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Deduction and Collection of Tax at Source (TDS & TCS) [ Section 190 to 206CA]

Tax Deduction at Source (TDS) and Advance Payment [Section 190]

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:

(I) 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.

(ii) 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.

(iii) Advance (ax:

The assessee, in certain cases, is under an obligation to pay tax in advance in certain installments.

Further, the tax, if paid by the employer under section 192(1A) on the non-monetary perquisites provided to the employee, shall also be one of the mode of collection or recovery of tax under Chapter XVII of the Income-tax Act.

The taxes deducted / collected or paid as advance tax in the previous year itself are known as prepaid taxes. Such pre-paid taxes are deductible from the total tax due from the assessee.

In addition to the above taxes, the assessee has to pay self-assessment tax under section 140A at the time of filing the return, if any tax is still due on the basis of returned income after deduction of the following:

(i)         Any relief under section 89.

(ii)     Any relief of tax or deduction of tax claimed under section 90, 90A, or 91 on account of tax paid in a country outside India.

(ill)    Any tax credit claimed to be set off in accordance with provisions of section II 5JAA (MAT credit).

(iv)     Any tax credit for alternate minimum tax in accordance with the provisions of section 115JD (AMT credit).

(v)        Any tax deducted or collected at sources.

(vi)       Any advance tax.

(vii)      Any tax paid by the employer under section 192(IA).

Direct Payment [Section 191]

In the case of income—

(a)     in respect of which provision is not made under Chapter XVII for deducting income-tax at the time of payment and

(b)     in any case where income-tax has not been deducted in accordance with the provisions of Chapter XVII (i.e. TDS provisions),

income-tax shall be payable by the assessee directly in the form of advance tax or otherwise.

List of Incomes / Payments from which Tax is Deductible at Source (TDS)

There are 33 items of Income / Payment from which Tax is Deductible at Source (TDS) as given below:

1.         TDS from Salary [Section 192]

2.       TDS from Accumulated balance of the Recognised Provident Fund (RPF) withdrawn by the employee [ Section 192A]

3.         TDS from Interest on Securities [Section 193]

4.         TDS from Dividends [Section 194]

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

6.         TDS from Winnings from Lottery, Crossword Puzzle, Card Games etc. [Section 194B]

7.         TDS from winning from Horse Races [Section 194BB]

8.         TDS from payment to Resident Contractor [Section 194C]

9.         TDS from Insurance Commission [Section 194D]

10.       TDS from Payment in respect of Life Insurance Policy [Section 194DA]

11.     TDS from Payment to Non-resident Sportsman or Sports Associations or Non-Resident Entertainer [Section 194E]

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

13.     TDS from Payment towards Commission and Brokerage [Section 194H]

14.     TDS on Rent [Section 194-I]

15.     TDS on Transfer of  Certain Immovable Properties (other than Agricultural Land) [Section 194-IA]

16.     TDS from Payment on Rent by certain Individual or HUF [Section 194-IB]

17.     TDS from Payment under Specified Agreement referred to section 45(5A0 [Section 194-IC]

18.     TDS from Fees for Professional or Technical Services, etc. [Section 194J]

19.     TDS from Payment of Compensation on Acquisition of Certain Immovable Property [Section-194LA]

20.     TDS from Income by way of Interest from Infrastructure Debt Fund [Section 194-LB]

21.     TDS from Certain Income from Units of a Business Trust [Section 194-LBA]

22.     TDS from Income in respect of Units of Investment Fund [Section 194-LBB]

23.     TDS from Income in respect of Investment in Securitisatoin Trust [Section 194-LBC]

24.     TDS from income by way of Interest from Indian Company or a Business Trust [Section 194-LC]

25.     TDS from Income by way of Interest on Certain Bonds and Government Securities  [Section 194-LD]

26.     TDS from Payment of certain Sums by certain Individuals or Hindu Undivided Family (HUF) [Section 194M]

27.     TDS from Payment on certain Amounts in Cash [Section 194N]

28.     TDS from Other Sums [Section 194]

29.     TDS from Income payable 'Net of Tax' [Section 195A]

30.     TDS from Income in respect of Units to Non-Residents [Section 196A]

31.     TDS from Income from Units to Offshore Fund [Section 196B]

32.     TDS from Income from Foreign Currency Bonds or Global Depository Receipts of Indian Company [Section 196C]

33.     TDS from Income of Foreign Institutional Investors from Securities [Section 196D]

Procedure and Scheme of TDS

The Obligation to deduct tax at source is upon the person responsible for paying the income / amount which is subject to TDS. Therefore such person i.e. payer has to follow the procedure for deducting the tax. The main responsibilities and procedure of TDS may be mentioned as under:—

(i)      The payer has to apply for tax deduction and collection account number (TDCAN) in Form No. 49B. There is no need to obtain TAN if the tax has to be deducted under section 194-IA or 194-IB or 194M.

(ii)     He is to deduct tax from the income / payment mentioned in the various sections i.e. section 192 to 196D.

(iii)       The amount so deducted should be deposited in challan No. 281 (except in case of section 194-IA or 194-IB or 194M) within the requisite time to the credit of Central Government. Separate challans should be used to deposit tax deducted under each section and the correct nature of payment code in the relevant column in the challan should be indicated.

For section 194-IA, the TDS is to be deposited, within the time specified electronically in
Form No. 26QB which is a challan cum statement of deduction of tax under section 194-IA.

For section 194-IB. the TDS is to be deposited, within the time specified, electronically in
Form No. 26QC which is a challan-cum-statement of deduction of tax under section 194-IB.

For section 194M, the TDS is to be deposited, within the time specified, electronically in the
prescribed Form which will be a challan-cum-statement of deduction of tax under section
194M.

(iv)     Tax is to be deducted at the basic rates prescribed under various sections. No surcharge or health and education cess (H&EC) is to be added to such basic rate except in the following cases:

(a)     Tax deduction from payment of salary, whether the recipient is resident or non-resident. In this case, surcharge, if applicable and health and education cess (H&EC) shall have to be added to the basic rate.

(b)     Tax deduction from payment/credit of any sum (other than salary) to a non-resident other than company. In this case also, surcharge, if applicable and health and education cess (H&EC) shall have to be added to the basic rate.

(c)      Tax deduction from payment/credit of any sum to a foreign company. In this case also, surcharge, if applicable and health and education cess (H&EC) shall have to be added to the basic rate.

As per section 206AA, if PAN is not provided, the rate of TDS shall be the normal rate prescribed or 20% whichever is higher.

(v)      Payee should be issued certificate of tax deduction at source on or before certain specified date.

(vi)     The payer should prepare such statements for such period as may be prescribed and file the same with the prescribed income-tax authority or the person authorised by such authority in such form and verified in such manner as may be prescribed.

(vii)    Tax has to be deducted at source at the rates specified in the Act or where the rates are not given in the Act, tax shall be deducted at the rates given in Part II of Schedule-I of the relevant Finance Act.

However, in case of salary, it shall be deducted at the slab rates given in Pan III of Schedule-I of the relevant Finance Act. Rates given in Pan III are also the rates applicable for advance income-tax.

 

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