SYNOPSIS
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1
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TDS / TCS deduction Applicability
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2
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Resident -TDS
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3
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Non -Resident -TDS
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4
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TCS Provision
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5
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Equalisation Levy
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6
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Other important Points in TDS/TCS
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Note : FY 2024-25 related Amendments if any highlighted in Red colour for quick reference
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1. TDS / TCS / EQUALISATION LEVY SHALL BE APPLICABLE TO THE FOLLOWING PERSONS :
a) All Companies
b) All Partnership Firms
c) All Trusts
d) All co-operative society
e) All society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India
f) Central Government or any State Government or any local authority
g) 1. Business Individuals / HUF’s:
Having a Business Turnover of INR 1 crore or Professional Turnover of INR 50 Lakhs during the preceding previous year.
2. Non-Business Individuals / HUF’s:
The following TDS section are applicable even other than business individual (as said above
point g)(1)) – applicable Section – 194IA, 194IB, 194M, 194S (Refer the section detail below)
2. TDS ON RESIDENT PAYMENTS
TDS % and Exemption Limits
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Particulars
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Individual
/ HUF
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Domestic company/
firm/Trust
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Criteria for Deduction
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Nature of payments
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Sec. Code
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Rate in %
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Rate in %
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Payment in Excess of
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1
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Salary
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192
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As per the prescribed rates applicable to individual & senior citizens
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2
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Payment of accumulated balance of provident fund which is taxable in the hands of an employee.
Note: Above mentioned payment would be subject to tax only if the employee makes withdrawal before continuous service of five years (other than due to ill health, discontinuance of business, cessation of employment) and does not opt for transfer of existing accumulated balance to the new employer.
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192A
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10%
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-
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Rs. 50,000
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3
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Interest on securities
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193
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10%
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10%
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Rs. 5,000, In the case of debentures issued by listed companies provided such amount should be given by an account payee cheque
In case of 8% saving (taxable) bonds also the limit is Rs. 10,000.
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4
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Dividend
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194
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10%
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10%
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For Individuals the Monetary Limit – Rs 5,000/- provided the dividend is paid in any mode other than cash.
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5
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Interest other than interest on securities
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194A
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10%
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10%
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- Bank/Co-operative Society/Post office Interest -Rs.40,000/-p.a (Senior Citizen Rs.50,000/- p.a)
- Other Payers -Rs.5,000/- p.a
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6
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Winnings from cross word puzzles, lotteries, card games ,other games of any sort
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194B
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30%
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30%
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Rs. 10,000/- (Per FY)
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7
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Online game winnings
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194BA
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30%
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30%
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No limit
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8
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Winnings from horse races
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194BB
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30%
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30%
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Rs. 10,000/- (Per FY)
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9
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Payment to Contractors
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194C
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1%
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2%
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Rs. 30,000/- per Transaction (or) Rs. 1,00,000/- p.a
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10
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Payment to contract transporters not covered 44AE
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194C
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1%
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2%
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Rs. 30,000/- per transaction (or) Rs. 1,00,000/- p.a
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11
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Insurance commission
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194D
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5%
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10%
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Rs. 15,000/- p.a
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12
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Payment in respect of life insurance policy (if taxable)
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194DA
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5%
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5%
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Rs. 1,00,000/-p.a
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13
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Payment in respect of deposit under National Savings Scheme
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194EE
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10%
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10%
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Rs. 2,500/- p.a.
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14
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Commission, etc., on sale of lottery tickets
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194G
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5%
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5%
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Rs. 15,000/- p.a.
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15
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Commission & Brokerage
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194H
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5%
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5%
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Rs. 15,000/- p.a.
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16
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a. Rent - Plant & Machinery.
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194I(a)
194I(b)
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2%
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2%
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Rs. 2,40,000/- p.a.
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b. Rent - Land, Building & Furniture or fittings.
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10%
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10%
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17
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Sale of Immovable Property
other than Agricultural Land
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194IA
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1%
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1%
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Rs. 50,00,000/- and above per transaction
(TDS is to be deducted at the rate of one per cent of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher)
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18
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Payment of Rent By individuals /HUFs*
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194IB
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5%
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5%
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Rs.50,000 per month
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19
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Payment of monetary
Consideration (not being a consideration in kind) under Joint
Development Agreements
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194IC
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10%
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10%
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No limit
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20
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Payment for Fees for technical services, Professional service or Royalty
- Fees for technical service
- call center 2% (w.e.f. 01.07.2017)
- Royalty consideration for sales, distribution, or exhibition of cinematographic films
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194J
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2%
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2%
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Rs.30,000/- p.a.
Rs.30,000/- p.a.
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a. Fee in all other cases
b. Other Royalty
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10%
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10%
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21
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Payment of compensation on compulsory acquisition of certain immovable property (Other than Agri Land)
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194LA
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10%
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10%
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Aggregate amt during FY not exceeds Rs. 2,50,000
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22
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Payment made by Individual / HUF to any resident contractor or professional or commission.
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194M
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5%
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5%
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Above Rs. 50,00,000/-
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22
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a. Cash withdrawal during the year from one or more account maintained with a bank, co-operative society engaged in business of banking or a post office
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194N
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2%
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2%
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Cash withdrawal in excess of Rs. 1 crore (in case of Co- Operative Society - in excess of Rs. 3 Crores)
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b. Cash withdrawal by any person has not filed return of income for 3 previous years as per Sec 139(1) from bank, co-operative society
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194N
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2%
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2%
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Cash withdrawal in excess of Rs. 20 Lakhs upto Rs. 1 crore.
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5%
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5%
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Cash withdrawal Above 1 Crore (in case of Co- Operative Society - in excess of Rs. 3 Crores)
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23
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Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform.
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194-O
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1%
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1%
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In Excess of Rs.5,00,000/-
No Limit for other than individual/HUF
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24
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Purchase of goods
(This section is applicable for the person whose turnover exceeds 10 crores during preceding FY)
Not applicable to
1. transaction on which any other TDS sec applicable (or)
2. Other than TCS sec 206C(1h) applicable transactions
(Also refer P.No. 4.1 in page No. 8)
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194Q
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0.1%
(If No PAN – 5%)
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0.1%
(If No PAN – 5%)
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If aggregate purchase from single vendor
> 50 lakh in the financial year.
(Limit of 50 lakhs is considered in each financial year. The 50 lakhs exemption is for every financial year for every vendor)
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25
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TDS on benefit or perquisite of a business or profession (Applies to any benefit or perquisite whether in cash or in kind or partly in cash and partly in kind)
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194R
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10%
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10%
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Above 20,000/-
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26
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Payment / credit of consideration for transfer of virtual digital assets
(W.e.f. 1st July 2022)
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194S
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1%
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1%
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“Specified Person” Payer– 50,000 Other Payers – 10,000
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3. TDS ON NON - RESIDENT PAYMENTS:
For Non-resident payments there is no basic exemption limits like resident TDS payment (i.e. 1 L for
Contractors, 30K for professions, 2.40L rent, etc)
3.1. TDS Rates for Frequent /Common Payments (As per Indian Income Tax Act)
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Nature of
Payment
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Individual
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Firm / society
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Non-Domestic Company
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0-50L TDS
(incl. of SC- Nil ;
Ed.cess 4%)
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> 50L - 1 Cr TDS
(incl. of SC- 10%
; Ed.cess 4%)
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>1 Cr – 2 Cr TDS
(incl. of SC- 15%
; Ed.cess 4%)
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>2 Cr – 5 Cr TDS
(incl. of SC- 25%
; Ed.cess 4%)
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> 5 Cr TDS
(incl. of SC- 37%
; Ed.cess 4%)
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0- 0 - 1 Cr TDS
(incl. of SC- Nil ; Ed.cess 4%)
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> 1 Cr TDS (incl. of SC- 12% ;
Ed.cess 4%)
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0- 1 Cr TDS
(incl. of SC- Nil ;
Ed.cess 4%)
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> l Cr –
10 Cr TDS(incl. of SC- 2% ;Ed.cess
4%)
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>10 Cr TDS
(incl. of SC- 5%
; Ed.cess 4%)
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Interest on foreign borrowing Except mentioned in 194 LB or LC
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20.8
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22.88
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23.92
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26
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28.496
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20.8
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23.296
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20.8
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21.216
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21.84
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Other
Income
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31.2
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34.32
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35.88
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39
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42.744
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31.2
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34.944
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41.6
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42.432
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43.68
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Royalty
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20.8
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22.88
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23.92
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26
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28.496
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20.8
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23.296
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20.8
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21.216
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21.84
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FTS
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20.8
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22.88
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23.92
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26
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28.496
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20.8
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23.296
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20.8
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21.216
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21.84
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3.2. Other Than 10% Tds for Royalty and Fees for Technical Services (FTS) Withholding Tax
Rates as per DTAA
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No
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Country Name
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Royalty
(Tax rate)
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FTS –{Fees for Technical service} – (Tax rate )
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1
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Australia (MAC)
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a) 10% in case of rental of equipment and Service provided along with know how and technical service.
b) In other case –
(i) 15% if the payer is govt or specified organization (or) 20% in any other cases (1st 5 years)
(ii) 15% (subsequent years) in all cases
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2
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Bangladesh
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10%
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No separate provision in DTAA
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3
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Belarus
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15%
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15%
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4
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Brazil
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25% for use of trademark; 15% for others
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No separate provision in DTAA
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5
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Bulgaria
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15% of royalty relating to literary, artistic, scientific works other than films or tapes used for radio or television broadcasting; 20% in other cases
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20%
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6
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Canada (MAC)
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10% - 20%
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10% - 20%
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7
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Denmark
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20%
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20%
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7
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Greece
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10%
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No separate provision in DTAA
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8
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Italy
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20%
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20%
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10
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Jordan
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20%
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20%
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12
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Kyrgyz republic
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15%
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15%
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13
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Libyan Arab Jamahiriya
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30%
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No separate provision in DTAA
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14
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Mongolia
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15%
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15%
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15
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Mauritius
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15%
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10%
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16
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Myanmar
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10%
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No separate provision in DTAA
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|
17
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Mozambique
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10%
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No separate provision in DTAA
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18
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Nepal
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15%
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No separate provision in DTAA
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19
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Oman
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15%
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15%
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20
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Philippines
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15% If it is payable in pursuance of any collaboration agreement approved by the government of India
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No separate provision in DTAA
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21
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Poland
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15%
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15%
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22
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Saudi Arabia
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10%
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No separate provision in DTAA
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23
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Spain (MFN)
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(i) 10% in case royalty relating to payment for right to use industrial, commerce or scientific equipment
(ii) 20% for other Royalty
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20%
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24
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Syrian Arab Republic
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10%
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No separate provision in DTAA
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25
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Tajikistan
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10%
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No separate provision in DTAA
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26
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Tanzania
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10%
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No separate provision in DTAA
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27
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Thailand
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10%
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No separate provision in DTAA
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|
28
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Turkey
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15%
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15%
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29
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United Arab Emirates
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10%
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No separate provision in DTAA
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|
30
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UK (MAC)
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a) 10% in case of rental of equipment and Service provided along with know how and technical service.
b) In other case –
(i)15% if the payer is govt or specified organization (or)20% in any other cases (1st 5 years)
(ii)15% (subsequent years) in all cases
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|
31
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USA (MAC)
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a) 10% in case of rental of equipment and Service provided along with know how and technical service.
b) In other case –
(i)15% if the payer is govt or specified organization (or)20% in any other cases (1st 5 years)
(ii)15% (subsequent years) in all cases
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3.3. Make Available Clause (MAC)
Countries in which Make Available Clause is mentioned under Fees for technical services of DTAA;
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No
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Country name
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Fees for Technical service (FTS)
|
|
1
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Australia
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Make Available Clause apply
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|
2
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Canada
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Make Available Clause apply
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3
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Netherlands
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Make Available Clause apply
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|
4
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Portuguese Republic
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Make Available Clause apply
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5
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Singapore
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Make Available Clause apply
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6
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UK
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Make Available Clause apply
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7
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USA
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Make Available Clause apply
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3.4. Most Favoured Nations (MFN)
As per the CBDT circular No. 3/2022 with subject -Clarification regarding the Most-Favoured-Nation (MFN) clause in the Protocol to India's DTAAs with certain countries it clarify applicability of the MFN clause. The relevant extract is as follows;
“5. In view of the above, it is hereby clarified that the applicability of the MFN clause and benefit of the lower rate or restricted scope of source taxation rights in relation to certain items of income (such as dividends, interest income, royalties, Fees for Technical Services, etc.) provided in India's DTAAs with the third States will be available to the first (OECD) State only when all the following conditions are met:
(i) The second treaty (with the third State) is entered into after the signature/ Entry into Force (depending upon the language of the MFN clause) of the treaty between India and the first State;
(ii) The second treaty is entered into between India and a State which is a member of the OECD at the time of signing the treaty with it;
(iii) India limits its taxing rights in the second treaty in relation to rate or scope of taxation in respect of the relevant items of income; and
(iv) A separate notification has been issued by India, importing the benefits of the second treaty into the treaty with the first State, as required by the provisions of sub-section (1) of Section 90 of the Income Tax Act, 1961.
If all the conditions enumerated in Paragraph 5(i) to (iv) are satisfied, then the lower rate or restricted scope in the treaty with the third State is imported into the treaty with an OECD State having MFN clause from the date as per the provisions of the MFN clause in the DTAA, after following the due procedure under the Indian tax law.
With the above background the following countries having the MFL clause (under PROTOCOL) under respective DTAA, however MFN clause shall be applied based on aforesaid circular.
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S.NO
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Country
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1
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Belgium
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2
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Finland
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3
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France
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4
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Hungary
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5
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Netherlands
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6
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Spain
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7
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Sweden
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8
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Switzerland
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Note : Even some countries covered under Most-Favoured Nation clause but based on the status member countries of WTO, but it may not relevant to DTAA applicability.
3.5 The Multilateral Instrument (MLI) to Implement Tax Treaty Relate Measures to Prevent Base Erosion And Profit Shifting (BEPS)
The Multilateral Instrument (MLI) plays a crucial role in international taxation by enabling swift implementation of tax treaty-related measures to prevent Base Erosion and Profit Shifting (BEPS). It modifies existing bilateral tax treaties to incorporate BEPS recommendations without the need for separate bilateral negotiations. The MLI helps tackle tax avoidance, improve dispute resolution, prevent treaty abuse, and ensure more effective tax treaty implementation. Its adoption signifies a commitment to a coherent international tax framework and enhances transparency and fairness in the global tax landscape.
Important Note : Therefore, when determining the applicable withholding tax rate, it's essential to consider if the other country has signed the Multilateral Instrument (MLI) with India, as this may influence the withholding tax obligations.
(This space has been intentionally left blank -PTO)
4. TCS % AND PRESCRIBED LIMITS FOR TCS COLLECTION
|
Sec.
|
Particulars
|
TCS Rates (in %)
|
|
206C(1)
|
Sale of the following:
|
|
|
a) Alcoholic Liquor for Human Consumption
|
1%
|
|
b) Tendu leaves
|
5%
|
|
c) Timber obtained under a forest lease
|
2.50%
|
|
d) Timber obtained by any mode other than under a forest lease
|
2.50%
|
|
e) Any other forest produce not being timber or tendu leaves
|
2.50%
|
|
f) Scrap
|
1%
|
|
g) Minerals, being coal or lignite or iron ore
|
1%
|
|
206C(1C)
|
Grant of lease or license of the following:
|
|
|
a) Parking lot
|
2%
|
|
b) Toll Plaza
|
2%
|
|
c) Mining and quarrying (Other than mining and quarrying of mineral oil, petroleum and natural gas)
|
2%
|
|
206C(1F)
|
Sale of Car value more than 10 Lakhs
|
1%
|
|
206C(1G)(a)
|
@-remittances for educational and medical treatment done under Liberalised Remittance Scheme (LRS)
|
5% (subject to a threshold limit exceeds of INR 7 Lakhs per year)
|
|
@- All other remittances done under Liberalised Remittance Scheme (LRS) –(W.E.F 1st July 2023)
|
20%
|
|
206C(1G)(b)
|
@-TCS on selling of overseas tour package –(W.E.F 1st July 2023)
|
20%
|
|
206C(1H)
|
@-selling goods other than those already covered under TCS provisions
(Not applicable business turnover is less than INR 10 Crore in the preceding financial year)
(Also Refer 4.1 below)
|
0.1% of the goods sold exceeding INR 50 Lakhs in financial year
(In non-PAN/Aadhaar cases the rate shall be 5%)
|
|
4.1 Comparison of 194Q (TDS) & 206C(1H) (TCS) with Example
|
|
Applicability of Sec 206C(1H) –
- Sec 206C(1H) will apply based on applicability of Sec. 194Q (TDS deduction on purchase of goods) from 1st July 2021
- Second Proviso to Section 206C(1H) provides that if the buyer is liable to deduct tax under Sec 194Q on the goods purchased by him from the seller and has deducted such amount, no TCS on the same transaction. Section 194Q(5) provides that no tax is required to be deducted by a person under this provision if tax is deductible under any other provision or tax is collectable under section 206C [other than a transaction on which tax is collectable under Section 206C(1H)].
- Though Section 206C(1H) excludes a transaction on which tax is actually deducted under any other provision (which will cover Section 194Q as well), but Section 194Q(5) does not create a similar exception for a transaction on which tax is collectible under Section 206C(1H). Thus, the buyer shall have the primary and foremost obligation to deduct the tax and no tax shall be collected on such transaction under Section 206C(1H). However, if the buyer makes a default, the liability to collect the tax gets shifted to the seller.
Applicability of Sec 194Q : -
- The total sales, gross receipts or turnover of the buyer from the business should exceed Rs. 10 crores during the financial year immediately preceding the financial year in which such goods are purchased.
- If the value of purchase exceeds Rs. 50 lakhs.
- Tax is required to be deducted at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier.
Example of Applicability of Section 194Q & 206C(1H)
|
Particulars
|
Scenario 1
|
Scenario 2
|
Scenario 3
|
|
|
|
|
|
|
Turnover of Seller (In cr.)
|
12
|
6
|
12
|
|
Turnover of Buyer (In cr.)
|
6
|
12
|
12
|
|
Sale of goods (In cr.)
|
2
|
2
|
2
|
|
Sales consideration paid during the year (In cr.)
|
1
|
1
|
1
|
|
Who is liable to deduct or collect tax?
|
Seller-206C(1H)
|
Buyer-194Q
|
Buyer-194Q
|
|
Rate of Tax
|
0.1%
|
0.1%
|
0.1%
|
|
Amount on which tax to be deducted or collected (In Cr.)
|
0.5
|
1.5
|
1.5
|
|
Tax to be deducted or collected
|
5,000
|
15,000
|
15,000
|
|
5. EQUALISATION LEVY
|
Applicability
|
% of Levy
|
Responsibility of payment of Levy
|
|
Any payable to a non-resident person greater than 1,00,000/- for the online advertisement services and other related services such as provisioning of digital space.
eg:- Advertisement in Facebook / Google Ads / Twitter / Linkedin / Amazon or other Cloud space and billing from abroad
|
6% from the consideration paid or payable to a non-resident
|
The Receiver of the service
|
|
Sum received or receivable by an e-commerce operator from e-commerce supply of goods or services made or provided or facilitated to
i) A person resident in India; or
ii) A person who buys such goods or services or both using internet protocols located address in India; or
iii) Sale of advertisement which targets a customer who is resident in India or a customer who accesses the advertisement through internet protocol address located in India; or
iv) Sale of data collected from a person who is resident in India or from a person who uses internet protocol address located in India
(This levy is not applicable if the sale, turnover or gross receipts of the e-commerce operator from e-commerce supply or services made or provided or facilitated to the persons mentioned above is less than Rs. 2 crores during the previous year)
eg:- This is applicable to the companies like Amazon /flipkart and having No permanent establishment in India.
|
2% on the sum received or receivable by an e-commerce operator
|
E-commerce operator
|
6. OTHER IMPORTANT POINTS IN TDS / TCS
6.1.1 TDS on “NO PAN” or “Invalid PAN” Cases (SEC. 206AA)
If the transactions liable to TDS and the deductee has not intimated the PAN (or) having No PAN (or)
having Invalid PAN (may be non-linking of Aadhar), then TDS deduction would be Higher of the rate
specified in the relevant provision or at the rate or rates in force or 20%.
Exemption for Non-resident from Sec 206AA with terms & Conditions
CBDT has issued notification no. 53/2016 dated 24 June 2016 giving relaxation to Non-residents ,not being a company, or a foreign company from furnishing PAN No. in India. TDS at higher rate of 20% will not be deducted if following conditions are satisfied by non-resident:-
Provisions of Sec 206AA shall not apply in respect of payments in the nature of
- Interest,
- Royalty,
- Fees for technical services and
- Payments on transfer of any capital asset,
If the non-resident furnishes the following details/ documents
(i) name, e-mail id, contact number;
(ii) address in the country of which the non-resident is a resident;
(iii) Tax Residency Certificate (TRC) from the Government of that country if the law of that country provides for issuance of such certificate;
(iv) Tax Identification Number (TIN) or any other Unique Identification Number of the non- resident of his residence country.
All the above information needs to be furnished in TDS returns as well.
For example:- ABC Pvt Ltd is making payment of Fees for technical services to X Inc, a US Company who do not have PAN in India. Higher rate of 20% u/s 206AA will not be applicable if X Inc provides Name, E-mail, Contact no, Address of USA, TRC, TIN or SSN of USA
6.1.2 TCS on “NO PAN” or “Invalid PAN” Cases (SEC. 206CC)
If PAN of collectee is not intimated to the collector (or) having No PAN (or) having Invalid PAN (may be non-linking of Aadhar), then TCS will be collected by virtue of sec 206CC either twice the rate specified in the table give above (point No.4 in page No.8) or at the rate of 5 % whichever is higher.
6.1.3 Deduct or Collect Tax at Source at Higher Rates (206AB) / (206CCA) -Non filer of Income Tax Return under certain circumstance.
The tax is required to be deducted/collected at source at rates
- Twice the normal rate prescribed under relevant provision (or)
- 5% Whichever is Higher
Note – If Sec. 206AB / (i.e No PAN or Inactive PAN) tax shall be deducted @ higher of the above or rate prescribed under 206AA or 206CC (pls refer above)
The above provision is applicable if the transaction is incurred with the person who satisfies the following conditions:
- The person does not file the income tax return for the financial year immediately preceding the FY in which tax is required to be deducted,
- where the income tax return filing due date is expired (not belated return) and
- The total amount of deduction and collection of tax (TDS and TCS) is Rs.50,000 or more in the immediately preceding FY.
Note: It does not apply
- To a non-resident who does not have a permanent establishment in India.
- Deduction under Section 192, 192A, 194B, 194BB, 194BBA, 194IA, 194IB, 194LBC, 194M or 194N.
6.2 Requirement of FORM 15CA and CB for foreign remittance
- For all non-resident remittance Form 15CA to be issued except transactions which are given in the Rule 37BB which including payments for imports.
- Where remittance is chargeable to tax under domestic law and the remittance, or the aggregate of such remittances exceeds 5 lakh rupees during the FY and a certificate in Form No. 15CB to be obtained from a CA to be electronically.
6.3 TDS on goods carriage transports
Declaration to be obtained from goods carriage contractors for non-deduction of TDS: With effect from 1st July, 2015 TDS will be applicable at the rate of 1% or 2%, for all payments made to a transport contractor during the course of plying, hiring or leasing of goods carriage, except in cases where such contractor has furnished a Declaration that they are owning not more than 10 goods carriage at any time during the year.
6.4 Identifying the category of the Person based on the PAN
If 4th letter of PAN is P – then the PAN belongs to Person (i.e., Individual)
H – HUF
F – Firm (Partnership Firm)
C – Company
T – Trust
5th letter of the PAN represents the 1st Letter of Name of person/ Firm/ Company
6.5 Other General Points
- GST to be excluded for TDS/TCS calculation.
- For Reimbursement- Proper supporting documents is in the company’s Name, then it is excluded for TDS calculation eg:- payment of tax like GST, TDS, ESI, PF etc
6.6 Interest for Late payment TDS /TCS
- If deducted but not paid – 1.5% p.m or part thereof from the month of deduction (not from the due date of the month) till the date of payment.
- If Not deducted – 1% p.m or part thereof from the month of Deduction till the date of Payment.
6.7 Late Filing fees for not filing of TDS /TCS return on or before due date. – Rs.200 per day or maximum of TDS amount for the quarter whichever is lower.
“Wish you all the success.”
We hope you find this TDS / TCS analysis useful, and we also solicit your feedback on these updates.
If you require any clarification related to this document feel free to reach us.
Thank You.
V.K. DINESH & SENTHILRAJA
Chartered Accountants
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Date : 01.04.2024
TEAM VKDS
Disclaimer:
This presentation intends to provide only an overall insight of the subjects covered herein. It should neither be regarded as comprehensive nor sufficient for making any decisions, nor should it be used in place of professional advice. V.K. Dinesh & Senthilraja Chartered Accountants does not accept any responsibility for defeat /loss, if any arising from any action taken or not taken by anyone using this presentation.