SUMMER TRAINING REPORT ON WORKING OF TAX DEDUCTED AT SOURCE
Undertaken at
“PANASONIC INDIA”
Submitted in partial fulfilment of the requirements For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION 2013-2015
At
FMS – WISDOM BANASTHALI VIDYAPITH
Submitted To:
Submitted By:
Mrs. Gargi Pant
Arushi Agarwal
Faculty Advisor
MBA II semester
Banasthali Vidyapith
Roll No. 13185
ACKNOWLEDGEMENTS
As it is rightly sai d “The successful realization of the project is an outgrowth of a consolidated effort of the people from disparate fronts. I t is only with their support and guidance that the developer could meet the end.” So I would lik e to thank all the members of Taxation Team for their full c ooperation and help during my Training. I wish to extend my sincere gratitude towards my instructor Mr. Amit Rustagi (Head
Taxation) for giving me this opportunity to undergo training in Finance Department. I am also grateful towards Mr. Arvind Kumar, Mr. Surender Singh & all other members of the Finance department for making me understand various aspects of Finance. Last but not the least I am thankful to all those persons with whom I have interacted and who directly or indirectly contributed significantly to the succ essful completion of my training.
Arushi Agarwal
ACKNOWLEDGEMENTS
As it is rightly sai d “The successful realization of the project is an outgrowth of a consolidated effort of the people from disparate fronts. I t is only with their support and guidance that the developer could meet the end.” So I would lik e to thank all the members of Taxation Team for their full c ooperation and help during my Training. I wish to extend my sincere gratitude towards my instructor Mr. Amit Rustagi (Head
Taxation) for giving me this opportunity to undergo training in Finance Department. I am also grateful towards Mr. Arvind Kumar, Mr. Surender Singh & all other members of the Finance department for making me understand various aspects of Finance. Last but not the least I am thankful to all those persons with whom I have interacted and who directly or indirectly contributed significantly to the succ essful completion of my training.
Arushi Agarwal
ABSTRACT
This project is based on the study of Tax Deducted at Source in PANASONIC INDIA PVT LTD. An insight view of the project will encompass – what it is all about, what it aims to achieve, what is its purpose and scope, the various rates of deducting tax, further specifying the Indian Taxation Structure and in the last, drawing inferences from the learning so far. PANASONIC INDIA PVT LTD., founded in 1972, is recognized as one of the famous Electronic goods provider in India. Panasonic makes available in India its wide range of consumer electronics, home appliances like LCD & Plasma TVs, DVD players, Home Theatre Systems, Smartphones, Cameras, Camcorders, Car Audio Systems, Air Conditioners, Washing Machines, Refrigerators, Microwave Ovens, Automatic Cookers, Vacuum Cleaners and a wide range of system products including communication ones. The objective of TDS is to ease the burden of tax payment by paying taxes as it is earned, to ensure effective collection of taxes, for timely mobilization of internal revenues. This project tries to evaluate how the management of Tax Deducted at Source is done in PANASONIC INDIA PVT LTD through d ifferent working sheets.
Table Of Content 1. Company Profile 1.1 Vision 1.2 Mission 1.3 Brand Promise 1.4 Sponsorship 1.5 Panasonic Group Companies In India 1.6 Division Sales Under Panasonic India 1.7 Divisional Factory Under Panasonic India 1.8 Products By Panasonic 2. Introduction to Indian Tax Structure 2.1 Direct Taxes a) Individual Income Tax b) Transfer Pricing c) Wealth Tax d) Capital Gains Tax 2.2 Indirect Taxes a) Excise Duty b) Customs Duty c) Service Tax d) Securities Transaction Tax e) Goods & Service Tax f) State Tax I.
Value Added Tax(VAT)
2.3 Other Keynotes a) Filling of VAT, CENVAT, Service Tax Return b) Permanent Account Number (PAN) 3. Tax Deducted at Source (TDS) 3.1 Who Shall Deduct Tax At Source? 3.2 What A Deductor Must Do? 3.3 TAN 3.4 Procedure To Pay TDS 3.5 Nature Of Payments And Rates 1. TDS on Salary (Section 192) 2. TDS on Interest on Securities (Section 193) 3. TDS on Dividend (Section 194) 4. TDS on Interest other than Interest on Securities(Section 194A) 5. TDS on winning from Lotteries/ Crossword Puzzles (Section 194B)
6. TDS on winning from Horse Race (Section 194BB) 7. TDS on Payment to Contractor (Section 194C) 8. TDS on Insurance Commission (Section 194D) 9. TDS on Payment to Non-Resident Sportsmen or Sport Association (Section 194E) 10. TDS on Payment in respect of Deposit Under NSS etc. (Section 194EE) 11. TDS on Payment on Account of Repurchase of U nit by Mutual Fund (Section 194F) 12. TDS on Commission (Sale of Lottery Ticket) ( Section 194G) 13. TDS on Commission (Brokerage) (Section 194H) 14. TDS on Rent (Section 194I) 15. TDS on Fees for Professional/ Technical Services (Section 194J) 16. TDS on Compensation on Acquisition of Capital Asset (Section 194L) 17. TDS on Compensation Payable on Compulsory Ac quisition of Immovable Property (Section 194 LA) 18. TDS on Other Sums (Section 195) 19. Gist of Rates of TDS 20. Certificate of Lower Rate from A.O (Section 197) 21. No Deduction in Certain Cases (Section 197A) 3.6 TDS Defaults 4. TCS 5. Bibliography
COMPANY PROFILE Panasonic Corporation formerly known as Matsushita Electric Industrial Co., Ltd. is a Japanese multinational electronics corporation headquartered in Kadoma, Osaka, Japan. The company was founded in 1918 by Kounosuke Matsushita, and has grown to become one of the largest Japanese electronics producers alongside Sony, Hitachi, Toshiba and Canon Inc. In addition to electronics, it offers non-electronic products and services such as home renovation services. Panasonic is the world's fourth-largest television manufacturer by 2012 market share.
Panasonic commenced its operations in India in the year 197 2. In 2008, Panasonic India Pvt Ltd was formed to integrate the different Panasonic interests in India. Daizo Ito joined as CEO Panasonic India in April 2008 and ensured Panasonic’s aggressive focus on India with heavy investments and expansion. Since then Panasonic has been on an upward growth path in the country with innovative product offerings, increased investments on business and various promotional initiatives. Today, Panasonic India is increasingly being seen as an Indian company, though with Japanese roots.
Panasonic makes available in India its wide range of consumer electronics, home appliances like LCD & Plasma TVs, DVD players, Home Theatre Systems, Smartphones, Cameras, Camcorders, Car Audio Systems, Air Conditioners, Washing Machines, Refrigerators, Microwave Ovens, Automatic Cookers, Vacuum Cleaners and a wide range of system products including communication ones like Mobile Phones, High Definition Videoconferencing, Professional Audio Video products like B roadcast Cameras, Projectors and Displays, Business Solutions including Printers, Whiteboards and Security Solutions. Panasonic has aggressively focuses on market research, product innovation and talent hiring in India for work in areas like energy, water, remote access and food. The company currently has a workforce of about 12,500 in India.
Panasonic has recently been designated India as regional hub to drive growth and build deeper inroads into the fast emerging Asiatic, Middle Eastern and Western economies. Starting from India, the company wants to create a knowhow to address consumers who are based out of India and then take the knowledge to emerging markets. India is the sixth strategic region which will take care of SAARC nations, Middle East Asia and Africa. Panasonic will aggressively and strategically invest in market research and product innovation and will recruit/bring the best of global talent using its in-house open application system and work in areas like energy, water, remote access and food.
VISION: Through our business activities, we at Panasonic have long nurtured our “consumer electronics DNA.” Making this DNA central to all of our activities and carrying it forth, we ai m to continue to provide “better living” for our customers in the various spaces and areas where our customers go about their lives, such as their homes, communities, businesses, journeys, and automobiles. Our four companies, “Appliances Company,” “Eco Solutions Company,” “AVC Ne tworks Company,” and “Automotive & Industrial Systems Company,” will play a central role in squarely addressing “industries” which are closely related to the individual spaces, and we will establish partnerships with key players in individual industries. Working together with our business partners, we will actively propose products and services, which realize new customer value. And also leveraging such expertise to make new proposals, we want to come up with new innovation in consumer electronics. Panasonic will make a contribution to realizing “A Better Life, A Better World” for each and every one of our customers.
MISSION: "Recognizing our responsibilities as industrialists, we will devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world."
BRAND PROMISE:
SPONSORSHIP Panasonic’s regional sponsorships are based on the corporate direction of enriching people’s lives. The various sponsorships aim to tap into the excitement shared and to build stronger relationships with the people of this dynamic region.
Asia Champions League and AFC Cup 27th Sea Games
Panasonic Group Companies in India • Panasonic Appliances (PAPIN): Established in 1988 for manufacture, import, marketing and sales of kitchen appliances and small domestic appliances. PAPIN is headquartered in Chennai, Tamil Nadu. • Panasonic AVC India [PAVCI]: Established in 1996, for manufacturer of CRT TVs and LCDs. PAVCI is based in Noida, UP. • Panasonic Energy India [PECIN]: Established in 1972, for manufacture and sales of dry cell batteries. PECIN is based in Baroda, Gujarat. • Panasonic Carbon India [PCIN]: Established in 1982, for manufacture and sales of carbon rods. PCIN is based in Chennai, Tamil Nadu.
• Anchor Electricals: Headquartered in Mumbai, Anchor e lectrical Private Limited started nearly five decades ago and became a subsidiary of Panasonic Electric Works (now Panasonic Corporation) in 2007. It is one of the largest domestic manufacturers of electrical construction materials with 4 manufacturing locations and boasts of 55 domestic bases and has employee strength of 10,004. Its sales and operating profit are steadily growing and it ended the last financial year with net sales of Rupees 13.5 billion and a stated capital of Rupees 4.8 Billion. It has a dominant market share in wiring devices and it is constantly expanding its product range and growing market share in Circuit Breakers, Lighting and Luminaries, Fans and Wires/Cables. Anchor aims to double this in the next three years from the existing and some new product categories.
• Firepro Systems Pvt. Ltd: Incorporated in 1992, Firepro Systems has been a t the forefront of integrated solutions for fire protection, security and building management systems Fire Alarm and Detection, Fire Suppression, Access Control, Video Surveillance, Intrusion Alarm, Building Management Systems. It is present in 14 locations across India.
Divisional Sales under Panasonic India: • Panasonic Marketing India (PMIN): CE (TV, Audio, Home Theatre), HA (AC, WM, Ref. , MWO, Beauty Care, Vacuum cleaner, Water Purifier) & Digital I maging (Camera & Movie)
• System Sales Division (SSD): Makes available display, projectors, telephones, PBX/KTS, fa x machines, security and networking products.
• Panasonic Industrial Devices Sales India (INDD) or making available compressors, motors for air conditioners and refrigerators, various batteries and many other industrial applications, components for printed circuit boards, flat and plasma panel for flat TV and plasma TV, heat exchanger for BTS relating applications, equipment’s for manufacturing industry.
• Panasonic Automotive Systems India(PASI): Specializes in sales and support of i n-car equipment and systems that provide comfort, such as multimedia equipment, safety, environmental protection and power management solutions
Divisional Factory under Panasonic India: • Appliances Company India: Factory for manufacture of kitchen appliances and small domestic appliances
• Panasonic Welding Systems India: For manufacture of arc welding equipment’s and related products based in Gurgaon, Haryana.
• Small appliances: Chennai
• Carbon rods: Chennai
• Batteries: Gujarat & Madhya Pradesh
PRODUCTS BY PANASONIC
TV
AUDIO/VIDEO
CAMERAS & CAMCORDERS
MOBILE PHONES
TABLETS
HOME APPLIANCES
BEAUTY CARE
PHONES & COMMUNICATION
TOUGHBOOK
PRINTERS
PROJECTORS
PROFESSIONAL DISPLAY PANELS
SECURITY SYSTEMS
BROADCAST
ELECTRONIC WHITEBOARD
REGISTERED OFFICE: No 88, 6Th Floor, Consumer Sales Div., Spic Building Annexe, Mount Road, Guindy, Chennai - 600032 Phone: +91-44-61089300
HEAD OFFFICE: First Floor, ABW Tower, IFFCO Chowk, Sector 25, Gurgaon - 122001, Haryana, India +91-124-4596600
Indian Tax Structure India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. Value Added Tax (VAT), stamp duty, state excise, land revenue and profession tax are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.
Indian taxation system has undergone tremendous reforms during the last decade. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India.
DIRECT TAXES Those taxes whose burden cannot be shifted to others and the person who pays these to the government has to bear it are called direct taxes. I n other words direct tax is imposed on an individual or a group of individuals, which affects them directly i.e., which they have to pay to the government directly. The direct tax can be of different types:
Individual Income Tax The tax imposed on an individual or a group of individuals on their annual incomes is known as income tax. Every individual whose annual income exceeds a certain specified limit is required, under the Income Tax Act, to pay a part of his income in the form of income tax. Its rates are announced in the beginning of each f inancial year by the central government. Financial Year: The period from 1st April to 31st march is taken as a financial year i.e. every financial year begins on 1st April and ends on 31st march of the consecutive year. Assessment Year: The year next to a particular financial year is called the assessment year for that financial year, e.g. for financial year 2005-06, the assessment year is 2006-07. Permanent Account Number: An individual is given a permanent account number (PAN) by the income tax department. He or she is obliged to f ile an income tax return of the financial year by a specified date of the subsequent financial year.
Transfer Pricing: Transfer Pricing Regulations ("TPR") are applicable to the all enterprises that enter into an 'International Transaction' with an ' Associated Enterprise'. Therefore, generally it applies to all cross border transactions entered into between associated enterprises. It even applies to transactions involving a mere book entry having no apparent financial impact. The aim is to arrive at the comparable price as available to any unrelated party in open market conditions and is known as the Arm's Length Price ('ALP').Increasing participation of multi-national groups in economic activities in India has given rise to new and complex issues emerging from transactions entered into between two or more enterprises belonging to the same group. Hence, there was a need to introduce a uniform and internationally accepted mechanism of determining reasonable, fair and equitable profits and tax in India in the case of such multinational enterprises. Accordingly, the Finance Act, 2001 introduced law of transfer pricing in India through sections 92A to 92F of the Indian Income tax Act, 1961 which guides computation of the transfer price and suggests detailed documentation procedures. This article aims to provide a brief overview on the applicability of transfer pricing regulations in India, methods of determining the transfer price and the documentation procedures.
Wealth Tax: Wealth tax, in India, is levied under Wealth-tax Act, 1957. Wealth tax is a tax on the benefits derived from property ownership. The tax is to be paid year after year on the same property on its market value, whether or not such property yields any income. Similar to income tax the liability to pay wealth tax also depends upon the residential status of the assesse. The assets chargeable to wealth tax are Guest house, residential house, commercial building, Motor car, Jewelry, bullion, utensils of gold, silver, Yachts, boats and aircrafts, urban land, cash in hand (in excess of INR 50,000 for Individual & HUF only),etc. But in reality majority of the potential tax payers do not pay this tax as most of the movable items such as jewelry, bullion etc. are stashed away from accounting. Invariably they just pay tax for the immovable wealth such as real estate.
Capital Gains Tax: The central government also charges tax on the capital gains that is derived from the sale of the assets. The capital gain is the difference bet ween the money received from selling the asset and the price paid for it. To restrict the misuse of this provision, the definition of capital asset is being widened to include personal e ffects such as archaeological collections, drawings, paintings, sculptures or any work of art. Capital gain also includes gain that arises on “transfer” (includes sale, exchange) of a capital asset and is categorized into short-term gains and long-term gains. The Long-term Capital Gains Tax is charged if the capital assets are kept for more than three years or 12 months in the case of securities and shares that are listed und er any recognized Indian stock exchange or mutual fund. Short-term Capital Gains Tax is applicable if the assets are held for less than the aforesaid period. In case of the long term capital gains, they are taxed at a concession rate. Normal corporate income tax rates are applicable for short term capital gains. In case of the short term and long term capital losses, they are allowed to be carried forward for 8 consecutive years.
INDIRECT TAXES Indirect taxes are those whose burden can be shifted to others so that those who pay these taxes to the government do not bear the whole burden but pass it on wholly or partly to others. Indirect taxes are levied on production and sale of commodities and services and small or a large part of the burden of indirect taxes are passed on to the c onsumers. Excise duties on the product of commodities, sales tax, service tax, customs duty, tax on rail or bus fare are some examples of indirect taxes.
Excise Duty: The central government levies excise duty under the Central Excise act of 1944 and the Central Excise Tariff Act of 1985. Central Excise duty is an indirect tax l evied on goods
manufactured in India and meant for domestic consumption. The Central Board of Ex cise and Customs under the Ministry of Finance, administers the excise duty. Central Excise Duty arises as soon as the goods are manufactured. It is pai d by a manufacturer, who passes on its incidence to the customers. Excisable goods have been defined as those, which have been specified in the Central Excise Tariff Act as being subjected to the duty of excise. There are three main types of excise duty
Basic Excise Duty is charged on all excisable goods other than salt at the rates mentioned in the said schedule
Additional Duties of Excise is charged on goods of special importance, in lieu of sales Tax and shared between Central and S tate Governments
Special Excise Duty is charged on all excisable goods on which there is a levy of Basic excise Duty. Every year the annual Budget specifies if Special Excise Duty shall be or shall not be levied and collected during the relevant financial year.
Note: Under the Cen vat (Central Value Added Tax) Scheme, introduced under The Cen vat Credit Rules, 2004, a manufacturer of product or provider of taxable service shall be allowed to take credit of duty of excise as well as of service tax paid o n any input received in the factory or any input service received by manufacturer of f inal product. Such credits can be used to set off any excise duty tax payable. In the recent budget, a number of tax exemptions have been initiated. Specific goods enjoy concessional duty rates. Exemptions are allowed to tax payers engaged in the manufacture of certain goods such as, water treatment, bio-diesel, processed food etc and certain types of establishments such as small scale industries, cottage industries that create jobs are also exempted.
Customs Duty: Customs duty in India falls under the Customs Act 1962 and Customs Tariff Act of 1975. Customs duty is the tax levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export f rom India. Additionally educational cess is also charged. The customs duty is evaluated on the value of the transaction of the goods. The Central Board of Excise and Customs under the Ministry of Finance manages the customs duty process in the country. The rate at which customs duty is a pplicable on the goods depends on the classification of the goods determined under the Customs Tariff. The Customs Tariff is generally aligned with the Harmonized System of Nomenclature (HSL). It should be noted that preferential/concessional rates of duty are also available under the various Trade Agreements.
Service Tax: Service tax was introduced in India way back in 1994 and started with mere 3 basic services viz. general insurance, stock broking and telephone. Subsequent Budgets have expanded the scope of the service tax as well as the rate of service tax. More than 100 services are subjected to tax under this provision. An education cess is also charged on the tax amount. The Central Board of Excise and Customs under the Ministry of Finance manages the administration of service tax. Every service provider of a taxable service is required to register with the Central Excise Office in the concerned jurisdiction. Exemptions are available for services that are exported, small service providers whose revenue fall below the prescribed level, services provided to UN and International Agencies and supplies to SEZ(Special Economic Zones). Subject to conditions, service tax is not payable on value of goods and material supplied while providing services.
Securities Transaction Tax (STT): Transactions in equity shares, derivatives and units of equity-oriented funds entered in a recognized stock exchange attract Securities Transaction Tax. Service Tax, Surcharge and Education Cess are not applicable on STT. Taxation of profit or loss from securities transactions depends on whether the activity of purchasing and selling of shares / derivatives is classified as investment activity or business activity. Treatment of STT also depends upon whether the income from these securities transactions are included under the head “Income from Capital Gains” or under the head ‘Profits and Gains of Business or Profession’.
NOTE:Goods and Service Tax: The Indian Government is keen on merging all taxes like Service Tax, Excise and VAT into a common Goods and Service Tax (GST). GST system has been proposed in order to simplify current indirect tax system which is very tedious and complicated. All goods and services will be brought into the GST base. There will be no distinction between goods and services. Alcohol, tobacco, petroleum products are likely to be out of the GST regime. The state and central combined tax rate is speculated to be between 16%-20% in line with the global trend. Originally slated for implementation by the year 2010 i t has been postponed twice and now scheduled for the year 2012. The c entral and state tax authorities which had locked horns earlier are seemingly nearing a consensus. If implemented this will be the most outstanding reform ever to the Indian tax system.
STATE TAXES
Apart from the central taxes, the states also levy taxes on various g ood and services. Main state taxes consist of:
Value Added Tax (VAT): Sales tax charged on the sales of movable goods has been replaced with VAT in most of the Indian states since 2005. This was introduced to counter the rampant double taxation issues a nd resultant cascading tax burden that occurred due to the f laws inherent in the previous sales tax system. VAT, chargeable only on goods and does not include services, is a multi-stage system of taxation, whereby tax is levied on value addition at each stage of transaction in the supply chain. The term ‘value addition’ implies the increase in value of goods and services at each stage of production or transfer of goods and services. VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer. VAT comes under the state list. Tax payers can claim credit for the taxes paid at earlier stages and purchases known as Input Tax Credit, by producing relevant tax invoices. The credit can be used to set off any VAT tax liability. Different rates of VAT are charged depending on the category to which the goods belong. Rates vary for essential commodities, bullion and valuable stones, industrial inputs and capital goods of mass consumption, and others. Petroleum tobacco, liquor and so on are subjected to higher rate and differ from state to state. Notably, there is no VAT on imports and e xport sales are not subjected to VAT. The refore VAT charged on inputs purchased and used in the manufacture of export goods or goods purchased for export, is available as a refund. Note: The Central Sales Tax which is levied on inter-State sales would be eliminated gradually.
OTHER KEY NOTES Filing of VAT, CENVAT, Service Tax returns Periodic returns must be submitted by companies registered for CENVAT or VAT/CST or Service Tax in India.
CENVAT filings are monthly, on the 10 th day following the period end.
VAT reporting is either monthly or quarterly, depending on the particular State’s rules.
Service Tax filings are bi-annual .
Permanent Account Number (PAN) PAN is an all India, unique ten-digit alphanumeric number, issued in the form of a laminated card by the Income Tax Department.
Who Must Have a PAN? Every person,—
if his total income or the total income of any other person in respect of which he is assessable, during any previous year, exceeded the maximum amount which is not chargeable to income-tax; or
carrying on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed INR 500,000 in any previous year; or
who is required to furnish a return of income or
being an employer, who is required to furnish a return of fringe benefits
PAN is increasingly being recognized as a valid Identity Proof across India and a mandatory document for important transactions such as purchase of property, motor vehicles, share transactions, opening of bank accounts, obtaining loans, maintaining deposits e tc., therefore any person not fulfilling the above conditions may also apply for allotment of PAN.
TAX DEDUCTED AT SOURCE (TDS) TDS is one of the modes of collection of taxes, by which a certain percentage of amounts are deducted by a person at the time of making/crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government account. It is similar to "pay as you earn" scheme also known as Withholding Tax in many other countries, one of the countries is USA. The concept of T DS envisages the principle of "pay as you earn". It facilitates sharing of responsibility of tax co llection between the deductor and the tax administration. It ensures regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion as well as expands the tax net.
Who shall deduct tax at source? Every person responsible for making payment of nature covered by TDS provisions of Income Tax Act shall be responsible to deduct tax. However in case of payments made under sec. 194A, 194C, 194H, 1 94I and 194J in respect of individual and HUF, only if the turnover or professional receipt exceeds sum of Rs. 40 lakh or Rs. 10 lakh respectively (the limits will be Rs.60 Lakh or Rs. 15 Lakh respectively w.e.f. 01.07.2010) in previous year, he is required to deduct tax at source.
These persons are mainly:
Principal Officer of a company for TDS purpose including the employer in case of private employment or an employee making payment on behalf of the employer.
DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such.
In the case of "interest on securities" other than payments made by or on behalf of the Central govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof.
Such person is called Deductor while the person from whom the tax is deducted is called Deductee. Tax must be deducted at the time of payment in c ash or cheque or credit to the payee's account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee's account and TDS must be made at the time of such credit.
What a deductor must do? 1. Obtain TAN
Every deductor is required to obtain a unique identification number called TAN (Tax Deduction Account Number) which is a ten digit a lpha numeric number e.g.DELH90468K.
This number has to be quoted by the deductor in every correspondence related to Income Tax matters concerning TDS.
2. He/She should obtain PAN of the deductee. 3. He/She should deduct the tax at correct rate. 4. The tax deducted has to be deposited in the designated banks withinspecified time. (Govt. deductor shall transfer the tax deducted through book entry in Government account).This is detailed below:
By or on behalf of the Government: on the same day,
By or on behalf of any other person: before the 7th of the following month.
However, if the amount is credited in the books on 31 st March then the tax should be remitted by 31st May. Note: w.e.f., 01.04.2008 electronic payment of tax has to be done by all corporate assesses and all persons whose cases are auditable under section 44B.
5. Use challan no. 281 for depositing TDS amount. 6. File statements of tax deduction in the prescribed time. The due dates for filing of TDS/TCS statement are :
15th of July for Quarter 1, 15th of October for Quarter 2, 15th of January for Quarter 3 and 15th June for last Quarter however for TCS statements the due date is 30th April. 7. Use correct form to file TDS/TCS Returns.They are: Form 24Q
for salaries
Form 26Q
for non-salaries
Form 27EQ
for TCS
Form 27A/27B Control sheet for electronic TDS/TCS
It may be noted that the following persons have to compulsorily file e-TDS /e-TCS statements
All government offices/Departments
All companies /corporations
All persons whose cases are auditable
All persons whose TDS statements contain more than 50 deductees.
Dos & Dont's for filing TDS Returns Dos
Ensure that TDS return is filed with same TAN against which TDS payment has been made & TDS certificate is issued.
Ensure that correct challan particulars including CIN and amount is mentioned.
Correct PAN of the deductee is mentioned.
Correct section is quoted against each deductee record.
Correct rate is quoted against each deductee record.
File correction statement as soon as discrepancy is noticed
Retain the original FVU file to enable fu ture corrections
Make use of free of charge RPU provided through TIN-NSDL.com
Download details of challan from challan status enquiry (TAN based view) from TINNSDL.com
Registration for TAN enables you to avail additional faci lities from Tax Information System.
Always verify status of TDS returns from Tin NSDL to ascertain the discrepancy, if any, and/or whether your TDS return stands accepted or rejected by the system.
Dont's
Don't file late returns as it affects deductee tax credit
Don't quote incorrect TAN vis-à-vis TDS payments
The process of filing of e-TDS /e-TCS returns is available in detail at following websites www.incometaxindia.gov.in or http://tin-nsdl.com. 8. Issue TDS certificates as per existing procedure and within the time prescribed as stated below: The certificate should be issued within one month from the end of the month in which the income is credited however for credit entries made on 31st March, due date is
7th June, except in the case of salary where the certific ate has to be issued by 30th of April of the following financial year in which the income was credited in the prescribed preformat i.e. Form No.16A.
9. File e-TBAF (In case of Govt. DDO's where TDS is credited in Central Govt. account through book adjustments)
TAN(Tax Deduction Account Number) Every deductor is required to obtain a unique identification number called TAN (Tax Deduction Account Number) which is a ten digit a lpha numeric number. This number has to be quoted by the deductor in every correspondence related to TDS.
Format of TAN:
Procedure for getting TAN : It can be obtained by filing an application in form no. 49B to any of the TIN facilitation Centres (TIN-FC) namely NSDL. Addresses of the TIN-FC as well as the forms can be downloaded from the website www.incometaxindia.gov.in or http://tin-nsdl.com. The fee for processing TAN application is Rs. 60/-. This can be paid by:
Cash at TIN-FC counter Demand draft or Cheque or Credit card
The demand draft/ cheque shall be in favour of ' NSDL-TIN'. TAN number will be communicated to the deductor by NSDL.
Procedure To Pay TDS:
NATURE OF PAYMENTS ATTRACTING TDS AND RATES THEREON: TDS on Salary [Sec. 192]:Any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax on the estimated income of the assesse under this head for that financial year. Donations:-
The employer should not give any deduction in respect of donations given by an employee to a notified public charitable institute. However, Prime Minister’s Drought Relief Fund, National Children’s Fund etc. are out of the purview of above c ircular.
TDS on Interest on Securities [Sec. 193]:The person responsible for paying to a resident any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax on the amount of the interest payable. No TDS or TDS at lower rates:-
a) Interest on Debentures: i) Debentures are issued by a Public Limited Company ii) Debentures are listed on a recognized stock exchange iii) Interest is paid by an account payee cheque iv) Interest does not exceed Rs.2, 500/- during the fi nancial year then no TDS is required to be deducted b) Interest payable on any security of the Central Government or a S tate Government (except interest on 8% Savings (Taxable) Bonds, 2003 exceeding Rs.10, 000/-) c) Interest payable to the LIC, or GIC, or four subsidiary companies of GIC, or any other insurer.
TDS on Dividend [Sec. 194]:The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment in cash or before issuing
any cheque or warrant in respect of any dividend or before making any distribution or payment to a shareholder, of any dividend deduct from the amount of such dividend, income-tax at the rates in force No TDS or TDS at lower rates:-
a) Dividend covered u/s 115-O: b) Dividend up to Rs. 2, 500/- during the financial year by an account payee cheque c) Dividend to LIC/GIC.
TDS on Interest other than Interest on Securities [Sec. 194A]:Any person, not being an individual or a HUF, who is responsible for paying to a resident any income by way of interest other than interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. Individuals or HUFs whose turnover exceeded Rs.40 lakh in case of business and Rs.10 lakh in case of profession during the preceding financial year shall be liable to deduct TDS. No TDS or TDS at lower rates:-
a) Income, paid or payable, by a person during a financial year doesn't exceed: i) Rs.10, 000/- where the payer is a banking company or any bank or banking i nstitution or co-operative society carrying on the business of banking ii) Rs.10, 000/- on any deposit with post office under notified scheme of Central Government iii) Rs.5, 000/- in any other case However, in case of interest on fixed time deposits ( other than recurring deposits) with banking company or co-operative society referred to above or interest on deposits with housing finance companies, the aforesaid limits of Rs.5,000/- or Rs.10,000/- shall be computed branch-wise b) No TDS on interest credited or paid by Firm to its Partners. c) Interest on compensation amount awarded by the Motor Accidents Claims Tribunal where the amount thereof does not exceed Rs.50, 000/- during the financial year.
TDS on Winnings from Lotteries or Crossword Puzzles [Sec. 194B]:The person responsible for paying to any person any income by way of
a) Winnings from any lottery or b) Crossword puzzle or c) Card game and other game of any sort in an amount exceeding Rs.5,000/- shall, at the time of payment thereof, deduct income-tax thereon at the rates in force. Where the winnings are wholly in kind or partly in cash and the part in cash is not sufficient to meet the liability of TDS then the person responsible for paying shall ensure that tax has been paid in respect of the whole of the winnings.
TDS on Winnings from Horse Races [Sec. 194BB]:Any person, being a bookmaker or a person to whom a l icence has been granted by the Government and who is responsible for paying to any person any income by way of winnings from any horse race exceeding Rs.2,500/- shall, at the time of payment thereof, deduct income-tax thereon at the rates in force.
TDS on Payments to Contractors [Sec. 194C]:Any person responsible for paying any sum to any resident (contractor) fo r carrying out any “work” (including supply of labour for c arrying out any work) in pursuance of a contract between the contractor and a “specified person” shall, deduct TDS at a) 1% if payee is individual or HUF b) 2% for other payees “Specified Person” (Payer):-
a) Central Govt. or State Govt. b) Any local authority c) Any company d) A co-operative society e) Any statutory corporation f) A university g) A trust h) A firm i) A registered society j) Any housing board authority
k) Any Government of a foreign State o r a foreign enterprise or any association or body establishedoutside India l) An AOP/BOI covered under audit during preceding financial year m) Individuals or HUFs whose turnover exceeded Rs.40 lakh in case of business and Rs.10 lakh in case of profession during the preceding fi nancial year. “Work” shall include:-
a) Advertising b) Broadcasting and telecasting including production of programmes for such Broadcasting or telecasting c) Carriage of goods or passengers by any mode of transport other than by railways d) Catering e) Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer (job work) (if material is purchased from a person other than such customer then it will not fall under the purview of “work”) TDS on such job work will be deducted on invoice value excluding value of material if i t is mentioned separately in the invoice otherwise on entire invoice value. Other Conditions:-
1. No deduction shall be made if sum paid or payable to contractor does not exceed Rs.20, 000/- and the aggregate of amounts of such incomes during the financial year does not exceed Rs.50,000/2. In case of payments in course of goods transport business no TDS shall be deducted if PAN is furnished by the payee. However if PAN is not furnished then the applicable rate of TDS is 20% 3. Reimbursement of expenses liable for TDS u/s 194 C.
TDS on Insurance Commission [Sec. 194D]:Any person responsible for paying to a resident any income by way of remuneration or reward, commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall, deduct income-tax thereon. No deduction shall be made when amount of such commission does not exceed Rs.5, 000/during the financial year.
TDS on Payments to non-resident sportsmen or sports associations [Sec. 194E]:Where any income referred to in section 115BBA is payable to a non-resident sportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution, the person responsible for making the payment shall, deduct income-tax thereon at 10%. According to Sec. 115BBA income by way of a) Participation in India in any game or b) Advertisement or c) Contribution of articles relating to any game or sport in India in newspapers, magazines or journals.
TDS on Payments in respect of Deposits under NSS etc. [Sec. 194EE]:The person responsible for paying any amount referred to in clause (a) of sub-section (2) of section 80CCA i.e. payments in respect of deposits under National Savings Scheme will deduct TDS at 20% at the time of payment.
TDS on Payments on account of repurchase of units by Mutual Funds etc. [Sec. 194F]:The person responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall, at the time of payment thereof, deduct TDS at the rate of 20%.
TDS on Commission etc. on the sale of lottery tickets [Sec. 194G]:Any person who is responsible for paying to any person, who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of c ommission, remuneration or prize (by whatever name called) on such tickets in an amount ex ceeding Rs.1,000/- shall, deduct TDS at the rate of 10%.
TDS on Commission or Brokerage [Sec. 194H]:Any person, not being an individual or a Hindu undivided family, who is responsible for paying, to a resident, any income by way of commission (not being insurance commission
referred to in section 194D) or brokerage, shall, deduct TDS thereon at the rate of 10%. No TDS to be deducted if amount does not exc eed Rs.2, 500/-. Individuals or HUFs whose turnover exceeded Rs.40 lakh in case of business and Rs.10 l akh in case of profession during the preceding financial year shall be lia ble to deduct TDS. No deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Ltd. or Mahanagar Telephone Nigam Ltd. to their public call office (PCOs) franchisees.
TDS on Rent [Sec. 194I]:Any person, not being an individual or a HUF, who is responsible for paying to a resident any income by way of rent, shall, deduct income-tax thereon at the rate of : a) 2% for the use of any machinery or plant or equipment; and b) 10% for the use of any land or building (including fac tory building) or land appurtenant to a building (including factory building) or furniture or fittings No TDS is deductible if payment during the f inancial year does not exceed Rs.1, 20,000/“Rent”:-
'Rent' means any payment under any lease, sub-lease, tenancy or any other agreement or arrangement for use of any – (a) Land; or (b) Building (including factory building); or (c) Land appurtenant to a building (i ncluding factory building); or (d) Machinery; or (e) Plant; or (f) Equipment; or (g) Furniture; or (h) Fittings
It is irrelevant whether or not such assets are owned by the payee. Non-refundable deposit:-
TDS will be applicable if deposit is non-refundable as it represents consideration for the use of land or building etc. If deposit carries interest then TDS on such interest will be covered u/s 194A. (Circular No. 718 dated 22nd Aug, 1995) If Rent includes municipal tax, ground rent:-
If rent includes municipal taxes & ground rent and the same has been borne by tenant then TDS will be deducted on such sum (Circular No. 718 dated 22nd Aug, 1995) When different payees are there
When rent is paid to different payees then the limit of Rs.1,20,000/- will apply to each payee separately TDS on Service Tax Component of Rent:-
According to the circular no. 4/2008 dated 28th Apr, 2008 TDS will not be deducted on the service tax component of rent. However the benefit of the above circular had been restricted only to S ec. 194I by Board.
TDS on fees for Professional or Technical Services [Sec. 194J]:Any person and individual or HUFs whose books of accounts were required to be audited during the preceding financial year, who is responsible for paying to a resident any sum by way of fees for professional services, or fees for tec hnical services or royalty shall be liable to deduct TDS at the rate of 10% of such amount.No TDS will be deducted if amount payable does not exceed Rs.20,000/- during the financial year. “Professional Services” means:
Services rendered by a person in the course of carrying on a)legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or b) Any other profession notified u/s 44AA; or c) Any other profession notified for pur pose of this section. The services notified u/s 194-J are services rendered by following persons in relation to the sports activities: Sports Persons, Umpires and Referees, Coaches and Trainers, Team Physicians and Physiotherapists, Event Managers, Commentators, Anchors and Sports Columnists.
Reimbursement of expenses
Reimbursement of expenses for which bill is separately raised did not attract provisions of Section 194J. That is to say if a consolidated bill is issued by a professional or consultant then TDS will beapplicable on the entire amount of bill.
TDS on compensation on acquisition of capital asset [Sec. 194L]:-
Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any capital asset, shall, deduct an amount equal to 10% of such sum as TDS thereon. However, TDS will not be deducted if amount of s uch compensation or consideration does not exceed Rs.1,00,000/-.
TDS on compensation payable on compulsory acquisition of immovable property [Sec. 194LA]:Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, deduct an amount equal to 10% of such sum as TDS thereon. However , TDS will not be deducted if amount of such compensation or consideration does not exceed Rs.1, 00,000/-.
TDS on other sums [Sec. 195]:Any person responsible for paying to a non-corporate non-resident, or to a non-domestic company, any interest (other than interest on securities) or any other sum (not being Salaries) shall, deduct income-tax thereon at the rates in force.
Gist of Rates of Tax Deduction at Source:-
Certificate of lower rate from A.O. [Sec. 197]:The recipient of income can apply in Form 13 to get certificate authorizing the payer to deduct tax at lower or deduct no tax as may be appropriate. The recipient may apply in respect of Sec. 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194I, 194J, 194K, 194LA & 195 i.e.but not in respect of Sec. 194B, 194BB, 194E, 194EE, 194F & 194L.
No Deduction in certain cases [Sec. 197A]:-
If the above conditions are satisfied then TDS will not be deductible if a declaration is submitted in duplicate in Form 15H ( for senior citizen) Form 15G (for others).
TDS DEFAULTS Failure to deduct the whole or part o f the Tax at source (non-deduction, short deduction or delay in deduction)
1. Failure to deposit whole or part of the TDS (non-deposit, short deposit or late deposit) 2. Failure to apply for TAN within the prescribed time limit or failure to quote TAN on allotment as required under section 203A. 3. Failure to furnish, in due time, TDS returns or TDS certificates or to deliver or cause to be delivered a copy of declaration in form no. 15H/15G/27C/copy of quarterly statement. 4. Failure to mention the PAN of the deductee in all quarterly statements as well as in all certificates furnished.
Consequences of Defaults: The following chart indicates the nature of default and its consequences which range from penal interest, penalty to prosecution :
TAX COLLECTED AT SOURCE (TCS) What is TCS? The seller has to collect tax from the payer who has purchased the following items :
Alcoholic liquor for human consumption Tendu leaves Timber obtained under a forest lease Timber obtained by any mode other than under a forest lease Any other forest produce not being timber or Tendu leaves Scrap Parking lot Toll plaza Mining and quarrying
The TCS on the above mentioned items vary from 1% to 5%
Deposit of TCS amount- within seven days of the following month. Issue of TCS certificate- within in one month of collection /debit (form 27D)
The rates of TCS for representative purpose (Financial Year 2010-11):
