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22 TDS

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These notes are incomplete without our videos. Study from these notes at your own risk.

We keep on updating our books, notes and videos. We have discussed everything in
our video classes. www.neerajaroraclasses.com Amendments and updates will be taught in classes and videos. Extra notes and charts will also be given. ₹

TDS
Basic Points

Deduction of tax at source and advance payment - Section 190

The total income of an assessee for the previous year is taxable in the relevant assessment year. For example,
the total income for the P.Y.20XX-YY is taxable in the A.Y.20YY-ZZ.

However, the income-tax is recovered from the assessee in the previous year itself through –
● Tax deduction at source (TDS)
● Tax collection at source (TCS)
● Payment of advance tax

These taxes are deductible from the total tax due from the assessee.

After adjusting TDS, TCS, Relief u/s 89, and Tax Credit under section 115JD, advance tax, any tax payable
according to the provisions of section 191(2) assessee has to pay balance tax also called self-assessment tax
under section 140A, while filing his return of income.

Liability to Deduct TDS

The person paying the payment (payer) is liable to deduct TDS on the amount paid to the payee.

On what amount TDS is required to be deducted and what will be the percentage of deduction will depend upon
the nature of amount paid, for example there are different provisions for deduction in case of rent, salary, fee
for professional consultancy.

TAN
The person deducting the TDS (Payer) shall get himself registered with the prescribed authority and shall get
his TAN (tax deduction and collection account number).

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No TDS
No tax shall be deducted if the payment is made to Government, RBI, Banks, Specified Mutual Funds or any
statutory corporation.

TDS, part of income

While computing gross total income, income shall be taken into account inclusive of TDS. For example, if there is
lottery income given in question Rs. 70,000, after deducting TDS @ 30%, it means gross income was Rs. 1,00,000.
While calculating GTI we will consider 1,00,000 as income under the head of other sources.

Credit of TDS
While calculating Net Tax payable TDS shall be deducted from the tax liability, for example in the above
situation total tax liability is Rs. 45,000 (30,000 on lottery and 15,000 on other income), the assessee will pay
only 15,000 after taking credit of TDS (Rs. 30,000) on lottery.

Proof of TDS
Every person deducting TDS shall give acknowledgement to the deductee in prescribed form. The prescribed
form are
● Form 16 if deduction is made from salary income
● Form 16A in other cases.
● Specific forms in few other cases - Will be discussed in the class

PAN
It is mandatory for deductee to furnish his PAN to deductor, otherwise higher of following
rates will be applicable for TDS-
● the rates prescribed in the act or
● 20%.

In some cases instead of 20%, it is 5% - These cases will be discussed with the relevant section itself.

Time for deduction

The general rule is that TDS shall be deducted at the time of Payment or credit in books of account whichever is
earlier.

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In case of salary income TDS is NOT required to be deducted at the time of credit it has to be deducted at the
time of actual payment only.

In the following section TDS is deducted at the time of Payment - 192 (with one exception) , 192A, 194, 194B,
194BB, 194DA, 194EE, 194F, 194LA, 194N

Time for Deposit of TDS deducted

Monthly - All other than 192/ 194A/ 194D/ 194H

Situation Time of Deposit

For the month of March On or before 30th April
Other months Within 7 days from the end of the month in which deduction is made.

Quarterly - 192/ 194A/ 194D/ 194H

- 7 th July/ 7 th Oct/ 7 th Jan/ 30th April

Filing of return / Statement of TDS

The quarterly return of TDS shall be filed by the following dates

S.No. Quarter ending on Date of filing statement

1. 30th June 31st July of the financial year
2. 30th September 31st October of the financial year
3. 31st December 31st January of the financial year
4. 31st March 31st May of the financial year immediately following the financial
in which such deduction is made.

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Certificate of Lower deduction of TDS (Application to AO, AO Satisfy –

Certificate – Deduct TDS at lower rate unless certificate is cancelled –
PAN is must)

➔ Assessee can make an application to AO

➔ For deduction of tax at a lower rate or for non-deduction of tax.
➔ (Except in the case of the casual income).
➔ If AO is satisfied that his application is justified
➔ he may give the assessee such a certificate.
➔ Once the assessee furnishes the certificate,
➔ the person liable to deduct tax shall deduct tax at a lower rate or deduct no tax,
➔ as the case may be,
➔ until the certificate is cancelled by AO.
➔ No such benefit shall be there if the application does not contain the PAN of the assessee.

Applicable for 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194M and 194-O.

No deduction of TDS – Section 197A

➔ If tax on estimated income + income to be received under section 193 or 194A is nil
➔ and the assessee gives a declaration
➔ to the person responsible for deduction of TDS
➔ that his tax liability on estimated income + income to be received from him is nil,
➔ then no deduction of tax shall be there under section 193 (interest on securities) & 194A (Interest
otherwise than on security).

➔ No Such benefit shall be there if income to be received u/s 193 & 194A exceeds exemption limit.

➔ But in case of senior citizens such benefits shall be available irrespective of the fact that such income is
greater than the exemption limit.

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➔ NOTE Now 197A is applicable to 192A, 193, 194A, 194D, 194DA, 194I 194K – It simply means in these
sections assessee can give declaration in prescribed form and Payer will not deduct TDS on any payment
to the payee (assessee)

Direct payment. - Section 191

In the case of income

● in respect of which provision is not made under this Chapter for deducting income-tax at the time of
payment, and
● in any case where income-tax has not been deducted in accordance with the provisions of this Chapter,

income-tax shall be payable by the assessee directly.

For the purposes of paying income-tax directly by the assessee under sub-section (1),
● if the income of the assessee in any assessment year, beginning on or after the 1st day of April, 2021,
includes income of the nature specified in clause (vi) of sub-section (2)of section 17 and
● such specified security or sweat equity shares referred to in the said clause are allotted or transferred
directly or indirectly by the current employer, being an eligible start-up referred to in section 80-IAC,

● the income-tax on such income shall be payable by the assessee within fourteen days of the earliest
○ after the expiry of forty-eight months from the end of the relevant assessment year; or
○ from the date of the sale of such specified security or sweat equity share by the assessee; or
○ from the date of the assessee ceasing to be the employee of the employer who allotted or
transferred him such specified security or sweat equity share,

NOTES
● Income will be chargeable in the year of allotment.
● Tax is not required to be paid / deducted in the same year.
● Tax will be deducted / paid in the year as described above.
● Rates of tax will be used for the year in which shares were allotted.

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Section 192 - Salary

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Basic exemption Any person Individual Average rate of At the time of

limit responsible for (Employee) income- tax payment
(Rs.2,50,000/Rs. paying any income computed on the
3,00,000 or 5,00,000 chargeable under basis of the rates
as the case may the head “Salaries in force.
be). This is taken
care of in
computation of the
average rate of
income-tax.

No TDS will be deducted from the salary paid to the partner of the firm.

Steps for deducting TDS from Salary

● Compute the income under head salary

● Consider income under any other head reported by employee
● Give Deductions under Chapter VI-A
● Set-off the loss under head house property
● Calculate Income tax at the rates in force.
● Divide the income tax by 12/or period of employment

Person responsible for paying income chargeable under the head "Salaries" to obtain proof or
evidence or particulars of prescribed deductions/ exemptions/set- off of losses claimed by the
assessee [Section 192(2D)]

● For ensuring clarity and uniformity, sub-section (2D) has been inserted in section 192
● to cast responsibility on the person responsible for paying any income chargeable under the head
"Salaries"

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● To obtain from the assessee, the evidence or proof or particulars of prescribed claims (including claim for
set-off of loss) under the provisions of the Act in the prescribed form and manner, for the purposes of -
○ estimating income of the assessee; or
○ computing tax deductible under section 192(1).

In simple words Employer will be responsible for the evidence of the claims made by assessee

Deferment of TDS obligation in case of Specified Securities Included in Salary

Finance Act, 2020 inserts sub-section (1C) in section 192, with effect from 1-4-2020, to provide for deferment of
TDS obligations and stipulates as follows:—

● the employer should be an eligible start-up referred to in section 80-IAC;

● the employer is obliged to deduct tax on salary income under section 192(1) [Monetary payment] and
section 192(1A) [non-monetary income i.e. perquisites];
● income included in salary is perquisite of the nature specified in section 17(2)(vi) [i.e. allotment or
transfer of specified security or sweat equity shares, free of cost or at concessional rate ("ESOP")];
● Tax to be deducted on the basis of rates in force of the financial year in which the said specified security
or sweat equity shares is allotted or transferred;
● Tax to be deducted or paid on such income shall be deferred and deducted/paid, within 14 days, at the
earliest of the happening of the following:—
○ After the expiry of forty-eight months from the end of relevant assessment year; or
○ From the date of the sale of such specified security or sweat equity share by the assessee (i.e.
employee); or
○ From the date on which the assessee ceases to be the employee of the person.

Section 192A - Premature withdrawal from Employee Provident Fund

TDS Not Required Payer Payee Rate of TDS Time of Deduction

No deduction under Trustees of the EPF Individual 10% At the time of

this section shall be Scheme or any (Employee) payment
made where the authorised person
NOTE : 197A is
amount of such under the Scheme
applicable
payment or, as the

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case may be, the

aggregate amount
of such payment to
the payee is less
than fifty thousand
rupees

Any person entitled to receive any amount on which tax is deductible under this section has to furnish his PAN
to the person responsible for deducting such tax. In case he fails to do so, tax would be deductible at the
maximum marginal rate.

Section 193 - Interest on Securities

TDS Not Required Payer Payee Rate of TDS Time of Deduction

1. On certain Any person Any resident 10% At the time of

securities, if responsible for payment or credit
interest is paying any income whichever is earlier
NOTE : 197A is
exempt - NO by way of interest
applicable
TDS on securities

2. 8% savings
(Taxable) Bonds,
2003 or 7.75%
savings
(Taxable) Bonds,
2018 upto Rs.
10,000 No TDS

3. In case of
interest on
debentures
issued by a Co.
in which the
public are
substantially

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interested,paid
or credited to a
resident
individual or HUF
by an A/c payee
cheque. No TDS
upto Rs. 5,000

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Dividends Section 194

● The principal officer of a domestic company is required to deduct tax on dividends distributed or paid by
it to its resident shareholders.

● Rate of TDS The rate of deduction of tax in respect of such dividend is - 10%.

● Time of tax deduction at source The deduction of tax has to be made before making any payment by
any mode in respect of any dividend or before making any distribution or payment to a resident
shareholder of any amount deemed as dividend under section 2(22)(a)/ (b)/(c)/(d)/(e).

● No tax is to deducted in case of a shareholder, being an individual, where -

○ the dividend is paid by any mode other than cash; and
○ the amount of such dividend or aggregate of dividend distributed or paid or likely to be
distributed or paid during the financial year by the company to such shareholder does not exceed
Rs. 5,000.

● The TDS provisions will not apply to such dividends credited or paid to 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.

● Section 197A is applicable - No TDS if declaration is given in prescribed form.

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Section 194A - Interest other than interest on securities to residents

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Payer is Any person Any resident 10% At the time of

● Banking payment or credit
Company or whichever is earlier
SPECIAL POINT - NOTE : 197A is
● Cooperative I/HUF Payer applicable
society engaged
in banking
An individual or
business or
Hindu Undivided
● a post office on Family shall be
any deposit required to deduct
under a tax at source if
notified turnover / total
scheme. sales / Gross
receipts exceeds
No TDS is required ● Business - 1
if amount does not crore
exceed Rs. 40,000 ● Profession
50 Lakhs
In case of senior In the preceding
citizen receiving financial year.
interest from above
3 - No TDS upto Rs.
50,000

In any other case

Amount is Rs.
5,000.

Other Points Section 194A

● This section is applicable on Fixed deposits and recurring deposits
○ but not savings bank account interest.
● Co-operative banks deduct tax at source on interest on time deposits credited or paid to its members.

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● The threshold limit will be calculated with reference to the total interest credited or paid by the banking
company or the co-operative society or the public company, as the case may be, (and not with reference
to each branch), where such a banking company or co-operative society or public company has adopted
core banking solutions.
● 194A is not applicable on such income credited or paid by a firm to a partner of the firm.
● Deduction of tax under this section from interest on the compensation amount awarded by the Motor
Accidents Claims Tribunal shall be made only at the time of payment and that too only if the amount of
interest payment or the aggregate amount of such interest payments during the financial year exceeds
Rs. 50,000.
● In case of minors where both the parents have deceased, TDS on the interest income accrued to the
minor is required to be deducted and reported against PAN of the minor child unless a declaration is
filed under Rule 37BA(2) that credit for tax deducted has to be given to another person.

● The CBDT has clarified that interest on FDRs made in the name of Registrar General of the Court or the
depositor of the fund on the directions of the Court, will not be subject to TDS till the matter is decided
by the Court. However, once the Court decides the ownership of the money lying in the fixed deposit, the
provisions of section 194A will apply to the recipient of the income.

● Deduction of tax at source on interest on deposits made under Capital Gains Accounts Scheme, 1988
where the depositor has deceased.

○ TDS on the interest income accrued for and upto the period of death of the depositor is required
to be deducted and reported against PAN of the depositor, and

○ TDS on the interest income accrued for the period after death of the depositor is required to be
deducted and reported against PAN of the legal heir,

unless a declaration is filed under Rule 37BA(2) that credit for tax deducted has to be given to another
person.

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194B - Winnings from any lottery, crossword puzzle or card game or

other game of any sort

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Upto Rs. 10,000 Any person Any person 30% At the time of
payment

194BB - Winnings from horse race

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Upto Rs. 10,000 Book Maker or a Any person 30% At the time of
person holding payment
licence for horse
racing or for
arranging wagering
betting in any race
course.

Tax will have to be deducted at source from winnings from horse races even though the winnings may be paid
to the person concerned in instalments of less than Rs. 10,000.

TDS has to be deducted before considering the losses if any.

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194C - Payments to Contractors

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Single sum credited Any person Any Resident 1% of sum paid or At the time of
does not exceed contractor for credited if the payment or credit
30,000 (or) carrying out any payee is an whichever is earlier
An individual or
Hindu Undivided work (Including Individual or HUF.
The aggregate of Family shall be supply of labour)
sums credited or required to deduct 2% of sum paid or
paid to a contractor tax at source if credited, if the
during the year turnover / total payee is any other
does not exceed Rs. sales / Gross person.
1,00,000 receipts exceeds
● Business - 1
Individual/HUF need crore
not deduct tax ● Profession
where sum is 50 Lakhs
credited or paid In the preceding
exclusively for financial year.
personal purposes

Other Points
● NO TDS
○ No deduction shall be made from any sum credited or paid or likely to be credited or paid during
the previous year
○ to the account of a contractor during the course of business of plying, hiring or leasing goods
carriages,
○ where such contractor owns ten or less goods carriages at any time during the previous year
○ and furnishes a declaration to that effect along with his Permanent Account Number,
○ to the person paying or crediting such sum.

Meaning of work for the purpose of 194C

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Raw Material Purchased from a person other than This will not be treated as work rather it will be treated as
the person to whom the final product will be supplied. sale of goods; No TDS is required to be deducted.

Construction contract not covered here.

Raw Material Supplied by/ Purchased from the Work is there. TDS will be required to be deducted.
customer

TDS will be deducted on

● Invoice value less value of material if it is shown
separately.
● Full value of Invoice if not shown separately.

Deduction of tax at source on payment of gas transportation charges by the purchaser of

natural gas to the seller of gas

In case the Owner/Seller of the natural gas

● sells as well as transports the gas to the purchaser
● till the point of delivery,
● where the ownership of gas to the purchaser is simultaneously transferred,
● the manner of raising the sale bill (whether the transportation charges are embedded in the cost of gas
or shown separately)
● does not alter the basic nature of such contract which remains essentially a ‘contract for sale’ and not a
‘works contract’ as envisaged in section 194C.

However, transportation charges paid to a third party transporter of gas, either by the Owner/Seller of the gas
or purchaser of the gas or any other person, shall continue to be governed by the appropriate provisions of the
Act and tax shall be deductible at source on such payment to the third party at the applicable rates.

Applicability of TDS provisions on payments by broadcasters or Television Channels to

production houses for production of content or programme for telecasting

Where the content is produced as per the specifications provided by the broadcaster/ telecaster and the
copyright of the content/programme also gets transferred to the telecaster/ broadcaster, such contract is
covered by the definition of the term work’ in section 194C and, therefore, subject to TDS under that section.

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Where the telecaster/broadcaster acquires only the telecasting/ broadcasting rights of the content already
produced by the production house, there is no contract for ‘’carrying out any work”, as required in section 194C.

Therefore, such payments are not liable for TDS under section 194C. However, payments of this nature may be
liable for TDS under other sections, if applicable.

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194D - Insurance Commission

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Up to Rs. 15,000 Any person Any Resident 5% At the time of

payment or credit
whichever is earlier

194DA - Sum under a life insurance policy

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Less than Rs. Any person Any Resident 5% of the net At the time of
1,00,000 amount received payment.
(Amount received -
Amount paid)
In other words, TDS
will be required to
be deducted if
Amount paid is Rs.
1,00,000 or more.

194E - Payment to non-resident sportsmen or sports associations of

income referred to in section 115BBA

TDS Not Required Payer Payee Rate of TDS Time of Deduction

No exemption is Any person Non-resident 20% (plus surcharge, At the time of

there sportsman if applicable, and payment or credit
(including an health and whichever is earlier
athlete) or education cess@4%)
entertainer who is
not a citizen of
India or non-
resident sports
association or
institution

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Income referred in section 115BBA

● Income received or receivable by a non-resident sportsman who is not a citizen of India (including an
athlete) by way of
○ participation in any game or sport in India (However, games like crossword puzzles, horse races
etc. taxable under section 115BB are not included herein); or
○ advertisement; or
○ contribution of articles relating to any game or sport in India in newspapers, magazines or
journals.
● income received or receivable by a non-resident entertainer (who is not a citizen of India) from his
performance in India.

194EE - Payments in respect of deposits under National Savings

Scheme, etc

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Less than Rs. 2,500 Any person I/HUF 10% At the time of
payment.

Repurchase of units by Mutual Fund or Unit Trust of India [Section

194F]

A person responsible for paying to any person any amount on account of repurchase of units covered under
section 80CCB(2) shall deduct tax at source at the rate of 20% at the time of payment of such amount.

194G - Commission on sale of lottery tickets

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Upto Rs. 15,000 in a Any person Any person 5% At the time of

financial year stocking, payment or credit
distributing, whichever is earlier

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purchasing or
selling lottery
tickets

194H - Commission or brokerage

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Upto Rs. 15,000 in a Any person Any resident 5% At the time of

financial year payment or credit
whichever is earlier
An individual or
Hindu Undivided
Family shall be
required to deduct
tax at source if
turnover / total
sales / Gross
receipts exceeds
● Business - 1
crore
● Profession
50 Lakhs
In the preceding
financial year.

Applicability of TDS provisions on payments by television channels and publishing houses to

advertisement companies for procuring or canvassing for advertisements

There are two types of payments involved in the advertising business

1. Payment by client to the advertising agency, and

2. Payment by advertising agency to the television channel/newspaper company

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TDS under section 194C will be applicable on the first type of payment, there will be no TDS under section 194C
on the second type of payment e.g. payment by advertising agency to the media company.

However, another issue has been raised in various cases as to whether the fees/charges taken or retained by
advertising companies from media companies for canvassing/booking advertisements (typically 15% of the
billing) is 'commission' or 'discount' for attracting the provisions of section 194H.

The CBDT has clarified that no TDS is attracted on payments made by television channels/newspaper
companies to the advertising agency for booking or procuring of or canvassing for advertisements

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194I - Rent
TDS Not Required Payer Payee Rate of TDS Time of Deduction

Upto Rs. 1,80,000 Any person Any resident For P & M or At the time of
2,40,000 in a equipment- 2% payment or credit
financial year whichever is earlier
An individual or Hindu
Undivided Family shall For land or building,
be required to deduct land appurtenant to
tax at source if a building, furniture
turnover / total sales / or fittings -10%
Gross receipts exceeds
● Business - 1
197A is applicable
crore
● Profession 50
Lakhs
In the preceding
financial year.

Notes -
● Section 197A has been amended for enabling persons,
● other than companies and firms,
● in receipt of rent,
● on which tax is deductible under section 194-I, to file self-declaration in Form No. 15G
● for non-deduction of tax at source to the person responsible for paying rent.
● Likewise, resident senior citizens in receipt of rent can file a declaration in Form No.15H for
non-deduction of tax at source to the person responsible for paying rent.

Applicability of TDS provisions under section 194-I to payments made by the customers on
account of cooling charges to the cold storage owners

The customer is not given any right to use any demarcated space/place or the machinery of the cold store and
thus does not become a tenant. Therefore, the provisions of 194-I are not applicable to the cooling charges paid
by the customers of the cold storage.

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However, since the arrangement between the customers and cold storage owners are basically contractual in
nature, the provision of section 194-C will be applicable to the amounts paid as cooling charges by the
customers of the cold storage.

No requirement to deduct tax at source under section 194-I on remittance of Passenger Service
Fees (PSF) by an Airline to an Airport Operator

Lump sum lease premium' or 'one-time upfront lease charges

The issue of whether or not TDS under section 194-I is applicable on 'lump sum lease premium' or 'one-time
upfront lease charges" paid by an assessee for acquiring long-term leasehold rights for land or any other
property has been examined by the CBDT.

Accordingly, the CBDT has, vide this Circular, clarified that lump sum lease premium or one-time upfront lease
charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold
rights over land or any other property are not payments in the nature of rent within the meaning of section
194-I.

Therefore, such payments are not liable for TDS under section 194-I.

TDS on GST Portion

wherever in terms of the agreement or contract between the payer and the payee, the component of 'GST on
services' comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source
on the amount paid or payable without including such 'GST on services' component.

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194IA - Payment on transfer of certain immovable property other than

agricultural land.

TDS Not Required Payer Payee Rate of Time of Deduction

TDS

ConsiderationLess than 50 Any person, being a Any resident 1% At the time of

Lakh transferee (PURCHASER) transferor payment or credit
🔴🔴🔴 (other than a person (SELLER) whichever is earlier.
referred to in section
194LA responsible for No requirement to
"consideration for transfer
paying compensation for obtain TAN
of any immovable property"
compulsory acquisition of
shall include all charges of
the nature of club immovable property) The provisions of
membership fee, car section 203A
parking fee, electricity or containing the
water facility fee, requirement of
maintenance fee, advance obtaining Tax
fee or any other charges of deduction account
similar nature, which are number (TAN) shall
incidental to transfer of the not apply to the
immovable property person required to
deduct tax in
accordance with the
provisions of section
194-IA.

Meaning of Agricultural Land

“Agricultural land”, for the purpose of this section, means rural agricultural land. In other words, transfer of
urban agricultural land, will attract the provision of section 194-IA, if the consideration is Rs. 50 lakhs or more.

Mr. X sold his house property in Bangalore as well as his rural agricultural land for a consideration of Rs. 60 lakh and Rs.
15 lakh, respectively, to Mr. Y on 1.8.20XX. He has purchased the house property and the land in the year 20XX for Rs. 40
lakh and Rs. 10 lakh, respectively. The stamp duty value on the date of transfer, i.e., 1.8.20XX, is Rs. 85 lakh and Rs. 20 lakh

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for the house property and rural agricultural land, respectively. Determine the tax implications in the hands of Mr. X and
Mr. Y and the TDS implications, if any, in the hands of Mr. Y, assuming that both Mr. X and Mr. Y are resident Indians.

Tax implications in the hands of Mr. X

As per section 50C, the stamp duty value of house property (i.e. Rs. 85 lakh) would be deemed to be the full value of
consideration arising on transfer of property. Therefore, Rs. 45 lakh (i.e. Rs. 85 lakh – Rs. 40 lakh, being the purchase price)
would be taxable as short-term capital gains in the A.Y.20YY-ZZ. Since rural agricultural land is not a capital asset, the
gains arising on sale of such land is not taxable in the hands of Mr. X.

Tax implications in the hands of Mr. Y

In case immovable property is received for inadequate consideration, the difference between the stamp value and actual
consideration would be taxable under section 56(2)(x). Therefore, in this case Rs. 25 lakh 85 lakh – Rs. 60 lakh) would be
taxable in the hands of Mr. Y under section 56(2)(x)
Since agricultural land is not a capital asset, the provisions of section 56(2)(x) are not attracted in respect of receipt of
agricultural land for inadequate consideration, since the definition of "property" under section 56(2)(x) includes only
capital assets specified thereunder.

TDS implications in the hands of Mr. Y

Since the sale consideration of house property exceeds Rs. 50 lakh, Mr. Y is required to deduct tax at source under section
194-IA. The tax to be deducted under section 194-IA would be Rs. 60,000, being 1% of Rs. 60 lakh. TDS provisions under
section 194-IA are not attracted in respect of transfer of rural agricultural land.

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194IB - Payment of rent by certain individuals or Hindu undivided

family.

TDS Not Required Payer Payee Rate of Time of Deduction

TDS

Up to 50,000 for Individual/ HUF Other than those Any 5% Credit or payment
a month or part resident for the last month
of a month. of the previous year
whose total sales, gross receipts or turnover
or the last month
from the business or profession exceeds Rs.
of the tenancy.
1 crore in case of business and Rs. 50 lakhs
in case of profession in the financial year
immediately preceding the financial year in
which such rent was credited or paid

For the purposes of this section, "rent" means any payment, by whatever name called, under any lease,
sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both

Notes
● In a case where the tax is required to be deducted in the cases where payee does not furnish PAN, such
deduction shall not exceed the amount of rent payable for the last month of the previous year or the
last month of the tenancy, as the case may be.
● No Requirement to obtain TAN

Example - On 01.04.20XX, Mr. A agreed to pay rent of Rs 80,000 per month for use of premises to Mr B. There is no
payment during the year. However, it is credited to his account on 31-3-20YY; Mr. B does not furnish his PAN to Mr. A.

The TDS liability of Mr. A would be as under:

● Total rent for the period April, 20XX to March, 20YY (Rs.80,000 per month × 12 months) = 9,60,000
● Tax deductible at source in March, 20YY (Rs. 9,60,000 × 20%) =1,92,000
● However, the TDS would be restricted to payment of rent for the last month of the previous year. = 80,000

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Example - Rent is paid at Rs. 45,000 per month for first half of the year and subsequently, it is increased to Rs. 60,000
per month for remaining period; in such circumstances, the tax is required to be deducted only in respect of rent paid at
Rs. 60,000 during second half of the year.

ICAI Illustration

Mr. X, a salaried individual, pays rent of ₹ 55,000 per month to Mr. Y from June, 20XX. Is he required to deduct tax at
source? If so, when is he required to deduct tax? Also, compute the amount of tax to be deducted at source.
Would your answer change if Mr. X vacated the premises on 31st December, 20XX?
Also, what would be your answer if Mr. Y does not provide his PAN to Mr. X?

Since Mr. X pays rent exceeding ₹ 50,000 per month in the F.Y. 20XX-YY, he is liable to deduct tax at source @5% of such
rent for F.Y. 20XX-YY under section 194-IB. Thus, ₹ 27,500 [₹ 55,000 x 5% x 10] has to be deducted from rent payable for
March, 20YY.

If Mr. X vacated the premises in December, 20XX, then tax of ₹ 19,250 [₹ 55,000 x 5% x 7] has to be deducted from rent
payable for December, 20XX.

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 the rent for March, 20YY.
● 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 the rent for December, 20XX.

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194IC - Payment under specified agreement.

TDS Not Required Payer Payee Rate of TDS Time of Deduction

0 Any person Any resident 10% At the time of

responsible for payment or credit
paying to a resident whichever is earlier
any sum by way of
consideration, not
being consideration
in kind, under the
agreement referred
to in sub-section
(5A) of section 45,

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194J - Fees for professional or technical services

TDS Not Required Payer Payee Rate of TDS Time of
Deduction

Rs. 30,000 in a financial Any person Any resident Refer Table Below At the time of
year, for each category of payment or
income. credit whichever
An individual or
is earlier
Hindu Undivided
(However, this limit does not Family shall be
apply in case of payment made required to
to the director of a company). deduct tax at
source if
turnover / total
● Fees for professional
sales / Gross
services; or
receipts exceeds
● Fees for technical services;
● Business
or
- 1 crore
● Any remuneration or fees
● Professio
or commission, by whatever
n 50
name called, to a director of
Lakhs
a company; or
In the preceding
● Royalty, or
financial year.
● Non-compete fees referred
to in section 28(va)

Individual/HUF need not deduct

tax where sum is credited or
paid exclusively for personal
purposes

The TDS rates under section 194J are as under:

S. No. Nature payments Rate of TDS

1. fees for professional services 10%

2. fees for technical services (being professional services) 10%

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3. fees for technical services (not being professional services) 2%

4. remuneration or fees or commission payable to directors of the company 10%

5. royalty in the nature of consideration for sale, distribution or exhibition of 2%

cinematographic films

6. royalty (other than covered in Sr. No. 5 above) 10%

7. any sum referred to in section 28(va) 10%

8. business of operation of call centre 2%

Example
XYZ Ltd. makes a payment of Rs 28,000 to Mr. Ganesh on 2.8.20XX towards fees for professional services and another
payment of Rs. 25,000 to him on the same date towards fees for technical services. Discuss whether TDS provisions
under section 194J are attracted.

Answer
TDS provisions under section 194J would not get attracted, since the limit of Rs. 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. 20XX-YY.

Some Misc. Points

● Professional services means services rendered by a person in the course of carrying on legal, medical, engineering or
architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such
other profession as is notified by the CBDT for the purposes of section 44AA or of this section.
● The CBDT has notified the services rendered by following persons in relation to the sports activities as Professional Services for
the purpose of the section 194J:
○ Sports Persons,
○ Umpires and Referees,
○ Coaches and Trainers,
○ Team Physicians and Physiotherapists,
○ Event Managers,
○ Commentators,
○ Anchors and
○ Sports Columnists.
● Accordingly, the requirement of TDS as per section 194J would apply to all the aforesaid professions. The term “profession”, as
such, is of a very wide import. However, the term has been defined in this section exhaustively. For the purposes of TDS,

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therefore, all other professions would be outside the scope of section 194J. For example, this section will not apply to professions
of teaching, sculpture, painting etc. unless they are notified.
● Explanation (b) to section 194J provides that the term fees for technical services‘ shall have the same meaning as in
Explanation 2 to section 9(1)(vii). (Refer chapter of Residential Status)
● The CBDT has, through Circular No.8/2009 dated 24.11.2009, clarified that TPAs (Third Party Administrators) who are making
payment on behalf of insurance companies to hospitals for settlement of medical/insurance claims etc. under various schemes
including cashless schemes are liable to deduct tax at source under section 194J on all such payments to hospitals etc.

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Income in respect of units [Section 194K]

Section 194K provides for deduction of tax at source @10% by any person responsible for paying to a resident
any income in respect of
● units of a Mutual fund
● units from Administrator of the specified undertaking
● units from the specified company

Time of deduction

The 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 by any mode, whichever is earlier.

Non-applicability of section 194K

No tax is required to be deducted if -

● The amount of such income or the aggregate of the amounts of such income credited or paid or likely to
be credited or paid during a financial year does not exceed Rs. 5,000; or
● The income is of the nature of capital gains.

CBDT clarified that TDS will be applicable only on dividend payment & no tax shall be required to be deducted by the mutual
fund on income which is in the nature of capital gains.

Where any income in respect of units of a mutual fund, Administrator of the specified undertaking or the specified
company 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 tax has to be deducted at source. The account to which
such income is credited may be called “Suspense account” or by any other name.

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194LA - Payment of compensation on acquisition of certain

immovable property

TDS Not Required Payer Payee Rate of TDS Time of Deduction

Upto 2,50,000 in a Any person Any resident 10% At the time of

financial year responsible for payment.
paying any sum in
the nature of
Compensation on
compensation or
acquisition of
enhanced
certain immovable
compensation on
property other than
compulsory
agricultural land
acquisition of
immovable property

“Agricultural land” for the purpose of this section means any land situated in India including urban agricultural
land.

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194M - Payment of certain sums by certain individuals or Hindu

undivided families.

TDS Not Required Payer Payee Rate of TDS Time of Deduction

If such sum or, as Any person, being an Any 5% At the time of

the case may be, individual or a Hindu resident payment or credit
the aggregate of undivided family (other than whichever is earlier
such sums, credited those who are required to
or paid to a deduct income-tax as per
resident during a the provisions of section
financial year does 194C, section 194H or section
not exceed fifty 194J)
lakh rupees.

responsible for paying any

sum to any resident for
carrying out any work
(including supply of labour
for carrying out any work)
in pursuance of a contract,
by way of commission or
brokerage

(not being insurance

commission referred to in
section 194D)

or by way of fees for

professional services during
the financial year, shall, at
the time of credit of such
sum or at the time of
payment of such sum in
cash or by issue of a cheque
or draft or by any other
mode, whichever is earlier,
deduct an amount equal to

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five per cent of such sum as

income-tax thereon:

TAN - Not Required

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SECTION 194N (Introduced by Finance Act, 2019 and Substituted by

Finance Act, 2020 w.e.f. 01.07.2020)

Every person, being,––

● a banking company to which the Banking Regulation Act, 1949 applies;

● a co-operative society engaged in carrying on the business of banking; or
● a post office,

● who is responsible for paying any sum,

● being the amount or the aggregate of amounts,
● as the case may be,
● in cash exceeding Rs. 1 crore during the previous year,
● to any person (herein referred to as the recipient) FROM ONE OR MORE ACCOUNTS maintained
by the recipient with it shall,
● at the time of payment of such sum,
● deduct an amount equal to 2% of SUCH SUM exceeding one crore rupees, as income-tax:

Provided that in case of a recipient

● who has not filed the returns of income
● for all of the three assessment years relevant to the three previous years, (20_ _ -_ _, 20_ _ -_ _, 20_
_ -_ _ )
● for which the time limit of filing return of income under sub-section (1) of section 139 has expired,
● immediately preceding the previous year
● in which the payment of the sum is made to him, the provision of this section shall apply with the
modification that—

● the sum shall be the amount or the aggregate of amounts, as the case may be, in cash exceeding Rs. 20
lakhs during the previous year; and
● the deduction shall be—
○ an amount equal to 2% of the sum where the amount or aggregate of amounts, as the case may
be, being paid in cash exceeds Rs. 20 lakhs during the previous year but does not exceed Rs. 1
crore; or

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○ an amount equal to 5% of the sum where the amount or aggregate of amounts, as the case may
be, being paid in cash exceeds Rs. 1 crore during the previous year:

Provided further that the Central Government may specify in consultation with the Reserve Bank of India, by
notification in the Official Gazette, the recipient in whose case the first proviso shall not apply or apply at
reduced rate, if such recipient satisfies the conditions specified in such notification:
Provided that nothing contained in this sub-section shall apply to any payment made to,–
● the Government;
● any banking company or co-operative society engaged in carrying on the business of banking or a post
office;
● any business correspondent of a banking company or co-operative society engaged in carrying on the
business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India;
● any white label automated teller machine 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
Reserve Bank of India under the Payment and Settlement Systems Act, 2007;

Provided also that the Central Government may specify in consultation with the Reserve Bank of India, by
notification in the Official Gazette, the recipient in whose case the provision of this section shall not apply or
apply at reduced rate, if such recipient satisfies the conditions specified in such notification.

NOTES
The provisions of section 194N shall apply where cash withdrawals exceed Rs. 1 crore from bank/co-operative
bank/post office during the previous year. The section applies to cash withdrawals made by residents as well as
Non-Resident.
The provisions of this section apply if aggregate cash withdrawals from one or more accounts maintained with
the bank/cooperative bank/post office exceeds Rs. 1 crore in a previous year. Accordingly if Mr. N withdraws
Rs70 Lakhs from his saving account on 15.7.2020 and Rs. 50 lakhs from his current account on 20.8.2020, with
Bank of India, then Bank of India shall deduct TDS of Rs. 40,000 from payment of Rs. 50 lakhs.

If a company has current accounts with HDFC bank at Mumbai Branch, Delhi Branch and Kolkata Branch and
cash withdrawn by the company is Rs. 60 lakh from each branch, the bank shall deduct TDS of Rs. 1,60,000.

However cash withdrawals from two different banks/co-operative banks shall not be aggregated.

● TDS will not be treated as part of Income.

● Assessees can take the credit of TDS.

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Section is not applicable to the following as well

● Cash Replenishment Agencies (CRA’s) and franchise agents of White Label Automated Teller Machine
Operators
● Commission agent or trader, operating under Agriculture Produce Market Committee (APMC), and
registered under any Law relating to Agriculture Produce Market.
● Full-Fledged Money Changer (FFMC) licensed by the RBI and its franchise agent

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SECTION 194-O (Introduced by Finance Act, 2020 w.e.f. 01.10.2020)

1. Notwithstanding anything to the contrary contained in any of the provisions of Part B of this Chapter,
where sale of goods or provision of services of an ecommerce participant is facilitated by an e-commerce
operator through its digital or electronic facility or platform (by whatever name called), such ecommerce
operator shall, at the time of credit of amount of sale or services or both to the account of an
e-commerce participant or at the time of payment thereof to such e-commerce participant by any
mode, whichever is earlier, deduct income-tax at the rate of 1% (0.75%, where the amount is paid or
credited during the period from 1 st October, 2020 to 31 st March, 2021) of the gross amount of such
sales or services or both.

Explanation.—For the purposes of this sub-section, any payment made by a purchaser of goods or
recipient of services directly to an e-commerce participant for the sale of goods or provision of services
or both, facilitated by an e-commerce operator, shall be deemed to be the amount credited or paid by the
e-commerce operator to the e-commerce participant and shall be included in the gross amount of such
sale or services for the purpose of deduction of income-tax under this sub-section.

2. No deduction under sub-section (1) shall be made from any sum credited or paid or likely to be credited
or paid during the previous year to the account of an ecommerce participant, being an individual or Hindu
undivided family, where the gross amount of such sale or services or both during the previous year does
not exceed Rs. 5 lakhs and such e-commerce participant has furnished his Permanent Account Number
or Aadhaar number to the e-commerce operator.

3. Notwithstanding anything contained in Part B of this Chapter, a transaction in respect of which tax has
been deducted by the e-commerce operator under sub-section (1), or which is not liable to deduction
under sub-section (2), shall not be liable to tax deduction at source under any other provision of this
Chapter

Provided that the provisions of this sub-section shall not apply to any amount or aggregate of amounts
received or receivable by an e-commerce operator for hosting advertisements or providing any other
services which are not in connection with the sale or services referred to in sub-section (1).

4. If any difficulty arises in giving effect to the provisions of this section, the Board may, with the approval
of the Central Government, issue guidelines for the purpose of removing the difficulty.

5. Every guideline issued by the Board under sub-section (4) shall be laid before each House of Parliament,
and shall be binding on the income-tax authorities and on the e-commerce operator.

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6. For the purposes of this section, an e-commerce operator shall be deemed to be the person responsible
for paying an e-commerce participant.

Explanation.—For the purposes of this section,—

a. "electronic commerce" means the supply of goods or services or both, including digital products, over
digital or electronic network;
b. "e-commerce operator" means a person who owns, operates or manages digital or electronic facility or
platform for electronic commerce;
c. "e-commerce participant" means a person resident in India selling goods or providing services or both,
including digital products, through digital or electronic facility or platform for electronic commerce;
d. "services" includes "fees for technical services" and fees "professional services", as defined in the
Explanation to section 194J.

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Deduction of tax by a specified bank in case of specified senior

citizen - Section 194P

Applicability and rate of TDS

Section 194P requires deduction of tax at source on the basis of
● rates in force
● by a specified bank, being a notified banking a company,
● on the total income of
● specified senior citizen for the relevant assessment year,
● computed after giving effect to deduction allowable under Chapter VI-A; and
● rebate allowable under section 87A

Exemption from filing return of income

The specified senior citizen is exempted from filing his return of income for the assessment year relevant to
the previous year in which the tax has been deducted under this section.

Meaning of certain terms

● Specified bank- A banking company as notified by the Central Government.
● Specified senior citizen
○ An individual, being a resident in India, who is of the age of 75 years or more at any time 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 an 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.

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Deduction of tax at source on purchase of goods [Section 194Q]

[w.e.f. 1.7.2021]

Applicability and rate of TDS Section 194 Q 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.

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.

Power of the CBDT to issue guidelines

In case any difficulty arises in giving effect to the provisions of this section, the CBDT is empowered to issue
guidelines, with the approval of the Central Government, for the purpose of removing the difficulty.

Every guideline issued by the CBDT shall, as soon as may be after it is issued, be laid before each House of
Parliament, and shall be binding on the income-tax authorities and on the person liable to deduct tax.

Non-applicability of TDS under section 194Q

Tax is not required to be deducted under this section in respect of a transaction on which -

a. tax is deductible under any of the provisions of this Act; and

b. tax is collectible under the provisions of section 206C, other than section 206C(1H).

In case of a transaction to which both section 206C(1H) and section 194Q applies, tax is required to be deducted
under section 194Q.

Meaning of buyer

Buyer means a person whose total sales, gross receipts or turnover from the business carried on by him
exceed ₹ 10 crores during the financial year immediately preceding the financial year in which the purchase of
goods is carried out.

However, the buyer does not include a person as notified by the Central Government for this purpose, subject to
fulfillment of the stipulated conditions.

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Example

Mr. Shetty, a resident Indian, is in retail business and his turnover for F.Y.2020-21 was ₹ 14 crores. He regularly
purchases goods from another resident, Mr. Sharma, a wholesaler, and the aggregate payments during the
F.Y.2021-22 was ₹ 105 lakh (₹ 20 lakh on 1.5.2021, ₹ 25 lakh on 12.7.2021, ₹ 22 lakh on 28.11.2021 and ₹ 38 lakh on
25.2.2022). Assume that the said amounts were credited to Mr. Sharma’s account in the books of Mr. Shetty on
the same date. Mr. Sharma’s turnover for F.Y.2020-21 was ₹ 25 crores. Based on the above facts, examine the
TDS/TCS implications, if any, under the Income-tax Act, 1961.

Since Mr. Shetty’s turnover for F.Y.2020-21 exceeds 10 crores, and payments made by him to Mr. Sharma, a
resident seller exceed ₹ 50 lakhs in the P.Y.2021-22, he is liable to deduct [email protected]% 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 1.5.2021 and 12.7.2021, 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
28.11.2021 [₹ 22 lakh – ₹ 5 lakhs, being the balance unexhausted threshold limit].

Tax of ₹ 3,800 (i.e 0.1% of ₹ 38 lakhs) has to be deducted u/s 194Q from the payment/ credit of ₹ 28 lakhs on
25.2.2022.

Note – In this case, since both section 194Q and 206C(1H) applies, tax has to be deducted u/s 194Q.

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Consequences of failure to deduct or pay tax – Section 201

If the person liable to deduct tax fails to deduct tax

● he shall be deemed to be assessee in default (penalty u/s 221 & interest u/s 220) +
● liable to pay interest @ 1% for every month or part of the month on the amount of tax from the date on
which such tax was deductible till the date on which such tax is deducted.

If a person liable to deduct tax fails to deposit the tax after deduction

● he shall be deemed to be assessee in default (penalty u/s 221 & interest u/s 220) +
● liable to pay interest @ 1.5% for every month or part of the month on the amount of tax from the date
on which such tax was deducted to the date on which such tax is actually paid.
● Such interest shall be paid before furnishing a quarterly statement for each quarter.
● Where the tax has not been paid after it is deducted, the amount of tax along with the interest shall be
a charge upon all the assets of the person liable to deduct tax.

Not to be considered as AID

A person who fails to deduct tax on the sum paid to a payee shall not be deemed to be an assessee in default in respect
of such tax if such payee
● Has furnished his return of income
● Has included such sum for computing income in such return of income.
● Has paid the tax due on the income declared by him in such return of income
● Further, the person is required to furnish a certificate to this effect from a Chartered Accountant in the prescribed
form.

Although in the above case the person responsible for deduction of tax is not considered as assessee in default still he will
be liable to pay interest on the amount not deducted from the date on which such tax was deductible to the date of
furnishing of return of income by the payee.

For example TDS was required to be deducted on 10/10/20XX but it was not deducted, the payee furnished his return of
income and included such sum for computing income and paid the tax due on such income by 30/09/20YY.

Conclusions

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The payer shall not be considered as assessee in default but he will be liable to pay interest @ 1% for every month or part
of the month. The period for which interest will be calculated and start from 10/10/20XX and will end on 30/09/20YY.

Time limit for issuing notice for considering assessee as assessee in

default

No order under section 201(1), deeming a person to be an assessee-in default for failure to deduct the whole or any part of
the tax from a person resident in India, shall be passed at any time after the expiry of
- seven years from the end of the financial year in which the payment is made or credit is given; or
- two years from the end of the financial year in which the correction statement is delivered under the proviso to
section 200(3) whichever is later

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