Transcript Document

T
D
S
BASICS
UPDATES
&
ISSUES
CA D R Venkatesh,
B.COM, LLB, FCA
,
Partner, MSSV & Co.,
Chartered Accountants
1
Bangalore
BASICS
 Status of Deductor/Payer
 Any Person …….
o Tax Payer
o Agriculturist
o Charitable/ Educational Institutions
2
BASICS
 Individual / HUF
o Whose total sales, gross receipts or turnover
o Exceed the monetary limits specified under
clause (a) or clause (b) of Section 44AB
o During
the
financial
year
immediately
preceding financial year
3
BASICS
 Status of Recipient/Payee
o Rate of Deduction
o Government
o Applicability of surcharge
4
BASICS
 Residential status of Recipient/Payee
o Resident
o Non-resident
5
BASICS
 Nature of expenditure
o In the hands of the deductor – payment /
Debit may be towards

Capital Expenditure

Revenue Expenditure

Reimbursement of Expenses
6
BASICS
 When to deduct
o Payment
o Credit
7
BASICS
 When to Remit
• During the year payment (Other
than March) – on or before 7 days
from the end of the month in which
deduction is made.
• Other cases – On or before 30th
day of April where the income or
amount is credited or paid in the
month of March.
8
BASICS
 Rate of Deduction
o Tax rate
- Under the respective sections
- Part II to First Schedule
- Part III to First Schedule – Salary
- Part II to First Schedule – u/s 195
- No Surcharge & No Education Cess
9
10
DISALLOWANCE
40(a)(ia) – Amount not deductible.
 Finance (No.2) Act, 2004
 A.Y.2005-06 onwards
MSSV & CO, Bangalore
11
DISALLOWANCE
Finance Act, 2008 w.r.e.f 01.04.2005
Has not been paid(A)In a case where the tax was deductible and
was so deducted during the last month of the
previous year, on or before the due date
specified in sec 139(1); or
(B)In any other case, on or before the end of the
previous year
12
DISALLOWANCE
 Finance Act, 2010 w.e.f AY 2010-11
Has not been paid, – On or before the due date specified in sec
139(1)
Amendment by Finance Act, 2010 is retrospective
effect from AY 2005-06
– As held in Kunubai Ramjibai v/s ITO (2010)
49 DTR 70 (Mumbai Trib.)
– This amendment is clarificatory in nature
13
Finance Act, 2012
 Provisio inserted to Sec 40 (a)(ia) w.e.f. 1st April, 2013.
 Provisio – Provided further that where an assessee fails
to deduct the whole or any part of the tax in accordance
with the provisions of Chapter XVII-B on any such sum
but is not to deemed to be an assessee in default under
the provisio to sub section (1) of section 201, then, for
the purpose of this sub clause, it shall be deemed that
the assessee has deducted and paid tax on such sum on
the date of furnishing of the return of income by the
resident payee referred to in the said provisio.
14
Finance Act, 2012
 Insertion of Proviso to Sec 201 w.e.f 1st
July,2012
 Proviso to Sec 201(1)
Provided that any person, including the
principal officer of a company, who fails to
deduct the whole or any part of the tax in
accordance with the provisions of this chapter
on the sum paid to a resident or on the sum
credited to the account of a resident shall not
be deemed to be an assessee in default in
respect of such tax, if such resident15
(i) has furnished his return of income u/s 139
(ii) has taken into account such sum for computing income
in such return of income, and
(iii) has paid the tax due on the income declared by him in
such return of income.
And the person furnishes a certificate to this effect from an
accountant in such form as may be prescribed - Form
No.26A
16
Form No. 26A [See Rule 31ACB]
Form for furnishing accountant certificate under
first proviso of sub-section (1) of section 201 of
the Income-tax Act, 1961





Details to be furnished by the Deductor
Name of the Deductor
PAN,TAN and address of the Deductor
Name of the Deductee
Amount Paid without deduction of whole or any
part of tax .
17




Certificate from an accountant certifying that
the deductee has fulfilled all the conditions
mentioned in first proviso of section 201(1) of
Income Tax Act is enclosed as Annexure – A.
Details of Interest paid, if any
Details of Payment – BSR Code, Challan Serial
Number and Date of Deposit of Challan
Designation of the person who signs this Form.
18
Annexure A
Certificate of Accountant under first proviso
section 201(1) certifying the furnishing of return
of income, payment of tax by the deductee.






Certifying with regard toName of the Accountant
Name and Address of the Deductee
PAN of the Deductee
Payer has paid or credited – a sum to the
account of the payee without deduction of
whole or any part of tax.
Details of Payment- Nature of Payment, Date
of Payment, Section under tax was deductible,
Amount paid or credited, Amount of tax
deductible, Date of Deduction, if any.
19

Details of the Return of Income filed by the
resident payee for the relevant Assessment
yearReceipt on tax has not been deducted, Head
of
Income under which receipt is
accounted for, Acknowledgement Number
of the Return filed, If paper return details of
Assessing Officer, Amount of Total Taxable
Income as per Return filed, Tax due on the
income declared in the return, Details of tax
paid.
20
 Payee has taken to account sum paid by the
payer for computing his taxable income in the
Return of Income filed.




Receipt on which Tax has not been deducted
Head of Income under which the receipt is
accounted for
Gross receipt under the head of income under
which the receipt is accounted for
Amount of taxable income under the head of
income under which the receipt is accounted for
21
 It has been ensured that the information furnished
is true and correct in all respects and no relevant
information has been concealed or withheld
 Declaration with regard to neither the accountant
nor any of his partners, is a director, partner, or an
employee of the entity or its associated concerns
 Declaration with regard to that if the details
provided in the certificate is proved incorrect or
false, will render him/them liable for any penal or
other consequences as may be prescribed in law or
is otherwise warranted.
22
Issues
 When to obtain this certificate from
Accountant
 Deductor assures that he will obtain the
certificate from the accountant of the
deductee.
 Form No. 3CD - clause 17(f).
23
 Provisio to Sec 201 (1A) w.e.f 1st July 2012.
Provided that in case any person, including the
principal officer of a company fails to deduct the whole
or any part of the tax in accordance with the
provisions of this chapter on the sum paid to a
resident or on the sum credited to the account of a
resident but is not deemed to be an assessee in
default under the first provisio of sub section (1), the
interest under clause (i) shall be payable from the date
on which such tax was deductible to the date of
furnishing of return of income by such resident.
24
Issues
 Interest to be calculated irrespective
of the tax liability of the deductee.
 When to compute this interest?
 Rate of Interest is 1%.
25
PENALTY
 Finance Act, 2012
 New Section 271H, w.e.f 1st July, 2012.
 Penalty for failure to furnish the statements or
false statements.
 271H – Fails to comply the provisions of Sec
200 (3) or 206 C (3), the penalty shall not be
less than Rs 10,000 but may extend up to Rs
1,00,000.
26
Fees




Finance Act, 2012
New Section 234E, w.e.f 1st July, 2012.
Fees for default in furnishing statements
234E (1) – without prejudice to the provisions
of the Act, where a person fails to deliver or
causes to be delivered a statement within the
time prescribed in sub section (3) of section
200 or provision to sub section (3) of section
206 C, he shall be a liable to pay, by way fee,
a sum of Rs 200 for everyday during which the
failure continues.
27
Finance Act, 2012
 Insertion of clause (1D), w.e.f 1st July, 2012.
 206C (1D)
Every person being a seller, who receives any
amount in cash as consideration for sale of bullion
(excluding any coin or any other article weighing
10gm or less)* or jewellery, shall, at the time of
receipt of such amount in cash , collect from the
buyer, a sum equal to 1% of sale consideration as
income tax, if the sale consideration,
(i) For bullion, exceeds Rs 2,00,000 or
(ii) For Jewellery, exceeds Rs 5,00,000.
* Deleted from 1st June 2013.
28
Finance Act, 2013
 Insertion of Section 194-IA.(1), w.e.f 1st June,
2013
 194-IA (1) Any Person, being a transferee,
responsible for paying(other than the person
referred to in section 194LA) to a resident
transferor any sum by way of consideration for
transfer of any immovable property (other than
agricultural land), shall, at the time of credit of
such sum to the account of the transferor or 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, deduct an amount equal to one percent of
such sum as income-tax thereon.
29
 194-IA (2) No deduction under sub-section (1) shall
be made where the consideration for the transfer of
an immovable property is less than fifty lakh
rupees.
 Explanation – For the purposes of this section(a) “agricultural land” means agricultural land in India,
not being a land situate in any area referred to in
items (a) and (b) of sub-clause (iii) of clause (14)
of section 2;
(b) “immovable property” means any land (other than
agricultural land) or any building or part of a
building.
30
Issues
 Whether
this
provision
is
applicable
to
agreements executed before 1st June, 2013 but
consideration is paid later.
 Section 203A is not applicable to this provision,
how seller will get a credit for the TDS made.
 Whether this provision is applicable to Joint
Development
Agreements
where
amount
received is less than Rs. 50 Lakhs but the Land
Owner gets in kind i.e 50% of the area
constructed where the value is more than Rs. 50
Lakhs.
31
32
Defaults
o
o
o
o
o
o
o
Non Deduction
Short deduction
Non remittance
Short remittance
Delay in remittance
Non / Delay in filing statements
Non / Delay in issuing certificates
33
Consequences
o
o
o
o
o
Interest
Amount not deductible (Disallowance)
Penalty
Fees
Prosecution
34
FINANCE ACT, 2010
Interest u /s 201 – w.e.f: 01.07.2010

At 1% for every month or part of a month on the
amount of such tax from the date on which such tax
was deductible to the date on which such tax is
deducted; and

At 1.5% for every month or part of a month on the
amount of such tax from the date on which such tax
was deducted to the date on which such tax is actually
paid
MSSV & CO, Bangalore
35
ISSUES:
M/s.ABC co. passed the following entries in the books of
accounts.
Internal Audit fee A/c Dr
Rs.1,00,000
To M/s. Smart Associates.
Rs.1,00,000
(Being the internal audit fee payable for the month of
January 2013.)
MSSV & CO, Bangalore
36
M/s.ABC co. passed the following entries in the books of
accounts.
Internal Audit fee A/c
Dr
Rs.1,00,000
To M/s. Smart Associates A/c.
Rs.90,000
To TDS Payable A/c
Rs.10,000
(Being the internal audit fee payable for the month of
January 2013 and TDS payable provided for.)
MSSV & CO, Bangalore
37
ISSUES:
 M/s X Co Ltd deducted tax of Rs 1 lakh
on professional charges of Rs 10 lakh on
07.03.2013. The Company remitted the
above tax on 04.05.2013. Calculate the
interest liability.
38
Rule 119A, Income Tax Rules, 1962
Procedure to be followed in calculating interest.
In calculating the interest payable by the assessee or the
interest payable by the Central Government to the assessee
under any provision of the Act,—
(a) where interest is to be calculated on annual basis, the
period for which such interest is to be calculated shall be
rounded off to a whole month or months and for this
purpose any fraction of a month shall be ignored; and the
period so rounded off shall be deemed to be the period in
respect of which the interest is to be calculated;
39
(b) where the interest is to be calculated for every month or
part of a month comprised in a period, any fraction of a
month shall be deemed to be a full month and the interest
shall be so calculated;
(c) the amount of tax, penalty or other sum in respect of
which such interest is to be calculated shall be rounded off
to the nearest multiple of one hundred rupees and for this
purpose any fraction of one hundred rupees shall be ignored
and the amount so rounded off shall be deemed to be the
amount in respect of which the interest is to be calculated.]
40
ISSUES:
 Threshold limit computation– whether to include
Service Tax?
u / s194J
u / s 194I
Fee
Rs. 27,500
Rent
Rs. 1,65,000
ST
Rs. 2,833
ST
Rs.
Rs. 30,333
MSSV & CO, Bangalore
16,995
Rs. 1,81,995
41
Issues
 M/s X Private Limited paid statutory audit fee of
Rs.1,00,000/- in cash during the accounting year
2012– 2013 with out deduction of tax at source.
 For
Assessment
year
2013–14,
Examine
the
disallowance u/s 40(a)(ia) and u/s 40A(3) ?
42
Issues
 Mr.X a practicing CA who is subject to Tax Audit u/s 44AB
for the year ending 31.03.2012 having the following
transactions during the financial year 2012 - 2013:
1. Constructed a house for self occupation & he is
making payment to contractor Rs.10,00,000/2. Borrowed funds from friends Rs.10,00,000/- on which
he wants to pay interest Examine the applicability of
TDS
43
Issues u/s 206 AA
 Furnishing of PAN
 Furnished after Previous Year is ended
 Furnished within the Financial Year
after 3 Quarters
 TDS Credit
 Wrong PAN furnished by the Deductee
44
Issues
 Disallowance under Sec 40(a)(ia)
 Service Tax element on fees/payment
Fees – Rs 10 lacs
ST - Rs 1.24 lacs
Whether Disallowance u/s 40(a)(ia)
Rs 10 lacs ???
Or
Rs 11.24 lacs ???
45
Issues
 Commission Or Brokerage
o Discount/Rebate/Incentive
o Commission paid to partners on
percentage of export sales
MSSV & Co.
46
Issues
 Rent
o Advance Rent of Rs. 8 Lakhs paid for next 5
during the financial years 2012-13
o Rent of Rs. 8.75 lakhs paid to 5 co-owners
o Warehousing Charges
o Cooling Charges paid to cold storage owners
MSSV & Co.
47
Issues
• Rent paid to owner as a percentage of sales.
• Tenants in a commercial complex following
payments are made to the owner:- Rent
- Maintenance charges
- Power & Water charges re-imbursements.
MSSV & Co.
48
Issues
 Incentive paid to a Contractor
 Contract Amount Rs 100 lacs
 Incentive 10 percent – Rs 10 lacs
 TOTAL Payment Rs 110 lacs
 Liquidated damages recovered from contractor
 Contract Amount Rs 100 lacs
 Liquidator Damages 10 percent – Rs 10 lacs
 Net Payment Rs 90 lacs
MSSV & Co.
49
Issues
 M/s co-operative Bank received form 15G and
From 15H the depositors for non-deduction of
tax at source. The Co-operative Bank did not
file copy of these forms before the
jurisdictional Commissioner. The AO proposed
to disallow u/s 40(a)(ia) the interest payment
to these depositors for not filing the forms.
DISCUSS…
50
Issues
 The deductor M/s Defaults ltd not
filed the quarterly returns for the
financial year 2012-13. The AO
proposed to disallow the payments
u/s 40(a)(ia) on which TDS is
deducted & remitted.
DISCUSS..
51
ISSUES
 M/s. Land Owners Pvt Ltd. entered into Joint
Venture with M/s. Developers Pvt Ltd. to
develop a property. The Area available for
development is 10,000 Sq. Ft. Market Value of
the property on the date of agreement on
01.01.2012 was Rs. 10 Crores. The Developer
completed the project and handed over the
possession of the commercial property to land
owner on 01.03.2013. Total construction cost
of the project to Developer is Rs. 10 Crores.
Discuss the applicability of TDS and which
year?
52
ISSUES
 M/s. Land Owners Pvt Ltd. entered into Joint
Venture with M/s. Developers Pvt Ltd. to
develop a property. The Developer agreed to
compensate the land owner @ Rs. 10 Lakh per
month during the period of construction. Kindly
examine the applicability of TDS for the
compensation payment.
53
Issues
 Mr. R purchased a residential property from
Mr. NR for Rs. 20 Crores and sale was
concluded by registration on 01.01.2012. Mr. R
received notice from Income Tax Department
stating that Mr. R violated the provisions of
Section 195. Discuss…
54
Issues
 Mr. R purchased a property from Mr. NR (Non –
Resident) for Rs. 20Crores and deducted Tax at
Source U/s. 195. The tax was remitted through a
company’s TAN Number in which Mr. R is a
Director. Subsequently the Income-tax Department
issued a notice to Mr.R for violation of provisions of
section 195. Discuss…
55
Issues
 Bank has paid gold appraisal fee of
Rs.70,000/- to Appraiser during the
Financial Year 2012-13. Whether
Bank has to deduct Tax at Source
U/s. 194C or U/s. 194J.
56
Issues
 The Bank has paid the commission of
Rs. 1,00,000/- each to 10 pigmy
agents without deducting Tax at
Source.
The
Assessing
Officer
proposes to disallow the expenditure
U/s. 40(a)(ia). Discuss…
57
Issues
 M/s. S Pvt Ltd paid the Audit Fee for 3 financial
years together on 1st March, 2013. The details
of the payment is as follows;
Audit Fee for the financial year ending 31.03.2012
– Rs. 28,090 (incl. of Service Tax)
Audit Fee for the financial year ending 31.03.2011
– Rs. 28,090 (incl. of Service Tax)
Audit Fee for the financial year ending 31.03.2010
– Rs. 28,090 (incl. of Service Tax)
Kindly advice whether M/s. S pvt Ltd is required
to deduct Tax at Source U/s. 194J
58
Issues
 M/s. Manufacturing Company has
paid a transport charges of Rs. 10
Lakh to M/s. Logistics Pvt Ltd during
the financial year 2012-13. The
company has not deducted the tax at
source under the plea that provisions
of section 194C (6) is applicable.
Kindly examine…
59
Issues
 Section 40(a)(ia) is attracted only to sums payable
as on Balance Sheet date?

Meriliyn Shipping and Transport V/s. Additional
Commissioner of Income Tax (2012) 016 ITR (Trib)
0001 (ITAT) (Vishakapatnam)

S S Warad V/s. Additional Commissioner of Income
Tax (2012) 019 ITR (Trib) 0035 – Bangalore Bench

Smt. J Rama V/s. ITO Ward 1(3) ITA No. 1204
(Bangalore)/08
60
 Section 40(a)(ia) is attracted only to
the expenses claimed U/s. 30 to 38.
 Teja Constructions V/s. Assistant
Commissioner of Income Tax (2010)
129 TTJ 0057
61
CONTROVERSIES
No TDS v/s Yes TDS
194C v/s 194J
194C v/s 194I
194C v/s 194H
194J v/s 192
192 v/s 194H
MSSV & CO, Bangalore
62
Conclusion
 Duty / Responsibility under chapter
XVII-B cannot be bypassed.
63
Conclusion
 Method of accounting

Cash Basis

Mercantile Basis

Compliance Basis
64
GOLDEN PRINCIPLES




Applicability
Rate
Deduction & Remittance
Planning
65
Tips for Better
and Clear
Understanding
of Provisions of
Chapter XVII B
66
 Step1:
Read, Read and Read until you are clear
about the provisions (Sections & rules)
 Step2:
Read, circulars and notifications
67
 Step 3 :
Read case laws of Supreme Court, High
Court, ITAT…
 Step 4 :
Advise accordingly
68
Finally
Deduct and remit
Without failure
Avoid – Interest,
With due care
penalty, prosecution
and disallowance
File TDS returns & Issue Within time
the forms
69
Then…
THE
DEDUCTOR
DEDUCTEE
WILL
SMILE FOREVER 
70
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