TDS Rates for FY 2018-19
Tax Deduction At Source, its Provisions and its revise rates for FY: 2018-19
TDS: The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
TDS is one of the several modes of recovery of tax and liability of TDS is without prejudice to other modes of recovery. TDS is not an alternative tax to direct levy, it is rather a supplement. The provisions of TDS have been enacted for the purpose of easy collection of taxes and to avoid evasion thereof by suitable tailoring of accounts.
In the recent past, the scope of Tax Deduction at Source (hereinafter referred to as ‘TDS’) has been widened by enlarging the scope of ‘work’ in relation to contractors/sub-contractors, and by extending TDS on rent, fees for professional and technical services, and payment on compulsory acquisition, etc It is very likely that tax. TDS would be extended to certain more payments, in future, as TDS has the triple advantage of augmenting government revenue, checking tax evasion and widening the tax base.
Objective of TDS : (i) Recovery of Tax Income Tax is primarily a tax on income and the person earning income is liable to pay tax by way of advance tax, self-assessment tax and tax on regular assessment. In this system of direct levy, the Tax Department comes into picture almost one year after the income has been earned. If the income earned has been spent away by that time, making of assessment would get reduced to a mere academic exercise, and the department would be a helpless spectator. Hence the system of direct levy has been gradually supplemented by the Tax Deduction at Source Scheme, wherein tax is deducted at specified rates from income/other payments made to the payee. The objective underlying Tax Deduction at Source is to collect taxes before disbursements are made so as to ensure collection or revenue at the earliest opportunity. In fact, this system operates as a form of forced savings.
(ii) Widening of Tax Net The other important function of the TDS system is to provide information about tax payers and help tax administration in broad basing the tax net. This objective is achieved by scrutiny of return statements filed by the persons who deduct tax at source. Some tax payers, non-filers too, come to the tax department for claiming credit of TDS which gives an opportunity to the tax department to enquire about the tax paying status of such persons
Liability to Deduct TDS : The persons responsible for making payment of specified incomes/sums (such as salary, interest, rent, professional/technical fees” etc) are, liable to deduct tax at source from such payments, In respect of certain sums, the liability to deduct TDS arises only if the payment exceeds the specified amount. Certain payments or payments made to certain persons have been specifically exempted from TDS provisions.
Rates for Tax Deduction at source
AY: 2019-20
The rate of TDS shall be increased by applicable surcharge and Health & Education cess.
There are various TDS Forms have been set depending on the reason of deduction. Different TDS forms as follows:
Interest on late payment of TDS
Interest is chargeable on short payment/late payment of TDS. There can be following scenarios :-
- When TDS is not deductedInterest at the rate of 1% per month or part thereof, for the period from the date on which TDS is deductible/collectible to the date on which TDS/TCS is actually deducted/collected.
- When TDS is deducted but payment is made lately
Interest at the rate of 1.5% per month or part thereof, for the period from the date on which TDS is actually deducted/collected to the date on which such TDS/TCS is actually paid.
As per define law, Calendar month is considered in calculating interest therefore if you delay payment by one day, you have to pay interest for two months. For example, if TDS is deducted in month of July and deposited on 8th of August then you have to pay interest for 2 month i.e. July and August. Total interest payable shall be 3%.
As per traces calculation if TDS is deducted in month of July and deposited on 8th of August then you have to pay interest for 1 month i.e. July and August. Total interest payable shall be 1.5%. if the payment is made on the last day of July i.e. 31st July
Interest paid on delay in deposit of TDS is not allowed as a expenditure under Income Tax Act.
Notes – Interest on late payment of TDS can be paid before furnishing TDS return or after demand raised by Traces. Such interest can be adjusted from amount remaining in any TDS Challan (under any section).
Non – Applicability
TDS can be avoided by submitting Form 15G or 15H. Form 15H is for senior citizens and they can submit if there is no tax on total income. Form 15G is for everybody else and they can file if the tax on total income is nil and total interest income is less than the basic exemption limit except NRIs.
TDS Certificates
Form 16 is your salary Tax Deducted at Source certificate issued by the employer deducting the tax while making payment to an employee. If an employer deducts Tax Deducted at Source on salary as per the Income tax rules of India then he must issue Form 16.
Form 16A TDS Certificate which declares or certifies TDS amount deducted and deposited on all other payments except salary.
Tax Deducted at Source on salaries is deducted at the average rate of estimated income (as per the Slab rates), TDS on interest, Rent etc. is to be deducted at the rates specified by the government.
All details that are there in Form 16A are available on Form 26AS. This can be used to file your return. But the same is not in the case of Form 16. All the Details of Form 16 that are available in Form 26AS is only deducted by the employer.
Requirement for deducting TDS
Under the Section of 206AA, if PAN No. is not furnished by the taxpayer then the withholding tax rate would be at 20% or at the rates in force or whichever is higher. PAN is not mandatory for the Non-residents where taxes have been deducted.
PENALTIES:
Late filing fees under section 234E
As per section 234E, where a person fails to file the TDS/TCS return on or before the due date prescribed in this regard, then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the failure continues. The amount of late fees shall not exceed the amount of TDS.
TDS/TCS return cannot be filed without payment of late filing fees as discussed above. In other words, the late filing fees shall be deposited before filing the TDS return. It should be noted that Rs. 200 per day is not penalty but it is a late filing fee.
Penalty under section 271H
As per section 271H, where a person fails to file the statement of tax deducted/collect at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then assessing officer may direct such person to pay penalty under section 271H. Minimum penalty can be levied of Rs. 10,000 which can go upto Rs. 1,00,000. Penalty under section 271H will be in addition to late filing fees prescribed under section 234E.
Apart from delay in filing of TDS/TCS return, section 271H also covers cases of filing incorrect TDS/TCS return. Penalty under section 271H can also be levied if the deductor/collector files an incorrect TDS/TCS return. In other words, minimum penalty of Rs. 10,000 and maximum penalty of upto Rs. 1,00,000 can be levied if the deductor/collector files an incorrect TDS/TCS return.
No penalty will be levied under section 271H for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him, along with the late-filing fee and interest (if any), to the credit of the Central Government, he had filed the TDS/TCS return before the expiry of a period of one year from the due date of filing the TDS/TCS return. In other words, no penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if following conditions are satisfied:
- The tax deducted/collected at source is paid to the credit of the Government.
- Late filing fees and interest (if any) is paid to the credit of the Government.
- The TDS/TCD return is filed before the expiry of a period of one year from the due date specified in this behalf.
It should be noted that the above relaxation is applicable only in case of penalty levied under section 271H for delay in filing the TDS/TCS return and not in case of filing incorrect TDS/TCS statement.
Apart from above relaxation, in following two cases the taxpayer can get relief from penalty under section 271H:
- Under section 273A(4) the Principal Commissioner of Income-tax or Commissioner of Income-tax has power to waive or reduce the penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A (4) in this regard are satisfied.
- Apart from shelter of section 273A (4), section 273B also provides immunity from penalty in genuine cases. As per section 273B, penalty under section 271H will not be levied if the taxpayer proves that there was a reasonable cause for failure.
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