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Advance learning on Tax Deducted at Source under section 194 C
and 194 I (Practical)
Provisions relating to time when tax is to be deducted at source from payment to
resident-contractors
Illustration
Mr. Kapoor, the proprietor of Kapoor & Co., gave an annual maintenance contract (AMC) for
maintenance of office furniture to Mr. Soham on a charge of Rs. 2,52,000. As per the agreed
terms, Mr. Kapoor has to make a payment of Rs. 2,00,000 in advance and the balance is to be
paid at the time of completion of the AMC. Mr. Kapoor intimated Mr. soham that he will be
deducting tax on the amount of advance. However, Mr. Soham argued that there was no need
to deduct tax at the time of payment of advance. Tax was to be deducted only when the bill of
the contract work would be raised by him. Is the contention of Mr. Soham correct?
Solution
As per section 194C, tax is to be deducted at the time of credit of sum to the account of the
contractor or at the time of payment thereof in cash or by issuance of a cheque or draft or by
any other mode, whichever is earlier. Considering the above provisions, advance of Rs.
2,00,000 will be liable to TDS and the argument of Mr. Soham is not correct.
Note: In the above case the provisions are discussed considering a specific case of section
194C. The above mentioned provisions (i.e., deduction of tax at the time of payment or
credit, whichever is earlier) will apply to all the payments liable to TDS, viz., interest other
than interest on securities (section 194A), commission/brokerage (section 194H), rent
(section 194I), fees for professional/technical services (section 194J), etc.
In case of salary liable to TDS under section 192, tax is to be deducted at the time of actual
payment of salary and, hence, if salary is paid in advance, then tax is to be deducted from
advance salary. However, no tax is to be deducted from salary which is not paid but is
credited to the account of the employee. In such a case tax will be deducted at the time of
payment of salary.
Rates of deduction of tax from payment to resident-contractors
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a catering contract
on the occasion of celebration party on completion on 25 years of their partnership to Mr.
Soham. The total payment to be made for the catering contract is Rs.5,84,000. Entire
payment has to be made in advance before commencement of contract. Determine the TDS
liability of the firm.
Solution
As per section 194C tax is to be deducted as follows:
@ 1% when the contract payment is being made or credit is being given to an individual
or an HUF.
@ 2% when the contract payment is being made or credit is being given to any person
other than an individual or an HUF.
In this case the contractor is Mr. Soham, i.e., an individual. Hence, TDS would apply @ 1%.
Total payment to be made is Rs. 5,84,000, TDS @ 1% will come to Rs. 5,840.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Suppose in the above case the contract is given to SM Pvt. Ltd. instead of Mr. Soham, then
the amount of TDS would come to Rs. 11,680, being @ 2% on Rs. 5,84,000.
Illustration
Mr. Raja is running a garment factory and his turnover for the previous year 2011-12 was Rs.
2,52,00,000. During the previous year 2012-13, he gave an annual maintenance contract to
SM Pvt. Ltd. for the maintenance of the furniture of factory. The annual contract payments
will amount to Rs. 1,84,000. He informed the director of the company that he will be
deducting tax at source from the contract payments @ 2%. The director argued that an
individual making contract payment has to deduct tax @ 1% and not @ 2%. The rate of 2%
applies only if the person making the payment is other than an individual. Is the contention of
the director correct?
Solution
As per section 194C, in respect of contract payments to be made to any individual or a HUF
(and not by an individual or HUF) will be liable to TDS @ 1%. In other words, the rate of 1%
will apply only in a case where the payee is an individual/HUF. In this case the payee is a
company and TDS will be deducted @ 2% and not @ 1%. Thus, the contention of the
director is incorrect.
Individual or HUF not to deduct tax if the payment or amount credited to contractor is
for personal use
Illustration
Mr. Kumar is running a garment factory. His turnover for the previous year 2011-12 was Rs.
2,52,00,000. During the year 2012-13, he gave a contract to construct his residential
bungalow. The contract payment to be made for construction of the bungalow was Rs.
2,52,000. Mr. Kumar intimated to the contractor that he would be deducting tax @ 1% from
the contract payments. The contractor argued that the provisions of section 194C do not apply
in case of contract payments made by an individual/ HUF for his/its personal purposes. Is the
contention of the contractor correct?
Solution
As per section 194C, an individual or HUF will not be liable to deduct tax on the sum
credited or paid to the account of the contractor where such sum is credited or paid
exclusively for personal purposes of such an individual or any member of HUF. In this case,
the contract payment was towards construction of personal residential bungalow of Mr.
Kumar and, hence, there was no requirement of deduction of tax at source. Thus, the
argument of the contractor is correct.
No tax is to be deducted at source if single payment does not exceed Rs. 30,000 and the
aggregate payment does not exceed Rs. 75,000
Illustration
Mr. Kumar, the proprietor of Kumar& Co., gave an annual maintenance contract for
maintenance of office air-conditioners to Mr. Shan. As per the agreed terms, the payments to
be made to Mr. Shan were as follows:
Rs. 25,200 to be paid on 5-5-2012.
Rs. 8,400 to be paid on 30-9-2012.
Rs. 12,800 to be paid on 17-10-2012.
Rs. 19,800 to be paid on 23-3-2013.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Mr. Kumar intimated to Mr. Shan that at the time of payment in the month of March, 2013 he
would be deducting tax @ 1% since the total payment exceeded Rs. 30,000. However, Mr.
Shan argued that payment made to him would not attract TDS since none of the payment
exceeded Rs. 30,000 and the total payment would not exceed Rs. 75,000. Is the contention of
Mr. Shan correct?
Solution
As per section 194C, no TDS will apply if single payment does not exceed Rs. 30,000 and the
aggregate payment made during the year does not exceed Rs. 75,000. In this case, all the
payments were below Rs. 30,000 and the total payment to be made during the year was below
Rs. 75,000. Hence, there was no requirement to deduct tax from the contract payments to be
made to Mr. Shan. Thus, the argument of Mr. Shan is correct.
Illustration
Mr. Kumar, the proprietor of Kumar & Co., gave an annual maintenance contract for
maintenance of office furniture to Mr. Soham. As per the agreed terms, the payment to be
made to Mr. Soham was as follows:
Rs. 44,000 to be paid in October, 2012.
Rs. 30,800 to be paid in February, 2013.
Mr. Kumar intimated to Mr. Soham that at the time of payment in the month of February, he
would be deducting tax @ 1% from the payment to be made to him. However, Mr. Soham
argued that payment made to him would not attract TDS, since the total payment would not
exceed Rs. 75,000. Is the contention of Mr. Soham correct?
Solution
As per section 194C, no TDS will apply if single payment does not exceed Rs. 30,000 and the
aggregate payment made during the year does not exceed Rs. 75,000. In this case both the
payments exceed Rs. 30,000 and, hence, would attract TDS. The argument of Mr. Soham is
not correct. Moreover, Mr. Kumar will have to deduct tax in October, 2012 also.
Illustration
Mr. Raja, the proprietor of Raja & Co. gave an annual maintenance contract for maintenance
of office furniture to Mr. Shan. As per the agreed terms, the payments to be made to Mr. Shan
were as follows:
Rs. 18,484 to be paid in October, 2012.
Rs. 13,264to be paid in December, 2012.
Rs. 52,252to be paid in March, 2013.
Mr. Raja deducted tax on the entire amount of Rs. 84,000. Entire tax was deducted from the
last payment of Rs. 52,252. However, Mr. Shan argued that payment made to him exceeded
Rs. 75,000, hence, TDS would apply but it would not apply to entire payment of Rs. 84,000,
but would apply only to the payment exceeding Rs. 75,000 (i.e., only on Rs. 9,000). Is the
contention of Mr. Shan correct?
Solution
As per section 194C, no TDS will apply if single payment does not exceed Rs. 30,000 and the
aggregate payment made during the year does not exceed Rs. 75,000. Once the payment
exceeds Rs. 75,000, the entire amount will be liable to TDS. Thus, in this case the argument
of Mr. Shan is not correct and Mr. Raja is correct in deduction of TDS on the entire payment
of Rs. 84,000.
(As amended by Finance Act, 2013)source : www.trpscheme.com
In this case payment is to be made to Mr. Shan who is an individual. Hence, tax will be
deducted @ 1%. TDS will come to Rs. 840 (1% of Rs. 84,000). Suppose in this case the
payee is a company, tax will be deducted @ 2%(i.e., Rs. 1,680).
Definition of “Work” given under section 194C
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a works contract to
Mr. Shan for manufacturing of the goods as per their specifications from the raw-materials to
be supplied by SM Corporation. The total contract payment was agreed at Rs. 2,52,000. SM
Corporation intimated Mr. Shan to produce his PAN, since they will be deducting tax @ 1%
from the contract payments. Mr. Shan argued that there was no need to deduct tax in respect
of contract of manufacturing of goods, since it was a contract of sale of goods and not a
contract for any work or service. Is the contention of the Mr. Shan correct?
Solution
The definition of work as given in section 194C includes the activity of manufacturing or
supplying any product according to the requirement or specification of a customer by using
material purchased from such customer. However, work will not include the activity of
manufacturing or supplying any product according to the requirement or specification of a
customer by using material purchased from a person, other than such customer.
Thus, the activity of manufacturing/supplying any product as per the requirement of other
person will be liable to TDS, if such product is manufactured from the raw-materials
provided by the person giving the contract. If such product is manufactured from raw
materials purchased from a person other than the person giving the contract, then the activity
will not be liable to TDS.
In the above case the goods were to be manufactured from the raw materials supplied by SM
Corporation, i.e., the customer only and not any outsider, hence, the activity was liable to
TDS. Thus, the argument of Mr. Shan is not correct.
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a work contract to
Mr. Shan for manufacturing the goods as per their specifications. The raw-materials required
for manufacturing the goods were to be acquired by Mr. Shan on his own account from the
market. The total contract payment was agreed at Rs. 5,52,000. SM Corporation intimated to
Mr. Shan to produce his PAN, since they would be deducting tax @ 1% from the contract
payments. The contractor argued that there was no need to deduct tax in respect of contract of
manufacturing of goods, since it was a contract of sale of goods and not a contract for any
work or service. Is the contention of Mr. Shan correct?
Solution
The definition of work as given in section 194C includes the activity of manufacturing/
supplying any product according to the requirement or specification of a customer by using
material purchased from such customer. However, work will not include the activity of
manufacturing/supplying any product according to the requirement or specification of a
customer by using material purchased from a person, other than such customer.
Thus, the activity of manufacturing/supplying of any product as per the requirement of other
person will be liable to TDS, if such product is manufactured from the raw-materials
provided by the person giving the contract. If such product is manufactured from raw-
materials purchased from a person other than such customer, then the activity will not be
liable to TDS.
(As amended by Finance Act, 2013)source : www.trpscheme.com
In the above case the goods were to be manufactured from the raw-materials acquired by Mr.
Shan from person other than SM Corporation (i.e., person other than the customer), hence,
the activity would not be liable to TDS. Thus, the argument of the contractor is correct.
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a catering contract
on the occasion of celebration party on completion of 25 years of their partnership to Mr.
Soham. The total payment to be made for the catering contract was Rs. 8,25,000. The firm
intimated Mr. Soham that they would be deducting tax @ 1% from the contract payments.
Mr. Soham argued that as per section 194C, TDS applies only in respect of contract for
carrying out any work (including supply of labour for carrying out any work) and catering
contract was not covered under the scope of section 194C. Is the argument of Mr. Soham
correct?
Solution
As per section 194C, TDS applies in respect of contract for carrying out any work (including
supply of labour for carrying out any work). It is specifically provided in section 194C that
work will include following activities:
Advertising
Broadcasting and telecasting, including production of programs for such broadcasting or
telecasting
Carriage of goods or passengers by any mode of transport other than by railways
Catering
Manufacturing or supplying a product according to the requirement or specification of a
customer by using materials purchased from such customer and not any other person
Thus, the argument of Mr. Soham is not correct and TDS will apply in respect of catering
contracts.
Time-limit of deposit of TDS to the credit of Central Government
Illustration
Mr. Raja is running a proprietary business under the name of Raja& Co. (turnover during the
preceding year was Rs. 1,84,00,000). He made a payments of Rs. 2,52,000 (for the previous
year 2012-13) to Mr. Shan for job work contract in March, 2013 and also deducted tax at @
1% while making the payment. Mr. Raja does not know the time-limit up to which he can
deposit the tax with Government. Advise him in this regard.
Solution
As per rule 30, time-limit of deposit of TDS with the Government is as follows:
Due date for payment
Where the payment is made by or on
behalf of the Government
Where the payment is made in any other
case than to the Government-
a) If the amount is credited or paid in the
(i) On the same day (without using any
challan form).
(ii) On or before 7 days from end of
month in which deduction is made
where tax is paid accompanied by an
Income-tax challan.
On or before April 30th
On or before 7 days from the end of the
(As amended by Finance Act, 2013)source : www.trpscheme.com
month of March
b) In any other case.
month in which the deduction is made.
Hence, Mr. Raja can deposit the TDS with the Government on or before 30th
April, 2013.
Provisions relating to the applicability of Form No. 16A and time-limit of issuance of
TDS certificate in Form No. 16A
Illustration
Mr. Raja is running a proprietary business under the name of Raja& Co. (turnover during the
preceding year was Rs. 1,84,00,000). He made payments of Rs. 84,000 during each quarter of
the previous year 2012-13 to Mr. Shan for job work contract. Mr. Raja deducted tax at @ 1%
while making the payment and also deposited the TDS with the Government within the time-
limit prescribed under rule 30. However, he does not know the Form No. in which TDS
certificate is to be issued and time-limit within which he can issue a TDS certificate. Advise
Mr. Raja in this regard.
Solution
In case of payments other than salary, TDS certificates are to be issued on quarterly basis in
Form No.16A.
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. The certificate is to be issued by
following dates:
Quarter Due date for Non-
Government deductor
Due date for Government
deductor
April to June 30th
July 15th
August
July to September 30th
October 15th
November
October to December 30th
January 15th
February
January to March 30th
May 30th
May
Mr. Raja can issue TDS certificate in Form No. 16A within 30 days from the end of each
quarter in respect of quarter April to June, July to September and October to December.
However, in respect of quarter January to March he can issue TDS certificate up to 30th
May,
2013.
Provisions relating to issuance of TDS certificate
Illustration
Mr. Raja is running a proprietary business under the name of Raja& Co. (turnover during the
preceding year was Rs. 1,84,00,000). He makes payments of Rs. 84,000 during each quarter
of the previous year 2012-13 to Mr. Shan for job work contract. Mr. Raja deducted tax at @
1% while making the payment and also deposited the TDS with the Government within the
time-limit prescribed under rule 30. However, he does not know how to generate a TDS
certificate. Advise him in this regard.
Solution
As per CBDT Circular No. 1/2012, dated 9-4-2012, it is mandatory for all the deductors to
issue TDS certificate in Form No. 16A by generating the certificate through TIN central
system by downloading the certificate from the TIN website with a unique TDS certificate
number. These provisions are applicable in respect of all sums deducted on or after 1-4-2012.
(As amended by Finance Act, 2013)source : www.trpscheme.com
The certificate so issued can be authenticated either by using digital signature or manual
signature.
Meaning of “Rent” and applicability of section 194 I in case of lease, sub-lease, tenancy
or any other agreement or arrangement for use of specific assets
Illustration
Kapoor & Co. is a proprietorship of Mr. Kapoor (turnover during the preceding year was Rs.
1,84,00,000). For the previous year 2012-13, the firm has to pay Rs. 6,48,000 towards rent of
office building. The accountants of the firm intimated the landlord that the firm will be
deducting tax from the rent @ 10%. The landlord argued that as per section 194I there is no
requirement to deduct tax from rent of office building. TDS is applicable only on rent of
factory building. Is the contention of landlord correct?
Solution
As per section 194I, tax is to be deducted on any amount paid towards rent. For the purpose
of section 194I, 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 :
Land
Building (including factory building)
Land appurtenant to a building (including factory building)
Machinery
Plant
Equipment
Furniture
Fittings
The above items may or may not be owned by the payee.
Thus, tax is to be deducted in respect of rent for office building also. Hence, the argument of
the landlord is not correct.
Illustration
Kapoor & Co. is a proprietorship of Mr. Kapoor (turnover during the preceding year was Rs.
1,84,00,000). For the previous year 2012-13, the firm has to pay Rs. 2,52,000 towards rent of
the machineries. The machineries are taken on rent from Mr. Kumar, who, in turn, has taken
the same on rent from Mr. Raja. The accountant of the firm intimated to Mr. Kumar that the
firm will be deducting tax from the rent @ 2%. Mr. Kumar argued that as per section 194I
there is no requirement to deduct tax from rent, if the payee is not the owner of the
machineries. TDS is applicable only if the rented property is owned by the person from
whom the property is rented. Is the contention of Mr. Kumar correct?
Solution
It is specified in section 194I that the rented property may or may not be owned by the person
from whom the property is taken on rent. Hence, in this case the firm has to deduct tax from
the rent to be paid to Mr. Kumar. The argument of Mr. Kumar is not correct.
Rates of deduction of tax from rental payments
Illustration
(As amended by Finance Act, 2013)source : www.trpscheme.com
Kapoor & Co. is a proprietorship of Mr. Kapoor (turnover during the preceding year was Rs.
2,52,00,000). For the previous year 2012-13, the firm has to pay Rs. 1,84,000 towards rent of
its office building. The accountant of the firm intimated to the owner that the firm will be
deducting tax from rent @ 10%. The owner argued that as per section 194I, tax is to be
deducted @ 2% in respect of rent of building. Is the contention of the owner correct?
Solution
As per section 194I, in respect of rent of land or building or furniture or fittings tax is to be
deducted @ 10%. Thus, in the above case the owner is incorrect. In this case tax will be
deducted @ 10%.
Illustration
Kapoor & Co. is a proprietorship of Mr. Kapoor (turnover during the preceding year was Rs.
1,52,00,000). For the previous year 2012-13, the firm has to pay Rs. 1,52,000 towards rent of
its equipments. The accountant of the firm intimated to the owner that the firm will be
deducting tax from rent @ 10%. The owner argued that as per section 194I tax is to be
deducted @ 2% in respect of rent of equipments. Is the contention of the owner correct?
Solution
As per section 194I, in respect of rent of land or building or furniture or fittings, tax is to be
deducted @10% and in respect of rent of any other items, tax is to be deducted@ 2%. Thus,
in the above case the owner is correct. In this case tax will be deducted @ 2%.
Illustration
SM Corporation is a partnership firm. For the previous year 2012-13, the firm has to pay Rs.
2,52,000 towards rent of its office building. The accountant of the firm intimated to the
landlord that the firm would be deducting tax from rent @ 2%. The landlord argued that as
per section 194I, tax is to be deducted @ 1% if the person to whom rent is to be paid is an
individual. Is the contention of the landlord correct?
Solution
As per section 194I in respect of rent of land or building or furniture or fittings tax is to be
deducted @ 10%. Thus, in the above case accountant as well as the land lord, both were
incorrect. In this case tax will have to be deducted @ 10%.
No deduction of tax at source from rental payments if the aggregate amount does not
exceed Rs. 1,80,000
Illustration
Mr. Raja is running a proprietary business under the name of Raja& Co. (turnover during the
preceding year was Rs. 1,52,52,000). For the previous year 2012-13, he has to pay rent of
office building of Rs. 84,000 to Mr. Shubham. He informed Mr. Shubham that he will be
deducting tax @ 10% from the rent. Mr. Shubham argued that there was no requirement of
deducting tax in respect of rent if the amount of rent does not exceed Rs. 1,50,000. Is the
contention of Mr. Shubham correct?
Solution
As per section 194I, there is no requirement of deduction of tax from rent, if aggregate
amount of rent to be paid during the year to a person does not exceed Rs. 1,80,000. In this
case, the aggregate amount of rent was below Rs. 1,80,000, hence, there was no requirement
of deducting tax from such rent. In this case, both the parties were incorrect, since Mr. Raja
wanted to deduct tax from rent even if the rent was below Rs. 1,80,000 and Mr. Shubham
argued that no tax was to be deducted if the annual rent was below Rs. 1,50,000 (the limit is
Rs. 1,80,000).
(As amended by Finance Act, 2013)source : www.trpscheme.com
Illustration
Mr. Raja is running a proprietary business under the name of Raja& Co. (turnover during the
preceding year was Rs. 1,52,52,000). For the previous year 2012-13, he has to pay rent of
office building of Rs. 1,92,000 to Mr. Shan. He informed Mr. Shan that he will be deducting
tax @ 10% from entire rent. Mr. Shan argued that there was no requirement of deducting tax
in respect of entire rent. TDS would apply only in respect of rent in excess of Rs.
1,80,000,i.e., only on Rs. 12,000. Is the contention of Mr. Shan correct?
Solution
As per section 194I, tax is to be deducted from rent, if aggregate amount of rent to be paid
during the year to a person exceeds Rs. 1,80,000. If the amount exceeds Rs. 1,80,000, then
tax is to be deducted on the entire amount and not only on the excess amount. Thus, the
contention of Mr. Shan is not correct.
Provisions relating to deduction of tax from rental payments excluding the amount of
service tax
Illustration
Mr. Raja is running a proprietary business under the name of Raja& Co. (turnover during the
preceding year was Rs. 1,84,52,000). For the previous year 2012-13, he has to pay rent of
office building of Rs. 2,84,000 to Mr. Soham. In addition to rent of Rs. 2,84,000, the landlord
demanded service tax of Rs. 35,102. Total payment to be made to Mr. Soham (including
service tax) amounted to Rs. 3,19,102. Mr. Raja informed Mr. Soham that he would be
deducting tax @ 10% from entire payment of Rs. 3,19,102 including service-tax. Mr. Soham
argued that there was no requirement of deducting tax in respect of service tax. TDS would
apply only on Rs. 2,84,000. Is the contention of Mr. Soham correct?
Solution
Yes, the contention of Mr. Soham is correct. In respect of rental payments, tax is to be
deducted on the amount of rent excluding service tax.
Provisions relating to inclusion/exclusion of amount of deposits while deducting tax
from rental payments
Illustration
Mr. Raja is running a proprietary business under the name of Raja& Co. (turnover during the
preceding year was Rs. 184,52,000). For the previous year 2012-13, he has to pay rent of
office building of Rs. 2,52,000 to Mr. Shivam. In addition to rent of Rs. 2,52,000, he has to
pay a non-refundable deposit of Rs. 3,84,000. He informed Mr. Shivam that he would be
deducting tax @ 10% from rent and deposit. Mr. Shivam argued that there was no
requirement of deducting tax in respect of non-refundable deposit and TDS would apply only
in respect of refundable deposits. Is the contention of Mr. Shivam correct?
Solution
The contention of Mr. Shivam is not correct. In respect of refundable deposits no TDS will
apply. TDS will apply only in respect of non-refundable deposits. Hence, Mr. Raja is required
to deduct tax @ 10% from rent as well as from non-refundable deposits.
Time-limit of deposit of tax to the credit of the Central Government
Illustration
Mr. Raja is running a factory (turnover during the preceding year was Rs. 1,84,00,000). He
pays rent of factory building of Rs. 30,000 (for the month of March, 2013) to Mr. Shan in
February, 2013 and deducted tax at @ 10% while making the payment. However, Mr. Raja
(As amended by Finance Act, 2013)source : www.trpscheme.com
does not know the time-limit up to which he can deposit the tax with the Government. Advise
him in this regard.
Solution
As per rule 30, time-limit of deposit of TDS with the Government is as follows:
Payment to be made Due date for payment
Where the payment is made by or on
behalf of the Government
Where the payment is made in any other
case than the Government-
a) If the amount is credited or paid in the
month of March
b) In any other case.
(i) On the same day (without using any
challan form).
(ii) On or before 7 days from end of
month in which deduction is made
where tax is paid accompanied by an
Income-tax challan.
On or before April 30th
On or before 7 days from the end of the
month in which the deduction is made.
Hence, Mr. Raja can deposit the TDS with the Government on or before 7th
March, 2013.
Provisions relating to the applicability of Form No. 16A and time-limit of issuance of
TDS certificate in Form No. 16A
Illustration
Mr. Raja is running a factory (turnover during the preceding year was Rs. 1,84,00,000). He
paid monthly rent of factory building of Rs. 84,000(for the previous year 2012-13) to Mr.
Shan. Mr. Raja deducted tax at @ 10% while making the payment and also deposited the
TDS with the Government within the time-limit prescribed under rule 30. However, he does
not know the Form No. in which TDS certificate is to be issued and time-limit within which
he can issue a TDS certificate. Advise Mr. Raja in this regard.
Solution
In case of payments other than salary, TDS certificates are to be issued on quarterly basis in
Form No.16A.
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. The certificate is to be issued by
following dates:
Quarter Due date for Non-
Government deductor
Due date for Government
deductor
April to June 30th
July 15th
August
July to September 30th
October 15th
November
October to December 30th
January 15th
February
January to March 30th
May 30th
May
(As amended by Finance Act, 2013)source : www.trpscheme.com
Hence, Mr. Raja can issue TDS certificate in Form No. 16A within the following time-limits:
Month in which rent is paid as well as tax
is deducted
Time-limit within which TDS certificate
should be issued
April 30th
July
May 30th
July
June 30th
July
July 30th
October
August 30th
October
September 30th
October
October 30th
January
November 30th
January
December 30th
January
January 30th
May
February 30th
May
March 30th
May
Provisions relating to issuance of TDS certificate
Illustration
Mr. Raja is running a factory (turnover during the preceding year was Rs. 1,84,00,000). He
pays monthly rent of factory building of Rs. 84,000(for the previous year 2012-13) to Mr.
Shan. Mr. Raja has deducted tax at @ 10% while making the payment and also deposited the
TDS with the Government within the time-limit prescribed under rule 30. However, he does
not know how to generate a TDS certificate. Advise him in this regard.
Solution
As per CBDT Circular No. 1/2012, dated 9-4-2012, it is mandatory for all the deductors to
issue TDS certificate in Form No. 16A by generating the certificate through TIN central
system by downloading the certificate from the TIN website with a unique TDS certificate
number. These provisions are applicable in respect of all sums deducted on or after 1-4-2012.
The certificate so issued can be authenticated either by using digital signature or manual
signature.
(As amended by Finance Act, 2013)source : www.trpscheme.com
FAQs
Q.1 When is tax to be deducted at source from payment to resident-contractors?
Explain with the help of illustration.
Following illustration will explain the provisions relating to time when tax is to be deducted
at source from payment to resident-contractors.
Illustration
Mr. Kapoor, the proprietor of Kapoor & Co., gave an annual maintenance contract (AMC) for
maintenance of office furniture to Mr. Soham on a charge of Rs. 2,52,000. As per the agreed
terms, Mr. Kapoor had to make a payment of Rs. 2,00,000 in advance and the balance was to
be paid at the time of completion of the AMC. Mr. Kapoor intimated Mr. Soham that he
would be deducting tax on the amount of advance. However, Mr. Soham argued that there is
no need to deduct tax at the time of payment of advance. Tax was to be deducted only when
the bill of the contract work would be raised by him. Is the contention of Mr. Soham correct?
Solution
As per section 194C, tax is to be deducted at the time of credit of sum to the account of the
contractor or at the time of payment thereof in cash or by issuance of a cheque or draft or by
any other mode, whichever is earlier. Considering the above provisions, advance of Rs.
2,00,000 will be liable to TDS. The argument of Mr. Soham is not correct.
Note: In the above case the provisions are discussed considering a specific case of section
194C. The above mentioned provisions (i.e., deduction of tax at the time of payment or
credit, whichever is earlier) will apply to all the payments liable to TDS, viz., interest other
than interest on securities (section 194A), commission/brokerage (section 194H), rent
(section 194I), fees for professional/technical services (section 194J), etc.
In case of salary liable to TDS under section 192, tax is to be deducted at the time of actual
payment of salary and, hence, if salary is paid in advance, then tax is to be deducted from
advance salary. However, no tax is to be deducted from salary which is not paid but is
credited to the account of the employee. In such a case tax will be deducted at the time of
payment of salary.
Q.2 What are the rates of deduction of tax from payment to resident-contractors?
Explain with the help of illustration.
Following illustrations will explain the provisions relating to rates at which tax is to be
deducted at source from payment to resident-contractors.
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a catering contract
on the occasion of celebration party on completion of 25 years of their partnership firm to
Mr. Soham. The total payment to be made for the catering contract was Rs. 5,84,000. Entire
payment had to be made in advance before commencement of contract. Determine the TDS
liability of the firm.
Solution
As per section 194C, tax is to be deducted as follows:
@ 1% when the contract payment is being made or credit is being given to an individual
or a HUF.
@ 2% when the contract payment is being made or credit is being given to any person
other than an individual or a HUF.
In this case the contractor is Mr. Soham, i.e., an individual. Hence, TDS would apply @ 1%.
Total payment to be made is Rs. 5,84,000; TDS @ 1% will come to Rs. 5,840.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Suppose in the above case the contract is given to SM Pvt. Ltd. instead of to Mr. Soham, then
the amount of TDS would come to Rs. 11,680, being @ 2% on Rs. 5,84,000.
Illustration
Mr. Raja is running a garment factory and his turnover for the previous year 2011-12 was Rs.
2,52,00,000. During the previous year 2012-13, he gave an annual maintenance contract to
SM Pvt. Ltd. for the maintenance of the furniture of factory. The annual contract payments
will amount to Rs. 1,84,000. He informed the director of the company that he will be
deducting tax at source from the contract payments @ 2%. The director argued that an
individual making contract payment had to deduct tax @ 1% and not @ 2%. The rate of 2%
applies only if the person making the payment is other than an individual. Is the contention of
the director correct?
Solution
As per section 194C, in respect of contract payments to be made to any individual or a HUF
(and not by an individual or HUF) will be liable to TDS @ 1%. In other words, the rate of 1%
will apply only in a case where the payee is an individual/HUF. In this case the payee is a
company and TDS will be deducted @ 2% and not @ 1%. Thus, the contention of the
director is incorrect.
Q.3 Explain with the help of illustration the provisions relating to deduction of tax at
source from payment or amount credited to contractor by individual or HUF for
personal purpose.
Following illustration will explain the provisions relating to deduction of tax at source from
payment or amount credited to contractor by individual or HUF for personal purpose.
Illustration
Mr. Kumar is running a garment factory. His turnover for the previous year 2011-12 was Rs.
2,52,00,000. During the year 2012-13, he gave a contract to construct his residential
bungalow. The contract payment to be made for construction of the bungalow was Rs.
2,52,000. Mr. Kumar intimated to the contractor that he will be deducting tax @ 1% from the
contract payment. The contractor argued that the provisions of section 194C do not apply in
case of contract payments made by an individual/ HUF for his/its personal purposes. Is the
contention of the contractor correct?
Solution
As per section 194C an individual or HUF will not be liable to deduct tax on the sum credited
or paid to the account of the contractor where such sum is credited or paid exclusively for
personal purposes of such an individual or any member of HUF. In this case, the contract
payments were made towards construction of personal residential bungalow of Mr. Kumar
and, hence, there was no requirement of deduction of tax at source. Thus, the argument of the
contractor was correct.
Q.4 Whether tax is to be deducted at source if single payment does not exceed Rs.
30,000 and the aggregate payment does not exceed Rs. 75,000? Explain with the help of
illustration.
Following illustrations will explain the provisions relating to deduction of tax at source if
single payment does not exceed Rs. 30,000 and the aggregate payment does not exceed Rs.
75,000.
Illustration
(As amended by Finance Act, 2013)source : www.trpscheme.com
Mr. Kumar, the proprietor of Kumar & Co., gave an annual maintenance contract for
maintenance of office air-conditioners to Mr. Shan. As per the agreed terms, the payments to
be made to Mr. Shan were as follows:
Rs. 25,200 to be paid on 5-5-2012.
Rs. 8,400 to be paid on 30-9-2012.
Rs. 12,800 to be paid on 17-10-2012.
Rs. 19,800 to be paid on 23-3-2013.
Mr. Kumar intimated to Mr. Shan that at the time of payment in the month of March, he
would be deducting tax @ 1% since the total payment exceeded Rs. 30,000. However, Mr.
Shan argued that payment made to him would not attract TDS since none of the payments
exceeded Rs. 30,000 and the total payment would not exceed Rs. 75,000. Is the contention of
Mr. Shan correct?
Solution
As per section 194C, no TDS will apply if single payment does not exceed Rs. 30,000 and the
aggregate payment made during the year does not exceed Rs. 75,000. In this case, all the
payments made were below Rs. 30,000 and the total payment to be made during the year was
below Rs. 75,000. Hence, there was no requirement to deduct tax from the contract payments
to be made to Mr. Shan. Thus, the argument of Mr. Shan was correct.
Illustration
Mr. Kumar, the proprietor of Kumar & Co., gave an annual maintenance contract for
maintenance of office furniture to Mr. Soham. As per the agreed terms, the payment to be
made to Mr. Soham was as follows:
Rs. 44,000 to be paid in October, 2012.
Rs. 30,800 to be paid in February, 2013.
Mr. Kumar intimated to Mr. Soham that at the time of payment in the month of February, he
would be deducting tax @ 1% from the payment to be made to him. However, Mr. Soham
argued that payment made to him would not attract TDS, since the total payment would not
exceed Rs. 75,000. Is the contention of Mr. Soham correct?
Solution
As per section 194C, no TDS will apply if single payment does not exceed Rs. 30,000 and the
aggregate payment made during the year does not exceed Rs. 75,000. In this case, both the
payments exceed Rs. 30,000 and, hence, would attract TDS. The argument of Mr. Soham is
not correct. Moreover, Mr. Kumar will have to deduct tax in October, 2012 also.
Illustration
Mr. Raja, the proprietor of Raja & Co. gave an annual maintenance contract for maintenance
of office furniture to Mr. Shan. As per the agreed terms, the payments to be made to Mr. Shan
were as follows:
Rs. 18,484 to be paid in October, 2012.
Rs. 13,264 to be paid in December, 2012.
Rs. 52,252 to be paid in March, 2013.
Mr. Raja deducted tax on the entire amount of Rs. 84,000. Entire tax was deducted from the
last payment of Rs. 52,252. However, Mr. Shan argued that payment made to him exceeded
Rs. 75,000, hence, TDS would apply but it would not apply to entire payment of Rs. 84,000,
(As amended by Finance Act, 2013)source : www.trpscheme.com
but would apply only to the payment exceeding Rs. 75,000 (i.e., only on Rs. 9,000). Is the
contention of Mr. Shan correct?
Solution
As per section 194C, no TDS will apply if single payment does not exceed Rs. 30,000 and the
aggregate payment made during the year does not exceed Rs. 75,000. Once the payment
exceeds Rs. 75,000, the entire amount will be liable to TDS. Thus, in this case the argument
of Mr. Shan is not correct and Mr. Raja is correct in deduction of TDS on the entire payment
of Rs. 84,000.
In this case payment is to be made to Mr. Shan who is an individual. Hence, tax will be
deducted @ 1%. TDS will come to Rs. 840 (1% of Rs. 84,000). Suppose in this case the
payee is a company, tax will be deducted @ 2% (i.e., Rs. 1,680).
Q.5 Explain with the help of illustration the definition of “Work” given under section
194C.
Following illustrations will explain the definition of “Work” given under section 194C.
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a works contract to
Mr. Shan for manufacturing of the goods as per their specifications from the raw-materials to
be supplied by SM Corporation. The total contract payment was agreed at Rs. 2,52,000. SM
Corporation intimated Mr. Shan to produce his PAN, since they will be deducting tax @ 1%
from the contract payments. Mr. Shan argued that there was no need to deduct tax in respect
of contract of manufacturing of goods, since it was a contract of sale of goods and not a
contract for any work or service. Is the contention of the Mr. Shan correct?
Solution
The definition of work as given in section 194C includes the activity of manufacturing or
supplying any product according to the requirement or specification of a customer by using
material purchased from such customer. However, work will not include the activity of
manufacturing or supplying any product according to the requirement or specification of a
customer by using material purchased from a person, other than such customer.
Thus, the activity of manufacturing/supplying any product as per the requirement of other
person will be liable to TDS, if such product is manufactured from the raw-materials
provided by the person giving the contract. If such product is manufactured from raw-
materials purchased from a person other than the person giving the contract, then the activity
will not be liable to TDS.
In the above case the goods were to be manufactured from the raw-materials supplied by SM
Corporation, i.e., the customer only and not any outsider, hence, the activity was liable to
TDS. Thus, the argument of Mr. Shan was not correct.
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a work contract to
Mr. Shan for manufacturing the goods as per their specifications. The raw-materials required
for manufacturing the goods were to be acquired by Mr. Shan on his own account from the
market. The total contract payment was agreed at Rs. 5,52,000. SM Corporation intimated to
Mr. Shan to produce his PAN, since they would be deducting tax @ 1% from the contract
payments. The contractor argued that there was no need to deduct tax in respect of contract of
manufacturing of goods, since it was a contract of sale of goods and not a contract for any
work or service. Was the contention of Mr. Shan correct?
Solution
(As amended by Finance Act, 2013)source : www.trpscheme.com
The definition of work as given in section 194C includes the activity of manufacturing/
supplying any product according to the requirement or specification of a customer by using
material purchased from such customer. However, work will not include the activity of
manufacturing/supplying any product according to the requirement or specification of a
customer by using material purchased from a person, other than such customer.
Thus, the activity of manufacturing/supplying of any product as per the requirement of other
person will be liable to TDS, if such product is manufactured from the raw-materials
provided by the person giving the contract. If such product is manufactured from raw-
materials purchased from a person other than such customer, then the activity will not be
liable to TDS.
In the above case the goods were to be manufactured from the raw-materials acquired by Mr.
Shan from person other than SM Corporation (i.e., person other than the customer), hence,
the activity would not be liable to TDS. Thus, the argument of the contractor is correct.
Illustration
SM Corporation, a partnership firm of Mr. Kumar and Mr. Kapoor, gave a catering contract
on the occasion of celebration party on completion of 25 years of their partnership to Mr.
Soham. The total payment to be made for the catering contract was Rs. 8,25,000. The firm
intimated Mr. Soham that they would be deducting tax @ 1% from the contract payments.
Mr. Soham argued that as per section 194C, TDS applies only in respect of contract for
carrying out any work (including supply of labour for carrying out any work) and catering
contract was not covered under the scope of section 194C. Was the argument of Mr. Soham
correct?
Solution
As per section 194C, TDS applies in respect of contract for carrying out any work (including
supply of labour for carrying out any work). It is specifically provided in section 194C that
work will include following activities:
Advertising
Broadcasting and telecasting, including production of programs for such broadcasting or
telecasting
Carriage of goods or passengers by any mode of transport other than by railways
Catering
Manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from such customer and not any other person
Thus, the argument of Mr. Soham is not correct and TDS will apply in respect of catering
contracts.
Q.6 What is the time-limit of deposit of tax deducted at source from contract payments
to the credit of Central Government? Explain with the help of illustration.
Following illustration will explain the provisions relating to time-limit of deposit of tax
deducted at source from contract payments made to the credit of Central Government.
Illustration
Mr. Raja is running a proprietary business under the name of Raja & Co. (turnover during the
preceding year was Rs. 1,84,00,000). He makes payments of Rs. 2,52,000 (for the previous
year 2012-13) to Mr. Shan for job work contract in March, 2013 and also deducted tax at @
1% while making the payment. Mr. Raja does not know the time-limit up to which he can
deposit the tax with Government. Advise him in this regard.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Solution
As per rule 30, time-limit of deposit of TDS with the Government is as follows:
Payment Details Due date for payment
Where the payment is made by or on
behalf of the Government
Where the payment is made in any other
case than the Government-
a) If the amount is credited or paid in the
month of March
b) In any other case.
(i) On the same day (without using any
challan form).
(ii) On or before 7 days from end of
month in which deduction is made
where tax is paid accompanied by an
Income-tax challan.
On or before April 30th
On or before 7 days from the end of the
month in which the deduction is made.
Hence, Mr. Raja can deposit the TDS with the Government on or before 30th
April, 2013.
Q.7 Explain with the help of illustration the provisions relating to the applicability of
Form No. 16A and time-limit of issuance of TDS certificate in Form No. 16A in respect
of tax deducted from contract payments.
Following illustration will explain the provisions relating to the applicability of Form No.
16A and time-limit of issuance of TDS certificate in Form No. 16A in respect of tax deducted
from contract payments.
Illustration
Mr. Raja is running a proprietary business under the name of Raja & Co. (turnover during the
preceding year was Rs. 1,84,00,000). He made payments of Rs. 84,000 during each quarter of
the previous year 2012-13 to Mr. Shan for job work contract. Mr. Raja deducted tax at @ 1%
while making the payment and also deposited the TDS with the Government within the time-
limit prescribed under rule 30. However, he does not know the Form No. in which TDS
certificate is to be issued and time-limit within which he can issue a TDS certificate. Advise
Mr. Raja in this regard.
Solution
In case of payments other than salary, TDS certificates are to be issued on quarterly basis in
Form No.16A.
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. The certificate is to be issued by
following dates:
Quarter Due date for Non-
Government deductor
Due date for Government
deductor
April to June 30th
July 15th
August
July to September 30th
October 15th
November
(As amended by Finance Act, 2013)source : www.trpscheme.com
October to December 30th
January 15th
February
January to March 30th
May 30th
May
Mr. Raja can issue TDS certificate in Form No. 16A within 30 days from the end of each
quarter in respect of quarter April to June, July to September and October to December.
However, in respect of quarter January to March, he can issue TDS certificate up to 30th
May,
2013.
Q.8 Explain with the help of illustration provisions relating to issuance of TDS
certificate in Form No. 16A in respect of tax deduction from contract payments.
Following illustration will explain provisions relating to issuance of TDS certificate in Form
No. 16A in respect of tax deduction from contract payments.
Illustration
Mr. Raja is running a proprietary business under the name of Raja & Co. (turnover during the
preceding year was Rs. 1,84,00,000). He makes payments of Rs. 84,000 during each quarter
of the previous year 2012-13 to Mr. Shan for job work contract. Mr. Raja has deducted tax at
@ 1% while making the payment and also has deposited the TDS with the Government
within the time-limit prescribed under rule 30. However, he does not know how to generate a
TDS certificate. Advise him in this regard.
Solution
As per CBDT Circular No. 1/2012, dated 9-4-2012, it is mandatory for all the deductors to
issue TDS certificate in Form No. 16A by generating the certificate through TIN central
system by downloading the certificate from the TIN website with a unique TDS certificate
number. These provisions are applicable in respect of all sums deducted on or after 1-4-2012.
The certificate so issued can be authenticated either by using digital signature or manual
signature.
Q.9 Explain with the help of illustration the meaning of “Rent” and applicability of
section 194-I in case of lease, sub-lease, tenancy, or any other agreement or
arrangement for use of specific assets.
Following illustrations will explain the meaning of “Rent” and applicability of section 194-I
in case of lease, sub-lease, tenancy, or any other agreement or arrangement for use of specific
assets.
Illustration
Kapoor & Co. is a proprietorship of Mr. Kapoor (turnover during the preceding year was Rs.
1,84,00,000). For the previous year 2012-13, the firm had to pay Rs. 6,48,000 towards rent of
office building. The accountants of the firm intimated the landlord that the firm would be
deducting tax from the rent @ 10%. The landlord argued that as per section 194I there was no
requirement to deduct tax from rent of office building. TDS was applicable only on rent of
factory building. Is the contention of landlord correct?
Solution
As per section 194I, tax is to be deducted on any amount paid towards rent. For the purpose
of section 194I, 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 :
Land
Building (including factory building)
Land appurtenant to a building (including factory building)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Machinery
Plant
Equipment
Furniture
Fittings
The above items may or may not be owned by the payee.
Thus, tax is to be deducted in respect of rent for office building also. Hence, the argument of
the landlord is not correct.
Illustration
Kapoor & Co. is a proprietorship firm of Mr. Kapoor (turnover during the preceding year was
Rs. 1,84,00,000). For the previous year 2012-13, the firm had to pay Rs. 2,52,000 towards
rent of the machineries. The machineries were taken on rent from Mr. Kumar, who, in turn,
had taken the same on rent from Mr. Raja. The accountant of the firm intimated to Mr.
Kumar that the firm would be deducting tax from the rent @ 2%. Mr. Kumar argued that as
per section 194I there was no requirement to deduct tax from rent, if the payee was not the
owner of the machineries. TDS was applicable only if the rented property was owned by the
person from whom the property was rented. Is the contention of Mr. Kumar correct?
Solution
It is specified in section 194I that the rented property may or may not be owned by the person
from whom the property is taken on rent. Hence, in this case the firm has to deduct tax from
the rent to be paid to Mr. Kumar. The argument of Mr. Kumar is not correct.
Q.10 What are the rates of deduction of tax from rental payments? Explain with the
help of illustrations.
Following illustrations will explain the rates of deduction of tax from rental payments.
Illustration
Kapoor & Co. is a proprietorship firm of Mr. Kapoor (turnover during the preceding year was
Rs. 2,52,00,000). For the previous year 2012-13, the firm had to pay Rs. 1,84,000 towards
rent of its office building. The accountant of the firm intimated to the owner that the firm will
be deducting tax from rent @ 10%. The owner argued that as per section 194I, tax was to be
deducted @ 2% in respect of rent of building. Is the contention of the owner correct?
Solution
As per section 194I, in respect of rent of land or building or furniture or fittings tax is to be
deducted @ 10%. Thus, in the above case the owner is incorrect. In this case tax will be
deducted @ 10%.
Illustration
Kapoor & Co. is a proprietorship firm of Mr. Kapoor (turnover during the preceding year was
Rs. 1,52,00,000). For the previous year 2012-13, the firm had to pay Rs. 1,52,000 towards
rent of its equipments. The accountant of the firm intimated to the owner that the firm will be
deducting tax from rent @ 10%. The owner argued that as per section 194I tax was to be
deducted @ 2% in respect of rent of equipments. Is the contention of the owner correct?
Solution
As per section 194I, in respect of rent of land or building or furniture or fittings, tax is to be
deducted @10% and in respect of rent of any other items, tax is to be deducted @ 2%. Thus,
in the above case, the owner is correct. In this case, tax will be deducted @ 2%.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Illustration
SM Corporation is a partnership firm. For the previous year 2012-13, the firm had to pay Rs.
2,52,000 towards rent of its office building. The accountant of the firm intimated to the
landlord that the firm would be deducting tax from rent @ 2%. The landlord argued that as
per section 194I, tax was to be deducted @ 1% if the person to whom rent was to be paid was
an individual. Is the contention of the land lord correct?
Solution
As per section 194I, in respect of rent of land or building or furniture or fittings, tax is to be
deducted @ 10%. Thus, in the above case, accountant as well as the landlord, both were
incorrect. In this case, tax will have to be deducted @ 10%.
Q.11 Explain with the help of illustration the provisions relating to non-deduction of tax
at source from rental payments if the aggregate amount does not exceed Rs. 1,80,000.
Following illustrations will explain the provisions relating to non-deduction of tax at source
from rental payments if the aggregate amount does not exceed Rs. 1,80,000.
Illustration
Mr. Raja is running a proprietary business under the name of Raja & Co. (turnover during the
preceding year was Rs. 1,52,52,000). For the previous year 2012-13, he has to pay rent of
office building of Rs. 84,000 to Mr. Shubham. He informed Mr. Shubham that he will be
deducting tax @ 10% from the rent. Mr. Shubham argued that there was no requirement of
deducting tax in respect of rent if the amount of rent did not exceed Rs. 1,50,000. Is the
contention of Mr. Shubham correct?
Solution
As per section 194I, there is no requirement of deduction of tax from rent, if aggregate
amount of rent to be paid during the year to a person does not exceed Rs. 1,80,000. In this
case the aggregate amount of rent was below Rs. 1,80,000, hence, there was no requirement
of deducting tax from such rent. In this case, both the parties were incorrect, since Mr. Raja
wanted to deduct tax from rent even if the rent was below Rs. 1,80,000 and Mr. Shubham
argued that no tax was to be deducted if the annual rent was below Rs. 1,50,000 (the limit is
Rs. 1,80,000).
Illustration
Mr. Raja is running a proprietary business under the name of Raja & Co. (turnover during the
preceding year was Rs. 1,52,52,000). For the previous year 2012-13, he had to pay rent of
office building of Rs. 1,92,000 to Mr. Shan. He informed Mr. Shan that he will be deducting
tax @ 10% from entire rent. Mr. Shan argued that there was no requirement of deducting tax
in respect of entire rent. TDS would apply only in respect of rent in excess of Rs. 1,80,000,
i.e., only on Rs. 12,000. Is the contention of Mr. Shan correct?
Solution
As per section 194I, tax is to be deducted from rent, if aggregate amount of rent to be paid
during the year to a person exceeds Rs. 1,80,000. If the amount exceeds Rs. 1,80,000, then
tax is to be deducted on the entire amount and not only on the excess amount. Thus, the
contention of Mr. Shan is not correct.
Q.12 Whether tax at source is to be deducted from the rental payments including the
amount of service tax or excluding the amount of service tax? Explain with the help of
illustration.
Following illustration will explain the provisions relating to deduction of tax from rental
payments excluding the amount of service tax.
Illustration
(As amended by Finance Act, 2013)source : www.trpscheme.com
Mr. Raja is running a proprietary business under the name of Raja & Co. (turnover during the
preceding year was Rs. 1,84,52,000). For the previous year 2012-13, he had to pay rent of
office building of Rs. 2,84,000 to Mr. Soham. In addition to rent of Rs. 2,84,000, the landlord
demanded service tax of Rs. 35,102. Total payment to be made to Mr. Soham (including
service tax) amounted to Rs. 3,19,102. Mr. Raja informed Mr. Soham that he would be
deducting tax @ 10% from entire payment of Rs. 3,19,102 including service-tax. Mr. Soham
argued that there was no requirement of deducting tax in respect of service tax. TDS would
apply only on Rs. 2,84,000. Is the contention of Mr. Soham correct?
Solution
Yes, the contention of Mr. Soham is correct. In respect of rental payments, tax is to be
deducted on the amount of rent excluding service tax.
Q.13 Explain with the help of illustration the provisions relating to inclusion/exclusion
of amount of deposits while deducting tax from rental payments.
Following illustration will explain the provisions relating to inclusion/exclusion of amount of
deposits while deducting tax from rental payments.
Illustration
Mr. Raja is running a proprietary business under the name of Raja & Co. (turnover during the
preceding year was Rs. 184,52,000). For the previous year 2012-13, he had to pay rent of
office building of Rs. 2,52,000 to Mr. Shivam. In addition to rent of Rs. 2,52,000, he had to
pay a non-refundable deposit of Rs. 3,84,000. He informed Mr. Shivam that he would be
deducting tax @ 10% from rent and deposit. Mr. Shivam argued that there was no
requirement of deducting tax in respect of non-refundable deposit and TDS would apply only
in respect of refundable deposits. Is the contention of Mr. Shivam correct?
Solution
The contention of Mr. Shivam is not correct. In respect of refundable deposits no TDS will
apply. TDS will apply only in respect of non-refundable deposits. Hence, Mr. Raja is required
to deduct tax @ 10% from rent as well as from non-refundable deposits.
Q.14 What is the time-limit of deposit of tax deducted at source from rental payments to
the credit of Central Government? Explain with the help of illustration.
Following illustration will explain the provisions relating to time-limit of deposit of tax
deducted at source from rental payments to the credit of Central Government.
Illustration
Mr. Raja is running a factory (turnover during the preceding year was Rs. 1,84,00,000). He
paid rent of factory building of Rs. 30,000 (for the month of March, 2013) to Mr. Shan in
February, 2013 and deducted tax at @ 10% while making the payment. However, Mr. Raja
does not know the time-limit up to which he can deposit the tax with the Government. Advise
him in this regard.
Solution
As per rule 30, time-limit of deposit of TDS with the Government is as follows:
Due date for payment
Where the payment is made by or on
behalf of the Government
(i) On the same day (without using any
challan form).
(ii) On or before 7 days from end of
month in which deduction is made
(As amended by Finance Act, 2013)source : www.trpscheme.com
Where the payment is made in any other
case than the Government-
a) If the amount is credited or paid in the
month of March
b) In any other case.
where tax is paid accompanied by an
Income-tax challan.
On or before April 30th
On or before 7 days from the end of the
month in which the deduction is made.
Hence, Mr. Raja can deposit the TDS with the Government on or before 7th
March, 2013.
Q.15 Explain with the help of illustration the provisions relating to the applicability of
Form No. 16A and time-limit of issuance of TDS certificate in Form No. 16A in respect
of tax deducted from rental payments.
Following illustration will explain the provisions relating to the applicability of Form No.
16A and time-limit of issuance of TDS certificate in Form No. 16A in respect of tax deducted
from rental payments.
Illustration
Mr. Raja is running a factory (turnover during the preceding year was Rs. 1,84,00,000). He
paid monthly rent of factory building of Rs. 84,000 (for the previous year 2012-13) to Mr.
Shan. Mr. Raja has deducted tax at @ 10% while making the payment and also had deposited
the TDS with the Government within the time-limit prescribed under rule 30. However, he
does not know the Form No. in which TDS certificate is to be issued and time-limit within
which he can issue a TDS certificate. Advise Mr. Raja in this regard.
Solution
In case of payments other than salary, TDS certificates are to be issued on quarterly basis in
Form No.16A.
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. The certificate is to be issued by
following dates:
Quarter Due date for Non-
Government deductor
Due date for Government
deductor
April to June 30th
July 15th
August
July to September 30th
October 15th
November
October to December 30th
January 15th
February
January to March 30th
May 30th
May
Hence, Mr. Raja can issue TDS certificate in Form No. 16A within the following time-limits:
Month in which rent is paid as well as tax
is deducted
Time-limit within which TDS certificate
should be issued
April 30th
July
May 30th
July
(As amended by Finance Act, 2013)source : www.trpscheme.com
June 30th
July
July 30th
October
August 30th
October
September 30th
October
October 30th
January
November 30th
January
December 30th
January
January 30th
May
February 30th
May
March 30th
May
Q.16 Explain with the help of illustration provisions relating to issuance of TDS
certificate in Form No. 16A in respect of tax deducted from rental payments.
Following illustration will explain provisions relating to issuance of TDS certificate in Form
No. 16A in respect of tax deducted from rental payments.
Illustration
Mr. Raja is running a factory (turnover during the preceding year was Rs. 1,84,00,000). He
paid monthly rent of factory building of Rs. 84,000 (for the previous year 2012-13) to Mr.
Shan. Mr. Raja had deducted tax at @ 10% while making the payment and also deposited the
TDS with the Government within the time-limit prescribed under rule 30. However, he does
not know how to generate a TDS certificate. Advise him in this regard.
Solution
As per CBDT’s Circular No. 1/2012, dated 9-4-2012, it is mandatory for all the deductors to
issue TDS certificate in Form No. 16A by generating the certificate through TIN central
system by downloading the certificate from the TIN website with a unique TDS certificate
number. These provisions are applicable in respect of all sums deducted on or after 1-4-2012.
The certificate so issued can be authenticated either by using digital signature or manual
signature.
(As amended by Finance Act, 2013)source : www.trpscheme.com
MCQs
Q1. TDS on contract payments is to be deducted as per the provisions of section 194J.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
TDS on contract payments is to be deducted as per the provisions of section194C.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q2. In respect of contract payments, when is tax to be deducted at source from the
payment made to the contractor?
(a) At the time of credit of sum to the account of the contractor
(b) At the time of payment of sum in cash or by issuance of a cheque or draft or by any
other mode
(c) At the time of credit of sum to the account of the contractor or at the time of payment
thereof in cash or by issuance of a cheque or draft or by any other mode, whichever is
earlier
(d) Any time as per the choice of the payer
Correct answer: (c)
Justification of correct answer:
Tax is to be deducted at the time of credit of sum to the account of the contractor or at the
time of payment thereof in cash or by issuance of a cheque or draft or by any other mode,
whichever is earlier.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since tax is to be deducted
at the time of credit of sum to the account of the contractor or at the time of payment thereof
in cash or by issuance of a cheque or draft or by any other mode, whichever is earlier. The
other options, viz., options (a), (b) and (d) giving incorrect provision are not correct.
Q3. Mr. Raja is running a factory (the turnover for the previous year 2011-12 was Rs.
2,52,00,000).During the previous year 2012-13, he gives annual maintenance contract
for maintenance of factory machineries to Mr. Shan at a charge of Rs. 1,84,000.He does
not want to deduct tax from Rs. 1,84,000 since as per his view, no tax is to be deducted if
the contract is given to a person being an individual or HUF. Is the contention of Mr.
Raja Correct?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
If the requirements of section 194C are satisfied, then tax is to be deducted from contract
payments, irrespective of the person to whom contract is given. As per section 194C, contract
payments to be made to any individual or a HUF will be liable to TDS @ 1%.
Thus, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q4. In respect of contract payments, at which rate, tax is to be deducted if the payee is
an individual or HUF?
(a) @ 1%
(b) @ 2%
(c) (a) or (b) as per the choice of the payer
(d) (a) or (b) as per the choice of Assessing Officer
Correct answer: (a)
Justification of correct answer:
In respect of contract payments tax is deductible @ 1% if the payee is an individual or HUF.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
rate of TDS. The other options, viz., options (b), (c) and (d) giving the incorrect
rate/provisions are not correct.
Q5. Mr. Raja is running a factory (the turnover for the previous year 2011-12 was Rs.
2,52,00,000) and during the previous year 2012-13, he gave annual maintenance
contract for maintenance of factory machineries to SM Corporation at a charge of Rs.
1,84,000.Hence, he is liable to deduct tax @ 1% since as per his views, tax is deductible
@ 1% if the payer is an individual or HUF.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
In respect of contract payments, tax is deductible @ 1% if the payee (not payer) is an
individual or HUF and @ 2% if the payee(not payer) is any person other than an individual or
HUF. Hence, in this case he is liable to deduct tax @ 2% and not @ 1%.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q6. In respect of contract payments, at which of the following rate, tax is to be deducted
if the payer is any person other than an individual or HUF?
(a) @ 1%
(b) @ 2%
(c) (a) or (b) as per the choice of the payer
(d) Tax is to be deducted either @ 1% or @ 2% according to the status of the payee and not
according to the status of the payer
Correct answer: (d)
Justification of correct answer:
In respect of contract payments, tax is deductible@ 1% if the payee (not payer) is an
individual or HUF and @ 2% if the payee (not payer) is any person other than an individual
or HUF.
Thus, option (d) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
provisions. The other options, viz., options (a), (b) and (c) giving the incorrect rate of
deduction/provision are not correct.
Q7. Mr. Raja is running a factory (the turnover for the previous year 2011-12 was Rs.
2,52,00,000) and during the previous year 2012-13, he gave annual maintenance
contract for maintenance of factory machineries to Kapoor HUF at a charge of Rs.
1,84,000.In this case, at which of the following rate Mr. Raja is required to deduct tax
from the total payment of Rs. 1,84,000?
(a) @ 1%
(b) @ 2%
(c) (a) or (b) as per the choice of Mr. Raja
(d) (a) or (b) as per the choice of Assessing Officer
Correct answer: (a)
Justification of correct answer:
In respect of contract payments, tax is deductible @ 1% if the payee (not payer) is an
individual or HUF. Hence, in this case he is liable to deduct tax @ 1%.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
rate of TDS. The other options, viz., options (b), (c) and (d) giving the incorrect
rate/provisions are not correct.
Q8. Mr. Raja is running a factory (the turnover for the previous year 2011-12 was Rs.
2,52,00,000) and during the previous year 2012-13, he gave annual maintenance
contract for maintenance of factory machineries to SM Pvt. Ltd. at a charge of Rs.
1,84,000.In this case, Mr. Raja is required to deduct tax @ 2% from the total payment
of Rs. 1,84,000 since the payee is other than an individual or HUF.
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
In respect of contract payments, tax is deductible@ 1% if the payee (not payer) is an
individual or HUF and @ 2% if the payee (not payer) is any person other than an individual
or HUF. Hence, Mr. Raja is liable to deduct tax @ 2% from the payment of Rs. 1,84,000
since the payee is a company.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q9. In respect of contract payments, tax is deductible @ 10% if the payee does not
provide his Permanent Account Number.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
In respect of contract payments, tax is deductible @ 20% if the payee does not provide his
Permanent Account Number.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Q10. Mr. Raja is running a factory (the turnover for the previous year 2011-12 was Rs.
2,52,00,000) and during the previous year 2012-13, he gave annual maintenance
contract for maintenance of factory machineries to Mr. Shan at a charge of Rs.
1,84,000.However, Mr. Shan did not furnish his PAN to Mr. Raja. In this case, at which
of the following rate tax will be deducted from the payment of Rs. 1,84,000?
(a) 1% (b) 2%
(c) 10% (d) 20%
Correct answer: (d)
Justification of correct answer:
In respect of contract payments, tax is deductible @ 20% if the payee does not provide his
Permanent Account Number.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
rate of TDS. The other options, viz., options (a), (b) and (c) giving incorrect rates of TDS are
not correct.
Q11. Tax is deductible from contract payments only if the payer being
________/_______ is liable to audit of accounts under clause (a) or clause (b) of section
44AB during the financial year immediately preceding the financial year in which
contract payments are credited or paid.
(a) An individual/HUF (b) An individual/partnership firm
(c) An individual/company (d) A partnership firm/HUF
Correct answer: (a)
Justification of correct answer:
Tax is deductible from contract payments only if the payer being an individual/HUF was
liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial
year immediately preceding the financial year in which contract payments were credited or
paid.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
status of the assessee. The other options, viz., options (b), (c) and (d) giving the incorrect
status are not correct.
Q12. Is tax deductible from contract payments if the payer is an individual or HUF and
was not liable to audit of accounts under clause (a) or clause (b) of section 44AB during
the financial year immediately preceding the financial year in which contract payments
were credited or paid?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
No tax is deductible from contract payments if the payer being an individual/HUF was not
liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial
year immediately preceding the financial year in which contract payments were credited or
paid.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provisions. The other option, viz., option (a) giving the incorrect provision is not correct.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Q13. Mr. Raja is running a factory (the turnover for the previous year 2011-12 was Rs.
2,52,00,000) and during the previous year 2012-13, he gave annual maintenance
contract for maintenance of factory machineries to Mr. Shan at a charge of Rs.
1,84,000.However, during the previous year 2011-12, Mr. Shan was not liable to audit.
Hence, Mr. Raja is not liable to deduct tax from the payment of Rs. 1,84,000.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
Tax is deductible from contract payments if the payer (not payee)being an individual/HUF
was liable to audit of accounts under clause (a) or clause (b) of section 44AB during the
financial year immediately preceding the financial year in which contract payments were
credited or paid. Hence, Mr. Raja is liable to deduct tax from the payment of Rs. 1,84,000
since he was liable to audit during the previous year 2011-12.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q14. Mr. Raja is running a factory (the turnover for the previous year 2011-12 was Rs.
2,52,00,000) and during the previous year 2012-13, he gave annual maintenance
contract for maintenance of factory machineries to Mr. Shan at a charge of Rs.
1,84,000.However, during the previous year 2011-12, Mr. Shan was not liable to audit.
At which of the following rate Mr. Raja is required to deduct tax from the payment of
Rs. 1,84,000?
(a) @ 1%
(b) @ 2%
(c) @ 10%
(d) (a) or (b) as per the choice of Mr. Raja
Correct answer: (a)
Justification of correct answer:
Tax is deductible from contract payments if the payer (not payee)being an individual/HUF
was liable to audit of accounts under clause (a) or clause (b) of section 44AB during the
financial year immediately preceding the financial year in which contract payments were
credited or paid. Moreover, tax is deductible @ 1% if the payee is an individual of HUF.
Hence, Mr. Raja is liable to deduct tax @ 1% from the payment of Rs. 1,84,000, since he was
liable to audit during the previous year 2011-12 and the payee, Mr. Shan was an individual.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
rate of TDS. The other options, viz., options (b), (c) and (d) giving the incorrect rate of
TDS/provision are not correct.
Q15. Mr. Raja is running a factory and during the previous year 2012-13, he gave
annual maintenance contract for maintenance of factory machineries to Mr. Shan at a
charge of Rs. 1,84,000. However, during the previous year 2011-12, Mr. Raja was not
liable to tax audit under section 44AB. At which of the following rate Mr. Raja is
required to deduct tax from the payment of Rs. 1,84,000?
(a) @ 1%
(b) @ 2%
(As amended by Finance Act, 2013)source : www.trpscheme.com
(c) @ 10%
(d) Mr. Raja is not liable to deduct tax at source
Correct answer: (d)
Justification of correct answer:
Tax is deductible from contract payments if the payer (not payee)being an individual/HUF
was liable to audit of accounts under clause (a) or clause (b) of section 44AB during the
financial year immediately preceding the financial year in which contract payments were
credited or paid. Hence, Mr. Raja is not liable to deduct tax from the payment of Rs. 1,84,000
since he was not liable to tax audit under section 44AB during the previous year 2011-12.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
provision. The other options, viz., options (a), (b) and (c) giving the incorrect rate of TDS are
not correct.
Q16. Mr. Kumar is running a garment factory (turnover for the previous year 2011-12
was Rs. 2,52,00,000). During the year 2012-13, he gave a contract to construct his
residential bungalow at a charge of Rs. 2,52,000.Is he liable to deduct tax at source from
the contract payment of Rs. 2,52,000?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
As per section 194C, an individual or HUF will not be liable to deduct tax on the sum
credited or paid to the account of the contractor where such sum is credited or paid
exclusively for personal purposes of such individual or any member of HUF. In this case, the
contract payments were towards construction of personal residential bungalow of Mr. Kumar
and, hence, there was no requirement of deduction of tax at source. Hence, Mr. Kumar was
not liable to deduct tax from the payment of Rs. 1,84,000.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q17. No tax is to be deducted in respect of contract payments if the single payment does
not exceed Rs. 30,000.
(a) True (b) False (c) Partly true and partly false
Correct answer: (c)
Justification of correct answer:
No tax is to be deducted in respect of contract payments if the single payment does not
exceed Rs. 30,000. However, once the aggregate payment exceeds Rs. 75,000 then tax is to
be deducted, even though single payment does not exceed Rs. 30,000.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
provision. The other options, viz., options (a) and (b) giving the incorrect provisions are not
correct.
Q18. No tax is to be deducted in respect of contract payments if the single payment does
not exceed Rs. 30,000. However, tax is to be deducted in respect of contract payments if
the aggregate payment made during the year exceeds Rs. 75,000.
(As amended by Finance Act, 2013)source : www.trpscheme.com
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
No tax is to be deducted in respect of contract payments if the single payment does not
exceed Rs. 30,000. However, if the aggregate payment exceeds Rs. 75,000, then the payer is
required to deduct tax from the total payment, even though single payment does not exceed
Rs. 30,000.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q19. Mr. Raja was required to make a payment of Rs. 25,200 to a contractor Mr. Shan
for the first time during the previous year 2012-13. Whether such transaction will
attract TDS u/s 194C?
(a) Yes (b) No
Correct Answer: (b)
Justification of correct answer:
Mr. Raja is not liable to deduct tax at source (TDS),because single payment is below Rs.
30,000.
Thus, option (b) is correct.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q20. During the previous year 2012-13, Mr. Kapoor, the proprietor of Kapoor & Co.,
gave an annual maintenance contract for maintenance of office furniture to Mr. Shan.
As per the agreed terms, the total payments to be made to Mr. Shan during the year
were as follows:
Rs. 12,800 to be paid in October, 2012.
Rs. 25,200 to be paid in February, 2013.
What will be the amount of tax to be deducted by Mr. Kapoor from the contract payments?
(a) Rs. 184 (b) Rs. 380
(c) Rs. 760 (d) Nil
Correct answer: (d)
Justification of correct answer:
No tax was to be deducted since individual payment did not exceed Rs. 30,000 and aggregate
payment made during the year did not exceed Rs. 75,000.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since no tax is to be
deducted. The other options, viz., options (a), (b) and (c) giving incorrect amounts of TDS are
not correct.
Q21. During the previous year 2012-13, Mr. Kapoor, the proprietor of Kapoor & Co.,
gave an annual maintenance contract for maintenance of office furniture to Mr. Shan.
As per the agreed terms, the payments to be made to Mr. Shanareas were as follows:
Rs. 38,400 to be paid in October, 2012.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Rs. 32,800 to be paid in February, 2013.
What will be the amount of tax to be deducted by Mr. Kapoor from the contract payments?
(a) Rs. 712 (b) Rs. 1,424
(c) Rs. 840 (d) Nil
Correct answer: (a)
Justification of correct answer:
Tax was to be deducted @ 1% since the payee is an individual and single payment exceeds
Rs. 30,000. TDS @ 1% on 71,200 (Rs. 38,400 + Rs. 32,800) will come to Rs. 712.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
amount of TDS. All the other options, viz., options (b), (c) and (d) giving incorrect amounts
of TDS are not correct.
Q22. During the previous year 2012-13, Mr. Kapoor, the proprietor of Kapoor & Co.,
gave an annual maintenance contract for maintenance of office furniture to SM Pvt.
Ltd. As per the agreed terms, the payments to be made to SM Pvt. Ltd. were as follows:
Rs. 38,400 to be paid in October, 2012.
Rs. 32,800 to be paid in February, 2013.
What will be the amount of tax to be deducted by Mr. Kapoor from the contract payments?
(a) Rs. 712 (b) Rs. 1,424
(c) Rs. 840 (d) Nil
Correct answer: (b)
Justification of correct answer:
Tax is to be deducted @ 2%, since the payee is a company i.e., other than an individual or
HUF and single payment exceeds Rs. 30,000. TDS @ 2% on Rs. 71,200 (Rs. 38,400 + Rs.
32,800) will come to Rs. 1,424.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
amount of TDS. All the other options viz., options (a), (c) and (d) giving incorrect amounts of
TDS are not correct.
Q23. Mr. Kapoor is running a factory(turnover during the preceding year was Rs.
52,00,000 and turnover for the year 2012-13 was Rs. 1,52,00,000). During the previous
year 2012-13, he gave an annual maintenance contract for maintenance of factory
equipments. Total contract payments for the year will amount to Rs. 1,52,000. In this
case Mr. Kapoor will be liable to deduct tax from contract payments since his turnover
for the year 2012-13 exceeded the limit prescribed under section 44AB.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
Turnover during the preceding year is to be considered and not the turnover of current year.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Q24. As per section 194C, TDS applies in respect of contract for carrying out any work
______ supply of labour for carrying out any work.
(a) Including (b) Excluding
Correct answer: (a)
Justification of correct answer:
As per section 194C, TDS applies in respect of contract for carrying out any work (including
supply of labour for carrying out any work).
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
provision. The other option, viz., option (b) giving the incorrect provision is not correct.
Q25. As per section 194C, which of the following activities will be included in the
definition of work?
(a) Advertising
(b) Broadcasting and telecasting excluding production of programs for such broadcasting or
telecasting
(c) Manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from a person other than such customer
(d) All of the above
Correct answer: (a)
Justification of correct answer:
Work will include all the following activities:
(a) Advertising
(b) Broadcasting and telecasting including production of programs for such broadcasting or
telecasting
(c) Catering
(d) Carriage of goods or passengers by any mode of transport other than by railways
(e) Manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from such customer
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
activity. The other options, viz., options (b), (c) and (d) giving incorrect activities are not
correct.
Q26. During the previous year 2012-13, SM Pvt. Ltd. gave a catering contract to Mr.
Shan on the occasion of celebration party on completion of its 25 years at a charge of
Rs. 2,52,000. Accounts Manager of a company was of the view that company was not
liable to deduct tax from payment of Rs. 2,52,000 since as per section 194C, no tax was
to be deducted from catering contracts.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
Catering contract is also liable to TDS. Hence, SM Pvt. Ltd. would be liable to deduct tax
from the payment of Rs. 2,52,000.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q27. During the previous year 2012-13, Mr. Raja gave a contract of manufacturing of a
product according to the requirement or specification by using material purchased
from the market to Mr. Shan at a charge of Rs. 2,52,000. Mr. Raja wants to deduct tax
@ 1% from such payment of Rs. 2,52,000. Can he do so?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
As per section 194C, the definition of work includes the activity of manufacturing/ supplying
any product according to the requirement or specification of a customer by using material
purchased from such customer. However, work will not include the activity of
manufacturing/supplying any product according to the requirement or specification of a
customer by using material purchased from a person, other than such customer. Hence, Mr.
Raja cannot deduct tax from such payment of Rs. 2,52,000.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q28. During the previous year 2012-13, Mr. Raja gave a contract of manufacturing a
product according to the requirement or specification of him by using material
purchased from Mr. Raja only to Mr. Shan at a charge of Rs. 2,52,000. Mr. Raja wants
to deduct tax @ 2% from such payment of Rs. 2,52,000. Can he do so?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
As per section 194C, the definition of work includes the activity of manufacturing/ supplying
any product according to the requirement or specification of a customer by using material
purchased from such customer. However, work will not include the activity of
manufacturing/supplying any product according to the requirement or specification of a
customer by using material purchased from a person other than such customer. Hence, Mr.
Raja is liable to deduct tax @ 1% and not @ 2% from such payment of Rs. 2,52,000 since the
payee is an individual.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q29. In respect of contract payments, TDS certificate is to be issued in Form No. 16.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. In other words, in respect of
contract payments, TDS certificate is to be issued in Form No. 16A.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q30. In respect of contract payments, the deductor is liable to deposit the tax deducted
in the month other than the month of March with the Government on or before 7 days
from the end of the month in which the tax is deducted.
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
In respect of contract payments, the deductor is liable to deposit the tax deducted in the
month other than the month of March with the Government on or before 7 days from the end
of the month in which the tax is deducted.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q31. In respect of contract payments what is the time-limit of deposit of the tax
deducted in the month of March with the Government?
(a) 31st March (b) 7
th April
(c) 15th
April (d) 30th
April
Correct answer: (d)
Justification of correct answer:
As per rule 30, following time-limit is applicable:
Due date for payment
Where the payment is made by or on
behalf of the Government
Where the payment is made in any other
case than to the Government-
a) If the amount is credited or paid in the
month of March
b) In any other case.
(i) On the same day (without using any
challan form).
(ii) On or before 7 days from end of
month in which deduction is made
where tax is paid accompanied by an
Income-tax challan.
On or before April 30th
On or before 7 days from the end of the
month in which the deduction is made.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
time-limit. The other options, viz., options (a), (b) and (c) giving incorrect time-limit are not
correct.
Q32. In respect of contract payments, the deductor is liable to issue Form No. 16A on
monthly basis.
(a) True (b) False
(As amended by Finance Act, 2013)source : www.trpscheme.com
Correct answer: (b)
Justification of correct answer:
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. In other words, the deductor is
liable to issue Form No. 16A on quarterly basis.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q33. As per rule 31, Form No. 16A in respect of tax deducted from contract payments is
to be issued on quarterly basis if the deductor is an individual or HUF. However, in case
of deductor other than an individual or HUF, Form No. 16A in respect of tax deducted
from contract payments is to be issued on monthly basis.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. In other words, the deductor is
liable to issue Form No. 16A on quarterly basis, irrespective of the status of the deductor.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q34. Section 194C would be attracted in respect of payments made to couriers for
carrying documents, letters, etc.
(a) True (b) False
Correct Answer: (a)
Justification of correct answer:
The carriage of documents, letters, etc., is in the nature of carriage of goods and, hence,
provisions of Sec. 194C would be attracted in respect of payments made to the couriers.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q35. Payment of commission to the person who arranges for release of advertisement
would be covered under Section 194C.
(a) True (b) False
Correct Answer: (a)
Justification of correct answer:
Payment of commission to the person who arranges for release of advertisement would be
covered under Section 194C.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q36. As per the provisions of which of the following section TDS on rent is to be
deducted?
(As amended by Finance Act, 2013)source : www.trpscheme.com
(a) 194A (b) 194C
(c)194D (d) 194I
Correct answer: (d)
Justification of correct answer:
TDS on rent is to be deducted as per the provisions of section194I.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
section. The other options, viz., options (a), (b) and (c) giving incorrect sections are not
correct.
Q37. As per section 194I, tax is to be deducted from rent at the time of credit of rent to
the account of the owner or at the time of payment thereof in cash or by issuance of a
cheque or draft or by any other mode, whichever is __________.
(a) Earlier (b) Later
Correct answer: (a)
Justification of correct answer:
Tax is to be deducted from rent at the time of credit of rent to the account of the owner or at
the time of payment thereof in cash or by issuance of a cheque or draft or by any other mode,
whichever is earlier.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
provision. The other option, viz., option (b) giving the incorrect provision is not correct.
Q38. Mr. Raja is running a factory (turnover for the previous year 2011-12 was Rs.
84,00,000).During the previous year 2012-13, Mr. Raja paid a rent of factory building of
Rs. 1,84,000 to his landlord, Mr. Shan. As per the views of Mr. Raja, he is not required
to deduct tax from the payment of Rs. 1,84,000 since no tax is deductible if payee is an
individual or HUF.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
No tax was deductible from rent if the payer being an individual/HUF was not liable to audit
of accounts under clause (a) or clause (b) of section 44AB during the financial year
immediately preceding the financial year in which rent was credited or paid. Hence, Mr. Raja
is liable to deduct tax from rent of Rs. 1,84,000 since he was liable to audit during the
previous year 2011-12.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q39. As per section 194I, in respect of rent of which of the following assets, TDS is to be
deducted @ 10% from the amount of rent?
(a) Land (b) Building
(c) Furniture or fittings (d) All of the above
Correct answer: (d)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Justification of correct answer:
As per section 194I, in respect of rent of land or building or furniture or fittings tax is to be
deducted @ 10%.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it covers all the assets
in respect of which tax is deducted @ 10%. The other options, viz., option (a), (b) and (c)
giving individual assets are not correct.
Q40. As per section 194I, in respect of rent of land or building or furniture or fittings
tax is to be deducted @ 10% from the amount of rent if the payee is an individual or
HUF. However, if the payee is other than an individual or HUF then tax is to be
deducted @ 2% from the rent of building or land or furniture or fittings.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 194I, in respect of rent of land or building or furniture or fittings tax is to be
deducted @ 10% irrespective of the status of the payee.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q41. Mr. Raja is running proprietary concern under the name of Raja & Co. (turnover
during the previous year 2011-12 was Rs. 68,00,000). During the previous year 2012-13,
he pays a rent of Rs. 1,84,000 to Mr. Shan in respect of furniture used by him in his
shop. What is the amount of tax Mr. Raja is required to deduct from rent of Rs.
1,84,000?
(a) Rs. 1,840 (b) Rs. 3,680
(c) Rs. 18,400 (d) Any amount as per the choice of Mr. Raja
Correct answer: (c)
Justification of correct answer:
As per section 194I, in respect of rent of land or building or furniture or fittings tax is to be
deducted @ 10%. Hence, TDS @ 10% will come to Rs. 18,400.
Thus, option (c) is the correct option.
Comment on incorrect answer: option (c) is the correct option since it gives the correct
amount of TDS. The other options, viz., options (a), (b) and (d) giving the incorrect
amount/provisions are not correct.
Q42. As per section 194I, in respect of rent of assets other than land or building or
furniture or fittings tax is to be deducted @ 2% from the amount of rent.
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
As per section 194I, in respect of rent of land or building or furniture or fittings tax is to be
deducted @ 10%, irrespective of the status of the payee. In respect of assets other than land
or building or furniture or fittings tax is to be deducted @ 2% from the amount of rent.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q43. Mr. Raja is running a factory (turnover for the previous year 2011-12 was Rs.
84,52,000). During the previous year he paid a rent of factory building of Rs. 1,88,000 to
Mr. Shan who, in turn, has taken the factory on rent from Mr. Kapoor. Mr. Raja does
not want to deduct tax from the rent of Rs. 1,88,000 since as per his view, no tax is to be
deducted in respect of sub-letting. Is the contention of Mr. Raja correct?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
Under section 194I, tax is to be deducted from rent. Thus, tax is to be deducted in case of
sub-letting also. Hence, Mr. Raja is liable to deduct tax from the rent of Rs. 1,88,000.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q44. As per section 194I, what is the maximum amount of rent which can be paid
without deduction of tax at source?
(a) Rs. 50,000 (b) Rs. 1,00,000
(c) Rs. 1,50,000 (d) Rs. 1,80,000
Correct answer: (d)
Justification of correct answer:
As per section 194I, if the amount of payment of rent during a financial year is Rs. 1,80,000
or less than Rs. 1,80,000 then the assessee can pay rent without deduction of tax.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount. The other options, viz., options (a), (b) and (c) giving the incorrect amount are not
correct.
Q45. As per section 194I, if the payment of rent of land or building or furniture or
fixture during a financial year is Rs. 1,80,000 or less than Rs. 1,80,000 then the assessee
can pay such rent without deduction of tax at source. However, in respect of rent of
assets other than land or building or furniture or fixture there is no such limit of Rs.
1,80,000.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 194I, if the amount of payment of rent during a financial year is Rs. 1,80,000
or less than Rs. 1,80,000 then the assessee can pay rent without deduction of tax irrespective
of the assets for which such rent is paid/payable.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Q46. During the year 2012-13, SM Corporation, a partnership firm, has to pay rent of
Rs. 1,84,000 to Mr. Raja. In this case the firm will be liable to deduct tax on ______.
(a) Rs. 1,84,000 (b) Rs. 4,000
(c) Rs. 1,65,600 (d) Nil
Correct answer: (a)
Justification of correct answer:
As per section 194I, tax is to be deducted if the annual rent exceeds Rs. 1,80,000. In this case,
the rent is Rs. 1,84,000. Hence, tax is to be deducted on the entire amount of Rs. 1,84,000.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
amount liable to TDS, all the other options, viz., options (b), (c) and (d) giving incorrect
amounts liable to TDS are not correct.
Q47. In respect of rental payments liable to TDS under section 194I, tax is to be
deducted on the amount of rent ________ service tax.
(a) Including (b) Excluding
Correct answer: (b)
Justification of correct answer:
In respect of rental payments liable to TDS under section 194I, tax is to be deducted on the
amount of rent excluding service tax. [Reference: CBDT’s Circular No. 4/2008 dated 28-04-
2008.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q48. In respect of rental payments liable to TDS under section 194I, tax is to be
deducted on the amount of rent excluding service tax if the payee is an individual or
HUF. However, if the payee is other than an individual or HUF, then tax is to be
deducted on the amount of rent including service tax.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
In respect of rental payments liable to TDS under section 194I, tax is to be deducted on the
amount of rent excluding service tax irrespective of the status of the payee.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q49. Mr. Kapoor is the proprietor of Kapoor & Co. (turnover of the firm in the
preceding year 2011-12 was Rs. 1,84,52,000). During the previous year 2012-13, the firm
has to pay rent of building of Rs. 1,84,000 to Mr. Shan. The landlord demanded Rs.
2,06,742 (including service tax @ 12.36%). What will be the amount of tax to be
deducted by Mr. Kapoor?
(a) Rs. 20,674 (b) Rs. 18,400
(c) Rs. 4,135 (d) Rs. 3,680
Correct answer: (b)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Justification of correct answer:
In respect of rental payments liable to TDS under section 194I, tax is to be deducted on the
amount of rent excluding service tax. In this case, tax is to be deducted @ 10% on Rs.
1,84,000. TDS @ 10% on Rs. 1,84,000 will come to Rs. 18,400.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
amount of TDS. The other options, viz., options (a), (c) and (d) giving incorrect amounts of
TDS are not correct.
Q50. SM Corporation (a partnership firm) has to pay rent of building of Rs. 2,52,000 to
Mr. Raja. The owner demanded Rs.2,83,147 (including service tax @ 12.36%). What
will be the amount of tax to be deducted by SM Corporation?
(a) Rs. 5,663 (b) Rs. 28,315
(c) Rs. 25,200 (d) Rs. 5,040
Correct answer: (c)
Justification of correct answer:
In respect of rental payments liable to TDS under section 194I, tax is to be deducted on the
amount of rent excluding service tax. In this case tax is to be deducted @ 10% on Rs.
2,52,000. TDS @ 10% on Rs. 2,52,000 will come to Rs. 25,200.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount of TDS. The other options, viz., options (a), (b) and (d) giving incorrect amounts of
TDS are not correct.
Q51. Mr. Kapoor is the proprietor of Kapoor & Co. (turnover of the firm in the
preceding year was Rs. 84,00,000). The firm has to pay rent of equipments of Rs.
2,52,000 to Mr. Shan. What will be the amount of tax to be deducted by Mr. Kapoor
from rent of equipments?
(a) Rs. 5,040 (b) Rs. 2,520
(c) Rs. 25,200 (d) Nil
Correct answer: (a)
Justification of correct answer:
In this case, tax is to be deducted @ 2% on Rs. 2,52,000. TDS @ 2% on Rs. 2,52,000 will
come to Rs. 5,040.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
amount of TDS. The other options, viz., options (b), (c) and (d) giving incorrect amounts of
TDS are not correct.
Q52. SM Corporation (a partnership firm) has to pay rent of machinery of Rs. 8,52,000
to Mr. Shan. What will be the amount of tax to be deducted by the firm from rent of
machinery?
(a) Rs. 8,520 (b) Rs. 85,200
(c) Rs. 17,040 (d) Nil
Correct answer: (c)
Justification of correct answer:
(As amended by Finance Act, 2013)source : www.trpscheme.com
In this case, tax is to be deducted @ 2% on Rs. 8,52,000. TDS @ 2% on Rs. 8,52,000 will
come to Rs. 17,040.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount of TDS. The other options, viz., options (a), (b) and (d) giving incorrect amounts of
TDS are not correct.
Q53. Mr. Kapoor is the proprietor of Kapoor & Co. (turnover of the firm in the
preceding year was Rs. 1,84,00,000). The firm has to pay rent of equipments of Rs.
1,75,000 to Mr. Shan. What will be the amount of tax to be deducted by Mr. Kapoor
from rent of equipments?
(a) Rs.1,750 (b) Rs. 3,500
(c) Nil (d) Rs. 17,500
Correct answer: (c)
Justification of correct answer:
Tax is to be deducted if the amount of rent exceeds Rs. 1,80,000. In this case annual rent is
Rs. 1,75,000, hence, no tax is to be deducted.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since no tax is to be
deducted. The other options, viz., options (a), (b) and (d) giving incorrect amounts of TDS are
not correct.
Q54. As per section 194I, no tax is deductible from rent if the payer being
__________/_________ was not liable to audit of accounts under clause (a) or clause (b)
of section 44AB during the financial year immediately preceding the financial year in
which rent is credited or paid.
(a) An individual/HUF (b) An individual/partnership firm
(c) A partnership firm/HUF (d) A partnership firm/company
Correct answer: (a)
Justification of correct answer:
As per section 194I, no tax is deductible from rent if the payer (being an individual or HUF)
is not liable to audit of accounts under clause (a) or clause (b) of section 44AB during the
financial year immediately preceding the year in which rent is paid or credited.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
status of the assessees. The other options, viz., options (b), (c) and (d) giving the incorrect
status are not correct.
Q55. As per section 194I, no tax is deductible from rent if the payer (being an individual
or HUF) was not liable to audit of accounts under clause (a) or clause (b) of section
44AB during the __________ in which the rent is paid or credited.
(a) Financial year
(b) Financial year immediately preceding the financial year
(c) Preceding 3 financial year
(d) Preceding 5 financial year
Correct answer: (b)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Justification of correct answer:
As per section 194I, no tax is deductible from rent if the payer (being an individual or HUF)
was not liable to audit of accounts under clause (a) or clause (b) of section 44AB during the
financial year immediately preceding the year in which rent is paid or credited.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
duration. The other options, viz., options (a), (c) and (d) giving the incorrect duration are not
correct.
Q56. As per section 194I, is tax at source to be deducted from the amount of refundable
deposits?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
As per section 194I there is no requirement of deduction of tax in respect of refundable
deposits.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q57. Mr. Raja is running a factory (turnover of the factory in the previous year 2011-12
was Rs. 84,00,000). During the previous year 2012-13, he has to pay factory rent of Rs.
2,52,000 to Mr. Shan. Mr. Raja also gives a refundable deposit of Rs. 4,84,000. What is
the amount of tax he is liable to deduct?
(a) Rs. 73,600 (b) Rs. 25,200
(c) Rs. 14,720 (d) Rs. 5,040
Correct answer: (b)
Justification of correct answer:
As per section 194I, there is no requirement of deduction of tax in respect of refundable
deposits. Hence, TDS @ 10% on Rs. 2,52,000 will come to Rs. 25,200.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
amount of TDS. The other options, viz., options (a), (c) and (d) giving the incorrect amounts
are not correct.
Q58. Mr. Raja is running a factory (turnover of the factory in the previous year 2011-12
was Rs. 84,00,000). During the previous year 2012-13, he had to pay factory rent of Rs.
2,52,000 to Mr. Shan. He also gave a refundable deposit of Rs. 4,84,000. Mr. Shan paid
interest of Rs. 58,080 on such refundable deposit to Mr. Raja. What is the amount of tax
Mr. Raja is liable to deduct (on factory rent/refundable deposit)
(a) Rs. 73,600 (b) Rs. 25,200
(c) Rs. 14,720 (d) Rs. 5,040
Correct answer: (b)
Justification of correct answer:
(As amended by Finance Act, 2013)source : www.trpscheme.com
In respect of refundable deposits no TDS will apply (whether or not any interest is paid on
refundable deposits).TDS will apply only in respect of non-refundable deposits. Hence, TDS
@ 10% on Rs. 2,52,000 will come to Rs. 25,200.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
amount of TDS. The other options, viz., options (a), (c) and (d) giving the incorrect amounts
are not correct.
Note: Also TDS on interest of Rs. 58,080 will have to be deducted in terms of section 194A.
Q59. As per section 194I, there is no requirement of deduction of tax in respect of non-
refundable deposits, if the owner is paying interest on such deposits.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
In respect of refundable deposits no TDS will apply (whether or not any interest is paid on
refundable deposits).TDS will apply only in respect of non-refundable deposits (whether or
not any interest is paid on non-refundable deposits).
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q60. As per section 194I, in respect of interest on non-refundable deposits tax is
deducted under section 194A.
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
As per section 194I, in respect of interest on non-refundable deposits tax is deducted under
section 194A.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q61. As per section 194I, is tax to be deducted from advance rent?
(a) Yes (b) No
Correct answer: (a)
Justification of correct answer:
Tax is to be deducted at the time of payment or credit of rent, whichever is earlier. Thus, in
respect of advance rent tax is to be deducted.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
provision. The other option, viz., option (b) giving the incorrect provision is not correct.
Q62. The limit of Rs. 1,80,000 per annum would apply separately for each co-owner of a
property.
(a) True (b) False
Correct Answer: (a)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Justification of correct answer:
Under Sec. 194-I, the tax is deductible from payment by way of rent, if such payment to the
payee during the year is likely to be Rs. 1,80,000 or more. If there are a number of payees,
each having definite and ascertainable share in the property, the limit of Rs. 1,80,000 will
apply to each of the payee/co-owner separately. The payer and payee are, however, advised
not to enter into same agreement to avoid TDS provisions.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q63. TDS will be deducted where initial payment is made as a loan or deposit out of
which rent is to be adjusted.
(a) True (b) False (c) Partly true and partly false
Correct Answer: (c)
Justification of correct answer:
Where initial payment is made as a loan or deposit out of which rent is to be adjusted on
month-to-month basis tax will have to be deducted at source. If deposit is refundable then
same would not be subject to TDS.
Thus, option (c) is correct.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
provision. The other options, viz., options (a) and (b) giving incorrect provisions are not
correct.
Q64. Whether Section 194-I is applicable to rent paid for the use of only a part or a
portion of any land or building?
(a) Yes (b) No
Correct Answer: (a)
Justification of correct answer:
The definition of the term “any land” or “any building” includes a part or portion of such land
or building. In other words, section 194I is applicable to rent paid for the use of only a part or
a portion of any land or building.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
provision. The other option, viz., option (b) giving the incorrect provision is not correct.
Q65. Mr. Raja is running a factory (turnover of the factory during the previous year
2011-12 was Rs. 84,00,000) in part of the premises taken on rent from SM Corporation.
During the previous year 2012-13, he paid rent of Rs. 2,52,000. However, he did not
deduct tax from such payment since as per his view, section 194I is not applicable to
rent paid for the use of only a part or a portion of any land or building. Is the payment
made by Mr. Raja correct?
(a) Yes (b) No
Correct Answer: (b)
Justification of correct answer:
The definition of the term “any land” or “any building” includes a part or portion of such land
or building. In other words, section 194I is applicable to rent paid for the use of only a part or
a portion of any land or building. Hence, the payment made by Mr. Raja is not correct.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provision. The other option, viz., option (a) giving the incorrect provision is not correct.
Q66. As per section 194-I, tax is deductible on leasing or hiring of machinery.
(a) True (b) False
Correct Answer: (a)
Justification of correct answer:
Tax is deductible on leasing or hiring of machinery.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q67. In respect of rental payments, which of the following Form No. is used to issue
TDS certificate?
(a) Form No. 16 (b) Form No. 16A
(c) From No. 24Q (d) From No. 26Q
Correct answer: (b)
Justification of correct answer:
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. In other words, in respect of rental
payments, TDS certificate is to be issued in Form No. 16A.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
Form No. The other options, viz., options (a), (c) and (d) giving the incorrect Form No. are
not correct.
Q68. In respect of rental payments, the deductor is liable to deposit tax deducted in the
month other than the month of March with the Government on or before 7 days from
the end of the month in which the tax is deducted.
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
In respect of rental payments, the deductor is liable to deposit the tax deducted in the month
other than the month of March with the Government on or before 7 days from the end of the
month in which the tax is deducted.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q69. In respect of rental payments, what is the time-limit of deposit of tax deducted in
the month of March with the Government?
(a) 31st March (b) 7
th April
(c) 15th
April (d) 30th
April
Correct answer: (d)
Justification of correct answer:
(As amended by Finance Act, 2013)source : www.trpscheme.com
As per rule 30, following time-limit is applicable:
Due date for payment
Where the payment is made by or on
behalf of the Government
Where the payment is made in any other
case than the Government-
a) If the amount is credited or paid in the
month of March
b) In any other case.
(i) On the same day (without using any
challan form).
(ii) On or before 7 days from end of
month in which deduction is made
where tax is paid accompanied by an
Income-tax challan.
On or before April 30th
On or before 7 days from the end of the
month in which the deduction is made.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
time-limit. The other options, viz., options (a), (b) and (c) giving incorrect time-limit are not
correct.
Q70. In respect of rental payments, the deductor is liable to issue Form No. 16A on
_____ basis.
(a) Monthly (b) Quarterly
(c) Half yearly (d) Yearly
Correct answer: (b)
Justification of correct answer:
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. In other words, the deductor is
liable to issue Form No. 16A on quarterly basis.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
duration. The other options, viz., options (a), (c) and (d) giving the incorrect duration are not
correct.
Q71. As per rule 31, Form No. 16A in respect of tax deducted from rental payments is to
be issued on quarterly basis if the deductor is an individual or HUF. However, in case of
deductor other than an individual or HUF, Form No. 16A in respect of tax deducted
from rental payments is to be issued on monthly basis.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. In other words, the deductor is
liable to issue Form No. 16A on quarterly basis, irrespective of the status of the deductor.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q72. SM Corporation is running a factory. It paid rent of Rs. 25,000 (for the month of
June, 2012) in May, 2012 after deducting tax @ 10% from the same. In this case, what
is the time-limit up to which he can issue TDS certificate?
(a) 31st May, 2012 (b) 30
th June, 2012
(c) 30th
July, 2012 (d) 31st July, 2012
Correct answer: (c)
Justification of correct answer:
As per rule 31, every person responsible for deduction of tax from payments other than salary
has to issue a quarterly TDS certificate in Form No. 16A. The certificate is to be issued by
following dates:
Quarter Due date for Non-
Government deductor
Due date for Government
deductor
April to June 30th
July 15th
August
July to September 30th
October 15th
November
October to December 30th
January 15th
February
January to March 30th
May 30th
May
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
time-limit. All the other options, viz., options (a), (b) and (d) giving the incorrect time-limit
are not correct.
(As amended by Finance Act, 2013)source : www.trpscheme.com