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TDS Tax Deducted at Source Indian Income Tax

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Tax deducted at source

  • TDS is one of the modes of collecting Income-tax from the assessees in India.
  • Such collection of tax is effected at the source when income arises or accrues. Hence where any specified type of income arises or accrues to any one, the Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of Income-tax and pay only the balance amount to the recipient of such income.
  • The tax so deducted at source by the payer, has to be deposited in the Government treasury to the credit of Central Govt. within the specified time. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment.
  • Income from several sources is subjected to tax deduction at source. Some of such income subjected to T.D.S. are salary, interest, dividend, interest on securities, winnings from lottery, horse races, commission and brokerage, rent, fees for professional and technical services, payments to non-residents etc.

Distinction between Fees to Professionals and payments to contractors

Payments to contractors and sub-contractors (Sec. 194 C)

  • [http://www.taxmann.com/DitTaxmann/IncomeTaxActs/2005ITAct/cirsec194c.htm As per Sec. 194C , a Contract of work implies getting something done as per your specifications. In commercial sense, a contract is a very wide term. Thus, even supply of goods is also a contract. However, no TDS is attracted if the goods are supplied without carrying out any process on them. For example, if one buys readymade greeting cards it is merely a purchase. However, if one gets them printed as per one’s specifications it becomes a contract of work. Other examples could be using public transport system (no TDS) vis-à-vis chartering a vehicle for a specific venue. Explanation III expressly states that the term ‘work’ shall also include – advertising, broadcasting and telecasting, transport contracts (other than by railways) and catering.
  • The value of a contract has become irrelevant. What is now material is whether one is paying or crediting an amount exceeding Rs. 20,000 at one point of time and/or aggregate of Rs. 50,000 in a financial year.

Fees to Professional (Sec. 194J)

Section 194J defines "professional services" to mean "services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of Section 44AA or of this Section. .

TDS provisions apply when the amount exceeds Rs. 20,000 p.a.

Rent paid to an Individual (paymt other then to NRI)

  • Tax Shall be deducted at Source if Aggregate Payment during F.Y. exceeds Rs. 1,20,000/-.

Tax Rate

  • (a) If his TDS related paymts/credits do not > Rs. 1000,000/-
    • Income Tax rate = 15.45%
  • (a) If his TDS related paymts/credits are > Rs. 1000,000/-
    • Income Tax rate = 16.995%

Ref: http://www.caclubindia.com/share_files/files_display.asp?files_id=7688

Helpful links

  1. Nature of Payment
  2. Section
  3. Rate of TDS
  4. When to deduct
  5. Time of Deposit to Central govt.
  6. Grant of TDS certificate
  7. Annual Returns relating to TDS
  8. Person responsible for deduction
  9. Form No.
  10. Time Limit

See also

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