Higher TDS from 1st April,2010

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The Blind Side

TDS AT A HIGHER RATE ON ALL TRANSACTIONS NOT HAVING PAN PROVISION TO COME INTO EFFECT FROM 1ST APRIL 2010

A new provision relating to tax deduction at source (TDS) under the Income Tax Act 1961 will become applicable with effect from 1^st April 2010. Tax at higher of the prescribed rate or 20% will be deducted on all transactions liable to TDS, where the Permanent Account Number (PAN) of the deductee is not available.  The law will also apply to all non-residents in respect of payments / remittances liable to TDS. As per the new provisions, certificate for deduction at lower rate or no deduction shall not be given by the assessing officer under section 197, or declaration by deductee under section 197A for non-deduction of TDS on payments shall not be valid, unless the application bears PAN of the applicant / deductee. 

            All deductors are liable to deduct tax at the higher rate in all transactions not having PAN of the deductees on or after 1^st April 2010. In order that there is no dispute regarding quoting / non-quoting of PAN or accuracy thereof, the law requires all deductees and dedutors to quote PAN of deductees in all correspondences, bills, vouchers and other documents sent to each other.  All deductors are, therefore, advised to intimate their deductees to obtain and furnish their PAN so as to avoid TDS at a higher rate. All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by 31^st March 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date.

            The procedure for obtaining PAN is simple, inexpensive and quick. Application for PAN can be filed in Form 49A to National Securities Depository Ltd. (NSDL) or Unit Trust of India Investor Services Ltd. (UTIISL) or their intermediaries. Non-residents can apply through the local embassy / consulate of India. Applications can also be filed, paid for or tracked online through the Internet on the following web-sites:-

http://incometaxindia.gov.in/

https://incometaxindiaefiling.gov.in/portal/index.jsp

http://www.tin-nsdl.com/

http://www.utitsl.co.in/

            The Central Board of Direct Taxes (CBDT) has issued Notification No.94/2009 relating to taxation of perquisites / profits in lieu of salary and Circular No.1/2010 for the guidance of tax dedutors for salaries. These documents are available on the department’s web site at http://incometaxindia.gov.in/

UTN not mendatory for filing it returns

PIB
The Central Board of Direct Taxes have further decided that the Notification No. 31 of 2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962 shall be kept in abeyance for the time being.

Taxpayers filing their income tax returns for assessment year (AY) 2009-10, or any other earlier AY, may continue to file their returns without mentioning the Unique Transaction Number (UTN) as required under the said Notification. The filing of such returns shall be treated as valid and in compliance to the requirements under section 139 of the Income Tax Act, 1961.

Further, the date from which the Notification No. 31 / 2009 shall become applicable on tax deducted at source (TDS) or tax collected at source (TCS) and deposited during the current financial year shall be notified by the Central Board of Direct Taxes subsequently.

All deductors / collectors of TDS / TCS may continue to deposit their TDS / TCS and file their quarterly TDS / TCS returns as per procedure existing prior to issuance of Notification No.31 / 2009 dated 25.3.2009.

BSC/BY/GN-154/09

New tax rule to usher in clarity on TDS credit

Tax relief

The new CBDT rule has now settled the position that a person who is liable to pay the tax should be eligible for the TDS credit

Joint owners in shares, deposits or property could now have the right to claim

K.R. Srivats

New Delhi, March 20 Tax deducted at source (TDS) credit can now be availed by persons other than the deductees. This has been clearly articulated by the Central Board of Direct Taxes (CBDT) in a new rule on TDS credit availment.

Bringing relief and certainty to taxpayers, the CBDT has also spelt out the situations and the procedure through which the tax credit will be made available for persons other than deductees.

The credit for TDS will be allowed to persons other than the deductees only in cases where the relevant income is assessable to income tax in the hands of such other person. The new CBDT rule has now settled the position that a person who is liable to pay the tax should be eligible for the TDS credit, say tax experts.

To illustrate this point, consider a situation of winnings from a raffle going to a minor. The tax is deducted before the payment is made to the minor. Under the clubbing provisions of income tax, the income of the minor gets clubbed with those of the parent and gets taxed at the latter’s hands.

As the TDS certificate is in the name of the minor (deductee being the minor), tax authorities at the ground level often deny TDS credit to the parent even though the incomes are clubbed and assessed in the hands of the parent. Now, the CBDT has made it clear that tax credit has to be granted to the parent (the person in whose hands the income is assessable).

Similarly, in a situation where the deductees are joint owners of shares, property and deposits, the CBDT has now said that the TDS credit would be available to the respective joint owners in proportion of their ownership of the asset. Hitherto, no mechanism was available by which all the joint owners in shares, deposits or property could have the right to claim TDS credit.

“The latest CBDT rule on credit for TDS will bring clarity at the ground level. They have gone by the principle that the person who pays the tax should get the tax credit,” Mr Jayesh Thakur, Associate Director, PricewaterhouseCoopers told Business Line.

Till date, tax officers were taking different views on the eligibility for tax credit in situations where the income is assessable to tax in the hands of persons other than the deductee. Hitherto, assessees were often required to go up to the High Courts to get benefit of the TDS credit, point out tax experts.

Trusts, partnership firms

The CBDT has also brought clarity and certainty to the eligibility for availment of TDS credit in respect of trusts, partnership firms and Association of Persons (AOP).

In situations where the deductee is a Trust and the income is assessable in the hands of trustees, the TDS credit should be granted to the trustee. Similarly, where the deductee is partner or karta of a Hindu Undivided Family (HUF) and the income is assessable as the income of firms or the HUF, the TDS credit would have to go to the partnership firm/HUF.

Where the deductee is the Association of Persons (AOP) and the income is assessable in the hands of the members, the CBDT has made it clear that the TDS credit should go to the members of AOP.

The procedure: For persons other than the deductee to get the TDS credit benefit, the deductees are required to file a declaration with the deductor. The declaration should have details of the other person (i.e. the person to whom tax credit is to be given) like name, PAN, payment or credit in relation to which tax credit is to be given and the reason for giving credit to such person.

The deductor would report tax deduction in the name of such other person to the tax authority. The TDS certificate could also be issued in the name of the person other than the deductee.

In Budget 2008-09, the Government decided that the system of allowing credit to the assessee for TDS/Tax collected at source (TCS) needs a certain degree of flexibility considering the ongoing technological and business process changes.

Instead of providing rigorous conditions regarding the method of giving credit for TDS in the Income Tax Act itself, the Government decided to do this through the rules. That promise has now been implemented by CBDT by bringing the necessary rule for this purpose.

Notification on TDS and TCS -PIB Release

The Board has amended the rules relating to Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) vide Notification No. S.O.858 (E) dated 25th March 2009.

In this context, taxpayers are informed that the new Form 17 (the challan for payment of TDS and TCS) is applicable only for payment of tax deducted or collected at source on or after 1st April 2009. Therefore, in respect of any TDS or TCS made before the 1st April, 2009, the payment will continue to be made to the credit of the Central Government by using the challan in Form No. 281 (i.e. the old challan form) even after 31st March 2009.

The Central Board of Direct Taxes will shortly issue a detailed circular on the amended rules relating to TDS and TCS.

Tax Deduction and Collection Account Number (TAN)

Tax Deduction and Collection Account Number (TAN)

TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN. TAN is allotted by the Income Tax Department on the basis of the application submitted to TIN Facilitation Centres managed by National Securities Depository Limited ( NSDL ). NSDL will intimate the TAN which will be required to be mentioned in all future correspondence relating to TDS/TCS. An application for allotment of TAN is to be filled in Form 49B and submitted at any of the TIN facilitation centres meant for receipt of e-TDS returns. The income tax act makes it mandatory for TAN to be quoted in all TDS/TCS returns, all TDS/TCS payment challans and all TDS/TCS certificates to be issued. Failure to apply for TAN or comply with any of the other provisions of the Act attracts a penalty. TDS/TCS returns will not be received if TAN is not quoted and challans for TDS/TCS payments will not be accepted by banks.

Tax Collection at Source (TCS)

Tax collection at source arises on the part of the seller of goods. Here, tax is collected at the source of income itself. It is to be collected at source from the buyer, by the seller at the point of sale. Such tax collection is to be made by the seller at the time of debiting the amount payable to the buyer to the account of the buyer or at the time of receipt of such amount from the buyer, whichever is earlier. A person collecting tax shall furnish a certificate specifying whether tax has been collected or not,what sum has been collected,the rate of tax applied on it and other such particulars as may be prescribed. It shall be furnished within 10 days from the date of debit or receipt of the amount furnished to the buyer to whose account such amount is debited or from whom such payment is received. The taxes collected must be remitted into the income tax department's account. Every person collecting tax shall, within such time as may be prescribed, apply to the Assessing Officer for the allotment of a tax-collection account number.

The following goods when sold must be subjected to tax collection at source :-

• Alcoholic liquor for human consumption (other than Indian made foreign liquor).


• Timber obtained under a forest lease.


• Timber obtained by any mode other than under a forest lease.


• Any other forest produce not being timber.

Tax Deduction at Source (TDS)

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 income tax act enjoins on the payer of such income to deduct the given percentage of income as income tax and pay the balance amount to the recipient of such income. The tax so deducted at source by the payer is to be deposited in the income tax department account. 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.

For example, person responsible for paying any income which is chargeable to tax under the head 'Salaries' is required to compute the tax liability in respect of such income and deduct tax at source at the time of payment.If the employee has any other income,he needs to inform the employer so that employer can take that income into consideration while computing his tax liability but he will not take into account losses except loss from house property.

Similarly, person responsible for paying any income by way of 'interest on securities' or any other interests are required to deduct tax at source at the prescribed rates at the time of credit of such income to the account of the payee or at the time of payment,whichever is earlier.

The income from the following sources is subjected to tax deduction at source

• Salary and all other positive incomes under any head on income( Section 192 )


• Interest on securities ( Section 193 )


• Interest other than interest on securities( Section 194A )


• Payments to contractors and sub-contractors( Section 194C )


• Winnings from Lottery or crossword puzzles( Section 194B )


• Winnings from horse races( Section 194BB )


• Insurance Commission covering all payments for procuring Insurance business( Section 194D )


• Any interest other than interest on securities payable to non-residents not being a company or to a foreign company( Section 195 )


• Payment to non-resident sportsman including athlete or sports association/institution.In case of non-resident sportsman,payments in respect of advertisements as well as articles on any game/sports in India in newspapers,magazines,etc. is included( Section 194E )


• Payment in respect of deposits under NSS[National Savings Scheme]( Section 194EE )


• Payment on account of repurchase of Units by Mutual Fund or UTI( Section 194F )


• Payment for Commission or brokerage( Section 194H )


• Payment of rent( Section 194I )


• Payment of fees for professional or technical services( Section 194J )


• Commission to Stockist,distributors,buyers and sellers of Lottery tickets including remuneration or prize on such tickets( Section 194G )


• Income from Units purchased in foreign currency or long-term capital gain arising from the transfer of such Units purchased in foreign currency ( Section196B )


• Payment of any income to non-residents in respect of interest or dividend on bonds and shares( Section 196C )etc.

TDS rate for FY 2008-09