Taxation & Accounting

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TDS on Salary for Financial Year 2020-2021

TDS on Salary for Financial Year 2020-2021

Central Board of Direct Taxation (CBDT) has released Circular No. 20/2020 dated 3rd December 2020, which explains provisions related to Tax Deduction at Source on Salary under Section 192 of Income Tax Act, 1961 applicable for Financial Year 2020-2021. CBDT Circular also explains the rates of deduction of income-tax from the payment of income chargeable under the head Salaries during the financial year 2020-2021 and explains certain related provisions of the act and Income-tax Rules, 1961 and Income-tax Rules, 1962.

Rate of Income Tax as per Finance Act, 2020

As per the finance act, 2020, income-tax is required to be deducted under Section 192 of the Income-tax Act from income chargeable under the head “Salaries†for the financial year 2020-2021 (The assessment Year 2021-2022) at the following rates:

Normal Rate of Tax

Tax computation for every individual other than the resident individual who is of the age of 60 years or more at any time during the financial year 2019-2020 is as follows:

Sl.No Income Tax Liability
1 Upto Rs.2,50,000 Nil
2 Between Rs.2,50,001 – Rs.5,00,000 5% of income in excess of Rs.2,50,000
3 Between Rs.5,00,001 – Rs.10,00,000 Rs.12,500 + 20% of income in excess of Rs.5,00,000
4 Above Rs.10,00,000 Rs.1,12,500 + 30% of income in excess of Rs.10,00,000

Tax liability for a resident individual who is of the age of 60 years or more but less than 80 years at any time during the financial year 2019-2020 is as follows:

Sl.No Income Tax Liability
1 Upto   Rs.3,00,000 Nil
2 Between Rs.3,00,001 – Rs.5,00,000 5% of income above Rs.3,00,000
3 Between Rs.5,00,001 – 10,00,000 Rs.10,000 + 20% of income in excess of  Rs.5,00,000
4

Above  Rs

10,00,000

Rs.1,10,000  +  30%    of    income   in    excess   of Rs.10,00,000

In the case of a resident individual who is of the age of 80 years or more at any time during the financial year 2019-2020 is as follows:

Sl.No Income Tax Liability
1 Upto   Rs.5,00,000 Nil
2 Between Rs.5,00,001 – Rs.10,00,000 20% of income above Rs.5,00,000
3 Above  Rs.10,00,000 Rs.1,00,000 + 30% of    income   in    excess   of Rs.10,00,000

The Concessional Rate of Tax under Section 115BAC

The Finance Act 2020 has inserted a new section 115BAC Income Tax Act, wherein an individual or an undivided Hindu family (HUF) gets an option to choose between the actual tax rates and the new concessional tax rates without considering prescribed exemptions or deductions.

  • In case a person having income from business or profession, such person is required to exercise the option in the prescribed manner on or before the due date specified under section 139(1) for any previous year relevant to the assessment year commencing on or after 01.04.2021 and such option is once exercised shall apply to subsequent assessment years.
  • In case of such persons, the option once exercised can be withdrawn only once and such person shall never eligible to exercise the option again unless such person ceases to have income from business and profession.
  • In case a person having income from any other sources apart from business or profession, such person is required exercise the option in the prescribed manner along with the return of income to be furnished under section 139(1) of the act for the previous year relevant to the assessment year.

The concessional rate of tax provided under section 115BAC will be computed without specified exemptions or deductions, set off of a loss and additional depreciation. The concessional rates of tax under section 115BAC are tabulated here

Sl.No Total Income Rate of Tax
1 Upto Rs.250000 Nil
2 From Rs. 250001 to Rs.500000 5%
3 From Rs. 500001 to Rs.750000 10%
4 From Rs. 750001 to Rs.1000000 15%
5 From Rs. 1000001 to Rs.1250000 20%
6 From Rs. 1250001 to Rs.1500000 25%
7 Above Rs.1500000 30%

Health and Education Cess

Health and Education Cess will be levied at the rate of 4% of income tax including surcharge wherever applicable, No marginal relief will be available in respect of such cess.

Section 192 of Income Tax Act- Tax Deduction at Source from Salaries

Method of Tax Tax calculation

Every person who is responsible for paying any income chargeable under the head salaries will deduct income-tax on the estimated income of the assessee under the head Salaries for the financial year 2020-2021.

As per section 192(1c) of the act, a person, being an eligible start-up referred to in section 80-IAC, responsible for paying any income to the assessee

Payment of Tax on Perquisites by Employer

An option has been provided to the employer to pay the tax on non-mandatory perquisites given to an employee. The employer can make payment of the tax on such perquisites himself without making any TDS from the salary of the employee.

The employer will have to pay the tax at the time when such tax was deductible at the time of payment of income chargeable under the head salaries to the employee.

Computation of Average Income Tax

The tax will be determined at the average of income-tax computed based on the rate in force for the financial year, on the income chargeable under the head salaries including the value perquisites for which tax has been paid by the employer itself.’

Salary from more than one employee

Section 192(2) deals with the situation where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction of tax at source by such employer from the aggregate salary of the employee, who is or has been in receipt of a salary from more than one employer.

The employee is now required to furnish to the present/chosen employer details of the income under the head Salaries due or received from the former/other employer and also tax deducted at source.

Income under any head other than Salaries

Section 192(2B) enables a taxpayer to furnish particulars of income under any head other than Salaries received by the taxpayer for the same financial year and any of tax deducted at source. The particulars can now be furnished in the simple statement which is properly signed and verified by the taxpayer in the manner as prescribed under Rule 26B(2)

Computation of Income under the head ‘Income from house propertyâ€

The following details will be obtained and kept by the employer in respect of loss claimed under the head “Income from house property†separately for each house property.

  • Gross annual rent/value
  • Municipal Taxes paid
  • Deduction claimed for interest paid
  • Other deduction claimed
  • Address of the property

The DDO shall also ensure furnishing of the evidence or particulars in Form No.12BB in respect of the deduction of interest as specified in Rule 26C and Section 192(2D).

The claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property

Section 24(b) of the Act allows a deduction from income from houses property on interest on borrowed capital as follows:

  • The deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence.
  • The quantum of deduction allowed as is tabulated here
Sl.No Purpose of Borrowing Capital Date of Borrowing Capital Maximum Deduction Allowable
1 Repair or Renewal or reconstruction of the house Any Time Rs.30000
2 Acquisition or construction of the house Before 01.04.1999 Rs.30000
3 Acquisition or construction of the house On or after 01.04.1999 Rs.150000 (upto AY2014-15)
Rs.200000 (w.e.f. AY 2015-16)
4 Aggregate deduction of SI.1 and SI.2 of the table above all shall not exceed Rs.200000 from the financial year 2019-2020

Other Conditions

  • The acquisition or construction of the house should be completed within 5 years from the end of the Financial Year in which the capital was borrowed.
  • DDO should have a completion certification of the house property against which the deduction is claimed either from the builder or through self-declaration from the employee.
  • Any prior period interest for the financial year up to the financial year in which the property was acquired or constructed will be deducted in equal instalments for the FY in question and subsequent four financial years.
  • The employee needs to furnish a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable.

Adjustment for Excess or Shortfall Deduction

As per the provision of section 139(2) of the income tax act, the deductor can make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that finical year itself.

Salary Paid in Foreign Currency

For deduction of tax on salary payable in foreign currency, the value in Indian rupees of such salary will be calculated at the Telegraphic transfer buying rate of such currency as on the date on which tax is required to be detected at the source.

The official notification pertaining to the

circular_20_2020

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CBDT Clarification on Section 115 BAC of Income Tax Act

CBDT Clarification on Section 115BAC of Income Tax Act

The Finance Act 2020 has inserted a new section 115BAC Income Tax Act, wherein an individual gets an option to choose between the actual tax rates and the new concessional tax rates without considering prescribed exemptions or deductions. However, given the introduction of this new Section 115BAC, there had been a lack of clarity on whether an employer can review the new tax regime at the time of withholding taxes from salary. To address such queries, the Central Board of Direct Taxes (CBDT) vide Circular No.C1 of 2020 issued a clarification that an employer, based on intimation received from the individual employee, should compute the tax deduction at source (TDS) by considering the provision of Section 115BAC, as applicable.

Section 115BAC of Income Tax Act

The new Section 115BAC of the Income-tax Act, 1961 provides that a person, being an individual or an undivided Hindu family (HUF) having income other than income from profession or business, may exercise the option concerning of a previous year to be taxed under the Section 115 BAC along with his/her return of income to be furnished under Section 139(1) of the Income-tax Act for each year. The concessional rate provided under section 115 BAC is subject to the condition that the total income needs to be computed without specified exemption or deduction, set off of a loss, and additional depreciation.

Key Points of the CBDT Clarifications on Section 115BAC

The Key points of the clarifications issued by CBDT are as follows:

  • If the Taxpayer is an employee and he has income other than that received from the organization. He intends to get a concessional rate under Section 115 BAC should intimate the detector each previous year.
  • In case the employee fails to make the intimation, the employer shall make TDS without considering the provisions of Section 115 BAC.

The New optional Tax Regime

As per the Finance Act, 2020, a new optional tax regime is provided for individuals and HUF with modified tax slabs and rates. On satisfaction of prescribed conditions, an individual or HUF may opt to compute tax in respect of total income without considering prescribed exemptions or deductions, while filing his Income-tax return as per the new slab rates, instead of the existing tax regime.

Know more about the applicable tax rates for the Individuals and HUFs opting new Section 115 BAC

Withholding taxes from salary

It is worth noting that every employer responsible for payment of salary is required to withhold tax on such salary paid to their employees based on the rates in force for the financial year (FY) in which the payment is made. The rates for deducting income tax from income chargeable under the head ‘Salaries’ is the actual tax rates. Given this, there has been a lack of clarity on whether an employer can consider the new tax regime at the time of withholding taxes.

Intimation of Opting New Tax Regime by an Employee

In this regard, CBDT has clarified that a taxpayer having income need to intimate his employer regarding the intention of opting for a new tax regime at concessional rates without considering prescribed exemptions or deductions. Such intimation, once made by an employee, cannot be modified during the relevant financial year. Consequently, the employer would have to compute the total income and deduct TDS as per the new tax regime.

  • In case the employee does not make any intimation to the employer, then the employer would be required to compute total income and deduct TDS as per the old tax regime.
  • The intimation to the employer would not amount to exercising the option in terms of section 115BAC (5) of the Act. Thus, the option of filing the return during that period may be different from the intimation made by the employee to his employer for that particular financial year.

Section115BAC for Taxpayer having Business Income

Further, in case of Taxpayer having a business income, option once exercised would be applicable for all subsequent financial year and such taxpayers would have to intimate to the employer, as applicable. The intimation once made cannot be changed for the subsequent financial year except under prescribed circumstances.

Conclusion

The clarifications issued by CBDT clears the ambiguity on the role of the employer concerning the application of the new tax regime while computing TDS on salary.

The notification will also mitigate any inconvenience and hardships for employees to claim refunds of excess taxes withheld (if any). Accordingly, in case of employees who intimate the employer to opt for new tax rates, the employer would be required to deduct TDS as per the new tax rates. The official notification of CDDT on clarification Clarification on Section 115 BAC of Income Tax Act is as follows:

circular_c1_2020

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TDS Conso File – TRACES Portal

TDS Conso File – TRACES Portal

Conso file download feature has been made available in TRACES from the Financial Year 2007-08. Basically, Conso file is a consolidated data of the TDS or TCS statement, both regular and correction, which is processed for the relevant Financial Year, quarter and form type.

Steps to download the Conso file from TRACES are summarized hereunder:

Following are the steps which the taxpayer needs to follow to download the Conso file from TRACES –

  1. Visit https://contents.tdscpc.gov.in/;
  2. Click on the Login icon and provide appropriate User Id, Password, TAN for deductor and verification code;
  3. Navigate the following path –

Statements / Payments > Request for Conso file;

  1. Provide the following information and click ‘Go’ –
    • Financial year;
    • Quarter; and
    • Form type.
  1. Complete the KYC validation for which following two options are available –
    • Digital Signature supported KYC validation; or
    • Normal KYC validation (i.e. without digital signature).
  1. Enter ‘Token Number’ of only regular, i.e. original statement corresponding to the Financial Year, Quarter and Form type displayed on the screen.
  2. Part 1 – Challan Identification Number / Transfer Voucher Details –

Tick the appropriate box and click on ‘Guide’ for selecting suitable challan option.

  1. Part 2 – Enter Unique PAN and amount combination for challan –

Tick the box in case there is no valid PAN corresponding to the challan details provided in Part 1. Click on ‘Guide’ for selecting appropriate PAN amount combination.

  1. Enter the ‘Authentication Code’ –

If the authentication code is already available, then, enter the same. However, if the authentication code is not available, you will need to verify the eTDS return details in order to generate the authentication code. Please note that the authentication code would be valid for one calendar year.

  1. On successful submission of Conso file request, the following message would be displayed –

‘Request for Conso file has been submitted. Request number is __________. The file would be available in ‘Downloads’.

  1. In order to ‘download’ the Conso file, after receiving the request number, follow the below steps –
    • Navigate path –

Downloads > Requested Downloads.

    • You need to select any one of the following –

      • Request Number;
      • Date; or
      • View all
    • On the basis of the above selection, files would be displayed with ‘Status’ like Submitted or Failed or Available. If the status is ‘submitted’, you need to wait for 24-48 hours and, if the status is ‘available’, the file can be downloaded by selecting the same.
    • There are two download options available which are –
      • HTTP Download – This download is preferred for small files.
      • Download Manager – This download is preferred for large files and when the internet speed is low.

Important points to be noted:

  • Before requesting for downloading the Conso file, it is important to check the ‘Statement Status’ under the ‘Statement / Payment Tab’. Request for the Consofile download is possible only when the statement status is either ‘Statement Processed with Default’ or ‘Statement Processed without Default’.
  • In case the paper return is filed, the Conso file for the same cannot be downloaded from TRACES .
  • The downloaded Conso file would be password protected and the password to open the Conso file is TAN_Request number. Please enter the password in capital letters.
  • The Conso file gets updated with each time a correction is filed for the particular Financial Year, Quarter and form type.

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Section 194O – TDS on e-Commerce Transactions

Section 194O – TDS on e-Commerce Transactions

The Union Budget imposes a new tax on the e-commerce transaction to provide more clarity into the e-commerce sector. This inclusion is expected to lead a massive cash flow from the e-commerce giants like Amazon and Flipkart with their corresponding sellers. The newly added section dealing with this is Section 194O and this article will explain the applicability and the coverage of this IT act.

General Terms

To understand the terms mentioned in Section 194O, the terms “e-Commerce, e-Commerce Operator and e-Commerce Participant” are explained as below:

Electronic Commerce – means by which the supply of goods or services or both, including digital products, over an electronic network or digitally.

E-commerce Operator – The person who possesses, manages or oversees the digital or electronic feature or platform for electronic commerce in charge of paying to e-commerce member.

E-commerce Participant – The Indian resident selling goods or providing services or both, including digital products, via electronic commerce or digitally.

Services – This is set of formalities that to include fees for technical services and fees for professional services, as defined in Section 194J.

Applicability

The Section aims for 1% TDS rate on the gross amount of sales of goods or services aided by e-commerce hands across the digital or electronic program to the applicants. The TDS rate of 1% applies either during the time of credit to e-commerce participants or payment by any mode or where the purchaser of goods or services makes payment directly to e-commerce participants.

For any Individual with evident PAN or Aadhaar during e-commerce transaction, no deduction required if the combined sale of goods lies within Rs.5 Lakhs during the FY. To prevent double deduction, with the payment provisions once covered and done under this section are not liable to TDS under any other provisions of the Act. But such exemption does not affect the amount collected by e-commerce operators on account of hosting any services that are not relevant to an e-commerce applicant.

The following are the significant revisions are still in the making in the sections:

  1. Section 197 offers a lower custody certificate that acquires for tax deduction under Section 194O
  2. Section 206AA affords the possibility of tax deducted at the rate of 5% instead of 1% as specified in Section 194O, for those with no proof of PAN or the Aadhaar

The proposed amendment is applicable on resident and NRI e-commerce operators producing payments to resident e-commerce applicants in kith and kin to the sale of goods or services aided via digitally. The proposed amendment is said to be effective from 1 April 2020.

Impression on sellers – The Section aims for 1% TDS rate on the gross amount of sales of goods or services aided by e-commerce hands across the digital or electronic program to the applicants. The TDS rate of 1% applies either during the time of credit to e-commerce participants or payment by any mode or where the purchaser of goods or services makes payment directly to e-commerce participants. The sellers with sales below Rs.5 lakhs are liable for a hit in the economy, yet the system manages customer traceability electronic network.

The newly added section can be read from the Finance Bill, 2020 (page 31) of the appended PDF below:

Finance-Bill-2020

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Section 195

Section 195 – TDS & Income Tax

Section 195 of the Income Tax Act relates to the TDS (Tax deducted at Source) deductions on income or payments belonging to Non-Resident Indians (NRIs). Section 195 lays down provisions to avoid double taxation on the amount and focuses on the tax rates and deductions over business transactions with non-residents. Any amount made through these business transactions is chargeable under the Income Tax Act, 1961. In this article, we look at Section 195 of the Income Tax Act, which consists of provisions pertaining to the TDS tax deductions.

Payer/Payee under Section 195

The following are the payer who pays the non-resident or remits the payments as per Section 195 of the Income Tax Act, 1961.

  • An individual
  • HUF (Hindu Undivided Family)
  • Partnership Firms
  • Non-Resident Indians (NRIs)
  • Foreign Companies
  • Persons having exempt income in India
  • Juristic person (regardless of the income is chargeable to tax in India or not)
  • Under Section 195, the NRIs (as per Section 6 of the Income Tax Act) whose sum is chargeable under this section are considered as a payee.

TDS under section 195 needs to be deducted as follows:

  • At the time of crediting a Party
  • On the actual date of payment

TDS Under Section 195

The following are the methods for TDS deduction as per Section 195 of Income Tax Act, 1961:

  • Firstly, the buyer must obtain the Tax Deduction Account Number (TAN), as per Section 203A of the Income Tax Act, before claiming for the TDS tax deductions. Upon the submission of Form 49B, it can be obtained which is available both online and offline. The buyer must hold his/her own PAN card as well as the PAN number of the NRI seller for the completing of the Form 49B submission process.
  • As per Section 195, the TDS must be deducted from the source during the payment process to the NRI. The details that are related to the TDS deductions and the rates that are applicable to be specified in the sale deed of the transactions that are made between the buyer and the NRI seller.
  • The TDS deducted by the buyer under Section 195 has to be deposited via challan or Form number for the TDS payment on or before the 7th of the subsequent month in which the TDS deductions have been made.
  • As per Section 195, the TDS can be deposited by the buyer via banks that have been authorised by the Government, or the Income Tax Department to collect the Direct Taxes.
  • After the process of TDS deposition as per Section 195, the buyer has to file the TDS return through the computerised medium by submitting the Form 27Q .
  • Upon filing the TDS returns under Section 195, the buyer can issue a TDS certificate, referred to as the Certificate of Tax Deduction or Form 16A, to the NRI seller. It is mandatory for the buyer to issue this certificate to the seller within 15 days from the due date of filing for TDS returns for that quarter.

Rate of TDS under Section 195

The below tabulation is the TDS deduction charges that are applicable under Section 195 of Income-tax Act, 1961:

Particulars TDS Rates
Income/payments/transactions from the investments done by an NRI 20%
Income from the long-term capital gains for an NRI under Section 115E 10%
Income from the long-term capital gains

10%

 

Income from the short-term capital gains under Section 111A

15%

 

Any other source of income from the long-term capital gains 20%
The interest that is payable on borrowed money in foreign currency 20%
The income from the royalty payable by the Government or an Indian concern 10%
The income from the royalty other than that which is payable by the Government or an Indian concern 10%
The income from the fees for technical services that are payable by the Government or an Indian concern 10%
Any other source of income 30%

Penalties under Section 195

  • If any person tries to break or violates the rules under Section 195, then the following consequences to be faced.
  • If withholding tax is not deducted or submitted at the specified time, then as per Section 40a(i) , the allowances will be cancelled, deduction in the year of payments.
  • If the TDS is deducted by the payer, but that is not submitted at the specified time, then the interest at 1.50 per month or part of the month from the date of deduction to date of deposit (Section 201(1A)) will be charged.
  • If the TDS is deducted by a payer and is not paid, then the penalty equivalent to the TDS amount is charged under Section 221.
  • The TDS deducted partial or a part of TDS is submitted and rest is withheld the penalty faced is equivalent to the difference between the actual deductible and deducted amount Section 271C that is not exceeding the amount of the TDS.

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TDS on Interests

Section 194A: TDS on Interest

In order to collect taxes in a quick and efficient manner, the Income Tax law has incorporated a system that deducts taxes at the point of generation of income. This is known as Tax Deducted at Source , or commonly known as TDS. Section 194A of the Income Tax Act deals with TDS with respect to interests on loans, advances and fixed deposits. This article talks about Section 194A of the Income Tax Act which deals with TDS on interest and is up to date with the amendments made for the same in the Union Budget 2019.

Overview

The provisions for deduction of taxes at the source is applicable to several payments such as salary, interest, brokerage, commission, royalty and professional fees, to name a few. Section 194A of the Income Tax Act talks about the provisions concerning TDS on interest excluding than that on Securities.

TDS must be deducted under Section 194A if interest, excluding that on securities, is paid to a Resident. Therefore, the provisions of this Section are not applicable if payment of interest is made to a Non-Resident Indian. However, TDS will be applicable on payments made to Non-Resident Indians as per Section 195 of the Income Tax Act.

Key Points

The following are the essentials of Section 194A of the Income Tax Act.

  • This section talks about the deduction of TDS on interests other than the interests on securities.
  • The provisions of Section 194A apply to a Resident Indian only. Therefore, these provisions would not apply when payments of interests are made to a Non-Resident Indian.
  • TDS will be applicable on payments made to Non-Resident Indians as per Section 195 of the Income Tax Act.

Eligible Taxpayers

The following taxpayers are required to deduct taxes at the source of their income in the way of TDS:

Every person, excluding an Individual or a Hindu Undivided Family, who has to pay interest, except those on securities, to a Resident Indian, is liable to deduct taxes on the interest payable as per Section 194A of the Income Tax Act.

NOTE: An Individual or HUF is liable to deduct TDS under Section 194A under the following conditions:

  • If the total sales, gross receipts or annual turnover of a business/profession carried out by an Individual/HUF crosses the threshold specified in Section 44AB during the FY immediately before the FY in which the afore-mentioned amount is credited.

In simple words, an Individual or HUF is liable to TDS under Section 194A if they are liable to get their respective accounts audited under Section 44AB in the preceding FY.

Time of Deduction

According to Section 194A of the Income Tax Act, the applicable taxes are to be deducted at the time of paying or crediting the interest, whichever is earlier.

NOTE: If the Motor Accident Claims Tribunal awards the compensation, TDS would be deducted at the time of payment. However, TDS is only applicable if the interest exceeds INR 50,000.

TDS Limitations

If the amount of an interest paid or credited exceeds INR 40,000, then the payer shall deduct TDS. This applies even when the amount is likely to be credited and paid in a financial year by:

  • A banking company or banking institution or any bank
  • A co-operative society that is engaged in the banking business
  • A post-office (on deposit under a scheme framed and notified by the Central Government)

Tax is only deductible if the total amount of the interest paid or payable by the deductor in the previous year exceeds INR 5,000. Further, it must be noted that if the amount of interest crosses the maximum permissible amount, TDS would be deducted on the entire amount of interest.

From the fiscal year 2018-19 onwards, no TDS would be deducted on the interest generated up to INR 50,000 by senior citizens. However, either of the following should be the source of the income:

  • Deposits with banks
  • Fixed deposit schemes
  • Deposits with post offices
  • Recurring deposit schemes

Computation of Interests

The deductor or the payer may deduct TDS if the amount of interest paid during the previous year exceeds INR 40,000 for banks and INR 5,000 in other cases. The following are the key points that need to be considered while computing TDS.

Cumulative Interest

While estimating the interest paid, the payer has to compute the total amount paid to the payee. For instance, if the interest payable in a particular month of the preceding year is INR 3,000, then there would be no TDS deducted. However, in a later month, the cumulative amount INR 7,000, then the deductee or the payee would have to deduct a TDS on INR 6,000 at the rate of 10% for that particular month.

Branch Neutral

When TDS is being calculated, banks have to consider all the total interest payments made. For instance, if an individual has a fixed deposit in all the different branches of an individual bank, the cumulative amount of interest paid would be considered while estimating TDS.

Interest Accrued

The deductor would be required to pay TDS when the interest is accrued if the deposit is for more than a year and the interest is compounded. This is applicable regardless of whether the same is paid or not.

Rates for TDS

The following rates of taxes will be applicable as required:

  • 10% as TDS will be applicable when PAN is furnished.
  • 20% as TDS will be applicable when PAN is not furnished.
  • Surcharge, Education Cess and SHEC will not be added to the above rates. Hence, taxes will be deducted at source at the basic rate.

Depositing TDS

The following is the time limit in which TDS must be deposited.

  • Tax deducted during any months between April to February is required to be deposited on or before the 7th of the immediate month. Taxes deducted in the month of March is required to be deposited on or before the 30th of April.

No Deduction of TDS

The deduction of TDS happens under either of the following scenarios.

By declaring under Form 15G/15H under Section 197A

When an individual, being the recipient, submits a declaration under Section 197A to the payer along with their PAN, in such cases, no tax would be deducted if the following conditions are fulfilled as well.

  • The recipient is an individual except for a firm or a company.
  • If the tax on the total income of the previous year is NIL.
  • If the total income does not cross the exemption limit, although, this is not applicable if the recipient is a resident senior citizen.
  • If the declaration is given in a duplicate form 15G and 15H for senior citizens. Investors may submit the declaration in the case of Senior Citizens Saving Scheme of 2004.
  • If the Nominees of the investors of the Scheme also produces the declaration after the death of the depositor at the time of payment.
  • On submitting the declaration to the bank, no taxes would be deducted on payment of interest, subject to certain conditions.

By submitting an application in Form 13 under Section 197

According to the provisions given under Section 197, the recipient may apply in Form 13 in order to obtain a certificate authorising the payer to deduct taxes at a lower rate/no taxes under certain conditions to the Assessing Officer. There is no specific time limit for the application, and it may be filed at any given time before the actual deduction of tax. This certificate cannot be applied by a recipient who does not own a PAN. The certificate would be issued directly to the individual responsible for paying income under advice to the applicant. The certificate cannot be issued with a retrospective effect. The recipient may furnish a copy of the certificate to the individual responsible for paying the income for no deduction/lower of tax at source.

Other Instances

A few other cases where no tax would be deducted at the source are as follows.

  • When the interest is paid to LIC, established under the Life Insurance Corporation Act of 1956.
  • When the interest is paid to any co-operative society or company under the business of insurance.
  • If the interest is paid on any financial corporation under the Central, State or Provincial Act.
  • If the interest is paid on Unit Trust of India, established under the Unit Trust of India Act of 1963.
  • If the interest is paid under any of the provisions of the Income Tax Act of 1961 or the Wealth Tax Tax of 1957 that was formulated by the Government.
  • If the interest paid to any bank under the regulation of the Bank Regulation Act of 1949 or any co-operative society. This also includes the co-operative land mortgage bank.
  • If the interest is paid or credit by the Central Government under any given provision of the Income Tax Act of 1961 or the Wealth Tax Act of 1957.

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TDS Challan Correction

OLTAS TDS Challan Correction

The deductor, while depositing TDS through challan , is required to provide various information like PAN / TAN , relevant assessment year, appropriate major and minor head code, nature of payment and amount of TDS to be deposited. While providing all such details, there are changes of clerical error at any point of time, and this will lead to no tax credit to the deductee. In order to avoid this situation, the Government has provided a challan correction mechanism which is being explained in the present article.

TDS challan correction is possible in the following manner –

  1. Online correction through TRACES;
  2. Correction by bank in case of physical challan and
  3. Correction by assessing officer in case of both physical and online challan.

Time period for correction request is also dependent on type of correction which is tabulated hereunder –

Sr. No. Type of correction request Time period within which correction request needs to be done
1 Total amount Within a period of 7 days from the date of deposit of challan
2 PAN / TAN Within a period of 7 days from the date of deposit of challan
3 Assessment Year Within a period of 7 days from the date of deposit of challan
4 Minor Head Within a period of 3 months from the date of deposit of challan
5 Major Head Within a period of 3 months from the date of deposit of challan
6 Nature of payment Within a period of 3 months from the date of deposit of challan

Important points to be kept in mind

  • Correction in ‘PAN / TAN ’ will be allowed only in the situation wherein the name in the challan matches the name as per new PAN / TAN .
  • Joint correction of both ‘Minor Head Code’ and ‘Assessment year’ is not allowed.
  • Correction in ‘Name’ cannot be carried out by the bank.
  • Correction in the ‘total amount’ is possible only in case when the corrected amount is same as that of the amount actually received by the bank and credited to the Government account.
  • In case there are more than one correction request, all the requested corrections would be allowed, if the validation for all the correction is cleared. However, in case even one correction request fails the validation test, none of the corrections would be allowed (i.e. even the correction which has cleared the validation test would not be allowed).

Steps for online correction of TDS Challan through TRACES

TRACES (TDS Reconciliation Analysis and Correction Enabling System) facilitates online correction of TDS challan. The deductor is required to follow the below mentioned steps –

  • Visit site https://contents.tdscpc.gov.in/ ;
  • Click on Login icon and provide User Id, Password and TAN for deductor;
  • Navigate the following path –

Defaults > Request for Correction.

    • Provide the appropriate details and submit the request.

Steps for submitting correction request to the bank

    • The applicant is required to submit the request form for correction (in duplicate) to a branch of the concerned bank.
    • The applicant is required to attach a copy of original challan counterfoil.
    • The applicant is required to submit a separate request form for each challan.
    • In case the applicant is a non-individual, then, the original authorization with seal of the non-individual applicant is required to be attached with the correction request form.

Steps for submitting correction request to the Assessing officer

    • If the time limit for submitting challan correction to the bank has expired, then, in that case, the taxpayer can submit the correction request to the concerned Assessing officer.
    • The concerned assessing officer is authorized under the OLTAS application to make corrections in the challan details.
    • The applicant is required to submit the request form for correction (in duplicate) to the concerned Assessing officer.
    • The applicant is required to attach a copy of the original challan counterfoil.
    • The applicant is required to submit a separate request form for each challan.
    • In case the applicant is a non-individual, then, the original authorization with the seal of the non-individual applicant is required to be attached with the correction request form to the concerned Assessing officer.

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Due Date for TDS Extended

Due Date for TDS Extended

The Central Board of Direct Taxes (CBDT) has extended the TDS filing due dates for Odisha. The move has been initiated to redress the difficulties faced by the deductors on account of the severe disruption of normal life and breakdown of communication systems caused by Cyclone Fani, which hit the state on 3rd May 2019. This article seeks to create awareness of this extension, which was notified on 24th May 2019.

Deposit of TDS

The due date for depositing Tax Deducted at Source (TDS) for April 2019 has been extended to the 20th May 2019. The date previously stipulated for this purpose was 7th May 2019.

On a basic note, the mechanism of TDS prompts a deductor who is required to make payment of specified nature to any other person (who is known as a deductee in this context) to deduct Tax at source. The tax so deducted must be remitted to Governmental Accounts. The remittance can be made either physically or electronically. Physical payment can be made by furnishing Challan 281 in the authorized bank branch. The electronic mode of payment is mandatory for:

Filing TDS Quarterly Statements

The deadline for filing quarterly statements for the last quarter of the financial year 2018-19 has been extended to 30th June 2019 from the usual due date of 31st May 2019. A quarterly statement refers to a quarterly return to be filed by the deductors of tax. The following details must be included in the statement:

  • PAN of the deductor and the deductee.
  • Sum of tax remitted to the Government.
  • Information of TDS challan.
  • Other details, if required.

File your TDS Returns with IndiaFilings

Issuance of TDS Certificates

The due date for issuing TDS certificates in Form 16 and Form 16A has been extended to 15th July 2019 from the previous deadline of 15th June.

TDS certificates must be issued by deductors of tax at source. The document enables taxpayers to claim the relevant tax credits, along with the applicable refunds. TDS Certificates are of two types, namely Annual TDS Certificate and Quarterly TDS Certificate. The former document is issued to the employees in Form 16 and relates to TDS on salary. It includes the particulars pertaining to TDS deducted by the employer from salary and the particulars of TDS deposited with the Government. Quarterly TDS Certificates are issued in Form 16A and is meant for the deduction of TDS on income other than salary. It is issued by banks when the TDS is deposited on interest earned by the depositor on fixed deposits.

A copy of the official notification has been attached for your reference:

Extension of Due Dates

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New Form 16 Format

New Form 16 Format

The Central Board of Direct Taxes (CBDT) has notified a new Form 16 format for the year 2019. Stated to be effective from May 12, 2019, the new Form 16 prompts for further details and places additional responsibilities on employers. In this article, we take a look at some of the major highlights of the new Form 16 format introduced in 2019.

What is Form 16?

Form 16 is a certificate from an employer that substantiates the TDS performed on the employees’ salary. The form comprises of two components, namely Part A and Part B and includes information on filing income tax returns. While Part A highlights the particulars of tax deducted and deposited quarterly, the latter is an annexure to PART A and provides a detailed breakup of salary and deductions. The form serves its purpose in claiming tax credits while filing Income Tax Returns (ITR) .

Responsibilities of Employer

Though the employer makes the certification through this form, the employees must support the employer with the essential and accurate details so as to enable him/her to specify the same in Form 16. As for the employer, he/she must verify the documents and details provided by the employee and validate the permissibility of expenses and deductions as per the income tax rules. The employer is vested with the responsibility of determining the taxable income and liability of the employee.

Salary Earned from Previous Employer

Employers would now be required to separately specify the particulars of the amount of salary received by the employee from other employers as “Reported total amount of salary received from other employersâ€. These details are furnished by the employee to the employer in Form 12B .

Disclosure of Secondary Income

Employees are required to disclose details of income or loss from house property or other sources to the employer for the performance of TDS. In the past, employees were free to disclose any type of income earned by them for the same purpose.

Breakup of Exempted Allowances

While the distinct presentation of the sum and particulars of allowances for all exemptions were optional in the past, it has been mandated in this amendment. This means that the list of allowances exempted u/s 10 must be reported specifically line by line. The likes of the same include Leave Travel Allowance, death cum retirement gratuity, commuted value of pension, leave encashment, and House Rent Allowance (HRA) among others.

Standard Deduction

Considering the introduction of a deduction of Rs. 40,000 from the financial year 2018-19, a provision for the compulsory reporting of Standard Deduction has been enforced.

Section 80CCD Deductions

Apart from Standard deductions, the following details of deduction must be stated:

  • Section 80CCD (1B) – for additional deduction of Rs. 50,000 in National Pension Scheme.
  • Section 80CCD (2) – for deduction in respect of the employer’s contribution.

Deductions to be Reported Specifically

The following deduction must be specifically reported:

  • Deduction for the payment of health insurance premium under section 80D.
  • Deduction for the payment of interest on loan acquired for higher education under section 80E .
  • Deduction for donations contributed under section 80G .
  • Deduction for interest income on savings accounts under section 80TTA .

Particulars of Rebate and Surcharge

Any particulars of Rebate and Surcharge must be reported in the form if the same is applicable.

Other Amendments

Besides what has been covered, the following amendments have been enacted:

  • Education Cess is now made into Health and Educational Cess.
  • As a similar break up of exemptions under section 10 and deduction under Chapter VIA has been added in Form 24Q (TDS returns meant for the filing of employers), the latter has been brought in line with Form 16.

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NRI Selling Property in India

NRI Selling Property in India

Guide to the tax implications relating to NRI selling property in India. In order to understand the tax implications, under the article, it has been assumed that the person based in the USA has sold out his property in India.

Double Taxation Avoidance Agreement (DTAA)

The DTAA , in general terms, is a tax treaty which is being signed between two countries so that the taxpayers can avoid paying double taxes on their income. Since the person selling the property in India is based in the USA, we are looking at the provisions of DTAA between India and USA.

The United States of America and Government of India, for the avoidance of double taxation and for the prevention of the fiscal evasion with respect to the taxes on income has entered into double taxation avoidance agreement i.e. DTAA and the taxes to which the agreement applies are explained hereinbelow –

  • The United States

The Federal income taxes imposed by the Internal Revenue Code and the exercise taxes imposed on insurance premium paid to foreign insurers and with respect to private foundations.

  • India

The income tax including any surcharge thereon and surtax. However, the same does not apply to the income tax on the undistributed income of companies, imposed under the Income Tax Act.

Interpreting Article 6 of the DTAA Agreement

Article 6, under the agreement for avoidance of double taxation of Income with the USA, deals with the income derived from the immovable property (real property).

The said article 6 clearly states that Income derived by a resident of contracting states from immovable property (real property) situated in the other contracting states may be taxed in that other state. The income so referred includes income from agriculture or forestry.

Understanding the Same in Simple Terms, Article 6 States that in the Case of Income Derived from the Immovable Property being Situated in India, the Said Income Should be Taxable in India.

It is important to note here that the income derived from immovable property includes any income from the direct use, letting or use in any other form of the immovable property.

Concluding thereby that any Income Arising on the Sale of Property in India would be Taxable in India as Article 6 of DTAA Entered into Between India and USA.

Tax Implication

There is no difference between tax calculation in case of capital gain arising in case of sale of property by the resident or a Non-resident person in India. The capital gain provisions are explained hereunder –

Capital Gain

Long term capital gain – asset held for more than 2 years – tax 20% plus cess and surcharge

Short term capital gain – asset sold within 2 years – tax as per income tax slab applicable to NRI

Tax Deduction at Source (TDS)

Section 195 of the Income Tax Act, 1961 binds the person, to deduct TDS , who is responsible for paying to a Non-resident, at the time of credit of such income to the account of the Non-resident or at the time of payment thereof in cash or cheque or any other mode, whichever is earlier.

Thus when the Non-Resident Person Sales Property in India, the Purchaser is Required to Deduct TDS @20% in Case the Property has been Sold within a Period of 2 Years of its Acquisition and TDS @30% in Case the Property has been Sold after 2 Years of its Acquisition.

Nil or Lower Tax Deduction

As since above, section 195 requires deduction of TDS, however, the Non-resident person has two options through which either he can apply for lower TDS or nil TDS deduction and the same is being briefed out in below paras.

Option 1 – Section 195 (3)

The Non-resident person Indian who is entitled to receive any income on which TDS needs to be deducted as per provisions of section 195 can make an application to the assessing officer for the grant of a certificate authorizing him to receive such income without deduction of TDS.

Conditions for Making an Application for No Deduction under Section 195 (3)

  1. The person concerned has been duly assessed to income tax in India and the person has furnished the income tax return for all the assessment years.
  2. The person concerned is not in default or deemed to be in default in respect of any tax, interest, penalty, fine or any other sum payable under the Act.
  3. The person concerned has been carrying on the business/profession in India for a period of not less than 5 years immediately preceding the date of the application. Further, the value of the fixed assets in India of such business/profession for the previous year immediately preceding the date of application exceeds INR 50 Lakhs.

Relevant Application Form

  1. Form No. 15C – Application by a banking company.
  2. Form No. 15D – Application by any other person.

Option 2 – Section 197

The Non-resident Indian who is entitled to receive any income on which TDS needs to be deducted as per provisions of section 195 can make an application to the Assessing officer, under section 197, and if the Assessing officer is satisfied that the total income of the Non-resident justifies lower TDS or nil TDS, then, the Assessing Officer may, accordingly, issue the certificate for lower deduction or no deduction.

Form 13

The applicant needs to file an application for the grant of a certificate for lower deduction or no deduction in Form no. 13. The application in form 13 needs to be submitted electronically using either a digital signature or through EVC (electronic verification code).

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