Tax Deduction at Source

Tax deducted at source is one of the modes of collecting Income-tax from the assessees in India. The tax so deducted at source by the payer, has to be deposited in the Government treasury to the credit of Central Govt. within the specified time. TDS is a certain percentage deducted at the time of payments of various kind such as salary, commission, rent, interest on dividends etc. Under the scheme of TDS, persons responsible for making payment of income, covered by scheme, are responsible to deduct tax at source and deposit the same to the governments treasury within the stipulated time. The recipient of income though he gets only the net amount (after deduction at source) is liable to tax on the gross amount and the amount deducted at source is adjusted against his final tax liability. Income from several sources is subjected to tax deduction at source. Presently this concept of T.D.S. is also used as an instrument in enlarging the tax base. Some of such income subjected to T.D.S. are salary, interest, dividend, interest on securities, winnings from lottery, horse races, commission and brokerage, rent, fees for professional and technical services, payments to nonresidents etc. It is always considered as an Advance tax which is paid to the government when we are being paid for provision made by us in the form of products or services. TDS rates for Financial Year 2012-13 Form 24Q: Male For Income Between 0 to 2,00,000 For Income Between 2,00,001 to 5,00,000 For Income Between 5,00,001 to 10,00,000 Surcharge Education Cess Note: Age of senior citizen is 60 and above years. New category of assessee "Very Senior Citizen", aged above 80 years, is exempted till 5,00,000 of income. Female For Income Between 0 to 2,00,000 For Income Between 2,00,001 to 5,00,000 For Income Between 5,00,001 to 10,00,000 Senior Citizen For Income Between 0 to 2,50,000 For Income Between 2,50,001 to 5,00,000 For Income Between 5,00,001 to 10,00,000 Tax (%) 0 10 20

For Income above 10,00,001 For Income above 10,00,001 For Income above 10,00,001 30 0 3

Consequences of default:

Where a person who is required to deduct tax at source, does not pay, or does not deduct, or after deducting fails to pay, the whole or any part of tax, then such person shall be deemed to be an assessee in default under section 201(1). The following chart indicates the nature of default and its consequences which range from penal interest, penalty to prosecution:

In addition to the above, there are other consequences in certain cases, as enumerated below; Disallowance of specified expenditure (while computing the income of the deductor) if TDS is not deducted from the payment. (Section 40a(ia)). Where the tax has not been paid after its deduction it shall be charge on the asset of the defaulter to recover the amount of TDS. (section 201(2)).

The various deductions which have to be undertaken at source can be summarized in the following table:

Form 26Q: Section Nature of Payment Code 192 Payment of salary to a resident/nonresident 193 Interest on securities 194 Deemed dividends u/s 2(22)(e) 194A Interest other than Interest on securities 194B Lottery or crossword puzzle or card game or other game of any sort. 194BB Horse races 194C Contracts/sub-contracts 194D Insurance Commission 194E Payment to nonresident sportsmen or sports association 194EE Payment in respect of deposits under NSS 194F Payment on account of repurchase of units of MF or UTI 194G Commission on sale of lottery tickets 194H Commission or brokerage 194-I Rent of Plant and Machinery Rent of Land or Building or Furniture and Fitting 194J Fees for professional or technical services 194L Payment of compensation to a resident on acquisition of certain immovable property Threshold Individual Company/Firm Limit or HUF Normal Income Tax Rates 10 10 10 10 5000 10 10 10000 30 30 5000 30000 20000 30 1 10 10 20 20 10 10 2 10 10 10 30 2 10 10 10 10 10 2 10 10 10

2500 1000 1000 5000 180000 180000 30000 100000

Due Date Table for TDS returns: Quarter First Second Third Fourth TDS Statement 30th June 30 September 31 December 31 March
st st th

Form 24Q July 15th October 15th January 15th May 15th

Form 26Q July 15th October 15th January 15th May 15th

Income from Salaries:

The income from salaries is required to be computed on estimated basis at the beginning of each financial year. Income Tax payable on the basis of such estimated salary income should be deducted at the rate applicable to the corresponding slab of income every month in equal instalments subject to adjustments depending upon tax saving investments made by the Deductee. When an employee is working with more than one employer simultaneously or changes his job from one during the financial year, the employer will deduct tax on considering the aggregate salary from all sources and tax deducted thereon, if any. Tax Deduction and TAN All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to obtain Tax Deduction and Collection Account Number or TAN as per the provisions of section 203A of the Income-tax Act. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates. Failure to apply for TAN or comply with any of the other provisions of the section attracts a penalty of Rs. 10,000/-. How does Deductor pay TDS Every organization responsible for deducting tax is required to file quarterly statements of TDS for the quarters ending on 30th June, 30th September, 31st December and 31st March in each Financial Year The provisions of quarterly statements of TDS have been introduced in the statute vide section 200(3) w.e.f. 01/04/2005. The returns, forms and their periodicity is given below e-TDS return is a TDS return prepared in form No.24Q, 26Q, 27EQ or 27Q in electronic media as per prescribed data structure. As per Section 206 of Income Tax Act all corporate and government Deductors are compulsorily required to file their TDS return on electronic media i.e. e-TDS. However for other Deductors, filing of e-TDS return is optional. TDS Certificates A tax deductor is required to issue TDS certificate to the Deductee within specified timed under section 203 of the Income Tax Act. The Deductee should produce the details of this certificate to adjust the amount of TDS against the Tax payable him, during the regular assessment of income tax. Various Types of TDS certificates are as follows:

Salaries Form 16: In case of Salaries, the certificate should be issued in FORM 16 containing the Tax computation details and the Tax deducted & Paid details. This refers to the details submitted over Form 24Q. Non-salaries Form 16A: In case of Non-Salaries, FORM 16A is issued containing the Tax deducted & Paid details. Separate certificates should be prepared for each Section(ex:194C, 194J). This refers to the details submitted over Form 26Q and 27Q.

NOTE:

If the amount paid as advance tax is higher than the total tax liability, the assessee will receive the excess amount as a refund. Interest @6% p.a. will be paid by the income tax department to the assessee on the excess amount if the excess amount is more than 10% of tax liability.