BASICS UPDATES & ISSUES 1 TDSTDS CA D R Venkatesh, B.COM, LLB, FCA, Partner, MSSV & Co., Chartered...
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Transcript of BASICS UPDATES & ISSUES 1 TDSTDS CA D R Venkatesh, B.COM, LLB, FCA, Partner, MSSV & Co., Chartered...
BASICS
UPDATES
&
ISSUES
1
T
D
SCA D R Venkatesh,
B.COM, LLB, FCA, Partner, MSSV & Co.,
Chartered AccountantsBangalore
2
BASICS
Status of Deductor/Payer
Any Person …….
o Tax Payer
o Agriculturist
o Charitable/ Educational Institutions
3
BASICS
Individual / HUF
o Whose total sales, gross receipts or turnover
o Exceed the monetary limits specified under
clause (a) or clause (b) of Section 44AB
o During the financial year immediately
preceding financial year
4
Status of Recipient/Payee
o Rate of Deductiono Governmento Applicability of surcharge
BASICS
5
BASICS
Residential status of Recipient/Payee
o Residento Non-resident
6
BASICS
Nature of expenditure
o In the hands of the deductor –
payment / Debit may be towards
Capital Expenditure
Revenue Expenditure
Reimbursement of Expenses
7
BASICS
When to deduct
o Payment
o Credit
BASICS When to Remit• During the year payment (Other
than March) – on or before 7 days from the end of the month in which deduction is made.
• Other cases – On or before 30th day of April where the income or amount is credited or paid in the month of March. 8
9
BASICS
Rate of Deductiono Tax rate - Under the respective sections - Part II to First Schedule - Part III to First Schedule – Salary - Part II to First Schedule – u/s 195 - No Surcharge & No Education Cess
10
UPDATES
• A.Y. 2013-14• A.Y. 2014-15
DISALLOWANCE
40(a)(ia) – Amount not deductible.
Finance (No.2) Act, 2004
A.Y.2005-06 onwards
MSSV & CO, Bangalore 11
DISALLOWANCE
Finance Act, 2008 w.r.e.f 01.04.2005Has not been paid-(A)In a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sec 139(1); or
(B)In any other case, on or before the end of the previous year
12
DISALLOWANCE Finance Act, 2010 w.e.f AY 2010-11Has not been paid, -
– On or before the due date specified in sec 139(1)
Amendment by Finance Act, 2010 is retrospective effect from AY 2005-06
– As held in Kunubai Ramjibai v/s ITO (2010) 49 DTR 70 (Mumbai Trib.)
– This amendment is clarificatory in nature
13
Finance Act, 2012
Provisio inserted to Sec 40 (a)(ia) w.e.f. 1st April, 2013.
Provisio – Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not to deemed to be an assessee in default under the provisio to sub section (1) of section 201, then, for the purpose of this sub clause, it shall be deemed that the assessee has deducted and paid tax on such sum on the date of furnishing of the return of income by the resident payee referred to in the said provisio.
14
Finance Act, 2012 Insertion of Proviso to Sec 201 w.e.f 1st
July,2012 Proviso to Sec 201(1)
Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax, if such resident-
15
(i) has furnished his return of income u/s 139
(ii) has taken into account such sum for computing income in such return of income, and
(iii) has paid the tax due on the income declared by him in such return of income.
And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed - Form No.26A
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Form No. 26A [See Rule 31ACB]
Form for furnishing accountant certificate under first proviso of sub-section (1) of section 201 of
the Income-tax Act, 1961
Details to be furnished by the Deductor Name of the Deductor PAN,TAN and address of the Deductor Name of the Deductee Amount Paid without deduction of whole or any
part of tax .
17
Certificate from an accountant certifying that the deductee has fulfilled all the conditions mentioned in first proviso of section 201(1) of Income Tax Act is enclosed as Annexure – A.
Details of Interest paid, if any Details of Payment – BSR Code, Challan Serial
Number and Date of Deposit of Challan Designation of the person who signs this Form.
18
Annexure ACertificate of Accountant under first proviso
section 201(1) certifying the furnishing of return of income, payment of tax by the deductee.
Certifying with regard to- Name of the Accountant Name and Address of the Deductee PAN of the Deductee Payer has paid or credited – a sum to the
account of the payee without deduction of whole or any part of tax.
Details of Payment- Nature of Payment, Date of Payment, Section under tax was deductible, Amount paid or credited, Amount of tax deductible, Date of Deduction, if any.
19
Details of the Return of Income filed by the resident payee for the relevant Assessment year-
Receipt on tax has not been deducted, Head of Income under which receipt is
accounted for, Acknowledgement Number of the Return filed, If paper return details of Assessing Officer, Amount of Total Taxable Income as per Return filed, Tax due on the income declared in the return, Details of tax paid.
20
Payee has taken to account sum paid by the payer for computing his taxable income in the Return of Income filed.
Receipt on which Tax has not been deducted Head of Income under which the receipt is
accounted for Gross receipt under the head of income under
which the receipt is accounted for Amount of taxable income under the head of
income under which the receipt is accounted for
21
It has been ensured that the information furnished is true and correct in all respects and no relevant information has been concealed or withheld
Declaration with regard to neither the accountant nor any of his partners, is a director, partner, or an employee of the entity or its associated concerns
Declaration with regard to that if the details provided in the certificate is proved incorrect or false, will render him/them liable for any penal or other consequences as may be prescribed in law or is otherwise warranted.
22
Issues
When to obtain this certificate from Accountant
Deductor assures that he will obtain the certificate from the accountant of the deductee.
Form No. 3CD - clause 17(f).
23
Provisio to Sec 201 (1A) w.e.f 1st July 2012.Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this chapter on the sum paid to a resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default under the first provisio of sub section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident.
24
Issues
Interest to be calculated irrespective of the tax liability of the deductee.
When to compute this interest? Rate of Interest is 1%.
25
PENALTY Finance Act, 2012
New Section 271H, w.e.f 1st July, 2012.
Penalty for failure to furnish the statements or false statements.
271H – Fails to comply the provisions of Sec 200 (3) or 206 C (3), the penalty shall not be less than Rs 10,000 but may extend up to Rs 1,00,000.
26
Fees Finance Act, 2012 New Section 234E, w.e.f 1st July, 2012. Fees for default in furnishing statements 234E (1) – without prejudice to the provisions of
the Act, where a person fails to deliver or causes to be delivered a statement within the time prescribed in sub section (3) of section 200 or provision to sub section (3) of section 206 C, he shall be a liable to pay, by way fee, a sum of Rs 200 for everyday during which the failure continues.
27
Finance Act, 2012 Insertion of clause (1D), w.e.f 1st July, 2012. 206C (1D) Every person being a seller, who receives any
amount in cash as consideration for sale of bullion (excluding any coin or any other article weighing 10gm or less)* or jewellery, shall, at the time of receipt of such amount in cash , collect from the buyer, a sum equal to 1% of sale consideration as income tax, if the sale consideration,
(i) For bullion, exceeds Rs 2,00,000 or (ii) For Jewellery, exceeds Rs 5,00,000.* Deleted from 1st June 2013.
28
Finance Act, 2013 Insertion of Section 194-IA.(1), w.e.f 1st June, 2013 194-IA (1) Any Person, being a transferee,
responsible for paying(other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one percent of such sum as income-tax thereon.
29
194-IA (2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.
Explanation – For the purposes of this section-(a) “agricultural land” means agricultural land in India,
not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;
(b) “immovable property” means any land (other than agricultural land) or any building or part of a building.
30
Issues Whether this provision is applicable to
agreements executed before 1st June, 2013 but consideration is paid later.
Section 203A is not applicable to this provision, how seller will get a credit for the TDS made.
Whether this provision is applicable to Joint Development Agreements where amount received is less than Rs. 50 Lakhs but the Land Owner gets in kind i.e 50% of the area constructed where the value is more than Rs. 50 Lakhs.
31
32
ISSUES
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Defaultso Non Deductiono Short deductiono Non remittanceo Short remittanceo Delay in remittanceo Non / Delay in filing statementso Non / Delay in issuing certificates
34
Consequences
o Interesto Amount not deductible (Disallowance)o Penaltyo Feeso Prosecution
FINANCE ACT, 2010Interest u /s 201 – w.e.f: 01.07.2010
At 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
At 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid
MSSV & CO, Bangalore 35
ISSUES:M/s.ABC co. passed the following entries in the
books of accounts.
Internal Audit fee A/c Dr Rs.1,00,000To M/s. Smart Associates. Rs.1,00,000
(Being the internal audit fee payable for the month of January 2013.)
MSSV & CO, Bangalore 36
M/s.ABC co. passed the following entries in the books of accounts.
Internal Audit fee A/c DrRs.1,00,000To M/s. Smart Associates A/c.
Rs.90,000To TDS Payable A/c
Rs.10,000(Being the internal audit fee payable for the
month of January 2013 and TDS payable provided for.) MSSV & CO, Bangalore 37
ISSUES: M/s X Co Ltd deducted tax of Rs 1 lakh
on professional charges of Rs 10 lakh on 07.03.2013. The Company remitted the above tax on 04.05.2013. Calculate the interest liability.
38
Rule 119A, Income Tax Rules, 1962
Procedure to be followed in calculating interest.In calculating the interest payable by the assessee or the interest payable by the Central Government to the assessee under any provision of the Act,—
(a) where interest is to be calculated on annual basis, the period for which such interest is to be calculated shall be rounded off to a whole month or months and for this purpose any fraction of a month shall be ignored; and the period so rounded off shall be deemed to be the period in respect of which the interest is to be calculated;
39
(b) where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be a full month and the interest shall be so calculated;
(c) the amount of tax, penalty or other sum in respect of which such interest is to be calculated shall be rounded off to the nearest multiple of one hundred rupees and for this purpose any fraction of one hundred rupees shall be ignored and the amount so rounded off shall be deemed to be the amount in respect of which the interest is to be calculated.]
40
ISSUES: Threshold limit computation– whether to include
Service Tax?
u / s194J u / s 194I
Fee Rs. 27,500 Rent Rs. 1,65,000
ST Rs. 2,833 ST Rs. 16,995
Rs. 30,333 Rs. 1,81,995
MSSV & CO, Bangalore 41
42
Issues
M/s X Private Limited paid statutory audit
fee of Rs.1,00,000/- in cash during the
accounting year 2012– 2013 with out
deduction of tax at source.
For Assessment year 2013–14, Examine the
disallowance u/s 40(a)(ia) and u/s 40A(3) ?
43
Mr.X a practicing CA who is subject to Tax Audit u/s
44AB for the year ending 31.03.2012 having the
following transactions during the financial year 2012 -
2013:
1. Constructed a house for self occupation & he is
making payment to contractor Rs.10,00,000/-
2. Borrowed funds from friends Rs.10,00,000/- on
which he wants to pay interest Examine the
applicability of TDS
Issues
44
Issues u/s 206 AA
Furnishing of PAN
Furnished after Previous Year is
ended
Furnished within the Financial Year
after 3 Quarters
TDS Credit
Wrong PAN furnished by the
Deductee
45
Issues Disallowance under Sec 40(a)(ia)
Service Tax element on fees/payment
Fees – Rs 10 lacs
ST - Rs 1.24 lacs
Whether Disallowance u/s 40(a)(ia)
Rs 10 lacs ???
Or
Rs 11.24 lacs ???
Issues
Commission Or Brokerage
o Discount/Rebate/Incentive
o Commission paid to partners on
percentage of export sales
46MSSV & Co.
Issues Rent
o Advance Rent of Rs. 8 Lakhs paid for
next 5 during the financial years 2012-13
o Rent of Rs. 8.75 lakhs paid to 5 co-
owners
o Warehousing Charges
o Cooling Charges paid to cold storage
owners 47MSSV & Co.
Issues• Rent paid to owner as a percentage of
sales.• Tenants in a commercial complex
following payments are made to the owner:- - Rent - Maintenance charges - Power & Water charges re-imbursements.
48MSSV & Co.
Issues
Incentive paid to a Contractor Contract Amount Rs 100 lacs Incentive 10 percent – Rs 10 lacs TOTALPayment Rs 110 lacs
Liquidated damages recovered from contractor Contract Amount Rs 100 lacs Liquidator Damages 10 percent – Rs 10 lacs Net Payment Rs 90 lacs
49MSSV & Co.
M/s co-operative Bank received form 15G and From 15H the depositors for non-deduction of tax at source. The Co-operative Bank did not file copy of these forms before the jurisdictional Commissioner. The AO proposed to disallow u/s 40(a)(ia) the interest payment to these depositors for not filing the forms.
DISCUSS…
50
Issues
Issues
The deductor M/s Defaults ltd not filed the quarterly returns for the financial year 2012-13. The AO proposed to disallow the payments u/s 40(a)(ia) on which TDS is deducted & remitted.
DISCUSS..
51
ISSUES M/s. Land Owners Pvt Ltd. entered into Joint
Venture with M/s. Developers Pvt Ltd. to develop a property. The Area available for development is 10,000 Sq. Ft. Market Value of the property on the date of agreement on 01.01.2012 was Rs. 10 Crores. The Developer completed the project and handed over the possession of the commercial property to land owner on 01.03.2013. Total construction cost of the project to Developer is Rs. 10 Crores. Discuss the applicability of TDS and which year?
52
ISSUES M/s. Land Owners Pvt Ltd. entered into Joint
Venture with M/s. Developers Pvt Ltd. to develop a property. The Developer agreed to compensate the land owner @ Rs. 10 Lakh per month during the period of construction. Kindly examine the applicability of TDS for the compensation payment.
53
Issues Mr. R purchased a residential property from Mr.
NR for Rs. 20 Crores and sale was concluded by registration on 01.01.2012. Mr. R received notice from Income Tax Department stating that Mr. R violated the provisions of Section 195. Discuss…
54
Issues Mr. R purchased a property from Mr. NR (Non –
Resident) for Rs. 20Crores and deducted Tax at Source U/s. 195. The tax was remitted through a company’s TAN Number in which Mr. R is a Director. Subsequently the Income-tax Department issued a notice to Mr.R for violation of provisions of section 195. Discuss…
55
Issues
Bank has paid gold appraisal fee of Rs.70,000/- to Appraiser during the Financial Year 2012-13. Whether Bank has to deduct Tax at Source U/s. 194C or U/s. 194J.
56
Issues
The Bank has paid the commission of Rs. 1,00,000/- each to 10 pigmy agents without deducting Tax at Source. The Assessing Officer proposes to disallow the expenditure U/s. 40(a)(ia). Discuss…
57
Issues M/s. S Pvt Ltd paid the Audit Fee for 3 financial
years together on 1st March, 2013. The details of the payment is as follows;
Audit Fee for the financial year ending 31.03.2012 – Rs. 28,090 (incl. of Service Tax)Audit Fee for the financial year ending 31.03.2011 – Rs. 28,090 (incl. of Service Tax)Audit Fee for the financial year ending 31.03.2010 – Rs. 28,090 (incl. of Service Tax)Kindly advice whether M/s. S pvt Ltd is required to deduct Tax at Source U/s. 194J
58
Issues
M/s. Manufacturing Company has paid a transport charges of Rs. 10 Lakh to M/s. Logistics Pvt Ltd during the financial year 2012-13. The company has not deducted the tax at source under the plea that provisions of section 194C (6) is applicable. Kindly examine…
59
Issues Section 40(a)(ia) is attracted only to sums payable
as on Balance Sheet date?
Meriliyn Shipping and Transport V/s. Additional Commissioner of Income Tax (2012) 016 ITR (Trib) 0001 (ITAT) (Vishakapatnam)
S S Warad V/s. Additional Commissioner of Income Tax (2012) 019 ITR (Trib) 0035 – Bangalore Bench
Smt. J Rama V/s. ITO Ward 1(3) ITA No. 1204 (Bangalore)/08
60
Section 40(a)(ia) is attracted only to the expenses claimed U/s. 30 to 38.
Teja Constructions V/s. Assistant Commissioner of Income Tax (2010) 129 TTJ 0057
61
CONTROVERSIES
No TDS v/s Yes TDS194C v/s 194J194C v/s 194I
194C v/s 194H194J v/s 192192 v/s 194H
MSSV & CO, Bangalore 62
63
Conclusion
Duty / Responsibility under chapter
XVII-B cannot be bypassed.
Conclusion Method of accounting
Cash Basis Mercantile Basis Compliance Basis
64
GOLDEN PRINCIPLES
Applicability Rate Deduction & Remittance Planning
65
Tips for Better and Clear Understanding of Provisions of Chapter XVII B
66
Step1:Read, Read and Read until you are clear about the provisions (Sections & rules)
Step2:
Read, circulars and notifications
67
Step 3 :Read case laws of Supreme Court, High Court, ITAT…
Step 4 :Advise accordingly
68
69
Finally
Deduct and remit Without failure
Avoid – Interest,
penalty, prosecution
and disallowance
With due care
File TDS returns & Issue
the forms
Within time
70
Then…
THE DEDUCTOR DEDUCTEE
WILL SMILE FOREVER
71