Tax Deducted at Source (Section 192 to 194C) - Taxation | Income Tax for assessment (Inter Level) PDF Download

Section 192. Deduction of tax from salary (Paid to resident)

1. Who is required to deduct tax at source (Tax Deducter): Any person responsible for paying salaries shall, at the time of payment, deduct tax at the average rate of tax, on the estimated total income of the assessee.

2. Rate of TDS: At normal and special rates. + Surcharge if any, Education cess is compulsory.

3. When to deduct tax at source: At the time of payment.

4. Computation of TDS: The employee may send the required details to the person responsible for making the payment.
a. Determine the Gross Salary.
b. Deduct all deductions u/s 16.
c. Determine the gross total income. (not being a loss under any such head other than the loss under the head Income from house property)
d. Allow deduction u/s 80C to 80U.
e. Compute tax. Add surcharge if applicable. Education cess shall be added.

Note: Business loss is not allowed to be set off from salary income. However loss from house property can be set off from salary income in computing amount of TDS. No other loss can be set off from salary income in computing amount of TDS.

5. When tax is not required to be deducted at source: Where total income do not exceeds basic exemption.

Section 192A. Deduction of ta x from pa yment made from unrecognised provident fund or premat ure withdrawal from RPF (Paid to resident)

1. Tax Deducter: Trustees of the Employees’ Provident Fund Scheme, 1952
2. Rate of TDS: 10%.
3. When to deduct tax at source: At the time of payment.
4. No TDS: Payment made is upto Rs. 50,000 w.e.f 1-6-2016 (upto 31-5-2016 Rs. 30,000)

Section 193. Deduction of tax from interest on securities (Paid to resident)

1. Tax deductor: Company or Central Govt. or State Government.

2. The rate of TDS is : 10%.

3. When to deduct tax at source: At the time of credit of the payee’s or at the time of payment whichever date is earlier. Where the credit is in any other account (Suspense A/c, Interest payable account) it shall be deemed that amount is credited to payee’s account and tax is required to be deducted at source. (PCD)

4. When tax is not required to be deducted at source:

Exempted Securities
i. Interest on Gold bonds, 1999 exempt u/s 10(15).
ii. Interest on RBI Relief Bonds is exempt u/s 10(15).

Tax free securities
i. Any securities of Central Govt. or State Govt. (Tax free securities) E.g. Interest on NSC
ii. Any interest on listed demat securities. (Tax free securities)
iii. Interest payable by an infrastructure capital company or infrastructure capital fund or a public sector company in relation to a zero coupon bond issued on or after the 1-6-2005 by such company or fund or public sector company. (Tax free securities)

Base amount
i. Interest amount upto Rs. 5,000 payable to resident Individual / HUF through account payee cheque on debentures (Listed or unlisted).

ii. 8% Saving (Taxable) Bonds, 2003 upto Rs. 10,000. (Tax free securities)
iii. If the assessee furnishes a declaration in writing in duplicate in Form 15H that tax on his estimated total income shall be nil. [refer section 197 and 197A]
Note : Tax free securities : No TDS but interest income is taxable under the head ‘Other Sources’
 

Section 194. Deduction of tax from deemed dividend u/s 2(22)(e) (Paid to resident)

1. Tax Deducter: Indian company or Closely held company who provides loan or advance to a shareholder in which shareholder holds atleast 10% voting power in the closely held company is treated as deemed dividend u/s 2(22)(e). Such dividend is taxable in the hands of shareholders.

Tax is required to be deducted at source on dividend referred to in S 2(22)(e) or S 115BBDA
2. Rate of TDS: 10%.
3. When to deduct tax at source: At the time of payment.
4. No TDS: Dividend payable by domestic company covered u/s 2(22)(a) to (d).

Section 194A. Interest other than interest on sec urities (Paid to resident )

1. Tax Deducter: Every person (other than individual and HUF) responsible for paying interest other than on securities is liable to deduct tax at source.
Any individual or a Hindu undivided family, in case of Professional - whose total sales exceeds Rs. 25 lakhs Others - exceeds Rs. 1 crore during the financial year immediately preceding the financial year in which such sum is credited or paid is required to deduct tax at source.
2. Rate of TDS: 10% of the interest payable or paid.
3. When to deduct tax at source: It is deducted at the earliest point of time. [PCD]
4. No TDS: Following interest payments are not subjected to TDS:
 

Base amount

i. Interest payable by Bank / Post Office / Co-operative society bank aggregate payment of interest during the financial year is upto Rs. 10,000. Rs. 5,000 in any other case.
Post office monthly scheme and Post office saving bank account : Tax is required to be deducted if amount of interest exceeds Rs. 10,000.
Suppose payment of interest from post office saving account is Rs. 15,000. TDS @ 10% is Rs. 1,500. Income charged under the head other sources Rs. 13,500. 80TTA maximum Rs. 10,000 is allowed as deduction.

ii. Interest on the compensation amount awarded by the Motor Accidents Claims Tribunal the aggregate of the amounts of such income paid during the financial year does not exceed Rs. 50,000.

Exempted interest
i. Exempted interest. [10(15)]. Interest on post office fixed deposit schemes.

Tax free
i. Interest to banks.
ii. Interest paid by a firm to its partners.
iii. Interest on deposits with a primary agricultural credit society or a primary credit society or a co-operative
land mortgage bank or a co-operative land development bank.
iv. No TDS on all incomes of New Pension Scheme Trusts.

Section 194B. Winning from Lotteries (paid to resident as well as non resident)

1. Tax Deducter: Every person.
2. When to deduct tax at source: At the time of payment.
3. Rate of TDS: Tax is to be deducted @ 30%
4. No TDS: upto Rs. 10,000 per transaction

Note 1: When prize money is partly in cash and partly in kind and cash is not sufficient to meet the tax liability then the amount of TDS shall be collected from the winner before releasing the prize money.
Note 2: Where the prize money is paid in installment tax shall be deducted from each installment.

Section 194BB. winning from horse race (paid to resident as well as non resident)

1. Tax Deducter: Every person.
2. When to deduct tax at source: At the time of payment.
3. Rate of TDS: Tax is to be deducted @ 30%.
4. No TDS: upto Rs. 10,000 per transaction. w.e.f. 1-6-2016

Section 194C. Payment to contractors / Job Workers (Paid to resident)

1. Tax Deducter: Every person except individual or HUF.
Any Individual or a Hindu undivided family, AOP / BOI is liable to audit of accounts u/s 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor.

Meaning of work: The work shall also include—
(a) advertising; (Print media, internet, mobile, TV, radio, hoardings, metro, cinema, making of ad films).
(b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting.
(except doordarshan)
(c) carriage of goods and passengers by any mode of transport other than by railways.
(d) catering.
(e) Job work : Manufacturing or supplying a product according to requirement or specification of a customer by using material purchased from such customer but does not include material purchased from a person other than such customer.
In case of job work, if cost of material is shown separately in the invoice then the same will not be considered for deducting TDS. However, if such cost of materials is not shown separately then the whole invoice value will be considered for deducting tax.
Note: No TDS in case of sale of goods. TDS also on only labour work.

2. When to deduct tax at source: It is deducted at the earliest point of time. [PCD]

3. Rate of TDS: Payment is made to resident contractor who is
a. Ind / HUF : 1%
b. Firm / Domestic Company : 2%
No TDS if in case of truck transporters who is computing income u/s 44AE and has furnished their PAN to the payer. But if PAN is not submitted then basic rate or 20% whichever is higher is applicable. But for truck transporter who owns more than 10 goods carriage this exemption from TDS is not available.

4. No TDS
a. The single payment should not exceed Rs. 30,000 per transaction and the aggregate of payment during the financial year do not exceed Rs. 1,00,000 w.e.f. 1-6-2016

b. No individual or a Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (Personal Contract)