Types Of Payment, Relevant Provisions, Person Responsible For Deduction Of Tax And Type Of Payee
|S No||Nature of Payment||Person Responsible for deduction of tax at source||TDS necessary when payment is made to|
|1.||Salary and all positive incomes under any head on income but not including loss under the head income under the House property (Sec 192)||All Governments, Companies, Co operartive societies, Local authorities, University, Institutions, Associations or Body , Trustees of a recognized Provident Fund or Superannuation Fund||Any individual having taxable salary during the previous year from any number of employers|
|2.||Interest on Securities (Sec 193)||Any person||Any person|
|3.||Dividend from Domestic Companies or companies which have made prescribed arrangement for declaration/payment of dividend within India (Excluded from TDS w.e.f. 1.6.97 by Finance Act, 97) (Sec 194)||Principal Officer of a Domestic Company.||A resident shareholder when total dividend paid exceeds Rs 2,500/-|
|4.||Interest other than interest on securities (Sec 194A)||Any person other than individual or HUF||A resident|
|5.||Winnings from Lottery or crossword puzzles (Sec 194B)||Any person||Any person|
|6.||Winnings from horse races (Sec 194BB)||Book maker or person holding a licence for horse racing, wagering or betting in any race course||Any person|
|7.||i. Payment to Contractors in pursuance of any work of contract including supply of labour contract (Sec 194C)||Central, State Government, local authority; Central, State 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 w.e.f. 1.7.95 vide Finance Act, 1995)||Any resident person|
|ii. Payment to sub-contractors (Sec 194C)||Any Contractor other than individual or HUF||Any resident person|
|8.||Insurance Commission covering all payments for procuring Insurance business(Sec 194D)||Any person responsible for payment||A resident|
|9.||Payment to non-resident sportsman (including athlete) or sports association or institution. In case of non-resident sportsman, it includes payments in respect of advertisements as well as articles on any game or sports in India in newspapers, magazines etc. (194E)||Any person responsible for payment||Any non-resident sportsman who is not a citizen of India and any non-resident sports association or institution|
|10.||Payments in respect of deposits under NSS (194EE)||Person responsible for patek philippe replica making payment in respect of amount referred to in Section 80CCA (2)(a).||Any person except when the payment is made to the heirs.|
|11.||Payment on account of repurchase of Units by Mutual Fund or UTI (194F)||Person responsible for making payment in respect of amount referred to in Section 80CCB (2).||Any person|
|12.||Commission to Stockists, distributors, buyers and sellers of Lotterytickets including remuneration or prize on such tickets (sec 194G)||Person responsible for making payment to such agent||Any person|
|13.||Commission brokerage (sec 194H)||Not applicable w.e.f. 1.6.92||-|
|14.||Payment of rent (sec 194I)||Any person responsible for making payment excluding individual & HUF.||Any person|
|15.||Fees for professional & technical services; professional services include legal, medical, engineering, 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)||Any person responsible for making payment except an individual & HUF.||A resident|
|Payment source||Threshold in Rs.||co-operative society/Local authority/company firm (rate in %)||HUF (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|
|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 gain||-||15||-|
|Fees for technical services payable by Government or an Indian concern in Pursuance of an agreement made by non- Resident with the government||-||10||-|
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
- Estimate the annual approximate salary.
- As it’s an approximate deduction from the employee salary. Calculate the exact taxable salary amount payable till current month of financial year.
- Calculate the approximate salary that will pay for next financial year.
- For the correct calculation of TDS it needs to calculate any other mode of income declared by the employee.
- Deduct any loss declared by the employee such as loss of the house.
- Declaration as per 80C, 80D, 80G etc.
- Calculate the surcharge, income tax and cess on the net income of the employee.
- Deduct any type of rebate.
- Calculate the total tax now deduct the TDS made till last month from it.
- Divide the net TDS by “remaining number of months in the FY” including this month.
- Deduct this month from employee salary.
- In this check that no payment should be paid to government, reserve bank or mutual fund.
- It is always preferable to calculate the threshold.
- Deduct the amount as per the declaration 197A for non deduction of TDS.
- Check that employee has fake watches not submitted a certificate by Assessing officer under section 197 for non-deduction of TDS or deduction at a lower rate.
- If you want to get effective TDS rates you need to include surcharge and cess.
Wrong or non calculation of TDS
- 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.
- 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)
Section 192 – This certificate on form 16 is submitted by the payer with in one month prior to next financial year.
Let’s have a look at the key sections:
- Section 192 – payment of salary or omega replica watches 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 breitling replica then there will not be any deduction for TDS from 01/10/2009 to 31/03/2010.
- If PAN is not provided then TDS dedu ction 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%.