D R Venkatesh,
B.COM, LLB, FCA
,
Partner, MSSV & Co.,
Chartered Accountants
1
Bangalore

Direct Tax
Corporate Tax
BACKGROUND
PRESS RELEASE DATED MAY 21, 2009
NO 402/92/2006-MC(12 of 2009)
FY 2008-09
(in Crores)
FY 2007-08
(in Crores)
Remarks
(in Crores)
3,38,212 3,12,202 26,010 increase, i.e. 8.33%
2,12,823 1,92,911 20,912 increase, i.e. 10.84%
Personal Income Tax
(FBT, STT & BCTT)
FBT
STT
Corporate TDS
Non-Corporate TDS
1,23,967
7,997
5,408
61,683
68,786
1,18,904 5,063 increase, i.e. 4.25%
7,116 881 increase, i.e. 12.28%
8,577 3,169 decrease, i.e. 36.90%
45,450 16,233 increase, i.e. 35.71%
59,145 9,641 increase, i.e. 16.38%
C.G. TDS 3,364 2,034 1,330 increase, i.e. 65.38%
Tax Collected by way of Assessment
31,242
2

• Direct Tax Collection short by Rs 52,798 Crores, as against the
Budgeted Target of Rs 3,65,000 Crores.
• Direct Tax Collection only Rs 48,280 Crores during the FY 2007-08, risen to over Rs 3,38,212 Crores, the increase is nearly SEVEN times in 11 years time.
• TDS Collection is Rs 1,30,469 Crores out of the Direct Tax
Collection of Rs 3,38,212 Crores.
• Cost of Collection is 0.66% during the FY 2008-09
• Cost of Collection was 0.54% during the FY 2007-08
3

Presentation
• Basics
• Update
• Practical Issues u/s 194 C, 194 I and 194 J
• Lower Deduction of Tax
• Annual Tax Statement
• Conclusion
4

Basics
• Status of Deductor/Payer o Any Person …….
o Tax Payer o Agriculturist o Charitable/ Educational Institutions
5

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
6

Basics
• Status of Recipient/Payee o Rate of Deduction o Applicability of Surcharge o Government
7

Basics
• Residential status of Recipient/Payee o Resident o Non resident
8

Basics
• Nature of expenditure o In the hands of the deductor – payment /
Debit may be towards

Capital Expenditure

Revenue Expenditure

Personal Expenditure
9

Basics
• When to deduct o Payment o Credit
10

• Rate of Deduction
Basics o Tax rate o Surcharge o Education Cess
11

Basics
• Remittance
• Deductor o Government - On same day o Others


During the year payment
Year end provisions o With Special Permission


Salaries – 15 th June, 15 th September, 15 th March
Interest, Insurance Commission, Commission or Brokerage u/s 194H –
15th July, 15th October, 15th January, 15th April
12

UPDATE
13

THE TAXATION LAWS (AMENDMENT) ACT, 2006
ASSENT OF THE PRESIDENT ON THE 13 TH JULY 2006
THE GAZETTE OF INDIA ON 14 TH JULY 2006
Clause 8 – Amendment to Section 40(a)(ia) w.e.f
1.04.2006 - Rent, Royalty
Clause 16 – Amendment to Section 194J- Royalty
- Any sum referred to in clause (va) of Section 28
14

UP DATE:
Clause 15 – Amendment to Section 194I -
Rent means any payment, by what ever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any:-
(a)Land ; or
(b)Building (including Factory Building) ; or
(c)Land appurtenant to a build (including Factory Building) ; or
(d)Machinery ; or (g) Furniture ; or
(e)Plant ; or
(f) Equipment ;or
(h) Fittings
Whether or not any or all of the above are owned by the payee.
15

THE FINANCE ACT 2007
 Section 194A

-
-
-
w.e.f 1.06.2007
Rs.5000 to Rs.10000
Rs.10000 – Co-operative Society engaged in carrying on the business of banking
Rs.10000 – On any deposit with Post Office under any scheme framed by Central
Government and notified by it in this behalf
-
-
-
-
Rs. 5000 in any other case.
Section 194C
194 C (1) – Substituted
(a), to (j) - old
(k) – New sub section
Any individual or a HUF . . . . . . . . . . .
16



-
-
-
Section 194 H w.e.f 01.06.2007
5% to 10%
Insertion of proviso – No deduction
Any commission or brokerage payable by BSNL or
MTNL to their public call office franchises
-
-
-
-
Section 194 I w.e.f. 01.06.2007
(a)
(b)
(c)
10% for use of any machinery or plant or equipment
15% land or building or furniture or fittings
Payee – individual or HUF
20% land or building or furniture or fittings
Payee – other than individual or HUF
17



18

– Amendment to Sec 199
– Amendment to Sec 203
– Amendment to Sec 40(a)(ia)
19

Amendment to Sec 40(a)(ia)
Has 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 sub - section[1] of section 139; or
[B] In any other case, on or before the last day of the previous year;
20

• Circular No. 4/2008, Dated April 28, 2008
• Circular No. 275/73/2007, Dated June 30, 2008
• NotificationNo.88/2008/F.NO.275/43/2008-IT[B], Dated
August 21, 2008
• Notification No. 28/2009, Dated March 16, 2009
• Notification No. 30/2009, Dated March 25, 2009
• Notification No. 31/2009, Dated March 25, 2009
• Notification No. 142/22/2008, TPL Circular No.
02/2009, Dated May 21,2009
21

• Circular No. 4/2008 dated April 28, 2008
• Clarification regarding service tax should be excluded for TDS u/s 194I
• Clarificatory Circular No. 275/73/2007 dated June 30,
2008
• Clarification regarding service tax should be included for TDS u/s 194J
22

U/s 194I U/s 194J
Rent Rs. 100,000
Service Tax Rs. 10,300
Total Rs. 110,300
TDS on Rs. 100,000
Fees
Service Tax
Total
TDS on
Rs. 100,000
Rs. 10,300
Rs. 110,300
Rs. 110,300
23

Any income by way of Any sum by way of
• 194A
• 194B
• 194BB
• 194D
• 194E
• 194G
• 194H
• 194I
• 194C
• 194J
• 194L
• 194LA
24

• NotificationNo.88/2008/F.NO.275/43/2008-IT[B]
Professional includes for Section 194J
• Sports Persons
• Umpires and Trainers
• Team Physicians and Physiotherapists
• Event Managers
• Commentators
• Anchors and
• Sports Columnists
25

• Notification No.28/2009
– Income Tax (Sixth Amendment) Rules, 2009
– W.e.f April 1, 2009
– New Rule 37BA, 37I
– Credit for tax deducted at source for the purpose of sec 199(3)
– On the basis of information relating to deduction of tax furnished by the deductor to the income tax authority or the person authorized by such authority
– TDS amount
– Assessment Year
26

• Notification No.30/2009
– Income Tax (Seventh Amendment) Rules, 2009
– W.e.f July 1, 2009
– New Rules 37BB
– Furnishing of information u/s 195(6)
– Form No. 15CA – Information shall be furnished electronically to the website designated by the IT
Department prior to remitting the payment
– Form No. 15CB – Certificate of Accountant
27

• Notification No.31/2009
– Income Tax (Eight Amendment) Rules, 2009
– W.e.f April 1, 2009
– New Rules 30, 31, 31A, 37CA, 37D
– New Forms 16, 16A, 17, 24C
28

Rule 30 :
Time schedule for remittance of TDS
– No change
• Within two months from the end of the month in which amount is credited by the payer to the account of the payee
• Any other case, within one week from the end of the month
29

Rule 30 :
• Special cases – prior approval of the Joint
Commissioner
– Quarterly payment of amount on 15 th June, 15 th
September, 15 th December and 15 th March salaries
– Quarterly payment of amount on 15 th July, 15 th
October, 15 th January and 15 th April – Interest,
Insurance Commission, commission or brokerage u/s 194H
• Rule 30(4) - Payment of tax under chapter XVII- B
– Electronically furnish an income tax challan in
Form No. 17
• Rule 30(5) – electronically remitted by way of
– Internet banking facility
– Credit or Debit card
30

Rule 31
• Rule 31(1) – TDS Certificate
– Form No. 16
– Form No. 16A
• Rule 31(2) – Time schedule for furnishing TDS
Certificate
– Within one week
– Within one month
– Within fourteen days
– Within one month
• Rule 31(3) – Duplicate Certificate
• Rule 31(4) – Duplicate Certificate
– Obtain indemnity bond from deductee
– Get a payment certified by the AO designated in this behalf by the chief commissioner or commissioner
31

Rule 31A
• Quarterly Statement of Deductions of Tax or Collection of Tax
– Form No. 24C – TDS Compliance Statement
– Form No. 24Q – Salaries
– Form No. 27Q – Other Cases – Deductees other than company being non-residents or a foreign company
– Form No. 26Q – Other Cases – others
– Form No. 27EQ – Collection of Taxes
32

Form 16, Form 16A and Form 27D has been modified with similar changes and have the same structure
• Additional changes made applicable to the above 3 forms are:
– Whether Original/Duplicate/Amended
– TDS Certificate Number
– Unique Transaction Number (UTN) has to be mentioned i.e.
provided by IT Department, along with Gross amount paid and TDS amount.
• Removal from old form:
– Details of Tax Deducted and Deposited into Central
Government account
– PAN of the Deductor
33

• TDS remittance challan – challan No. 281 is replaced by
Form No. 17 and the remittance is to be done electronically (either by way of internet banking or through Debit/ Credit Cards)
• Additional Requirements as per Form No. 17
– PAN of the Deductor
– Challan is section Independent. Deductor can prepare a single challan at the end of the month for all his TDS deductions (Including Salaries and Non
Salaries).
– Due date of deposit of TDS is same as per old provision.
– Deductor has to provide deductee wise PAN, Name and TDS amount.
34

• It is to be filed by all assesses who have been allotted
TAN.
• Section wise (all), 3 months separate information, are to be filed electronically to the DGIT or the person authorized by the DGIT on quarterly basis.
• It contain information of Total Payment, Total amount eligible for deduction, Total amount considered for TDS at full rate, Amount of TDS at full rate, Total amount considered for TDS at lesser rate, Amount of TDS at lesser rate, Total TDS.
• The due dates for delivering the Form 24C i.e. 15 th July.
15 th October, 15 th January for first 3 quarters of financial year and 15 th June following the last quarter of the financial year.
35

• SCH COM-1 Details of TDS compliance in the month of
___ ____
• SCH COM-2 Details of TDS compliance in the month of
___ ____
• SCH COM-3 Details of TDS compliance in the month of
___ ____
• SCH PAY Details of payment of tax deducted or collected at source
• At a glance the preliminary structure of Form 24C is similar to Income Tax Return especially the deductor details
36

• The Deductee records under that challan have to be entered online [if less than 10] or have to be uploaded through a file.
• On successful payment, an acknowledgement would be generated in Form 17 format, which validates [Yes/No] for each PAN of the deductee and generates a Unique Transaction Number [UTN] for each deductee record.
• It is a common link between Challan, TDS certificate and eTDS Statement and will be provided by the I.T. department.
37

Circular No. 02/2009 Dated May 21, 2009
• TDS or TCS effected on or after April 1, 2009, but not later than May 31, 2009:
Fill-up Form No. 17 – between July 1, 2009 to
July 15, 2009
• Return of Income in Form No. ITR 1 to ITR 8 for the AY 2009-10
Quoting of relevant UTN for every TDS or TCS
• Deductions or collections made before April 1,
2009
38

Practical issues
39

• Mr.X a practicing CA who is subject to Tax Audit u/s 44AB for the year ending 31.03.2009
having the following transactions during the financial year 2009 - 2010:
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
40

Issues - General
The entries passed in books of accounts for MIS purposes.
Examine the applicability of chapter
XVII - B
41

Issues – General
• Excess/Short deduction
• Excess/Short Remittance - Adjustment
- With in the quarter.
- With in the financial year
• Refund of Excess tax remitted
42

Issues - General
o Non deduction o Short deduction o Non remittance o Short remittance o Delay in remittance
43

Issues - General
o Interest o Penalty o Prosecution o Amount not deductible
44

Issues - General
 Disallowance u/s 40(a)(ia) & Form No 3CD o In the case of
 non deduction
 short deduction
 non remittance
 short remittance
 delay in remittance
45

Issues - General
 Compute the Disallowance u/s 40(a)(ia) for the AY
2009-10
 Internal Audit Fee for the FY 2008-09 Paid every month with out deduction of tax.
 TDS made during March 2009 (Including earlier months) and remitted to Govt.
- On or before March 31, 2009
- On July 25, 2009 or September 25, 2009
 Internal Audit Fee for the FY 2008-09 Paid every month with deduction of tax but not remitted to Government.
 Remitted before March 31, 2009
 Remitted on July 25, 2009 or September 25, 2009
46

Issues - General
• M/s X Private Limited paid statutory audit fee of
Rs.1,00,000/- in cash during the accounting year
2008 – 2009 with out deduction of tax at source.
• For Assessment year 2009–10, Examine the disallowance u/s 40(a)(ia) and u/s 40A(3) ?
47

Issues - General
• The Assessee has received the transport advance of Rs.10
Crore from X Limited. X Limited has deducted the TDS U/s
194C on 10Crores while making the advance payment. The
Assessee couldn't complete the contract work to the extent of
Rs.6Crores and the same has been returned to X Limited.
The Assessee has credited Rs.10Crores as income debited
Rs.6Crores to as Fright Charges refund account in the P&L A/c.
The assessing officer disallowed Rs 6Corores u/s 40a(ia) since the assessee has not deducted the tax at source. Discuss
48

Issues - General
• Assessment completed U/s 143(3) for the
Assessment Year 2005 – 2006, 2006 – 2007 &
2007 – 2008. The Assessing officer verified the books of accounts and all the records & no observations regarding noncompliance of provisions of Chapter XVII – B is noted in the said order.
Survey officials of TDS Circle observed that for the above years the assessee has violated the
TDS provisions and propose to invoke Section
40(a)(ia). examine
49

Issues - General


50

Issues – Specific
• U/s 194C o Contract between the contractor and specified entity o Each contract less than Rs. 20,000 o Total payment in financial year Rs. 50,000 o Sub contractor – individual – not owned more than 2 lorries
51

Issues – Specific
• Incentive paid to a Contractor
• Liquidated damages recovered from contractor
52

Issues – Specific
- Section 194C or Section 194I
53

Issues – Specific
- Loading and unloading charges
- Freight/transportation charges
54

• M/s A limited has given turnkey project to B Limited for setting the data centre in their premises for 3 Crore plus applicable taxes. B Limited raised the invoice which is as follows:
____________________________________________________________________________________
Invoice
Towards setting data centre
Add: VAT @12.5%(on 75% of the value)
- 3,00,00,000
28,12,500
Add: Service Tax @12.36% (33% of the value) 12,23,640
-----------------
3,40,36,140
-----------------
____________________________________________________________________________________________________________________________________
Issue – 1 :
Issue – 2 :
M/s A Limited propose to deduct the Tax on 33% of contract value.
Whether TDS should be made including Service Tax and VAT?
55

• X Limited entrusted the construction work to C Limited. As per the arrangement, construction materials is supplied by X
Limited to maintain the quality. X Limited deducted the amount towards supply of material from gross contract price.
The details are as follows:
Contract Price (Gross)
Less: Amount deducted towards supply
Rs.100 Lakhs of material
Net amount paid to C Ltd
Rs.70 Lakhs
-------------
Rs.30 Lakhs
-------------
X Limited deducted TDS U/s 194C on Rs.100 Lakhs.
Discuss the accounting entries to be passed in the books of accounts in both the companies to avoid the probable
TDS issues.
56

Issues – Specific
o Advance Rent of Rs. 5 Lakhs paid for next 5
Financial years on 30.06.2008
o Rent of Rs.5 lakhs paid to 5 co-owners o Warehousing Charges o Cooling Charges paid to cold storage owners
57

Issues – Specific
• M/s King fisher Airlines paid landing fee and parking fee of Rs.10 Crores to Airport authorities during the accounting year 2008 - 09. M/s Kingfisher Airlines proposes to deduct tax at source:-
194C or 194I ?
• 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.
58

Issues – Specific
• M/s X Limited has paid interest free refundable deposit of Rs.100 lakhs to M/s Y Limited. M/s Y
Limited allowed M/s X limited to use the building without rent. Assessing Officer observed that this arrangement is only to avoid the TDS and he propose to invoke the provisions of Section 194A in the case of M/s Y Limited and Section 194I in the case of M/s X Limited.
59

Issues – Specific
• Fees for professional services o Is TDS to be effected u/s 194J on the gross amount of bill including service tax and reimbursement of expenses or the fees only?
60

Issues – Specific
Audit Fee
Service Tax & Cess
Reimbursement of expenses
Total
Rs. 1,00,000
Rs. 10,300
Rs. 50,000
Rs. 1,60,300
61

Issues – Specific
• M/s Specialty Hospital Private Limited makes payment to consulting doctors by collecting amount from patients . It retains 20% of the fee collected as its service charges and pays 80% to the consulting doctors.
- TDS U/s 192 or 194J?
- TDS on 80% or 100%
62

LOWER DEDUCTION OF TAX
• Section 197
• Payments Covered:
- Section 192 - Section 194J
- Section 193 - Section 194K
- Section 194 - Section 194LA
- Section 194A - Section 195
- Section 194C
- Section 194D
- Section 194G
- Section 194H
- Section 194I
• Form No 13
63

• Form No. 26AS
• Section 203AA
• Rule 37AB
• Statement issued on behalf of Income Tax Department
• Details of Tax indicated based on the data submitted by the deductor
• Due Date for sending this statement is July 31 every year
• Form 26AS consists of:
- General Information
- Part A : Details of TDS
- Part B : Details of TCS
- Part C : Details of Tax Paid, other than TDS/TCS
64

Conclusion
• Remittance without deduction
Transportation
Charges
TDS @ 2.266%
Total
Rs. 100L
Rs. 2.266L
Rs. 102.266L
65

Conclusion
• Remittance in advance
• Duty / Responsibility under chapter
XVII – B cannot be bypassed
66

Conclusion
o o o
Cash Basis
Mercantile Basis
Compliance Basis
67

Conclusion
68

69

70

71

Deduct and remit
Finally
Without failure
Avoid – interest, penalty, prosecution and disallowance
With due care
File TDS returns & Issue the forms
Within time
72

Then…
73

74