Tax Deduction At Source

The income tax act makes responsible the payer of income of any person to deduct the prescribed percentage of income as income tax and pay the balance amount to the recipient of such income. Tax deduction at source means the tax required to be paid by the assesses, is deducted by the person paying the income to him. Thus, the tax is deducted at the source of income itself. The following are rates of TDS and the respective threshold limits for different types of payments to residents:

Section  

Nature of Payment

Threshold Limit (RS)

Tax (%)

193

Interest on Debentures & Securities

10

194

Deemed Dividend

10

194A

Other Interest for Banking Co’s

> 10,000

10

194A

Other Interest for other entities

> 5,000

10

194B

Lottery/Crossword Puzzle

> 10,000

30

194BB

Winnings from Horse Race

> 5,000

30

194C

Contracts to Transporter, who has provided a valid PAN for Individuals / HUF

 If owns more than 10 vehicles

1

194C

Contracts to Transporter, who has provided a valid PAN for others

 30,000 or aggregate during the year Rs. 1,00,000

2

194D

Insurance Commission

> 20,000

10

194EE

Withdrawal from NSS

> 2,500

20

194F

Repurchase of Units by MF/UTI

20

194G

Commission on Sale of Lottery Tickets

> 1,000

10

194H

Commission or Brokerage

> 5,000

5

194I

Rent of Plant & Machinery

> 180,000

2

194I

Rent of Land, Building, Furniture, etc

> 180,000

10

194J

Professional or Technical Fess

> 30,000

10

194J(1) (ba)

Any remuneration or commission paid to director of the company (Effective from 1 July 2012)

10

The tax so deducted will have to be remitted on or before seven days from the end of the month in which the deduction is made and on or before 30th day of April where the income or amount is credited or paid in the month of March.

In respect of tax deducted but not paid, interest at the rate of 1.5 % pm and in respect of tax deducted late after the due date at the rate of 1% pm.

Quarterly TDS statements are to be filed before the following dates:

Quarter  

Form No. 24Q

April to June

31-Jul

July to September

31-Oct

October to December

31-Jan

January to March

31-May

Disallowance of expenditure for non-deduction of TDS

Under section 40 (a) of the Income Tax Act, the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession:

  • any interest, royalty, fees for technical services or other sum chargeable under this Act, which is payable outside India; or in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200.
  • any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work including supply of labour for carrying out any work, on which tax is deductible at source and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139:
  • any payment which is chargeable under the head “Salaries”, if it is payable outside India; or to a non-resident, and if the tax has not been paid thereon nor deducted there from under Chapter XVII-B;

Default / Failure  

Under Section

Nature of Demand

Quantum of Demand / Penalty

Failure to Deduct Tax at Source

201(1)

Tax Demand

Equal to tax amount deductible but not deducted

Failure to Deduct Tax at Source

201(1A)

Interest

@1% pm of tax deductible

Failure to Deduct Tax at Source

271C

Penalty

Equal to tax amount deductible but not deducted

Failure to furnish TDS returns

272A(2)(k)

Penalty

Rs. 100 for every day during which the failure continues subject to the maximum of TDS amount.

Failure to issue TDS certificates u/s 203

272A(2)(g)

Penalty

Rs. 100 for every day during which the failure continues subject to the maximum of TDS amount.

Failure to mention PAN of the deductee in the TDS statements and certificates

272B

Penalty

Rs. 10,000