31188sm DTL Finalnew-May-Nov14 Cp28

28
Deduction, Collection and

Recovery of Tax
28.1 Deduction and Collection 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.2015-16 is taxable in the A.Y.2016-17.
However, the 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 and advance tax.
Let us understand the main differences between TDS and TCS (1)
(2)
(3)
TDS
TDS is tax deduction at source
Person responsible for paying is
required to deduct tax at source
at the prescribed rate.
Generally, tax is required to be

deducted at the time of credit to
the account of the payee or at
the time of payment, whichever
is earlier.
The Institute of Chartered Accountants of India
TCS
TCS is tax collection at source.
Seller of certain goods is responsible for
collecting tax at source at the prescribed rate
from the buyer.
Person who grants licence or lease (in respect
of any parking lot, toll plaza, mine or quarry) is
responsible for collecting tax at source at the
prescribed rate from the licensee or lessee, as
the case may be.
Generally, tax is required to be collected at
source at the time of debiting of the amount
payable by the buyer of certain goods to the
account of the buyer or at the time of receipt of
such amount from the said buyer, whichever is
earlier.
28.2
Income Tax
However, in case of payment of
salary and payment in respect of
life insurance policy, tax is
required to be deducted at the
time of payment.
However, in case of sale of jewellery or bullion,

tax collection at source is required at the time of
receipt of sale consideration in cash.
28.2 Direct Payment [Section 191]

Section 191 provides that in the following cases, tax is payable by the assessee directly
(1) in the case of income in respect of which tax is not required to be deducted at source;
and
(2) income in respect of which tax is liable to be deducted but is not actually deducted.
In view of these provisions of section 191, the proceedings for recovery of tax necessarily had
to be taken against the assessee whose tax was liable to be deducted, but not deducted.
In order to overcome this difficulty, the Explanation to this section provides that if
(1) any person, including the principal officer of the company, who is required to deduct tax
at source; or
(2) an employer paying tax on non-monetary perquisites under section 192(1A),
does not deduct the whole or part of the tax, or after deducting fails to pay such tax deducted,
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.
28.3 Deduction of Tax at Source

28.3.1 Salary [Section 192]
(1) This section casts an obligation on every person responsible for paying any income
chargeable to tax under the head Salaries to deduct income-tax on the amount payable.
(2) 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. Therefore, the liability to deduct tax at source in the
case of salaries arises only at the time of payment.
(3) Average rate of income-tax means the rate arrived at by dividing the amount of incometax calculated on the total income, by such total income.
(4) However, deduction at a rate lower than that prescribed may be made if a certificate has
been obtained under section 197 from the Assessing Officer.
(5) Every year, the CBDT issues a circular giving details and direction to all employers for
the purpose of deduction of tax from salaries payable to the employees during the relevant
financial year. These instructions should be followed.
(6) The concept of payment of tax on non-monetary perquisites has been provided in
Deduction, Collection and Recovery of Tax
28.3
sections 192(1A) and (1B). These sections provide that the employer may pay this tax, at his
option, in lieu of deduction of tax at source from salary payable to the employee. Such tax will
have to be worked out at the average rate applicable to aggregate salary income of the
employee and payment of tax will have to be made every month along with tax deducted at
source on monetary payment of salary, allowances etc.
(7) Time and mode of payment to Government account of TDS or tax paid under
section 192(1A) [Rule 30]
(a) All sums deducted in accordance with Chapter XVII-B by an office of the Government
shall be paid to the credit of the Central Government on the same day where the tax is paid
without production of an income-tax challan and on or before seven days from the end of the
month in which the deduction is made or income-tax is due under section 192(1A), where tax
is paid accompanied by an income-tax challan.
(b) All sums deducted in accordance with Chapter XVII-B by deductors other than a
Government office shall be paid to the credit of the Central Government on or before 30th
April, where the income or amount is credited or paid in the month of March. In any other
case, the tax deducted should be paid on or before seven days from the end of the month in
which the deduction is made or income-tax is due under section 192(1A).
(c) In special cases, the Assessing Officer may, with the prior approval of the Jo int
Commissioner, permit quarterly payment of the tax deducted under section
192/194A/194D/194H on or before 7th of the month following the quarter, in respect of first
three quarters in the financial year and 30th April in respect of the quarter ending on 31st
March. The dates for quarterly payment would, therefore, be 7th July, 7th October, 7th
January and 30th April, for the quarters ended 30th June, 30th September, 31st December
and 31st March, respectively.
(8) In cases where an assessee is simultaneously employed under more than one employer
or the assessee takes up a job with another employer during the financial year after his
resignation or retirement from the services of the former employer, he may furnish the details
of the income under the head Salaries due or received by him from the other employer, the
tax deducted therefrom and such other particulars to his current employer. Thereupon, the
subsequent employer should take such information into consideration and then deduct the tax
remaining payable in respect of the employees remuneration from both the employers put
together for the relevant financial year.
(9) For purposes of deduction of tax out of salaries payable in a foreign currency, the value
of salaries in terms of rupees should be calculated at the prescribed rate of exchange as
specified in Rule 26 of the Income-tax Rules, 1962.
(10) In respect of salary payments to employees of Government or to employees of
companies, co-operative societies, local authorities, universities, institutions, associations or
bodies, deduction of tax at source should be made after allowing relief under section 89(1),
where eligible.
(11) A tax payer having salary income in addition to other income chargeable to tax for that
financial year, may send to the employer, the following:
28.4
(i)
Income Tax
particulars of such other income;
(ii) particulars of any tax deducted under any other provision;

(iii) loss, if any, under the head Income from house property.
The employer shall take the above particulars into account while calculating tax deductible at
source.
It is also provided that except in cases where loss from house property has been adjusted
against salary income, the tax deductible from salary should not be reduced as a
consequence of making the above adjustments.
(12) Sub-section (2C) provides that the employer shall furnish to the employee, a statement
giving correct and complete particulars of perquisites or profits in lieu of salary provided to him
and the value thereof. The statement shall be in the prescribed form and manner. This
requirement is applicable only where the salary paid/payable to an employee exceeds
` 1,50,000. For other employees, the particulars of perquisites/profits in lieu of salary shall be
given in Form 16 itself.
(13) Sub-section (2D) has been inserted by the Finance Act, 2015 to cast responsibility
on the person responsible for paying any income chargeable under the head Salaries
to obtain from the assessee, the evidence or proof or particulars of prescribed claims
(including claim for set-off of loss) under the provisions of the Act in the prescribed
form and manner, for the purposes of
(1) estimating income of the assessee; or
(2) computing tax deductible under section 192(1).
28.3.2 Tax to be deducted@10% on premature taxable withdrawal from

employees provident fund [Section 192A]
(1) Under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF &
MP Act, 1952), certain specified employers are required to comply with the Employees
Provident Fund Scheme, 1952 (EPFS). However, these employers are also permitted to
establish and manage their own private provident fund (PF) scheme subject to fulfillment of
certain conditions.
(2) The provident funds established under a scheme framed under EPF & MP Act, 1952 or
Provident Fund exempted under section 17 of the said Act and recognised under the Income tax Act, 1961 are termed as Recognised Provident fund (RPF) under the Act.
(3) Part A of the Fourth Schedule to the Income-tax Act, 1961 contains the provisions
relating to RPFs. Under the existing provisions of Rule 8 of Part A of the Fourth Schedule, the
withdrawal of accumulated balance by an employee from the RPF is exempt from taxation.
(4) For the purpose of discouraging pre-mature withdrawal and promoting long term savings,
if the employee makes withdrawal before continuous service of five years (other than the
cases of termination due to ill health, contraction or discontinuance of business, cessation of
28.5
employment etc.) and does not opt for transfer of accumulated balance to new employer, the
withdrawal would be subject to tax.
(5)
Rule 9 of Part A of the Fourth Schedule provides the manner of computing the tax liability of
the employee in respect of such pre-mature withdrawal. In order to ensure collection of tax in respect
of such pre-mature withdrawals, Rule 10 of Part A of the Fourth Schedule casts responsibility on the
trustees of the RPF to deduct tax as computed in Rule 9 at the time of payment.
(6) Rule 9 provides that the tax on withdrawn amount is required to be calculated by recomputing the tax liability of the years for which the contribution to RPF has been made by
treating the same as contribution to unrecognized provident fund. The trustees of private
provident fund schemes, are generally a part of the employer group and hence, have access
to or can easily obtain the information regarding taxability of the employee making pre -mature
withdrawal for the purposes of computation of the amount of tax liability under Rule 9.
However, it may not always be possible for the trustees of EPFS to get the information
regarding taxability of the employee such as year-wise amount of taxable income and tax
payable for the purposes of computation of the amount of tax liability under Rule 9.
(7) New section 192A has, therefore, been inserted with effect from 1 st June, 2015, to
provide for deduction of tax @10% on premature taxable withdrawal from employees provident
fund scheme. Accordingly, in a case where the accumulated balance due to an employee
participating in a recognized provident fund is includible in his total income owing to the
provisions of Rule 8 of Part A of the Fourth Schedule not being applicable, the trustees of the
Employees Provident Fund Scheme, 1952 or any person authorised under the sch eme to
make payment of accumulated balance due to employees are required to deduct income -tax
@10% at the time of payment of accumulated balance due to the employee.
(8) Tax deduction at source under this section has to be made only if the amount of such
payment or aggregate amount of such payment of the payee is ` 30,000 or more.
(9) Further, any person entitled to receive any amount on which tax is deductible under this
section has to furnish his PAN to the person responsible for deducting such tax. In case he
fails to do so, tax would be deductible at the maximum marginal rate.
(10) In order to reduce the compliance burden of these employees, the facility of filing self declaration for non-deduction of tax under section 197A shall be extended to the employees
receiving pre-mature withdrawal i.e., an employee can give a declaration in Form No. 15G to
the effect that his total income including taxable pre-mature withdrawal from employees
provident fund scheme does not exceed the maximum amount not chargeable to tax. When
the employee furnishes such declaration, no tax will be deducted by the trustee of Employees
Provident Fund Scheme while making the payment to such employee.
(11) Likewise, facility of filing self-declaration in Form No. 15H for non-deduction of tax under
section 197A has also been extended to the employees of the age of 60 years or more
receiving pre-mature withdrawal.
28.6
Income Tax
28.3.3 Interest on securities [Section 193]

(1) This section casts responsibility on every person responsible for paying to a resident any
income by way of interest on securities.
(2) Such person is vested with the responsibility to deduct income-tax at the rates in force
from the amount of interest payable.
The rate at which tax is deductible under section 193 is 10%, both in the case of domestic
companies and resident non-corporate assessees.
(3) Tax should be deducted at the time of credit of such income to the account of the payee
or at the time of payment thereof in cash or by issue of a cheque or draft or by any other
mode, whichever is earlier.
(4) However, no tax deduction is to be made from any interest payable:
(i)
on 4% National Defence Bonds 1972, where the bonds are held by an individual not
being a non-resident;
(ii) on 4% National Defence Loan, 1968 or 4% National Defence Loan, 1972, where the
interest is payable to an individual;
(iii) on National Development Bonds;
(iv) on 7-year National Savings Certificates (IV Issue);
(v) on debentures issued by any institution or authority or any public sector company or any
co-operative society (including a co-operative land mortgage bank or a co-operative land
development bank), as notified by the Central Government;
(vi) on 6% Gold Bonds, 1977 or 7% Gold Bonds, 1980, where the bonds are held by an
individual (other than a non-resident), provided that the holders of the bonds make a
written declaration that the total nominal value of the bonds held by him or on his behalf
did not in either case exceed ` 10,000 at any time during the period to which the interest
relates;
(vii) on any security of the Central Government or a State Government;
Note It may be noted that tax has to be deducted at source in respect of interest
payable on 8% Savings (Taxable) Bonds, 2003, if such interest payable exceeds
` 10,000 during the financial year.
(viii) on any debentures (whether listed or not listed on a recognized stock exchange) issued
by the company in which the public are substantially interested to a resident individual or
HUF. However,
(a) the interest should be paid by the company by an account payee cheque;
(b) the amount of such interest or the aggregate thereof paid or likely to be paid during
the financial year by the company to such resident individual or HUF should not
exceed ` 5,000.
(ix) on securities to LIC, GIC, subsidiaries of GIC or any other insurer, provided
(a) the securities are owned by them or
28.7
(b) they have full beneficial interest in such securities.

(x) on any security issued by a company, where such security is in dematerialised form an d
is listed on a recognised stock exchange in India in accordance with the Securities
Contracts (Regulation) Act, 1956 and the rules made thereunder.
(5) In all the above cases, the declaration shall be made by the recipient to the person
responsible for paying such interest on securities.
(6) If the person entitled to receive interest produces a certificate under section 197 from the
Assessing Officer to the effect that his total income is either below the taxable limit or is liable
to income-tax at a lower rate, the interest on securities shall be paid without any deduction of
tax or after deduction of tax at such lower rate, as the case may be.
(7) Where any income by way of interest on securities is credited to any account in the
books of account of the person liable to pay such income, such crediting is deemed to be
credit of such income to the account of the payee and tax has to be deducted at source.
(8) The account to which such interest is credited may be called Interest Payable account
or Suspense account or by any other name.
28.3.4 Dividends [Section 194]

(1) Dividends declared, distributed or paid by a domestic company are exempt in the hands
of the shareholder under section 10(34). This includes deemed dividend under sections
2(22)(a) to (d). This is because such dividend attracts dividend distribution tax @ 15% in the
hands of the company.
(2) The TDS provisions under this section are attracted only in respect of deemed dividend
referred to in section 2(22)(e), if such dividend exceeds ` 2,500 in a year.
(3) The rate of deduction of tax in respect of such dividend is 10%.
(4) Individual shareholders, who are residents in India are entitled to receive their dividends
from any domestic company without deduction of tax at source by the company in cases
where (i)
the amount of dividend income received from the company does not exceed ` 2500
during the year; and
(ii) the dividend is paid by an account payee cheque.

The TDS provisions will not apply to dividend receivable by LIC, GIC, its subsi diaries or any
other insurer provided the shares are owned by them, or they have full beneficial interest in
such shares.
28.3.5 Interest other than interest on securities [Section 194A]

This section deals with the scheme of deduction of tax at source from interest other than
interest on securities. The main provisions are the following:
(1) This section applies only to interest, other than interest on securities, credited or paid
by assessees other than individuals or Hindu undivided families not subject to tax audit under
section 44AB in the immediately preceding financial year. In other words, individuals and
28.8
Income Tax
HUFs subject to tax audit in the immediately preceding financial year, companies, firms,
association of persons, local authorities and artificial juridical persons are under a legal
obligation to deduct tax at source in respect of the interest other than interest on securities
paid by them.
(2) These provisions apply only to interest paid or credited to residents. In respect of
payments to non-residents, the provisions are contained under section 195.
(3) The deduction of tax must be made at the time of crediting such interest to the payee or
at the time of its payment in cash or by any other mode, whichever is earlier.
(4) Where any such interest is credited to any account in the books of account of the person
liable to pay such income, such crediting is deemed to be credit of such income to the account
of the payee and the tax has to be deducted at source.
(5) The account to which such interest is credited may be called Interest Payable account
or Suspense account or by any other name.
The CBDT has, vide Circular No.3/2010 dated 2.3.2010, given a clarification regarding
deduction of tax at source on payment of interest on time deposits und er section 194A by
banks following Core-branch Banking Solutions (CBS) software. It has been clarified that
Explanation to section 194A is not meant to apply in cases of banks where credit is made to
provisioning account on daily/monthly basis for the purpose of macro monitoring only by the
use of CBS software. It has been further clarified that since no constructive credit to the
depositors / payees account takes place while calculating interest on time deposits on daily
or monthly basis in the CBS software used by banks, tax need not be deducted at source on
such provisioning of interest by banks for the purposes of macro monitoring only. In such
cases, tax shall be deducted at source on accrual of interest at the end of financial year or at
periodic intervals as per practice of the bank or as per the depositor's / payee's requirement or
on maturity or on encashment of time deposits, whichever event takes place earlier, whenever
the aggregate of amounts of interest income credited or paid or likely to be credited or paid
during the financial year by the banks exceeds the limits specified in section 194A.
(6) The deduction of tax at source is to be made in all cases where the amount of income by
way of interest or, as the case may be, the aggregate of the amounts of interest credited or
paid or likely to be credited or paid during the financial year to the account of or to the payee
or any other person on his behalf is more than ` 5,000.
(7) The rate at which the deduction is to be made are given in Part II of the First Schedule to
the Annual Finance Act. The rate at which tax is to be deducted is 10% both in the case of
resident non-corporate assessees and domestic companies.
(8) No deduction of tax shall be made in the following cases:
(a) If the aggregate amount of interest paid or credited during the financial year does not
exceed ` 5,000.
This limit is ` 10,000 in respect of interest paid on
(i)
time deposits with a banking company;
28.9
(ii) time deposits with a co-operative society engaged in banking business; and
(iii) deposits with post office under notified schemes.
In all other cases, the limit would be ` 5,000.
The limit will be calculated with respect to income credited or paid by a branch of a bank
or a co-operative society or a public company in case of:
(i)
time deposits with a bank
(ii) time deposits with a co-operative society carrying on the business of banking; and
(iii) deposits with housing finance companies, provided:
-
they are public companies formed and registered in India

their main object is to carry on the business of providing long-term finance for
construction or purchase of houses in India for residential purposes.
As per the proviso to section 194A(3)(i), in the case of income credited or paid in respect
of time deposits with a banking company or a co-operative bank or a public company with
the main object of providing long-term finance for construction or purchase of houses in
India for residential purposes, the threshold limit for deduction of tax at source (i.e.,
` 10,000 or ` 5,000, as the case may be) shall be computed with reference to the
income credited or paid by a branch of the banking company or the co -operative society
or the public company.
A second proviso has been inserted in section 194A(3)(i) to provide tha t the
threshold limit will be reckoned with reference to the total interest credited or paid
by the banking company or the co-operative society or the public company, as the
case may be, (and not with reference to each branch), where such banking
company or co-operative society or public company has adopted core banking
solutions.
(b) Interest paid or credited by a firm to any of its partners;
(c) Income paid or credited by a co-operative society (other than a co-operative bank) to a
member there of or to such income credited or paid by a co-operative society to any
other co-operative society;
(d) Interest paid or credited in respect of deposits under any scheme framed by the Central
Government and notified by it in this behalf;
(e) Interest income credited or paid in respect of deposits (other than time deposits made on
or after 1.7.1995) with
(i)
a bank to which the Banking Regulation Act, 1949 applies; or
(ii) a co-operative society engaged in carrying on the business of banking.

(f)
Interest credited or paid in respect of deposits with primary agricultural credit society or a
primary credit society or a co-operative land mortgage bank or a co-operative land
development bank.
(g) Interest income credited or paid by the Central Government under any provi sions of the
28.10
Income Tax
Income-tax Act, 1961, the Estate Duty Act, the Wealth-tax Act, 1957, the Gift-tax Act, the
Companies (Profits) Surtax Act or the Interest Tax Act.
(h) Interest paid or credited to the following entities:
(1) banking companies, or co-operative societies engaged in the business of banking,
including co-operative land mortgage banks;
(2) financial corporations established under any Central, State or Provincial Act.
(3) the Life Insurance Corporation of India.
(4) companies and co-operative societies carrying on the business of insurance.
(5) the Unit Trust of India; and
(6) notified institution, association, body or class of institutions, associations or bodies.
(National Skill Development Fund has been notified by the Central Government fo r
this purpose)
(i)
income credited by way of interest on the compensation amount awarded by the

Motor Accidents Claims Tribunal;
(j)
income paid by way of interest on the compensation amount awarded by the Motor
Accidents Claims Tribunal where the amount of such income or, as the case may
be, the aggregate of the amounts of such income paid during the financial year
does not exceed ` 50,000.
(k) income paid or payable by an infrastructure capital company or infrastructure capital fund
or public sector company in relation to a zero coupon bond issued on or after 1.6.2005.
(9) The expression time deposits [for the purpose of (8)(a),(e) and (f) above] means
the deposits, including recurring deposits, repayable on the expiry of fixed periods.
(10) The time for making the payment of tax deducted at source would reckon from the date
of credit of interest made constructively to the account of the payee.
28.11
Illustration 1
Examine the TDS implications under section 194A in the cases mentioned hereunder
(i)
On 1.10.2015, Mr. Harish made a six-month fixed deposit of ` 10 lakh@9% p.a. with
ABC Co-operative Bank. The fixed deposit matures on 31.3.2016.
(ii) On 1.6.2015, Mr. Ganesh made three nine month fixed deposits of ` 1 lakh each carrying
interest@9% with Dwarka Branch, Janakpuri Branch and Rohini Branches of XYZ Bank,
a bank which has adopted CBS. The fixed deposits mature on 28.2.2016.
(iii) On 1.4.2015, Mr. Rajesh started a 1 year recurring deposit of ` 20,000 per month@8%
p.a. with PQR Bank. The recurring deposit matures on 31.3.2016.
Answer
(i)
ABC Co-operative Bank has to deduct tax at source@10% on the interest of ` 45,000
(9% ` 10 lakh ) under section 194A. The tax deductible at source under section
194A from such interest is, therefore, ` 4,500.
(ii) XYZ Bank has to deduct tax at source@10% under section 194A, since the aggregate
interest on fixed deposit with the three branches of the bank is ` 20,250 [1,00,000 3
9% 9/12], which exceeds the threshold limit of ` 10,000. Since XYZ Bank has adopted
CBS, the aggregate interest credited/paid by all branches has to be considered. Since
the aggregate interest of ` 20,250 exceeds the threshold limit of ` 10,000, tax has to be
deducted@10% under section 194A.
(iii) Tax has to be deducted under section 194A by PQR Bank on the interest of ` 10,400
falling due on recurring deposit on 31.3.2016 to Mr. Rajesh, since
(1) recurring deposit has been included in the definition of time deposit; and
(2) such interest exceeds the threshold limit of ` 10,000.
28.3.6 Winnings from lotteries, crossword puzzles and horse races [Sections
194B and 194BB]
(1) Any income of a casual and non-recurring nature of the type of winnings from lotteries,
crossword puzzles, card game and other game of any sort, races including horse races, etc .
will be charged to income-tax at a flat rate of 30% [Section 115BB].
(2) According to the provisions of section 194B, every person responsible for paying to any
person, whether resident or non-resident, any income by way of winnings from lottery or
crossword puzzle or card game and other game of any sort, is required to deduct income -tax
therefrom at the rate of 30% if the amount of payment exceeds ` 10,000.
(3) Further, in a case where the winnings are wholly in kind or partly in cash and partly in
kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of
whole of the winnings, the person responsible for paying shall, before releasing the winnings,
ensure that tax has been paid in respect of the winnings.
(4) Section 194BB casts responsibility on the following persons to deduct tax at source (i)
a bookmaker; or
28.12
Income Tax
(ii) a person to whom a license has been granted by the Government under any law for the
time being in force (a) for horse racing in any race course; or
(b) for arranging for wagering or betting in any race course.
(5) The obligation to deduct tax at source under section 194BB arises when the
abovementioned persons make payment of any income by way of winnings from any horse
race in excess of ` 5,000. The rate applicable for deduction of tax at source is 30%.
(6) Tax will have to be deducted at source from winnings from horse races even though the
winnings may be paid to the person concerned in installments of less than ` 5,000. Similarly,
in cases where the book-maker or other person responsible for paying the winnings, credits
such winnings and debits the losses to the individual account of the punter, the set off of the
loss against the income would be treated for this purpose as a constructive paymen t of the
income.
(7) In the context of the provisions of section 194BB, the expression any horse race used
therein must be taken to include, wherever the circumstances so necessitate, more than one horse
race. Therefore, winnings by way of jack pot would also fall within the scope of section 194BB.
28.3.7 Payments to contractors and sub-contractors [Section 194C]

(1) Section 194C provides for deduction of tax at source from the payment made to resident
contractors and sub-contractors.
(2) Any person responsible for paying any sum to a resident contractor for carrying out any
work (including supply of labour for carrying out any work) in pursuance of a contract between
the contractor and the Central Government, a State Government, local authority, statut ory
corporation, a company, co-operative society, any statutory authority dealing with housing
accomodation, any society registered under the Societies Registration Act, 1860, any trust or
any university or any firm or any Government of a foreign State or foreign enterprise or any
association or body established outside India or an individual, HUF, AOP or BOI subject to
tax audit under section 44AB in the immediately preceding financial year must deduct income tax at the prescribed rate from such sum at the time of credit or payment, whichever is earlier.
Payments made by Individuals, HUFs, AOPs and BOIs to a contractor would attract TDS if
their total sales/turnover exceeds ` 100 lakh (in case of business) and gross receipts exceed
` 25 lakh (in case of profession) in the immediately preceding financial year. However, relief
has been provided in respect of payments made by individuals/HUFs to a contractor
exclusively for personal purposes.
(3) The rate of TDS under section 194C on payments to contractors would be 1%, where the
payee is an individual or HUF and 2% in respect of other payees. The same rates of TDS
would apply for both contractors and sub-contractors.
(4)
The applicable rates of TDS under section 194C are as follows
Payee
TDS rate
Individual / HUF contractor/sub-contractor
1%
Other than individual / HUF contractor/sub-contractor
2%

Contractor in transport business (if PAN is furnished)
Nil
Sub-contractor in transport business (if PAN is furnished)
Nil
28.13
(5) No deduction will be required to be made if the consideration for the contract does not
exceed ` 30,000. However, to prevent the practice of composite contracts being split up into
contracts valued at less than ` 30,000 to avoid tax deduction, it has been provided that tax
will be required to be deducted at source where the amount credited or paid or likely to be
credited or paid to a contractor or sub-contractor exceeds ` 30,000 in a single payment or
` 75,000 in the aggregate during a financial year.
Therefore, even if a single payment to a contractor does not exceed ` 30,000, TDS provisions
under section 194C would be attracted where the aggregate of the amounts of such sums
credited or paid or likely to be credited or paid to the contractor during the financial year
exceeds ` 75,000.
Illustration 2
ABC Ltd. makes the following payments to Mr. X, a contractor, for contract work during the
P.Y.2015-16
` 15,000 on 1.5.2015
` 25,000 on 1.8.2015
` 30,000 on 1.12.2015
On 1.3.2016, a payment of ` 28,000 is due to Mr. X on account of a contract work.
Discuss whether ABC Ltd. is liable to deduct tax at source under section 194C from payments
made to Mr. X.
Solution
In this case, the individual contract payments made to Mr. X does not exceed ` 30,000.
However, since the aggregate amount paid to Mr. X during the P.Y.2015-16 exceeds ` 75,000
(on account of the last payment of ` 28,000, due on 1.3.2016, taking the total from ` 70,000
to ` 98,000), the TDS provisions under section 194C would get attracted. Tax has to be
deducted@1% on the entire amount of 98,000 from the last payment of ` 28,000 and the
balance of ` 27,020 (i.e. ` 28,000 ` 980) has to be paid to Mr. X.
(6) Work includes
(a) advertising;
(b) broadcasting and telecasting including production of programmes for such broadca sting
or telecasting;
(c) carriage of goods or passengers by any mode of transport other than by railways;
(d) catering;
(e) manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from such customer.
28.14
Income Tax
However, work shall not include manufacturing or supplying a product according to the
requirement or specification of a customer by using raw material purchased from a person,
other than such customer, as such a contract is a contract for sale. However, this will not be
applicable to a contract which does not entail manufacture or supply of an article or thing (e.g.
a construction contract).
It may be noted that the term work would include manufacturing or supplying a product
according to the requirement or specification of a customer by using material purchased from
such customer. In such a case, tax shall be deducted on the invoice value excluding the value
of material purchased from such customer if such value is mentioned sep arately in the invoice.
Where the material component has not been separately mentioned in the invoice, tax shall be
deducted on the whole of the invoice value.
(7) No deduction is required to be made from the sum credited or paid or likely to be credited
or paid during the previous year to the account of a contractor, during the course of the
business of plying, hiring or leasing goods carriages, if he furnishes his PAN to the deductor.
In order to convey the true intent of law, it has been clarified that this relaxation from
the requirement to deduct tax at source shall only be applicable to the payment in the
nature of transport charges (whether paid by a person engaged in the business of
transport or otherwise) made to a contractor, who fulfills the following three conditions
cumulatively -
(8) Goods carriage means (i)
any motor vehicle constructed or adapted for use solely for the carriage of goods; or
(ii) any motor vehicle not so constructed or adapted, when used for the carriage of goods.
The term motor vehicle does not include vehicles having less than four wheels and with
engine capacity not exceeding 25cc as well as vehicles running on rails or vehicles adapted
for use in a factory or in enclosed premises.
(9) The substance of the provisions is explained hereunder:
(i)
The deduction of income-tax at source from payments made to non-resident contractors
28.15
will be governed by the provisions of section 195.

(ii) The deduction of income-tax will be made from sums paid for carrying out any work or for
supplying labour for carrying out any work. In other words, the section will apply only in
relation to works contracts and labour contracts and will not cover contracts for sale of
goods.
(iii) Contracts for rendering professional services by lawyers, physicians, surgeons,
engineers, accountants, architects, consultants etc., cannot be regarded as contracts for
carrying out any work and, accordingly, no deduction of income-tax is to be made from
payments relating to such contracts under this section. Separate provisions for fees for
professional services have been made under section 194J.
(iv) The deduction of income-tax must be made at the time of credit of the sum to the account
of the contractor, or at the time of payment thereof in cash or by issue of a cheque or
draft or by any other mode, whichever is earlier.
(10) Deduction of tax at source on payment of gas transportation charges by the
purchaser of natural gas to the seller of gas [Circular No. 9/2012 dated 17.10.2012]
In response to the representations received by CBDT, on the difficulties being faced in the
matter of tax deduction at source on Gas Transportation Charges paid by the purchasers of
Natural gas to the owners/sellers of gas, CBDT has, through this Circular, clarified that in case
the Owner/Seller of the gas sells as well as transports the gas to the purchaser till the point of
delivery, where the ownership of gas to the purchaser is simultaneously transferred, the
manner of raising the sale bill (whether the transportation charges are embedded in the cost of
gas or shown separately) does not alter the basic nature of such contract which remains
essentially a contract for sale and not a works contract as envisaged in section 194C.
Therefore, in such circumstances, the provisions of Chapter XVIIB are not applicable on the
component of Gas Transportation Charges paid by the purchaser to the Owner/Seller of the
gas. Further, the use of different modes of transportation of gas by Owner/Seller will not alter
the position.
However, transportation charges paid to a third party transporter of gas, either by the
Owner/Seller of the gas or purchaser of the gas or any other person, shall continue to be
governed by the appropriate provisions of the Act and tax shall be deductible at so urce on
such payment to the third party at the applicable rates.
28.3.8 Insurance Commission [Section 194D]

(1) Section 194D casts responsibility on any person responsible for paying to a resident any
income by way of remuneration or reward.
(2) Such income may be by way of insurance commission or other remuneration in
consideration for soliciting or procuring insurance business (including the business relating to
the continuance, renewal or revival of policies of insurance).
(3) Such person is required to deduct income-tax at the rate of 10%, both in the case of
resident non-corporate assessees and domestic companies.
(4) The deduction is to be made at the time of the credit of the income to the account of the
payee or at the time of making the payment (by whatever mode) to the payee, whichever is earlier.
28.16
Income Tax
(5) The tax under this section has to be deducted at source only if the amount of such
income or the aggregate of the amounts of such income credited or paid during the financial
year to the account of the payee exceeds ` 20,000.
28.3.9
Payment in respect of life insurance policy [Section 194DA]
(1) Under section 10(10D), any sum received under a life insurance policy, including the sum
allocated by way of bonus on such policy is exempt subject to fulfillment of conditions
specified under the said section.
(2) Consequently, the sum received under a life insurance policy which does not fulfill the
conditions specified under section 10(10D) is taxable.
(3) For ensuring a proper mechanism for reporting of transactions and collection of tax in
respect of sum paid under life insurance policies which are not exempt under section 10(10D),
new section 194DA has been inserted to provide for deduction of tax at the rate of 2% on any
sum paid to a resident under a life insurance policy, including the sum allocated by way of
bonus, which are not exempt under section 10(10D) .
(4) However, tax deduction is required only if the payment or aggregate payment in a
financial year to an assessee is ` 1,00,000 or more. This is for alleviating the compliance
burden on the small tax payers.
Illustration 3
Examine the applicability of the provisions for tax deduction at source under section 194DA in
the above cases (i) Mr.X, a resident, is due to receive ` 4.50 lakhs on 31.3.2016, towards maturity proceeds
of LIC policy taken on 1.4.2013, for which the sum assured is ` 4 lakhs and the annual
premium is ` 1,25,000.
(ii) Mr.Y, a resident, is due to receive ` 2.20 lakhs on 31.3.2016 on LIC policy taken on
1.4.2011, for which the sum assured is ` 2 lakhs and the annual premium is ` 35,000.
(iii) Mr.Z, a resident, is due to receive ` 95,000 on 1.10.2015 towards maturity proceeds of
LIC policy taken on 1.10.2011 for which the sum assured is ` 90,000 and the annual premium
was ` 19,000.
Answer
(i) Since the annual premium exceeds 10% of sum assured in respect of a policy taken on
1.4.2012, the maturity proceeds of ` 4.50 lakhs are not exempt under section 10(10D) in the
hands of Mr.X. Therefore, tax is required to be deducted@2% under section 194DA on the
maturity proceeds of ` 4.50 lakhs payable to Mr.X.
(ii) Since the annual premium is less than 20% of sum assured in respect of a policy taken
before 1.4.2012, the sum of ` 2.20 lakhs due to Mr.Y would be exempt under section 10(10D)
in his hands. Hence, no tax is required to be deducted at source under section 194DA on
such sum payable to Mr.Y.
(iii) Even though the annual premium exceeds 20% of sum assured in respect of a policy
taken before 1.4.2012, and consequently, the maturity proceeds of ` 95,000 would not be
28.17
exempt under section 10(10D) in the hands of Mr.Z, the tax deduction provisions under
section 194DA are not attracted since the maturity proceeds are less than ` 1 lakh.
28.3.10 Payments to non-resident sportsmen or sports association [Section

194E]
(1) This section provides for deduction of tax at source in respect of any income referred to
in section 115BBA payable to a non-resident sportsman (including an athlete) or an
entertainer who is not a citizen of India or a non-resident sports association or institution.
(2) Deduction of tax at source @20% should be made by the person responsible for making
the payment.
(3) Such tax deduction should be at the time of credit of such income to the account of the
payee or at the time of payment there of in cash or by issue of a cheque or draft or by any
other mode, whichever is earlier.
(4) The following are the income referred to in section 115BBA (i)
income received or receivable by a non-resident sportsman (including an athlete) by way

of (a) participation in any game or sport in India (However, games like crossword puzzles,
horse races etc. taxable under section 115BB are not included herein); or
(b) advertisement; or
(c) contribution of articles relating to any game or sport in India in newspapers,
magazines or journals.
(ii) Guarantee amount paid or payable to a non-resident sports association or institution in

relation to any game or sport played in India. However, games like crossword puzzles,
horse races etc. taxable under section 115BB are not included herein.
(iii) income received or receivable by a non-resident entertainer (who is not a citizen of India)
from his performance in India.
28.3.11 Payments in respect of deposits under National Savings Scheme etc.

[Section 194EE]
(1) The person responsible for paying any amount from National Savings Scheme Account under
section 80CCA shall deduct income-tax thereon at the rate of 20% at the time of payment.
(2) However, no such deduction shall be made where the amount of payment or the
aggregate amount of payments in a financial year is less than ` 2,500.
(3) The provisions of this section shall not apply to the payments made to the heirs of the
assessee.
28.3.12 Repurchase of units by Mutual Fund or Unit Trust of India [Section 194F]
A person responsible for paying to any person any amount on account of repurchase of units
covered under section 80CCB(2) shall deduct tax at source at the rate of 20% at the time of
payment of such amount.
28.18
Income Tax
28.3.13 Commission etc. on the sale of lottery tickets [Section 194G]

(1) Under section 194G, the person responsible for paying any income by way of
commission, remuneration or prize (by whatever name called) on lottery tickets in an amount
exceeding ` 1,000 shall deduct income-tax thereon at the rate of 10%.
(2) Such deduction should be made at the time of credit of such income to the account of the
payee or at the time of payment of such income by cash, cheque, draft or any other mode,
whichever is earlier.
(3) Where any such income 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
crediting shall be deemed to be credit of such income to the account of the payee and the
provisions of this section shall apply accordingly.
28.3.14 Commission or brokerage [Section 194H]

(1) Any person, not being an individual or a Hindu undivided family not subject to tax audit
under section 44AB in the immediately preceding financial year, who is responsib le for paying
any income by way of commission (other than insurance commission) or brokerage to a
resident shall deduct income tax at the rate of 10%.
(2) The deduction shall be made at the time such income is credited to the account of the
payee or at the time of payment in cash or by issue of cheque or draft or by any other mode,
(3) Even where income is credited to some other account, whether called Suspense
account or by any other name, in the books of account of the person li able to pay such
income, such crediting shall be deemed to be credit to the account of the payee for the
purposes of this section.
(4) No deduction is required if the amount of such income or the aggregate of such amount
does not exceed ` 5,000 during the financial year.
(5) Commission or brokerage includes any payment received or receivable, directly or
indirectly, by a person acting on behalf of another person for services rendered, or for any
services in the course of buying or selling of goods, or in relation to any transaction relating to
any asset, valuable article or thing, other than securities.
(6) However, this section is not applicable to professional services. Professional Services
means services rendered by a person in the course of carrying on legal, medical, engineering
or architectural profession or the profession of accountancy or technical consultancy or interior
decoration or such other profession as notified by the CBDT for the purpose of compulsory
maintenance of books of account under section 44AA.
(7) Further, there would be no requirement to deduct tax at source on commission or
brokerage payments by BSNL or MTNL to their public call office (PCO) franchisees.
28.3.15 Rent [Section 194-I]

(1) Any person, other than an individual or a HUF not subject to tax audit under section
44AB in the immediately preceding year, who is responsible for paying to a resident any
28.19
income by way of rent shall deduct income tax at the rate of:
(i)
2% in respect of rent for plant, machinery or equipment;
(ii) 10% in respect of other rental payments (i.e., rent for use of any land or building,
including factory building, or land appurtenant to a building, including factory building, or
furniture or fixtures).
(2) This deduction is to be made at the time of credit of such income to the account of the
payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other
(3) No deduction need be made where the amount of such income or the aggregate of the
amounts of such income credited or paid or likely to be credited or paid during the financial
year to the account of the payee does not exceed ` 1,80,000.
(4) Further, no deduction shall be made under this section from rent credited or paid to
a business trust, being a REIT, in respect of any real estate asset owned directly by it.
(5) Rent means any payment, by whatever name called, under any lease, sub -lease,
tenancy or any other agreement or arrangement for the use of (either separately or together)
any
(a) land; or
(b) building (including factory building); or
(c) land appurtenant to a building (including factory building); or
(d) machinery; or
(e) plant; or
(f)
equipment; or
(g) furniture; or
(h) fittings,
whether or not any or all of the above are owned by the payee.
(6) Where any such income 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
crediting shall be deemed to be credit of such income to the account of the payee and the
provisions of this section will apply accordingly.
Applicability of TDS provisions under section 194-I to payments made by the customers
on account of cooling charges to the cold storage owners.
CBDT Circular No.1/2008 dated 10.1.2008 provides clarification regarding applicability of
provisions of section 194-I to payments made by the customers on account of cooling charges
to the cold storage owners.
The main function of the cold storage is to preserve perishable goods by means of a
mechanical process, and storage of such goods is only incidental in nature. The customer is
28.20
Income Tax
also not given any right to use any demarcated space/place or the machinery of the cold store
and thus does not become a tenant. Therefore, the provisions of 194-I are not applicable to
the cooling charges paid by the customers of the cold storage.
However, since the arrangement between the customers and cold storage owners are
basically contractual in nature, the provision of section 194-C will be applicable to the amounts
paid as cooling charges by the customers of the cold storage.
Applicability of TDS provisions under section 194-I to service tax component of rental
income
CBDT Circular No.4/2008 dated 28.4.2008 provides clarification on deduction of tax at source
(TDS) on service tax component of rental income under section 194-I.
As per the provisions of 194-I, tax is deductible at source on income by way of rent paid to any
resident. Further, rent has been defined in 194-I to mean any payment, by whatever name
called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the
use of (either separately or together) any,(a) land; or
(b) building (including factory building); or
(c) land appurtenant to a building (including factory building); or
(d) machinery; or
(e) plant; or
(f)
equipment; or
(g) furniture; or
(h) fittings,
whether or not any or all of the above are owned by the payee.
Service tax paid by the tenant doesnt partake the nature of income of the landlord. The
landlord only acts as a collecting agency for Government for collection of service tax.
Therefore, tax deduction at source under section 194-I would be required to be made on the
amount of rent paid/payable without including the service tax.
Non-deduction of tax at source on the service tax component comprised in payments
other than rent made to residents, if the service-tax component is indicated separately
The CBDT had issued Circular No.4/2008 dated 28.4.2008 clarifying that tax is to be deducted
at source under section 194-I, on the amount of rent paid/payable without including the service
tax component.
In respect of payments other than rent, the CBDT has, vide Circular No.1/2014 dated
13.1.2014, clarified that wherever in terms of the agreement/contract between the payer and
the payee, the service tax component comprised in the amount payable to a resident is
indicated separately, tax shall be deducted at source under Chapter XVII -B on the amount
paid/payable without including such service tax component.
28.21
28.3.16 Payment on transfer of certain immovable property other than

agricultural land [Section 194-IA]
(1) Chapter XVII-B of the Income-tax Act, 1961 requires tax to be deducted at source on
certain specified payments made to residents by way of salary, interest, rent, commission,
brokerage, fees for professional and technical services, royalty etc.
In case of transfer of immovable property by a non-resident, the TDS provisions under section
195 are attracted in the hands of the transferee. However, in case of transfer of immovable
property by residents, there is no requirement to deduct tax at source, the only exception
being a case of compulsory acquisition of immovable property (other than agricultural land) in
respect of which tax deduction is required under section 194LA.
(2) For the twin purposes of having a reporting mechanism of transactions in the real estate
sector and also collecting tax at the earliest point of time, section 194 -IA was inserted by the
Finance Act, 2013. It requires every transferee responsible for paying any sum as
consideration for transfer of immovable property (land, other than agricultural land, or building
or part of building) to deduct tax, at the rate of 1% of such sum, at the time of credit of such
sum to the account of the resident transferor or at the time of payment of such sum to a
resident transferor, whichever is earlier.
(3) However, tax is not required to be deducted at source where the total amount of
consideration for the transfer of immovable property is less than ` 50 lakh.
(4) Further, since tax deduction at source for compulsory acquisition of immovable property
is covered under section 194LA, the provisions of section 194-IA do not get attracted in the
hands of the transferee in such cases.
(5) The provisions of section 203A containing the requirement of obtaining Tax deduction
account number (TAN) shall not apply to the person required to deduct tax in accordance with
the provisions of section 194-IA.
Time and mode of payment of tax deducted at source under section 194-IA to the credit
of Central Government, furnishing challan-cum-statement and TDS Certificate [Rules 30,
31A & 31] Such sum deducted under section 194-IA shall be paid to the credit of the Central
Government within a period of seven days from the end of the month in which the deduction is
made and shall be accompanied by a challan-cum-statement in Form No.26QB [Rule 30].
(i) The amount so deducted has to be deposited to the credit of the Central Government by
electronic remittance within the above mentioned time limit, into RBI, SBI or any
authorized bank [Rule 30].
(ii) Every person responsible for deduction of tax under section 194-IA shall also furnish to
the DGIT (Systems) or any person authorized by him, a challan-cum-statement in Form
No.26QB electronically within seven days from the end of the month in which the
deduction is made [Rule 31A].
(iii) Every person responsible for deduction of tax under section 194-IA shall furnish the TDS
certificate in Form No.16B to the payee within 15 days from the due date for furnishing
the challan-cum-statement in Form No.26QB under Rule 31A, after generating and
downloading the same from the web portal specified by the DGIT (Systems) or the
person authorized by him [Rule 31].
28.22
Income Tax
Illustration 4
Mr. X sold his house property in Bangalore as well as his rural agricultural land for a
consideration of ` 60 lakh and ` 15 lakh, respectively, to Mr. Y on 1.8.2015. He has
purchased the house property and the land in the year 2013 for ` 40 lakh and ` 10 lakh,
respectively. The stamp duty value on the date of transfer, i.e., 1.8.2015, is ` 85 lakh and
` 20 lakh for the house property and rural agricultural land, respectively. Determine the tax
implications in the hands of Mr. X and Mr. Y and the TDS implications, if any, in the hands of
Mr. Y, assuming that both Mr. X and Mr. Y are resident Indians.
Solution
(i)
Tax implications in the hands of Mr.X

As per section 50C, the stamp duty value of house property (i.e. ` 85 lakh) would
be deemed to be the full value of consideration arising on transfer of property.
Therefore, ` 45 lakh (i.e., ` 85 lakh ` 40 lakh, being the purchase price) would be
taxable as short-term capital gains in the A.Y.2016-17.
Since rural agricultural land is not a capital asset, the gains arising on sale of such
land is not taxable in the hands of Mr. X.
(ii)
Tax implications in the hands of Mr.Y

In case immovable property is received for inadequate consideration, the difference
between the stamp value and actual consideration would be taxable under section
56(2)(vii), if such difference exceeds ` 50,000.
Therefore, in this case ` 25 lakh (` 85 lakh ` 60 lakh) would be taxable in the
hands of Mr.Y under section 56(2)(vii).
Since agricultural land is not a capital asset, the provisions of section 56(2)(vii) are
not attracted in respect of receipt of agricultural land for inadequate consideration,
since the definition of property under section 56(2)(vii) includes only capital assets
specified thereunder.
(iii) TDS implications in the hands of Mr.Y

Since the sale consideration of house property exceeds ` 50 lakh, Mr.Y is required
to deduct tax at source under section 194-IA. The tax to be deducted under section
194-IA would be ` 60,000, being 1% of ` 60 lakh.
TDS provisions under section 194-IA are not attracted in respect of transfer of rural
agricultural land.
28.3.17 Fees for professional or technical services [Section 194J]

(1) Every person, other than an individual or Hindu undivided family not subject to tax audit
under section 44AB in the immediately preceding financial year, who is responsible for paying
to a resident any sum by way of
(i)
fees for professional services; or
(ii) fees for technical services; or
28.23
(iii) any remuneration or fees or commission, by whatever name called, other than those on
which tax is deductible under section 192, to a director of a company; or
(iv) royalty, or
(v) non-compete fees referred to in section 28(va)
shall deduct tax at source at the rate of 10%.
(2) The deduction is to be made at the time of credit of such sum to the account of the payee
or at the time of payment thereof in cash or by issue of a cheque or draft or by any other
(3) No tax deduction is required if the amount of fees or the aggregate of the amounts of
fees credited or paid or likely to be credited or paid during a financial year does not exceed `
30,000 in the case of fees for professional services, ` 30,000 in the case of fees for technical
services, ` 30,000 in the case of royalty and ` 30,000 in the case of non-compete fees.
The limit of ` 30,000 under section 194J is applicable separately for fees for professional
services, fees for technical services, royalty and non-compete fees referred to in section
28(va). It implies that if the payment to a person towards each of the above is less than
` 30,000, no tax is required to be deducted at source, even though the aggregate payment or
credit exceeds ` 30,000. However, there is no such exemption limit for deduction of tax on
any remuneration or fees or commission payable to director of a company .
Illustration 5
XYZ Ltd. makes a payment of ` 28,000 to Mr. Ganesh on 2.8.2015 towards fees for
professional services and another payment of ` 25,000 to him on the same date towards fees
for technical services. Discuss whether TDS provisions under section 194J are attracted .
Answer
TDS provisions under section 194J would not get attracted, since the limit of
` 30,000 is applicable for fees for professional services and fees for technical services,
separately. It is assumed that there is no other payment to Mr. Ganesh towards fees for
professional services and fees for technical services during the P.Y.2015-16.
(4) An individual or a Hindu undivided family, whose total sales, gross recei pts or turnover
from the business or profession carried on by him exceed the monetary limits specified under
clause (a) or clause (b) of section 44AB during the financial year immediately preceding the
financial year in which such sum by way of fees for professional or technical services is
credited or paid shall be liable to deduct income-tax under this sub-section.
(5) However, such individual or Hindu Undivided family, shall not be liable to deduct income tax on the sum payable by way of fees for professional services, in case such sum is credited
or paid exclusively for personal purposes.
(6) Where any fees for professional or technical services is credited to any account, whether
called suspense account or by any other name, in the books of accounts of the person liable
to pay such sum, such crediting shall be deemed to be credit of such sum to the account of
the payee and tax has to be deducted accordingly.
28.24
Income Tax
(7) Professional services means services rendered by a person in the course of carrying on
legal, medical, engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or advertising or such other profession as is
notified by the CBDT for the purposes of section 44AA or of this section.
(8) Other professions notified for the purposes of section 44AA are as follows:
(a) Profession of authorised representatives;
(b) Profession of film artist;
(c) Profession of company secretary.
(9) The CBDT has notified the services rendered by following persons in relation to the
sports activities as Professional Services for the purpose of the section 194J:
(a) Sports Persons,
(b) Umpires and Referees,
(c) Coaches and Trainers,
(d) Team Physicians and Physiotherapists,
(e) Event Managers,
(f)
Commentators,
(g) Anchors and

(h) Sports Columnists.
(10) Accordingly, the requirement of TDS as per section 194J would apply to all the aforesaid
professions. The term profession, as such, is of a very wide import. However, the term has
been defined in this section exhaustively. For the purposes of TDS, therefore, all other
professions would be outside the scope of section 194J. For example, this section will not
apply to professions of teaching, sculpture, painting etc. unless they are notified.
(11) Explanation (b) to section 194J provides that the term fees for technical services shall
have the same meaning as in Explanation 2 to section 9(1)(vii). The term fees for technical
services as defined in Explanation 2 to section 9(i)(vii) means any consideration (including
any lump sum consideration) for rendering of any of the following services:
(i)
Managerial services;
(ii) Technical services;

(iii) Consultancy services;
(iv) Provision of services of technical or other personnel.
It is expressly provided that the term fees for technical services will not include following
types of consideration:
(i)
Consideration for any construction, assembly, mining or like project, or
(ii) Consideration which is chargeable under the head Salaries.

(12) The CBDT has, through Circular No.8/2009 dated 24.11.2009, clarified that TPAs (Third
28.25
Party Administrators) who are making payment on behalf of insurance companies to hospitals
for settlement of medical/insurance claims etc. under various schemes including cashless
schemes are liable to deduct tax at source under section 194J on all such payments to
hospitals etc. This is because the services rendered by hospitals to various patients are
primarily medical services and, therefore, the provisions of section 194J are applicable to
payments made by TPAs to hospitals etc.
Consequently, all such past transactions between TPAs and hospitals would fall within the
provisions of section 194J and consequence of failure to deduct tax or after deducting tax
failure to pay on all such transactions would make the deductor (TPAs) deemed to be an
assessee-in-default in respect of such tax and also liable for charging of interest under section
201(1A).
However, no proceedings under section 201 may be initiated after the expi ry of six years from
the end of the financial year in which payments have been made without deducting tax at
source etc. by the TPAs. Further, the tax demand arising out of section 201(1) in situations
arising above, may not be enforced if the deductor (TPA) satisfies the officer in charge of TDS
that the relevant taxes have been paid by the deductee-assessee (hospitals etc.). A certificate
from the auditor of the deductee-assessee stating that the tax and interest due from deducteeassessee has been paid for the assessment year concerned would be sufficient compliance
for the above purpose. However, this will not alter the liability to charge interest under section
201(1A) till payment of taxes by the deductee-assessee or liability for penalty under section
271C, as the case may be.
(13) Consideration for use or right to use of computer software is royalty within the
meaning of section 9(1)(vi)
As per section 9(1)(vi), any income payable by way of royalty in respect of any right, property
or information is deemed to accrue or arise in India. The term royalty means consideration
for transfer of all or any right in respect of certain rights, property or information. There have
been conflicting court rulings on the interpretation of the definition of royalt y, on account of
which there was a need to resolve the following issues
Does consideration for use of computer software constitute royalty?
(i) Is it necessary that the right, property or information has to be used directly by the
payer?
(ii) Is it necessary that the right, property or information has to be located in India or control
or possession of it has to be with the payer?
(iii) What is the meaning of the term process?
In order to resolve the above issues arising on account of conflicting judicia l decisions and to
clarify the true legislative intent, Explanations 4, 5 & 6 have been inserted with retrospective
effect from 1st June, 1976.
Explanation 4 clarifies that the consideration for use or right to use of computer software is
royalty by clarifying that, transfer of all or any rights in respect of any right, property or
information includes and has always included transfer of all or any right for use or right to use
a computer software (including granting of a licence) irrespective of the mediu m through which
such right is transferred.
28.26
Income Tax
Consequently, the provisions of tax deduction at source under section 194J and section 195
would be attracted in respect of consideration for use or right to use computer software since
the same falls within the definition of royalty.
Note - The Central Government has, vide Notification No.21/2012 dated 13.6.2012, effective
from 1st July, 2012, exempted certain software payments from the applicability of tax
deduction under section 194J. Accordingly, where payment is made by the transferee for
acquisition of software from a resident-transferor, the provisions of section 194J would not be
attracted if (1)
the software is acquired in a subsequent transfer without any modification by the

transferor;
(2) tax has been deducted either under section 194J or under section 195 on payment for
any previous transfer of such software; and
(3) the transferee obtains a declaration from the transferor that tax has been so deducted
along with the PAN of the transferor.
28.3.18 Payment of compensation on acquisition of certain immovable property

[Section 194LA]
(1) Section 194LA provides for deduction of tax at source by a person responsible for paying
to a resident any sum in the nature of
(i) compensation or the enhanced compensation or
(ii) the consideration or the enhanced consideration
on account of compulsory acquisition, under any law for the time being in force, of any
immovable property (other than agricultural land).
(2) Immovable property means any land (other than agricultural land) or any building or part
of a building.
(3) The amount of tax to be deducted is 10% of such sum mentioned in (1) above.
(4) The tax should be deducted at the time of payment of such sum in cash or by issue of a
cheque or draft or by any other mode, whichever is earlier.
(5) No tax is required to be deducted where the amount of such payment or, as the case
may be, the aggregate amount of such payments to a resident during the financial year does
not exceed ` 2 lakh.
28.3.19 Income by way of interest from Infrastructure Debt Fund [Section 194LB]
(1) Interest income received by a non-resident or a foreign company from notified
infrastructure debt funds set up in accordance with the prescribed guidelines would be subject
to tax at a concessional rate of 5% under section 115A on the gross amount of such interest
income as compared to tax @ 20% on other interest income of non-resident. The
concessional rate of tax is expected to give a fillip to infrastructure and encourage inflow of
long-term foreign funds to the infrastructure sector
(2) Accordingly, tax would be deductible @ 5% on interest paid/credited by such fund to a
non-resident/foreign company. The person responsible for making the payment shall, at the
28.27
time of credit of such income to the account of the payee or at the time of payment thereof in
cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct
income-tax @5%.
28.3.20 Income by way of interest from an Indian company [Section 194LC]

(1) Interest paid by an Indian company or business trust 1 to a foreign company or a noncorporate non-resident in respect of borrowing made in foreign currency from sources outside
India between 1.7.2012 and 30.6.2017 would be subject to tax at a concessional rate of 5% on
gross interest (as against the rate of 20% of gross interest applicable in respect of other
interest received by a non-corporate non-resident or foreign company from Government or an
Indian concern on money borrowed or debt incurred by it in foreign currency).
(2) To avail this concessional rate, the borrowing should be from a source outside India
under a loan agreement at any time between 1.7.2012 and 30.6.2017 or by way of issue of
long-term infrastructure bonds during the period between 1.7.2012 and 30.9.2014 or by way of
issue of any long-term bond, including long-term infrastructure bonds during the period
between 1.10.2014 and 30.6.2017 and approved by the Central Government in this behalf.
(3) The interest to the extent the same does not exceed the interest calculated at the rate
approved by the Central Government, taking into consideration the terms of the loan or the
bond and its repayment, will be subject to tax at a concessional rate of 5%.
(4) Such interest paid by an Indian company to a non-corporate non-resident or a foreign
company would be subject to TDS@5% under section 194LC.
(5) Further, levy of higher rate of TDS@20% under section 206AA in the absence of PAN
would not be attracted in respect of payment of interest on long-term bonds, as referred to in
section 194LC, to a non-corporate non-resident or to a foreign company.
Approval of long-term bonds and rate of interest
Through Circular No.15/2014, dated 17-10-2014, the CBDT conveys the approval of Central
Government for issue of long-term bonds including long-term infrastructure bonds by Indian
companies which satisfy the following conditions:
(a) The bond shall be issued at any time on or after 1 st October, 2014 but before 1 st July,
2017.
(b) The bond issue shall comply the relevant provisions of Foreign Exchange Management
Act, 1999, read with relevant ECB regulations, either under automatic route or approval route.
(c)
The bond issue should have Loan Registration Number issued by Reserve Bank of India.
(d) The term long term means that the bond to be issued should have original maturity
term of three years or more.
Further, the Central Government has also approved the interest rate for the purpose of section
Business trust means a trust registered as an Infrastructure Investment Trust or a Real Estate Investment
Trust, the units of which are required to be listed on a recognized stock exchange, in accordance with the
regulations made under the SEBI Act, 1992 and notified by the Central Government in this behalf.
Note: The TDS provisions under section 194LBA relating to income from units of a business trust and
section 194LBB relating to income in respect of units of investment fund have been discussed in Chapter 13
on Assessment of various entities.
1
28.28
Income Tax
194LC in respect of borrowing by way of issue of long term bond including long term
infrastructure bond, as any rate of interest which is within the All-in-cost ceilings specified by
the RBI under ECB regulations as is applicable to the borrowing through a long term bond
issue having regard to the tenure thereof.
Any bond issue satisfying the above conditions would be treated as approved by the Central
Government for the purpose of section 194LC. Further, it has also been clarified that
consequent to the amendment to section 194LC, the approval of Central Government
contained in Circular No. 7/2012, in so far as they apply to borrowings by way of a loan
agreement, shall be valid for the borrowings made on or before 30/06/2017 instead of
30/06/2015 as mentioned in the said Circular.
28.3.21 Interest on Government securities or rupee-denominated bonds of an

Indian company payable to a Foreign Institutional Investor (FII) or a Qualified
Foreign Investor (QFI) [Section 194LD]
(1) Section 194LD provides that any income by way of interest payable during the period
between 1.6.2013 and 30.6.2017 in respect of investment made by an FII or QFI in a rupee
denominated bond of an Indian company or a Government security, shall be subject to tax
deduction at source at a concessional rate of 5% (as against the rate of 20% of interest
applicable in respect of other interest received by a QFI or FII).
(2) The interest to the extent the same does not exceed the interest calculated at the rate
notified by the Central Government in this behalf will be subject to tax deduction at a
concessional rate of 5%.
(3) Any person who is responsible for paying to a person being a FII or a QFI, any such
interest shall, at the time of credit of such income to the account of the payee or at the time of
payment of such income in cash or by the issue of a cheque or draft or by any other mode,
whichever is earlier, deduct income-tax thereon@5%.
(4) FII refers to Foreign Institutional Investors specified by the Central Government by
notification in the Official Gazette.
(5) QFI refers to Qualified Foreign Investors i.e. Foreign Investors, being non-residents, who
meet certain KYC requirements under SEBI laws and are hence permitted to invest in equity
and debt schemes of Mutual Funds, thereby enabling Indian Mutual Funds to have direct
access to foreign investors and widen the class of foreign investors in Indian equity and debt
market. QFI does not include FIIs.
28.3.22 Other sums (payable to non-residents) [Section 195]

(1) Any person responsible for paying interest (other than interest referred to in section
194LB or section 194LC or section 194LD) or any other sum chargeable to tax (other than
salaries) to a non-resident or to a foreign company is liable to deduct tax at source at the rates
prescribed by the relevant Finance Act. Such persons are also required t o furnish the
information relating to payment of any sum in such form and manner as may be prescribed by
the CBDT.
28.29
Under section 195(1), the obligation to deduct tax at source from interest and other payments
to a non-resident, which are chargeable to tax in India, is on any person responsible for
paying to a non-resident or to a foreign company. The words any person used in section
195(1) is intended to include both residents and non-residents. Therefore, a non-resident
person is also required to deduct tax at source before making payment to another nonresident, if the payment represents income of the payee non-resident, chargeable to tax in
India. Therefore, if the income of the payee non-resident is chargeable to tax, then tax has to
be deducted at source, whether the payment is made by a resident or a non-resident.
Explanation 2 clarifies that the obligation to comply with section 195(1) and to make
deduction thereunder applies and shall be deemed to have always applied and extends and
shall be deemed to have always extended to all persons, resident or non-resident, whether or
not the non-resident has :(a) a residence or place of business or business connection in India; or
(b) any other presence in any manner whatsoever in India.
(2) In order to subject an item of income to deduction of tax under this section the payee
must be a non-resident or a foreign company.
(3) The tax is to be deducted at source at the time of credit of such income to the account of
the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by
any other mode, whichever is earlier.
(4) Where any interest or other sum as aforesaid is credited to any account, whether called
Interest payable account or Suspense account or by any other nam e, in the books of
account of the person liable to pay such income, such crediting shall be deemed to be credit
of such income to the account of the payee.
(5) The statutory obligation imposed under this section would apply for the purpose of
deduction of tax at source from any sum being income assessable to tax (other than salary
income) in the hands of the non-resident/foreign company. However, no deduction shall be
made in respect of any dividends declared/distributed/paid by a domestic company, which is
exempt in the hands of the shareholders under section 10(34).
(6) Payment to a non-resident by way of royalties and payments for technical services
rendered in India are common examples of sums chargeable under the provisions of the Act to
which the liability for deduction of tax at source would apply.
(7) In the case of interest payable by the Government or a public sector bank within the
meaning of section 10(23D) or a public financial institution within the meaning of section
10(23D), deduction of tax shall be made only at the time of payment thereof in cash or by the
issue of a cheque or draft or by any other mode.
(8) Section 195(6) provides that the person responsible for paying any sum, whether or not
chargeable to tax under the provisions of the Act, to a non-corporate non-resident or to a
foreign company, shall be required to furnish the information relating to payment of such sum
in the prescribed form and prescribed manner.
28.30
Income Tax
(9) Specified class or classes of persons, making payment to the non-resident, to

mandatorily make application to Assessing Officer to determine the appropriate
proportion of sum chargeable to tax [Section 195(7)]
(i)
Under section 195(1), any person responsible for paying to a non-corporate non-resident
or to a foreign company, any interest or any other sum chargeable under the provisions
of the Act (other than salary), has to deduct tax at source at the rates in force.
(ii) Under section 195(2), where the person responsible for paying any such sum chargeable
to tax under the Act (other than salary) to a non-resident, considers that the whole of
such sum would not be income chargeable in the hands of the recipient, he may make an
application to the Assessing Officer to determine, by general or special order, the
appropriate proportion of such sum so chargeable. When the Assessing Officer so
determines, the appropriate proportion, tax shall be deducted under section 195(1) only
on that proportion of the sum which is so chargeable.
(iii) Consequent to the retrospective amendments in section 2(47), section 2(14) and section
9(1), sub-section (7) in section 195 provides that, notwithstanding anything contained in
sections 195(1) and 195(2), the CBDT may, by notification in the Official Gazette, specify
a class of persons or cases, where the person responsible for paying to a non-corporate
non-resident or to a foreign company, any sum, whether or not chargeable under the
provisions of this Act, shall make an application to the Assessing Officer to determine, by
general or special order, the appropriate proportion of sum chargeable to tax. Where the
Assessing Officer determines the appropriate proportion of the sum chargeable, tax shall
be deducted under sub-section (1) on that proportion of the sum which is so chargeable.
(iv) Consequently, where the CBDT specifies a class of persons or cases, the person
responsible for making payment to a non-corporate non-resident or a foreign company in
such cases has to mandatorily make an application to the Assessing Officer, whether or
not such payment is chargeable under the provisions of the Act.
(10) Procedure for refund of TDS under section 195 to the person deducting tax in
cases where tax is deducted at a higher rate prescribed in the DTAA
The CBDT has, through Circular No.7/2011 dated 27.9.2011, modified Circular No.07/2007,
dated 23.10.2007 which laid down the procedure for refund of tax deducted at source under
section 195 of the Income-tax Act, 1961 to the person deducting tax at source from the
payment to a non-resident. The said Circular allowed refund to the person making payment
under section 195 in the circumstances indicated therein as the income does not accrue to the
non-resident or if the income is accruing, no tax is due or tax is due at a lesser rate. The
amount paid to the Government in such cases to that extent does not constitute tax.
The said Circular, however, did not cover a situation where the tax is deducted at a rate
prescribed in the relevant DTAA which is higher than the rate prescribed in the Income -tax
Act, 1961. Since the law requires deduction of tax at a rate prescribed in the relevant DTAA
or under the Income-tax Act, 1961 whichever is lower, there is a possibility that in such cases
excess tax is deducted relying on the provisions of relevant DTAA.
28.31
Accordingly, in order to remove the genuine hardship faced by the resident deductor, the
Board has modified Circular No. 07/2007, dated 23-10-2007 to the effect that the beneficial
provisions under the said Circular allowing refund of tax deducted at source under secti on 195
to the person deducting tax at source shall also apply to those cases where deduction of tax at
a higher rate under the relevant DTAA has been made while a lower rate is prescribed under
the domestic law.
28.3.23 Non-applicability of TDS provisions on payments made to Corporations

whose income is exempt under section 10(26BBB) [Circular No.7/2015, dated
23-04-2015]
The CBDT had earlier issued Circular No. 4/2002 dated 16.07.2002 which laid down that there
would be no requirement for tax deduction at source in respect of payments made to such
entities, whose income is unconditionally exempt under section 10 of the Income -tax Act, 1961
and who are statutorily not required to file return of income as per the section 139. The said
Circular also lists the entities which are unconditionally exempt under section 10 and who are
statutorily not required to file return of income as per section 139.
Subsequently, section 10(26BBB) was inserted in the Income-tax Act, 1961 vide Finance Act,
2003 w.e.f. 01.04.2004 to provide that any income of a corporation established by a Central,
State or Provincial Act for the welfare and economic upliftment of ex -service-men being the
citizens of India does not form part of the total income. The corporations covered under
section 10(26BBB) are also statutorily not required to file return of income as per the section
139.
The corporations covered under section 10(26BBB) satisfy the two conditions of Circular No.
4/2002 i.e., such corporations are statutorily not required to file return of income as per section
139 and their income is also unconditionally exempt under section 10 of the Income -tax Act,
1961. Accordingly, the CBDT has examined the matter and extended the benefit of the said
Circular to such corporations whose income is exempt under section 10(26BBB). Hence, there
would be no requirement for tax deduction at source from the payments made to such
corporations, since their income is anyway exempt under the Income-tax Act, 1961.
28.3.24 Income payable net of tax [Section 195A]

(1) Where, under an agreement or other arrangement, the tax chargeable on any income
referred to in the foregoing provisions of this Chapter is to be borne by the person by whom
the income is payable, then, for the purposes of deduction of tax under those provisions such
income shall be increased to such amount as would, after deduction of tax thereon, be equal
to the net amount payable under such agreement or arrangement.
(2) However, no grossing up is required in the case of tax paid [under section 192(1A)] by an
employer on the non-monetary perquisites provided to the employee.
28.3.25 Interest or dividend or other sums payable to Government, Reserve Bank

or certain corporations [Section 196]
(1) No deduction of tax shall be made by any person from any sums payable to -
28.32
(i)
Income Tax
the Government; or
(ii) the Reserve Bank of India; or

(iii) a corporation established by or under a Central Act, which is, under any law for the time
being in force, exempt from income-tax on its income; or
(iv) a Mutual Fund specified under section 10(23D).
(2) This provision for non-deduction is when such sum is payable to the above entities by
way of (i)
interest or dividend in respect of securities or shares (a) owned by the above entities; or
(b) in which they have full beneficial interest or
(ii) any income accruing or arising to them.
28.4 Certificate for deduction of tax at a lower rate [Section 197]

(1) This section applies where, in the case of any income of any person or sum payable to
any person, income-tax is required to be deducted at the time of credit or payment, as the
case may be at the rates in force as per the provisions of sections 192, 193,194,194A, 194C,
194D, 194G, 194H, 194-I, 194J 194K, 194LA and 195.
(2) In such cases, the assessee can make an application to the Assessing Officer for
deduction of tax at a lower rate or for non-deduction of tax.
(3) If the Assessing Officer is satisfied that the total income of the recipient justifies the
deduction of income-tax at lower rates or no deduction of income-tax, as the case may be, he
may give to the assessee such certificate, as may be appropriate.
(4) Where the Assessing Officer issues such a certificate, then the person responsible for
paying the income shall deduct income-tax at such lower rates specified in the certificate or
deduct no tax, as the case may be, until such certificate is cancelled by the Assessing Officer.
(5) Enabling powers have been conferred upon the CBDT to make rules for prescribing the
procedure in this regard.
28.5 No Deduction in Certain Cases [Section 197A]

(1) This section enables an individual, who is resident in India and whose estimated total
income of the previous year is less than the basic exemption limit, to receive dividends and
any sum out of National Savings Scheme Account, without deduction of tax at source under
sections 194 and 194EE, on furnishing a declaration in duplicate in the prescribed form and
verified in the prescribed manner [Sub-section (1)].
(2) The declaration in the above form is to be furnished by the declarant to the person
responsible for paying any income of the nature referred to in sections 194 or 194EE. The
declaration will have to be to the effect that the tax on the estimated total income of the
declarant of the previous year in which such income is to be included in computing his total
income will be nil [Sub-section (1)].
28.33
(3) No deduction of tax shall be made under section 192A or 193 or 194A or 194DA, where
a person, who is not a company or a firm, furnishes to the person responsi ble for paying any
income of the nature referred to in section 192A or 193 or 194A or 194DA, a declaration in
writing in duplicate in the prescribed form to the effect that the tax on his estimated total
income of the previous year in which such income is to be included in computing his total
income will be nil [Sub-section (1A)].
(4) The provisions of this section will, however, not apply where (i) the amount of any income from dividends,
(ii) payments in respect of deposits under National Savings Schemes, etc. or
(iii) income from interest on securities or interest other than interest on securities or units or
(iv) the aggregate of the amounts of such incomes in (1), (2) and (3) above credited or paid
or likely to be credited or paid during the previous year in which such income is to be included
exceeds the maximum amount which is not chargeable to income-tax [Sub-section (1B)].
(5) For a senior citizen, who is of the age of 60 years or more at any time during the previous
year, no deduction of tax shall be made under section 192A or section 193 or section 194 or
section 194A or section 194DA or section 194EE, if they furnish a declaration in writing to the
payer, of any amount or income mentioned in the above sections [Sub-section (1C)].
(6) Such declaration should be in duplicate in the prescribed form and verified in the
prescribed manner to the effect that the tax on his estimated total income of the previous year
in which such income is to be included in computing his total income will be ni l. The restriction
contained in sub-section (1B) will not apply to senior citizens [Sub-section (1C)].
(7) No deduction of tax shall be made by an Offshore Banking Unit from the interest paid on (i)
deposit made by a non-resident/not-ordinarily resident on or after 1.4.2005; or
(ii) borrowing from a non-resident/not-ordinarily resident on or after 1.4.2005.

This provision is contained in sub-section (1D).
(8) No deduction of tax at source shall be made from any payment to any person for, or on
behalf of, the New Pension System Trust referred in section 10(44).
(9) No deduction of tax shall be made from specified payments to such institution,
association or body or class of institutions or associations or bodies as may be notified by the
Central Government in the Official Gazette in this behalf. Therefore, in respect of such
specified payments made to notified bodies, no tax is to be deducted at source.
Accordingly, the Central Government has notified that no deduction of tax shall be made from
the payments of the nature specified below, in case such payment is made by a person to a
bank listed in the Second Schedule to the Reserve Bank of India Act, 1934, excluding a
foreign bank
(i)
bank guarantee commission,
(ii)
cash management service charges,
(iii)
depository charges on maintenance of DEMAT accounts ,
(iv)
charges for warehousing services for commodities,
28.34
Income Tax
(v)
underwriting service charges,
(vi)
clearing charges (MICR charges) and
(vii)
credit card or debit card commission for transaction between the merchant
establishment and acquirer bank,
(10) On receipt of the declaration referred to in sub-section (1), (1A) or (1C), the person
responsible for making the payment will be required to deliver or cause to be delivered to the
Chief Commissioner or Commissioner, one copy of the declaration on or before the 7th day of
the month following the month in which the declaration is furnished to him [Section 197A(2)].
28.6 Miscellaneous Provisions

28.6.1 Tax deducted is income received [Section 198]
(1) All sums deducted in accordance with the foregoing provisions shall, for the purpose of
computing the income of an assessee, be deemed to be income received.
(2) However, the tax paid by an employer under sub-section (1A) of section 192 on nonmonetary perquisites provided to the employees, shall not be deemed to be income received
by the assessee.
28.6.2 Credit for tax deducted at source [Section 199]

(1) Tax deducted at source in accordance with the above provisions and paid to the credit of
the Central Government shall be treated as payment of tax on behalf of the (i)
person from whose income the deduction was made; or
(ii) owner of the security; or

(iii) depositor; or
(iv) owner of property; or
(v) unit-holder; or
(vi) shareholder.
(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central
Government, shall be treated as the tax paid on behalf of the person in respect of whose
income, such payment of tax has been made.
(3) The CBDT is empowered to frame rules for the purpose of giving credit in respect of tax
deducted or tax paid under Chapter XVII. The CBDT also has the power to make rules for
giving credit to a person other than the persons mentioned in (1) and (2) above. Further, the
CBDT can specify the assessment year for which such credit may be given.
(4) Rule 37BA Credit for tax deducted at source for the purposes of section 199
Rule 37BA(1) provides that credit for tax deducted at source and paid to the Central Government
shall be given to the person to whom the payment has been made or credit has been given (i.e.,
the deductee) on the basis of information relating to deduction of tax furnished by the deductor to
the income-tax authority or the person authorized by such authority.
28.35
Clause (i) of Rule 37BA(2) provides that where under any provisions of the Act, the whole or
any part of the income on which tax has been deducted at source is assessable in the hands
of a person other than the deductee, credit for the whole or any part of the tax deducted at
source, as the case may be, shall be given to the other person and not to the deductee.
However, the deductee should file a declaration with the deductor and the deductor should
report the tax deduction in the name of the other person in the information relatin g to
deduction of tax referred to in sub-rule (1) of Rule 37BA.
28.6.3 Duty of person deducting tax [Section 200]

(1) The persons responsible for deducting the tax at source should deposit the sum so
deducted to the credit of the Central Government within the prescribed time [Sub-section (1)].
(2) Further, an employer paying tax on non-monetary perquisites provided to employees in
accordance with section 192(1A), should deposit within the prescribed time, the tax to the
credit of the Central Government or as the Board directs [Sub-section (2)].
Rule 30 Prescribed time and mode of payment to Government account of TDS or tax
paid under section 192(1A)
(a) All sums deducted in accordance with Chapter XVII-B by an office of the Government
shall be paid to the credit of the Central Government on the same day where the tax is paid
without production of an income-tax challan and on or before seven days from the end of the
month in which the deduction is made or income-tax is due under section 192(1A), where tax
is paid accompanied by an income-tax challan.
(b) All sums deducted in accordance with Chapter XVII-B by deductors other than a
Government office shall be paid to the credit of the Central Government on or before 30th
April, where the income or amount is credited or paid in the month of March. In any other
case, the tax deducted should be paid on or before seven days from the end of the month in
which the deduction is made or income-tax is due under section 192(1A).
(c) In special cases, the Assessing Officer may, with the prior approval of the Joint
Commissioner, permit quarterly payment of the tax deducted under section 192/
194A/194D/194H on or before 7th of the month following the quarter, in respect of first three
quarters in the financial year and 30th April in respect of the quarter ending on 31st March.
The dates for quarterly payment would, therefore, be 7th July, 7th October, 7th January and
30th April, for the quarters ended 30th June, 30th September, 31st December and 31st March,
respectively.
(3) For the purpose of improving the reporting of payment of TDS made through book
entry and to make existing mechanism enforceable, sub-section (2A) has been inserted
in section 200. Accordingly, where the tax deducted [including paid under section
192(1A)] has been paid without the production of a challan, the PAO/TO/CDDO or any
other person, by whatever name called, who is responsible for crediting such sum to
the credit of the Central Government, shall furnish within the prescribed time a
statement in the prescribed form for the prescribed period to the prescribed income-tax
authority or the person authorised by such authority by verifying the same in the
prescribed manner and setting forth prescribed particulars.
28.36
Income Tax
(4) Sub-section (3) casts responsibility on the following persons

(i)
any person deducting any sum on or after 1st April, 2005 in accordance with the
foregoing provisions of this chapter; or,
(ii) any person being an employer referred to in section 192(1A).
(5) These persons are responsible for preparing such statements for such periods as may be
prescribed, after paying the tax deducted to the credit of the Central Government within the
prescribed time.
(6) Such statements have to be delivered or caused to be delivered to the prescribed
income-tax authority or the person authorised by such authority.
(7) Such statements should be in the prescribed form and verified in the prescribed manner.
(8) It should set forth such particulars and should be delivered within such time as may be
prescribed.
(9) The deductor may also deliver to the prescribed authority, a correction statement (a) for rectification of any mistake; or
(b) to add, delete or update the information furnished in the statement delivered under
section 200(3).
(10) Every person responsible for deduction of tax under Chapter XVII-B shall deliver, or
cause to be delivered, the following quarterly statements to the DGIT (Systems) or any person
authorized by him, in accordance with section 200(3):
(i) Statement of TDS under section 192 in Form No.24Q;
(ii) Statement of TDS under sections 193 to 196D in Form No.26Q in respect of all deductees
other than a deductee being a non-resident not being a company or a foreign company or resident
but not ordinarily resident in which case the relevant form would be Form No.27Q.
Rule 31A - Time limit for submission of quarterly statements
Date of ending of
the quarter of the
financial year
30th June
30th September
31st December
31st March
Due date in the case of a

deductor, being an office of
Government
31st July of the financial year
31st October of the financial year
31st January of the financial year
15th May of the financial year
immediately
following
the
financial year in which deduction
is made
Due date in case of other

deductors
15th July of the financial year
15th October of the financial year
15th January of the financial year
15th May of the financial year
immediately
following the
financial year in which
deduction is made
28.6.4 Correction of arithmetic mistakes and adjustment of incorrect claim

during computerized processing of TDS statements [Section 200A]
(1) At present, all statements of tax deducted at source are filed in an electronic mode,
thereby facilitating computerised processing of these statements.
28.37
(2) Therefore, in order to process TDS statements on computer, electronic processing on the
same lines as processing of income-tax returns has been provided in section 200A with effect
from 1st April, 2010.
(3) The following adjustments can be made during the computerized processing of
statement of tax deducted at source or a correction statement
(i) any arithmetical error in the statement; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the
statement.
The term an incorrect claim apparent from any information in the statement shall mean such
claim on the basis of an entry, in the statement,
(a) of an item, which is inconsistent with another entry of the same or some other item in
such statement;
(b) in respect of rate of deduction of tax at source, where such rate is not in accordance with
the provisions of the Act.
(4) The interest, if any, has to be computed on the basis of the sums deductible as
computed in the statement;
(5)
The fee, if any, has to be computed in accordance with the provision of section 234E.
(6) The sum payable by, or the amount of refund due to, the deductor has to be determined
after adjustment of interest and fee against the amount paid under section 200 or section 201
or section 234E and any amount paid otherwise by way of tax or interest or fee.
(7) An intimation will be prepared and generated and sent to the deductor, specifying his tax
liability or the refund due, within one year from the end of the financial year in which the
statement is filed. The refund due shall be granted to the deductor.
(8) For this purpose, the CBDT is empowered to make a scheme for centralized processing
of statements of TDS to determine the tax payable by, or refund due to, the deductor.
28.6.5 Consequences of failure to deduct or pay [Section 201]

(1) The following persons shall be deemed to be an assessee in default if they do not deduct
the whole or any part of the tax or after deducting fails to pay the tax (i) any person including the principal officer of a company, who is required to deduct any
sum in accordance with the provisions of the Act; and
(ii) an employer paying tax on non-monetary perquisites under section 192(1A).
(2) However, any person (including the principal officer of the company) who fails to deduct the
whole or any part of the tax on the amount credited or payment made to a resident payee shall
not be deemed to be an assessee-in-default in respect of such tax if such resident payee
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return of income; and
(iii) has paid the tax due on the income declared by him in such return of income,
and the payer furnishes a certificate to this effect from an accountant in such form as may be
prescribed.
28.38
Income Tax
(3) Further, no penalty shall be charged under section 221 from such person unless the
Assessing Officer is satisfied that such person has failed to deduct and pay the tax without
good and sufficient reasons.
(4) A person deemed to be an assessee-in-default under section 201(1), for failure to deduct
tax or to pay the tax after deduction, is liable to pay simple interest @ 1% for every month or
part of month on the amount of such tax from the date on which tax was deductible to the d ate
on which such tax was actually deducted and simple interest @ 1% for every month or part
of month from the date on which tax was deducted to the date on which such tax is actually
paid [Section 201(1A)].
Illustration 6
An amount of ` 40,000 was paid to Mr. X on 1.7.2015 towards fees for professional services
without deduction of tax at source. Subsequently, another payment of ` 50,000 was due to Mr.
X on 28.2.2016, from which tax@10% (amounting to ` 9,000) on the entire amount of
` 90,000 was deducted. However, this tax of ` 9,000 was deposited only on 22.6.2016.
Compute the interest chargeable under section 201(1A).
Solution
Interest under section 201(1A) would be computed as follows
Particulars
1% on tax deductible but not deducted i.e., 1% on ` 4,000 for 8 months
320
1% on tax deducted but not deposited i.e. 1% on ` 9,000 for 4 months
540
860
(5) Such interest should be paid before furnishing the statements in accordance with section
200(3).
(6) Where the payer fails to deduct the whole or any part of the tax on the amount credited
or payment made to a resident and is not deemed to be an assessee-in-default under section
201(1) on account of payment of taxes by such resident payee, interest under section
201(1A)(i) i.e., @1% p.m. or part of month, shall be payable by the payer from the date on
which such tax was deductible to the date of furnishing of return of income by such resident
payee. The date of deduction and payment of taxes by the payer shall be deemed to be the
date on which return of income has been furnished by the resident payee.
(7) Where the tax has not been paid after it is deducted, the amount of the tax together with
the amount of simple interest thereon shall be a charge upon all the assets of the person or
the company, as the case may be.
(8) No order under section 201(1), deeming a person to be an assessee -in-default for failure
to deduct the whole or any part of the tax from a person resident in India, shall be passed at
any time after the expiry of seven years from the end of the financial year in which the
payment is made or credit is given.
(9) Further, the exclusions from the time limit, as specified in Explanation 1 to section 153,
would also apply to the above time limit for passing an order deeming a person to be an
assessee-in-default. Also, the time limit would not apply to an order passed consequent to the
28.39
direction contained in an order of the Commissioner under sections 263 and 264,
Commissioner (Appeals) under section 250, Appellate Tribunal under section 254, Supreme
Court/National Tax Tribunal under section 260 and Supreme Court under section 262. Thus,
the time limit would be extended where effect is to be given to various appellate proceedings
or where proceedings are stayed.
(10) Section 201(1) deems a person to be an assessee-in-default if he
(i)
does not deduct tax; or
(ii) does not pay; or

(iii) after so deducting fails to pay
the whole or any part of the tax, as required by or under this Act.
Thus, section 201(1) contemplates three types of defaults. The default contemplated in (ii) is
covered by the default contemplated in (iii). However, the time limit has been specified only
for passing of orders relating to default contemplated in (i) above. There is no time limit
specified in respect of the other defaults.
(11) Therefore, no time-limits have been prescribed for the order under section 201(1) where
(i)
the deductor has deducted but not deposited the tax deducted at source, as this would
be a case of defalcation of government dues,
(ii) the employer has failed to pay the tax wholly or partly, under sub-section (1A) of section
192, as the employee would not have paid tax on such perquisites,
(iii) the deductee is a non-resident as it may not be administratively possible to recover the
tax from the non-resident.
28.6.6 Deduction only one mode of recovery [Section 202]

(1) Recovery of tax through deduction at source is only one method of recovery.
(2) The Assessing Officer can use any other prescribed methods of recovery i n addition to
tax deducted at source.
28.6.7 Certificate for tax deducted [Section 203]

(1) Every person deducting tax at source shall issue a certificate to the effect that tax has
been deducted and specify the amount so deducted, the rate at which tax h as been deducted
and such other particulars as may be prescribed.
(2) Every person, being an employer, referred to in sub-section (1A) of section 192 shall,
within such period, as may be prescribed, furnish to the person in respect of whose income
such payment of tax has been made, a certificate to the effect that tax has been paid to the
Central Government, and specify the amount so paid, the rate at which the tax has been paid
and such other particulars as may be prescribed.
Certificate of TDS to be furnished under section 203 [Rule 31]
The certificate of deduction of tax at source to be furnished under section 203 shall be in Form
No.16 in respect of tax deducted or paid under section 192 and in any other case, Form
No.16A.
28.40
Income Tax
Form No.16 shall be issued to the employee annually by 31st May of the financial year
immediately following the financial year in which the income was paid and tax deducted. Form
No.16A shall be issued quarterly within 15 days from the due date for furnishing the statement
of TDS under Rule 31A.
28.6.8 Common number for TDS and TCS [Section 203A]

(1) Persons responsible for deducting tax or collecting tax at source should apply to the
Assessing Officer for the allotment of a tax-deduction and collection-account number.
(2) Section 203A(2) enlists the documents/certificates/returns/challans in which the tax
deduction account number or tax collection account number or tax deduction and collection
account number has to be compulsorily quoted. They are (i)
challans for payment of any sum in accordance with the provisions of section 200 or
section 206C(3);
(ii) certificates furnished under section 203 or section 206C(5);

(iii) statements prepared and delivered or caused to be delivered in accordance with the
provisions of section 200(3) or section 206C(3).
(iv) returns delivered in accordance with the provisions of section 206 or section
206C(5A)/(5B); and
(v) in all other documents pertaining to such transactions as may be prescribed in the
interests of revenue.
(3) The requirement of obtaining and quoting of TAN under section 203A shall not
apply to such person, as may be notified by the Central Government in this behalf .
28.6.9 Furnishing of statement of tax deducted [Section 203AA]

(1) This section provides for furnishing of a statement of the tax deducted on or after 1st
April, 2008 by the prescribed income-tax authority or the person authorised by such authority
referred to in section 200(3)
(2) Such statement should be prepared and delivered to every person (a) from whose income, tax has been deducted or
(b) in respect of whose income, tax has been paid.
(3) Such statement should be in the prescribed form specifying the amount of tax deducted
or paid and other prescribed particulars.
28.6.10 Person responsible for paying taxes deducted at source [Section 204]
For purposes of deduction of tax at source the expression person responsible for paying means:
(1)
Nature of income/payment
Person responsible for paying tax
Salary (other than payment of

salaries by the Central or State
Government)
(i) the employer himself; or

(ii) if the employer is a company, the company
itself, including the principal officer thereof.
28.41
(2)
Interest on securities (other than

payments by or on behalf of the
Central or State Government)
the local authority, corporation or company,

including the principal officer thereof.
(3)
Any sum payable to a nonresident Indian, representing

consideration for the transfer by
him of any foreign exchange
asset, which is not a short term
capital asset
the Authorised Person responsible for remitting

such sum to the non-resident Indian or for
crediting such sum to his Non-resident (External)
Account maintained in accordance with the
Foreign Exchange Management Act, 1999 and
any rules made thereunder.
(4)
Credit / payment of any other

sum chargeable under the
provisions of the Act
(i) the payer himself; or
Credit / payment of any sum

chargeable under the provisions
of the Act made by or on behalf
of the Central Government or
the Government of a State.
(i) the drawing and disbursing officer; or
(5)
(ii) if the payer is a company, the company

itself including the principal officer thereof.
(ii) any other person, by whatever name called,
responsible for crediting, or as the case may be,
paying such sum.
28.6.11 Bar against direct demand on assessee [Section 205]

Where tax is deductible at source under any of the aforesaid sections, the assessee shall not be
called upon to pay the tax himself to the extent to which tax has been deducted from that income.
28.6.12 Furnishing of statements in respect of payment of interest to residents

without deduction of tax [Section 206A]
(1) This section casts responsibility on every banking company or co-operative society or
public company referred to in the proviso to section 194A(3)(i) to prepare such statements for
such period as may be prescribed
if they are responsible for paying to a resident,
the payment should be of any income not exceeding ` 10,000, where the payer is a
banking company or a co-operative society, and ` 5,000 in any other case.
such income should be by way of interest (other than interest on securities)
(2) The statements have to be delivered or caused to be delivered to the prescribed income tax authority or the person authorised by such authority.
(3) The statements have to be in the prescribed form, verified in the prescribed manner and
to be filed within the prescribed time, on a floppy, diskette, magnetic cartridge tape, CD -ROM
or any other computer readable media.
(4) The Central Government may, by notification in the Official Gazette, cast responsibility
on any person other than a person mentioned in (1) above.
(5) Such persons would be persons responsible for paying to a resident any income liable for
deduction of tax at source.
28.42
Income Tax
(6) Such persons are vested with the responsibility to prepare and deliver or cause to be
delivered statements within the prescribed time to the prescribed income-tax authority or the
person authorized by such authority.
(7) Such statements should be in the prescribed form and verified in the prescribed manner.
(8) Such statements should be on a floppy, diskette, magnetic cartridge tape, CD -ROM or
any other computer readable media.
28.6.13 Mandatory requirement of furnishing PAN in all TDS statements, bills,

vouchers and correspondence between deductor and deductee [Section 206AA]
(1) The non-quoting of PAN by deductees in many cases have led to delay in issue of refund
on account of problems in the processing of returns of income and in granting credit for tax
deducted at source.
(2) With a view to strengthening the PAN mechanism, section 206AA provides that any
person whose receipts are subject to deduction of tax at source i.e. the deductee, shall
mandatorily furnish his PAN to the deductor failing which the deductor shall deduct tax at
source at higher of the following rates
(i) the rate prescribed in the Act;
(ii) at the rate in force i.e., the rate mentioned in the Finance Act; or
(iii) at the rate of 20%.
For instance, in case of rental payment for plant and machinery, where the payee does not
furnish his PAN to the payer, tax would be deductible @20% instead of @2% prescribed under
section 194I. However, non-furnishing of PAN by the deductee in case of income by way of
winnings from lotteries, card games etc., would result in tax being deducted at the existing rate
of 30% under section 194B. Therefore, wherever tax is deductible at a rate higher than 20%,
this provision would not have any impact.
(3) Tax would be deductible at the rates mentioned above also in cases where the taxpayer
files a declaration in Form 15G or 15H (under section 197A) but does not provide his PAN.
(4) Further, no certificate under section 197 will be granted by the Assessing Officer unless
the application contains the PAN of the applicant.
(5) If the PAN provided to the deductor is invalid or it does not belong to the deductee, it
shall be deemed that the deductee has not furnished his PAN to the deductor. Accordingly,
tax would be deductible at the rate specified in (ii) above.
(6) These provisions will also apply to non-residents where tax is deductible on payments or
credits made to them. However, the provisions of section 206AA shall not apply in respect of
payment of interest on long-term bonds, as referred to in section 194LC, to a non-corporate
non-resident or to a foreign company.
(7) Both the deductor and the deductee have to compulsorily quote the PAN of the deductee
in all correspondence, bills, vouchers and other documents exchanged between them.
28.7 Tax collection at source [Section 206C]

Under section 206C(1), sellers of certain goods are required to collect tax from the buyers at
the specified rates. The specified percentage for collection of tax at source is as follows:

Nature of Goods
28.43
Percentage
(i)
Alcoholic liquor for human consumption
1%
(ii)
(iii)
Tendu leaves
Timber obtained under a forest lease
5%
2.5%
(iv)
Timber obtained by any mode other than (iii)
2.5%
(v)
Any other forest produce not being timber or tendu leaves
2.5%
(vi)
Scrap
1%
(vii) Minerals, being coal or lignite or iron ore

1%
However, no collection of tax shall be made in the case of a resident buyer, if such buyer
furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the
prescribed form and verified in the prescribed manner to the effect that goods referred to in
column (2) of the above Table are to be utilised for the purpose of manufacturing, processing
or producing articles or things or for the purposes of generation of power and not for trading
purposes. [Sub-section (1A)]
Buyer means a person who obtains in any sale, by way of auction, tender, or any other
mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any
such goods but does not include
(i)
a public sector company, the Central Government, a State Government, and an

embassy, a high commission, legation, commission, consulate and the trade
representation, of a foreign State and a club, or
(ii) a buyer in the retail sale of such goods purchased by him for personal consumption.
Seller means the Central Government, a State Government or any local authority or
corporation or authority established by or under a Central, State or Provincial Act, or any
company or firm or co-operative society and also includes an individual or a HUF whose total
sales, gross receipts or turnover from the business or profession carried on by him exceed the
monetary limits specified under clause (a) or clause (b) of section 44AB during the financial
year immediately preceding the financial year in which the goods of the nature specified in the
Table in sub-section (1) or sub-section (1D) are sold.
Scrap means waste and scrap from the manufacture or mechanical working of materials
which is definitely not usable as such because of breakage, cutting up, wear and other
reasons;
The person responsible for collecting tax under this section shall deliver or cause to be
delivered to the Chief Commissioner or Commissioner one copy of the declaration referred to
in sub-section (1A) on or before 7 th of the month next following the month in which the
declaration is furnished to him [Sub-section (1B)].
Sub-section (1C) provides for collection of tax by every person who grants a lease or a licence
or enters into a contract or otherwise transfers any right or interest in any parking lot or toll
plaza or a mine or a quarry to another person (other than a public sector company) for the use
of such parking lot or toll plaza or mine or quarry for the purposes of busines s. The tax shall
be collected as provided, from the licensee or lessee of any such licence, contract or lease of
28.44
Income Tax
the specified nature, at the rate of 2% at the time of

(1) debiting of the amount payable by the licensee or lessee to his account or
(2) at the time of receipt of such amount from the licensee or lessee
(a) in cash or
(b) by the issue of a cheque or draft or
(c) by any other mode,
Two Explanations have been inserted w.e.f. 1.6.2007 to clarify the scope of the term mining and
quarrying. Explanation 1 excludes mining and quarrying of mineral oil from the scope of mining
and quarrying. Explanation 2 clarifies that mineral oil includes petroleum and natural gas.
These Explanations seek to relieve the oil exploration and incidental services from the
applicability of TCS provisions, since these services are in the organised sector.
Section 206C(1D) provides that tax is to be collected at source@1% of sale consideration by
the seller from the buyer, where the sale of jewellery or bullion is in cash and the sale
consideration
(1)
for jewellery exceeds ` 5 lakh,
(2) for bullion exceeds ` 2 lakh

In such cases, tax has to be collected at source by the seller from the buyer irrespective of the
purpose of its use, whether for manufacturing or trading or for personal use .
The purpose of this requirement is to reduce the quantum of cash transaction in bullion and
jewellery sector and curb the flow of unaccounted money in the trading system of bullion and
jewellery. Buyer for the purpose of this transaction shall mean a person who obtains in any
sale, goods of the nature specified therein.
The power to recover tax by collection under sub-section (1) or (1C) or (1D) shall be without
prejudice to any other mode of recovery [Sub-section (2)].
Any amount collected under sub-section (1) or (1C) or (1D) shall be paid within the prescribed
time to the credit of the Central Government or as the Board directs [Sub-section (3)].
All sums collected in accordance with section 206C(1)/(1C)/(1D) by an office of the
Government, shall be paid to the credit of the Central Government on the same day where the
tax is paid without production of an income-tax challan and on or before 7 days from the end
of the month in which the collection is made, where tax is paid accompanied by an income -tax
challan; and all sums collected in accordance with the provisions of section 206C(1)/(1C) /(1D)
by collectors other than an office of the Government, shall be paid to the credit of the Central
Government within one week from the last day of the month in which the collection is made
[Rule 37CA].
A person collecting tax in accordance with the provisions of the section is vested with the
responsibility of preparing such statements for such periods as may be prescribed after paying
the tax collected to the credit of the Central Government within the prescribed time. The
28.45
statement should be delivered or caused to be delivered to the prescribed income -tax

authority or the person authorised by such authority. The statement should be in the
prescribed form and verified in the prescribed manner. The statement should set forth the
prescribed particulars and should be filed within such time as may be prescribed.
Quarterly statement in prescribed form (Form No.27EQ) shall be delivered, or cause to be
delivered, to the DGIT (Systems) or any person authorized by him in accordance with t he
proviso to section 206C(3). The time limit for furnishing such quarterly statements shall be
15th of the month following each quarter in respect of the first three quarters and 15th May for
the last quarter ending on 31st March. The due dates would therefore be 15th July, 15th
October, 15th January and 15th May for the quarters ending 30th June, 30th September, 31st
December and 31st March, respectively [Rule 31AA].
For the purpose of improving the reporting of payment of TDS/TCS made through book
entry and to make existing mechanism enforceable, sub-section (3A) has been inserted
in section 206C. Accordingly, where the tax collected has been paid without the
production of a challan, the PAO/TO/CDDO or any other person, by whatever name
called, who is responsible for crediting such sum to the credit of the Central
Government, shall furnish within the prescribed time a statement in the prescribed form
for the prescribed period to the prescribed income-tax authority or the person
authorised by such authority by verifying the same in the prescribed manner and
setting forth prescribed particulars.
The person collecting tax at source who is required to prepare statements to be
delivered to Director General of Income-tax(Systems)/ NSDL after paying the tax
collected to the credit of the Central Government, may also deliver to the said authority,
a correction statement for rectification of any mistake or to add, delete or update the
information furnished in the statement so delivered in the specified form and veri fied in
the specified manner [Section 206C(3B)].
Any amount collected in accordance with the provisions of this section and paid to the credit of
the Central Government shall be deemed to be payment of tax on behalf of the person from
whom the amount has been collected. The CBDT may prescribe the rules based on which
credit shall be given to such person for the amount so collected in a particular assessment
year [Sub-section (4)].
Every person collecting tax in accordance with the provisions of this secti on shall, within such
period as may be prescribed from the date of debit or receipt of the amount, furnish to the
buyer or licensee or lessee to whose account such amount is debited or from whom such
payment is received, a certificate to the effect that tax has been collected specifying the sum
so collected, the rate at which the tax has been collected and such other particulars as may be
prescribed [Sub-section (5)].
Certificate of tax collected at source under section 206C(5) in Form No.27D shall be furni shed
by the collector within 15 days from the due date for furnishing the quarterly statement of TCS
under Rule 31AA [Rule 37D].
The prescribed income-tax authority or the person authorized by such authority have now
been vested with the responsibility to prepare and deliver a statement in the prescribed form
specifying the amount of tax collected and such other particulars as may be prescribed, within
28.46
Income Tax
the prescribed time after the end of each financial year beginning on or after 1.4.2008.
The CBDT is empowered to frame a scheme for the purpose of filing of returns with such other
authority or agency, if it considers necessary or expedient to do so.
Sub-section (5B) provides that the person responsible for collecting tax (other than a
company/Central Government/State Governments) has the option to deliver or cause to be
delivered such return on a floppy, diskette, magnetic cartridge tape, CD -ROM or any other
computer readable media to the prescribed income-tax authority in accordance with such
scheme as may be specified by the Board in this behalf.
The proviso to the said sub-section provides that where the person collecting tax is a company
or the Central Government or a State Government, then such person is responsible to deliver
or cause to be delivered, within the prescribed time after the end of each financial year, such
returns on computer media under the said scheme.
Thus, filing of returns on computer media is compulsory where the seller is a company or the
Central Government or a State Government. In every other case, the filing of returns on
computer media is optional.
As per sub-section (5C), a return filed on computer media is deemed to be a return for the
purposes of sub-section (5A) and the rules made thereunder. Such a return is also admissible
as evidence in any proceedings made thereunder, without further proof of production of the
original.
Rectification of defective TCS return [Section 206C(5D)]
Sub-section (5D) empowers the Assessing Officer, in case he considers that the return
delivered or cause to be delivered under sub-section (5B) is defective, to (i)
intimate the defect to the person collecting tax and
(ii) give him an opportunity of rectifying the defect within a period of (1) fifteen days from the date of such intimation or
(2) within such further period which the Assessing Officer may, in his discretion, allow on an
application made in this behalf and
if the defect is not rectified within the said period of fifteen days or within such further period
so allowed, then, such return would be treated as an invalid return. The provisions of the
Income-tax Act, 1961 would apply as if such person had failed to deliver the return.
A person who is responsible for collecting the tax in accordance with the provisions of this
section shall be liable to pay the tax to the credit of the Central Government, even if he has
failed to collect the tax [Sub-section (6)].
Sub-section (6A) provides that any person responsible for collecting tax shall be deemed to be
an assessee in default in respect of the tax if such person (1) does not collect the whole or any part of the tax or
(2)
fails to pay such tax after having collected the tax.
Any person responsible for collecting tax at source, other than a seller of jewellery or bullion,
would not be deemed to be an assessee-in-default for failure to collect tax on the amount
28.47
received from a buyer or licensee or lessee or on the amount debited to the account of the
buyer or licensee or lessee, if such buyer or licensee or lessee has furnished his re turn of
income under section 139, taking into account such amount for computing income and paid
the tax due on the income declared by him in such return of income. Further, the person
should also furnish a certificate to this effect from an accountant in the prescribed form.
Further, no penalty shall be charged under section 221 from such person unless the
Assessing Officer is satisfied that the person has without good and sufficient reasons failed to
collect and pay the tax.
If the person responsible for collecting tax does not collect the tax or after collecting the tax
fails to pay it as required under this section, he shall be liable to pay simple interest at the rate
of 1% p.m. or part thereof on the amount of such tax from the date on which su ch tax was
collectible to the date on which the tax was actually paid and such interest shall be paid before
furnishing the quarterly statement for each quarter in accordance with the provisions of sub section (3) [Sub-section (7)].
In such cases where a person is not deemed to be an assessee-in-default on account of the
tax being paid by the buyer/licensee/lessee, interest shall be payable by the collector from the
date on which tax was collectible to the date of furnishing return of income by such buyer o r
licensee or lessee.
Where the tax has not been paid as aforesaid, after it is collected, the amount of tax together
with the amount of simple interest thereon referred to in sub-section (7) shall be a charge
upon all the assets of the person responsible for collecting tax [Sub-section (8)].
Further, sub-section (9) provides for issue of certificates by Assessing Officer for collection of
tax at a lower rate than those specified in sub-section (1)/(1C)/(1D). Such certificate shall be
issued on an application made by the buyer or licensee or lessee in this behalf.
Sub-section (10) provides that the person responsible for collecting tax shall collect the same
at the rate specified in such certificate until such certificate in cancelled by the Assessing
Officer.
Sub-section (11) empowers the Board to make rules specifying the cases in which and the
circumstances under which an application maybe made for the grant of such certificate and
the conditions subject to which certificate may be granted.
28.8 Processing of statements of tax collected at source [Section

206CB]
(i)
Enabling provision has been introduced for processing of TCS statements in the like
manner provided in section 200A for processing of TDS statements. Accordingly, new
section 206CB has been inserted for facilitating processing of statements of tax collected
at source.
(ii) The manner of processing a statement of tax collection at source or a correction

statement made by a person collecting any sum under section 206C, as provided in
section 206CB(1), is as follows -
28.48
Income Tax
(a) the sums collectible under Chapter XVII-BB shall be computed after making the
following adjustments, namely:
(i)
any arithmetical error in the statement;
(ii) an incorrect claim, apparent from any information in the statement (i.e., a
claim, on the basis of an entry, in the statement
(1) of an item, which is inconsistent with another entry of the same or some
other item in such statement;
(2) in respect of rate of collection of tax at source, where such rate is not in
accordance with the provisions of the Income-tax Act, 1961).
(b) the interest, if any, shall be computed on the basis of the sums collectible as
computed in the statement;
(c) the fee, if any, shall be computed in accordance with the provisions of section 23 4E;
(d) the sum payable by, or the amount of refund due to, the collector, shall be
determined after adjustment of such interest and fee against any amount paid under
section 206C or section 234E and any amount paid otherwise by way of tax or
interest or fee;
(e) an intimation shall be prepared or generated and sent to the collector specifying the
sum determined to be payable by, or the amount of refund due to, him; and
(f)
the amount of refund due to the collector in pursuance of such determination shall
be granted to the collector:
However, no intimation under section 206CB(1) shall be sent after the expiry of the
period of one year from the end of the financial year in which the statement is filed.
(iii) The CBDT is empowered to make a scheme for centralised processing of statements of
tax collected at source to expeditiously determine the tax payable by, or the refund due
to, the collector, as required under section 206CB(1).
28.9 Advance Payment of Tax [Section 207 to 219]

1. Advance tax is payable in respect of all income including capital gains and casual
income.
2. Under section 208, obligation to pay advance tax arises in every case where the advance
tax payable is ` 10,000 or more.
In case of senior citizens who have passive source of income like interest, rent, etc., the
requirement of payment of advance tax causes genuine compliance hardship. Therefore, in
order to reduce the compliance burden on such senior citizens, exemption from payment of
advance tax has now been provided to a resident individual(i)
not having any income chargeable under the head Profits and gains of business or
profession; and
(ii) of the age of 60 years or more.
28.49
Such senior citizens need not pay advance tax and are allowed to d ischarge their tax liability
(other than TDS) by payment of self-assessment tax.
Limit for payment of advance tax: An assessee who is liable to pay advance tax of less than
` 10,000 will not be saddled with interest under sections 234B and 234C for defaults in
payment of advance tax. However, the consequences under section 234A regarding interest
for belated return shall continue.
No need for filing estimate: An assessee has to estimate his current income and pay
advance tax thereon. He need not submit any estimate or statement of income to the
Assessing Officer, except where he has been served with notice by the Assessing Officer.
Where obligation to advance tax has arisen, the assessee shall himself compute the advance
tax payable on his current income at the rates in force in the financial year and deposit the
same whether or not he has been earlier assessed to tax.
In the case of a person who has been already assessed by way of a regular assessment in
respect of the total income of any previous year, the Assessing Officer, if he is of the opinion
that such person is liable to pay advance tax, can serve an order under section 210(3)
requiring the assessee to pay advance tax. For this purpose, the total income of the latest
previous year in respect of which the assessee has been assessed or the total income
returned by the assessee for any subsequent previous year, whichever is higher, shall be
taken as the basis for computation of advance tax payable.
The above order can be served by the Assessing Officer at any time during the financial year
but not later than the last date of February.
If, after sending the above order, but before 1st March of the financial year, the assessee
furnishes a return relating to any later previous year or an assessment is completed in respect
of a later return of income, the Assessing Officer can amend computation on the income to
returned or assessed.
If assessee feels that his own estimate of advance tax payable would be less than the one
sent by the Assessing Officer, he can file estimate of his current income and advance tax
payable thereon. Where the advance tax payable or assessees estimation would be higher
than the tax computed by the Assessing Officer, then the advance tax shall be paid based
upon such higher amount.
No reduction of tax deductible but not deducted and tax collectible but not collected,
while computing advance tax liability
(i)
As per section 209, the amount of advance tax payable by a person is computed by
reducing the amount of income-tax which would be deductible or collectible at source
during the financial year from any income which has been taken into account in
computing the total income.
(ii) Some courts had opined that in case where the payer pays any amount (on which tax is
deductible at source) without deduction of tax at source, the payee shall not be liable to
pay advance tax to the extent tax is deductible from such amount.
(iii) With a view to make such a person (payee) liable to pay advance tax, the proviso has to
28.50
Income Tax
section 209(1)(d) provides that the amount of tax deductible at source but not so
deducted by the payer shall not be reduced from the income tax liability of the payee for
determining his liability to pay advance tax.
(iv) In effect, only if tax has actually been deducted at source, the same can be reduced for
computing advance tax liability of the payee. Tax deductible but not so deducted cannot
be reduced for computing advance tax liability of the payee.
(v) Similarly, only if tax has actually been collected at source, the same can be reduced for
computing advance tax liability of the buyer or licensee or lessee. Tax collectible but not
so collected cannot be reduced for computing advance tax liability of the buyer or
licensee or lessee.
Payment of advance tax
Advance tax shall be payable by companies and other assessees as per the following
schedule of installments:
Companies - Four installments
Due date of installment
On or before the 15th June
On or before
September
the
Amount payable
Not less than 15% of such advance tax.
15th
Not less than 45% of such advance tax, as reduced by

the amount, if any, paid in the earlier installment.
On or before the 15th December
Not less than 75% of such advance tax, as reduced by

the amount or amounts, if any, paid in the earlier
installment or installments.
The whole amount of such advance tax as reduced by
the amount or amounts, if any, paid in the earlier
On or before the 15th March
Non-corporate assessees - Three installments

Due date of installment
Amount payable
On or before the 15th September
Not less than 30% of such advance tax
On or before the 15th December
Not less than 60% of such advance tax, as reduced

by the amount, if any, paid in the earlier installment
or installments.
The whole amount of such advance tax as reduced
by the amount or amounts, if any, paid in the earlier
On or before the 15th March
If the last date for payment of any installment of advance tax is a day on which the receiving
bank is closed, the assessee can make the payment on the next immediately following
working day and in such cases, the mandatory interest leviable under section 234B and 234C
would not be charged.
Where advance tax is payable by virtue of the notice of demand issued by the Assessing
28.51
Officer, the whole or the appropriate part of the advance tax shall be payable in the remaining
installments.
Where the assessee does not pay any installment by the due date, he shall be deemed to be
an assessee-in-default in respect of such installment.
28.10 Scheme of Mandatory Interest

28.10.1 Interest for defaults in furnishing return of income [Section 234A]
1. Where the return of income for any assessment year under sub-section 139(4) or in
response to a notice under section 142(1), is furnished after the due date or is not f urnished,
the assessee shall be liable to pay simple interest at the rate of 1% for every month or part of
a month comprised in the period commencing on the day immediately following the due date
and,
(a) where the return is furnished after the due date, ending on that date of furnishing the
return; and
(b) where no return has been furnished, ending on the date of completion of assessment
under section 144.
2. The amount on which interest will be payable will be the amount of the tax on the total
income as determined under section 143(1) or on regular assessment, as reduced by the
amount of (i)
advance tax, if any, paid ;
(ii)
any tax deducted or collected at source;
(iii)
any relief of tax allowed under section 90 or 90A;
(iv)
any deduction of tax allowed under section 91;
(v)
any tax credit allowed to be set-off in accordance with the provisions of section 115JAA
or section 115JD.
3. Due date means the date specified in section 139(1) as applicable in the case of the
assessee.
4. The tax on total income as determined under section 143(1) shall not include additional
income-tax payable under section 143.
5. Where in relation to an assessment year an assessment is made for the first time under
section 147, the assessment so made shall be regarded as regular assessment for the
purposes of this section.
6. The interest payable under this section shall be reduced by the interest paid under
section 140A.
7. Where the return of income for any assessment year required by a notice under section
148 issued after the determination of income under section 143(1) or after completion of
assessment under section 143(3) or section 144 or section 147 is furnished after the expiry of
the time allowed under such notice, or is not furnished, the assessee shall be liable to pay
simple interest at the rate of 1% for every month or part of a month comprised in the period
commencing on the date immediately following the expiry of the time allowed as aforesaid and,
28.52
(i)
Income Tax
where the return is furnished after the expiry of the time aforesaid ending on the date of
furnishing the return;
(ii) where no return has been furnished ending on the date of completion of the
reassessment or re-computation under section 147.
8. The amount on which the above interest is payable is the amount by which the tax on the
total income determined on the basis of such reassessment or re-computation exceeds the tax on
the total income determined under section 143(1) or on the basis of the earlier assessment
aforesaid.
9. Where as a result of an appellate order or an order of the revision or an order from the
Settlement Commission, the interest payable is reduced or increased the Assessing Officer
shall proceed as follows:
(i)
Where the interest is increased, the Assessing Officer shall serve on the assessee a
notice of demand in the prescribed form specifying the sum payable and such demand
notice shall be a notice under section 156.
(ii) Where interest is reduced, the excess paid shall be refunded.

10. Interest under section 234A not chargeable on self assessment tax paid before the
due date of filing of return of income [Circular No. 2/2015, dated 10-2-2015]
Interest under section 234A is charged in case of default in furnishing return of income by an
assessee. The interest is charged at the specified rate on the amount of tax payable on the
total income, as reduced by the amount of advance tax, TDS/TCS, any relief of tax allowed
under section 90 and 90A, any deduction allowed under section 91 and any tax credit allowed
in accordance with section 115JAA and section 115JD. Since self-assessment tax is not
mentioned as a component of tax to be reduced from the amount on which interest under
section 234A is chargeable, interest is being charged on the amount of self -assessment tax
paid by the assessee even before the due date of filing of return.
However, it has been held by Honble Supreme Court, in the case of CIT vs Prannoy Roy
(2009) 309 ITR 231, that interest under section 234A on default of furnishing return of income
shall be payable only on the amount of tax that has not been deposited before the due date of
filing of the Income-tax return for the relevant assessment year.
Accordingly, the CBDT reviewed the present practice of charging interest and decided that no
interest under section 234A shall be charged on self assessment tax paid by the
assessee on or before the due date of filing of return.
28.10.2 Interest for defaults in payment of advance tax [Section 234B]

1. The assessee will be liable to pay interest at the rate of 1% for every month or for part of
month for the period starting from 1st April of the following financial year to the date of regular
assessment on the amount of tax on the total income as determined under section 143(1) or
on regular assessment after giving credit for any advance tax paid, tax deducted at source and
collected at source, if the advance tax paid falls short of 90% of the assessed tax.
2. Meaning of the term assessed tax: The tax on the total income determined under
section 143(1) or on regular assessment as reduced by the amount of -
28.53
(i) any tax deducted or collected at source on any income which is taken into account for
calculating the total income.
(ii) any relief of tax allowed under section 90 or 90A;
(iii) any deduction of tax allowed under section 91;
(iv) any tax credit allowed to be set-off in accordance with the provisions of section 115JAA or
section 115JD.
3. An assessment made for the first time under section 147 shall be deemed to be regular
assessment.
4. Tax on the total income determined under section 143(1) shall not include the additional
income-tax, if any, payable.
5. Where before the date of determination of total income under section 143(1) or
completion of regular assessment, tax is paid by the assessee under section 140A, interest
shall be calculated up to the date on which the tax is so paid and reduced by the interest paid
under section 140A.
Thereafter, interest shall be calculated on the amount by which the tax paid under section
140A together with the advance tax paid falls short of the assessed tax.
6. Where an application under section 245C(1) for any assessment year has been made,
the assessee shall be liable to pay simple interest at the rate of 1% for every month or part of
a month comprised in the following period:
Period commencing from:
Period ending on:

and the date of making such application
the 1st April of such assessment year
Amount on which interest is payable:

the additional amount of income-tax referred to in section 245C(1)
Further, where as a result of an order of the Settlement Commission under section 245D(4) for
any assessment year, the amount of total income disclosed in the application under section
245C(1) is increased, the assessee shall be liable to pay simple interest at the rate of 1% for
every month or part of a month comprised in the following period Period commencing from:
the 1st April of such assessment year
Period ending on:

and the date of order under section 245D(4)
Amount on which interest is payable:

Tax on total income determined on the basis of order under section 245D(4)
minus
Tax on total income disclosed in the application filed under section 245C(1).
If, as a consequence of an order passed by the Settlement Commission
under section 245D(6B) to rectify a mistake apparent from the record,
the amount on which interest is payable is increased or decreased, the
interest shall be increased or decreased accordingly.
28.54
Income Tax
7. As per section 234B(3), where the total income is increased on reassessment under
section 147 or section 153A, the assessee shall be liable for interest@1% for every month or
part of a month on the amount of the increase in tax on total income as a consequence of
reassessment or recomputation [Tax on total income determined on the basis of reassessment
or recomputation Tax on total income determined under section 143(1) or on the basis of
regular assessment].
Period for which interest is payable
Period commencing from:
the 1st April next following the
financial year
Period ending on:

and the date of reassessment or recomputation
under section 147 or section 153A.
8. Where as a result of an appellate order, an order of revision or an order from Settlement

Commission, the interest payable is increased or reduced, the Assessing Officer shall serve a
notice of demand on the assessee where the interest is increased, and where the interest is
reduced, the excess interest paid shall be refunded.
28.10.3 Interest for deferment of advance tax [Section 234C]

In the case of companies: It has been provided that the shortfall for the purpose of
charging interest for deferment of advance tax, in the case of companies, which are liable to
pay advance tax shall be the difference between:
(i)
15% of the tax due on the returned income and the advance tax paid by the company on
or before 15th day of June;
(ii) 45% of the tax due on the returned income and the advance tax paid by the company on
or before 15th day of September;
(iii) 75% of the tax due on the returned income and the advance tax paid by the company on
or before 15th day of December.
It has also been provided that where the advance tax paid by the company on or before the
15th day of June is not less than 12% of the tax due on the returned income and the advance
tax paid on or before the 15th day of September is not less than 36% of the tax due on the
returned income, then the companies will not be liable to pay any interest on the amount of the
shortfalls on the aforesaid dates.
In the case of any other assessees: The shortfall for the purpose of charging interest
for deferment of advance tax shall be the difference between:
(i)
30% of the tax due on the returned income and the advance tax paid on or before 15th
day of September.
(ii) 60% of the tax due on the returned income and the advance tax paid on or before 15th
day of December.
Enlarging the scope of levy of interest for deferment of advance tax: The whole
amount of the advance tax is required to be paid on or before 15th March during the
28.55
financial year. The proviso to section 211(1), however, provides that any amount paid by
way of advance tax on or before 31st March, is also to be treated as advance tax paid
during the financial year. This proviso was inserted as certain High Courts had held that
payment made after the 15th March during the financial year would not cease to be
payment of advance tax. There is no penal provision in the law to enforce payment of the
last installment of advance tax by 15th March. The aforesaid proviso and the absence of
a penal provision have generated a tendency among the assessees to make payment of
advance tax only towards the last day of the financial year.
Section 234C(1), therefore, provides that where the whole amount of advance tax paid by
an assessee on or before 15th March in the financial year is less than the tax due on the
returned income, the assessee is liable to pay simple interest at the rate of 1% per month or
part of the month on the amount of the shortfall from the tax due on the returned income.
An assessee is required to pay advance tax in specified installments on his estimated total
income including capital gains and income from winnings from lotteries, horse races etc.
covered by section 2(24)(ix). No interest will be levied under section 234C in respect of any
shortfall in payment of advance tax due on returned income if the shortfall is on account of
under estimation or failure to estimate the amount of capital gains or income under section
2(24) (ix) and the assessee has paid the whole amount of the tax payable in respect of the
income as part of the installment of advance tax which is immediately due.
These provisions shall apply even in cases where no advance tax has been paid by the
assessee who is liable to pay such tax during the financial year.
Tax due on the returned income means the tax chargeable on the total income declared
in the return of income furnished by the assessee for the assessment year immediately
following the financial year in which the advance tax is paid or payable, as reduced by
the amount of
(i)
any tax deductible or collectible at source on any income which is taken into
account for calculating the total income.
(ii)
any relief of tax allowed under section 90 or 90A;
(iii)
any deduction of tax allowed under section 91;
(iv)
any tax credit allowed to be set-off in accordance with the provisions of section
115JAA or section 115JD.
Payment of advance tax relatable to capital gain, etc. to be allowed in the

remaining installments : Under section 234C penal interest is not charged on account
of underestimate or failure to estimate either the amount of capital gain or of income from
winnings from lottery, horse races, etc., referred to section 2(24)(ix) if the assessee pays
the whole of the tax payable in respect of such income, as part of the installment of
advance tax which is immediately due after such income is earned or by 31st March if no
such installment is due.
This requirement of paying the whole of the tax was causing hardship as the entire tax
laid to be paid on a short notice. In many cases, even the sale proceeds of the capital
asset were not received before the advance tax payment became due. Section 234C
allows the assessees to pay the tax in relation to capital gain or to income from winnings
28.56
Income Tax
from lottery, horse races, etc., as part of the remaining installments of advance tax which
are due in the financial year and if no installment is due then before 31st March of the
previous year.
28.10.4 Interest on excess refund granted at the time of summary assessment

[Section 234D]
(1) Under section 143(4), where a regular assessment under section 143(3) or section 144 is
made, any tax or interest paid under section 143(1) shall be deemed to have been paid
towards such regular assessment and if no refund is due on regular assessment or the
amount refunded under section 143(1) exceeds the amount refundable on regular
assessment, the whole or the excess amount so refunded is deemed to be tax payable
by the assessee. However, no interest is charged for the period during which the refund
amount has been utilised by the assessee.
(2) Therefore, section 234D was inserted to charge interest on excess refund granted at the
time of summary assessment.
(3) Sub-section (1) provides that where any refund is granted to the assessee under section
143(1) and no refund is due on regular assessment or the amount refunded under
section 143(1) exceeds the amount refundable on regular assessment, then the
assessee shall be liable to pay simple interest at the rate of two-third per cent on the
whole or the excess amount so refunded for every month or part of the month from the
date of grant of the refund to the date of such regular assessment.
(4) Sub-section (2) further provides that the interest chargeable under sub -section (1) shall
be reduced, where, as a consequence to the order passed due to rectification, appeal,
revisions etc. under sections 154/155/250/254/260/262/263/264 or an order of the
Settlement Commission under section 245D(4) of the Income-tax Act, the amount of
refund granted under section 143(1) is held to be correctly allowed.
(5) An assessment made for the first time under section 147 or section 153A shall be
regarded as regular assessment for the purpose of this section.
28.10.5 Fee for default in furnishing TDS/TCS Statements

(1) A fee of ` 200 for every day would be levied under section 234E for late furnishing of
TDS/TCS statement from the due date of furnishing of TDS/TCS statement to the date of
furnishing of TDS/TCS statement. However, the total amount of fee shall not exceed the total
amount of tax deductible/collectible and such fee has to be paid before delivering the
TDS/TCS statement. Such fees would be attracted in respect of tax deducted or collected at
source on or after 01.07.2012.
(2) In addition to said fee, a penalty ranging from a minimum of ` 10,000 to a maximum of
` 1,00,000 shall also be levied under section 271H for not furnishing TDS/TCS statement
within the prescribed time or furnishing incorrect information in the said statements in respect
of tax deducted or collected at source on or after 01.07.2012. Consequently, with effect from
1.7.2012, penalty shall not be leviable under section 272A in respect of such failure.
Since late furnishing of TDS/TCS statements would attract levy of fees under section 234E, no
penalty under section 271H shall be levied for delay in furnishing of TDS/TCS statement, if the
TDS/TCS statement is furnished within one year of the prescribed due date after payment of
28.57
tax deducted or collected along with applicable interest and fee. However, if the delay is
beyond the period of one year, both fee under section 234E and penalty under section 271H
would be leviable.
28.11 Collection and Recovery of Tax - Other Methods

28.11.1 Payment of tax and defaults by the assessee [Section 220]
(i)
Under section 220(1), any amount specified as payable in a notice of demand under
section 156 shall be paid within thirty days of the service of notice at the place and to the
person mentioned in the notice.
(ii) If the amount specified in the notice is not paid within the period, the assessee shall be
liable to pay simple interest at 1% for every month or part of a month comprised in the
period commencing from the day immediately following the end of the period mentioned
in section 220(1) and ending with the day on which the amount is paid. This is provided
for in section 220(2).
(iii) The first proviso to section 220(2) states that where as a result of an order under
sections 154/155/250/254/260/262/264/245D(4), the amount on which interest payable
under this section had been reduced, the interest shall be reduced accordingly and the
excess interest paid, if any, shall be refunded.
(iv) The liability of the assessee to pay interest is based on the theory of continuity of the
proceedings and the doctrine of relation back.
(v) Accordingly, section 220(1A) provides that where any notice of demand has been served
upon an assessee and any appeal or other proceeding, as the case may be, is filed or
initiated in respect of the amount specified in the said notice of demand, then such
demand shall be deemed to be valid till the disposal of appeal by the last appellate
authority or disposal of proceedings, as the case may be, and any such notice of demand
shall have effect as provided in section 3 of the Taxation Laws (Continuation and
Validation of Recovery Proceedings) Act, 1964 [See Note below]
(vi) Further, the second proviso to section 220(2) provides that if as a result of order under
the sections specified in the first proviso to section 220(2), the amount of interest payable
was reduced, and thereafter, as a result of another order under any of the sections given
in the first proviso or section 263, the interest payable was increased, the assessee
would be liable to pay interest under section 220(2) from the day immediately following
the end of the period mentioned in the first notice of demand referred to in section 220(1)
till the date on which the amount is paid.
Note - Section 3 of the Taxation Laws (Continuation and Validation of Recovery
Proceedings) Act, 1964
Continuation and validation of certain proceedings
(1) Where any notice of demand in respect of any Government dues is served upon an
assessee by a Taxing Authority under any scheduled Act, and any appeal or other
proceeding is filed or taken in respect of such Government dues, then, -
28.58
Income Tax
(a) where such Government dues are enhanced in such appeal or proceeding, the
Taxing Authority shall serve upon the assessee another notice of demand only in
respect of the amount by which such Government dues are enhanced and any
proceeding in relation to such Government dues as are covered by the notice or
notices of demand served upon him before the disposal of such appeal or
proceeding may, without the service of any fresh notice of demand, be continued
from the stage at which such proceedings stood immediately before such disposal;
(b) where such Government dues are reduced in such appeal or proceeding,(i)
it shall not be necessary for the Taxing Authority to serve upon the assessee a
fresh notice of demand;
(ii) the Taxing Authority shall give intimation of the fact of such reduction to the
assessee. Further, where a certificate has been issued to the Tax Recovery
Officer for the recovery of such amount, intimation of the fact of reduction shall
also be given to him;
(iii) any proceedings initiated on the basis of the notice or notices of demand
served upon the assessee before the disposal of such appeal or proceeding
may be continued in relation to the amount so reduced from the stage at which
such proceedings stood immediately before such disposal;
(c)
no proceedings in relation to such Government dues (including the imposition of

penalty or charging of interest) shall be invalid by reason only that no fresh notice of
demand was served upon the assessee after the disposal of such appeal or
proceeding or that such Government dues have been enhanced or reduced in such
appeal or proceeding:
(2) No fresh notice of demand shall be necessary in any case where the amount of
Government dues is not varied as a result of any order passed in any appeal or other
proceeding under any scheduled Act.
(3) The provisions of this section shall have effect notwithstanding any judgment, decree or
order of any court, tribunal or other authority.
Illustration 6
The Assessing Officer issued a notice of demand under section 156 to Mr.X on 1.10.2015 for
payment of ` 15 lakhs towards his income-tax liability for the A.Y.2014-15, requiring him to
pay the said amount within 30 days.
(a) Is he required to issue fresh notice of demand and if so, for what amount, in the following
two cases (each case has to be considered independently)
(i)
If the tax demand is reduced to ` 12 lakhs by the Commissioner (Appeals) by issue

of order under section 250;
(ii) If the tax demand is increased to ` 20 lakhs by the Appellate Tribunal, by issue of
an order under section 254.
28.59
(b) How would the interest liability under section 220(2) be calculated if the tax demand is
reduced to ` 12 lakhs by the Commissioner (Appeals) by issue of order under section
250 and subsequently increased to ` 15 lakhs by the Appellate Tribunal by way of issue
of order under section 254?
Answer
(a)
(i)
No fresh notice of demand is required to be served on Mr.X. The Assessing Officer

is only required to give an intimation of the fact of reduction of demand to ` 12 lakhs
to Mr.X. The proceedings initiated on the basis of the original notice of demand may
be continued in relation to the reduced amount of ` 12 lakhs from the stage at
which such proceedings stood immediately before disposal of appeal.
(ii) A fresh notice of demand has to be given only in respect of ` 5 lakhs, being the
amount of enhancement. Any proceedings in relation to ` 15 lakhs covered by the
original notice of demand served upon Mr.X may be continued from the stage at
which such proceedings stood immediately before disposal of appeal.
(b) The interest under section 220(2) has to be paid on ` 15 lakhs @1% per month or part of
the month comprised in the period commencing from 1.11.2015 and ending with the date
on which the amount is paid, assuming that Mr. X has not paid any interest so far.
Section 220(2A) empowers the Principal Chief Commissioner or Chief Commissioner of
Principal Commissioner or Commissioner to reduce or waive any interest payable under
section 220(2) if he is satisfied that:
(i)
payment of such amount has caused or would cause genuine hardship to the assessee;
(ii) default in the payment of the amount on which interest was made payable under the said
sub-section was due to circumstances beyond the control of the assessee; and
(iii) the assessee has co-operated in any enquiry relating to the assessment or any
proceeding for the recovery of any amount due from him.
Since the intimation generated after processing the TDS statement under section 200A(1)
would be deemed as a notice of demand under section 156, consequently, interest under
section 220 would be attracted for failure to pay the tax specified in the intimation. However,
interest under section 201(1A) is leviable for non-payment of tax specified in the intimation.
Therefore, it has been provided that in cases where interest is charged for any period under
section 201(1A) on the tax specified in the intimation under section 200A, then, interest under
section 220(2) would not be levied on the same amount for the same period.
Likewise, since the intimation generated after processing of TCS statement shall be deemed
as a notice of demand under section 156, failure to pay the tax specified in the intimation shall
attract levy of interest as per the provisions of section 220(2). Section 206C(7) also provides
for levy of interest for non-payment of tax specified in the intimation to be issued. In order to
remove the possibility of charging interest on the same amount for the same period of default
both under section 206C(7) and section 220(2), sub-section (2C) has been inserted in section
220 to specifically provide that where interest is charged for any period under section
28.60
Income Tax
206C(7) on the amount of tax specified in the intimation issued under 206CB(1), no
interest shall be charged under section 220(2) on the same amount for the same period.
28.11.2 Penalty payable [Section 221]: Where an assessee is in default in payment of

tax including advance tax and interest payable thereon, the Assessing Officer sh all impose a
penalty which in cases of continuing default, may be increased from time to time. However,
the total penalty should not exceed the tax in arrears. The Assessing Officer should give the
assessee a reasonable opportunity of being heard before levying such a penalty.
No penalty shall be levied on the assessee for default in payment of tax in cases where the
Assessing Officer is satisfied that default was for good and sufficient reasons . The Taxation
laws (Amendment and Miscellaneous Provisions) Act, 1986 has shifted the burden of proof
upon the assessee. Accordingly, penalty will not be levied under this section only when the
assessee proves to the satisfaction of the Assessing Officer that the default was for good and
sufficient reasons.
The Explanation to section 221(1) provides that an assessee would not cease to be liable to
pay any penalty for his default or delay in payment of the tax merely by reason of the fact that
before the date of levy of such penalty the tax which was in arrears had actually been paid by
him. Thus wherever there is delay on the part of the assessee, he would be liable to penalty
even though by the time the Assessing Officer initiates action for the levy of penalty the
amount of tax in arrears is actually paid. An order imposing penalty is appealable and the
assessees right of appeal is subject to the condition that he must first pay the tax or penalty;
the assessee should first pay the tax before filing the appeal.
28.11.3 Certificate to Tax Recovery Officer [Section 222]

(1) When an assessee is in default or is deemed to be in default in making a payment of tax
the Tax Recovery Officer may draw up under his signature a statement in the prescribed form
and specifying the amount of arrears due from the assessee (such statement being hereinafter
and in the Second Schedule referred to as certificate) and shall proceed to recover from such
assessee the amount specified in the certificate by one of more of the modes mentioned
below in accordance with the Second Schedule.
(a) Attachment and sale of the assessees movable property.
(b) Attachment and sale of assessees immovable properties.
(c) Arrest of the assessee and his detention in prison.
(d) Appointing a receiver for the management of assessees movable and immovable
properties.
(2) For the purpose of this section the assessees movable or immovable property shall
include any property which has been transferred directly or indirectly by the assessee to his
spouse or minor child or sons wife or sons minor child otherwise than for adequate consideration and which is held by any of the persons aforesaid. So far as the movable or
immovable property so transferred to his minor child or his sons minor child is concerned,
they shall even after the date of attainment of majority by such minor child or sons minor child
continue to be included in the assessees movable or immovable property for recovering any
arrears.
28.61
(3) The Tax Recovery Officer may take action under sub-section (1) notwithstanding that
proceedings or recovery of the arrears by any special mode have been taken.
28.11.4 Tax Recovery Officer by whom recovery is to be effected [Section 223]

(1) The Tax Recovery Officer competent to take action under section 222 shall be:
(a) The Tax Recovery Officer within whose jurisdiction the assessee carries on business or
profession is situated.
(b) The Tax Recovery Officer within whose jurisdiction the assessee resides or any movable
or immovable property of the assessee is situated.
(2) The jurisdiction is assigned either by the Board or the Chief Commissioner or Commissioner who is authorised in this behalf by the Board under section 120.
(3) Where an assessee has property within the jurisdiction of more than one Tax Recovery
Officer and Recovery Officer by whom the certificate is drawn up
(a) is not able to recover the entire amount by sale of the property within his jurisdiction.
(b) he may send the certificate to a Tax Recovery Officer within whose jurisdiction the
assessee has property. There upon the Tax Recovery Officer shall proceed to recover
the amount as if the certificate was drawn up by him.
28.11.5 Stay of proceedings in pursuance of certificate and amendment or

cancellation thereof [Section 225]
(1) It shall be lawful for the Tax Recovery Officer to grant time for the payment of any tax
and when he does so he shall stay proceedings for the recovery of such tax until the expiry of
the time so granted.
(2) Where as a result of appeal the demand is reduced and the order is the subject matter of
further proceedings the Tax Recovery Officer shall stay the recovery. Such part of the amount
specified in the certificate as pertains to such deduction for the period in which an appeal or
other proceedings remains pending.
(3) Where a certificate has been drawn up and as a result of appellate order the amount is
reduced, the Tax Recovery Officer shall modify the certificate or cancel it if it is necessary.
28.11.6 Other modes of recovery [Section 226]

(1) Where no certificate has been drawn up under section 222 the Assessing Officer may
recover the tax by any one or more of the modes provided in the section.
(2) Where a certificate has been drawn up under section 222, the Tax Recovery Officer may
without prejudice to the modes of recovery specified in this section recover the tax by any one
or more of the modes provide in this section.
(3) This section enumerates the various modes of recovery by the Assessing or Tax
Recovery Officer. Students may refer to the section for details.
28.11.7 Priority as regards recovery of taxes: Any claim in regard to any property in
relation to which a notice under this section is issued, shall be void as against any demand
28.62
Income Tax
contained therein. Where a person, on whom a notice (garnishee order) under thi s section has
been served, objects on oath that the amount demanded from him is not due to the assessee
or that he does not hold any money for or on behalf of the assessee, he cannot be compelled
by the Assessing Officer to make the payment. But if it is later on found that such a statement
made by him was false, he would personally become liable to pay the amount to the extent of
his own liability to the assessee or to the extent of the assessees liability, which ever is less.
Such personal liability would arise even in cases where the person in receipt of a notice from
the Assessing Officer makes a payment in disregard of the notice served on him.
Moneys belonging to the assessee in default which are in the custody of a Court or Receiver
are also liable for attachment. Further, on being authorised by the Commissioner, the
Assessing Officer is also empowered to recover the tax by distraint and sale of movable
property as laid down in the Third Schedule. For details, students may refer to the Third
Schedule in the Act. In addition, tax may be recovered, through the State Government if the
recovery of tax in any area has been entrusted to it under the Constitution. In such a case the
State Government may direct that the tax shall be recovered in respect of any particular area
together with the municipal taxes or local rates by municipality or local authority [Section 227].
28.11.8 Tax Clearance Certificate [Section 230]: Sub-section (1) provides as follows (1) No person, who is not domiciled in India and who has come to India in connection with
business, profession or employment; and who has income derived from any source in India,
shall leave the territory of India by land, sea or air unless he furnishes to the prescribed
authority an undertaking in the prescribed form.
(2) The said undertaking should be furnished from the employer of the said person or
through whom such person is in receipt of the income.
(3) The undertaking should be to the effect that tax payable by such person who is no t
domiciled in India shall be paid by the employer or the person through whom any income is
received.
(4) The prescribed authority shall, on receipt of the undertaking, immediately give to such
person a no-objection certificate, for leaving India.
(5) However, the provisions contained in sub-section (1) shall not apply to a person who is
not domiciled in India but visits India as a foreign tourist or for any other purpose not
connected with business, profession or employment.
Sub-section (1A) provides as follows (1) Every person, who is domiciled in India at the time of his departure, shall furnish, to the
income-tax authority or such other authority as may be prescribed his permanent account
number allotted to him under section 139A, the purpose of his visit and the estimated period of
his stay outside India.
(2) In case no such permanent account number has been allotted to him, or his total income
is not chargeable to income-tax or he is not required to obtain a permanent account number
under the Income-tax Act, 1961 a certificate in the prescribed form shall be furnished to the
income-tax authority or such other authority, as may be prescribed.
28.63
(3) However, where an income-tax authority opines that there exist circumstances which
render an Indian domiciled to obtain a certificate under this section, such person shall not
leave the territory of India by land, sea or air unless (i)
he obtains a certificate from the income-tax authority stating that he has no liabilities
under the Income-tax Act 1961 and the Wealth-tax Act, 1957 or
(ii) that satisfactory arrangements have been made for the payment of all or any of such
taxes which are or may become payable by that person [First proviso to sub-section (1A)]
(4) No income-tax authority shall make it necessary for any person who is domiciled in
India to obtain a certificate under this section unless he records the reasons therefor and
obtains the prior approval of the Chief Commissioner of Income-tax.
If the owner or charterer of any ship or aircraft carrying persons from any place in India to any
place outside India allows any of the above mentioned persons to travel by such ship or
aircraft without first satisfying that such person is in possession of a certificate as required, h e
shall be personally liable to pay the whole or any part of the tax payable by such person. In
such a case, the owner or charterer shall be deemed to be an assessee in default for such
sum and recovery shall be as if it were an arrear of tax.
For the purpose of this section, the expressions owner and charterer include any
representative, agent or employee empowered by the owner or charterer to allow persons to
travel by the ship or aircraft.
28.11.9 Recovery by suit or under other law [Section 232]: Section 232 provides that
the Assessing Officer or the Government can have recourse to the other modes of recovery
under any other law for the time being in force, over the above various modes specified above
to recover the tax dues under the Act, in the same way as other debts due to the Government.
It shall also be lawful for the Assessing Officer or the Government to take recourse to any
other law or file a suit in any manner for the recovery of the arrears due from the assessee.
28.12 Refunds
28.12.1 Eligibility and procedure: An assessee is entitled to claim a refund of tax if the
tax actually paid (and not merely payable) by him or on his behalf for any assessment year
exceeds the amount of tax with which he is properly chargeable under the Act for that year.
This may arise usually as a result of excess deduction of tax at source from salaries,
dividends, interest, to or as a result of excess payment of advance tax when the tax originally
paid on assessment is reduced on appeal, revision, rectification or reference. Where such a
claim or refund is made, the assessee cannot question the correctness or validity of the
assessment or any other matter related thereto which has become final and conclusive. He is
also debarred from asking for a review or revision of the assessment [Sections 237 and 242].
In case where the payer of income from salary, dividend, interest or other sum has wrongly
deducted tax at source and paid the same to the credit of the Central Government, then it is
the payer of the income who wrongly deducted tax (and not the recipient) who will be entitled
to claim the refund provided that the recipient is neither taxable on the gross income nor
28.64
Income Tax
entitled to credit in respect of the tax deducted. Where the tax payable by an u nregistered firm
is recovered from its partners the tax should be treated as having been paid by the firm and
consequently, the application for refund must be made by the firm and not by the partner from
whom the tax was recovered. In respect of tax free income (i.e. where salary, annuity, interest
etc. is paid tax free) the amount of tax is included in the recipients total income by adding it to
the net income received; since the tax in such cases is deemed to have been deducted and
paid on behalf of the recipient of the income, he would be entitled to claim a refund if the tax
so paid is in excess of the amount with which he is properly chargeable.
Where the value of fringe benefits provided or deemed to have been provided by one
employer is included under any provisions of Chapter XII-H in the value of fringe benefits
provided or deemed to have been provided by any other employer, the latter alone is entitled
to a refund under this Chapter in respect of such fringe benefits.
Generally, a claim for refund can be made only by the person on whose account the tax was
already paid. But in cases where the income of one person is included in the total income of
another person under sections 60 to 65, the latter person alone is entitled to claim the refund.
If any person is not able to claim or receive the refund due to him on account of his death,
mental incapacity, insolvency, dissolution, liquidation, etc., his legal representative or trustee,
guardian liquidator or receiver, the case may be, is entitled to claim or receive the refund on
behalf of such person [Section 238].
All claims of refunds should be made in the prescribed form (Form No. 30) and verified in the
prescribed manner in accordance with Rule 41 of the Income-tax Rule and shall be
accompanied by the return of income except in cases where such a return had already been
filed. The requirements of the Rule are mandatory in nature and if an application or refund is
not in compliance with the requirement of the Rule, it would be invalid and consequentl y will
not be entertained. The claim for refund should be supported by the certificate of tax deducted
at source. The claim may be presented by the claimant in person or through a duly authorised
agent or may be sent by post.
The time-limit for making application for refund is one year from the last day of the relevant
assessment year. This applies for a claim in respect of fringe benefits also [Section 239].
The Court has no power to extend this period of limitation in any case. This period of limitation
would not, however, apply to cases where a refund becomes due to the assessee as a result
of an order in appeal, reference, revision or making any reassessment; but in cases where the
refund is due to the assessee on the basis of the completed regular assessment, the
assessee may file a suit for the refund due to him if it is not granted on his application or he
may file a petition for a writ of mandamus to compel the Department to make the refund.
Where the refund becomes due to the assessee as a result of an order passed in appeal,
reference, revision or rectification, he need not make an application to claim the same. In such
a case, the Assessing Officer is bound to pass an order of refund without waiting for the
application from the assessee Where, by the order aforesaid an assessment is cancelled and
an order of fresh assessment is directed to be made the refund shall become due only on the
making of such fresh assessment Where the assessment is annulled the refund shall become
due only of the amount of tax paid in excess of the tax chargeable on the total income
returned by the assessee [Section 240].
28.65
28.12.2 Correctness of assessment not to be questioned [Section 242] : While

making a claim for refund, an assessee cannot question the correctness of any assessment or
other matter decided which has become final and conclusive or ask for a review of the same.
The assessee shall not be entitled to any relief on such claim except refund of tax wrongly
paid or paid in excess.
28.12.3 Interest on Refunds [Section 244A]

(1) Section 244A provides that interest at % for every month or part of a month shall be
payable on tax or penalty becoming refundable on account of excess payment of advance
tax, advance tax on fringe benefits, tax deducted at source or collected at source and other
tax or penalty becoming refundable.
(2) The period for which the interest is payable will be (i)
Where the refund is of any advance tax or tax deducted or collected at source, the interest
shall be payable for the period starting from 1 st April to the date of the grant of refund.
(ii) Where the refund is of other taxes/penalties, the interest shall be paid for the period
starting from the date of payment of such tax or penalty upto the date on which the
refund is granted.
(3) The assessee can claim interest on refund due also in pursuance of determination of
total income under section 143(1) or on regular assessment. However, no interest shall be
payable if the amount of refund due is less than 10% of the tax determined under section
143(1) or on regular assessment.
(4) Where there is a delay in granting refund and the reasons for such delay are attributable
to the assessee, either wholly or in part, the period of the delay so attributab le to the assessee
shall be excluded from the period for which interest is payable. In case any question arises
as to the period of delay attributable to the assessee, it shall be decided by the Chief
Commissioner or Commissioner.
(5) Where as a result of an order passed under sections 143(3) or 144 or 147 or 154 or 155
or 250, 254, 260, 262, 263 or 264 or an order of Settlement Commission under section 245D,
the amount on which interest is payable under section 244A is increased/reduced, the interes t
shall be increased or reduced accordingly.
(6) Interest allowed under section 244A is the income of the previous year in which it is
allowed, and should be declared in the return of income furnished in the assessment year
relevant to the previous year.
28.12.4 Set off of refunds against tax remaining payable [Section 245]: Where a
refund is found due to any person, the Assessing Officer, Deputy Commissioner (Appeals),
Commissioner (Appeals) or Chief Commissioner or Commissioner may, in lieu of paymen t of
the refund, set off the amount to be refunded or any part of that amount, against any tax or
interest remaining payable by the said person under the Act. However, the set off can be done
only after giving intimation in writing to such person of the action proposed to be taken under
this section.
28.66
Income Tax
28.12.5 Other Provisions : In all cases where an assessment or reassessment is completed

and any tax, interest, penalty, fine or any other sum is payable by the assessee, the
Assessing Officer shall serve upon the assessee a notice of demand specifying the sum so
payable. Though the Act does not prescribe any time limit within which a notice of demand
should be served on the assessee the notice of demand must be issued within a reasonable
time [Section 156]. Likewise, where the assessment results in a loss and such loss is to be
carried forward, the Assessing Officer shall notify to the assessee by an order in writing the
amount of such loss computed by him [Section 157]. In cases where a registered firm i s
assessed or an unregistered firm is assessed under section 183(b) as registered, the
Assessing Officer shall notify to the firm, by an order in writing the amount of total income
assessed and its apportionment amongst the several partners [Section 158]. The assessee
has a right of appeal against any order passed by the Assessing Officer under sections 157
and 158.

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28

Deduction, Collection and

Generally, tax is required to be

The Institute of Chartered Accountants of India

However, in case of sale of jewellery or bullion,

28.2 Direct Payment [Section 191]

28.3 Deduction of Tax at Source

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

The Institute of Chartered Accountants of India

(ii) particulars of any tax deducted under any other provision;

28.3.2 Tax to be deducted@10% on premature taxable withdrawal from

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

The Institute of Chartered Accountants of India

28.3.3 Interest on securities [Section 193]

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

(b) they have full beneficial interest in such securities.

28.3.4 Dividends [Section 194]

(ii) the dividend is paid by an account payee cheque.

28.3.5 Interest other than interest on securities [Section 194A]

The Institute of Chartered Accountants of India

time deposits with a banking company;

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

time deposits with a bank

they are public companies formed and registered in India

a bank to which the Banking Regulation Act, 1949 applies; or

(ii) a co-operative society engaged in carrying on the business of banking.

The Institute of Chartered Accountants of India

income credited by way of interest on the compensation amount awarded by the

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

The Institute of Chartered Accountants of India

28.3.7 Payments to contractors and sub-contractors [Section 194C]

The applicable rates of TDS under section 194C are as follows

Individual / HUF contractor/sub-contractor

Other than individual / HUF contractor/sub-contractor

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

Sub-contractor in transport business (if PAN is furnished)

The Institute of Chartered Accountants of India

(8) Goods carriage means (i)

The deduction of income-tax at source from payments made to non-resident contractors

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

will be governed by the provisions of section 195.

28.3.8 Insurance Commission [Section 194D]

The Institute of Chartered Accountants of India

Payment in respect of life insurance policy [Section 194DA]

The Institute of Chartered Accountants of India

Deduction, Collection and Recovery of Tax

28.3.10 Payments to non-resident sportsmen or sports association [Section

income received or receivable by a non-resident sportsman (including an athlete) by way

(ii) Guarantee amount paid or payable to a non-resident sports association or institution in

28.3.11 Payments in respect of deposits under National Savings Scheme etc.

The Institute of Chartered Accountants of India