is liable to Deduct TDS under Section 194H

Any person, (other than individual or a Hindu undivided family) who is responsible for paying, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, deduct income-tax thereon.

However, individuals and HUF who were covered under section 44AB(a) and (b) in the preceding previous year, are also required to deduct tax at source.

(2). When TDS under Section 194H is to be Deducted

It will be deducted at the time of credit of such income to the account of the payee or to any account, whether called suspense account or by any other name or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier.

(3). TDS Rate under Section 194H for the Financial Year 2019-20

The rate of TDS shall be 5%.

Notes:

  1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
  2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

(4). Where TDS under Section 194H is either Not to be Deducted or to be Deducted at Lower Rate [Section 197]:

(1)      No deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to the payee, does not exceed Rs.15,000.

(2)      No deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Ltd. or Mahanagar Telephone Nigam Ltd. to their public call office franchisees.

(3) The person receiving the commission or brokerage may make an application in new Form 13 to the concerned Assessing Officer and obtain such certificate, as may be appropriate, authorizing the person responsible for making such payment to deduct tax at nil rate or at lower rate. The certificate will be given by the Assessing Officer if he is satisfied that it is justified to do so.

As per section 206AA (4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

11. TDS on Rent (Section 194-I)

(1). “Meaning of Rent” [Explanation(i) to Section 194-I]

“Rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,—

  1. land; or
  2. building (including factory building); or
  3. land appurtenant to a building (including factory building); or
  4. machinery; or
  5. plant; or
  6. equipment; or
  7. furniture; or
  8. fittings,

whether or not any or all of the above are owned by the payee.

TDS on Rent (Section 194-I)
TDS on Rent (Section 194-I)

(2). Who is liable to Deduct TDS under Section 194-I

Any person, other than an individual or a HUF, is responsible for paying to resident in India, any income by way of the rent, amounting in aggregate to more than Rs. 2,40,000 in a financial year.

However, individuals and HUF who were covered under section 44AB(a) and (b) in the preceding previous year, are also required to deduct tax at source.

(3). When TDS under Section 194-I is to be Deducted

The person responsible for paying rent should deduct tax at source. Tax is to be deducted at source either:

  1. at the time of credit of such income to the account of payee; or
  2. at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode,

whichever is earlier.

(4). TDS Rate under Section 194-I for the Financial Year 2019-20

 Nature of Payment (194-I) – RentRate
(a)Rent of plant. machinery or equipment2%
(b)Rent of Land, building or furniture to an individual and Hindu undivided family10%
(c)Rent of land, building or furniture to a person other than an individual or Hindu undivided family10%

Notes:

  1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
  2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

(5). Where No TDS is to be Deducted or TDS is to be Deducted at a Lower Rate under Section 194-I

No tax is required to be deducted at source under this section in the following conditions are satisfied:

(A) Where aggregate amount of Rent does not exceed Rs.1,80,000:

No tax is to deducted if the aggregate amount of rent in the previous year does not exceed Rs.1,80,000 . Where the share of each co-owner in the property is definite and ascertainable the limit of Rs.1,80,000) will be applicable to each co-owner separately.

(B) Where a self-declaration under Form No. 15G/15H is furnished by a particular person [Section 197A(1A), (1B) and (1C)]:

A person, other than a company or firm may furnish a declaration in writing in duplicate in new Form No. 15G to the payer to the effect that there is no tax payable on his Total Income. In this case, the payer shall not deduct any tax at source.

However, as per section 197A(1B), the assessee cannot furnish the declaration under this clause if the aggregate amount of the following incomes credited or paid or likely to be credited or paid during the previous year in which such income is to be included exceeds the maximum amount which is not chargeable to tax:

  1. Payment from accumulated balance of recognized provident fund, if taxable.
  2. Interest on securities.
  3. Interest other than interest on securities.
  4. Payment in respect of life insurance policy, if taxable.
  5. Insurance commission
  6. Payment in respect of deposit under National Saving Scheme.
  7. Payment in respect of rent.

(C). Where TDS under Section 194H is either Not to be Deducted or to be Deducted at Lower Rate [Section 197 Rule 28 and 28AA]:

Any person to whom rent is payable may make an application in Form No. 13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorising the payer not to deduct tax or to deduct tax at a lower rate.

As per section 206AA (4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

12. TDS on Transfer of certain Immovable Properties (other than Agricultural Land) [Section 194-IA)

(1). Who is liable to Deduct TDS under Section 194-IA

Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA, relating to compensation in case of compulsory acquisition of property) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall be liable to deduct TDS under Section 194-IA

(2). When TDS under Section 194-IA is to be Deducted

Tax is to be deducted:

  1. at the time of credit of such sum to the account of the transferor, or
  2. at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode,

whichever is earlier.

(3). TDS Rate under Section 194-IA for the Financial Year 2019-20

The rates of TDS in case of transfer of immovable property shall be 1%.

Notes:

  1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
  2. The rate of TDS will be 20% in all cases, if PAN is not quoted.

(4). When TDS under Section 194-IA is Not to be Deducted in case of Transfer of certain Immovable Property

In the following cases tax is not to be deducted at source under section 194-IA:

  1. The immovable property transferred is a rural agricultural land.
  2. The immovable property has been compulsory acquired under any law.
  3. The total amount of consideration for the transfer of immovable property is less than Rs.50,00,000.

13. TDS on Payments of Rent by certain Individuals or HUF (Section 194-IB)

(1). Who is liable to Deduct TDS under Section 194-IB

Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent.

Explanation.—For the purposes of this section, “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.

(2). When TDS under Section 194-IB is to be Deducted [Section 194-IB (2)]

Tax is to be deducted:

  1. at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or
  2. at the time of payment thereof (i.e. rent of last month) in cash or by issue of a cheque or draft or by any other mode,

whichever is earlier.

(3). Where No TDS under Section 194-IB is to be Deducted

  1. No tax is required to be deducted at source under this section where the rent does not exceed Rs.50,000 for a month or part of a month during the previous year.
  2. When the individual or HUF is covered under section 194-I.

(4). TDS Rate under Section 194-IB for the Financial Year 2019-20

5% of such income by way of Rent

(5). No requirement for obtaining TAN by the Diductor to Deduct TDS under Section 194-IB (3)

The provisions of section 203A (relating to obtaining TAN) shall not apply to a person required to deduct tax in accordance with the provisions of this section.

(6). Amount of TDS under Section 194-IB when PAN is not provided by the recipient of the Rent [Section 194-IB (4)]

As per section 206AA, if the PAN is not provided by the recipient of the rent rate of TDS is 20%.

However, under this section (i.e. section 194-IB) if PAN is not provided, such deduction shall not exceed—

  1. the amount of rent payable for the last month of the previous year, or
  2. the last month of the tenancy,

as the case may be.

14. TDS on Fees for Professional or Technical Services (Section 194J)

(1). Meaning of ‘Professional Services’ and ‘Fees for Technical Services’

The expression “professional services” has been defined to mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising (i.e., models, artists, photographers providing services to an advertising agency) or such other profession as is notified by the Board for the purposes of section 44AA (i.e., authorised representative, film artist or company secretary or information technology) or of this section.

The expression “Fees for technical services” means any consideration  (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services  (including the provision of services of technical or other personnel) but does not include consideration for any  construction, assembly, mining or like project undertaken by the recipient or consideration which would be  income of the recipient chargeable under the head “Salaries”.

(2). Who is liable to Deduct TDS under Section 194J

Any person, other than an individual or a HUF, who is responsible for paying to a resident any sum by way of: —

  1. fees for professional, or
  2. fees for technical services,
  3. any remuneration or fee or commission by whatever name called paid to a director, which is not in the nature of salary,
  4. royalty, or
  5. any sum referred to in clause (va) of section 28 which relates to non-compete payment for not carrying out any activity in relation to any business or not sharing any know-how, patents copyrights, trade marks, etc.

shall deduct income tax on income comprised therein.

(3). Rate of TDS under Section 194J for the Financial Year 2019-20

10% on such income.

However, w.e.f. 1.6.2017, in the case of a payee, engaged only in the business of operation of call centre, the rate of TDS shall be 2% instead of 10%.

Notes:

  1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
  2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

(4). When TDS under Section 194J is to be Deducted:

Tax is to be deducted either ..

  1. at the time of actual payment of such fees or
  2. its credit to the account of the payee

whichever is earlier.

No tax is to be deducted if the amount or the aggregate amounts of such fees, etc. does not exceed ₹30,000 for each item in a financial year. However, there is no threshold limit of ₹30,000 in case a payment to a director covered under section 194J.

(5). Where No TDS under Section 194J is to be Deducted or to be Deducted at Lower Rate [Section 194 Rule 28 and 28AA]

Any person to whom any fee is payable may make an application in Form No. 13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorising the payer not to deduct tax or to deduct tax at a lower rate.

As per section 206AA (4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number (PAN) of the applicant.

15. TDS on Payments of Compensation on Acquisition of certain Immovable Property (Section 194LA)

Section 194LA was inserted with effect from October 1, 2004. The provisions of section 194LA are given below—

(1). Who is responsible to Deduct TDS under Section 194LA

Any person, who is responsible for paying, on or after 1.10.2004, to a resident, any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land) shall, deduct income-tax thereon.

“Immovable property” means any land (other than agricultural land) or any building or part of a building.

(2). When TDS under Section 194LA is to be Deducted:

It will be deducted:

  1. at the time of payment of such sum in cash or by the issue of a cheque or draft or
  2. by any other mode,

whichever is earlier.

(3). Rate of TDS under Section 194LA for the Financial Year 2019-20

10% of such compensation.

Notes:

  1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
  2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

(4). Where No TDS under Section 194LA is to be Deducted

  1. No deduction shall be made under this section in a case where the amount of such payment or as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed Rs.2,50,000.
  2. No deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
  3. Any person to whom compensation is payable may make an application in Form No. 13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorising the payer not to deduct tax or to deduct tax at a lower rate.

As per section 206AA (4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number (PAN) of the applicant.

16. TDS on Payment of certain sums by certain Individuals or Hindu Undivided Family [Section 194M] 

(1) Who is liable to deduct TDS 

Any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J) responsible for paying any sum to any resident— 

(i)            for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, 

(ii)           by way of commission (not being insurance commission referred to in section 194D) or brokerage or 

(iii)          by way of fees for professional services 

during the financial year. 

(2). When TDS is to be Deducted [Section 194M (1)] 

Tax is to be deducted: 

(a)           at the time of credit of such sum, or 

(b)          at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, 

whichever is earlier. 

(3).  Where No TDS is to be Deducted at Source 

(a)           No deduction under this section shall be made if such sum or, as the case may be, aggregate of such sums,  credited or paid to a resident during a financial year does not exceed ₹50,00,000. 

(b)          If the individual or HUF is required to deduct income-tax as per the provisions of section 194C, section  194H or section 194J. 

(4). Rate of TDS U/s 194M w.e.f. 1.9.2019 

5% of such sum. 

Notes: 

1. No surcharge or health and education cess shall be added to the above rates. Hence, tax will be deducted  at source at the basic rate. 

2. The rate of TDS will be 20% in all cases, if PAN is not quoted. 

(5). Where the TDS is either Not to be Deducted or to be Deducted at Lower Rate 

The assessee to whom such sum is payable may make an application in Form No. 13 for obtaining a  certificate for deduction of tax at any lower rate or no deduction of tax, as the case may be.

An application by a person for grant of a certificate for the deduction of income-tax at any lower rates or no  deduction of income-tax, as the case may be, under section 197(1) shall be made in Form No. 13 electronically,— 

(i) under digital signature; or 

(ii) through electronic verification code. 

Where such certificate is given, it will be valid for such period of the previous year as may be specified in the  certificate and the person responsible for paying such sum, until such certificate is cancelled by the Assessing  Officer, deduct income-tax at the rate specified in such certificate or deduct no tax, as the case may be. 

(6). No requirement for obtaining TAN by the deductor [Section 194M (2)] 

The provisions of section 203A (relating to obtaining TAN) shall not apply to a person required to deduct tax  in accordance with the provisions of this section. 

17. TDS on Payment of certain Amounts in Cash [Section 194N] 

(1).  Who is liable to Deduct TDS? 

Every person, being, –– 

(i) a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); 

(ii) a co-operative society engaged in carrying on the business of banking; or 

(iii) a post office, 

who is responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of ₹1 crore during the previous year, to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it? 

(2). When TDS is to be Deducted 

At the time of payment of such sum, or, as the case may be, aggregate of such sums, in cash, in excess of ₹1 crore during the previous year from one or more accounts maintained by the recipient with it. 

(3).  Rate of TDS U/s 194N w.e.f. 1.9.2019 

2% of sum exceeding ₹1 crore paid in cash, during the previous year from one or more accounts maintained by the recipient with it. 

Notes: 

1. No surcharge or health and education cess shall be added to the above rates. Hence, tax will be deducted at source at the basic rate. 

2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee. 

(4).  Where No TDS is to be Deducted at Source under Section 194N

(1) No tax is to be deducted at source if any sum, or, as the case may be, aggregate of sums paid in cash, does not exceed ₹1 crore during the previous year from one or more accounts maintained by the recipient. 

(2) Where any payment is made to, –– 

  1. the Government; 
  2. any banking company or co-operative society engaged in carrying on the business of banking or a post office; 
  3. any business correspondent of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India under the Reserve Bank of India Act, 1934; 
  4. any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007; 
  5. such other person or class of persons, which the Central Government may, by notification in the Official Gazette, specify in consultation with the Reserve Bank of India.

18. TDS on Income of Non-Resident Indian (NRI) [Section 195]

(1). TDS on income of non-resident:

Any person responsible for paying to a non-resident, not being a  company, or to a foreign company, any interest (Not being interest referred to in section 194LB or section 194LC  or section 194LD) or any sum chargeable under this Act (other than salary) shall deduct income-tax thereon at the  rates in force. 

(2).  When the TDS is to be deducted:

Tax shall be deducted either at the time of actual payment of such income or at the time of its credit to the account of the payee (by whatever name called), whichever is earlier. 

However, in the case of interest payable by the Government or a public sector bank or a public financial institution, deduction of tax shall be made only at the time of payment thereof in cash or by cheque or draft. 

(3).  Payee of the amount may make application for deduction of TDS on the “income” comprised in the payment [Section 195(2)] 

Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may  make an application in such form and manner to the Assessing Officer, to determine in such manner, as may be  prescribed, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be  deducted under section 195(1) only on that proportion of the sum which is so chargeable. 

(4).  Where no TDS is to be deducted at source [Section 195(3)]:

The person entitled to receive any interest or other sum (other than income from salary) may make an application in prescribed Form to the concerned Assessing Officer and obtain a certificate authorising the person responsible for making such payment to make payment of such income without deducting tax thereon.

Where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon. 

(5). Furnishing of information relating to payment of such Sum [Section 195(6)]:

The person responsible for paying to a non-resident, (not being a company), or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed. 

(6).  Board may by general or specified order authorize Assessing Officer to determine the appropriate proportion of such chargeable on which tax is to be deducted:

The Board may be notification in  Official Gazette specify a class or classes of persons or cases, where the deductor shall make an application to the  Assessing Officer to determine, by general or special order the appropriate provision of sum chargeable and upon  such determination tax shall be deducted ‘accordingly on amount determined by the Assessing Officer.

Tags

Categories

Archives

Translate:

Translate »