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 2022-23 related Amendments are highlighted in Red colour for quick reference
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1. TDS / TCS / EQUALISATION LEVY SHALL 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.
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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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-
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Rs. 5,000
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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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Monetary Limit – Rs 5,000/-
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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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-
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Rs. 10,000/-
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7
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Winnings from horse races
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194BB
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30%
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-
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Rs. 10,000/-
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8
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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 contract (or) Rs. 1,00,000/- p.a
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9
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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 contract (or) Rs. 75,000/- p.a
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10
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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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15,000/- p.a
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11
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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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12
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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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13
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Payment for Fees for technical services,Professional service or Royalty
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194J
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Rs. 30,000/- p.a.
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- Fees for technical service
- call center 2% (w.e.f. 01.07.2017)
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2%
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2%
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a. Fee in all other cases
b. Royalty consideration for sales, distribution or exhibition of cinematographic films
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10%
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10%
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14
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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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Above Rs. 50,00,000/- 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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15
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Payment of Rent By individuals /HUFs*
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194IB
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5%
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-
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Rs.50,000 per month
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16
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Payment of monetary
consideration under Joint
Development Agreements
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194IC
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10%
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10%
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-
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17
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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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18
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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
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b. Cash withdrawal Cash 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
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19
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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/-
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20
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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. 7)
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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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21
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TDS on benefit or perquisite of a business or profession
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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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21
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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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10.4
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11.44
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11.96
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13
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14.248
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10.4
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11.648
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10.4
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10.608
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10.92
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FTS
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10.4
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11.44
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11.96
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13
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14.248
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10.4
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11.648
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10.4
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10.608
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10.92
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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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(i) 10% in case of rental of equipment and Service provided along with known how and technical service
(ii) In other case -20% (1st 5 years) / 15% (subsequent years)
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2
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Bangladesh (MFN)
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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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15% - 20%
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15% - 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 (MFN)
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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 Republic
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10%
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No separate provision in DTAA
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30
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UK (MFN)
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(i) 10% in case of rental of equipment and Service provided along with known how and technical service
In other case -20% (1st 5 years) / 15% (subsequent years)
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31
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USA (MFN)
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(ii) 10% in case of rental of equipment and Service provided along with known how and technical service
(iii) In other case -20% (1st 5 years) / 15% (subsequent years)
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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)
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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)
If under any Convention or Agreement between India and a third State being a member of the OECD which enters into force after 1st January, 1990, India limits its taxation on royalties or fees for technical services to a rate lower or a scope more restricted than the rate or scope provided for in the present Agreement on the said items of income, the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under the present Agreement with effect from the date from which the present Agreement or the said Convention or Agreement is effective, whichever date is later
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S.NO
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Country
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Royalty
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Fees for Technical service (FTS)
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|
1
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Afghanistan
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Most Favoured Nation
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Most Favoured Nation
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2
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Bangladesh
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Most Favoured Nation
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Most Favoured Nation
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3
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Belgium
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Most Favoured Nation
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Most Favoured Nation
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4
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Bhutan
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Most Favoured Nation
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Most Favoured Nation
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5
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Finland
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Most Favoured Nation
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Most Favoured Nation
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|
6
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France
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Most Favoured Nation
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Most Favoured Nation
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|
7
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Hungary
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Most Favoured Nation
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Most Favoured Nation
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|
8
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Kazakhstan
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Most Favoured Nation
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Most Favoured Nation
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|
9
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Maldives
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Most Favoured Nation
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Most Favoured Nation
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|
10
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Nepal
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Most Favoured Nation
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Most Favoured Nation
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|
11
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Netherlands
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Most Favoured Nation
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Most Favoured Nation
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12
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Sri Lanka
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Most Favoured Nation
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Most Favoured Nation
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13
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Spain
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Most Favoured Nation
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Most Favoured Nation
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14
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Sweden
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Most Favoured Nation
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Most Favoured Nation
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15
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Switzerland
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Most Favoured Nation
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Most Favoured Nation
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3.5 Multilateral Convention to Implement Tax Treaty Relate Measures to Prevent
Base Erosion And Profit Shifting (BEPS)
BEPS package included tax treaty-related measures to address certain hybrid mismatch
arrangements, prevent treaty abuse, address artificial avoidance of permanent establishment
status, and improve dispute resolution;
Conscious of the need to ensure swift, co-ordinate and consistent implementation of
the treaty-related BEPS measures in a multilateral context;
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S.NO
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COUNTRY
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EFFECTIVE DATE
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1
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Australia
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01/04/2020
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2
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Austria
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|
3
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Belgium
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4
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Finland
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5
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Georgia
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6
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Ireland
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7
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Japan
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8
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Latvia
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|
9
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Lithuania
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|
10
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Luxembourg
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|
11
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Malta
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|
13
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Poland
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|
14
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Serbia
|
|
15
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Singapore
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16
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United Kingdom
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17
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Slovak Republic
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|
18
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Canada
|
01/04/2021
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|
19
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Cyprus
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|
20
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Czech Republic
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21
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Norway
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22
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Portuguese Republic
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23
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Russia
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24
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Ukraine
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4. TCS % AND PRESCRIBED LIMITS FOR TCS COLLECTION
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Sec.
|
Particulars
|
TCS Rates (in %)
|
|
206C
(1)
|
Sale of the following:
|
|
|
a) Alcoholic Liquor for Human Consumption
|
1%
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b) Tendu leaves
|
5%
|
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c) Timber obtained under a forest lease
|
2.50%
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d) Timber obtained by any mode other than under a forest lease
|
2.50%
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e) Any other forest produce not being timber or tendu leaves
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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)
|
@-All outward remittances done under Liberalised Remittance Scheme (LRS)
|
5 % (subject to a threshold limit exceeds of INR 7 Lakhs per year)
|
|
206C(1G)(b)
|
@-TCS on selling of overseas tour package
|
5 %
|
|
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” Cases (SEC. 206AA)
If the transactions liable to TDS and No PAN is available, then TDS deduction would be Higher of the
rate specified in the relevant provision 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 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” Cases (SEC. 206CC)
If PAN of collectee is not intimated to the collector, tax will be collected by virtue of sec 206CC either twice the rate specified in the table give above (point No.4 in page No.6) or at the rate of 5 % whichever is higher.
6.1.3 Deduct or Collect Tax at Source at Higher Rates
The tax is required to be deducted/collected at source at rates higher than prescribed in the Act, if the transaction is incurred with the person who satisfies the following conditions:
- The person not file the income tax return for the financial year (before Budget 2022, two FY) immediately preceding the FY in which tax is required to be deducted,
- where the income tax return (not belated return) filing due date is expired and
- The total amount of deduction and collection of tax (TDS and TCS) is Rs.50,000 or more in each of these two previous years.
Note: It does not apply to a non-resident who does not have a permanent establishment in India. Permanent establishment for this purpose includes a fixed place of business where the enterprise’s business is carried out wholly or partially.
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 represent 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 form the due date of the month)
- If Not deducted – 1% p.m or part thereof from the month of Deduction
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.
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V.K. DINESH & SENTHILRAJA
Chartered Accountants