Tds N Adv Tax
Tds N Adv Tax
Tds N Adv Tax
LEARNING OUTCOMES
After studying this chapter, you would be able to–
appreciate the modes of recovery of income-tax from an
assessee;
comprehend and apply the provisions governing deduction
of tax at source from certain specified income and
payments;
examine whether tax is deductible in a particular case(s)
considering the provisions of the relevant section;
compute the tax deductible at source in respect of a
particular case(s);
1
Referred to in section 80-IAC, which provides for deduction from gross total income of eligible start-
ups. This section will be dealt with in detail at the Final level.
2
Referred to in section 80-IAC
(vi) on 6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980, where the bonds
are held by an individual (other than a non-resident), provided that
the holders of the bonds make a written declaration that the total
nominal value of the bonds held by him or on his behalf did not in
either case exceed `10,000 at any time during the period to which the
interest relates;
(vii) on any security of the Central Government or a State Government
Note – It may be noted that tax has to be deducted at source in
respect of interest payable on 8% Savings (Taxable) Bonds, 2003, or
7.75% Savings (Taxable) Bonds, 2018, only if such interest payable
exceeds ` 10,000 during the financial year.
(viii) on any debentures (whether listed or not listed on a recognized stock
exchange) issued by the company in which the public are substantially
interested to a resident individual or HUF. However,
(a) the interest should be paid by the company by an account payee
cheque;
(b) the amount of such interest or the aggregate thereof paid or
likely to be paid during the financial year by the company to
such resident individual or HUF should not exceed ` 5,000.
(ii) The TDS provisions will not apply to such dividend credited or paid to 3 -
(a) LIC, GIC, subsidiaries of GIC or any other insurer provided the
shares are owned by them, or they have full beneficial interest in
such shares
(b) any other person as may be notified by the Central Government.
3.5 Interest other than interest on securities [Section 194A]
This section deals with the scheme of deduction of tax at source from interest
other than interest on securities. The main provisions are the following:
(1) Applicability of TDS under section 194A
This section applies only to interest, other than “interest on securities”,
credited or paid by assessees other than individuals or Hindu undivided
family. However, an individual or Hindu undivided family whose total sales,
gross receipts or turnover from the business or profession carried on by him
exceed ` 1 crore in case of business and ` 50 lakhs in case of profession
during the immediately preceding financial year is liable to deduct tax at
source under this section.
These provisions apply only to interest paid or credited to residents.
(2) Time of tax deduction at source
The deduction of tax must be made at the time of crediting such interest to
the account of the payee or at the time of its payment in cash or by any
other mode, whichever is earlier.
Where any such interest is credited to any account in the books of account
of the person liable to pay such income, such crediting is deemed to be
credit of such income to the account of the payee and the tax has to be
deducted at source. The account to which such interest is credited may be
called “Interest Payable account” or “Suspense account” or by any other
name.
The CBDT has, vide Circular No.3/2010 dated 2.3.2010, given a clarification
regarding deduction of tax at source on payment of interest on time
deposits under section 194A by banks following Core-branch Banking
Solutions (CBS) software. It has been clarified that Explanation to section
194A is not meant to apply in cases of banks where credit is made to
3 a business trust by a special purpose vehicle (This provision will be relevant at the Final level)
(4) Threshold limit for deduction of tax at source under section 194C
No deduction will be required to be made if the consideration for the
contract does not exceed ` 30,000. However, to prevent the practice of
composite contracts being split up into contracts valued at less than
` 30,000 to avoid tax deduction, it has been provided that tax will be
required to be deducted at source where the amount credited or paid or
likely to be credited or paid to a contractor or sub-contractor exceeds
` 30,000 in a single payment or ` 1,00,000 in the aggregate during a
financial year.
Therefore, even if a single payment to a contractor does not exceed ` 30,000,
TDS provisions under section 194C would be attracted where the aggregate of
is engaged in the
business of plying,
owns ten or hiring or leasing
less goods goods carriages
has furnished a
carriages at any declaration to this
time during the effect along with
previous year his PAN
Exemption
u/s
194C(6)
4
Deduction u/s 80CCB was available in respect of investment made in notified units of UTI or
Mutual Funds during the PYs 1990-91 and 1991-92
ILLUSTRATION 6
Moon TV, a television channel, made payment of ` 50 lakhs to a production house
for production of programme for telecasting as per the specifications given by the
channel. The copyright of the programme is also transferred to Moon TV. Would
such payment be liable for tax deduction at source under section 194C? Discuss.
Also, examine whether the provisions of tax deduction at source under section 194C
would be attracted if the payment was made by Moon TV for acquisition of
telecasting rights of the content already produced by the production house.
SOLUTION
In this case, since the programme is produced by the production house as per the
specifications given by Moon TV, a television channel, and the copyright is also
transferred to the television channel, the same falls within the scope of definition
of the term ‘work’ under section 194C. Therefore, the payment of ` 50 lakhs made
by Moon TV to the production house would be subject to tax deduction at source
under section 194C.
If, however, the payment was made by Moon TV for acquisition of telecasting
rights of the content already produced by the production house, there is no
contract for ‘’carrying out any work”, as required in section 194C(1). Therefore,
such payment would not be liable for tax deduction at source under section 194C.
3.15 Rent [Section 194-I]
(1) Applicability and Rate of TDS
Any person other than individual or HUF, who is responsible for paying to a
resident any income by way of rent, shall deduct income tax at the rate of:
(i) 2% in respect of rent for plant, machinery or equipment;
(ii) 10% in respect of other rental payments (i.e., rent for use of any land
or building, including factory building, or land appurtenant to a
building, including factory building, or furniture or fittings).
However, an individual or HUF whose total sales, gross receipts or turnover
from the business or profession carried on by him exceed ` 1 crore in case of
business and ` 50 lakhs in case of profession during the financial year
immediately preceding financial year in which such rent was credited or paid,
is liable to deduct tax at source.
GST shall include Integrated Goods and Services Tax, Central Goods and
Services Tax, State Goods and Services Tax and Union Territory Goods and
Services Tax.
Further, for the purposes of this Circular, any reference to “service tax” in an
existing agreement or contract which was entered into prior to 01.07.2017
shall be treated as “GST on services” with respect to the period from
01.07.2017 onward till the expiry of such agreement or contract.
In case Mr. Y does not provide his PAN to Mr. X, tax would be deductible@20%,
instead of 5%.
In case 1 above, this would amount to ` 1,10,000 [` 55,000 x 20% x 10], but the
same has to be restricted to ` 55,000, being rent for March, 2022.
In case 2 above, this would amount to ` 77,000 [` 55,000 x 20% x 7], but the same
has to be restricted to ` 55,000, being rent for December, 2021.
3.18 Payment under specified agreement [Section 194-IC]
(1) Applicability and Rate
This section casts responsibility on any person responsible for paying to a
resident any sum by way of consideration, not being consideration in kind,
under a specified agreement under section 45(5A), to deduct income-tax at
the rate of 10%.
(2) Time of deduction
This deduction is to be made at the time of credit of such sum to the
account of the payee or at the time of payment thereof in cash or by issue
of cheque or draft or by any other mode, whichever is earlier.
(3) Non-applicability of section 194-IA
Since tax deduction at source for specified agreement under section 45(5A)
is covered under section 194-IC, the provisions of section 194-IA do not get
attracted in the hands of the transferee in such cases.
(4) Meaning of specified agreement
Specified agreement under section 45(5A):
- It means a registered agreement in which a person owning land or
building or both, agrees to allow another person to develop a real
estate project on such land or building or both.
- The consideration, in this case, is a share, being land or building or
both in such project; Part of the consideration may also be in cash.
3.19 Fees for professional or technical services [Section 194J]
(1) Applicability and Rate of TDS
Every person other than an individual or a HUF, who is responsible for
paying to a resident any sum by way of –
(i) fees for professional services; or
Summary of rates and threshold limit under section 194J for deduction
of tax at source
Separate
Nature of payment TDS rate
Limit
Fees for technical services (not being 2% ` 30,000
professional services)
Fees for professional services 10% ` 30,000
Royalty in the nature of consideration for 2%
sale, distribution or exhibition of
cinematographic films ` 30,000
Other royalty 10%
Any remuneration or fees or commission, 10% Nil
by whatever name called, other than those
on which tax is deductible under section
192, to a director of a company
Non-compete fees 10% ` 30,000
In case of a payee, engaged only in the business of operation of call centre,
the tax shall be deducted at source @2%
ILLUSTRATION 9
XYZ Ltd. makes a payment of ` 28,000 to Mr. Ganesh on 2.8.2021 towards fees
for professional services and another payment of ` 25,000 to him on the same
date towards fees for technical services. Discuss whether TDS provisions under
section 194J are attracted.
SOLUTION
TDS provisions under section 194J would not get attracted, since the limit of
` 30,000 is applicable for fees for professional services and fees for technical
services, separately. It is assumed that there is no other payment to Mr. Ganesh
towards fees for professional services and fees for technical services during the
P.Y.2021-22.
(4) Non-applicability of TDS under section 194J
(i) An individual or a Hindu undivided family is not liable to deduct tax at
source.
However, an individual or HUF, whose total sales, gross receipts or
turnover from business or profession carried by him exceeds ` 1 crore
(i) they are required to deduct tax at source u/s 194C for carrying out any
work (including supply of labour for carrying out any work) in
pursuance of a contract i.e., an individual or a HUF whose total sales,
gross receipts or turnover from the business or profession carried on
by him exceeds ` 1 crore in case of business and ` 50 lakhs in case of
profession during the immediately preceding financial year and such
amount is not exclusively credited or paid for personal purposes of
such individual or HUF.
(ii) they are required to deduct tax at source u/s 194H on commission
(not being insurance commission referred to in section 194D) or
brokerage i.e., an individual or a HUF whose total sales, gross receipts
or turnover from the business or profession carried on by him exceeds
` 1 crore in case of business and ` 50 lakhs in case of profession
during the immediately preceding financial year.
(iii) they are required to deduct tax at source u/s 194J on fees for professional
services i.e., an individual or a HUF whose total sales, gross receipts or
turnover from the business or profession carried on by him exceeds ` 1
crore in case of business and ` 50 lakhs in case of profession during the
immediately preceding financial year and such amount is not exclusively
credited or paid for personal purposes of such individual or HUF.
(5) No requirement to obtain TAN
The provisions of section 203A containing the requirement of obtaining Tax
deduction account number (TAN) shall not apply to the person required to
deduct tax in accordance with the provisions of section 194M.
(6) Time and mode of payment of tax deducted at source under section
194-IA, 194-IB and 194M to the credit of Central Government, furnishing
challan-cum-statement and TDS Certificate [Rules 30, 31A & 31]
(i) Such sum deducted u/s 194-IA, 194-IB and 194M shall be paid to the
credit of the Central Government within a period of 30 days from the end
of the month in which the deduction is made and shall be accompanied by
a challan-cum-statement in Form No.26QB, 26QC and 26QD, respectively
[Rule 30].
(ii) The amount so deducted has to be deposited to the credit of the
Central Government by electronic remittance within the above
mentioned time limit, into RBI, SBI or any authorized bank [Rule 30].
Note - For the meaning of the terms “Work”, “Professional services” and “Commission
or brokerage” refer sub-heading “3.7 Payments to contractors and sub-contractors
[Section 194C]”, “3.19 Fees for professional or technical services [Section 194J]” and
“3.14 Commission or brokerage [Section 194H]”, respectively.
ILLUSTRATION 10
Examine whether TDS provisions would be attracted in the following cases, and if so,
under which section. Also specify the rate of TDS applicable in each case. Assume that
all payments are made to residents.
SOLUTION
Particulars of Nature of Aggregate of Whether TDS provisions
the payer payment payments in are attracted?
the F.Y.2021-
22
1 Mr. Ganesh, Contract ` 5 lakhs No; TDS under section
an individual Payment for 194C is not attracted since
carrying on repair of the payment is for
retail business residential personal purpose. TDS
with turnover house under section 194M is not
of ` 2.5 crores attracted as aggregate of
in the contract payment to the
P.Y.2020-21 payee in the P.Y.2021-22
does not exceed ` 50 lakh.
Payment of ` 80,000 Yes, u/s 194H, since the
commission payment exceeds ` 15,000,
to Mr. Vallish and Mr. Ganesh’s turnover
for business exceeds ` 1 crore in the
purposes P.Y.2020-21.
2. Mr. Rajesh, a Contract ` 55 lakhs Yes, u/s 194M, since the
wholesale Payment for aggregate of payments
trader whose reconstruction (i.e., ` 55 lakhs) exceed ` 50
turnover was of residential lakhs. Since, his turnover
` 95 lakhs in house does not exceed 1 crore in
P.Y. 2020-21 the P.Y.2020-21, TDS
provisions under section
194C are not attracted in
respect of payments made
in the P.Y.2021-22.
(3) Modification in rate of TDS and threshold limit of withdrawal for recipient
who has not furnished return of income for last 3 years
If the recipient has not furnished the returns of income for all the three
assessment years relevant to the three previous years, for which the time
limit of file return of income under section 139(1) has expired, immediately
preceding the previous year in which the payment of the sum is made, the
sum shall mean the amount or the aggregate of amounts, as the case
may be, in cash > ` 20 lakhs during the previous year, and the tax shall
be deducted at the rate of -
- 2% of the sum, where the amount or aggregate of amounts, as the
case may be, being paid in cash > ` 20 lakhs but ≤ ` 1 crore
- 5% of the sum, where the amount or aggregate of amounts, as the
case may be, being paid in cash > ` 1 crore.
However, the Central Government is empowered to specify, with the
consultation of RBI, by notification, the recipient in whose case this
provision shall not apply or apply at reduced rate, subject to the satisfaction
of the conditions specified in such notification.
(4) Non-applicability of TDS under section 194N
Liability to deduct tax at source under section 194N shall not be applicable
to any payment made to –
(i) the Government
(ii) any banking company or co-operative society engaged in carrying on
the business of banking or a post-office
(iii) any business correspondent of a banking company or co-operative
society engaged in carrying on the business of banking, in accordance
with the RBI guidelines
(iv) any white label ATM operator of a banking company or co-operative
society engaged in carrying on the business of banking, in accordance
with the authorisation issued by the RBI under the Payment and
Settlement Systems Act, 2007
The Central Government may specify, with the consultation of RBI, by
notification, the recipient in whose case section 194N shall not apply or
apply at reduced rate, subject to the satisfaction of the conditions specified
S. Term Meaning
No.
(i) Electronic The supply of goods or service or both, including
commerce digital products, over digital or electronic network.
(ii) E-commerce A person who owns, operates or manages digital or
operator electronic facility or platform for electronic
commerce.
(iii) E-commerce A person resident in India selling goods or providing
participant services or both, including digital products, through
digital or electronic facility or platform for electronic
commerce.
(iv) Services It includes fees for technical services and fees for
professional services as defined in section 194J.
S. Term Meaning
No.
(i) Specified A banking company as notified by the Central
bank Government
(ii) Specified An individual, being a resident in India, who
senior - is of the age of 75 years or more at any time
citizen during the previous year;
- is having pension income [Also, he should have no
other income except interest income received or
receivable from any account maintained by such
individual in the same specified bank in which he
is receiving his pension income]; and
- has furnished a declaration to the specified bank
containing such particulars, in the prescribed form
and verified in the prescribed manner.
Particulars ` `
I Salaries
Pension ( 52,000 x 12) 6,24,000
Less: Standard deduction u/s 16(ia) 50,000
5,74,000
II Income from Other Sources
Interest on fixed deposit (` 20 lakh x 8%) 1,60,000
Interest on savings account 9,500 1,69,500
Gross total income 7,43,500
Less: Deductions under Chapter VI-A
Under Section 80C
Five year term deposit (` 2 lakh, restricted 1,50,000
to ` 1.5 lakh)
Under section 80TTB
Interest on fixed deposit and savings account,
restricted to 50,000, since Mr. Sharma is a
resident Indian of the age of 77 years. 50,000 2,00,000
Total Income 5,43,500
(2) SBI, being a specified bank, is required to deduct tax at source u/s 194P (after
considering the tax, if any, deducted on pension u/s 192) and remit the same to
the Central Government. In such a case, Mr. Sharma would not be required to
file his return of income u/s 139.
(3) If the fixed deposit of ` 20 lakh is with a bank other than SBI, which is the bank
where his pension is credited, then, Mr. Sharma would not qualify as a “specified
senior citizen”, consequent to which SBI would not be liable to deduct tax under
section 194P. In this case, Mr. Sharma would have to file his return of income u/s
139, since his total income (without giving effect to deduction under Chapter VI-
A) exceeds the basic exemption limit.
It may be noted that in this case, TDS provisions u/s 192 would, in any case, be
attracted in respect of pension income. Further, Canara Bank would, be liable to
deduct tax@10% under section 194-A on interest on fixed deposit, since the
same exceeds ` 50,000.
3.26 Deduction of tax at source on purchase of goods [Section 194Q]
[w.e.f. 1.7.2021]
(1) Applicability and rate of TDS
Section 194Q requires any person, being a buyer who is responsible for
paying any sum to any resident-seller for purchase of goods of the value
or aggregate of such value exceeding ` 50 lakhs in a previous year, to deduct
tax at source @0.1% of such sum exceeding ` 50 lakhs.
(2) Time of deduction
The deduction is to be made at the time of credit of such sum to the account of
the resident-seller or at the time of payment thereof by any mode, whichever is
earlier.
Where such sum is credited to any account in the books of account of the person
liable to pay such income, such credit of income is deemed to be credit of such
income to the account of the payee and tax has to be deducted at source. The
account in the books of Mr. Gupta on the same date. Mr. Agarwal’s turnover for
F.Y.2020-21 was ` 15 crores.
(1) Based on the above facts, examine the TDS/TCS implications, if any, under the
Income-tax Act, 1961.
(2) Would your answer be different if Mr. Gupta’s turnover for F.Y.2020-21 was ` 8
crores, all other facts remaining the same?
(3) Would your answer to (1) and (2) change, if PAN has not been furnished by the
buyer or seller, as required?
SOLUTION
(1) Since Mr. Gupta’s turnover for F.Y.2020-21 exceeds 10 crores, and payments
made by him to Mr. Agarwal, a resident seller exceed ` 50 lakhs in the
P.Y.2021-22, he is liable to deduct tax@0.1% of ` 45 lakhs (being the sum
exceeding ` 50 lakhs) in the following manner –
No tax is to be deducted u/s 194Q on the payments made on 1.6.2021 and
12.8.2021, since the aggregate payments till that date i.e. 45 lakhs, has not
exceeded the threshold of ` 50 lakhs.
Tax of ` 1,700 (i.e., 0.1% of ` 17 lakhs) has to be deducted u/s 194Q from
the payment/ credit of ` 22 lakh on 23.11.2021 [` 22 lakh – ` 5 lakhs, being
the balance unexhausted threshold limit].
Tax of ` 2,800 (i.e., 0.1% of ` 28 lakhs) has to be deducted u/s 194Q from
the payment/ credit of ` 28 lakhs on 25.3.2022.
Note – In this case, since both section 194Q and 206C(1H) applies, tax has to
be deducted u/s 194Q.
(2) If Mr. Gupta’s turnover for the F.Y.2020-21 was only ` 8 crores, TDS
provisions under section 194Q would not be attracted. However, TCS
provisions under section 206C(1H) would be attracted in the hands of Mr.
Agarwal, since his turnover exceeds ` 10 crores in the F.Y.2020-21 and his
receipts from Mr. Gupta exceed ` 50 lakhs.
No tax is to be collected u/s 206C(1H) on 1.6.2021 and 12.8.2021, since the
aggregate receipts till that date i.e. 45 lakhs, has not exceeded the threshold
of ` 50 lakhs.
Tax of ` 1,700 (i.e., 0.1% of ` 17 lakhs) has to be collected u/s 206C(1H) on
23.11.2021 (` 22 lakh – ` 5 lakhs, being the balance unexhausted threshold
limit).
5
Specified under section 10(23D)
(ii) Payment to any person for, or on behalf of, the NPS Trust [Sub-
section (1E)]
No deduction of tax at source shall be made from any payment to any
person for, or on behalf of, the New Pension System Trust 6.
6
referred in section 10(44)
6. MISCELLANEOUS PROVISIONS
6.1 Tax deducted is income received [Section 198]
(1) All sums deducted in accordance with the foregoing provisions shall, for the
purpose of computing the income of an assessee, be deemed to be income
received.
(2) However, the following tax paid or deducted would not be deemed to be income
received by the assessee for the purpose of computing the total income–
(i) the tax paid by an employer under section 192(1A) on non-monetary
perquisites provided to the employees
(ii) tax deducted under section 194N
6.2 Credit for tax deducted at source [Section 199]
(1) Tax deducted at source in accordance with the above provisions and paid to
the credit of the Central Government shall be treated as payment of tax on
behalf of the-
(i) person from whose income the deduction was made; or
(ii) owner of the security; or
(iii) depositor; or
(d) Tax deducted under sections 194-IA, 194-IB and 194M have to be
remitted within 30 days from the end of the month of deduction. A
challan-cum-statement in Form 26QB/26QC/26QD has to be furnished
within 30 days from the end of the month of deduction.
(3) For the purpose of improving the reporting of payment of TDS made through
book entry and to make existing mechanism enforceable, it is provided that
where the tax deducted or tax referred to in section 192(1A) has been paid
without the production of a challan, the PAO/TO/CDDO or any other person,
by whatever name called, who is responsible for crediting such sum to the
credit of the Central Government, shall deliver or cause to be delivered within
the prescribed time a statement in the prescribed form, verified in the
prescribed manner and setting forth prescribed particulars to the prescribed
income-tax authority or the person authorized by such authority.
(4) The following persons are responsible for preparing such statements for
such periods as may be prescribed, after paying the tax deducted to the
credit of the Central Government within the prescribed time –
(i) any person deducting any sum on or after 1st April, 2005 in
accordance with the foregoing provisions of this chapter; or,
(ii) any person being an employer referred to in section 192(1A).
(5) Such statements have to be delivered or caused to be delivered to the
prescribed income-tax authority or the person authorized by such authority.
(6) Such statements should be in the prescribed form and verified in the
prescribed manner.
(7) It should set forth such particulars and should be delivered within such time
as may be prescribed.
(8) The deductor may also deliver to the prescribed authority, a correction
statement –
(a) for rectification of any mistake; or
(b) to add, delete or update the information furnished in the statement
delivered under section 200(3).
Rule 31A – Submission of quarterly statements
Every person responsible for deduction of tax under Chapter XVII-B shall deliver,
or cause to be delivered, the following quarterly statements to the DGIT (Systems)
or any person authorized by him, in accordance with section 200(3):
However, every person responsible for deduction of tax under section 194-IA,
194-IB or 194M have to furnish to the Principal Director General of Income-tax
(Systems) ( in case of sections 194-IB and 194M) or Director General of Income-
tax (System) or the person authorised by them, a challan-cum-statement in Form
No.26QB, 26QC or 26QD respectively, within thirty days from the end of the
month of deduction of tax.
6.4 Correction of arithmetic mistakes and adjustment of incorrect
claim during computerized processing of TDS statements [Section
200A]
(1) At present, all statements of tax deducted at source are filed in an electronic
mode, thereby facilitating computerised processing of these statements.
Therefore, in order to process TDS statements on computer, electronic
processing on the same lines as processing of income-tax returns has been
provided in section 200A.
(2) The following adjustments can be made during the computerized processing of
statement of tax deducted at source or a correction statement –
(i) any arithmetical error in the statement; or
SOLUTION
Interest under section 201(1A) would be computed as follows –
Particulars `
7
As per TRACES, interest is computed for 5 months
which tax has been deducted and such other particulars as may be
prescribed.
(2) Every person, being an employer, referred to in section 192(1A) shall, within
such period, as may be prescribed, furnish to the person in respect of whose
income such payment of tax has been made, a certificate to the effect that tax
has been paid to the Central Government, and specify the amount so paid, the
rate at which the tax has been paid and such other particulars as may be
prescribed.
(3) Certificate of TDS to be furnished under section 203 [Rule 31]
The certificate of deduction of tax at source to be furnished under section 203
shall be in Form No.16 in respect of tax deducted or paid under section 192
and in any other case, Form No.16A.
Form No.16 shall be issued to the employee annually by 15th June of the
financial year immediately following the financial year in which the income
was paid and tax deducted. Form No.16A shall be issued quarterly within 15
days from the due date for furnishing the statement of TDS under Rule 31A.
Form No. 16B, 16C or 16D shall be issued by the every person responsible
for deduction of tax under section 194-IA, 194-IB or 194M to the payee
within fifteen days from the due date for furnishing the challan-cum-
statement in Form No. 26QB, 26QC or 26QD, respectively, under rule 31A.
Note – The entire TDS process can be understood at a glance from the
diagram given in the next page. The reference to Rules and Forms are only for
the information of students. They are, however, not required to memorize the
Rule numbers and Form numbers for examination purposes.
Sections 193, 194A, 194C, 194D, 194E, 194G, Sections 192 8, 192A, 194, 194B, 194BB, 194DA, 194EE,
194H, 194-I/IA/IB/IC, 194J, 194K, 194M, 194O 194F, 194LA, 194N
Deduct tax at the time of credit to the Deduct tax at the time of payment
a/c of the payee or payment, Remittance [Rule 30]
whichever is earlier
Where tax is Where tax is paid (i) Cases (other than # (ii) (iii) (iv) (iv)
paid without accompanied by (ii), (iii) & (iv) u/s u/s u/s u/s
production of an IT challan 192/ 194- 194- 194M
challan 194A/ IA IB
194D/
Income/Amt is 194H
credited or paid in
March Any other
On the same day On or before 7 month Qtly payt 30 days from the end of the
days from the 30th On or before 7 7th July/ month of deduction
end of the month April days from the 7th Oct/ 7th
of deduction end of the Jan/ 30th
month of April
dedn.
PAO/TO/CDDO Furnishing Stt of TDS [Rule 31A] Rule 31A - Furnish Challan-
[Form 24Q/26Q/27Q] cum-stt in Form
Qtr ending Due date 26QB/26QC/26QD with 30
Submit Statement in Form 24G to 30th June 31st July days from the end of the
agency authorised by PDIT (Sys) 30th Sep 31st Oct month of deduction
31st Dec 31st Jan
31St March 31st May
6.8 Person responsible for paying taxes deducted at source [Section 204]
For purposes of deduction of tax at source the expression “person responsible for
paying” means:
(5) Such persons may be required to prepare statement for such period as may
be prescribed in the prescribed form and deliver or cause to be delivered
such statement within the prescribed time to the prescribed income-tax
authority or the person authorized by such authority.
(6) Such statements should be in the prescribed form, containing such
particulars and verified in the prescribed manner.
(7) Such person referred to in (1) and (4) above may also deliver to the
prescribed authority, a correction statement -
(a) for rectification of any mistake; or
(a) to add, delete or update the information furnished in the statement
delivered referred in (2) & (5) above.
6.11 Mandatory requirement of furnishing PAN in all TDS statements,
bills, vouchers and correspondence between deductor and
deductee [Section 206AA]
(1) The non-furnishing of PAN by deductees in many cases have led to delay in
issue of refund on account of problems in the processing of returns of
income and in granting credit for tax deducted at source.
(2) With a view to strengthening the PAN mechanism, section 206AA provides
that any person whose receipts are subject to deduction of tax at source i.e.
the deductee, shall mandatorily furnish his PAN to the deductor failing
which the deductor shall deduct tax at source at higher of the following
rates –
(i) the rate prescribed in the Act;
(ii) at the rate in force i.e., the rate mentioned in the Finance Act; or
(iii) at the rate of 20%. [5% in case tax is required to be deducted at
source u/s 194-O and 194Q]
For instance, in case of rental payment for plant and machinery, where the
payee does not furnish his PAN to the payer, tax would be deductible @20%
instead of @2% prescribed under section 194-I. However, non-furnishing of
PAN by the deductee in case of income by way of winnings from lotteries,
card games etc., would result in tax being deducted at the existing rate of
30% under section 194B. Therefore, wherever tax is deductible at a rate
higher than 20%, this provision would not have any impact.
9
or section 194LBC (this section will be dealt with at the Final level)
business of the enterprise is wholly or partly carried on. This concept and related
provisions will be dealt with at the Final level.
(10) The amount of advance tax payable by an assessee in the financial year
calculated by -
(i) the assessee himself based on his estimation of current income; or
(ii) the Assessing Officer as a result of an order under section 210(3) or
amended order under section 210(4)
is subject to the provisions of section 209(2), as per which the net
agricultural income has to be considered for the purpose of computing
advance tax.
7.3 Instalments of advance tax and due dates
(1) Common advance tax payment schedule for both corporates and non-
corporates [other than assessees computing profits on presumptive
basis under section 44AD(1) or section 44ADA(1)]:
Note - Any amount paid by way of advance tax on or before 31st March shall
also be treated as advance tax paid during each financial year ending on 31st
March.
(2) Advance tax payment by assessees computing profits on presumptive
basis under section 44AD(1)or section 44ADA(1)
An eligible assessee, opting for computation of profits or gains of business
on presumptive basis in respect of eligible business referred to in section
44AD(1) or for computation of profits or gains of profession on presumptive
basis in respect of eligible profession referred to in section 44ADA(1), shall
be required to pay advance tax of the whole amount in one instalment on
or before 15th March of the financial year.
However, any amount paid by way of advance tax on or before 31st March shall
also be treated as advance tax paid during each financial year ending on 31st
March.
(3) If the last day for payment of any instalment of advance tax is a day on
which the receiving bank is closed, the assessee can make the payment on
the next immediately following working day, and in such cases, the interest
leviable under sections 234B and 234C would not be charged.
(4) Where advance tax is payable by virtue of the notice of demand issued 11 by
the Assessing Officer, the whole or the appropriate part of the advance tax
specified in such notice shall be payable on or before each of such due
dates as fall after the date of service of notice of demand.
11
under section 156
(5) Where the assessee does not pay any instalment by the due date, he shall
be deemed to be an assessee in default in respect of such instalment.
7.4 Credit for advance tax [Section 219]
Any sum, other than interest or penalty, paid by or recovered from an assessee as
advance tax, is treated as a payment of tax in respect of the income of the
previous year and credit thereof shall be given in the regular assessment.
7.5 Interest for non-payment or short-payment of advance tax
[Section 234B]
(1) Interest under section 234B is attracted for non-payment of advance tax or
payment of advance tax of an amount less than 90% of assessed tax.
(2) The interest liability would be 1% per month or part of the month from
1st April following the financial year upto the date of determination of
income under section 143(1).
(3) Such interest is calculated on the amount of difference between the
assessed tax and the advance tax paid.
(4) Assessed tax is the tax calculated on total income less
- tax deducted or collected at source.
- any relief of tax allowed under section 89
- any tax credit allowed to be set off in accordance with the provisions
of section 115JD
(5) However, where self-assessment tax is paid by the assessee under section
140A or otherwise, interest shall be calculated upto the date of payment of
such tax and reduced by the interest, if any, paid under section 140A
towards the interest chargeable under this section. Thereafter, interest shall
be calculated at 1% on the amount by which the tax so paid together with
the advance tax paid falls short of the assessed tax.
7.6 Interest payable for deferment of advance tax [Section 234C]
(a) Manner of computation of interest under section 234C for deferment
of advance tax by corporate and non-corporate assessees:
In case an assessee, other than an assessee who declares profits and
gains in accordance with the provisions of section 44AD(1) or section
44ADA(1), who is liable to pay advance tax under section 208 has failed to
pay such tax or the advance tax paid by such assessee on its current income
Note – However, if the advance tax paid by the assessee on the current income,
on or before 15th June or 15th September, is not less than 12% or 36% of the
tax due on the returned income, respectively, then, the assessee shall not be
liable to pay any interest on the amount of the shortfall on those dates.
(b) Computation of interest under section 234C in case of an assessee who
declares profits and gains in accordance with the provisions of section
44AD(1) or section 44ADA(1):
In case an assessee who declares profits and gains in accordance with the
section 44AD(1) or section 44ADA(1), as the case may be, who is liable to
pay advance tax under section 208 has failed to pay such tax or the advance
tax paid by the assessee on its current income on or before 15th March is
less than the tax due on the returned income, then, the assessee shall be
liable to pay simple interest at the rate of 1% on the amount of the shortfall
from the tax due on the returned income.
Term Meaning
(i) Overseas For section 206C(1G)
tour Any tour package which offers visit to a country/(ies) or
program territory/(ies) outside India. It includes expenses for
package travel or hotel stay or boarding or lodging or any other
expenditure of similar nature or in relation thereto.
[Clause (ii) of Explanation to section 206C(1G)]
12
as defined in Explanation to section 10(20)
(3) Higher rate of TCS for non-filers of income-tax return and non-
furnishers of PAN [Section 206CCA & 206CC]
(i) Section 206CCA requires tax to be collected at source under the
TDS TCS
(1) TDS is tax deduction at source TCS is tax collection at source.
(2) Person responsible for paying (i) Seller of certain goods is
is required to deduct tax at responsible for collecting tax
source at the prescribed rate. at source at the prescribed
rate from the buyer.
(ii) Person who grants licence or
lease (in respect of any
parking lot, toll plaza, mine or
quarry) is responsible for
collecting tax at source at the
prescribed rate from the
licensee or lessee, as the case
may be.
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
9.102
192 Salary Basic exemption limit Any person Individual Average rate At the time of
responsible for (Employee) of income- payment 13
(` 2,50,000 / `3,00,000,
paying any tax
as the case may be).
income computed
This is taken care of
chargeable under on the basis
in computation of the
the head of the rates
average rate of
“Salaries in force.
income-tax.
192A Premature Payment or Trustees of the Individual 10% [In case At the time of
withdrawal aggregate payment ≥ EPF Scheme or (Employee) of failure to payment
from Employee ` 50,000 any authorised furnish PAN,
Provident Fund person under the TDS@
Scheme Maximum
Marginal
Rate]
193 Interest on > ` 10,000 in a F.Y., in Any person Any resident 10% At the time of credit
Securities case of interest on responsible for of such income to
8% Savings (Taxable) paying any the account of the
Bonds, 2003/7.75% income by way of payee or at the
13
Except in case of TDS on perquisite of ESOP provided by eligible start-up
9.103
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
payment deduction of tax at deduction
source
Savings (Taxable) interest on time of payment,
Bonds, 2018. securities whichever is earlier.
> ` 5,000 in a F.Y., in
case of interest on
debentures issued by
a Co. in which the
public are
substantially
interested, paid or
credited to a resident
194 Dividend > ` 5,000 in a F.Y., in The Principal Resident 10% Before making any
ADVANCE TAX, TDS AND INTRODUCTION TO TCS
dividend.
other cases
194A Interest other > ` 40,000 in a F.Y., in Any person Any Resident 10% At the time of credit
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
payment deduction of tax at deduction
source
9.104
194B Winnings from > ` 10,000 The person Any Person 30% At the time of
any lottery, responsible for payment
crossword paying income
puzzle or card by way of such
game or other winnings
game of any sort
9.105
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
payment deduction of tax at deduction
source
194BB Winnings from > ` 10,000 Book Maker or a Any Person 30% At the time of
horse race person holding payment
licence for horse
racing or for
arranging for
wagering or
betting in any race
course.
194C Payments to Single sum credited Central/State Any Resident 1% of sum At the time of
operative society,
credited, if
Individual/HUF need university
the payee is
not deduct tax where established under
any other
sum is credited or Central/State/
person.
paid exclusively for Provincial Act,
personal purposes declared university
9.105
individual/HUF
whose total sales,
gross receipts or
turnover from
business or
profession
exceeds ` 1 crore
in case of
business or ` 50
lakhs in case of
the immediately
preceding F.Y.
194D Insurance > ` 15,000 in a Any person Any Resident 5% At the time of
Commission financial year responsible for credit of such
paying any income to the
income by way of account of the
remuneration or payee or at the
reward for time of payment,
soliciting or whichever is earlier.
procuring
insurance
business
194DA Any sum under ≥ ` 1,00,000 Any person Any resident 5% of the At the time of
a Life (aggregate amount of responsible for amount of
9.107
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
payment deduction of tax at deduction
source
Insurance payment to a payee in paying any sum income payment
Policy a financial year) under a LIP, comprised
including the sum
allocated by way
of bonus
194G Commission > ` 15,000 in a Any person Any person 5% At the time of
on sale of financial year responsible for stocking, credit of such
9.107
194H Commission or > ` 15,000 in a Any person (other Any resident 5% At the time of
brokerage financial year than an credit of such
income to the
Individual or HUF
account of the
whose total sales,
payee or at the
gross receipts or
turnover from
whichever is
business or
earlier.
profession do not
exceed ` 1 crore
in case of
business or ` 50
lakhs in case of
profession during
the immediately
preceding F.Y.)
responsible for
paying
commission or
brokerage.
9.109
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
payment deduction of tax at deduction
source
194-I Rent > ` 2,40,000 in a Any person (other Any resident For P & M or At the time of
financial year than an individual equipment- credit of such
or HUF whose total 2% income to the
sales, gross account of the
receipts or payee or at the
turnover from For land or time of payment,
business or building, land whichever is
profession carried appurtenant earlier.
on by him do not to a building,
exceed ` 1 crore in furniture or
paying rent.
compensation for
compulsory
acquisition of
immovable
property other
than rural
agricultural land)
194-IB Payment of > ` 50,000 for a Individual/ HUF Any Resident 5% At the time of credit
rent by certain month or part of a (other than of rent, for the last
194-IC Payment under No threshold Any person Any Resident 10% At the time of
specified specified. responsible for credit of such
agreement paying any sum income to the
referred to in by way of account of the
section 45(5A) consideration, payee or at the
not being time of payment,
consideration in whichever is
kind, under a earlier.
registered
agreement,
consideration,
being a share in
L or B or both in
such project, with
payment of part
consideration in
9.111
cash.
194J Fees for > ` 30,000 in a Any person, Any Resident 2% - Payee At the time of
professional or financial year, for other than an engaged credit of such sum
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
payment deduction of tax at deduction
source
9.112
194K Income on > ` 5,000 in a Any person Any resident 10% At the time of
units other financial year responsible for credit of such sum
than in the paying any income to the account of
nature of in respect of units the payee or at
capital gains of a mutual the time of
fund/Administrator payment,
194LA Compensation > ` 2,50,000 in a Any person Any Resident 10% At the time of
on acquisition financial year responsible for payment
ADVANCE TAX, TDS AND INTRODUCTION TO TCS
immovable
property
Section Nature of Threshold Limit for Payer Payee Rate of TDS Time of
payment deduction of tax at deduction
source
9.114
194M - Payments to > ` 50,00,000 in a Individual or HUF Any Resident 5% At the time of
Contractors financial year other than those credit of such sum
who are required to the account of
- Commission
to deduct tax at the payee or at
or brokerage
source under the time of
- Fees for section 194C or payment,
professional 194H or 194J whichever is
services earlier.
194N Cash > ` 1 crore - a banking Any person @2% of At the time of
exceeds ` 1
crore
194-O Sale > ` 5 lakhs, being E-commerce E-commerce 1% of gross At the time of
consideration gross amount of sales operator, who participant amount of credit of such sum
or or service or both in a facilitates sale of sale or to the account of
consideration financial year to an e- goods or service or the payee or at
9.115
turnover from
business exceeds
` 10 crores during
the FY
immediately
preceding the FY
in which the
9.117
purchase of goods
is carried out.
9.118 INCOME TAX LAW
Notes –
(1) Section 206AA requires furnishing of PAN by the deductee to the deductor,
failing which the deductor has to deduct tax at the higher of the following
rates, namely, -
(i) at the rate specified in the relevant provision of the Income-tax Act,
1961; or
(ii) at the rate or rates in force; or
(iii) at the rate of 20% and in case of section 194-O and 194-Q, 5%
(2) Section 206AB requires tax to be deducted at source under the provisions of
this Chapter on any sum or income or amount paid, or payable or credited, by
a person (deductee) to a specified person, at higher of the following rates –
(j) at twice the rate prescribed in the relevant provision of the Act;
(ii) at twice the rate or rates in force i.e., the rate mentioned in the Finance
Act; or
(iii) at 5%
However, section 206AB is not applicable in case of tax deductible at source
under sections 192, 192A, 194B, 194BB 14 or 194N.
Meaning of “specified person” – A person who has not filed the returns of
income for both of the two assessment years relevant to the two
previous years immediately prior to the previous year in which tax is
required to be deducted, for which the time limit of filing return of income
under section 139(1) has expired, and the aggregate of tax deducted at
source and tax collected at source in his case is ` 50,000 or more in
each of these two previous years.
(3) In case the provisions of section 206AA are also applicable to the specified
person, in addition to the provisions of this section, then, tax is required to be
deducted at higher of the two rates provided in section 206AA and section
206AB.
(4) The threshold limit given in column (3) of the table is with respect to each
payee.
14
or section 194LBC (this section will be dealt with at the Final level)
the rate of 2%, at the time of debiting of the amount payable by the
licensee or lessee to his account or at the time of receipt of such
amount from the licensee or lessee in cash or by the issue of a cheque
or draft or by any other mode, whichever is earlier
(c) Every person, being a seller, who receives any amount as
consideration for sale of a motor vehicle of the value exceeding ` 10
lakhs, shall, at the time of receipt of such amount, collect tax from the
buyer@1% of the sale consideration.
(d) Every person,
- being an authorized dealer, who receives amount under the
Liberalised Remittance Scheme of the RBI for overseas remittance
from a buyer, being a person remitting such amount out of India,
- being seller of an overseas tour programme package who
receives any amount from the buyer who purchases the package
has to collect tax at the rate of 5% of such amount at the time of
debiting of the amount payable by the buyer or at the time of receipt of
such amount from the said buyer by any mode, whichever is earlier.
Rate of TCS in case of collection by an authorized dealer
S. Amount and purpose of remittance Rate of
No. TCS
(i) (a) Where the amount is remitted for a Nil
purpose other than purchase of overseas (No tax to
tour programme package; and be
(b) the amount or aggregate of the amounts collected at
being remitted by a buyer is less than ` 7 source)
lakhs in a financial year
Particulars `
2020-21 1,05,00,000
2021-22 95,00,000
Examine whether tax deduction at source provisions are attracted for the below said
expenses incurred during the financial year 2021-22:
Particulars `
Interest paid to UCO Bank on 15.8.2021 41,000
Contract payment to Raj (2 contracts of ` 12,000 each) on 24,000
12.12.2021
Shop rent paid (one payee) on 21.1.2022 2,50,000
Commission paid to Balu on 15.3.2022 7,000
Answer
As the turnover of business carried on by Ashwin for F.Y. 2020-21, has exceeded
` 1 crore, he has to comply with the tax deduction provisions during the financial
year 2021-22, subject to, the exemptions provided for under the relevant sections
for applicability of TDS provisions.
Interest paid to UCO Bank
TDS under section 194A is not attracted in respect of interest paid to a banking
company.
Contract payment of ` 24,000 to Raj for 2 contracts of ` 12,000 each
TDS provisions under section 194C would not be attracted if the amount paid to a
contractor does not exceed ` 30,000 in a single payment or ` 1,00,000 in the
aggregate during the financial year. Therefore, TDS provisions under section 194C
are not attracted in this case.
Shop Rent paid to one payee – Tax has to be deducted@10% under section
194-I as the annual rental payment exceeds ` 2,40,000.
Commission paid to Balu – No, tax has to be deducted under section 194H in this
case as the commission does not exceed ` 15,000.
Question 2
Compute the amount of tax deduction at source on the following payments made
by M/s. S Ltd. during the financial year 2021-22 as per the provisions of the
Income-tax Act, 1961.
Answer
(i) No tax is required to be deducted at source under section 194C by M/s S
Ltd. on payment to transporter Mr. R, since he satisfies the following
conditions:
(1) He owns ten or less goods carriages at any time during the previous
year.
(2) He is engaged in the business of plying, hiring or leasing goods
carriages;
(3) He has furnished a declaration to this effect along with his PAN.
(ii) As per section 194J, liability to deduct tax is attracted only in case the
payment made as fees for technical services and royalty, individually,
exceeds ` 30,000 during the financial year. In the given case, since, the
individual payments for fee of technical services i.e., ` 25,000 and royalty
` 20,000 is less than ` 30,000 each, there is no liability to deduct tax at
source. It is assumed that no other payment towards fees for technical
services and royalty were made during the year to Mr. Shyam.
(iii) Provisions of section 194C are not attracted in this case, since the payment
for repair of building on 30.06.2021 to M/s. X Ltd. is less than the threshold
limit of ` 30,000.
(iv) According to section 194C, the definition of “work” does not include the
manufacturing or supply of product according to the specification by
customer in case the material is purchased from a person other than the
customer or associate of such customer.
Therefore, there is no liability to deduct tax at source in respect of payment
of ` 2,00,000 to Mr. A, since the contract is a contract for ‘sale’.
(v) As per section 194LA, any person responsible for payment to a resident, any
sum in the nature of compensation or consideration on account of compulsory
acquisition under any law, of any immovable property, is responsible for
deduction of tax at source if such payment or the aggregate amount of such
payments to the resident during the financial year exceeds ` 2,50,000.
In the given case, no liability to deduct tax at source is attracted as the
payment made does not exceed ` 2,50,000.
(vi) As per section 194H, tax is deductible at source if the amount of
commission or brokerage or the aggregate of the amounts of commission
or brokerage credited or paid during the financial year exceeds ` 15,000.
Since the commission payment made to Mr. Y does not exceed ` 15,000, the
provisions of section 194H are not attracted.
Question 3
Examine the applicability of TDS provisions and TDS amount in the following cases:
(a) Rent paid for hire of machinery by B Ltd. to Mr. Raman ` 2,60,000 on
27.9.2021.
(b) Fee paid on 1.12.2021 to Dr. Srivatsan by Sundar (HUF) ` 35,000 for surgery
performed on a member of the family.
(c) ABC and Co. Ltd. paid ` 19,000 to one of its Directors as sitting fees on
01-01-2022.
Answer
(a) Since the rent paid for hire of machinery by B. Ltd. to Mr. Raman exceeds
` 2,40,000, the provisions of section 194-I for deduction of tax at source are
attracted.
The rate applicable for deduction of tax at source under section 194-I on
rent paid for hire of plant and machinery is 2%, assuming that Mr. Raman
had furnished his permanent account number to B Ltd.
Therefore, the amount of tax to be deducted at source:
= ` 2,60,000 x 2% = ` 5,200.
Note: In case Mr. Raman does not furnish his permanent account number
to B Ltd., tax shall be deducted @ 20% on ` 2,60,000, by virtue of provisions
of section 206AA.
(b) As per the provisions of section 194J, a Hindu Undivided Family is required
to deduct tax at source on fees paid for professional services only if the
total sales, gross receipts or turnover form the business or profession
exceed ` 1 crore in case of business or ` 50 lakhs in case of profession, as
the case may be, in the financial year preceding the current financial year
and such payment made for professional services is not exclusively for the
personal purpose of any member of Hindu Undivided Family.
Section 194M, provides for deduction of tax at source by a HUF (which is
not required to deduct tax at source under section 194J) in respect of fees
for professional service if such sum or aggregate of such sum exceeds ` 50
lakhs during the financial year.
In the given case, the fees for professional service to Dr. Srivatsan is paid on
1.12.2021 for a personal purpose, therefore, section 194J is not attracted.
Section 194M would have been attracted, if the payment or aggregate of
payments exceeded ` 50 lakhs in the P.Y.2021-22. However, since the
payment does not exceed ` 50 lakh in this case, there is no liability to
deduct tax at source under section 194M also.
(c) Section 194J provides for deduction of tax at source @10% from any sum
paid by way of any remuneration or fees or commission, by whatever name
called, to a resident director, which is not in the nature of salary on which
tax is deductible under section 192. The threshold limit of ` 30,000 upto
which the provisions of tax deduction at source are not attracted in respect
of every other payment covered under section 194J is, however, not
applicable in respect of sum paid to a director.
(3) Under section 194BB, tax is to be deducted at source, if the winnings from
horse races exceed ` 10,000. The rate of deduction of tax at source is 30%.
Hence, tax to be deducted = ` 1,50,000 x 30% = ` 45,000.
(4) As per section 194LA, any person responsible for payment to a resident, any
sum in the nature of compensation or consideration on account of
compulsory acquisition under any law, of any immovable property, is
required to deduct tax at source, if such payment or the aggregate amount
of such payments to the resident during the financial year exceeds
` 2,50,000.
In the given case, there is no liability to deduct tax at source as the payment
made to Mr. A does not exceed ` 2,50,000.
Question 5
Briefly discuss the provisions relating to payment of advance tax on income arising
from capital gains and casual income.
Answer
The proviso to section 234C contains the provisions for payment of advance tax in
case of capital gains and casual income.
Advance tax is payable by an assessee on his/its total income, which includes
capital gains and casual income like income from lotteries, crossword puzzles, etc.
Since it is not possible for the assessee to estimate his capital gains, or income
from lotteries etc., it has been provided that if any such income arises after the
due date for any instalment, then, the entire amount of the tax payable (after
considering tax deducted at source) on such capital gains or casual income
should be paid in the remaining instalments of advance tax, which are due.
Where no such instalment is due, the entire tax should be paid by 31st March of
the relevant financial year.
No interest liability on late payment would arise if the entire tax liability is so
paid.
Note: In case of casual income the entire tax liability is fully deductible at source
@30% under section 194B and 194BB. Therefore, advance tax liability would arise
only if the surcharge, if any, and health and education cess@4% in respect thereof,
along with tax liability in respect of other income, if any, is ` 10,000 or more.
Question 6
Mr. Jay having total income of ` 8,70,000, did not pay any advance tax during the
previous year 2021-22. He wishes to pay the whole of the tax, along with interest if
any, on filing the return in the month of July, 2022. What is total tax which Mr. Jay
has to deposit as self-assessment tax along with interest, if he files the return on
29.07.2022? Assume that he does not exercise the option under section 115BAC.
Answer
Obligation to pay advance tax arises in every case, where the advance tax payable
is ` 10,000 or more. As a consequence of such failure, assessee may be charged
with interest under section 234B and 234C.
In the given case, since Mr. Jay did not deposit any amount of advance tax during
the previous year, he will need to pay the total tax due on his income along with
interest for default in payment of advance tax [under section 234B] and interest
for deferment of advance tax [under section 234C] before filing of his return.
Total tax due on returned income of ` 8,70,000 is ` 89,960 [(20% of ` 3,70,000 +
` 12,500) + cess@4%]
Interest under section 234B
Interest under section 234B is attracted - a) When the assessee, who is liable to
pay advance tax has failed to pay such tax; or b) Where the advance tax paid by
the assessee is less than 90% of the assessed tax.
Since, Mr. Jay did not pay any amount as advance tax, interest under section 234B at
1% per month or part of the month will be levied beginning from 1st April of the
following year i.e., 01.04.2022 till the time he deposits the whole tax under self-
assessment.
Interest will be levied on tax liability of ` 89,900 (rounded off to nearest hundred,
ignoring fraction) at 1% for four months i.e., from 1st April to 29th July.
The interest under section 234B amount to ` 3,596
Interest under section 234C
Assessees, other than assessees who declare profits and gains in accordance with
provision of section 44AD(1) or section 44ADA(1), are liable to pay advance tax in
4 installments during the previous year. Section 234C is attracted, if the actual
installment paid by the assessee is the less than the amount required to be paid
by him on such instalments. The interest shall be calculated at 1% per month or
Mr. Jay needs to pay ` 98,091 as total of tax and interest on or before filing of
return in the month of July, 2022.