Other Services
Tax Deducted at Source (TDS)
Every business, whether a startup or an existing company, is certain to incur some expenses or to make payments to its parties irrespective of its size and scale. Thus TDS provisions apply to all types and size of businesses. It applies in the same or similar way to a proprietor (Covered under Tax Audit u/s 44AB), firm, LLP or a company registered under the companies, Act. 2013. The payment of expense by a person is an Income in the hands of the recipient. Thus the payor is under a liability to deduct the tax at applicable rates while making payment to the party. For small payments, the provision of TDS does not apply until it crosses a threshold limit as prescribed. It must be noted that the TDS is applicable only on the specified payment and after it reaches the threshold limit. The most common types of expenses on which TDS is applicable is provided hereunder.
Key Points of TDS Deduction & Payment
Payment of TDS Deducted
The tax deducted at source (TDS) while making payment to parties for qualified expenses must be deposited before 7th of next month. For example, the TDS deducted in November 2020 is payable on or before 7th December 2020. The challan number for making TDS deposit is 281. while making TDS Payment care must be exercised while selecting the appropriate section/nature of the payment/Assessment Year etc.
The Consequence of Non-Compliance
The non-compliance of TDS provisions is a grave offence and is punishable under section 271 (C) of the Income Tax Act 1961, wherein the minimum penalty is 10,000 which can go up to Rs. 1,00,000/-. Further section 276B applies to all such cases where a willful default is established, in all those cases the punishment is 3 Years rigorous imprisonment which can go up to seven years.
Interest on Non Payment of TDS
The TDS deducted by a person need to be deposited within 7th day of the next month. Any failure or delay in depositing the TDS is punishable under section 271 C or/and Section 276 B. The defaulter is further liable to pay interest on delayed payment at the rate of 1.5% per month or part thereof. There is no provision in law where the interest can be waived; hence the assessee should be very careful.
Filing of TDS Return
After making the payment of TDS to the income tax, the taxpayer is required to file a quarterly return where the TDS deposited is mapped against the PAN of the person from which TDS was deducted. The TDS Return is filed within 30th of the month succeeding the quarter. For example, the first quarter ends on 30th June, hence the TDS Return must be submitted before 30th July.
Interest on Non-Deduction of TDS
When a person while making payment for which he ought to have deducted TDS fails in deducting TDS or deducts an amount less than the required amount. In all such cases, the deductor is liable to pay an interest @ 1% per month or part of the month, till the date on which TDS is deducted. Hence, a business person must be prudent while making payment to parties and ensure that TDS is deducted.
Other Consequences of Default on TDS
The expenses on which TDS was required to be deducted shall be disallowed as an expense under section 40(a) while computing the total taxable income. To understand it quickly let’s take an example of business where the income is 12 lakhs and the expense is also 12 lakhs then effectively there shall be zero income tax, However, if the TDS is not deducted then the tax shall be INR 3,60,000 plus cess and interest applicable (30% of 12 lakhs)
Important Note:
TDS deducted in a month is required to be paid before the 7th day of next month. While making TDS mention correct section in the challan number 281. For TDS payment use a separate challan while making payment for a specific type (section). Interest on Late Payment is- 1.5% per month or part thereof, The penalty on Late filing of TDS Return is Rs. 200 per day, however, it is limited to the TDS amount.
TDS / TCS RATES FOR F.Y.2021-22
| Section | Nature of Payment | Threshold limit of payment | Rates |
|---|---|---|---|
| 192 | Income from Salary | Senior Citizen (60 Years) – Rs. 3,00,000 Super Senior Citizen (80 Years) – Rs. 5,00,000 Others – Rs. 2,50,000 | Average rate of Tax + Health & Education Cess (Surcharge if Salary > 50 Lacs) or, Option to choose between New and Old Tax Slab Regime for Salaried Employees |
| 192A | Premature Withdrawal from EPF (wef 01.06.2015) (*If PAN not furnished Rate of TDS at Maximum Mariginal Rate of 34.608%) | Rs. 50,000 | 10% |
| 193 | * Interest on Securities | Rs. 10,000 | 10% |
| 194 | Dividend | RS.5000 | 10% (Tds shall not be deducted on Dividend paid or credited to Business trust by Special Purpose Vehicle or any other person as may be specified) |
| 194A | Interest from a Banking Company | Rs. 40,000 per annum for Others /Rs. 50,000 per annum for Senior citizen | 10% |
| 194A | Interest other than from a Banking Company | Rs. 5,000 per annum | 10% |
| 194B | Winning from Lotteries & Cross Word Puzzles | Rs. 10,000 per annum | 30% |
| 194BB | Winnings from horse races | Rs. 10,000 per annum | 30% |
| 194C | Payment to contractor/sub-contractor | Rs.30,000 Per Contract (or) Rs. 1,00,000 per annum | Individual/HUF 1% Others 2% |
| 194D | Insurance Commision | Rs. 15,000 | Resident:5% Domestic Company:10% |
| 194DA | Payment under life insurance policy | Rs.1,00,000 per annum | 5% |
| 194EE | Out of deposit under NSS | Rs.2,500 | 10% |
| 194F | Payment on account of repurchase of units by Mutual Fund or Unit Trust of India | | 20% |
| 194G | Commission on Sale of Lottery Tickets | Rs. 15,000 | 5% |
| 194H | **Commission/Brokerage | Rs. 15,000 per annum | 5% |
| 194-I(a) | **Rent of Plant / Machinery | Rs. 2,40,000 per annum | 2% |
| 194-I(b) | **Rent of Land or building or furniture or fitting | Rs. 2,40,000 per annum | 10% |
| 194-IA | Payment or transfer of immovable property (other than rural agriculture land) | Rs. 50,00,000 & above | 1% |
| 194-IB | Rent payable by an individual or HUF not liable to tax audit | Rs.50,000 per month | 5% |
| 194-IC | Payment of monetary consideration under Joint Development Agreements | | 10% |
| 194J | Fees for Professional / Technical Services / Royalty / Remuneration to director | Rs. 30,000 per annum | 2% (For Call Centre & Fees for Technical Services & Royalty) 10% (For Others) |
| 194K | Income in respect of units of Mutual funds or specified company | | 10% |
| 194LA | Compensation on acquisition of immovable Property | Rs. 2,50,000 | 10% |
| 194LBA(1) | Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | | 10% |
| 194LBB | Payment in respect of units of Investment funds u/s 115UB [other than income which is exempt under Section 10(23FBB)] | | 10% |
| 194LBC(1) | Income in respect of investment made in a securitisation trust | | Individual or HUF 25% Other 30% |
| 194M | TDS on payment to resident contractors and professionals or by way of commission / brokerage (other than those who covered u/s 194C or 194J) by individual/HUF not liable for tax audit. | Rs. 50 lacs | 5% |
| 194N | TDS on cash withdrawal from Bank, Post office etc. | i) in excess of Rs. 1 crore | 2% |
| 194N | TDS on cash withdrawal from Bank / Co-operative bank / Post office etc. | ii) in excess of Rs. 20 lakhs* (* for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired) | 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year |
| 194O | Tds on E-commerce participants | 5 Lakh | 1% |
| 194P | TDS on Senior Citizen above 75 Years | NOTE 1 | As per Rates in force |
| 194Q | Purchase of goods (w.e.f 01.07.2021) | 50 Lakh | 0.10% |
| | * Only for Debenture in which the public are substantially interested ** Other than Individual or HUF except those covered u/s 44AB |
| Note - |
|---|
| In case of non availibility of PAN :- TDS shall be at the rate specified or rate of 20% whichever is higher |
| TDS on Non-Filers of ITR under section 206AB (applicable w.e.f 01.07.2021) |
| Note-1 |
|---|
| Following conditions needs to be satisfied- 1. The senior citizen is resident in India and of the age of 75 years or more during the previous year; 2. He has only pension income and may also have interest income from the same bank (specified bank – to be notified by the CG) in which he is receiving his pension income; 3. He shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed. 4.Specified bank would be required to compute income after giving effect to deductions allowable under Chapter VI-A and rebate under section 87A and deduct Income Tax on the base of rates in force. Once all done, there will not be requirement of furnishing return of income for this assessment year |
| In case of PAN | Higher of the following rates :- 1. Twice the rate specified in the relevant provision of the Act; or 2. Twice the rate or rates in force; or 3. At the rate of 5% |
| In case of non availability of PAN | Higher of the following rates :- 1. Twice the rate specified in the relevant provision of the Act; or 2. Twice the rate or rates in force; or 3. At the rate of twenty percent |
TCS Rates
| Section | Nature of Payment | Threshold Limit of Payment | Rates |
|---|---|---|---|
| 206C (1) | Sale of Scrap | | 1.00% |
| 206C (1) | Sale of Tendu Leaves | | 5% |
| 206C (1) | Sale of Timber obtained under a forest lease or other mode | | 2.50% |
| 206C (1) | Sale of Any other forest produce not being a Timber or tendu leaves | | 2.50% |
| 206C (1) | Sale of Alcoholic Liquor for Human Consumption | | 1% |
| 206C | Sale of Indian made for foreign liquor | | 1% |
| 206C (1C) | Lease or license of Parking lot, toll plaza, mining & quarrying | | 2% |
| 206C (1) | Sale of Minerals,coal lignite, Iron ore by a trader | | 1% |
| 206C (1F) | Sale Value of Motor vehicle whether in cheque or in any other mode of receipt | Exceeding Rs. 10 Lakhs per transaction | 1% |
| 206C | Foreign remittance through Liberalised Remittance Scheme (LRS) of exceeding Rs. 7 Lakh in a financial year if remitted amount is out of loan obtained from any financial institution u/s 80E for the purpose of pursuing any education | | 0.5% (applicable from 01.10.2020) |
| 206C | Foreign remittance through Liberalised Remittance Scheme (LRS) of exceeding Rs. 7 Lakh in any other case | | 5% (applicable from 01.10.2020) |
| 206C | Selling of overseas tour package | | 5% (applicable from 01.10.2020) |
| 206C | Sale of goods (Other than those being exported) of value exceeding Rs. 50 Lakh in previous year whose total Sale/ gross receipts / turnover from business exceeds Rs 10 Crore during immediately financial year | Rs. 50 Lakhs | 0.1% (applicable from 01.10.2020) |
| NOTE :- | |
|---|---|
| In case of non availability of PAN :- | Higher of the following rates :- 1. Twice the rate specified in the relevant provision of the Act; or 2. At the rate of 5% |
| TCS on Non-Filers of ITR under section 206CCA (applicable w.e.f 01.07.2021) | Higher of the following rates :- 1. Twice the rate specified in the relevant provision of the Act; or 2. At the rate of 5% |
Surcharges & Education Cess
| Type of Payment | Surcharge | Rate | Health and Education Cess (4.00%) |
|---|---|---|---|
| Salary (Residents) | Upto 50 Lacs 50 Lacs to 1 Crore > 1 Crore but upto 2 Crore > 2 crore but upto 5 crore > 5 crore | Nil 10% 15% 25% 37% | Yes Yes Yes Yes Yes |
| Other Payments to Residents | No | Nil | No |
Interest for failure to deduct tax at source/delay in payment of TDS
| Type of Payment | Health and Education Cess (4.00%) |
|---|---|
| From date when deductible till actual deduction | 1.00% |
| From date of deduction till payment | 1.50% |
TDS / TCS RATES FOR F.Y.2020-21
| Section | Nature of Payment | Threshold Limit of Payment | 01-04-2020 to 13-05-2020 | New rates from 14-05-2020 to 31-03-2021 |
|---|---|---|---|---|
| 192 | Income from Salary | Senior Citizen (60 Years) – Rs. 3,00,000 Super Senior Citizen (80 Years) – Rs. 5,00,000 Others – Rs. 2,50,000 | Average rate of Tax + Health & Education Cess (Surcharge if Salary > 50 Lacs) | Average rate of Tax + Health & Education Cess (Surcharge if Salary > 50 Lacs) |
| 192A | Premature Withdrawal from EPF (wef 01.06.2015) (*If PAN not furnished Rate of TDS at Maximum Mariginal Rate of 34.608%) | Rs. 50,000 | 10% | 10% |
| 193 | * Interest on Securities | Rs. 10,000 | 10% | 7.5% |
| 194 | Dividend | | 10% | 7.5% |
| 194A | Interest from a Banking Company | Rs. 40,000 per annum /Rs. 50,000 per annum for Senior citizen | 10% | 7.5% |
| 194A | Interest other than from a Banking Company | Rs. 5,000 per annum | 10% | 7.5% |
| 194B | Winning from Lotteries & Cross Word Puzzles | Rs. 10,000 per annum | 30% | 30% |
| 194BB | Winnings from horse races | Rs. 10,000 per annum | 30% | 30% |
| 194C | Payment to contractor/sub-contractor | Rs.30,000 per contract (or) Rs. 1,00,000 per annum | Individual/HUF 1% ,Others 2% | Individual/HUF 0.75% ,Others 1.5% |
| 194D | Insurance Commision | Rs. 15,000 | Resident:5% Domestic Company:10% | Resident:3.75% Domestic Company:10% |
| 194DA | Payment under life insurance policy | Rs.1,00,000 per annum | Upto 31-08-2019 : 1 % w.e.f 01-09-2019 : 5% | 3.75% |
| 194EE | Out of deposit under NSS | Rs.2,500 | 10% | 7.5% |
| 194F | Payment on account of repurchase of units by Mutual Fund or Unit Trust of India | | 20% | 15% |
| 194G | Commission on Sale of Lottery Tickets | Rs. 15,000 | 5% | 3.75% |
| 194H | **Commission/Brokerage | Rs. 15,000 per annum | 5% | 3.75% |
| 194-I(a) | **Rent of Plant / Machinery | Rs. 2,40,000 per annum | 2% | 1.5% |
| 194-I(b) | **Rent of Land or building or furniture or fitting | Rs. 2,40,000 per annum | 10% | 7.5% |
| 194-IA | Payment or transfer of immovable property (other than rural agriculture land) | Rs. 50,00,000 & above | 1% | 0.75% |
| 194-IB | Rent payable by an individual or HUF not liable to tax audit | Rs.50,000 per month | 5% | 3.75% |
| 194-IC | Payment of monetary consideration under Joint Development Agreements | | 10% | 7.5% |
| 194J | Fees for Professional / Technical Services / Royalty / Remuneration to director | Rs. 30,000 per annum | 2% (For Call Centre & Fees for Technical Services & Royalty ) 10% (For Others) | 1.5% (For Call Centre & Fees for Technical Services & Royalty ) 7.5% (For Others) |
| 194-K | Income in respect of units of Mutual funds or specified company | | 10% | 7.5% |
| 194LA | Compensation on acquisition of immovable Property | Rs 2,50,000 | 10% | 7.5% |
| 194LBA(1) | Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | | 10% | 7.5% |
| 194LBB | Payment in respect of units of Investment funds u/s 115UB [other than income which is exempt under Section 10(23FBB)] | | 10% | 7.5% |
| 194LBC(1) | Income in respect of investment made in a securitisation trust | | Individual/HUF 25% Other 30% | Individual/HUF 18.75% Other 22.5% |
| 194M | TDS on payment to resident contractors and professionals or by way of commission / brokerage (other than those who covered u/s 194C or 194J) by individual/HUF not liable for tax audit. | Rs. 50 lacs | 5% | 3.75% |
| 194N | TDS on cash withdrawal from Bank, Post office etc. | i) in excess of Rs. 1 crore | 2% | 2% |
| 194N | TDS on cash withdrawal from Bank, Post office etc | ii) in excess of Rs. 20 lakhs* (* for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired) | 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year( from 01/07/2020)) 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year ( from 01/07/2020) | 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year ( from 01/07/2020) 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year ( from 01/07/2020) |
| 194-O | Tds on E-commerce participants | | NA | 0.75% (w.e.f 01.10.2020) |
| * Only for Debenture in which the public are substantially interested |
| ** Other than Individual or HUF except those covered u/s 44AB |
| Note |
|---|
| In case of non availibility of PAN :- Tds shall be at the rate specified or at the rate of 20% whichever is higher |
| Section | Nature of Payment | Threshold Limit of Payment | Rates |
|---|---|---|---|
| 206C (1) | Sale of Scrap | | 1.00% |
| 206C (1) | Sale of Tendu Leaves | | 5% |
| 206C (1) | Sale of Timber obtained under a forest lease or other mode | | 2.50% |
| 206C (1) | Sale of Any other forest produce not being a Timber or tendu leaves | 2.50% | |
| 206C (1) | Sale of Alcoholic Liquor for Human Consumption | | 1% |
| 206C | Sale of Indian made for foreign liquor | | 1% |
| 206C (1C) | Lease or license of Parking lot, toll plaza, mining & quarrying | | 2% |
| 206C (1) | Sale of Minerals,coal lignite, Iron ore by a trader | | 1% |
| 206C (1F) | Sale Value of Motor vehicle whether in cheque or in any other mode of receipt | Exceeding Rs. 10 Lakhs per transaction | 1% |
| 206C | Foreign remittance through Liberalised Remittance Scheme (LRS) of exceeding Rs. 7 Lakh in a financial year if remitted amount is out of loan obtained from any financial institution u/s 80E for the purpose of pursuing any education | | 0.5% (applicable from 01.10.2020) |
| 206C | Foreign remittance through Liberalised Remittance Scheme (LRS) of exceeding Rs. 7 Lakh in any other case | | 5% (applicable from 01.10.2020) |
| 206C | Selling of overseas tour package | | 5% (applicable from 01.10.2020) |
| 206C | Sale of goods (Other than those being exported) of value exceeding Rs. 50 Lakh in previous year whose total Sale/ gross receipts / turnover from business exceeds Rs 10 Crore during immediately financial year | Rs. 50 Lakhs | 0.1% (applicable from 01.10.2020) |
