ICAI Notes: Advance Tax, Tax Deduction at Source and Introduction to Tax Collection at Source | Taxation for CA Intermediate PDF Download

 Page 1


LEARNING OUTCOMES 
a
  
CHAPTER 
7 
PA
 
ADVANCE TAX, TAX
DEDUCTION AT SOURCE
AND TAX COLLECTION 
AT SOURCE 
After studying this chapter, you would be able to– 
? appreciate the modes of recovery of income-tax from an 
assessee; 
? comprehend and apply the provisions governing deduction 
of tax at source from certain specified income and 
payments; 
? examine whether tax is deductible in a particular case(s) 
considering the provisions of the relevant section; 
? compute the tax deductible at source in respect of a 
particular case(s); 
? identify the cases where tax is not required to be deducted 
at source and the conditions to be satisfied for this purpose; 
? comprehend and appreciate the duty of the person 
deducting tax;  
© The Institute of Chartered Accountants of India
Page 2


LEARNING OUTCOMES 
a
  
CHAPTER 
7 
PA
 
ADVANCE TAX, TAX
DEDUCTION AT SOURCE
AND TAX COLLECTION 
AT SOURCE 
After studying this chapter, you would be able to– 
? appreciate the modes of recovery of income-tax from an 
assessee; 
? comprehend and apply the provisions governing deduction 
of tax at source from certain specified income and 
payments; 
? examine whether tax is deductible in a particular case(s) 
considering the provisions of the relevant section; 
? compute the tax deductible at source in respect of a 
particular case(s); 
? identify the cases where tax is not required to be deducted 
at source and the conditions to be satisfied for this purpose; 
? comprehend and appreciate the duty of the person 
deducting tax;  
© The Institute of Chartered Accountants of India
INCOME TAX LAW 
 
a
 
 
7.2 
? examine the consequences of failure to deduct tax at 
source or make payment of the tax deducted at source; 
? appreciate when the liability to pay advance tax arises; 
? compute advance tax liability and the schedule of 
instalments for payment of advance tax; 
? comprehend the concept of tax collection at source and 
appreciate when tax is collectible at source; 
? appreciate the difference between tax deduction at source 
and tax collection at source. 
© The Institute of Chartered Accountants of India
Page 3


LEARNING OUTCOMES 
a
  
CHAPTER 
7 
PA
 
ADVANCE TAX, TAX
DEDUCTION AT SOURCE
AND TAX COLLECTION 
AT SOURCE 
After studying this chapter, you would be able to– 
? appreciate the modes of recovery of income-tax from an 
assessee; 
? comprehend and apply the provisions governing deduction 
of tax at source from certain specified income and 
payments; 
? examine whether tax is deductible in a particular case(s) 
considering the provisions of the relevant section; 
? compute the tax deductible at source in respect of a 
particular case(s); 
? identify the cases where tax is not required to be deducted 
at source and the conditions to be satisfied for this purpose; 
? comprehend and appreciate the duty of the person 
deducting tax;  
© The Institute of Chartered Accountants of India
INCOME TAX LAW 
 
a
 
 
7.2 
? examine the consequences of failure to deduct tax at 
source or make payment of the tax deducted at source; 
? appreciate when the liability to pay advance tax arises; 
? compute advance tax liability and the schedule of 
instalments for payment of advance tax; 
? comprehend the concept of tax collection at source and 
appreciate when tax is collectible at source; 
? appreciate the difference between tax deduction at source 
and tax collection at source. 
© The Institute of Chartered Accountants of India
 
ADVANCE TAX, TDS AND TCS 
a
a
    7.3 
 
  
Tax deduction 
at source
Deduction of tax at 
source 
[Section 192 to 196]
Certificate of 
deduction of tax at 
a lower rate
[Section 197]
No deduction of tax 
in certain cases
[Section 197A]
Miscellaneous 
Provisions
[Section 198 to 
206AB]
Advance Tax
Liability to pay 
advance tax 
[Section 207 to 208]
Computation of 
advance tax 
[Section 209]
Instalments of 
advance tax and due 
dates 
[Section 211]
Credit for advance 
tax 
[Section 219]
Interest on non-
payment / short 
payment or deferment 
of advance tax 
[Section 234B & 234C]
Tax collection 
at source
Collection of tax 
at source
[Section 206C]
TCS for non-
filers of income-
tax return and 
non-furnishers 
of PAN [Section 
206CCA & 
206CC]
Difference 
between TDS 
and TCS
Common 
Number for TDS 
and TCS 
[Section 203A]
CHAPTER OVERVIEW 
© The Institute of Chartered Accountants of India
Page 4


LEARNING OUTCOMES 
a
  
CHAPTER 
7 
PA
 
ADVANCE TAX, TAX
DEDUCTION AT SOURCE
AND TAX COLLECTION 
AT SOURCE 
After studying this chapter, you would be able to– 
? appreciate the modes of recovery of income-tax from an 
assessee; 
? comprehend and apply the provisions governing deduction 
of tax at source from certain specified income and 
payments; 
? examine whether tax is deductible in a particular case(s) 
considering the provisions of the relevant section; 
? compute the tax deductible at source in respect of a 
particular case(s); 
? identify the cases where tax is not required to be deducted 
at source and the conditions to be satisfied for this purpose; 
? comprehend and appreciate the duty of the person 
deducting tax;  
© The Institute of Chartered Accountants of India
INCOME TAX LAW 
 
a
 
 
7.2 
? examine the consequences of failure to deduct tax at 
source or make payment of the tax deducted at source; 
? appreciate when the liability to pay advance tax arises; 
? compute advance tax liability and the schedule of 
instalments for payment of advance tax; 
? comprehend the concept of tax collection at source and 
appreciate when tax is collectible at source; 
? appreciate the difference between tax deduction at source 
and tax collection at source. 
© The Institute of Chartered Accountants of India
 
ADVANCE TAX, TDS AND TCS 
a
a
    7.3 
 
  
Tax deduction 
at source
Deduction of tax at 
source 
[Section 192 to 196]
Certificate of 
deduction of tax at 
a lower rate
[Section 197]
No deduction of tax 
in certain cases
[Section 197A]
Miscellaneous 
Provisions
[Section 198 to 
206AB]
Advance Tax
Liability to pay 
advance tax 
[Section 207 to 208]
Computation of 
advance tax 
[Section 209]
Instalments of 
advance tax and due 
dates 
[Section 211]
Credit for advance 
tax 
[Section 219]
Interest on non-
payment / short 
payment or deferment 
of advance tax 
[Section 234B & 234C]
Tax collection 
at source
Collection of tax 
at source
[Section 206C]
TCS for non-
filers of income-
tax return and 
non-furnishers 
of PAN [Section 
206CCA & 
206CC]
Difference 
between TDS 
and TCS
Common 
Number for TDS 
and TCS 
[Section 203A]
CHAPTER OVERVIEW 
© The Institute of Chartered Accountants of India
INCOME TAX LAW 
a
7.4 
1. DEDUCTION OF TAX AT SOURCE AND
ADVANCE PAYMENT [SECTION 190]
The total income of an assessee for the previous year is taxable in the relevant 
assessment year. For example, the total income for the P.Y. 2023-24 is taxable in 
the A.Y. 2024-25. However, income-tax is recovered from the assessee in the 
previous year itself through – 
(1) Tax deduction at source (TDS)
(2) Tax collection at source (TCS)
(3) Payment of advance tax
Another mode of recovery of tax is from the employer through tax paid by him 
under section 192(1A) on the non-monetary perquisites provided to the 
employee. 
These taxes are deductible from the total tax due from the assessee. The assessee, 
while filing his return of income, has to pay self-assessment tax under section 
140A, if tax is due on the total income as per his return of income after adjusting, 
inter alia, TDS, TCS, relief of tax claimed under section 89, tax credit claimed to be 
set off in accordance with the provisions of section 115JD, in case assessee 
exercises the option of shifting out of the default tax regime provided under section 
115BAC(1A), any tax or interest payable according to the provisions of section 
191(2) and advance tax.  
2. DIRECT PAYMENT [SECTION 191]
Direct payment of tax - Section 191(1) provides that in the following cases, tax is 
payable by the assessee directly – 
(i) in the case of income in respect of which tax is not required to be deducted
at source; and
(ii) income in respect of which tax is liable to be deducted but is not actually
deducted.
In view of this provision, the proceedings for recovery of tax necessarily had to be 
taken against the assessee whose tax was liable to be deducted, but not 
deducted. 
© The Institute of Chartered Accountants of India
Page 5


LEARNING OUTCOMES 
a
  
CHAPTER 
7 
PA
 
ADVANCE TAX, TAX
DEDUCTION AT SOURCE
AND TAX COLLECTION 
AT SOURCE 
After studying this chapter, you would be able to– 
? appreciate the modes of recovery of income-tax from an 
assessee; 
? comprehend and apply the provisions governing deduction 
of tax at source from certain specified income and 
payments; 
? examine whether tax is deductible in a particular case(s) 
considering the provisions of the relevant section; 
? compute the tax deductible at source in respect of a 
particular case(s); 
? identify the cases where tax is not required to be deducted 
at source and the conditions to be satisfied for this purpose; 
? comprehend and appreciate the duty of the person 
deducting tax;  
© The Institute of Chartered Accountants of India
INCOME TAX LAW 
 
a
 
 
7.2 
? examine the consequences of failure to deduct tax at 
source or make payment of the tax deducted at source; 
? appreciate when the liability to pay advance tax arises; 
? compute advance tax liability and the schedule of 
instalments for payment of advance tax; 
? comprehend the concept of tax collection at source and 
appreciate when tax is collectible at source; 
? appreciate the difference between tax deduction at source 
and tax collection at source. 
© The Institute of Chartered Accountants of India
 
ADVANCE TAX, TDS AND TCS 
a
a
    7.3 
 
  
Tax deduction 
at source
Deduction of tax at 
source 
[Section 192 to 196]
Certificate of 
deduction of tax at 
a lower rate
[Section 197]
No deduction of tax 
in certain cases
[Section 197A]
Miscellaneous 
Provisions
[Section 198 to 
206AB]
Advance Tax
Liability to pay 
advance tax 
[Section 207 to 208]
Computation of 
advance tax 
[Section 209]
Instalments of 
advance tax and due 
dates 
[Section 211]
Credit for advance 
tax 
[Section 219]
Interest on non-
payment / short 
payment or deferment 
of advance tax 
[Section 234B & 234C]
Tax collection 
at source
Collection of tax 
at source
[Section 206C]
TCS for non-
filers of income-
tax return and 
non-furnishers 
of PAN [Section 
206CCA & 
206CC]
Difference 
between TDS 
and TCS
Common 
Number for TDS 
and TCS 
[Section 203A]
CHAPTER OVERVIEW 
© The Institute of Chartered Accountants of India
INCOME TAX LAW 
a
7.4 
1. DEDUCTION OF TAX AT SOURCE AND
ADVANCE PAYMENT [SECTION 190]
The total income of an assessee for the previous year is taxable in the relevant 
assessment year. For example, the total income for the P.Y. 2023-24 is taxable in 
the A.Y. 2024-25. However, income-tax is recovered from the assessee in the 
previous year itself through – 
(1) Tax deduction at source (TDS)
(2) Tax collection at source (TCS)
(3) Payment of advance tax
Another mode of recovery of tax is from the employer through tax paid by him 
under section 192(1A) on the non-monetary perquisites provided to the 
employee. 
These taxes are deductible from the total tax due from the assessee. The assessee, 
while filing his return of income, has to pay self-assessment tax under section 
140A, if tax is due on the total income as per his return of income after adjusting, 
inter alia, TDS, TCS, relief of tax claimed under section 89, tax credit claimed to be 
set off in accordance with the provisions of section 115JD, in case assessee 
exercises the option of shifting out of the default tax regime provided under section 
115BAC(1A), any tax or interest payable according to the provisions of section 
191(2) and advance tax.  
2. DIRECT PAYMENT [SECTION 191]
Direct payment of tax - Section 191(1) provides that in the following cases, tax is 
payable by the assessee directly – 
(i) in the case of income in respect of which tax is not required to be deducted
at source; and
(ii) income in respect of which tax is liable to be deducted but is not actually
deducted.
In view of this provision, the proceedings for recovery of tax necessarily had to be 
taken against the assessee whose tax was liable to be deducted, but not 
deducted. 
© The Institute of Chartered Accountants of India
 
ADVANCE TAX, TDS AND TCS 
a
a
    7.5 
In order to overcome this difficulty, the Explanation to this section provides that if 
any person, including the principal officer of a company – 
(i) who is required to deduct tax at source; or  
(ii) an employer paying tax on non-monetary perquisites under section 192(1A),  
does not deduct, or after deducting fails to pay such tax, or does not pay, the 
whole or part of the tax, then, such person shall be deemed to be an assessee-in-
default. 
However, if the assessee himself has paid the tax, this provision will not apply.  
3. DEDUCTION OF TAX AT SOURCE 
3.1  Salary [Section 192] 
(1) Applicability of TDS under section 192 
 This section casts an obligation on every person responsible for paying any 
income chargeable to tax under the head ‘Salaries’ to deduct income -tax at 
the time of payment on the amount payable. 
(2) Manner of deduction of tax 
(i)  Such income-tax has to be calculated at the average rate of income-
tax computed on the basis of the rates in force for the relevant 
financial year in which the payment is made, on the estimated total 
income of the assessee where the employee intimates to the 
employer his intent to exercise the option of shifting out of the 
default tax regime provided under section 115BAC(1A).  
(ii) Average rate of income-tax means the rate arrived at by dividing the 
amount of income-tax calculated on the total income, by such total 
income. 
(iii) A deductor, being an employer, has to seek information from each of its 
employees having income under section 192 regarding their intended 
tax regime and each such employee would intimate the same to the 
deductor, being his employer, regarding his intended tax regime for 
each year and upon intimation, the deductor has to compute his total 
income, and deduct tax at source thereon according to the option 
exercised.  
© The Institute of Chartered Accountants of India