depriciation

Computation under the Companies Act. Depreciation is computed using either

the straight-line method (where the amount of depreciation is uniform for all the years)
or the written-down value method (where the amount of deprecation is highest in the
first year and goes on reducing year after year).

Under the Income Tax Act. Depreciation is charged on the ‘block of assets’, and
not on individual assets. The block represents the group of assets for which the same
rate of depreciation applies. Under the Income Tax Act, depreciation is computed using
the written-down value method, except in case of an undertaking engaged in generating
and distributing power.

Read more: Depreciation chart 2010-11 Income Tax Companies act 2010-11 | SIMPLE TAX
INDIA-ITR FORM -TDS RATE 11-12

While the actual cost of new asset is added to the block, the amount received on the
sale of an asset (including scrap value) is reduced from it. Depreciation at the
prescribed rates is computed on the written-down value of the block as on the last day
of the financial year–typically 31 March. This value is the aggregate cost of acquisition
of the assets in a block as reduced by the depreciation charged in previous years.

New Rates. The rates of depreciation under the Income Tax Act are not linked to the
useful life of the asset. Mobile phones are treated as plant and machinery, and are
entitled to depreciation at the rate of 15 per cent.

Condition for allowability

The following fundamental conditions need to be fulfilled to claim depreciation:

(1) The person claiming depreciation must be the owner or the co-owner of the asset;

(2) The asset must be(put to use) used in the business. If it is only partly used for
business, depreciation would be allowable on pro-rata basis;

(3) The asset must be used during the relevant financial year. If an asset is purchased
and put to use for less than 180 days, that is, on or after the first day of October, only
50 per cent of the normal depreciation will be allowed in that year. In the subsequent
years however, the asset will be subject to depreciation at the normal rates. So if an
assessee buys a machine on 1 September 2009 but does not put it to use before 1
December 2009, he will be allowed depreciation at 7.5 per cent (instead of the normal
15 per cent) for the financial year ended 31 March 2006. The crucial date is the date of
putting the asset to use.

Suppose a Person purchased a Car on 31st March and put to use on same date even
then he can claim 50% of the  depreciation of the full year i,e 7.5%(50% of 15%)

Read more: Depreciation chart 2010-11 Income Tax Companies act 2010-11 | SIMPLE TAX
INDIA-ITR FORM -TDS RATE 11-12

**Depreciation is allowed as a deduction while computing income under the head ‘profits and
gains of business or profession’ and ‘income from other sources’. It is allowed on all fixed
assets, save and except land. However, it is not allowed to a person earning salary income, even
if he uses his car for commuting between his office and residence. Likewise, a person who owns
house property and lets it out cannot claim depreciation on the building while working out
income from house property.

Why provide for depreciation?

There are two reasons. Firstly, the use of any asset erodes its value due to wear and tear or due
to the passage of time, or due to obsolescence resulting from a change in technology. The cost of
an asset should be written down to reflect its correct value. Since assets like plant and machinery,
buildings, and furniture and fixtures are used to generate revenue, the reduction in their values
represents a charge, which is debited to the profit and loss account to arrive at the correct profits
of the year.

Read more: DEPRECIATION RATE INCOME TAX SET OFF BLOCK OF ASSESTS LEASE
HIRE PURCHASE | SIMPLE TAX INDIA-ITR FORM -TDS RATE 11-12

Secondly, depreciation is a non-cash expenditure–it does not involve an outflow of cash from the
business, and therefore results in the accumulation of funds. But since it is debited to the profit
and loss account like any other expense, it reduces the taxable profits and, therefore, the burden
of tax. It acts as a source of internal financing for replacement of an asset at the end of its useful
life.

Computation under the Companies Act. Depreciation is computed using either the straight-
line method (where the amount of depreciation is uniform for all the years) or the written-down
value method (where the amount of deprecation is highest in the first year and goes on reducing
year after year).

Under the Income Tax Act. Depreciation is charged on the ‘block of assets’, and not on
individual assets. The block represents the group of assets for which the same rate of
depreciation applies. Under the Income Tax Act, depreciation is computed using the written-
down value method, except in case of an undertaking engaged in generating and distributing
power.

While the actual cost of new asset is added to the block, the amount received on the sale of an
asset (including scrap value) is reduced from it. Depreciation at the prescribed rates is computed
on the written-down value of the block as on the last day of the financial year–typically 31
March. This value is the aggregate cost of acquisition of the assets in a block as reduced by the
depreciation charged in previous years.

New Rates. The rates of depreciation under the Income Tax Act are not linked to the useful life
of the asset. Mobile phones are treated as plant and machinery, and are entitled to depreciation at
the rate of 15 per cent.

Condition for allowability

The following fundamental conditions need to be fulfilled to claim depreciation:

(1) The person claiming depreciation must be the owner or the co-owner of the asset;

(2) The asset must be(put to use) used in the business. If it is only partly used for business,
depreciation would be allowable on pro-rata basis;

(3) The asset must be used during the relevant financial year. If an asset is purchased and put to
use for less than 180 days, that is, on or after the first day of October, only 50 per cent of the
normal depreciation will be allowed in that year. In the subsequent years however, the asset will
be subject to depreciation at the normal rates. So if an assessee buys a machine on 1 September
2009 but does not put it to use before 1 December 2009, he will be allowed depreciation at 7.5
per cent (instead of the normal 15 per cent) for the financial year ended 31 March 2006. The
crucial date is the date of putting the asset to use.

Suppose a Person purchased a Car on 31st March and put to use on same date even then he can
claim 50% of the  depreciation of the full year i,e 7.5%(50% of 15%)
Download Depreciation rate for Income Tax Act and Companies ACT
Hire-purchase or lease?

In case an asset is purchased under a hire-purchase scheme, the depreciation is available to

the hirer (the user of the asset). But if it is taken on lease, depreciation is allowed to the lessor
(the financer). Hence, acquiring an asset on hire purchase is a better option than acquiring the
same under lease, if the intention is to avail deduction for depreciation.

However, in a lease, although a lessee (the user) loses the benefit of depreciation, he can treat
the lease rentals as an expense and reduce his taxable income accordingly. The decision to go in
for lease or hire purchase should depend on when the asset will be put to use, the rate of
depreciation available on the asset and the cash flow position of the user, among others.

Claim of depreciation :optional /mandatory ?

Until 31 March 2001, a taxpayer could choose whether or not to claim depreciation. From 1
April 2001 onwards, however, the claim of depreciation is no longer optional and the amount of
depreciation will be compulsorily treated as deduction, irrespective of whether or not the claim
has been made.
Unabsorbed depreciation(set off and carry forward) 
set off
If, in a particular year there are losses or inadequate profits, depreciation amount may not be
fully deductible. In such cases, the amount that cannot be deducted wholly or partially can be set
off against any other income.
carry forward
If such ‘unabsorbed depreciation’ cannot be adjusted against the income of the same year, it can
be carried forward to next year and can be adjusted against any income of the next year and so
on. Unabsorbed depreciation can be carried forward for any number of years without any
limitation.

Read more: DEPRECIATION RATE INCOME TAX SET OFF BLOCK OF ASSESTS LEASE
HIRE PURCHASE | SIMPLE TAX INDIA-ITR FORM -TDS RATE 11-12
Types Of Payment, Relevant Provisions, Person Responsible For Deduction Of Tax And Type Of Payee

TDS necessary
S Person Responsible for
Nature of Payment when payment
No deduction of tax at source
is made to

All Governments, Companies, Any individual

Co operative societies, Local having taxable
Salary and all positive incomes under
authorities, University, salary during the
any head on income but not including
1. Institutions, Associations or previous year
loss under the head income under the
Body , Trustees of a recognized from any
House property (Sec 192)
Provident Fund or number of
Superannuation Fund employers

2. Interest on Securities (Sec 193) Any person Any person

Dividend from Domestic Companies or A resident

companies which have made shareholder
prescribed arrangement for Principal Officer of a Domestic when total
3.
declaration/payment of dividend Company. dividend paid
within India (Excluded from TDS i.e. exceeds Rs
1.6.97 by Finance Act, 97) (Sec 194) 2,500/-

Interest other than interest on Any person other than

4. A resident
securities (Sec 194A) individual or HUF

Winnings from Lottery or crossword

5. Any person Any person
puzzles (Sec 194B)

Book maker or person holding

a license for horse racing,
6. Winnings from horse races (Sec 194BB) Any person
wagering or betting in any race
course

7. I. Payment to Contractors in pursuance Central, State Government, Any resident

of any work of contract including local authority; Central, State person
supply of labour contract (Sec 194C) or provincial Corporation;
Company ; Co-operative
Society; trust; University; a
constituted authority engaged
in housing and planning &
development of Cities, Towns
and Villages; and firm (firm
included i.e. 1.7.95 vide
Finance Act, 1995)
 ii. Payment to sub-contractors (Sec Any Contractor other than Any resident
194C) individual or HUF person

Insurance Commission covering all

Any person responsible for
8. payments for procuring Insurance A resident
payment
business(Sec 194D)

Payment to non-resident sportsman Any non-resident

(including athlete) or sports sportsman who
association or institution. In case of is not a citizen of
non-resident sportsman, it includes Any person responsible for India and any
9.
payments in respect of advertisements payment non-resident
as well as articles on any game or sports
sports in India in newspapers, association or
magazines etc. (194E) institution

Person responsible for making Any person

Payments in respect of deposits under payment in respect of amount except when the
10.
NSS (194EE) referred to in Section 80CCA payment is made
(2) (a). to the heirs.

Person responsible for making

Payment on account of repurchase of payment in respect of amount
11. Any person
Units by Mutual Fund or UTI (194F) referred to in Section 80CCB
(2).

Commission to Stockists, distributors,

buyers and sellers of Lottery tickets Person responsible for making
12. Any person
including remuneration or prize on payment to such agent
such tickets (sec 194G)

13. Commission brokerage (sec 194H) Not applicable i.e. 1.6.92 -

Any person responsible for

14. Payment of rent (sec 194I) making payment excluding Any person
individual & HUF.

15. Fees for professional & technical Any person responsible for
services; professional services include making payment except an
legal, medical, engineering, individual & HUF.
architectural, accountancy, technical
consultancy, interior decoration,
advertising & any profession notified
under Section 44AA ; Technical fees
 mean any consideration for rendering
any managerial , technical or
Consultancy service including provision
of services of technical or other
personnel(sec 194J)

Rates for TDS

What is TDS?

In a simple language TDS stands for tax deducted at source. It is a tax that is deducted from the
earning of the employee by the employer in other words it is a tax that is deducted at source. It is
deducted as per the finance act of that year. TDS should not be confused with the income tax
return; TDS is a different tax than income tax . Tax deduction is useful to reduce the income tax
and provide tax relief. TDS is deposited in the government treasury and later on assigned to
central government. TDS came into existence because government wants to expand their tax
bracket in the country.

Let�s have a look at some of the income that is subjected to tax deduction at source (TDS).

1. Income through the salary

2. Interest rate generated from nay mode
3. Rental charges
4. Insurance commission
5. Prize money from betting, lotteries and horse races
6. Commission on sale of lottery ticket
7. Income generated from the foreign countries
8. Fees for professional and technical services

Latest TDS (tax deducted at source) rate � 2010 -2011

co-operative
HUF
Threshold society/Local
Payment source (rate
in Rs. authority/company firm
in %)
(rate in %)
Winning from lotteries 10000 30 30
Winning from horse races 5000 30 30
Commission on insurance 20000 10 10
Rent or property 180000 10 10
Interest from bank 10000 10 10
Commission/brokerage 5000 10 10
 Professional fees 30000 10 10
Scrap - 1 1
Toll plaza - 2 2
Mining /quarrying - 2 2
Interest on debenture and securities - 10 -
Withdrawal from NSS 2500 20 -
Payment to nonresident sportsmen - 10 -
Income from ling term capital gain - 20 -
Income by way of short term capital
- 15 -
gain
Fees for technical services payable by
Government or an Indian concern in
- 10 -
Pursuance of an agreement made by
non- Resident with the government

TDS is not applicable if Pan is provided by the transporter. Surcharge and cess is not applicable
on TDS with effect from 1 April 2009 on any payment made by the resident.

Calculation of how to deduct correct TDS

 Salaries

1. Estimate the annual approximate salary.

A. As it’s an approximate deduction from the employee salary. Calculate the
exact taxable salary amount payable till current month of financial year.
B. Calculate the approximate salary that will pay for next financial year.
2. For the correct calculation of TDS it needs to calculate any other mode of income
declared by the employee.
3. Deduct any loss declared by the employee such as loss of the house.
4. Declaration as per 80C, 80D, 80G etc.
5. Calculate the surcharge, income tax and cess on the net income of the employee.
6. Deduct any type of rebate.
7. Calculate the total tax now deduct the TDS made till last month from it.
8. Divide the net TDS by �remaining number of months in the FY� including this
month.
9. Deduct this month from employee salary.

 Non salaries
1. In this check that no payment should be paid to government, reserve bank or
mutual fund.
 2. It is always preferable to calculate the threshold.
3. Deduct the amount as per the declaration 197A for non deduction of TDS.
4. Check that employee has not submitted a certificate by Assessing officer under
section 197 for non-deduction of TDS or deduction at a lower rate.
5. If you want to get effective TDS rates you need to include surcharge and cess.

Wrong or non calculation of TDS

1. Any payment that is payable as interest, commission, rent or brokerage. It should be

added to the income tax to get the final tax structure.
2. Attract penalty that is applicable for the person who is not able to pay the amount of tax
on time.

Interest earned from securities, horse racing, insurance commission and lottery prizes are
applicable for the TDS. Tax deduction is applicable for any kind of charity and if the person is
suffering from any kind of disability.

All people who want to pay TDS are required to apply for TAN (tax deduction and collection
account number)

TDS certificate

Section 192 � This certificate on form 16 is submitted by the payer within one month prior to
next financial year.

Let’s have a look at the key sections:

 Section 192 � payment of salary or payment of wages.

 Section 193 � Payment of securities or payment of interest.
 Section 194 A � Interest other than securities.
 Section 194 B � Amount generated from lotteries or card game.
 Section 194 BB- Winning from horse race.
 Section 194C � Payment to contractor.
 Section 194 H � payment of commission or brokerage.
 Section 194 I � Payment of rent of plant and payment of machinery
 Section 194J- Payment of professional charges.

TDS implications on payment of commission or brokerage are like if a person who is responsible
for paying to a resident, and any income that comes in the form of commission or brokerage have
to deduct tax at source from there.

There are few charges that are exempted from tax at source (TDS)

The discount that is avail by the stamp vendor should not be confused with TDS as per section
194H, in the course of buying and selling of goods the discount comes does not come under the
provision of commission or brokerage the tax will be deducted at source.
Deduction of tax by airlines from its agent. In this tax will be deducted at source as per the
section 194H. TDS will be deducted from the actual cost of the airline fare.

TDS is not applicable in RBI due to the turnover commission payable by the reserve bank of
India to the agency bank.

For PCO franchisee no deduction shall b e made by BSNL or MTNL.

 In case of transport contract if PAN is provided then there will not be any deduction for
TDS from 01/10/2009 to 31/03/2010.
 If PAN is not provided then TDS deduction would be 1 %.
 As per the new clause the charges for the rent paid, plant and machinery the TDS would
be 2% however for land, furniture and building it would be 10%.

TAN (Tax Deduction Account Number)

Tax Deduction and Collection Account Number or TAN is a 10 digit alpha-numeric number
which is compulsory to be obtained by all persons who are accountable for Tax Deduction at
Source (TDS) and Tax Collection at Source (TCS) on behalf of the Income Tax Department. The
persons who deduct or collect tax at source on behalf of the Income Tax Department are required
to apply for and obtain TAN. If a person responsible for TDS/TCS fails to apply for TAN or
does not comply with the provisions of the Act, he may have to pay a penalty of Rs. 10,000/-.

The Income Tax Act makes it mandatory for all persons responsible for TDS/TCS to quote TAN
in all the TDS/TCS returns, all TDS/TCS payment challans and all TDS/TCS certificates to be
issued. TDS/TCS returns, whether filed in paper or electronic format, will not be received by the
authority if TAN is not quoted. Also, banks will not accept any TDS/TCS challans on which
TAN is not quoted.

A person should have only one TAN. It is illegal for a person to have multiple TANs. If a person
has received a duplicate TAN by mistake or otherwise, the same must be surrendered for
cancellation. No separate TAN is required for TDS or TCS. The same TAN needs to be
mentioned in all returns and challans, whether related to TDS or TCS. However, in case of
companies or banks, if the company/bank has more than one branch, then each branch or the
person responsible for that branch must separately apply for TAN.

Application for TAN

In order to apply for a TAN or to get the details on the existing TAN changed or corrected, you
are required to make an application in the requisite form. You cannot apply for a TAN on plain
paper. Application for new TAN is to be made in Form 49B and submitted to any of the Tax
Information Network Facilitation Centres (TIN-FCs) managed by the National Securities
Depository Ltd (NSDL). TIN-FC addresses are available at www.incometaxindia.gov.in or
http://tin.nsdl.com. The application can also be made online through http://tin.nsdl.com.
Generally, no documents are needed to be submitted with TAN application, but in case of online
application, the acknowledgement generated must be forwarded to the NSDL. The processing fee
for TAN is Rs. 50/- + service tax, as applicable. This fee needs to be paid at the time of
submitting the Form.

The applications are digitized by NSDL and are then forwarded to the Income Tax Department.
The Income Tax Department will process the TAN application and will issue the TAN that will
be intimated online to NSDL. On the basis of receipt of the TAN from Income Tax Department,
the NSDL will issue TAN letters to the applicant. The new TAN letter would come to the person
at the address indicated in the Form or would be given against the acknowledgement in case of
online application. NSDL will intimate the TAN to the person and he would be required to
mention the TAN on all future correspondence relating to TDS/TCS.

Certificate of Deduction In India

1. Salary (sec 192) :

Form No.16 (Rule 31 (1) (a). The certificate should be issued by the deductor within one
month of the close of the financial year in which deduction is made.

2. In all other cases :

Form No 16A (Rule 31(1)(b)).

1. General time limit for issuing certificates in all other cases is within one month
from the end of the month during which the credit is given or sum paid.
2. Rule 31(3), first proviso, gives further option to the payer to issue certificate
within one week after the expiry of two months from the month in which income
is credited. This option is available where the amount is credited to the account of
the payee on the last day of the accounting period of the payer. This option is
available in respect of payments except sec 192-salary, 194B-winning from
lotteries, 194BB-winning from horse races, 194EE-payments from NSS deposits,
194F-payments in respect of repurchase of units, 194K-income in respect of units.
3. Where payment in respect of TDS is permitted quarterly under rule 30(1) i.e.
income from interest, insurance commission, the certificate is to be issued within
14 days of the payment of Income Tax.

Note : Where more than one certificate is required to be furnished to the payee during the
financial year, then on the request of the payee, one consolidated certificate may be issued
within one month from the end of such financial year vide new proviso to Rule 30 inserted
vide notification dated 2.7.1996
Tax Deducted at Source
From Wikipedia, the free encyclopedia

Tax Deducted at Source or best known TDS is one of the modes of collecting Income-tax from
the assessees in India. This is governed under Indian Income Tax Act, 1961, by the Central
Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian
Revenue Service (IRS), Mini of Finance, Govt. of India.

[edit] Overview

In simple terms, TDS is the tax getting deducted from the person the amount
(Employee/Deductee) by the person paying such amount (Employer/Deductor). This is
applicable for certain types of payments, as applicable under the Act.[1]

In the process of TDS, deduction of tax is effected at the source when income arises or accrues.
Hence where any specified type of income arises or accrues to any one, the Income-tax Act
enjoins on the payer of such income to deduct a stipulated percentage of such income by way of
Income-tax and pay only the balance amount to the recipient of such income.

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. The tax so deducted from the income of the
recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment.

Income from several sources is subjected to tax deduction at source. Presently this concept of
TDS is also used as an instrument in enlarging the tax base. Some of such income subjected to
TDS are salary, interest, dividend, interest on securities, winnings from lottery, horse races,
commission and brokerage, rent, fees for professional and technical services, payments to non-
residents etc. It is always considered as an Advance tax which is paid to the government.

[edit] Tax Deduction Account Number

Tax Deduction Account Number or TAN is a unique identification number for person
deducting the tax. The person who is liable to deduct the Tax should obtain a TAN before
deducting such Tax. TAN should applied through Form No 49B (prescribed under Income Tax
Law). Such form can be submitted online at NSDL website. OR can also be submitted at Tax
Information Network Facilitation Center (TIN-FC). These centers are established by NSDL
(which is an appointed intermediary by the Government) across India.[2]

TAN Application should accompany a 'proof of identity' and a 'proof of address' (photocopies) of
the deductor. In case, the application is made online, these documents need to be sent over mail
(post/courier) to NSDL - TAN Application division.
Once NSDL receives the TAN application along with said documents (either through TIN FC /
Online), the details are verified and then sent to Income Tax Department. Once approved,
Income Tax Department will allocate a unique number, and indicate the applicant through
NSDL.

TAN will be 10 characters' alpha numeric string comprising of 4 Alpha - 5 Numeric - 1 Alpha.
[E.g.: BLRR02933A]. The first 3 characters consists of Income Tax Region Code (BLR =>
Bangalore) and the Fourth digit consists of 'First Character' of deductor name (R => Relyon
Softech Ltd). Remaining characters form a unique combination to get identified at Income Tax
Department.

[edit] Deductor

Under the process of TDS, Deductor is a person/company who is liable to deduct the Tax at
source, from the payment being made to the party. Deductor is also termed as Employer in cases
where the payments are under Salaries.[3]

[edit] Deductee

Deductee is the person, from whom the tax is being deducted or accrued for deduction.[4]
Depending on the nature of the deduction being made, deductees and respective submission
forms are categorized to 4 types:

1. Salaries: In case of salaries, the deductee is termed as an Employee. All the information of
deductions and payments in this category should be submitted in Form 24Q to the government.
2. Non-Salaries - Resident: In case of non-salaries and the payment is made to a resident in India,
the deductee is termed as a Deductee or a Party. All the information of deductions and
payments in this category should be submitted in Form 26Q to the government.
3. Non-Salaries – Nonresident: In case of non-salaries and the payment is made to a non-resident
of India, the deductee is termed as a Deductee or a Party. All the information of deductions and
payments in this category should be submitted in Form 27Q to the government.

[edit] TDS Certificates

A tax deductor is also required to issue TDS certificate to the deductee within specified timed
under section 203 of the I T Act. The certification from the deductor, for the deduction and
payment of the respective TDS amount to the bank, issued to the deductee is a TDS certificate.[5]

The deductee should produce the details of this certificate, during the regular assessment of
income tax, to adjust the amount of TDS against the Tax payable by the Deductee [assessee].

[edit] Types of TDS certificates

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, the certificate should be issued in FORM
16A containing the Tax deducted & Paid details. Separate certificates should be prepared for
each Section [nature of payment]. This refers to the details submitted over Form 26Q and 27Q.

TCS Certificates - Form 27D: There is a separate certificate Form 27D, which is falling under
Tax Collected at Source(TCS).
Service tax

Any person providing taxable service to any person shall pay service tax at the rate specified in
Sec.66 in such a manner and within such period as may be prescribed.
(Sec.68 of the Finance Act, 1994)
The table below shows the rate of service tax applicable at the relevant period of time.

Sr.No. Period Rate of Rate of Rate

Service Tax Education of Secondary &
Cess Higher
Education Cess
1. Till 13.05.2003 5% Nil Nil
2. 14.05.2003 to 09.09.2004 8% Nil Nil
3. 10.09.2004 to 17.04.2006 10% 2% of the Nil
S.T.
4. 18.04.2006 to 10.05.2007 12% 2% of the Nil
S.T.
5. 11.05.2007 to 23.02.2009 12% 2% of S.T. 1% of S.T.
6. From 24.02.2009 Onwards 10% 2% of S.T. 1% of S.T.

1.  In case of Individuals or Proprietary Concerns and Partnership Firm, service tax is to be
paid on a quarterly basis. The due date for payment of service tax is the 5th of the month
immediately following the respective quarter ( in case of e-payment, by 6th of the month
immediately following the respective quarter). For this purpose, quarters are: April to
June, July to September, October to December and January to March. However, payment
for the last quarter i.e. January to March is required to be made by 31st of March itself.
( Refer Rule 6 (1) of Service Tax Rules, 1994)
2. In case of any other category of service provider other than specified at 6.1 above, service
tax is to be paid on a monthly basis, by the 5th of the following month ( in case of e-
payment, by 6th of the month immediately following the respective month). However,
payment for the month of March is required to be made by 31st of March itself.(Refer
Rule 6 (1) of Service Tax Rules, 1994)
3. Service tax is to be paid on the amount realized / received by the assessee during the
relevant period ( i.e. a month or a quarter as the case may be)( Refer Rule 6 (1) of Service
Tax Rules, 1994)
 4. The facility of e-payment of service tax has been introduced with effect from 11.05.2005.
From 1st April, 2010 e-payment of service tax has been made mandatory for the
assessees who have paid service tax of Rs.10 Lakhs (cash+ cenvat) and above during the
last financial year or who have paid service tax of Rs.10 Lakhs (cash + cenvat) and above
during the current financial year. The e-payment shall be made only in designated banks
by 6th day of the following month.(Refer Rule 6 (1) & (2) of Service Tax Rules, 1994)
{List of Banks, authorized to accept e-payment is given in para 12)
5. The assessee is required to deposit the amount of service tax in the designated banks
through GAR-7 challan.(Refer Rule 6 (2) of Service Tax Rules, 1994)( Assessees may
contact jurisdictional office for details of the designated banks.)
6. While depositing the service tax, the appropriate ‘account head’ pertaining to the
particular service category should be mentioned on the challan. The correct accounting
heads have been given in the table showing the ‘List of Services’ in para 1.3.
7. If the assessee deposits the amount of tax liable to be paid, by cheque, then the date of
presentation of the cheque to the designated bank would be treated as the date of payment
of service tax.(Refer Rule 6 (2A) of Service Tax Rules, 1994)
8. Where an assessee has paid any service tax in respect of taxable service to the credit of
Central Govt., which is not provided by him either wholly or partially for any reason, the
assessee may adjust the excess service tax so paid by him (proportionately on pro-rata
basis) against his service tax liability for the subsequent period, if the assessee has
refunded the value of taxable service and the service tax thereon to the person concerned.
( Refer Rule 6 (3) of Service Tax Rules, 1994)
9. The assessee can opt for provisional payment of service tax in case he is not able to
correctly estimate the tax liability. In such a situation he may request in writing to the
jurisdictional Assistant / Deputy Commissioner for the same.( Refer Rule 6 (4) of Service
Tax Rules, 1994).
10. Service tax ( including interest, penalty, refund) is to be rounded off to the nearest rupee.
50 paise or more should be rounded off to the next rupee and less than 50 paise should be
ignored.( Refer Board’s Circular No.53/1/2003 dated 11.03.2003)
11. Any person who has collected any sum on account of service tax, is under obligation to
pay the same to the Government. He can not retain the sum so collected with him by
contending that service tax is not payable.( Refer section 73A of the Finance Act, 1994.)

Read more: SERVICE TAX RATE CHART- DEPOSIT DUE DATE-INTEREST ON LATE
DEPOSIT | SIMPLE TAX INDIA-ITR FORM -TDS RATE 11-12
Service taxes extended to a few services:
1. Legal consultants (lawyers to pay service tax from now),
2. Transportation of goods through Railways, including government railways,
3. Transport of coastal goods and goods through Inland Water,
4. Cosmetic and plastic surgery service.

Following have been exempted in the Budget 2009-10:

1. Sub brokers have been exempted from payment of service tax.
2. Transportation of passengers through contract carriage permit has been exempted.
3. Federation of Indian Exporters Organisation and Export promotion councils has been exempted from
paying service tax on membership subscription.

Service Tax in India

The responsibility of collecting the tax lies with the Central Board of Excise and Customs(CBEC). The
office of Director General (Service Tax) has been formed in the year 1997 to monitor the collection and
assessment of service tax.

Service tax is a tax levied on services rendered by a person and the responsibility of payment of the tax
is cast on the service provider. It is an indirect tax as it can be recovered from the service receiver by the
service provider in course of his business transactions. Every year more and more services have been
brought under the net of Service Tax. The current list includes:
1) Telephone, (2) Stockbroker, (3) General Insurance.

(4) Advertising agencies, (5) Courier agencies, (6) Radio pager services.
 
(7) Consulting engineers, (8] Custom house agents, (9) Steamer agents, (10) Clearing & forwarding
agents, (11) Air travel agents, (12) Tour operators, (13) Rent-a-Cab Operators (exempted upto 31.3.2000
Vide Notification No.3/99 Dt.28.2.99, reintroduced w.e.f. 1.4.2000), (14) Manpower recruitment Agency
(1st July, 1997), (15) Mandap Keepers (1st July, 1997)

The services provided by goods transport operators, out door caterers and pandal shamiana contractors
was abolished vide Notification No.49/98, 2nd June,1998.
 
(16) Architects, (17) Interior Decorators, (18) Management Consultants, (19) Practicing Chartered
Accountants, (20) Practicing Company Secretaries, (21) Practicing Cost Accountants, (22) Real Estates
Agents/Consultants, (23) Credit Rating Agencies, (24) Private Security Agencies, (25) Market Research
Agencies, (26) Underwriters Agencies

(27) Scientific and technical consultancy services, (28) Photography, (29) Convention, (30) Telegraph,
(31) Telex, (32) Facsimile (fax), (33) Online information and database access or retrieval, (34) Video-tape
production, (35) Sound recording, (36) Broadcasting, (37) Insurance auxiliary activity, (38) Banking and
other financial services, (39) Port, (40) Authorised Service Stations, (41) Leased circuits Services

(42) Auxiliary services to life insurance, (43) Cargo handling, (44) Storage and warehousing services, (45)
Event Management, (46) Cable operators,(47) Beauty parlours
(48) Health and fitness centres,(49) Fashion designer,(50) Rail travel agents,(51) Dry cleaning services.

(52).     Commercial vocational institute, coaching centres and private tutorials, (53) Technical testing
and analysis (excluding health & diagnostic testing) technical inspection and certification service, (54)
Maintenance & repair services, (55) Commission and Installation Services, (56) Business auxiliary
services, namely business promotion and Support services (excluding on information technology
services), (57) Internet café, (58) Franchise Services

(59)   Transport of goods by road (earlier Goods Transport Operators service re-introduced), (60)    Out
door Caterer’s service (re-introduced), (61)     Pandal or Shamiana service (re-introduced), (62)      Airport
Services, (63)      Transport of Goods by Air Services, (64)       Business Exhibition Services, (65)      
Construction Services in relation to Commercial or Industrial BuildingConstruction Services in relation to
Commercial or Industrial Building

(66)       Intellectual Property Services, (67)       Opinion Poll Services, (68)       TV or Radio Programme
Services, (69)       Survey and Exploration of Minerals Services, (70)       Travel Agent’s Services other than
Rail and Air travel agents, (71)       Forward Contract Services, (72)      Transport of goods through pipe
line or other conduit Services, (73)      Site preparation & clearance Services, (74)      Dredging Services,
(75)      Survey & Mapmaking Services, (76)      Cleaning Services, (77)      Membership of Clubs &
Associations, (78)      Packaging Services, (79)      Mailing list compilation & Mailing Services, (80)    
Construction Services in relation to Residential Complexes
 
Penal provisions do exist in respect of Service Tax also. Failure to obtain registrations, failure to pay the
tax, failure to furnish the prescribed returns, suppression of the correct value of the taxable services and
failure to comply with notice do attract penal provisions as prescribed. But, it is specifically provided that
no penalty is imposable on the assessee for any of the above failures, if the assessee proves that there
was reasonable cause for the failure. This provision has been inserted to take care of the genuine
difficulties of the new assessees.

Relief to Housing Societies. The central governments has notified to levy service tax (applicable from
April 1, 2007) on only those societies where the maintenance charges paid by members of society
exceeds Rs 3000 per month and the overall gross collection of the society is more than Rs. 8 lakhs per
annum. Thus if the society collects less than Rs. 3000 per month or its total collection is less than Rs. 10
lakhs (applicable from 1.4.2008), then it does not collect service tax.

Rate of Service Tax & Service Tax Exemption amount

The new service tax rate effective from 24/2/2009 is 10.3%, which is down by 2% from the previous
service tax rate of 12.36% (including 3% education cess). However, if your turnover for last year was less
than Rs. 10 lacs (applicable from 1.4.2008; previous to this the limit was Rs. 8 lacs) you don't collect the
service tax. That is only if your turnover is over 10 lacs, you must collect service tax. The service tax is
payable to the government on the amount realized or received. That is the liability to pay the service tax
is not based on the total billing amount.

From April 1, 2008 the service tax rate on the composite works contract scheme (for contractors
registered under this scheme) is doubled from 2% of the total value of the contract to 4%. The scheme,
introduced in the last Budget, brought works contract services in the service tax net. The services
included integrated construction and turnkey projects on which value-added tax (VAT) is also levied.
Contractors have the option to either register their projects started after June 1, 2007, under the
scheme and pay a lower tax rate or pay the existing rate of 12.36% as service tax.

Sources pointed out that the decision to hike the service tax rate under the scheme was mainly to bring
the tax rate on a par with the earlier works contract scheme that was applicable from 2004 to 2007. The
earlier scheme also had an effective tax rate of about 4% on construction related services.

Payment & Return Due Dates

(a) Individuals or Proprietary Concerns and Partnership Firm. Service tax is to be paid on quarterly basis.
The due date for payment of service tax is the 5th of the month immediately following the respective
quarter. (Quarters are : April to June, July to September, October to December and January to March).
However, payment for the last quarter i.e. January to March is required to be made by 31st of March
itself.

 Half yearly return is filed on Form ST-3. The due date for April - Sept return is 25th October and for
October - March return is 25th April.

(b) Other category of service providers. Service tax is to be paid on a monthly basis, by the 5th of the
following month.  However, payment for the month of March is required to be made by 31st of March
itself.  

Export of Service Rules, 2005 & Export of Service (Amendment) Rules, 2006. There is no service tax
applicable on export of service if such service is delivered outside India and used outside India and
payment for such service provided outside India is received by the service provider in convertible foreign
exchange.

Sevice Tax Registration. To apply for service tax number, you must use Form 1. You must have PAN to
apply. For more information: www.cbec.gov.in and www. servicetax.gov.in