Taxmann's Deduction of Tax at Source with Advance Tax and Refunds

ABOUT THE AUTHORS

Dr. Vinod K. Singhania got his Ph.D. from the Delhi School of Economics in 1976. His fields of special interest include all facets of corporate legislation and corporate economics especially the tax laws.

Associated in different capacities with several professional institutes and business houses in India and abroad, Dr. Singhania is author of many popular books (some of which are also available on CDs) published by Taxmann. He has to his credit more than 300 research articles which have appeared in leading journals. He has been a resource person in over 800 seminars in India and abroad. He can be reached at vks@taxmann.com.

Dr. Kapil Singhania, a Fellow of the Institute of Chartered Accountants of India and belonging to the alumni of Shri Ram College of Commerce, has got the Ph.D. for extensive research work done in the area of corporate taxation. His fields of involvement in research work in form of articles in various reputed journals and analytical studies span across from corporate laws to direct taxation. He has authored a variety of acclaimed books on direct taxes published by Taxmann.

Dr. Singhania is providing tax consultancy to a number of business organizations, which include multinational and public sector companies.

I-5

CONTENTS PAGE

CHAPTER-HEADS

PAGE

Contents

I-13

BOOK ONE : DEDUCTION OF TAX AT SOURCE CHAPTER 1

:

DEDUCTION OF TAX AT SOURCE FROM SALARY

CHAPTER 2

:

HOW TO WORK OUT ESTIMATED SALARY AND QUANTUM OF TAX TO BE DEDUCTED THEREFROM

CHAPTER 3

:

4 46

TAX DEDUCTION FROM ACCUMULATED BALANCE OF PROVIDENT FUND DUE TO AN EMPLOYEE

219

CHAPTER 4

:

HOW TO COMPUTE TAXABLE PREMATURE WITHDRAWAL OF PROVIDENT FUND AND TAX TO BE DEDUCTED THEREFROM

222

CHAPTER 5

:

DEDUCTION OF TAX AT SOURCE FROM INTEREST ON SECURITIES

229

HOW TO COMPUTE INTEREST ON SECURITIES AND TAX DEDUCTIBLE THEREFROM AT SOURCE

241

CHAPTER 6

:

CHAPTER 7

:

DEDUCTION OF TAX AT SOURCE FROM DIVIDEND

267

CHAPTER 8

:

HOW TO COMPUTE DIVIDENDS AND TAX DEDUCTIBLE THEREFROM

271

CHAPTER 9

:

DEDUCTION OF TAX AT SOURCE FROM INTEREST OTHER THAN INTEREST ON SECURITIES

281

CHAPTER 10

:

HOW TO COMPUTE INTEREST (OTHER THAN INTEREST ON SECURITIES) AND TAX DEDUCTIBLE THEREFROM

288

TAX DEDUCTION FROM WINNINGS FROM LOTTERY, CROSSWORD PUZZLE, CARD GAMES OR OTHER GAMES

305

CHAPTER 11

:

CHAPTER 12

:

WINNINGS FROM LOTTERY, CROSSWORD PUZZLE, CARD GAME OR ANY OTHER GAME AND TAX TO BE DEDUCTED THEREFROM

309

CHAPTER 13

:

TAX DEDUCTION FROM WINNINGS FROM HORSE RACE

317

CHAPTER 14

:

WINNINGS FROM HORSE RACE AND TAX TO BE DEDUCTED THEREON

322

CHAPTER 15

:

TAX DEDUCTION FROM PAYMENT TO CONTRACTORS

325

CHAPTER 16

:

WHAT CONSTITUTES A PAYMENT TO CONTRACTOR/ SUB-CONTRACTOR AND HOW MUCH TAX IS TO BE DEDUCTED THEREFROM

331

TAX DEDUCTION FROM INSURANCE COMMISSION

356

CHAPTER 17

:

I-7

CONTENTS CHAPTER-HEADS PAGE CHAPTER 18

:

HOW TO COMPUTE INSURANCE COMMISSION AND TAX TO BE DEDUCTED THEREFROM

361

CHAPTER 19

:

TAX DEDUCTION FROM PAYMENT IN RESPECT OF LIFE INSURANCE POLICY

366

CHAPTER 20

:

HOW TO COMPUTE TAX TO BE DEDUCTED FROM PAYMENT IN RESPECT OF LIFE INSURANCE POLICY

371

CHAPTER 21

:

DEDUCTION OF TAX AT SOURCE FROM NATIONAL SAVINGS SCHEME

376

CHAPTER 22

:

HOW TO COMPUTE AMOUNT REFERRED TO IN SECTION 80CCA(2)(a) AND TAX TO BE DEDUCTED THEREFROM

380

CHAPTER 23

:

DEDUCTION OF TAX AT SOURCE ON ACCOUNT OF REPURCHASE OF UNITS BY MUTUAL FUNDS OR UNIT TRUST OF INDIA

384

CHAPTER 24

:

HOW TO COMPUTE AMOUNT REFERRED TO IN SECTION 80CCB(2) AND TAX TO BE DEDUCTED THEREFROM

388

CHAPTER 25

:

DEDUCTION OF TAX AT SOURCE FROM COMMISSION ON SALE OF LOTTERY TICKETS

391

CHAPTER 26

:

HOW TO COMPUTE COMMISSION ON SALE OF LOTTERY TICKETS AND TAX DEDUCTIBLE THEREFROM

395

CHAPTER 27

:

TAX DEDUCTION FROM COMMISSION OR BROKERAGE

398

CHAPTER 28

:

HOW TO COMPUTE COMMISSION OR BROKERAGE AND TAX TO BE DEDUCTED THEREFROM

403

CHAPTER 29

:

TAX DEDUCTION FROM RENT

416

CHAPTER 30

:

HOW TO COMPUTE RENT AND TAX TO BE DEDUCTED THEREFROM

421

CHAPTER 31

:

DEDUCTION OF TAX AT SOURCE FROM CONSIDERATION PAYABLE FOR ACQUISITION OF IMMOVABLE PROPERTY OTHER THAN AGRICULTURAL LAND IN RURAL AREA

433

CHAPTER 32

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF CONSIDERATION FOR ACQUISITION OF ANY IMMOVABLE PROPERTY

435

TAX DEDUCTION FROM PAYMENT OF RENT BY CERTAIN INDIVIDUALS AND HUFs

441

CHAPTER 33

:

CHAPTER 34

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM RENT UNDER SECTION 194-IB

443

CHAPTER 35

:

TAX DEDUCTION FROM PAYMENT UNDER SPECIFIED AGREEMENT

447

CHAPTER 36

:

HOW TO COMPUTE CONSIDERATION WHICH IS SUBJECT TO TAX DEDUCTION UNDER SECTION 194-IC

449

DEDUCTION OF TAX AT SOURCE FROM FEES FOR TECHNICAL OR PROFESSIONAL SERVICES OR ROYALTY

453

CHAPTER 37

:

I-8

CONTENTS CHAPTER-HEADS PAGE CHAPTER 38

CHAPTER 39 CHAPTER 40

:

: :

HOW TO COMPUTE FEES FOR PROFESSIONAL AND TECHNICAL SERVICES AND ROYALTY AND TAX DEDUCTIBLE THEREFROM

459

DEDUCTION OF TAX AT SOURCE FROM INCOME IN RESPECT OF UNITS

472

HOW TO COMPUTE INCOME IN RESPECT OF UNITS AND TAX DEDUCTIBLE THEREFROM

474

CHAPTER 41

:

DEDUCTION OF TAX AT SOURCE FROM PAYMENT OF COMPENSATION ON ACQUISITION OF IMMOVABLE PROPERTY

478

CHAPTER 42

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF COMPENSATION ON ACQUISITION OF IMMOVABLE PROPERTY

481

CHAPTER 43

:

DEDUCTION OF TAX AT SOURCE FROM INCOME BY WAY OF INTEREST FROM INFRASTRUCTURE DEBT FUND

485

CHAPTER 44

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF INTEREST ON INFRASTRUCTURE DEBT FUND

488

CHAPTER 45

:

DEDUCTION OF TAX AT SOURCE FROM INTEREST ON UNITS OF BUSINESS TRUST

491

HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF INTEREST ON UNITS OF BUSINESS TRUST

494

CHAPTER 46

:

CHAPTER 47

:

DEDUCTION OF TAX AT SOURCE FROM INCOME IN RESPECT OF UNITS OF INVESTMENT FUND/ SECURITISATION TRUST

497

CHAPTER 48

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM INCOME IN RESPECT OF UNITS OF INVESTMENT TRUST/ SECURITISATION TRUST

500

CHAPTER 49

:

DEDUCTION OF TAX AT SOURCE FROM INCOME BY WAY OF INTEREST FROM INDIAN COMPANY UNDER SECTION 194LC

504

CHAPTER 50

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM INTEREST PAYABLE TO NON-RESIDENT/FOREIGN COMPANY

508

CHAPTER 51

:

DEDUCTION OF TAX AT SOURCE FROM INTEREST ON CERTAIN BONDS AND GOVERNMENT SECURITIES UNDER SECTION 194LD

513

HOW TO COMPUTE TAX DEDUCTIBLE FROM INTEREST PAYABLE UNDER SECTION 194LD

517

CHAPTER 52

:

CHAPTER 53

:

TAX DEDUCTION FROM PAYMENT TO RESIDENT CONTRACTOR, BROKER OR PROFESSIONAL BY CERTAIN INDIVIDUALS AND HUFs

520

CHAPTER 54

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT/ CREDIT TO CONTRACTOR, PROFESSIONAL OR BROKER UNDER SECTION 194M

522

DEDUCTION OF TAX AT SOURCE FROM CASH PAYMENT TO ACCOUNTHOLDERS UNDER SECTION 194N

526

CHAPTER 55

:

I-9

CONTENTS CHAPTER-HEADS PAGE CHAPTER 56

:

HOW TO COMPUTE TAX DEDUCTIBLE FROM CASH PAYMENT TO ACCOUNTHOLDERS UNDER SECTION 194N

528

CHAPTER 57

:

DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO E-COMMERCE PARTICIPANTS

532

CHAPTER 58

:

HOW TO COMPUTE INCOME AND TAX DEDUCTIBLE THEREFROM

534

CHAPTER 59

:

DEDUCTION OF TAX AT SOURCE FROM INCOME OF SPECIFIED SENIOR CITIZEN

539

HOW TO COMPUTE INCOME OF SPECIFIED SENIOR CITIZEN AND TAX DEDUCTIBLE THEREFROM

540

DEDUCTION OF TAX AT SOURCE ON PAYMENT FOR PURCHASE OF GOODS

543

HOW TO COMPUTE TAX TO BE DEDUCTED UNDER SECTION 194Q

545

DEDUCTION OF TAX AT SOURCE ON BENEFIT OR PERQUISITE IN RESPECT OF BUSINESS OR PROFESSION

552

CHAPTER 60 CHAPTER 61 CHAPTER 62 CHAPTER 63

: : : :

CHAPTER 64

:

HOW TO COMPUTE VALUE OF BENEFIT OR PERQUISITE AND TAX DEDUCTIBLE THEREFROM

554

CHAPTER 65

:

DEDUCTION OF TAX AT SOURCE FROM PAYMENT ON TRANSFER OF VIRTUAL DIGITAL ASSET

558

CHAPTER 66

:

HOW TO COMPUTE TAX TO BE DEDUCTED UNDER SECTION 194S

560

CHAPTER 67

:

TAX DEDUCTION FROM PAYMENTS TO NONRESIDENTS

564

CHAPTER 68

:

HOW TO COMPUTE AMOUNT PAYABLE TO NONRESIDENT AND TAX TO BE DEDUCTED THEREFROM

573

CHAPTER 69

:

DEDUCTION OF TAX AT SOURCE FROM INCOME OF UNITS OF OFFSHORE FUND

600

HOW TO COMPUTE AMOUNT OF TAX DEDUCTION UNDER SECTION 196B

603

CHAPTER 70

:

CHAPTER 71

:

DEDUCTION OF TAX AT SOURCE FROM INCOME FROM FOREIGN CURRENCY BOND OR SHARES OF INDIAN COMPANY

606

CHAPTER 72

:

HOW TO COMPUTE AMOUNT OF TAX DEDUCTION UNDER SECTION 196C

609

CHAPTER 73

:

DEDUCTION OF TAX AT SOURCE FROM INCOME OF FOREIGN INSTITUTIONAL INVESTORS FROM SECURITIES

612

HOW TO COMPUTE AMOUNT OF TAX DEDUCTION UNDER SECTION 196D

615

CHAPTER 74

:

BOOK TWO : ADVANCE TAX CHAPTER 75

:

INCOME LIABLE TO ADVANCE TAX

I-10

640

CONTENTS CHAPTER-HEADS PAGE CHAPTER 76

:

LIABILITY TO ADVANCE TAX - WHEN ARISES

641

CHAPTER 77

:

DUE DATES OF PAYMENT

643

CHAPTER 78

:

COMPUTATION OF ADVANCE TAX LIABILITY

646

CHAPTER 79

:

INTEREST PAYABLE BY THE ASSESSEE/GOVERNMENT

653

BOOK THREE : TAX COLLECTION AT SOURCE CHAPTER 80

:

TAX COLLECTION AT SOURCE

680

BOOK FOUR : REFUND CHAPTER 81

:

REFUND FOR EXCESS PAYMENT

704

CHAPTER 82

:

INTEREST ON REFUND

708 713

REFERENCER

I-11

CONTENTS PAGE

CONTENTS PAGE

Chapter-heads

I-7

BOOK ONE : DEDUCTION OF TAX AT SOURCE

1 DEDUCTION OF TAX AT SOURCE FROM SALARY 1.1

Who is responsible to deduct tax at source in case of income from salary 1.1-1

1.2

4 4 5

When tax is to be deducted Private arrangement of paying salary tax-free cannot discharge obligation of section 192

5

1.2-2

Tax deduction not required on judgment debt

5

1.2-3

Furlough pay received in foreign currency is taxable as salary

5

1.2-4

Deduction of tax at source is mandatory from salary

5

1.2-5

Correctness of investment

6

1.2-1

1.3

Where salary is payable by other employers also

How to compute tax deductible at source

6

When tax payable on perquisites is paid by employer

6

1.3-2

When relief under section 89 is available

6

1.3-3

When income other than salary income is considered by employer

7

1.3-4

Statement of particulars in prescribed form

9

1.3-5

How to make adjustment of excess or deficiency

9

1.3-6

Deduction from provident fund payment

9

1.3-1

1.4

Tax deduction and collection account number (TAN)

1.5

Deposit of tax to the credit of Central Government

9 10

1.5-1

Where to deposit tax

10

1.5-2

Time within which tax is to be deposited

11

I-13

CONTENTS PAGE

1.6

1.5-3

Payment through challan

12

1.5-4

Claim for refund

13

Issue a certificate for tax deducted at source to employee

13

1.6-2

Form No. 16 with digital signature

14

1.6-3

Time limit within which the certificate should be given

15

Issue of duplicate certificate

15

1.6-4 1.7

1.8

13

How to prepare Form No. 16

1.6-1

Statement or return of tax deduction to Government

15

1.7-1

Return of tax deduction from contribution paid by the trustees of an approved superannuation fund

15

1.7-2

Annual filing of return

15

1.7-3

Quarterly return

15

1.7-4

By whom return is to be filed

24

Consequences of failure to deduct or pay tax, furnish return, etc.

26

1.8-1

Failure to deduct and/or pay tax

26

1.8-2

Failure to comply with provision of section 203A regarding tax-deduction account number

39

1.8-3

Failure to issue certificate, or submit return, statement, etc.

39

1.8-4

Disallowance of deduction in respect of salary payable to resident

44

Disallowance of deduction in respect of salary payable to non-resident

45

Illustration

45

1.8-5

2 HOW TO WORK OUT ESTIMATED SALARY AND QUANTUM OF TAX TO BE DEDUCTED THEREFROM 2.1

46

What is salary 2.1-1

Employer-employee relationship, a pre-requisite

46

2.1-2

Salary and wages are not conceptually different

49

2.1-3

Salary to former/present/prospective employee

49

2.1-4

Salary income must be real and not fictitious

49

2.1-5

When salary is forgone

50

2.1-6

Salary paid tax-free

50

I-14

CONTENTS PAGE

2.2

Basis for deduction of tax at source

2.3

Different forms of salary and its payment subject to tax deduction at source

52

2.3-1

Advance salary

52

2.3-2

Arrears of salary

52

2.3-3

Leave salary

52

Illustration

55

2.3-4

Salary to a partner

56

2.3-5

Salary in lieu of notice period

56

2.3-6

Fees and commission

56

2.3-7

Bonus

56

2.3-8

Gratuity

57

Illustration

60

Pension

63

Illustrations

64

2.3-10

Annuity

67

2.3-11

Annual accretion to the credit balance in provident fund

67

2.3-9

2.4

50

2.3-12

Amount transferred from unrecognised provident fund to recognised provident fund

67

2.3-13

Retrenchment compensation

67

2.3-14

Profits in lieu of salary

69

2.3-15

Remuneration in addition to salary on the basis of work done

71

2.3-16

Voluntary payments to employees

72

2.3-17

Compensation received at the time of voluntary retirement or separation

73

2.3-18

Salary received by a teacher/professor from SAARC Member States

76

2.3-19

Contribution to notified pension scheme by the Central Government or any other employer

76

2.3-20

Decretal amount arising from suit for arrears of salary and wrongful termination of appointment

76

2.3-21

Salary to non-resident seafarers

77

Allowances when subject to tax deduction at source

77

2.4-1

City compensatory allowance

77

2.4-2

House rent allowance

77

Illustrations

79

Entertainment allowance

80

Illustrations

81

2.4-3

I-15

CONTENTS PAGE

2.4-4

2.5

2.6

Special allowance

81

Illustrations

94

2.4-5

Allowance to Government employees outside India

95

2.4-6

Tiffin allowance

95

2.4-7

Fixed medical allowance

95

2.4-8

Servant allowance

95

2.4-9

Allowance to High Court

95

2.4-10

Allowance received from United Nations Organisation

95

2.4-11

Allowance to foreign technician

95

2.4-12

Allowance to other foreign citizen

96

2.4-13

Compensatory allowance under article 222(2) of the Constitution

96

2.4-14

Sumptuary allowance

96

2.4-15

Allowances received by a teacher/professor from SAARC Member States

96

Perquisites, amenability to tax deduction at source

96

2.5-1

What is “perquisite”

96

2.5-2

“Perquisite” as defined by the Act

98 99

2.5-3

Perquisites chargeable/not chargeable to tax

2.5-4

Valuation of perquisites

102

Illustration

104

Sums related to provident funds, amenability to deduction of tax at source

148

2.6-1

Types of employees’ provident funds

149

2.6-2

Statutory provident fund

149

2.6-3

Recognised provident fund

149

2.6-4

Unrecognised provident fund

149

2.6-5

Public provident fund

149

2.6-6

Tax treatment

150

Contributions to and payment from approved superannuation fund, amenability to tax deduction at source

154

2.8

Approved gratuity fund - Tax treatment of the inflow and outflow

155

2.9

Computation of salary

155

2.7

2.10

2.9-1

Standard deduction

155

2.9-2

Entertainment allowance

155

2.9-3

Professional tax or tax on employment

155

Salaries of foreign technicians

I-16

156

CONTENTS PAGE

2.11

156

Salaries of foreign citizens 2.11-1

Diplomatic personnel

156

2.11-2

Foreigners on tour

156

2.11-3

Salary received by a ship’s crew

156

2.11-4

Remuneration of a foreign trainee

156

2.12

Deductions granted under sections 80C to 80U

157

2.13

Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.

157

2.13-1

Salient features of section 80C

157

2.13-2

Computation of deduction under section 80C

157

Illustrations

163

2.14

Deduction in respect of pension fund

166

2.15

Deduction in respect of contribution to National Pension System of Central Government (NPS)

167

2.15-1 2.15-2

167

Conditions Consequences if the above conditions are satisfied

167

Illustration

169

2.16

Deduction in respect of subscription to long-term infrastructure bonds

169

2.17

Deduction in respect of investment made under an equity saving scheme

170

Deduction under section 80D in respect of medical insurance premia

171

2.18

2.19

2.18-1

Conditions

171

2.18-2

Maximum deductible amount

171

Illustrations

172

Deduction under section 80DD in respect of medical treatment of handicapped dependents 2.19-1

Conditions

173

2.19-2

Amount of deduction

175

2.19-3 2.20

173

If dependent predeceases the taxpayer

175

Illustrations

175

Deduction in respect of medical treatment under section 80DDB - To what extent available

175

2.20-1

Conditions

175

2.20-2

Amount of deduction

176

2.20-3

Prescribed diseases and certificate from a doctor

176

I-17

CONTENTS PAGE

2.21

2.22 2.23

2.24

2.25

2.26

2.27 2.28

Deduction in respect of interest on loan taken for higher education 2.21-1

Conditions

177

2.21-2

Amount deductible

178

Deduction in respect of interest on loan taken for residential house property

178

Deduction in respect of interest on loan taken for certain house property

179

Illustration

179

Deduction in respect of interest on loan taken for purchase of electric vehicle

181

Illustration

182

Deduction under section 80G in respect of donation to national funds

183

2.25-1

Maximum limit

185

2.25-2

Other points

185

Deduction under section 80GG in respect of rent paid Amount of deduction

186

2.26-2

Meaning of total income for the purpose of section 80GG

186

Illustration

187

Deductions in respect of certain donations for scientific research or rural development

187

Deduction in respect of interest on deposits in savings accounts

188

2.30-2 2.30-3

2.32

Post Office Savings Bank interest exemption under section 10(15)(i)

Deduction under section 80U in case of a person with disability 2.30-1

2.31

Post office savings bank interest exemption under section 10(15)(i)

Deduction under section 80TTB in respect of interest on deposits in case of senior citizens 2.29-1

2.30

185

2.26-1

2.28-1 2.29

177

189 190 190 191 191

Conditions Amount of deduction

192

Illustration

193

Other points

193

When income other than salary income is considered for tax deduction under section 192

193

When salary received from other employer is considered

193

I-18

CONTENTS PAGE

2.33 2.34

Rate of exchange for deduction of tax at source on income payable in foreign currency

194

Rates of tax deduction at source during the financial year 2022-23

194

2.34-1 2.34-2

Rate of income-tax under the alternative tax regime

195

If PAN is not given by employer

201

Tax rebate under section 87A

201

Illustrations

201

2.36

Tax rebate under sections 88B and 88C

202

2.37

Relief under section 89

202

2.35

2.37-1

202

Illustration

203

Computation of relief in respect of gratuity

203

Illustration

204

2.37-3

Computation of relief in respect of compensation on termination of employment

205

2.37-4

Computation of relief in respect of payment in commutation of pension

205

Computation of relief in respect of payment of arrears of family pension

205

2.37-2

2.37-5 2.38

Computation of relief when salary has been paid in arrears or in advance

When can employee reduce the incidence of tax deduction Certificate for deduction of tax at lower rates

206

2.38-1

How lower rate is determined

206

2.38-2

Validity of certificate

206

2.38-3

Issued to the payer

206

2.38-4

Retrospective certificate not possible

207

2.38-5

Instruction issued by Board

207

2.38-6

Concession by the Government due to outbreak of COVID-19 pandemic

207

2.38-7

Other points

207

2.39

Rounding off of income

208

2.40

Employee gets credit of tax deducted at source

208

2.40-1 2.41

Rules framed by Board

208

Going through the real exercise - Examples on computation of estimated salary and tax to be deducted therefrom under section 192

209

Illustrations

209

I-19

CONTENTS PAGE

3 TAX DEDUCTION FROM ACCUMULATED BALANCE OF PROVIDENT FUND DUE TO AN EMPLOYEE 3.1 3.2

3.3 3.4

3.5

Person responsible for tax deduction from accumulated balance of provident fund

219

When tax has to be deducted

219

3.2-1

No tax is deductible if payment is less than Rs. 50,000

219

3.2-2

Private arrangement of paying accumulated balance of provident fund tax-free is not relevant

219

Tax deduction account number

219

Deposit of tax to the credit of Central Government

219

3.4-1

Where to deposit

219

3.4-2

Time of deposit

220

3.4-3

Payment through challan

220

3.4-4

Claim for refund

220

Issue of certificate of tax deduction

220

3.5-1

Issue of duplicate certificate

220

3.6

Quarterly return to the Government

220

3.7

Consequences of failure to deduct or pay tax or furnish return

220

3.7-1

Failure to deduct and/or pay tax

221

3.7-2

Failure to comply with the provisions of section 203A regarding tax-Deduction account number

221

3.7-3

Failure to issue certificate or submit return

221

4 HOW TO COMPUTE TAXABLE PREMATURE WITHDRAWAL OF PROVIDENT FUND AND TAX TO BE DEDUCTED THEREFROM When withdrawal from provident fund is subject to the tax deduction under section 192A

222

4.2

Rates of tax

223

4.3

Payment without tax deduction or with deduction at lower rates

223

Tax credit

223

4.1

4.4

4.4-1

Rules framed by Board

223

Illustration

224

I-20

CONTENTS PAGE

5 DEDUCTION OF TAX AT SOURCE FROM INTEREST ON SECURITIES 5.1 5.2

Who is responsible to deduct tax at source in the case of interest on securities

229

When tax has to be deducted at source

229

5.2-1 5.2-2

Relevance of identity of deductee under TDS provisions

229

Private arrangement of paying interest on securities as tax-free cannot discharge obligation under section 193

231

5.3

How to compute tax deduction at source

231

5.4

Tax deduction account number

231

5.5

Deposit of tax to the credit of the Central Government

231

5.6

5.5-1

Where to deposit

231

5.5-2

Time of deposit of TDS/TCS

231

5.5-3

Challans for payment

232

5.5-4

Claim for refund

232

Issue of certificate for tax deduction from interest on securities 5.6-1

TDS certificate in Form No. 16A

232

5.6-2

Time limit within which the certificate shall be issued

233

Issue of duplicate certificate

233

5.6-3 5.7

5.8

232

Return of tax deduction at source from interest on securities

233

5.7-1

Annual return

233

5.7-2

Quarterly statement TDS deposited

233

Consequences of failure to deduct or pay tax, furnish returns, etc.

235

5.8-1

Failure to deduct and/or pay tax

235

5.8-2

Failure to comply with the provision of section 203A regarding tax deduction account number

235

5.8-3

Failure to issue certificates, or submit returns

235

5.8-4

Forfeiture of deduction in respect of interest on securities

235

Illustration

236

I-21

CONTENTS PAGE

6 HOW TO COMPUTE INTEREST ON SECURITIES AND TAX DEDUCTIBLE THEREFROM AT SOURCE 6.1 6.2

6.3

6.4

6.5

6.6

6.7

Interest on securities - How defined Interest on securities not liable for tax deduction 6.2-1 Notified securities 6.2-2 TDS on 8 per cent Savings (Taxable) Bonds, 2003 or 7.75 per cent Savings (Taxable) Bonds, 2018 What happens when recipient is Government - Interest on securities payable to the Government and certain Corporations TDS on interest on securities - A few typical cases 6.4-1 When interest is paid to oneself - Interest on own debentures 6.4-2 Interest payable to funds established for the benefits of armed forces 6.4-3 Interest to provident funds 6.4-4 Deep discount bond Rates for tax deduction at source 6.5-1 PAN of recipient is not available 6.5-2 When recipient is a non-filer of Income-tax return When can a security holder reduce the incidence of tax deduction 6.6-1 Certificate for tax deduction at lower rate or no deduction 6.6-2 Declaration under section 197A 6.6-3 Payment to certain institution whose income is exempt under section 10(23C) Tax credit to one who pays 6.7-1 Rules to be framed by Board 6.7-2 Joint owners 6.7-3 Beneficial owner

241 241 242 254

255 256 256 256 256 256 257 257 257 258 258 261 263 263 264 264 264

7 DEDUCTION OF TAX AT SOURCE FROM DIVIDEND 7.1

Who is responsible for tax deduction in the case of dividend

267

7.1-1

Who is “principal officer”

267

7.1-2

What makes one an Indian company

267

I-22

CONTENTS PAGE

7.1-3

What amounts to prescribed arrangements for declaration and payment of dividends in India

268

7.2

What is “dividend” for the purpose of tax deduction

268

7.3

When tax is to be deducted

268

7.3-1

Private arrangement of paying dividend tax-free cannot discharge obligation under section 194

268

7.4

Tax deduction account number

268

7.5

Deposit of tax to the credit of Central Government

269

7.6

7.5-1

Where to deposit

269

7.5-2

Time within which tax is to be deposited

269

7.5-3

Filing challan for payment

269

7.5-4

Claim for refund

269

Issue a certificate for tax deducted at source to shareholders 7.6-1

TDS certificate in Form No. 16A

269

7.6-2

Time-limit within which the certificate should be given

270

Issue of duplicate certificate

270

Statement/returns to the Government

270

7.6-3 7.7

7.8

269

7.7-1

Annual return

270

7.7-2

Quarterly return of TDS deposited

270

Consequences of failure to deduct or pay tax, furnish returns, etc.

270

7.8-1

Failure to deduct and/or pay tax

270

7.8-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

270

Failure to issue certificate, or submit return/ statement

270

7.8-3

8 HOW TO COMPUTE DIVIDENDS AND TAX DEDUCTIBLE THEREFROM 8.1

Defining dividends

271

8.2

Deemed dividend under the Income-tax Act

271

8.3

8.2-1

Definition under section 2(22)(e)

271

8.2-2

Accumulated profits

271

8.2-3

Distribution of accumulated profits by way of advance or loan

273

Rates for tax deduction at source during the financial year 2022-23

I-23

276

CONTENTS PAGE

8.4 8.5

8.6

8.3-1 PAN of recipient is not available 8.3-2 When recipient is a non-filer of Income-tax return Dividends payable to Government or certain corporation Deduction of tax at lower rates or at nil rate 8.5-1 Certificate for receiving dividend without tax deduction 8.5-2 Declaration under section 197A 8.5-3 No TDS if dividend is not more than Rs. 5,000 8.5-4 No TDS if dividend is paid or credited to an insurance company Who gets credit for tax deducted 8.6-1 Rules framed by Board

276 277 277 277 277 278 279 279 279 279

9 DEDUCTION OF TAX AT SOURCE FROM INTEREST OTHER THAN INTEREST ON SECURITIES 9.1 9.2 9.3

9.4 9.5 9.6

9.7

9.8

Who is to discharge the responsibility to make tax deduction at source Which interest qualifies for tax deduction at source under section 194A When tax has to be deducted at source 9.3-1 When interest is credited to “Interest payable account” or “Suspense account” 9.3-2 Private arrangement of paying interest tax-free cannot discharge obligation under section 194A How to compute tax deduction at source Tax deduction account number Deposit of tax to the credit of Central Government 9.6-1 Where to deposit 9.6-2 Time of deposit 9.6-3 Payment through challan 9.6-4 Claim for refund Issue certificate of tax deduction from interest other than interest on securities 9.7-1 Certificates are issued by downloading from TIN website 9.7-2 Time limit within which certificate shall be issued 9.7-3 Issue of duplicate certificate Return of tax deduction at source

281 281 282 282 282 283 283 283 283 283 284 284 284 284 284 285 285

9.8-1

Annual return

285

9.8-2

Quarterly return of TDS deposited

285

I-24

CONTENTS PAGE

9.9

9.8-3 Quarterly return for payment without tax deduction Consequences of failure to deduct or pay tax, furnish return, etc.

9.9-1 Failure to deduct and/or pay tax 9.9-2 Failure to comply with the provisions of section 203A regarding tax-deduction account number 9.9-3 Failure to issue certificate or submit return 9.9-4 Forfeiture of deduction in respect of interest other than interest on securities

286 287 287 287 287 287

10 HOW TO COMPUTE INTEREST (OTHER THAN INTEREST ON SECURITIES) AND TAX DEDUCTIBLE THEREFROM 10.1

10.2

10.3 10.4

When a payment can be regarded as “interest” 10.1-1 Conditions 10.1-2 When a payment is deemed to be payment of interest for the purpose of tax deduction Rates for tax deduction at source during the financial year 2022-23 10.2-1 PAN of recipient is not available 10.2-2 When recipient is a non-filer of Income-tax return 10.2-3 When adjustment are called for Treatment of interest other than interest on securities payable to Government or certain corporation Interest other than interest on securities not liable to tax deduction under section 194A(3)/197A 10.4-1 If interest does not exceed a specified amount 10.4-2 Paid/credited to banks/financial institutions 10.4-3 Interest by firm 10.4-4 Co-operative society 10.4-5 Interest under notified schemes 10.4-6 Interest by bank 10.4-7 Interest by co-operative society/bank 10.4-8 Interest by Government 10.4-9 Interest credited on compensation 10.4-10 Interest paid on compensation 10.4-11 Zero coupon bonds 10.4-12 Interest referred to in section 10(23FC) 10.4-13 Interest by offshore banking unit

288 288

10.4-14 Interest to Tirumala Tirupati Devasthanams

297

I-25

288 289 289 289 290 290 290 290 291 294 294 295 295 296 296 296 296 296 297 297

CONTENTS PAGE

10.5

10.4-15 Interest to securitisation trust

297

Interest without tax deduction or with deduction at lower rates

297

Certificate for tax deduction at lower rate under section 197(1)

297

10.5-2

Declaration under section 197A

297

10.5-3

Payment to certain institutions whose income is exempt under section 10(23C)

299

10.5-1

10.6

To deduct or not - Treatment of some typical cases Interest on deposits in joint names - Manner of tax deduction

299

10.6-2

Interest payment under Land Acquisition Act

300

10.6-3

Interest payable on hundi by buyer to supplier in case of outstation sale of goods - Whether tax to be deducted by the buyer

300

10.6-4

Interest payable by consignors to their commission agent

301

10.6-5

Payment under a hire purchase agreement

301

10.6-6

Who is an individual

301

10.6-7

Interest payable by retail finance service company

301

10.6-8

Cheque discounting charges

301

10.6-9

Payment under a hire purchase agreement

301

10.6-1

10.7

299

10.6-10 Interest on delayed payment of insurance compensation

301

10.6-11 Personal loan of directors routed through company

302

10.6-12 Discounting charges

302

10.6-13 Chit fund

302

10.6-14 Judgment debtor

302

10.6-15 Interest on overdue purchase bills is not ‘interest’

302

10.6-16 Loan processing fees

302

10.6-17 Tax deduction on the deposits in banks in the name of the registrar to the Supreme Court/High Court during pendency of litigation

302

10.6-18 Tax deductible even in the case of loss

303

10.6-19 TDS on interest on deposits made under Capital Gains Accounts Scheme where depositor has deceased

303

Giving credit for tax deducted

303

10.7-1

Rules to be framed by Board

I-26

303

CONTENTS PAGE

11 TAX DEDUCTION FROM WINNINGS FROM LOTTERY, CROSSWORD PUZZLE, CARD GAMES OR OTHER GAMES Who is responsible for tax deduction in the case of winnings from lottery, crossword puzzle, card game or other game

305

11.2

Payments from which deduction is to be made

305

11.3

When tax has to be deducted

305

11.1

11.3-1 11.4 11.5

11.6

11.8

305

Tax deduction account number

305

Deposit of tax in the credit of Central Government

305

11.5-1

Where to deposit

305

11.5-2

Time of deposit

306

11.5-3

Payment through challan

306

11.5-4

Claim for refund

306

Issue a certificate for tax deducted at source

306

Certificate is issued by downloading from TIN website

306

11.6-2

Time limit

306

11.6-3

Issue of duplicate certificate

307

11.6-1

11.7

Private arrangement of paying income tax-free cannot discharge obligation under section 194B

Annual/quarterly return to the Government

307

11.7-1

Annual return

307

11.7-2

Quarterly return

307

Consequences of failure to deduct or pay tax or furnish return, etc.

308

11.8-1

Failure to deduct and/or pay tax

308

11.8-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

308

11.8-3

Failure to issue certificate, or submit return

308

11.8-4

Disallowance of expenditure

308

12 WINNINGS FROM LOTTERY, CROSSWORD PUZZLE, CARD GAME OR ANY OTHER GAME AND TAX TO BE DEDUCTED THEREFROM 12.1

What can be termed as winnings from lottery, crossword puzzle and card game

I-27

309

CONTENTS PAGE

One has to fall back on dictionary meanings and judicial pronouncement

309

12.1-2

Preliminary conditions subject to which tax deduction can be made

311

12.1-3

Some typical situations - How to deal with them

312

12.1-1

12.2

Rates for deduction of tax at source during the financial year 2022-23

313

12.3

No deduction at source from payments to Government or certain corporation

314

Giving credit for tax deducted

315

12.4

12.4-1

Rules framed by Board

315

13 TAX DEDUCTION FROM WINNINGS FROM HORSE RACE 13.1

Who is responsible for tax deduction 13.1-1

Bookmaker - Meaning of

317 317

13.2

When winnings from horse racing are subject to tax deduction at source

317

13.3

When tax has to be deducted

318

13.3-1

Private arrangement of making payment tax-free cannot discharge the obligation

318

13.4

Tax deduction account number

318

13.5

Deposit of tax to the credit of Central Government

318

13.6

13.5-1

Where to deposit

318

13.5-2

Time of deposit

318

13.5-3

Payment through challan

319

13.5-4

Claim for refund

319

Issue of certificate for deduction from winning from horse races

319

Certificates are issued by downloading from TIN website

319

13.6-2

Time limit within which the certificate shall be issued

319

13.6-3

Issue of duplicate certificate

320

13.6-1

13.7

Annual/quarterly return of winning from horse race to the Government

320

13.7-1

Annual return

320

13.7-2

Quarterly return

320

I-28

CONTENTS PAGE

13.8

Consequences of failure to deduct or pay tax, furnish return, etc.

321

13.8-1

Failure to deduct and/or pay tax

321

13.8-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

321

13.8-3

Failure to issue certificate or submit return

321

13.8-4

Disallowance of expenditure

321

14 WINNINGS FROM HORSE RACE AND TAX TO BE DEDUCTED THEREON 14.1

322

Meaning of horse race 14.1-1

When winnings from horse race are subject to tax deduction

322

14.2

Rates at which deduction of tax is to be made at source during the financial year 2022-23

322

14.3

No deduction of tax from winnings payable to the Government/certain corporation

323

Credit for tax deducted

323

14.4

14.4-1

Rules framed by Board

323

15 TAX DEDUCTION FROM PAYMENT TO CONTRACTORS 15.1

Person responsible for making deduction at source under section 194C 15.1-1

15.2

Payment to a resident contractor

When tax has to be deducted at source

325 325 326

15.2-1

When amount is transferred to “Suspense account”

327

15.2-2

Private arrangement of making payment to contractor/sub-contractor without tax deduction cannot discharge the obligation under section 194C

327

15.3

How to compute the amount of tax deduction

327

15.4

Tax deduction account number

327

15.5

Deposit of tax to the credit of Central Government

327

15.5-1

Where to deposit

327

15.5-2

Time of deposit

327

15.5-3

Payment through challan

328

15.5-4

Claim for refund

328

I-29

CONTENTS PAGE

15.6

15.7

15.8

Issue of certificate of tax deduction

328

15.6-1

Certificates are issued by downloading from TIN website

328

15.6-2

Time limit within which certificate shall be issued

328

15.6-3

Issue of duplicate certificate

329

Annual and quarterly returns of tax deducted at source

329

15.7-1

Annual return

329

15.7-2

Quarterly return

329

Consequences of failure to deduct or pay tax, furnish return, etc.

330

15.8-1

Failure to deduct and/or pay tax

330

15.8-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

330

15.8-3

Failure to issue certificate or submit return

330

15.8-4

Forfeiture of deduction in respect of payment to contractors/sub-contractors

330

16 WHAT CONSTITUTES A PAYMENT TO CONTRACTOR/ SUB-CONTRACTOR AND HOW MUCH TAX IS TO BE DEDUCTED THEREFROM 16.1

16.2

Payment to contractors/sub-contractors

331

16.1-1

When such payments are subject to tax deduction

331

16.1-2

When such payments to contractors are not subject to tax deduction at source

331

“Work contract” and “contract for supply of labour for works contract” - Meaning of

333

16.2-1

“Work” as defined in section 194C

333

16.2-2

Work contract or sale of goods

334

16.2-3

Tests to determine whether a contract is work contract

334

16.2-4

Emerging conclusion

336

16.2-5

Examples of “work contracts” and “contracts for sale of goods”

337

16.3

Judicial pronouncements

343

16.4

Rates for tax deduction at source during the financial year 2022-23

346

16.4-1 16.5

346

Other points

Clarifications from the Board

347

Advertising contract

347

16.5-1

I-30

CONTENTS PAGE

16.6 16.7

16.5-2

Broadcasting/telecasting contracts

349

16.5-3

Payment made to travel agent/or an airline

349

16.5-4

Does catering include serving food in restaurant

350

16.5-5

Payment of hire charges

350

16.5-6

Payment to an electrician

351

16.5-7

Maintenance contracts

351

16.5-8

Fixed deposit commission

351

16.5-9

Procurement of orders

351

16.5-10 Reimbursement

351

16.5-11 Bidi manufacturing

351

16.5-12 National Rural Employment Programme

351

16.5-13 Bus contractor

351

16.5-14 Road transporters

352

16.5-15 Tax deduction when material is supplied to contractor

352

16.5-16 Contract on piece rate basis

353

Payment to Government and certain corporations

353

Certificate for tax deduction at lower rates

354

16.7-1 16.8

Time limit for soliciting the favour

354

Credit for tax deduction 16.8-1

354

Rules framed by Board

354

17 TAX DEDUCTION FROM INSURANCE COMMISSION 17.1

Person responsible for tax deduction from insurance commission

356

17.2

When tax has to be deducted

356

17.2-1

No tax is deductible if payment during a financial year does not exceed Rs. 15,000

356

17.2-2

Private arrangement of paying commission taxfree is not relevant

356

17.3

Tax deduction account number

356

17.4

Deposit of tax to the credit of Central Government

356

17.4-1

Where to deposit

356

17.4-2

Time of deposit

357

17.4-3

Payment through challan

357

17.4-4

Claim for refund

357

I-31

CONTENTS PAGE

17.5

17.6

17.7

Issue of certificate of tax deduction

358

17.5-1

Certificates are issued by downloading from TIN website

358

17.5-2

Time-limit within which certificate shall be issued

358

17.5-3

Issue of duplicate certificate

358

Annual and quarterly returns of tax deducted at source

358

17.6-1

Annual return

358

17.6-2

Quarterly return

358

Consequences of failure to deduct or pay tax, furnish return, etc.

360

17.7-1

Failure to deduct and/or pay tax

360

17.7-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

360

17.7-3

Failure to issue certificates or submit return

360

17.7-4

Disallowance of expenditure

360

18 HOW TO COMPUTE INSURANCE COMMISSION AND TAX TO BE DEDUCTED THEREFROM 18.1

What qualifies as insurance commission for the purpose of tax deduction at source 18.1-1

18.2

Rates at which tax is to be deducted at source during the financial year 2022-23 18.2-1

18.3

No tax deduction when payments are to Government and certain corporation

Circumstances in which no deduction or deduction at lower rate is possible 18.3-1 18.3-2

18.4

Conditions to attract section 194D

361 362 362 363

Certificate for tax deduction at lower rate under section 197(1)

363

Declaration under section 197A

363

Credit given to person on whose behalf tax is deducted 18.4-1

361

Rules framed by Board

364 364

19 TAX DEDUCTION FROM PAYMENT IN RESPECT OF LIFE INSURANCE POLICY 19.1

Person responsible for tax deduction

366

19.2

When tax has to be deducted

366

I-32

CONTENTS PAGE

19.2-1 19.2-2

No tax is deductible if payment during a financial year is less than Rs. 1,00,000

366

Private arrangement of paying commission tax-free is not relevant

366

19.3

Tax deduction account number

366

19.4

Deposit of tax to the credit of Central Government

366

19.5

19.4-1

Where to deposit

366

19.4-2

Time of deposit

367

19.4-3

Payment through challan

367

19.4-4

Claim for refund

367

Issue of certificate of tax deduction

367

Certificates are issued by downloading from TIN website

367

19.5-2

Time-limit within which certificate shall be issued

367

19.5-3

Issue of duplicate certificate

368

19.5-1

19.6

19.7

Annual and quarterly returns of tax deducted at source

368

19.6-1

Annual return

368

19.6-2

Quarterly return

368

Consequences of failure to deduct or pay tax, furnish return, etc.

369

19.7-1

Failure to deduct and/or pay tax

369

19.7-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

370

19.7-3

Failure to issue certificates or submit return

370

19.7-4

Disallowance of expenditure

370

20 HOW TO COMPUTE TAX TO BE DEDUCTED FROM PAYMENT IN RESPECT OF LIFE INSURANCE POLICY 20.1

What qualifies as payment in respect of life insurance policy for the purpose of tax deduction at source under section 194DA 20.1-1

20.2

20.3

When exemption is available under section 10(10D)

371 371

Rates at which tax is to be deducted at source during the financial year 2022-23

372

Illustrations

373

Circumstances in which no deduction or deduction at lower rate is possible

373

I-33

CONTENTS PAGE

20.4

Credit given to person on whose behalf tax is deducted 20.4-1

Rules framed by Board

374 374

21 DEDUCTION OF TAX AT SOURCE FROM NATIONAL SAVINGS SCHEME 21.1

Who is responsible to deduct tax

376

21.2

When tax is to be deducted

376

21.3

How to compute amount of tax deducted at source

376

21.4

Tax deduction account number

376

Deposit of tax to the credit of Central Government

376

21.5

21.6

21.5-1

Where to deposit

376

21.5-2

Time of deposit

376

21.5-3

Payment through challan

377

21.5-4

Claim for refund

377

Issue of certificate for tax deduction

377

Certificates are issued by downloading from TIN website

377

21.6-2

Time limit within which the certificate shall be issued

377

21.6-3

Issue of duplicate certificate

377

Annual and quarterly return to the Government

377

21.6-1

21.7

21.8

21.7-1

Annual returns

378

21.7-2

Quarterly return

378

Consequences of failure to deduct or pay tax or furnish return

379

21.8-1

Failure to deduct and/or pay tax

379

21.8-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

379

21.8-3

Failure to issue certificate or submit return

379

21.8-4

Disallowance of expenditure

379

22 HOW TO COMPUTE AMOUNT REFERRED TO IN SECTION 80CCA(2)(a) AND TAX TO BE DEDUCTED THEREFROM 22.1

Payments referred to in section 80CCA(2)(a) 22.1-1

What is the scheme of section 80CCA

I-34

380 380

CONTENTS PAGE

22.1-2

Payments subject to tax deduction under section 194EE

380

22.2

Rate of tax in force during the financial year 2022-23

381

22.3

Payment without tax deduction under section 197A

381

22.3-1 22.4

Mode of submission of Form No. 15G/15H by payer of income to income-tax authorities

382

Tax credit 22.4-1

382

Rules framed by Board

382

23 DEDUCTION OF TAX AT SOURCE ON ACCOUNT OF REPURCHASE OF UNITS BY MUTUAL FUNDS OR UNIT TRUST OF INDIA 23.1

Who is responsible to deduct tax

384

23.2

When tax is to be deducted

384

23.2-1

Private arrangement to pay income free of tax

384

23.3

How to compute amount of tax deducted

384

23.4

Tax deduction account number

384

23.5

Deposit of tax to the credit of the Central Government

384

23.6

23.5-1

Where to deposit

384

23.5-2

Time of deposit

385

23.5-3

Payment through challan

385

23.5-4

Claim for refund

385

Issue of certificate for tax deduction

385

23.6-1

Certificates are issued by downloading from TIN website

385

23.6-2

Time-limit within which the certificate shall be issued

385

Issue of duplicate certificate

386

23.6-3 23.7

23.8

Annual and quarterly returns to the Government

386

23.7-1

Annual return

386

23.7-2

Quarterly returns

386

Consequences of failure to deduct or pay tax or furnish return

387

23.8-1

Failure to deduct and/or pay tax

387

23.8-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

387

23.8-3

Failure to issue certificate or submit return

387

23.8-4

Disallowance of expenditure

387

I-35

CONTENTS PAGE

24 HOW TO COMPUTE AMOUNT REFERRED TO IN SECTION 80CCB(2) AND TAX TO BE DEDUCTED THEREFROM 24.1

Payments affected by section 194F

388

24.1-1

What is the scheme of section 80CCB

388

24.1-2

Payments subject to tax deduction under section 194F

388

Illustration

388

24.1-3 24.2

Rate of tax in force during the financial year 2022-23

389

24.3

Deduction of tax at lower rate

389

Tax credit

389

24.4

24.4-1

Rules framed by Board

389

25 DEDUCTION OF TAX AT SOURCE FROM COMMISSION ON SALE OF LOTTERY TICKETS 25.1

Who is responsible to deduct tax at source

391

25.2

When tax is deducted at source

391

25.2-1

When amount is credited to “suspense account”

391

25.2-2

Private arrangement to pay commission free of tax

391

25.3

How to compute tax deduction at source under section 194G

391

25.4

Tax deduction account number

391

25.5

Deposit of tax to the credit of Central Government

391

25.6

25.7

25.5-1

Where to deposit

391

25.5-2

Time of deposit

392

25.5-3

Payment through challan

392

25.5-4

Claim for refund

392

Issue of certificate of tax deduction

392

25.6-1

Certificates are issued by downloading from TIN website

392

25.6-2

Time-limit within which certificate shall be issued

392

25.6-3

Issue of duplicate certificate

393

Annual and quarterly return to the Government

393

25.7-1

Annual return

393

25.7-2

Quarterly return

393

I-36

CONTENTS PAGE

25.8

Consequences of failure to deduct or pay tax or furnish return

394

25.8-1

Failure to deduct and/or pay tax

394

25.8-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

394

25.8-3

Failure to issue certificate or submit return

394

25.8-4

Disallowance of expenditure

394

26 HOW TO COMPUTE COMMISSION ON SALE OF LOTTERY TICKETS AND TAX DEDUCTIBLE THEREFROM 26.1

When a payment is affected by section 194G

395

26.2

Rates for tax deduction

395

26.3

Deduction of tax at lower rate

396

Tax credited

396

26.4

26.4-1

Rules framed by Board

396

27 TAX DEDUCTION FROM COMMISSION OR BROKERAGE 27.1 27.2

Person responsible for tax deduction from commission/ brokerage

398

When tax has to be deducted

398

27.2-1 27.2-2

No tax is deductible if payment during a financial year does not exceed Rs. 15,000

398

Private arrangement of paying commission taxfree is not relevant

398

27.3

Tax deduction account number

399

27.4

Deposit of tax to the credit of Central Government

399

27.5

27.4-1

Where to deposit

399

27.4-2

Time of deposit

399

27.4-3

Payment through challan

400

27.4-4

Claim for refund

400

Issue of certificate of tax deduction

400

27.5-1

Certificates are issued by downloading from TIN website

400

27.5-2

Time limit within which the certificate shall be issued

400

I-37

CONTENTS PAGE

Issue of duplicate certificate

400

Annual and quarterly return to the Government

400

27.5-3 27.6

27.7

27.6-1

Annual return

400

27.6-2

Quarterly return

400

Consequences of failure to deduct or pay tax or furnish return

402

27.7-1

Failure to deduct and/or pay tax

402

27.7-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

402

27.7-3

Failure to issue certificate or submit return

402

27.7-4

Forfeiture of deduction in respect of commission/ brokerage

402

28 HOW TO COMPUTE COMMISSION OR BROKERAGE AND TAX TO BE DEDUCTED THEREFROM 28.1

When commission/brokerage is subject to the tax deduction under section 194H

403

28.2

Brokerage/commission covered by section 194H

403

28.2-1

Professional services excluded

403

28.2-2

“Commission” judicially defined

404

28.2-3

Brokerage judicially defined

405

28.2-4

Commission and service are two essential elements

406

28.2-5

Commission retained by consignee - Is it subject to tax deduction

409

28.2-6

Turnover commission by RBI

409

28.2-7

Trade discount is different

409

28.2-8

Discount on SIM offered by cellular telephone network provider to distributors

410

Other judicial rulings

410

28.2-9

28.2-10 Conclusions

412

28.3

Rates of tax

412

28.4

No tax deduction when recipient is Government and certain corporations

413

Payment without tax deduction or with deduction at lower rates

413

28.5

28.5-1

Certificate for tax deduction at lower rate under section 197(1)

I-38

413

CONTENTS PAGE

28.5-2 28.6

Turnover commission payable by Central Government

414

Tax credit 28.6-1

414

Rules framed by Board

414

29 TAX DEDUCTION FROM RENT 29.1

Person responsible for tax deduction from rent

416

29.2

When tax has to be deducted

416

29.2-1

No tax is deductible if payment during a financial year does not exceed Rs. 2,40,000

417

29.2-2

Private arrangement of paying rent tax-free is not relevant

417

29.3

Tax deduction account number

417

29.4

Deposit of tax to the credit of Central Government

417

29.5

29.4-1

Where to deposit

417

29.4-2

Time of deposit

417

29.4-3

Payment through challan

418

29.4-4

Claim for refund

418

Issue of certificate of tax deduction

418

Certificates are issued by downloading from TIN website

418

Time limit within which the certificate shall be issued

418

Issue of duplicate certificate

418

Annual and quarterly return to the Government

418

29.5-1 29.5-2 29.5-3 29.6

29.7

29.6-1

Annual return

418

29.6-2

Quarterly return

419

Consequences of failure to deduct or pay tax or furnish return

420

29.7-1

Failure to deduct and/or pay tax

420

29.7-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

420

29.7-3

Failure to issue certificate or submit return

420

29.7-4

Forfeiture of deduction in respect of rent

420

I-39

CONTENTS PAGE

30 HOW TO COMPUTE RENT AND TAX TO BE DEDUCTED THEREFROM 30.1 30.2

When rent is subject to the tax deduction under section 194-I

421

Rent covered by section 194-I

421

30.2-1

Rent as defined in section 194-I

421

30.2-2

Broad inferences

423

30.3

Rates of tax

429

30.4

No tax deduction when recipient is Government and certain corporations

429

30.4-1 30.4-2 30.5

30.6

No tax deduction if recipient is exempt under section 10(23C)

430

No tax deduction if recipient is real estate investment trust

430

Deduction of tax at lower rates

430

30.5-1

Certificate for receiving rent without tax deduction

430

30.5-2

Declaration under section 197A

431 431

Tax credit 30.6-1

Rules framed by Board

431

31 DEDUCTION OF TAX AT SOURCE FROM CONSIDERATION PAYABLE FOR ACQUISITION OF IMMOVABLE PROPERTY OTHER THAN AGRICULTURAL LAND IN RURAL AREA 31.1

Who is responsible for tax deduction at source under section 194-IA

433

31.2

When tax has to be deducted at source

433

31.3

Tax deduction account number

433

Deposit of tax to the credit of Central Government

433

31.4

31.5

31.4-1

Where to deposit

433

31.4-2

Time of deposit

433

31.4-3

Payment through challan

434

31.4-4

Claim for refund

434

Issue a certificate for tax deducted at source 31.5-1

Certificates are issued by downloading from TRACES Portal

I-40

434 434

CONTENTS PAGE

31.5-2

Time limit within which the certificate should be given

434

Issue of duplicate certificate

434

31.6

Annual and quarterly return to the Government

434

31.7

Consequences of failure to deduct or pay tax, furnish returns, etc.

434

31.5-3

31.7-1

Failure to deduct and/or pay tax

434

31.7-2

Failure to issue certificate, or submit return/ statement

434

Forfeiture of deduction

434

31.7-3

32 HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF CONSIDERATION FOR ACQUISITION OF ANY IMMOVABLE PROPERTY 32.1

Income subject to tax deduction under section 194-IA

435

32.1-1

Immovable property

435

32.1-2

Agricultural land

435

32.1-3

Rural area in India

436

Rate for tax deduction at source during the financial year 2022-23

437

32.3

Consideration payable to Government or certain corporation

439

32.4

Certificate of tax deduction at lower rate

439

32.5

Who gets credit for tax deducted

439

Rules framed by Board

439

32.2

32.5-1

33 TAX DEDUCTION FROM PAYMENT OF RENT

BY CERTAIN INDIVIDUALS AND HUFs 33.1

Person responsible for tax deduction under section 194-IB

441

33.2

When tax has to be deducted

441

33.3 33.4

33.2-1

No tax is deductible if rent does not exceed Rs. 50,000 per month

441

33.2-2

Private arrangement of paying tax-free rent is not relevant

441

Tax deduction account number

441

Deposit of tax to the credit of Central Government

441

33.4-1

441

Where to deposit

I-41

CONTENTS PAGE

33.5

33.4-2

Time of deposit

442

33.4-3

Payment through challan

442

33.4-4

Claim for refund

442

Issue of certificate of tax deduction

442

33.5-1

Issue of duplicate certificate

442

33.6

Return to the Government

442

33.7

Consequences of failure to deduct or pay tax or furnish return

442

33.7-1

Failure to deduct and/or pay tax

442

33.7-2

Failure to issue certificate or submit return

442

33.7-3

Forfeiture of deduction

442

34 HOW TO COMPUTE TAX DEDUCTIBLE FROM RENT UNDER SECTION 194-IB 34.1

Rent subject to tax deduction under section 194-IB

443

Rates of tax deduction during the financial year 2022-23

443

Illustrations

443

34.3

Payment without tax deduction or with deduction at lower rates

445

34.4

Consideration payable to Government or certain corporation

445

Tax credit

445

34.2

34.5

34.5-1

Rules framed by Board

445

35 TAX DEDUCTION FROM PAYMENT UNDER SPECIFIED AGREEMENT 35.1

Person responsible for tax deduction from payment under specified agreement

447

35.2

When tax has to be deducted

447

35.2-1 35.3 35.4

Private arrangement to pay consideration free of tax

447

Tax deduction account number

447

Deposit of tax to the credit of Central Government

447

35.4-1

Where to deposit

447

35.4-2

Time of deposit

448

35.4-3

Payment through challan

448

35.4-4

Claim for refund

448

I-42

CONTENTS PAGE

35.5 35.6 35.7

Issue of certificate of tax deduction 35.5-1 Issue of duplicate certificate Quarterly return to the Government Consequences of failure to deduct or pay tax or furnish return 35.7-1 Failure to deduct and/or pay tax 35.7-2 Failure to comply with the provisions of section 203A regarding tax-deduction account number 35.7-3 Failure to issue certificate or submit return

448 448 448 448 448 448 448

36 HOW TO COMPUTE CONSIDERATION WHICH IS SUBJECT TO TAX DEDUCTION UNDER SECTION 194-IC 36.1

36.2 36.3 36.4

When payment under specified agreement is subject to tax deduction under section 194-IC 36.1-1 Specified agreement under section 45(5A) Rates of tax Illustration Payment without tax deduction or with deduction at lower rates Tax credit 36.4-1 Rules framed by Board

449 449 450 450 451 451 451

37 DEDUCTION OF TAX AT SOURCE FROM FEES FOR TECHNICAL OR PROFESSIONAL SERVICES OR ROYALTY 37.1

Who is responsible for tax deduction in the case of fees for technical or professional services or royalty 37.1-1 37.1-2

37.2

37.3

453

Director’s fees subject to TDS under section 194J from July 1, 2012

453

When payment/credit by an individual/HUF is subject to TDS under section 194J

453

When tax has to be deducted at source

454

37.2-1

When fees is credited to “suspense account”

454

37.2-2

Private arrangement of paying fees for technical or professional services or royalty tax-free cannot discharge obligation under section 194J

455

Tax deduction account number

I-43

455

CONTENTS PAGE

37.4

37.5

Deposit of tax to the credit of Central Government 37.4-1

Where to deposit

455

37.4-2

Time of deposit

455

37.4-3

Payment through challan

456

37.4-4

Claim for refund

456

Issue a certificate for tax deducted at source

37.7

456

37.5-1

Certificates are issued by downloading from TIN website

456

37.5-2

Time limit within which the certificate should be given

456

Issue of duplicate certificate

456

Annual and quarterly return to the Government

456

37.5-3 37.6

455

37.6-1

Annual return

456

37.6-2

Quarterly return

457

Consequences of failure to deduct or pay tax, furnish returns, etc.

458

37.7-1

Failure to deduct and/or pay tax

458

37.7-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

458

37.7-3

Failure to issue certificate, or submit return/ statement

458

37.7-4

Forfeiture of deduction in respect of technical/ professional fees/royalty

458

38 HOW TO COMPUTE FEES FOR PROFESSIONAL AND TECHNICAL SERVICES AND ROYALTY AND TAX DEDUCTIBLE THEREFROM 38.1

38.2

Professional/technical services 38.1-1

What is professional services

459

38.1-2

Technical services

460

38.1-3

“Royalty” as defined in Explanation 2 to section 9(1)(vi)

461

When payments for professional/technical fees, royalty, director’s fees are covered by section 194J 38.2-1

38.3

459

464 465

Other points

Rates for tax deduction at source during the financial year 2022-23

468

Reimbursement of expenditure - Whether subject to TDS

469

38.3-1

I-44

CONTENTS PAGE

38.4 38.5

38.6

Fees for professional services/technical services or royalty payable to Government or certain corporation

469

Certificate of tax deduction at lower rate

470

38.5-1

Time limit for soliciting the favour

470

38.5-2

Concession by the Government due to outbreak of COVID-19 pandemic

470

Who gets credit for tax deducted

470

Rules framed by Board

470

38.6-1

39 DEDUCTION OF TAX AT SOURCE FROM INCOME IN RESPECT OF UNITS 39.1 39.2 39.3 39.4

39.5

39.6 39.7

Who is responsible for tax deduction at source under section 194K When tax has to be deducted at source 39.2-1 Credit of income to “suspense account” Tax deduction account number Deposit of tax to the credit of Central Government 39.4-1 Where to deposit 39.4-2 Time within which tax has to be deposited Issue a certificate for tax deducted at source to unitholders 39.5-1 Certificates are issued by downloading from TRACES Portal 39.5-2 Time limit within which the certificate should be given 39.5-3 Issue of duplicate certificate Statement/returns to the Government Consequences of failure to deduct or pay tax, furnish returns, etc.

39.7-1 Failure to deduct and/or pay tax 39.7-2 Failure to comply with the provisions of section 203A regarding tax deduction account number 39.7-3 Failure to issue certificates or submit return/ statement

472 472 472 472 472 472 472 472 472 473 473 473 473 473 473 473

40 HOW TO COMPUTE INCOME IN RESPECT OF UNITS AND TAX DEDUCTIBLE THEREFROM 40.1

Income subject to tax deduction under section 194K

I-45

474

CONTENTS PAGE

Rates for tax deduction at source during the financial year 2022-23

474

40.3

Income in respect of units payable to Government or certain corporation

475

40.4

Deduction of tax at lower rates

475

40.2

40.5

40.4-1

Certificate for receiving such sum without tax deduction or with deduction at lower rate

475

40.4-2

Declaration under section 197A

475

Who get credit for tax deducted

476

41 DEDUCTION OF TAX AT SOURCE FROM PAYMENT OF COMPENSATION ON ACQUISITION OF IMMOVABLE PROPERTY Who is responsible for tax deduction at source under section 194LA

478

41.2

When tax has to be deducted at source

478

41.3

Tax deduction account number

478

41.4

Deposit of tax to the credit of Central Government

478

41.1

41.5

41.6

41.7

41.4-1

Where to deposit

478

41.4-2

Time within which tax has to be deposited

478

41.4-3

Claim for refund

478

Issue a certificate for tax deducted at source

478

41.5-1

Certificates are issued by downloading from TIN website

478

41.5-2

Time-limit

478

41.5-3

Issue of duplicate certificate

479

Statement/return to the Government

479

41.6-1

Annual return

479

41.6-2

Quarterly return

479

Consequences of failure to deduct or pay tax, etc.

480

41.7-1

Failure to deduct and/or pay tax

480

41.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

480

I-46

CONTENTS PAGE

42 HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF COMPENSATION ON ACQUISITION OF IMMOVABLE PROPERTY 42.1

Income subject to tax deduction under section 194LA

481

42.2

Rates for tax deduction at source during the financial year 2022-23

482

42.3

Income is payable to Government or certain corporation

482

Deduction of tax at lower rates

483

42.4

42.4-1 42.5

Certificate for receiving such without tax deduction or with deduction at lower rate

Who get credit for tax deducted 42.5-1

Rules framed by Board

483 483 483

43 DEDUCTION OF TAX AT SOURCE FROM INCOME BY WAY OF INTEREST FROM INFRASTRUCTURE DEBT FUND 43.1 43.2 43.3 43.4

43.5

43.6

43.7

Who is responsible for tax deduction at source under section 194LB When tax has to be deducted at source Tax deduction account number Deposit of tax to the credit of Central Government 43.4-1 Where to deposit 43.4-2 Time within which tax has to be deposited 43.4-3 Claim for refund Issue a certificate for tax deducted at source 43.5-1 Certificates are issued by downloading from TIN website 43.5-2 Time-limit 43.5-3 Issue of duplicate certificate Statement/return to the Government 43.6-1 Annual return 43.6-2 Quarterly return Consequences of failure to deduct or pay tax, etc.

43.7-1 Failure to deduct and/or pay tax 43.7-2 Failure to comply with the provisions of section 203A regarding tax deduction account number

I-47

485 485 485 485 485 485 485 485 485 485 486 486 486 486 487 487 487

CONTENTS PAGE

44 HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF INTEREST ON INFRASTRUCTURE DEBT FUND 44.1

Income subject to tax deduction under section 194LB

488

44.2

Rates for tax deduction at source during the financial year 2022-23

488

44.3

Deduction of tax at lower rate

489

Who get credit for tax deducted

489

44.4

44.4-1

Rules framed by Board

489

45 DEDUCTION OF TAX AT SOURCE FROM INTEREST ON UNITS OF BUSINESS TRUST 45.1

Who is responsible for tax deduction at source under section 194LBA

491

45.2

When tax has to be deducted at source

491

45.3

Tax deduction account number

491

45.4

Deposit of tax to the credit of Central Government

491

45.5

45.4-1

Where to deposit

491

45.4-2

Time within which tax has to be deposited

491

45.4-3

Claim for refund

491

Issue a certificate for tax deducted at source

45.6

45.7

491

Certificates are issued by downloading from TIN website

491

45.5-2

Time-limit

491

45.5-3

Issue of duplicate certificate

492

Statement/return to the Government

492

45.5-1

45.6-1

Annual return

492

45.6-2

Quarterly return

492

Consequences of failure to deduct or pay tax, etc.

493

45.7-1

Failure to deduct and/or pay tax

493

45.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

493

45.7-3

Forfeiture of deduction in respect of payment of interest

493

I-48

CONTENTS PAGE

46 HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT OF INTEREST ON UNITS OF BUSINESS TRUST 46.1

Income subject to tax deduction under section 194LBA

494

46.2

Rates for tax deduction at source during the financial year 2022-23

494

46.3

Deduction of tax at lower rate

495

Who get credit for tax deducted

495

46.4

46.4-1

Rules framed by Board

495

47 DEDUCTION OF TAX AT SOURCE FROM INCOME IN RESPECT OF UNITS OF INVESTMENT FUND/SECURITISATION TRUST 47.1

Who is responsible for tax deduction at source under section 194LBB/194LBC

497

47.2

When tax has to be deducted at source

497

47.3

Tax deduction account number

497

47.4

Deposit of tax to the credit of Central Government

497

47.5

47.4-1

Where to deposit

497

47.4-2

Time within which tax has to be deposited

497

47.4-3

Claim for refund

497

Issue a certificate for tax deducted at source

47.6

47.7

497

Certificates are issued by downloading from TIN website

497

47.5-2

Time-limit

497

47.5-3

Issue of duplicate certificate

498

Statement/return to the Government

498

47.5-1

47.6-1

Annual return

498

47.6-2

Quarterly return

498

Consequences of failure to deduct or pay tax, etc.

499

47.7-1

Failure to deduct and/or pay tax

499

47.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

499

47.7-3

Forfeiture of deduction in respect of payment of interest

499

I-49

CONTENTS PAGE

48 HOW TO COMPUTE TAX DEDUCTIBLE FROM INCOME IN RESPECT OF UNITS OF INVESTMENT TRUST/SECURITISATION TRUST 48.1 48.2 48.3

Income subject to tax deduction under section 194LBB/ 194LBC

500

Rates for tax deduction at source during the financial year 2022-23

500

Certificate for tax deduction at lower rate (applicable with effect from June 1, 2016)

501

48.3-1

Time-limit for soliciting the favour

501

48.3-2

How lower rate is determined

501

48.3-3

Concession by the Government due to outbreak of COVID-19 pandemic

501

Other points

502

Who get credit for tax deducted

502

48.3-4 48.4

48.4-1

Rules framed by Board

502

49 DEDUCTION OF TAX AT SOURCE FROM INCOME

BY WAY OF INTEREST FROM INDIAN COMPANY UNDER SECTION 194LC Who is responsible for tax deduction at source under section 194LC

504

49.2

When tax has to be deducted at source

504

49.3

Tax deduction account number

504

49.4

Deposit of tax to the credit of Central Government

505

49.1

49.5

49.4-1

Where to deposit

505

49.4-2

Time within which tax has to be deposited

505

49.4-3

Claim for refund

505

Issue a certificate for tax deducted at source

49.6

505

Certificates are issued by downloading from TIN website

505

49.5-2

Time-limit

505

49.5-3

Issue of duplicate certificate

505

Statement/return to the Government

505

49.5-1

49.6-1

Annual return

505

49.6-2

Quarterly return

505

I-50

CONTENTS PAGE

49.7

Consequences of failure to deduct or pay tax, etc.

507

49.7-1

Failure to deduct and/or pay tax

507

49.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

507

50 HOW TO COMPUTE TAX DEDUCTIBLE FROM INTEREST PAYABLE TO NON-RESIDENT/ FOREIGN COMPANY 50.1

Income subject to tax deduction under section 194LC 50.1-1

Approval by Central Government

508 508

50.2

Time of tax deduction

510

50.3

Rates for tax deduction at source during the financial year 2022-23

510

Deduction of tax at lower rate

511

Who get credit for tax deducted

511

50.4 50.5

50.5-1

Rules framed by Board

511

51 DEDUCTION OF TAX AT SOURCE FROM INTEREST ON CERTAIN BONDS AND GOVERNMENT SECURITIES UNDER SECTION 194LD Who is responsible for tax deduction at source under section 194LD

513

51.2

When tax has to be deducted at source

513

51.3

Tax deduction account number

513

51.4

Deposit of tax to the credit of Central Government

513

51.1

51.5

51.4-1

Where to deposit

513

51.4-2

Time within which tax has to be deposited

513

51.4-3

Claim for refund

513

Issue a certificate for tax deducted at source

51.6

514

Certificates are issued by downloading from TRACES Portal

514

51.5-2

Time-limit

514

51.5-3

Issue of duplicate certificate

514

Statement/return to the Government

514

51.5-1

51.6-1

Annual return

514

51.6-2

Quarterly return

514

I-51

CONTENTS PAGE

51.7

Consequences of failure to deduct or pay tax, etc.

516

51.7-1

Failure to deduct and/or pay tax

516

51.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

516

52 HOW TO COMPUTE TAX DEDUCTIBLE FROM INTEREST PAYABLE UNDER SECTION 194LD 52.1

Income subject to tax deduction under section 194LD

517

52.2

Time of tax deduction

517

52.3

Rates for tax deduction at source during the financial year 2022-23

517

52.4

Deduction of tax at lower rate

518

52.5

Who get credit for tax deducted

518

52.5-1

Rules framed by Board

518

53 TAX DEDUCTION FROM PAYMENT TO RESIDENT CONTRACTOR, BROKER OR PROFESSIONAL BY CERTAIN INDIVIDUALS AND HUFs 53.1 53.2

Person responsible for tax deduction under section 194M

520

When tax has to be deducted

520

53.2-1 53.2-2 53.3 53.4

53.5

No tax is deductible if payment/credit does not exceed Rs. 50 lakh in a financial year

520

Private arrangement of paying tax-free rent is not relevant

520

Tax deduction account number

520

Deposit of tax to the credit of Central Government

520

53.4-1

Where to deposit

521

53.4-2

Time of deposit

521

53.4-3

Payment through challan

521

53.4-4

Claim for refund

521

Issue of certificate of tax deduction

521

53.5-1

Issue of duplicate certificate

521

53.6

Return to the Government

521

53.7

Consequences of failure to deduct or pay tax or furnish return

521

53.7-1

Failure to deduct and/or pay tax

I-52

521

CONTENTS PAGE

53.7-2

Failure to issue certificate or submit return

521

53.7-3

Forfeiture of deduction

521

54 HOW TO COMPUTE TAX DEDUCTIBLE FROM PAYMENT/CREDIT TO CONTRACTOR, PROFESSIONAL OR BROKER UNDER SECTION 194M Payment/credit subject to tax deduction under section 194M

522

54.2

Work contract, commission or brokerage and professional Meaning of

522

54.3

Rates of tax deduction during the financial year 2022-23

522

Illustration

523

Payment without tax deduction or with deduction at lower rates

523

54.5

Consideration payable to Government or certain corporation

524

54.6

Tax credit

524

54.1

54.4

54.6-1

Rules framed by Board

524

55 DEDUCTION OF TAX AT SOURCE FROM CASH PAYMENT TO ACCOUNTHOLDERS UNDER SECTION 194N 55.1

Person responsible for tax deduction under section 194N

526

55.2

When tax has to be deducted

526

55.2-1 55.2-2

No tax is deductible if cash payment does not exceed Rs. 1 crore in a financial year

526

Private arrangement of paying tax-free rent is not relevant

526

55.3

Tax deduction account number

526

55.4

Deposit of tax to the credit of Central Government

526

55.5

55.4-1

Where to deposit

526

55.4-2

Time of deposit

527

55.4-3

Payment through challan

527

55.4-4

Claim for refund

527

Issue of certificate of tax deduction

527

55.5-1

Issue of duplicate certificate

I-53

527

CONTENTS PAGE

55.6

Return to the Government

527

55.7

Consequences of failure to deduct or pay tax or furnish return

527

55.7-1

Failure to deduct and/or pay tax

527

55.7-2

Failure to issue certificate or submit return

527

56 HOW TO COMPUTE TAX DEDUCTIBLE FROM CASH PAYMENT TO ACCOUNTHOLDERS UNDER SECTION 194N 56.1

Cash payment subject to tax deduction under section 194N

528

56.2

Rates of tax deduction during the financial year 2022-23

528

56.3

Payment without tax deduction or with deduction at lower rates

529

56.4

Consideration payable to Government or certain corporation

530

Tax credit

530

56.5

56.5-1

Rules framed by Board

530

57 DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO E-COMMERCE PARTICIPANTS 57.1

Who is responsible for tax deduction at source under section 194-O

532

57.2

When tax has to be deducted at source

532

57.3

Tax deduction account number

532

57.4

Deposit of tax to the credit of Central Government

532

57.5

57.4-1

Where to deposit

532

57.4-2

Time within which tax has to be deposited

532

Issue a certificate for tax deducted at source to unitholders

532

57.5-1

Certificates are issued by downloading from TRACES Portal

532

57.5-2

Time limit within which the certificate should be given

533

Issue of duplicate certificate

533

57.6

Statement/returns to the Government

533

57.7

Consequences of failure to deduct or pay tax, furnish returns, etc.

533

57.5-3

57.7-1

Failure to deduct and/or pay tax

533

57.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

533

I-54

CONTENTS PAGE

57.7-3

Failure to issue certificates or submit return/ statement

533

58 HOW TO COMPUTE INCOME AND TAX DEDUCTIBLE THEREFROM 58.1

Income subject to tax deduction under section 194-O

534

58.1-1

When tax is not deductible

534

58.1-2

TDS under other sections

534

58.1-3

Removing any difficulty

534

Rates for tax deduction at source during the financial year 2022-23

535

Illustrations

535

58.3

Income in respect of units payable to Government or certain corporation

537

58.4

Deduction of tax at lower rates

537

58.2

58.5

58.4-1

Time-limit for soliciting the favour

537

58.4-2

How lower rate is determined

537

58.4-3

Validity of the certificate

537

58.4-4

Other points

537

Who get credit for tax deducted

537

59 DEDUCTION OF TAX AT SOURCE FROM INCOME OF SPECIFIED SENIOR CITIZEN 59.1

Who is responsible for tax deduction at source under section 194P

539

59.2

When tax has to be deducted at source

539

59.3

Tax deduction account number

539

59.4

Deposit of tax to the credit of Central Government

539

59.4-1

Where to deposit

539

59.4-2

Time within which tax has to be deposited

539

59.5

Statement/returns to the Government

539

59.6

Consequences of failure to deduct or pay tax, furnish returns, etc.

539

59.6-1

Failure to deduct and/or pay tax

539

59.6-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

539

I-55

CONTENTS PAGE

59.6-3

Failure to issue certificates or submit return/ statement

539

60 HOW TO COMPUTE INCOME OF SPECIFIED SENIOR CITIZEN AND TAX DEDUCTIBLE THEREFROM 60.1

Income subject to tax deduction under section 194P

540

60.2

Rates for tax deduction at source during the financial year 2022-23

540

60.3

Deduction of tax at lower rates

540

60.4

Who get credit for tax deducted

540

60.5

Return under section 139(1) not required

541

61 DEDUCTION OF TAX AT SOURCE ON PAYMENT FOR PURCHASE OF GOODS Who is responsible for tax deduction at source under section 194Q

543

61.2

When tax has to be deducted at source

543

61.3

Tax deduction account number

543

Deposit of tax to the credit of Central Government

543

61.1

61.4

61.5

61.4-1

Where to deposit

543

61.4-2

Time within which tax has to be deposited

543

Issue a certificate for tax deducted at source to unitholders

544

Certificates are issued by downloading from TRACES Portal

544

Time limit within which the certificate should be given

544

Issue of duplicate certificate

544

61.6

Statement/returns to the Government

544

61.7

Consequences of failure to deduct or pay tax, furnish returns, etc.

544

61.5-1 61.5-2 61.5-3

61.7-1

Failure to deduct and/or pay tax

544

61.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

544

Failure to issue certificates or submit return/statement

544

61.7-3

I-56

CONTENTS PAGE

62 HOW TO COMPUTE TAX TO BE DEDUCTED UNDER SECTION 194Q 62.1

62.2

Income subject to tax deduction under section 194Q

545

62.1-1

When tax is not deductible

545

62.1-2

Removing any difficulty

545

Rates for tax deduction at source during the financial year 2022-23 62.2-1

Clarifications by CBDT

546 546

62.3

Income in respect of amount payable to Government or certain corporation

550

62.4

Deduction of tax at lower rates

550

62.5

Who get credit for tax deducted

550

63 DEDUCTION OF TAX AT SOURCE ON BENEFIT OR PERQUISITE IN RESPECT OF BUSINESS OR PROFESSION Who is responsible for tax deduction at source under section 194R

552

63.2

When tax has to be deducted at source

552

63.3

Tax deduction account number

552

63.4

Deposit of tax to the credit of Central Government

552

63.1

63.4-1

Where to deposit

552

63.4-2

Time within which tax has to be deposited

552

63.5

Statement/returns to the Government

552

63.6

Consequences of failure to deduct or pay tax, furnish returns, etc.

552

63.6-1

Failure to deduct and/or pay tax

552

63.6-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

553

Failure to issue certificates or submit return/ statement

553

63.6-3

I-57

CONTENTS PAGE

64 HOW TO COMPUTE VALUE OF BENEFIT OR PERQUISITE AND TAX DEDUCTIBLE THEREFROM 64.1

Amount subject to tax deduction under section 194R

554

64.1-1

Benefit or perquisite covered by section 194R

554

64.1-2

Removing any difficulty

555

64.2

Rates for tax deduction at source during the financial year 2022-23

555

64.3

Deduction of tax at lower rates

556

64.4

Who get credit for tax deducted

556

65 DEDUCTION OF TAX AT SOURCE FROM PAYMENT ON TRANSFER OF VIRTUAL DIGITAL ASSET Who is responsible for tax deduction at source under section 194S

558

65.2

When tax has to be deducted at source

558

65.3

Tax deduction account number

558

65.4

Deposit of tax to the credit of Central Government

558

65.1

65.5

65.4-1

Where to deposit

558

65.4-2

Time within which tax has to be deposited

558

Issue a certificate for tax deducted at source to unitholders

558

Certificates are issued by downloading from TRACES Portal

558

65.5-2

Time limit within which the certificate should be given

558

65.5-3

Issue of duplicate certificate

558

65.6

Statement/returns to the Government

559

65.7

Consequences of failure to deduct or pay tax, furnish returns, etc.

559

65.5-1

65.7-1

Failure to deduct and/or pay tax

559

65.7-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

559

Failure to issue certificates or submit return/ statement

559

65.7-3

I-58

CONTENTS PAGE

66 HOW TO COMPUTE TAX TO BE DEDUCTED UNDER SECTION 194S 66.1

Income subject to tax deduction under section 194S

560

66.1-1

Virtual digital asset

560

66.1-2

Threshold limit

560

66.1-3

Overlapping between sections 194-O and 194S

561

66.1-4

Removing difficulty

561

Rates for tax deduction at source during the financial year 2022-23

561

Income in respect of amount payable to Government or certain corporation

562

66.4

Deduction of tax at lower rates

562

66.5

Who get credit for tax deducted

562

66.2 66.3

67 TAX DEDUCTION FROM PAYMENTS TO NON-RESIDENTS 67.1

Who is required to deduct tax under sections 194E, 195 and 196A 67.1-1 67.1-2

67.2 67.3

564

Payer/Principal officer is person responsible for tax deduction

564

In case of consideration for transfer of foreign exchange amount

564

Payment from which deduction has to be made

565

When tax has to be deducted

565

67.3-1

Payments referred to section 115BBA

565

67.3-2

Interest of mutual fund payable to non-resident

565

67.3-3

Any other payments

565

67.3-4

Private arrangement of paying income tax-free cannot discharge obligation under sections 194E, 195 and 196A

566

67.4

Tax deduction account number

566

67.5

Deposit of tax to the credit of Central Government

566

67.5-1

Where to deposit

566

67.5-2

Time of deposit

566

67.5-3

Payment through challan

567

67.5-4

Claim for refund

567

I-59

CONTENTS PAGE

67.6

67.7

Issue of certificate for tax deducted at source 67.6-1

Certificates are issued by downloading from TIN website

567

67.6-2

Time limit

567

67.6-3

Issue of duplicate certificate

567

Quarterly return to the Government

567

Quarterly return

567

67.7-1 67.8

567

Consequences of failure to deduct or pay tax or furnish return

569

67.8-1

Failure to deduct and/or pay tax

569

67.8-2

Failure to comply with the provisions of section 203A regarding tax deduction account number

569

67.8-3

Failure to issue certificate, or submit return

569

67.8-4

Forfeiture of deduction in respect of payment of annual charge, interest, royalty, fees, etc.

569

68 HOW TO COMPUTE AMOUNT PAYABLE TO NON-RESIDENT AND TAX TO BE DEDUCTED THEREFROM 68.1

68.2

Payments subject to tax deduction under section 194E 68.1-1

Payments covered by section 115BBA

573

68.1-2

Other points pertaining to section 194E

574

Payment subject to tax deduction under section 196A 68.2-1

68.3

573

No tax deduction if UTI’s units are purchased in foreign currency

“Other sum” subject to tax deduction under section 195

574 574 575

68.3-1

Meaning of non-resident

575

68.3-2

Withdrawal of Circular Nos. 23, 163 and 786 and its impact on taxability of export commission in India

575

68.3-3

Payment made to resident agent of a non-resident

577

68.3-4

Advances to ship hirer adjustable against hire charges

577

68.3-5

Constructive payment of commission to nonresident through another non-resident

577

68.3-6

Money paid into Court under decree obtained by non-resident

578

68.3-7

Payment to non-resident for goods resold by it to resident seller

578

I-60

CONTENTS PAGE

Interest on purchase price paid to non-resident in instalments

578

Customary, non-contractual payment to officers of ship by stevedores

578

68.3-10 Payment to foreign firm whose one of the partners is managing firm’s affairs from India

578

68.3-11 Section 195 is applicable even in the case of regular trading operation

579

68.3-12 Payment to foreign shipping companies

579

68.3-13 Payments to non-resident at UAE

580

68.3-14 Payments of interest by a branch office to head office outside India

580

68.3-15 Any other sum chargeable to tax

581

68.3-16 Travelling expenses

581

68.3-17 Payment for data transmission

581

68.3-18 When payee is non-resident at the time of tax deduction but becomes resident at the time of payment

581

68.3-19 Mere accrual of income is not sufficient

582

68.3-20 Reimbursement of salary or other expenses

582

68.3-21 When income is exempt under DTAA

582

68.3-22 Lead manager of GDR

582

68.3-23 Transfer of controlling interest in a foreign company having assets in India

582

68.3-24 Lease rent, roaming charges, telephone services, uplinking charges, bandwidth network charges, interconnection/port access charges

584

68.3-25 Export contract

584

68.3-26 Remittance from India

584

68.3-27 Subscription charges

584

Tax deduction only on recipient’s chargeable income Provisions for ascertaining recipient’s chargeable income

585

68.3-8 68.3-9

68.4

Appropriation is not possible in the case of interest, fees and royalty

587

Grossing up of amount payable to non-resident stipulated to be paid net of taxes

589

68.4-1 68.5

68.5-1 68.6

Cases when grossing up is not required

Rates of tax deduction at source for the financial year 2022-23 68.6-1

TDS when payment/credit is given to a person in notified jurisdictional area

I-61

590 591 591

CONTENTS PAGE

68.6-2 68.7

68.8

68.9

Payments to non-resident without tax deduction in certain cases

68.11

592 594

68.7-1

Qualifying persons and qualifying incomes

594

68.7-2

Conditions to be satisfied

594

68.7-3

Procedure for issue of certificate

595

Certificate for deduction of tax at lower rate in the case of recipient other than a company

595

68.8-1

Time limit for soliciting the favour

595

68.8-2

How lower rate is determined

596

68.8-3

Validity of the certificate

596

68.8-4

Other points

596

Furnishing information regarding remittance 68.9-1

68.10

TDS when PAN of deductee is not available

596 597

Other points

Credit for tax deducted

597

68.10-1 Rules framed by Board

597

Refund for denying liability to deduct tax in certain cases

598

69 DEDUCTION OF TAX AT SOURCE FROM INCOME OF UNITS OF OFFSHORE FUND 69.1

Who is responsible to deduct tax

600

69.2

When tax is to be deducted

600

69.3

How to compute amount of tax deducted

600

69.4

Tax-deduction account number

600

69.5

Deposit of tax to the credit of Central Government

600

69.6

69.5-1

Where to deposit

600

69.5-2

Time of deposit

600

69.5-3

Payment through challan

601

69.5-4

Claim for refund

601

Issue of certificate for tax deduction

601

69.6-1

Certificates are issued by downloading from TIN website

601

69.6-2

Time limit

601

69.7

Quarterly returns to the Government

602

69.8

Consequences of failure to deduct or pay tax or furnish return

602

69.8-1

Failure to deduct and/or pay tax

I-62

602

CONTENTS PAGE

69.8-2 69.8-3

Failure to comply with the provisions of section 203A regarding tax deduction account number

602

Failure to issue certificate or submit return

602

70 HOW TO COMPUTE AMOUNT OF TAX DEDUCTION UNDER SECTION 196B 70.1

Amount covered by section 196B

603

70.1-1

Units referred to in section 115AB

603

70.1-2

Overseas financial organisation

603

70.2

Rate for tax deduction

604

70.3

When tax is deductible at lower rate

604

70.4

Tax credit

604

70.4-1

Rules framed by Board

604

71 DEDUCTION OF TAX AT SOURCE FROM INCOME FROM FOREIGN CURRENCY BOND OR SHARES OF INDIAN COMPANY 71.1

Who is responsible to deduct tax

606

71.2

When tax is to be deducted

606

71.3

How to compute amount of tax deducted

606

71.4

Tax deduction account number

606

71.5

Deposit of tax to the credit of Central Government

606

71.6

71.5-1

Where to deposit

606

71.5-2

Time of deposit

606

71.5-3

Payment through challan

607

71.5-4

Claim for refund

607

Issue of certificate for tax deduction

607

71.6-1

Certificates are issued by downloading from TIN website

607

71.6-2

Time limit

607

71.7

Quarterly returns to the Government

608

71.8

Consequences of failure to deduct or pay tax or furnish return

608

71.8-1

Failure to deduct and/or pay tax

I-63

608

CONTENTS PAGE

71.8-2 71.8-3

Failure to comply with the provisions of section 203A regarding tax-deduction account number

608

Failure to issue certificate or submit return

608

72 HOW TO COMPUTE AMOUNT OF TAX DEDUCTION UNDER SECTION 196C 72.1

Amount covered by section 196C 72.1-1

Bonds/shares referred to in section 115AC

609 609

72.2

Rate for tax deduction

609

72.3

When tax is deductible at lower rate

610

Tax credit

610

72.4

72.4-1

Rules framed by Board

610

73 DEDUCTION OF TAX AT SOURCE FROM INCOME OF FOREIGN INSTITUTIONAL INVESTORS FROM SECURITIES 73.1

Who is responsible to deduct tax

612

73.2

When tax is to be deducted

612

73.3

How to compute amount of tax deducted

612

73.4

Tax deduction account number

612

Deposit of tax to the credit of Central Government

612

73.5

73.6

73.5-1

Where to deposit

612

73.5-2

Time of deposit

612

73.5-3

Payment through challan

613

73.5-4

Claim for refund

613

Issue of certificate for tax deduction

613

73.6-1 73.6-2

Certificates are issued by downloading from TIN website

613

Time limit

613

73.7

Quarterly returns to the Government

614

73.8

Consequences of failure to deduct or pay tax or furnish return

614

73.8-1

Failure to deduct and/or pay tax

614

73.8-2

Failure to comply with the provisions of section 203A regarding tax-deduction account number

614

Failure to issue certificate or submit return

614

73.8-3

I-64

CONTENTS PAGE

74 HOW TO COMPUTE AMOUNT OF TAX DEDUCTION UNDER SECTION 196D 74.1

Amount covered by section 196D

615

74.1-1

Securities referred to in section 115AD

615

74.1-2

Who is a Foreign Institutional Investor

615

74.2

Rate for tax deduction

635

74.3

When tax is deductible at lower rate

636

74.4

Tax credit

636

74.4-1

Rules framed by Board

636

BOOK TWO : ADVANCE TAX

75 INCOME LIABLE TO ADVANCE TAX 75.1

Provisions applicable up to the assessment year 1988-89

640

75.2

All incomes are subject to advance tax from the assessment year 1989-90

640

76 LIABILITY TO ADVANCE TAX - WHEN ARISES 76.1

Who is liable to pay advance tax

641

Illustration

641

77 DUE DATES OF PAYMENT 77.1

643

Instalments of advance tax Due dates

643

Illustration

643

77.3

Tax paid after the due dates but within the financial year

644

77.4

Due dates when advance tax is payable on notice issued

by Assessing Officer

644

Illustrations

644

77.2

I-65

CONTENTS PAGE

78 COMPUTATION OF ADVANCE TAX LIABILITY 78.1

Payment of advance tax by the assessee on his own account 78.1-1

No need to submit any estimate/statement

646

78.1-2

Revision of second and subsequent instalment

646

78.1-3

Computation of tax

646

78.1-4 78.2

Tax rates

646

Illustration

646

Payment of advance tax in pursuance of order of Assessing Officer 78.2-1 78.2-2

78.3

646

Lower/higher estimate by assessee

649 649

Computation of tax by Assessing Officer

649

Illustration

650

Payment of advance tax in pursuance of revised order of Assessing Officer

651

78.3-1

Lower/higher estimate by assessee

651

78.3-2

Computation of tax

651

Illustration

651

79 INTEREST PAYABLE BY THE ASSESSEE/GOVERNMENT 79.1

Interest for default in payment of advance tax

653

79.1-1

Assessed tax - Meaning of

653

79.1-2

Adjustment when tax is paid before regular assessment under section 140A

654

Adjustment in the case of reassessment/recomputation under section 147 or 153A

654

79.1-4

Adjustment in the case of rectification/revision/ modification under sections 154, 155, 250, 254, 260, 262, 263, 264, 245D(4)

655

79.1-5

Where an application for settlement is made under section 245C(1)

655

79.1-6

Interest under section 234B or 234C in case of MAT

656

79.1-7

Shipping business of non-residents

656

79.1-8

Payment by cheque

656

79.1-9

Specific order

656

79.1-3

79.1-10 If returned income and assessed income of latest year is nil

I-66

657

CONTENTS PAGE

79.2

79.3

79.1-11 Collection of interest under sections 234A, 234B and 234C is mandatory

657

79.1-12 Cash seized during search

657

79.1-13 Shortfall because of interpretation of law

658

79.1-14 When advance tax liability arises because of a subsequent court ruling

658

79.1-15 Application of section 234B in the case of settlement of cases

658

79.1-16 Other points

659

Interest for deferment of advance tax

659

79.2-1

Category A

659

79.2-2

Category B

660

79.2-3

Category C

661

79.2-4

Short payment of advance tax in case of capital gains/casual income

662

79.2-5

What is returned income

662

Waiver or reduction of interest under sections 234A, 234B and 234C

662

79.3-1

Conditions

662

79.3-2

Period

662

79.3-3

Extent of interest to be reduced or waived

663

79.3-4

Discretion should be exercised in judicial manner

663

79.4

Chief Commissioner/Director General (Investigation) to reduce penal interest in certain cases

663

79.5

Power of CBDT and Settlement Commission to reduce/ waive interest

664

Interest payable to assessee

664

79.6

79.6-1 79.6-2 79.7

Provisions applicable after amendments by the Finance Act, 2016 and Finance Act, 2017

665

Other points

666

Procedure to be followed in calculation of interest

667

Illustrations

667

BOOK THREE : TAX COLLECTION AT SOURCE

80 TAX COLLECTION AT SOURCE 80.1

In which case tax has to be collected at source

I-67

680

CONTENTS PAGE

80.2

Tax collection in Category A

681

80.2-1

Who is seller in Category A

681

80.2-2

Who is buyer in Category A

682

80.2-3

Meaning of “scrap”

683

80.2-4

When tax has to be collected in Category A

684

80.2-5

Goods utilised for manufacturing/processing or generation power of in Category A is not subject to tax collection

685

80.2-6

Other judicial rulings

686

80.3

Tax collection in Category B

686

80.4

Tax collection in Category C

686

80.5

Tax collection in Category D

687

80.6

Tax collection in Category E

687

Illustrations

688

Tax collection in Category F

690

80.7

80.7-1

Clarification given by the Board in Circular No. 17/2020

691

80.8

Requirement to furnish PAN by collectee

693

80.9

Special provision for TCS for non-Filers of Income-tax return

693

80.10

Tax collection at lower rate

694

80.11

Tax collection account number

694

80.12

Deposit of tax

695

80.12-1 e-Payment of tax

695

Issue of certificate

695

80.13-1 Due date of issuing certificate in Form No. 27D

695

80.13-2 Duplicate certificate

695

80.13

Return to the Government

696

80.14-1 Annual return

696

80.14-2 Quarterly return

696

80.14-3 Mode of furnishing quarterly returns

696

80.14-4 Quarterly return not possible before payment of tax and interest

697

80.14-5 PAN data of collectee

697

80.15

Consequences of failure to collect or pay tax, furnish return, etc.

697

80.16

Tax credit to one who pays

697

80.16-1 Rules framed by Board

697

80.14

I-68

CONTENTS PAGE

80.17

Consequences if tax is not collected or paid

697

80.18

There is no ambiguity in the provisions of section 206C

698

BOOK FOUR : REFUND

81 REFUND FOR EXCESS PAYMENT 81.1

Right to claim refund - When arises

704

81.2

Who can claim refund

704

81.3

How to claim refund

704

81.3-1 81.4

Claim after the statutory time-limit

704 705

Refund on appeal 81.4-1

In case assessment is set aside or cancelled

705

81.4-2

In case assessment is annulled

706

81.5

Correctness of assessment not to be questioned

706

81.6

Set off of refunds against the tax remaining payable

706

82 INTEREST ON REFUND 82.1

Interest on refund on excess payment of advance tax and tax deduction at source

708

82.2

Interest on refund of tax other than advance tax/tax deducted at source

708

82.3

Refund which arises out of appeal effect

708

82.4

Interest along with refund is a must

708

82.5

Delay attributable to the assessee is not considered

709

82.6

Automatic revision of interest in case of appeal, reassessment, etc.

710

Interest on excess refund

710

82.7

82.7-1

Interest under section 234D(1)

710

82.7-2

Computation of interest

711

Illustration

711

I-69

CONTENTS PAGE

REFERENCER Referencer 1 : Tax rates

715

u Tax deduction at source

715

Referencer 2 : Withholding tax rates

723

Referencer 3 : Rates for tax collection at source

729

Referencer 4 : Advance tax rates

733

Referencer 5 : Calendar for tax deduction/Collection at source and advance payment of tax

741

I-70

61 Deduction of tax at source on payment for purchase of goods Who is responsible for tax deduction at source under section 194Q 61.1 Under section 194Q, tax is deductible by buyer of goods. “Buyer” for this purpose, means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs. 10 crore during the financial year immediately preceding the financial year in which the purchase of goods is carried out. However, “buyer” does not include a person notified by the Central Government (subject to such conditions as may be specified therein)†.

Any person (being a buyer) who is responsible for paying any sum to any resident seller for purchase of any goods of the value (or aggregate of such value) exceeding Rs. 50 lakh in any previous year, is required to deduct tax at source under section 194Q with effect from July 1, 2021.

When tax has to be deducted at source 61.2 Tax should be deducted by the buyer, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier. Where, however, the above sum is credited to any account (whether called “suspense account” or by any other name) in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

Tax deduction account number 61.3 See para 1.4.

Deposit of tax to the credit of Central Government 61.4 Tax is to be deposited to the credit of the Central Government as follows – 61.4-1 Where to deposit - See para 1.5-1.

61.4-2 Time within which tax has to be deposited - See para 37.4-2. † In exercise of this power, the Central Government has specified that Air India Assets Holding Ltd. shall not be considered as “buyer” for this purpose in case of transfer of goods by Air India Ltd. to it under a plan approved by the Central Government – Notification No. S.O. 3680(E), dated September 10, 2021.

543

Para 61.7

DEDUCTION OF TAX AT SOURCE ON PAYMENT

Book One

Issue a certificate for tax deducted at source to unitholders 61.5 Every person deducting tax from income in respect of units is required to issue certificate in Form No. 16A. 61.5-1 Certificates are issued by downloading from TRACES Portal See para 7.6-1.

61.5-2 Time limit within which the certificate should be given - See para 7.6-2.

61.5-3 Issue of duplicate certificate - See para 1.6-4.

Statement/returns to the Government 61.6 Quarterly return of income in respect of tax deducted under section 194Q is to be filed within the prescribed time-limit in Form No. 26Q [see para 37.6-2].

Consequences of failure to deduct or pay tax, furnish returns, etc.

61.7 The following are consequences of different defaults : 61.7-1 Failure to deduct and/or pay tax - See para 1.8-1.

61.7-2 Failure to comply with the provisions of section 203A regarding tax deduction account number - See para 1.8-2.

61.7-3 Failure to issue certificates or submit return/statement - See para 1.8-3.

544

62 How to compute tax to be deducted under section 194Q Income subject to tax deduction under section 194Q 62.1 If the following conditions are satisfied, then tax is deductible under section 194Q – 1. Payer is “buyer” of goods.

2. Payment/credit is on or after July 1, 2021.

3. Payment/credit pertains to purchase of goods from seller.

4. Aggregate payment/credit during the financial year exceeds Rs. 50 lakh.

If the above conditions are satisfied, the buyer is required to deduct tax at source under section 194Q. 62.1-1 When tax is not deductible - Tax is not deductible under section 194Q if the following cases – Cases when TDS under section 194Q not applicable

Comments

Case 1 - If tax is deductible under any other section

If tax is deductible under any other section, then tax shall be deducted under that section and not under section 194Q. Even when tax is deductible under any other section (but not actually deducted by the payer), TDS provisions of that section will apply and not TDS under section 194Q.

Case 2 - If tax is collectible under the provisions of section 206C [but other than sub-section (1H)]

If a particular transaction is covered by TCS provisions of section 206C [other than sub-section (1H)], then tax will be collected by the seller (and tax is not deductible by the buyer under section 194Q).

If a particular transaction is covered by section 194Q as well as section 206C(1H), then TDS under section 194Q will apply and not TCS under section 206C(1H).

62.1-2 Removing any difficulty - 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. These guidelines shall be laid before each House of Parliament 545

Para 62.2

HOW TO COMPUTE TAX TO BE DEDUCTED

Book One

and shall be binding on the income-tax authorities and on the e-commerce operator.

Rates for tax deduction at source during the financial year 2022-23 62.2 Tax is deductible under section 194Q with effect from July 1, 2021.

Tax is deductible by buyer at the rate of 0.1 per cent of the amount paid or payable exceeding Rs. 50 lakh. ➢ If the recipient does not furnish his PAN to the deductor, tax will be deducted at the rate of 5 per cent by virtue of section 206AA. PAN of the deductee should be mentioned in any correspondence and document which is exchanged between the deductor and deductee. ➢ If recipient is a non-filer of income-tax return, tax is deductible (by virtue of section 206AB) at the rate of 5 per cent [for detailed discussion, see para 6.5-2].

62.2-1 Clarifications by CBDT - Vide Circular No. 13/2021, dated June 30, 2021 and Circular No. 20/2021, dated November 25, 2021, the following clarifications are given by the Board pertaining to section 194Q – ➢ Transactions in securities - Section 194Q shall not be applicable in

relation to, – a. transactions in securities and commodities which are traded through recognized exchanges; b. transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges. ➢ Adjustment for GST and other State levies - When tax is deducted at the

time of credit of amount in the account of seller and in terms of the agreement or contract between the buyer and the seller, the component of GST comprised in the amount payable to the seller is indicated separately, tax shall be deducted under section 194Q on the amount credited without including such GST. If, however, the tax is deducted on payment basis (because the payment is earlier than the credit) the tax would be deducted on the whole amount as it is not possible to identify that payment with GST component of the amount to be invoiced in future.

The above clarification will also be applicable in the case of purchase/sale of goods which are not covered by GST but covered by other State levies (i.e., VAT, excise duty, etc.). ➢ Purchase returns - Tax is required to be deducted at the time of payment

or credit, whichever is earlier. Thus, before purchase return happens, the tax must have already been deducted under section 194Q on that purchase. If that is the case and against this purchase return the money is refunded by the seller, then this tax deducted may be adjusted against the next purchase against the same seller. No adjustment is required if the 546

Ch. 62

RATES FOR TDS DURING FINANCIAL YEAR 2022-23

Para 62.2

purchase return is replaced by the goods by the seller as in that case the purchase on which tax was deducted under section 194Q has been completed with goods replaced. ➢ Whether non-resident can be buyer under section 194Q - The provisions

of section 194Q shall not apply to a non-resident whose purchase of goods from seller resident in India is not effectively connected with the permanent establishment of such non-resident in India. ➢ Whether tax is to be deducted when the seller is a person whose income

is exempt - The provisions of section 194Q shall not apply on purchase of goods from a person (being a seller) who as a person is exempt from income tax under the Act (like person exempt under section 10) or under any other Act passed by the Parliament. However, this clarification would not apply if only part of the income of the seller is exempt. ➢ Whether tax is to be deducted on advance payment - Since the provisions

of section 194Q apply on payment or credit whichever is earlier, TDS shall apply to advance payment made by the buyer to the seller. ➢ Whether provisions of section 194Q shall apply to buyer in the year of

incorporation - Under section 194Q a buyer is required to have total sales or gross receipts or turnover from the business carried on by him exceeding Rs. 10 crore during the financial year immediately preceding the financial year in which the purchase of goods is carried out. Since this condition would not be satisfied in the year of incorporation, the provisions of section 194Q shall not apply in the year of incorporation. ➢ Whether provisions of section 194Q shall apply to buyer if the turnover

from business is Rs.10 crore or less - For the purposes of section 194Q, a buyer is required to have total sales or gross receipts or turnover from the business carried on by him exceeding Rs. 10 crore during the immediately preceding financial year. Consequently, the sales or gross receipts or turnover from business carried on by him must exceed Rs. 10 crore. His turnover or receipts from non-business activity is not to be counted for this purpose. ➢ Cross application of section 194-O, section 206C(1H) section 194Q -

Under section 194Q(5), the provision of this section shall not apply to 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 a transactions on which sub-section (1H)] applies.

After conjoint reading of all these provisions the following clarifications are given by the Board – 1. If tax has been deducted by the e-commerce operator on a transaction under section 194-O [including transactions on which tax is not deducted 547

Para 62.2

HOW TO COMPUTE TAX TO BE DEDUCTED

Book One

on account of sub-section (2) of section 194-O], that transaction shall not be subjected to tax deduction under section 194Q. 2. Section 206C(1H) provides exemption from TCS if the buyer has deducted tax at source on goods purchased by him. To remove difficulties, it has been clarified that this exemption would also cover a situation where instead of the buyer, the e-commerce operator has deducted tax at source on that transaction of sale of goods by seller to buyer through e-commerce operator.

3. If a transaction is both within the purview of section 194-O as well as section 194Q, tax is required to be deducted under section 194-O and not under section 194Q. 4. Similarly, if a transaction is both within the purview of section 194-O as well as section 206C(1H), tax is required to be deducted under section 194-O. The transaction shall come out of the purview of section 206C(1H) after tax has been deducted by the e-commerce operator on that transaction. Once the e-commerce operator has deducted the tax on a transaction, the seller is not required to collect the tax under section 206C(1H) on the same transaction. Primary responsibility is on e-commerce operator to deduct the tax under section 194-O and that responsibility cannot be condoned if the seller has collected the tax under section 206C(1H). This is for the reason that the rate of TDS under section 194-O is higher than rate of TCS under section 206C(1H).

5. If a transaction is both within the purview of section 194Q as well as section 206C(1H), the tax is required to be deducted under section 194Q. The transaction shall come out of the purview of section 206C(1H) after tax has been deducted by the buyer on that transaction. Once the buyer has deducted the tax on a transaction, the seller is not required to collect the tax under section 206C(1H) on the same transaction. If, however, for any reason, tax has been collected by the seller under section 206C(1H), before the buyer could deduct tax under section 194Q on the same transaction, such transaction would not be subjected to tax deduction again by the buyer. ➢ E-auction services carried out through electronic portal - The provisions

of section 194-O shall not apply in relation to e-auction activities carried out by e-auctioneers if the following parameters are satisfying – a. the e-auctioneer conducts e-auction services for its clients in its electronic portal and is responsible for the price discovery only which is reported to the client; b. the price so discovered through e-auction process is not necessarily the price at which the transaction takes place and it is up to the discretion of the client to accept the price or to directly negotiate with the counter-party; 548

Ch. 62

RATES FOR TDS DURING FINANCIAL YEAR 2022-23

Para 62.2

c. the transaction of purchase/sale takes place directly between the buyer and the seller outside the electronic portal maintained by the e-auctioneer and price discovery only acts as the starting point for negotiation and conclusion of purchase/sale; d. the e-auctioneer is not responsible for facilitating the purchase and sale of goods for which e-auction was conducted on its electronic portal except to the extent of price discovery; e. payments for the transactions are carried out directly between the buyer and the seller outside the electronic portal and the e-auctioneer does not have any information about the quantum and the schedule of payment which is decided mutually by the client and the counterparty; f. for payment made to e-auctioneer for providing e-auction services, the client deducts tax under the relevant provisions of the Act other than section 194-O. This clarification shall not apply if any of the aforesaid parameters are not satisfied. Moreover, the buyer and seller would still be liable to deduct/ collect tax as per the provisions of sections 194Q and 206C(1H), as the case may be. ➢ Applicability of section 194Q in cases where exemption has been

provided under section 206C(1A) - Under section 206C(1A), tax is not collectible in case of a resident buyer, if the buyer furnishes to the person responsible for TCS a declaration to the effect that the goods [as referred to in section 206C(1)] are to be utilized for the purposes of manufacturing/ processing of articles or for the purposes of generation of power and not for trading purposes. Since by virtue of section 206C(1A), the tax is not required to be collected for goods covered under sub-section (1) of the said section, the Board has clarified that the provisions of section 194Q will apply and the buyer shall be liable to deduct tax under the said section if the conditions specified therein are fulfilled. ➢ Applicability of the provisions of section 194Q in case of Government department (not being a public sector undertaking/corporation) - In case of any Government department (which is not carrying out any business or commercial activity), the primary requirement for being considered as a “buyer” (i.e., turnover of the preceding year exceeding Rs. 10 crore) will not be fulfilled. Consequently, such an organization will not be subject to TDS provisions of section 194Q. If, however, the said department is carrying on a business/commercial activity (turnover of the preceding year exceeds Rs. 10 crore), the provision of section 194Q shall apply subject to the fulfilment of other conditions.

549

Para 62.5

HOW TO COMPUTE TAX TO BE DEDUCTED

Book One

It may be noted that for the purpose of section 194Q Central Government/ State Government (or any department of Government) shall not be considered as “seller” and no tax is to be deducted by the buyer, in cases where any department of Central or State Government are seller of goods.

However, any other person (such as a public sector undertaking or corporation established under Central or State Act) shall be required to comply with the provisions of section 194Q. Income in respect of amount payable to Government or certain corporation 62.3 No tax is deductible at source from income in respect of units payable to the following – a. the Government [sec. 196(i)]; or b. the Reserve Bank of India [sec. 196(ii)]; or c. a corporation established by or under a Central Act which is, under any law for the time being in force, exempt from tax on its income [sec.

196(iii)]; or d. a mutual fund specified under section 10(23D) [sec. 196(iv)]. ➢ Section 197A(1F) - Tax is not deductible from a specified payment to a notified institution, association or body or class of institutions, associations or bodies [see para 6.3].

Deduction of tax at lower rates [Sec. 197(1)] 62.4 The provisions of section 197 (pertaining to lower/nil TDS certificate from the Assessing Officer) are not applicable in respect of tax deductible under section 194Q. Who get credit for tax deducted 62.5 Any tax deducted from income from units in accordance with the provision of section 194Q and paid to the Central Government is treated as a payment of tax on behalf of unitholder. Tax credit is, therefore, given to him for the amount so deducted at the time of assessment.

550

CHAPTERS 63 & 64

Deduction of tax at source on benefit or perquisite in respect of business or profession under section 194R HOW TO PROCEED

➢ Ascertain whether you are a person responsible for making deduc-

tion at source on benefit or perquisite in respect of business or profession under section 194R – see para 63.1. ➢ Find out the rate of tax deduction – see para 64.3. ➢ Deposit the tax deducted to the credit of the Central Government,

for the place of payment, time of payment and the number of challan form for payment – see para 63.4. ➢ Issue a certificate of tax deduction at source to payee – see para

63.5. ➢ File returns of tax deducted at source to the concerned Assessing

Officer – see para 63.5.

RELATED ISSUES

➢ Tax-deduction account number – see para 1.4. ➢ Consequences of failure to deduct or pay tax, furnish return, etc. –

see para 63.6.

551

Deduction of Tax at Source with Advance Tax and Refunds AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : : : : :

TAXMANN VINOD K. SINGHANIA APRIL 2022 35TH EDITION 9789356220867 816 PAPERBACK

Rs. : 2095 | USD : 66

Description This book provides legal analysis of the provisions relating to TDS, TCS, Advance Tax and Refunds under the Income-tax Act. It also includes guidance on all practical problems supported by illustrations and legal jurisprudence.

The Present Publication is the 35 th Edition, authored by Dr Vinod K. Singhania. This book is amended by the Finance Act, 2022 and divided into four divisions, namely: u

Deduction of Tax at Source

u

Advance Tax

u

Tax Collection at Source

u

Refund

The key features of the book are as follows: u

[Detailed Analysis] of TDS and TCS provisions

u

[40+ Original Illustrations] for easy understanding of various complex provisions

u

[Case Laws] covering the ratio of all important Case Laws relating to TDS & TCS

u

[Complete Analysis of the Rules] prescribed for TDS and TCS provisions

u

[Guidance on the Controversial Issues] with supporting Case Laws

u

[Circulars and Notifications] are linked with the relevant provisions

u

[Referencer] for the following: n

Tax Rates w.r.t. to TDS

n

Withholding Tax Rates

n

Rates for TCS

n

Advance Tax Rates

n

Calendar for TDS, TCS & Advance Payment of Tax

ORDER NOW