Corporate Fiscal Obligations

DEDUCTION OF TAX AT SOURCE

Salary [Section 192]
1) Applicability of TDS under section 192
This section casts an obligation on every person
responsible for paying any income chargeable to
tax under the head ‘Salaries’ to deduct income-tax
at the time of payment on the amount payable.
2) Manner of deduction of tax
• Such income-tax has to be calculated at the average rate of income-tax
computed on the basis of the rates in force for the relevant financial year
in which the payment is made, on the estimated total income of the
assessee where the employee intimates to the employer his intent to
exercise the option of shifting out of the default tax regime under
section 115BAC.
Note - The liability to deduct tax at source in the case of salaries arises only
at the time of payment.

• Average rate of income-tax means the rate arrived at by dividing the

amount of income- tax calculated on the total income, by such total
income.
• With effect from A.Y. 2024-25, the income-tax in respect of the total
income of an employee would be computed at the rates provided in
section 115BAC(1A), subject to certain conditions, including the
condition that the employee does not avail of specified exemptions
and deductions. The new tax regime provided in section 115BAC is
the default tax regime applicable, inter alia, to an individual.
However, under section 115BAC(6), an employee may exercise an option to
opt out of this tax regime.
• A deductor, being an employer, has to seek information from each
of its employees having income under section 192 regarding their
intended tax regime and each such employee shall intimate the

1
 same to the deductor, being his employer, regarding his intended tax
regime for each year and upon intimation, the deductor shall
compute his total income, and deduct tax at source thereon
according to the option exercised.
If intimation is not made by the employee, it shall be presumed that the
employee continues to be in the default tax regime and has not exercised
the option to opt out of the new tax regime. Accordingly, in such a case,
the employer shall deduct tax at source, on income under section 192, in
accordance with the rates provided under section 115BAC(1A).
It is also clarified that the intimation would not amount to exercising
option under section 115BAC(6) and the person shall be required to do so
separately in accordance with the provisions of that section [Circular No.
4/2023 dated 5.4.2023].

• The concept of payment of tax on non-monetary perquisites has been

provided in sections 192(1A) and (1B). These sections provide that the
employer may pay this tax, at his option, in lieu of deduction of tax at
source from salary payable to the employee. Such tax will have to be
worked out at the average rate applicable to aggregate salary income of the
employee and payment of tax will have to be made every month along
with tax deducted at source on monetary payment of salary, allowances
etc.
• An employer, being an eligible start up referred to in section 80-IAC,
responsible for paying any income to the assessee by way of perquisite
being any specified security or sweat equity shares allotted or
transferred, directly or indirectly, free of cost or at concessional rate to
the assessee, has to deduct or pay, as the case may be, tax on the value
of such perquisite provided to its employee within 14 days from the
earliest of the following dates -
1. after the expiry of 48 months from the end of the relevant assessment year; or
2. from the date of the sale of such specified security or sweat equity share by
the assessee; or
3. from the date of the assessee ceasing to be the employee of the employer

2
 who allotted such shares
Such tax has to deducted or paid on the basis of rates in force for the financial year
in which the said specified security or sweat equity share is allotted or
transferred.
• In cases where an assessee is simultaneously employed under more
than one employer or the assessee takes up a job with another employer
during the financial year after his resignation or retirement from the
services of the former employer, he may furnish the details of the
income under the head “Salaries” due or received by him from the other
employer, the tax deducted therefrom and such other particulars to his
current employer. Thereupon, the subsequent employer should take such
information into consideration and then deduct the tax remaining
payable in respect of the employee’s remuneration from both the
employers put together for the relevant financial year.
• For purposes of deduction of tax out of salaries payable in a foreign
currency, the value of salaries in terms of rupees should be calculated at
the prescribed rate of exchange as specified in Rule 26 of the
Income-tax Rules, 1962.
• In respect of salary payments to employees of Government or to
employees of companies, co-operative societies, local authorities,
universities, institutions, associations or bodies, deduction of tax at source
should be made after allowing relief under section 89(1), where eligible.
• A tax payer having salary income in addition to other income chargeable to
tax for that financial year, may send to the employer, the following
particulars of:
1. such other income and particulars of any tax deducted under any
other provision;
2. loss, if any, under the head ‘Income from house property’, if the
assessee intimated to the employer his intent to exercise the option
of shifting out of the default tax regime provided under section
115BAC(1A).
The employer shall take the above particulars into account while calculating

3
tax deductible at source.
• It is also provided that except in cases where loss from house property
has been adjusted against salary income, the tax deductible from salary
should not be reduced as a consequence of making the above
adjustments. Loss from house property would be adjusted against salary
where the assessee intimated to the employer his intent to exercise the
option of shifting out of the default tax regime provided under section
115BAC(1A). However, loss under the head “income from house
property” shall be allowed to be set off against salary and income under
any other head subject to maximum of ` 2,00,000.
3) Furnishing of statement of particulars of perquisites or profits
in lieu of salary by employer to employee
Section 192(2C) provides that the employer shall furnish to the employee, a
statement in Form No. 12BA giving correct and complete particulars of perquisites
or profits in lieu of salary provided to him and the value thereof. The statement
shall be in the prescribed form and manner. This requirement is applicable only
where the salary paid/payable to an employee exceeds ` 1,50,000. For other
employees, the particulars of perquisites/profits in lieu of salary shall be given
in Form 16 itself.
4) Circular issued by CBDT
Every year, the CBDT issues a circular giving details and direction to all
employers for the purpose of deduction of tax from salaries payable to the
employees during the relevant financial year. These instructions should be
followed.

Interest on securities [Section 193]

Person responsible for deduction of tax at source

This section casts responsibility on every person responsible for paying to a
resident any income by way of interest on securities

Rate of TDS
Such person is vested with the responsibility to deduct income-tax at the rates

4
in force from the amount of interest payable.
The rate at which tax is deductible under section 193 is 10%, both in the case
of domestic companies and resident non-corporate assessees.
Time of tax deduction at source
Tax should be deducted at the time of credit of such income to the account of
the payee or at the time of payment thereof in cash or by issue of a cheque or draft
or by any other mode, whichever is earlier.
Where any income by way of interest on securities is credited to any account in the
books of account of the person liable to pay such income, such crediting is deemed
to be credit of such income to the account of the payee and tax has to be
deducted at source. The account to which such interest is credited may be
called “Interest Payable account” or “Suspense account” or by any other
name.
Non-applicability of TDS under section 193
1. on 4¼% National Defence Bonds 1972, where the bonds are held by an individual
not being a non-resident
2. on 4¼% National Defence Loan, 1968 or 4¾% National Defence Loan,
1972, where the interest is payable to an individual;
3. on National Development Bonds;
4. on 7-year National Savings Certificates (IV Issue);
5. on debentures issued by any institution or authority or any public sector
company or any co-operative society (including a co-operative land mortgage
bank or a co- operative land development bank), as notified by the Central
Government
6. on 6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980, where the bonds are held by
an individual (other than a non-resident), provided that the holders of the bonds
make a written declaration that the total nominal value of the bonds held by
him or on his behalf did not in either case exceed ` 10,000 at any time during the
period to which the interest relates;
7. on any security of the Central Government or a State Government;
Note – It may be noted that tax has to be deducted at source in respect of
interest payable on 8% Savings (Taxable) Bonds, 2003, or 7.75% Savings
(Taxable) Bonds, 2018, only if such interest payable exceeds ` 10,000 during the

5
financial year.

8. on any debentures issued by the company in which the public are

substantially interested to a resident individual or HUF. However,
i. the interest should be paid by the company by an account payee cheque;
ii. the amount of such interest or the aggregate thereof paid
or likely to be paid during the financial year by the
company to such resident individual or HUF should not
exceed ` 5,000.
9. on securities to LIC, GIC, subsidiaries of GIC or any other insurer, provided –
i. the securities are owned by them or
ii. they have full beneficial interest in such securities.
10.to a business trust by a special purpose vehicle on any security.

Dividend [Section 194]

Applicability of TDS under section 194
The principal officer of a domestic company is
required to deduct tax on dividend distributed
or paid by it to its resident shareholders.
The provisions of tax deduction at source under section 194, therefore, applies
only to dividend distributed or paid to resident shareholders.
Rate of TDS
The rate of deduction of tax in respect of such dividend is 10%.
Time of tax deduction at source
The deduction of tax has to be made before making any payment by any mode
in respect of any dividend or before making any distribution or payment to a
resident shareholder of any amount deemed as dividend under section
2(22)(a)/(b)/(c)/(d)/(e).

Non-applicability of TDS under section194

1) No tax is to be deducted in case of a shareholder, being an individual, where -

6
 a) the dividend is paid by any mode
other than cash; and
b) the amount of such dividend or aggregate of dividend distributed or
paid or likely to be distributed or paid during the financial year by the
company to such shareholder does not exceed ` 5,000.
2) The TDS provisions will not apply to such dividend credited or paid to
• LIC, GIC, subsidiaries of GIC or any other insurer provided the
shares are owned by them, or they have full beneficial interest in such
shares
• a business trust by a special purpose vehicle
• any other person as may be notified by the Central Government.

Interest other than interest on securities [Section 194A]

Applicability of TDS under section 194A
This section applies only to interest, other than
“interest on securities”, credited or paid by
assessees other than individuals or Hindu
undivided family. However, an
individual or Hindu undivided family whose total sales, gross receipts or
turnover from the business or profession carried on by him exceed ` 1 crore in
case of business and ` 50 lakhs in case of profession during the immediately
preceding financial year is liable to deduct tax at source under this section.
These provisions apply only to interest paid or credited to residents.

Time of tax deduction at source

The deduction of tax must be made at the time of crediting such interest to the
payee or at the time of its payment in cash or by any other mode, whichever
is earlier.
Where any such interest is credited to any account in the books of account of
the person liable to pay such income, such crediting is deemed to be credit of
such income to the account of the payee and the tax has to be deducted at source.

7
The account to which such interest is credited may be called “Interest Payable
account” or “Suspense account” or by any other name.

Rate of TDS
The rate at which the deduction is to be made is given in Part II of the First Schedule
to the Annual Finance Act.
The rate at which tax is to be deducted is 10% both in the case of resident non-
corporate assessees and domestic companies.
Non-applicability of TDS under section 194A
No deduction of tax shall be made in the following cases:
a) If the aggregate amount of interest paid or credited during the financial year does not
exceed Rs.5,000
This limit is Rs.4000 where the payer is a –
i) banking company
ii) a co-operative society engaged in banking business
iii) post office and interest is credited or paid in respect of any deposit
under notified schemes.
In respect of (i), (ii) and (iii) above, the limit is Rs.50,000 in case of payee being a
senior citizen.
The limit will be calculated with respect to income credited or paid by a branch
of a banking company or a co-operative society or a public company in case
of:
i) time deposits with a banking company
ii) time deposits with a co-operative society carrying on the business
of banking; and
iii) deposits with housing finance companies, provided:
• they are public companies formed and registered in India
• their main object is to carry on the business of providing long-term
finance for construction or purchase of houses in India for residential
purposes
• they are eligible for deduction under section 36(1)(viii).
The threshold limit will be reckoned with reference to the total interest credited

8
or paid by the banking company or the co-operative society or the public
company, as the case may be, (and not with reference to each branch), where
such banking company or co-operative society or public company has adopted
core banking solutions.
b) Interest paid or credited by a firm to any of its partners;
c) Interest paid or credited in respect of deposits under any scheme framed by the Central
Government and notified by it in this behalf;
d) Interest income credited or paid in respect of deposits (other than time deposits made
on or after 1.7.1995) with a banking company to which the Banking Regulation Act,
1949 applies; or
e) Income paid or credited by a co-operative society (other than a co-operative bank) to a
member thereof or to such income credited or paid by a co-operative society to any
other co-operative society;

Payments to contractors and sub-contractors [Section 194C]

Applicability of TDS under section 194C
Section 194C provides for deduction of tax at source from the payment
made to resident contractors and sub-contractors.

Tax has to be deducted at source under section 194C by any person

responsible for paying any sum to a resident contractor for carrying out any
work (including supply of labour for carrying out any work) in pursuance of a
contract between the contractor and the
(i) the Central Government or any State Government; or
(ii) any local authority; or
(iii) any statutory corporation; or
(iv) any company; or
(v) any co-operative society; or
(vi) any statutory authority dealing with housing accommodation; or
(vii) any society registered under the Societies Registration Act, 1860;
or
(viii) any trust; or

9
 (ix) any university established under a Central, State or
Provincial Act and an institution declared to be a
university under the UGC Act, 1956; or
(x) any firm; or
(xi) any Government of a foreign State or foreign
enterprise or any association or body established
outside India; or
(xii) any person, being an individual, HUF, AOP or BOI, who has total
sales, gross receipts or turnover from the business or profession
carried on by him exceeding 1 crore in case of business and 50
lakhs in case of profession during the financial year immediately
preceding the financial year in which such sum is credited or paid
to the account of the contractor.
Time of deduction
Tax has to be deducted at the time of payment of such sum or at the time of
credit of such sum to the account of the contractor, whichever is earlier.
Where any such sum is credited to any account in the books of account of the
person liable to pay such income, such crediting is deemed to be credit of such
income to the account of the payee and the tax has to be deducted at source.
The account to which such sum is credited may be called “Suspense
account” or by any other name.
However, no tax has to be deducted at source in respect of payments made by
individuals/ HUF to a contractor exclusively for personal purposes.
Rate of TDS
The rate of TDS under section 194C on payment to contractors would be 1%
where, the payee is an individual or HUF and 2% in respect of other payees.
The same rate of TDS would apply for both contractors and sub-contractors.
Paye TDS
e rate
Individual/HUF contractor/sub-contractor 1%
Other than individual / HUF contractor/sub-contractor 2%
Contractor in transport business (if PAN is furnished) Nil
Sub-contractor in transport business (if PAN is furnished) Nil

10
Threshold limit for deduction of tax at source under section 194C
No deduction will be required to be made if the consideration for the contract does
not exceed Rs.30,000 in a single payment or Rs.1,00,000 in aggregate during a
financial year.
Non-applicability of TDS under section194C
No deduction is required to be made from the sum credited or paid or likely to
be credited or paid during the previous year to the account of a contractor,
during the course of the business of plying, hiring or leasing goods carriages, if
he furnishes his PAN to the deductor.
In order to convey the true intent of law, it
has been clarified that this relaxation from the
requirement to deduct tax at source shall
only be applicable to the payment in the
nature of transport charges (whether paid by a
person engaged in the business of transport or
otherwise) made to a contractor fulfils the
following three conditions cumulatively -

Important points
i. The deduction of income-tax at source from payments made to non-
resident con- tractors will be governed by the provisions of section
195.
ii. The deduction of income-tax will be made from sums paid for carrying

11
 out any work or for supplying labour for carrying out any work. In other
words, the section will apply only in relation to ‘works contracts’ and
‘labour contracts’ and will not cover contracts for sale of goods.
iii. Contracts for rendering professional services by lawyers, physicians,
surgeons, engineers, accountants, architects, consultants etc., cannot be
regarded as contracts for carrying out any “work” and, accordingly, no
deduction of income-tax is to be made from payments relating to such
contracts under this section. Separate provisions for fees for
professional services have been made under section 194J.

Commission or brokerage [Section 194H]

Applicability and Rate of TDS
Any person other than an individual or HUF, who is responsible for paying any
income by way of commission (other than insurance commission) or brokerage
to a resident shall deduct income tax at the rate of 5%.

However, an individual or HUF whose total sales, gross receipts or turnover

from the business or profession carried on by him exceed ` 1 crore in case of
business and ` 50 lakhs in case of profession during the financial year
immediately preceding financial year in which such commission or brokerage is
credited or paid, is liable to deduct tax at source.
Time of deduction
The deduction shall be made at the time such income is credited to the account
of the payee or at the time of payment in cash or by issue of cheque or draft
or by any other mode, whichever is earlier.
Even where income is credited to some other account, whether called “Suspense
account” or by any other name, in the books of account of the person liable to pay
such income, such crediting shall be deemed to be credit to the account of the payee
for the purposes of this section.
Threshold limit
No deduction is required if the amount of such income or the aggregate of such amount does
not exceed Rs.15000 during the financial year.
Meaning of “Commission or brokerage”

12
“Commission or brokerage” includes any payment received or receivable,
directly or indirectly, by a person acting on behalf of another person for
services rendered, or for any services in the course of buying or selling of
goods, or in relation to any transaction relating to any asset, valuable article
or thing, other than securities.

Non-applicability of TDS under section 19H

This section is not applicable to professional services “Professional Services”

means services rendered by a person in the course of carrying on legal, medical,
engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or such other profession as notified
by the CBDT for the purpose of compulsory maintenance of books of account
under section 44AA.

Further, there would be no requirement to deduct tax at source on commission

or brokerage payments by BSNL or MTNL to their public call office (PCO)
franchisees.

Rent [Section 194-I]

Applicability and Rate of TDS
Any person other than individual or HUF, who is responsible for paying to a resident
any income by way of rent, shall deduct income tax at the rate of:
2% in respect of rent for plant, machinery or equipment

10% in respect of other rental payments (i.e., rent for use of any land or
building, including factory building or land appurtenant to a building, including
factory building, or furniture or fittings).
However, an individual or HUF whose total sales, gross
receipts or turnover from the business or profession
carried on by him
exceed ` 1 crore in case of business and ` 50 lakhs in case of profession during the
F.Y. immediately preceding the F.Y. in which such rent was credited or paid,
is liable to deduct tax at source.

Further, no deduction shall be made under this section from rent credited or paid to

13
a business trust, being a REIT, in respect of any real estate asset owned directly
by it.
Time of deduction
This deduction is to be made at the time of credit of such income to the account
of the payee or at the time of payment thereof in cash or by issue of cheque or draft
or by any other mode, whichever is earlier.
Where any such income is credited to any account, whether called “Suspense
account” or by any other name, in the books of account of the person liable to
pay such income, such crediting shall be deemed to be credit of such income to
the account of the payee and the provisions of this section will apply
accordingly.
Threshold limit
No deduction need be made where the amount of such income or the aggregate of the
amounts of such income credited or paid or likely to be credited or paid during the financial
year to the account of the payee does not exceed Rs.240000

Fees for professional or technical services [Section 194J]

Applicability and Rate of TDS
Every person other than an individual or a HUF, who is responsible for paying to a
resident any sum by way of –
• fees for professional services; or
• fees for technical services; or
• any remuneration or fees or
commission, by whatever name
called, other than those on
which tax is deductible under
section 192, to a director of a
company; or

• royalty, or
• non-compete fees referred to in Sec. 28(va)

14
shall deduct tax at source at the rate of
2% in case of fees for technical services (not being professional services) or royalty where
such royalty is in the nature of consideration for sale, distribution or exhibition of
cinematographic films; and
10% in other cases
However, in case of a payee, engaged only in the business of operation of call centre, the tax
shall be deducted at source @2%
Time of deduction
The deduction is to be made at the time of credit of such sum to the account of
the payee or at the time of payment thereof in cash or by issue of a cheque or draft
or by any other mode, whichever is earlier.
Where any sum is credited to any account, whether called suspense account or by
any other name, in the books of accounts of the person liable to pay such sum,
such crediting shall be deemed to be credit of such sum to the account of the
payee and tax has to be deducted accordingly.
Threshold limit
No tax deduction is required if the amount of fees or the aggregate of the amounts of fees
credited or paid or likely to be credited or paid during a financial year does not exceed
Rs.30000 in the case of fees for professional services, Rs.30000 in the case of fees for
technical services, Rs.30000 in the case of royalty and Rs.30000 in the case of non-
compete fees.
The limit of Rs.30,000 under section 194J is applicable separately for fees for
professional services, fees for technical services, royalty and non-compete fees
referred to in section 28(va). It implies that if the payment to a person
towards each of the above is less than Rs.30,000, no tax is required to be
deducted at source, even though the aggregate payment or credit exceeds
Rs.30,000 to such person. However, there is no such exemption limit for deduction
of tax on any remuneration or fees or commission payable to director of a
company.
Nature of TDS Separate
payment rate Limit
Fees for technical services (not being professional 2% ` 30,000
services)
Fees for professional services 10% ` 30,000
Royalty in the nature of consideration for sale, 2%
distribution or exhibition of cinematographic films

15
 Other royalty 10% ` 30,000
Any remuneration or fees or commission, by 10% Ni
whatever name called, other than those on which l
tax is deductible
under section 192, to a director of a company
Non-compete fees 10% `
30
,0
00
Note - In case of a payee, engaged only in the business of operation of call
centre, the tax shall be deducted at source @2%

Meaning of “Professional services”

“Professional services” means services rendered by a person in the course of carrying on
legal, medical, engineering or architectural profession or the profession of accountancy
or technical consultancy or interior decoration or advertising or such other profession as
is notified by the CBDT for the purposes of section 44AA or of this section.
Other professions notified for the purposes of section 44AA are as follows:
(a) Profession of “authorised representatives”;
(b) Profession of “film artist”;
(c) Profession of “company secretary”.
(d) Profession of “Information technology”
The CBDT has notified the services rendered by following persons in relation
to the sports activities as Professional Services for the purpose of the section
194J:
(i) Sports Persons,
(ii) Umpires and Referees,
(iii) Coaches and Trainers,
(iv) Team Physicians and Physiotherapists,
(v) Event Managers,
(vi) Commentators,
(vii) Anchors and
16
 (viii) Sports Columnists.
Accordingly, the requirement of TDS as per section 194J would apply to all the aforesaid
professions. The term “profession”, as such, is of a very wide import. However, the term
has been defined in this section exhaustively. For the purposes of TDS, therefore, all
other professions would be outside the scope of section 194J. For example, this section
will not apply to professions of teaching, sculpture, painting etc. unless they are notified.

Meaning of “Fees for technical services”

Explanation (b) to section 194J provides that the term ‘fees for technical
services’ shall have the same meaning as in Explanation 2 to section
9(1)(vii). The term ‘fees for technical services’ as defined in Explanation 2 to
section 9(i)(vii) means any consideration (including any lump sum consideration)
for rendering of any of the following services:
(i) Managerial services;
(ii) Technical services;
(iii) Consultancy services;
(iv) Provision of services of technical or other personnel.
It is expressly provided that the term ‘fees for technical services’ will not
include following types of consideration:
(i) Consideration for any construction, assembly, mining or like
project, or
(ii) Consideration which is chargeable under the head ‘Salaries’.
CERTIFICATE FOR DEDUCTION OF TAX AT A LOWERRATE [SECTION 197]
This section applies where, in the case of any income of any person or sum payable to
any person, income-tax is required to be deducted at the time of credit or payment, as
the case may be at the rates in force as per the provisions of sections 192, 193, 194, 194A,
194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-
O and 195.
(1) In such cases, the assessee can
make an application to the
Assessing Officer for
deduction of tax at a lower
rate or for non-deduction of
tax.

17
 (2) If the Assessing Officer is satisfied that the total income of
the recipient justifies the deduction of income-tax at lower
rates or no deduction of income-tax, as the case may be,
he may give to the assessee such certificate, as may be
appropriate.
(3) Where the Assessing Officer issues such a certificate, then
the person responsible for paying the income shall deduct
income-tax at such lower rates specified in the certificate
or deduct no tax, as the case may be, until such certificate
is cancelled by the Assessing Officer.
(4) Enabling powers have been conferred upon the CBDT to
make rules for prescribing the procedure in this regard.

NO DEDUCTION IN CERTAIN CASES [SECTION 197A]

(1)Enabling provision for filing of declaration for receipt of dividend and NSS
payment without deduction of tax [Sub-section (1)]
(i) This section enables an individual, who is resident in
India and whose estimated total income of the previous
year is less than the basic exemption limit, to receive
dividends and any sum out of National Savings
Scheme Account, without deduction of tax at source
under sections 194 and 194EE, on furnishing a
declaration in duplicate in the prescribed form and
verified in the prescribed manner.
(ii) The declaration in the above form is to be furnished
in writing in duplicate by the declarant to the person
responsible for paying any income of the nature
referred to in sections 194 or 194EE. The declaration
will have to be to the effect that the tax on the
estimated total income of the declarant of the
previous year in which such income is to be
included in computing his total income will be
Nil.

18
(2) Enabling provision for filing of declaration for non-deduction of tax under
section 192A or 193 or 194A or 194D or 194DA or 194-I or 194K by persons, other
than companies and firms [Sub-section (1A)]
No deduction of tax shall be made under the above provisions of the Act,
where a person, who is not a company or a firm, furnishes to the person
responsible for paying any income of the nature referred to in these sections, a
declaration in writing in duplicate in the prescribed form to the effect that the tax
on his estimated total income of the previous year in which such income is to
be included in computing his total income will be Nil.
(3) Filing declaration not permissible if income/aggregate of incomes exceed
basic exemption limit [Sub-section (1B)]
Declaration cannot be furnished as per the above provisions, where -
1. payments of dividend; or
2. payments in respect of deposits under National Savings
Schemes, etc.; or
3. payment of premature withdrawal from Employee Provident
Fund; or
4. income from interest on securities or
5. interest other than “interest on securities” or units; or
6. insurance commission; or
7. payment in respect of life insurance policy; or
8. rent; or
9. income from units; or
10.the aggregate of the amounts of such incomes in (1) to (10)
above
credited or paid or likely to be credited or paid during the previous year in
which such income is to be included exceeds the basic exemption limit.

Enabling provision for filing of declaration by resident senior citizens for non-
deduction of tax at source [Sub-section (1C)]
For a resident senior citizen, who is of the age of 60 years or more at any
time during the previous year, no deduction of tax shall be made under

19
section 192A or section 193 or section 194 or section 194A or section 194D or
section 194DA or section 194EE or section 194-I or section 194K, if such
individual furnishes a declaration in writing in duplicate in Form 15H to the
payer, that tax on his estimated total income of the previous year in which such
income is to be included in computing his total income is Nil. The restriction
contained in sub-section (1B) will not apply to resident senior citizens.
Further, declaration in Form 15H can also be made in a case where income of
the assessee, who is eligible for rebate of income-tax under section 87A, is
higher than the basic exemption limit (after allowing for deduction(s) under
Chapter VI-A, if any, or set off of loss, if any, under the head “Income from
house property” for which, the declarant is eligible) but his tax liability would
be “Nil” after taking into account the rebate available to him under section
87A.

Duty of person deducting tax [Section 200]

1) The persons responsible for deducting the tax at source should deposit
the sum so deducted to the credit of the Central Government or as
the Board directs, within the prescribed time [Sub-section (1)].

2) Further, an employer paying tax on non-monetary perquisites provided to

employees in accordance with section 192(1A), should deposit within the prescribed
time, the tax to the credit of the Central Government or as the Board directs [Sub-
section (2)].
3) For the purpose of improving the reporting of payment of TDS made
through book entry and to make existing mechanism enforceable,
section 200(2A) provides that where the tax deducted or tax referred to
in section 192(1A) has been paid without the production of a challan,
the Pay and Accounts Officer or the Treasury Officer or the Cheque
Drawing and Disbursing Officer (PAO/TO/CDDO) or any other person,
by whatever name called, who is responsible for crediting such sum to
the credit of the Central Government, shall deliver or cause to be
delivered within the prescribed time a statement in the prescribed
form, verified in the prescribed manner and setting forth prescribed
particulars to the prescribed income- tax authority or the person
authorised by such authority.

20
 4) Sub-section (3) casts responsibility on the following persons for
preparing such statements for such periods as may be prescribed, after
paying the tax deducted to the credit of the Central Government
within the prescribed time –
a. any person deducting any sum on or
after 1st April, 2005 in accordance with
the foregoing provisions of this chapter;
or,
b. any person being an employer referred to
in section 192(1A).
5) Such statements have to be delivered or caused to be delivered to the
prescribed income-tax authority or the person authorised by such
authority.
6) Such statements should be in the prescribed form and verified in the prescribed
manner.
7) It should set forth such particulars and should be delivered within such
time as may be prescribed.
8) The deductor may also deliver to the prescribed
authority, a correction statement –
a) for rectification of any mistake; or
b) to add, delete or update the information furnished in the
statement delivered under section 200(3).
Note – Refer diagram on page no.13.115 for time limit for payment of
TDS to Government account or tax paid under section 192(1A)
prescribed under section 200(1)/(2) read with Rule 30 and furnishing
statement of TDS under section 200(3) read with Rule 31A

Interest Liability for failure or deduct to pay TDS

A person deemed to be an assessee-in-default under section 201(1), for failure
to deduct tax or to pay the tax after deduction, is liable to pay simple interest

• @1% for every month or part of month on the amount of such tax
from the date on which tax was deductible to the date on which such tax
was actually deducted and

21
 • @1½% for every month or part of month from the date on which tax
was deducted to the date on which such tax is actually paid [Section
201(1A)].

Mandatory requirement to furnish PAN [Section 206AA]

1) The non-furnishing of PAN by deductees in many cases led to delay in
issue of refund on account of problems in the processing of returns of
income and in granting credit for tax deducted at source.
2) With a view to strengthening the PAN mechanism, section 206AA provides that any
person whose receipts are subject to deduction of tax at source i.e., the deductee, shall
mandatorily furnish his PAN to the deductor failing which the deductor shall
deduct tax at source at higher of the following rates –
(i) the rate prescribed in the Act;
(ii) at the rate in force
i.e., the rate
mentioned in the
Finance Act; or

(iii) at the rate of 20% [5%,

in case tax is required to
be deducted at source u/s
194-O and u/s 194Q]

3) Tax would be deductible at the rates mentioned above also in cases

where the taxpayer files a declaration in Form 15G or 15H (under
section 197A) but does not provide his PAN.
4) Further, no certificate under section 197 will be granted by the
Assessing Officer unless the application contains the PAN of the
applicant.
5) Both the deductor and the deductee have to compulsorily quote the
PAN of the deductee in all correspondence, bills, vouchers and other
documents exchanged between them.
6) If the PAN provided to the deductor is invalid or it does not belong to the
deductee, it shall be deemed that the deductee has not furnished his PAN
to the deductor. Accordingly, tax would be deductible at the rate
specified in (2) above.
22
 7) The provisions of section 206AA shall not apply in respect of payment
of interest on long- term bonds, as referred to in section 194LC, to a
non-corporate non-resident or to a foreign company.

TAX COLLECTION AT SOURCE

Applicability and Rates

Sale of certain goods [Sec.206C (1)]

Under section 206C(1), sellers of certain goods are required to collect tax from the
buyers at the specified rates. The specified percentage for collection of tax at
source is as follows:

Nature of Percentag
Goods e
(a) Alcoholic liquor for human consumption 1%
(b) Tendu leaves 5%
(c) Timber obtained under a forest lease 2.5%
(d) Timber obtained by any mode other than (c) 2.5%
(e) Any other forest produce not being timber or tendu leaves 2.5%
(f) Scrap 1%
(g) Minerals, being coal or lignite or iron ore 1%
Non-applicability of TCS [Section 206C(1A)]

No collection of tax shall be made under section

206C(1) in the case of a resident buyer, if such
buyer furnishes to the person responsible for
collecting tax, a declaration in writing in
duplicate in the prescribed form and verified in
the prescribed manner to the effect that goods
referred to in above table are to be utilised for
the purpose of manufacturing, processing or
producing articles or things or for the purposes of
generation of power and not for trading purposes.

23
Furnishing of copy of declaration within specified time [Section 206C(1B)]
The person responsible for collecting tax under this section shall deliver or
cause to be delivered to the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner one copy of the
declaration referred to in 206C (1A) on or before 7th of the month next
following the month in which the declaration is furnished to him.

Lease or a licence of parking lot, toll plaza or mine or a quarry [Section 206C(1C)]
Section 206C(1C) provides for collection of tax by every person who grants a lease or a
licence or enters into a contract or otherwise transfers any right or interest in any -
• parking lot or
• toll plaza or
• a mine or a quarry
to another person (other than a public sector company) for the use of such
parking lot or toll plaza or mine or quarry for the purposes of business. The tax
shall be collected as provided, from the licensee or lessee of any such licence,
contract or lease of the specified nature, at the rate of 2%.
Note – Mining and quarrying excludes mining and quarrying of mineral oil.
Mineral oil includes petroleum and natural gas. Thus, mining and quarrying
excludes mining and quarrying of petroleum and natural gas. Consequently,
the oil exploration and incidental services are relieved from the applicability of
TCS provisions, since these services are in the organized sector.

Sale of motor vehicle of value exceeding Rs.10

lakhs [Section 206C(1F)]
Section 206C(1F) provides that every person, being a seller, who receives any amount as
consideration for sale of a motor vehicle of the value exceeding ` 10 lakhs, shall collect tax
from the buyer @1% of the sale consideration.
Cases where no tax is to be collected
(i) No TCS by the authorized dealer on an amount in respect of which the
sum has been collected by the seller.
(ii) No TCS, if the buyer is liable to deduct tax at source under any other
provision of the Act and has deducted such tax.
(iii) No TCS, if the buyer is the Central Government, a State Government, an

24
 embassy,
a High Commission, a legation, a commission, a consulate, the trade
representation of a foreign State, a local authority9 or any other person
notified by the Central Government, subject to fulfillment of conditions
stipulated thereunder.
Accordingly, the Central Government has, vide Notification No. 99/2022,
dated 17.08.2022, notified that the provisions of section 206C(1G) would
not be applicable to a person (being a buyer) who is a non-resident in terms
of
section 6 and who does not have a permanent establishment in India.

Sale of goods of value exceeding Rs.50 lakh [Section 206C(1H)]

• As per section 206C(1H), tax is also required to be collected by a seller, who
receives any amount as consideration for sale of goods of the value or aggregate of
such value exceeding ` 50 lakhs in a previous year [other than exported goods or
goods covered under sub-sections (1)/(1F)/(1G)]
• Tax is to be collected at source @0.1% u/s 206C(1H) of the sale
consideration exceeding ` 50 lakhs, at the time of receipt of consideration.
• Tax is, however, not required to be collected if the buyer is liable to deduct tax at
source under any other provision of the Act on the goods purchased by him from the
seller and has deducted such tax
• Tax shall be collected at the time of receipt of such amount under section 206C(1H).

TCS under GST for E-commerce Sales

• Any dealer or trader selling goods online on the e-commerce platform
would get the payment form the online platform after deducting an
amount of tax @1% under the IGST Act.
• Tax to be deposited by 10th of the next month.
• All the dealers or traders are required to get registered under GST
compulsorily.
• These provisions are applicable w.e.f. 1st October 2018

Higher rate of TCS for non-furnishers of PAN [Section 206CC]

i) The provisions of section 206CC require

25
 tax collection at the higher of the following
two rates, in case of failure by the person
paying any sum or amount on which tax is
collectible at source (collectee) to furnish
PAN [PAN or Aadhar number in case
of section 206C(1H)] to the person
responsible for collecting tax at source
(collector) –
• at twice the rate specified in the relevant provision of the Act
• at 5% [1%, in case tax is required to be collected at source u/s 206C(1H)].
W.e.f. 1.7.2023, the higher rate of TCS leviable for non-
furnishing of PAN should not exceed 20%.
ii) Tax would be collectible at the rates mentioned above also in case
where the person furnishes a declaration under section 206C(1A)
but does not furnish his PAN.
iii) Both the collectee and collector have to compulsorily quote the
PAN of the collectee in all correspondence, bills, vouchers and other
documents exchanged between them.
iv) If the PAN provided to the collector is invalid or it does not belong
to the collectee, it shall be deemed that the collectee has not
furnished his PAN to the collector. Accordingly, tax would be
collectible at the rate specified in (i) above.
v) The provisions of section 206CC does not apply to a non-resident
who does not have a permanent establishment in India.

Higher rate of TCS for non-filers of income-tax return [Section 206CCA]

(i) Section 206CCA requires tax to be collected at source under the
provisions of this Chapter on any sum or amount received by a person
from a specified person, at higher of the following rates –
(a) at twice the rate specified in the relevant provision of the
Act;
(b) at 5%
W.e.f. 1.7.2023, the higher rate of TCS leviable for
26
 non-filers of income-tax return should not exceed
20%.

(ii) In case the provisions of section 206CC are also applicable to the specified
person, in addition to the provisions of section 206CCA, then, tax is required to
be collected at higher of the two rates provided in section 206CC and section
206CCA.
(iii) Meaning of “specified person” – A person who has not furnished
- the return of income for the assessment year
relevant to the previous year immediately
preceding the financial year in which tax is
required to be collected, for which the time limit
for furnishing the return of income under
section 139(1) has expired and
- the aggregate of tax deducted at source and tax
collected at source in his case is ` 50,000 or
more in the said previous year
However, the specified person does not include
- a non-resident who does not have a permanent establishment
in India or;
- a person who is not required to furnish return
of income and who is notified by the Central
Government.
For example, if tax collection is required in January, 2024, the same would
be collected at the higher rate under section 206CCA, if return of income of the
buyer for A.Y. 2023-24 has not been filed and aggregate of TDS/TCS in the case
of buyer is ` 50,000 or more in P.Y. 2022-23.

TCS to be paid within prescribed time [Section 206C(3)]

Any amount collected under this section shall be paid within the prescribed time to the credit of
the Central Government or as the Board directs.
Time limit for paying tax collected to the credit of the Central Government [Rule 37CA]

27
 Person Period within
collecting sums Circumstance which such sum
in should be
accordance paid to the credit of
with section the Central
206C Government
(1) An office of (i) where the tax is paid on the same day
the without production of
Government an income-tax
challan
(ii) where tax is paid on or before 7 days
accompanied by an from the end of the
income-tax challan month in which the
collection is made
(2) Collectors other within one week from
than an office of the last day of the
the Government month in which the
collection is made

Due dates for furnishing statement of TCS [Rule 31AA]

Quarter Due Date
ending
I 30th June 15th July
II 30th 15th
September October
II 31st 15th
I December January
I 31st March 15th May
V

28