Advance Tax, TDS andTCS- an overview

Presentation by Asoke kumar Dey

Joint Commissioner of Income Tax(retd)Kolkata

Different stages of collection

A. Pre-paid taxes (Advance tax, TDS and self assessment tax)

B. Recovery by the AOC. Recovery by the TRO

Advance tax It is paid in advance during the FY It is paid by the assessee on his own accordAdvance is on the concept “Pay as you earn”

Liability

Advance tax liability arises when the tax payable is Rs 10,000/- or more

There will be no advance tax liability to a resident in India who-

a)Does not have any income chargeable under the head “ profits and gains from business or profession” and

b)Is of the age of sixty years or more at any time during the year

How to compute

Estimate the amount of current incomeEstimate the tax payable at the rate in force Reduce the amount by the amount of tax deductible/collectible at source

If TDS/TCS is not made by the deductor/collector within the FY, the assessee is liable to pay advance tax on the amount.Vide the proviso to section 209 wef 01.04.2012

Table ISl No Instalment Due date Amount

1 1st 15th June Not less than 15% of the advance tax

2 2nd 15th September Not less than 45% of advance tax as reduced by earlier instalment paid

3 3rd 15th December Not less than 75% of advance tax as reduced by earlier instalments paid

4 4th 15th March Not less than 100% of advance tax as reduced by earlier instalments paid

Table IISl No

Instalment Due date Amount

1 1st 15th September Not less than 30% of advance tax

2 2nd 15th December Not less than 60% of advance tax as reduced by earlier instalment paid

3 3rd 15th March Not less than 100% of advance tax as reduced by earlier instalments paid

Duties of the AO

o Prepare list of 100 top advance tax payers under your jurisdictiono Issue suitable letters to the top tax payersoTake necessary action, if required

Failure to pay advance tax- sec 234B

Interest is to be paid @ 1% on the amount by which the advance tax paid falls short of the assessed tax- from the 1st day of April of the relevant AY to the date of determination of income tax payable u/s 143(1)/143(3)/ 147

A case studyIn the case of Rambabu, the tax payable for the AY 2010-11 was determined at Rs 2.5 lakh 31.12.2012 u/s 143(3) . The case was reassessed u/s 147 and the tax payable was determined on 31.03.2014 at Rs 4.5 lakh. How much interest u/s 234B is payable in the reassessent?

A question

In one case after giving appeal effect the Interest payable u/s 234B is reduced by Rs 10,000/-. Is it required to issue fresh notice u/s 156?

234C

When there is a short fall in payment of advance in a particular quarter by a company/ non company interest is payable @ 1% on the amount of short fall of the tax due on returned income for three months

Paid by 31st March

Mr Yadav paid the advance tax payable in the last installment on 31st march . What will be the effect ?

Capital Gain Madhu babu earned a Capital Gain of Rs 5 lakh on 15th Dec. 2014 but paid the advance tax on 30th March 2014. How much interest is payable by him ?

Penalty

Is there any penalty or prosecution for non payment of

advance tax ?

Major Contributors

Who is to deduct tax ? The person responsible for payment is to make deduction of tax He may be the principle Officer of a company He may be a DDO in the case of a Government deductor

Sl No nature of payment Threshold limit Rate

1 Interest ( u/s 194A) 10000/5000 10%

2 Lottery ( u/s 194B ) 10000 30%

3 Contractors payments( u/s 194C )

300000/750000

1% or 2%

4 Insurance Commission( u/s 194D)

20000 10%

5 Commission & brokerage (u/s 194H )

5000 10%

6 Rent (u/s 194I) 180000 10% or 2%

7 Professional & Technical payment (u/s 194J)

30000 10%

Other cases194BB Winning from Horse

RaceRs 5000/- 30%

194E Payment to non-resident sportsman

- 20%

194EE Deposits underNSS

Rs 2500/- 20%

194G Commission on Lottery Ticket

Rs 1000/- 10%

194LA Compensation on Compulsory acquisition of immovable property

Rs 2,00,000/- 10%

Deduction without PAN w.e.f 01.04.2010

In case of non-furnishing of PAN by deductees, tax shall be deducted at the higher of following viz.i) at the rate specified in the relevant provision of Actii) at the rate or rates in forceiii) at the rate of 20%

Vide section 206AA

Section 192- TDS on salary

Who will deduct ? Any person responsible for payment of salary

When will be deducted

At the time of payment of the salary

What will be the rate ?

Rate in force in that particular year

On which amount On the estimated salary of the year

Average rate

Average rate =

Income Tax payable on the estimated income 12

Items allowable from salary

Deduction for investments u/s 80COther deductions u/s 80D, 80DD, 80DDB,

80E, 80G, 80GG, 80ULoss from self occupied house propertyRelief u/s 89 for arrear or advance

payment of salary

Exempted casesU/S 194A

Payments to-a) A banking Company b) A financial Corporationc) LICd) UTIe) Any Company or co-operative society

carrying on insurance businessf) Any other institution notified by govt.

An example Park Street branch of Central bank has

paid interest of 1)Rs 1 lakh to M/S XY Ltd,2) Rs 5.5 lakh to Kolkata Municipal Corporation

and 3)Rs 8000/- to Mrs Reena Roy in the month of

January 2012. How much TDS should the bank make in

that month ?

Section 194C-TDS on payments to contractors

For carrying out any work ( including supply of labour for carrying out any work)

At the time of credit of sum to the account of the contractor or at the time of payment in cash, cheque or draft which ever earlier

Work include • Advertising • Broadcasting and telecasting • Carriage of goods or passengers by any

mode of transport other than railway• Catering • Manufacturing or supplying a product

according to the requirement and specification of a customer by using material purchased from such customer

An example

Mr X a contractor has paid as given below:- I) Rs 5 lakh for purchase of brick from a contractor ii) paid Rs 3.5 lakh to M/s AB Ltd, a labour

contractor iii) paid Rs 4 lakh to Mr parekh, a labour contractor iv) Paid Rs 25,000/- to Mr Nayar another contractor

Compute the total amount of tax to be deducted u/s194C

u/s 194H -A question

M/S Vodafone sold mobile sims to the retail sellers and allowed discount on the MRP.

Whether the m/s Vodafone should deduct tax against discoount allowed?

Rent-An example

A bank has made the following payments of rent-

a) Rs 15 lakh for house Ab) Rs 1.2 lakh for house B c) Rs 5 lakh for some machineries taken on

rent compute the tax deductible on rent paid

194E- payment to non-resident sportsman or entertainer

When the income is payable to a non-resident sportsman or entertainer who is not a citizen of India or a non resident sports Association

The rate of deduction will be 20%

194IA wef 01.06.2013 Any person ( being a transferee) responsible for

paying (other than the person referred in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property ( other than agricultural land in rural area) is liable to deduct tax

No deduction when the consideration is less than Rs 50 lakh

The rate of deduction is 1% of the consideration The payee will deposit the TDS in a challan cum

statement in Form No 26QB and issue TDS certificate in Form No 16B

SALIENT FEATURES OF TCS CONTINUES….

RATE FOR COLLECTION OF TAX AT SOURCE ( AS ON 01/07//2010 )In case of sales u/s 206C(1)

Sl. No. Section Nature of Goods % Rate of TCS

1 206C(1) Alcoholic liquor for human consumption 12 206C(1) Tendu leaves 53 206C(1) Timber obtained under a forest lease 2.5

4 206C(1)Timber obtained by any mode other than a

forest lease 2.5

5 206C(1)Any other forest produce not being timber

or tendu leaves 2.56 206C(1) Scrap 1

TCS on lease, license etcu/s 206C(1C) wef 01.10.2004

Sl No Nature of license

Rate of Tax

Code

1 Parking Lot 2% 6CF

2 Toll Plaza 2% 6CG

3 Mining quarrying

2% 6CH

TCS on sale of minerals

Any sale of minerals being coal or lignite or Iron Ores The rate of collection is 1%

When the purchase is being made for utilisation in power generation no TCS is required

Vide sec 206C(1D) wef 01.07.2012

TCS on sale of Jewellerywef 01.07.2012

A seller who receives any amount in cash as sale consideration of bullion or jewellery shall at the time of receipt of such amount in cash, collect from the buyer , a sum equal to 1% of sale consideration as income tax if such consideration exceeds-

a) Rs 2 lakh for bullion b) Rs 5 lakh for jewellery

SALIENT FEATURES OF TCS CONTINUES….

No TCS, if a resident buyer furnishes to the collector, a declaration in Form No. 27C, verifyingthat the specified goods are to be utilized for thepurpose of manufacturing, processing producing articles or things and not for the trading purposes.

TRACES It means TDS Reconciliation Analysis Correction Enabling SystemIt can be entered through www.tdscpc.gov.in

CPC(TDS) PROCESSING

E-TDS DATA

NO/Lower deductioncertificate

OLTAS Data

ITD

CPC-TDSVerificationMaching of

challanProcessing

Defaults (Short deduction, short payment and late payment interest)PAN errors

Deductors and other

stakeholders

Mapping of PAN with TANCreation of PAN ledger and TDS Certificates

INPUTIntimation/ letter

clarification

synchronise

FACILITIES FOR DEDUCTOR Default summaryOnline correctionOnline PAN verificationVerification of 197 certificatesStatement and challan statusDownload TDS certificates, consolidated statement file, justification report on defaults

Facilities to the AO(TDS) TDS/TCS statement processing status TAN/AIN detailsConsolidated statement files Intimation u/s 200A/154Challan details Justification report

Challan correction by AO

-Change of one TAN to another TAN- Change of assessment year- Change of section code

Facilities to a TaxpayerView and download 26AS View and download Form 16B A compressive view of TDS defaults relating to all PANs associated with a PAN

Quarterly statement Forms

Sl No Form No Applicable to

1 24Q Payments of salary to Residents

2 26Q Payments other than salary to residents

3 27Q Payments to non residents

4 27EQ TCS made u/s 206C

Due dates of filing Quarter Govt

deductor Non Govt deductor

1st Quarter 31st July 15th July

2nd Quarter 31st October 15th October

3rd Quarter 31st January 15th January

4th Quarter 15th May 15th May

AO will find out the list of non-filers from the TRACESHe will issue letters to the non-filers after one month of the due date He will also take follow up actions

Processing the statements-Sec 200A

The Processing of statements is done by tdscpc at Gaziabad through TRACES

After processing an intimation is issued showing the amount of demand

The intimation is to be sent within one year from the end of the year in which the statement is filed

Consequential rectification, required if any also done by the CPC

Duty of the AO

The duty of the AO is find out list of demands raised by the CPC Issue letters/ notices to the deductors to collect the demandGuide the deductor to file correction statement , if required

Assessee in default u/s 201

When the deductor -a ) does not deductb) After deduction fails to deposit the whole or part of the taxThe deductor will be treated as an assesee in default

Consequences

Will be treated as an assesse in default Interest u/s 201(1A) is charged @ 1% for

short deduction and 1.5@ for short payment

Penalty u/s 221 is initiated May create a charge on the asset of the

deductor

Other consequences

Disallowance of the expenditure u/s 40(a)(ia) on which no TDS has been made or TDS has been made but has not been deposited

Penalty U/s 271C for non deduction of TDS @ 100% of the TDS amount

Limitation of order u/s 201 wef 01.04.2010

When failed to deduct whole or part of the tax-

a)Two years from the end of FY in which the statement is filed

b)Six years from the end of the FY in which the payment is made or credited

Limitation wef 01.10.2014

No order u/s 201(1) in respect of default to deduct the whole or the part of the tax shall be made at any time after seven years from the end of the year in which the payment is made or credit is given

Duty of the AO

Issue a show cause notice in suitable casesAllow necessary opportunity to explain the case Pass a speaking order determining the amount including interest u/s 201(1A) payable

Information received from the AOs concernedInformation received from other sources As a consequences of survey/verification conducted

Certificate U/S 197

Assessing Officer is satisfied that the total Income of the recipient justifies the deduction of income tax at any

lower rates or no deduction of income tax

Application is to be filed bythe deductee

Application in Form No-13

Rule 28AA- consideration a) Tax payable on estimated income of the

previous year relevant to the AYb) Tax payable on the assessed/returned

income of the last three previous years c) Existing liability under income tax Act /

wealth tax Act d) Advance tax payment till the date of

application e) TDS till the date of payment

Prosecution u/s 276B AO will identify the case from the TRACES He will identify the principal officer u/s 2(35) and

send a proposal to the CIT through JCIT CIT will issue a show cause letters to the

responsible person/principal officers CIT will issue a sanction for launching

prosecution u/s 279(1) AO will send the proposal to ADIT (prosecution)

in the prescribed format

TDS Survey u/s 133A wef 01.10.2014

Any office or any other place where business or profession is carried on.

Place of survey

(i) To afford such facility to inspect the books of accounts or other documents as may be required and available at that place

(ii) To furnish such information as may be required relating to the matter

powers

TDS survey/verification

Whether TDS has been made against the expenditures which requires deduction

Whether deduction has been made at proper rate

Whether the tax deducted has been deposited to Govt. account in due time

Whether the statements have been filed

Selection of case

• Deposit of TDS is lower than earlier years• TDS statements are not being filed though

it has its activity • A special nature of payment where TDS

is not made by similar deductors • Any petition from deductee/outsider giving

information of non payment of TDS • Deductors not following the guidelines from

CBDT

Other duties of AO

Make regular contacts with top deductors of his jurisdiction and guide them Conduct workshops/seminars with different classes of deductors

Thank You