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Tax deduction at source

Deductor: He is the person


who makes the deduction
Deductee: He is the person
from whose income tax is
deducted

Tax is deducted at source by


the deductor on the
payments which is in the
nature of income of the
deductee at the rates
prescribed in the Act.

All deductees must


mandatorily quote their PAN
to the deductor else the
deduction will be made at
the rate of 20% which could
be higher than otherwise
prescribed in the Act.
(Section 206AA(1)(iii).

PAN helps the deductee in


claiming the tax deducted
at source against the
income received by it. The
TDS certificate issued by
the deductor to the
deductee contains all
particulars such as PAN,
rate at which deducted,
nature of payment, AY, and
amount.

The Deductor is required to


obtain a TAN (Tax account
number) which is his unique
identification number for
filing his TDS returns or
quarterly statements that
shows the TDS made by him
on all TDS deductible
payments.

The deductor shall pay within the


prescribed time the sums so
deducted to the credit of the
central government or as the
board directs (section 200)
Failure to deduct or pay, or after
deducting does not pay the whole
or any part of the tax then such
person will be deemed to be an
assessee in default(section 201)

TDS is required to be made


on payment of salaries
computed on the rates at
force for the FY in which the
payment is made,sec 192
Salaries will include
perquisites and TDS will be
deducted on perqs also.
sec192(1B)

If the person has held


successive employments or
simultaneous employments
under more than one
employer he may choose
the employer deductor and
provide him all relevant
details of his receipts for
making TDS. Sec192(2)

In making the TDS from


salaries the deductor will
also take into account the
eligible claims of the
deductee for seeking relief
in his computation of
income for subscriptions
made by him in accordance
with sec 80C and also sec
80EE

The TDS certificate is required


to be given to the person
from whose income, tax has
been deducted. This contains
his PAN, total income, rate of
deduction, FY/AY, date of
payment to the govt. of the
amount so deducted, sec 203

TDS is required to be made


on payments made by way
of interest on securities to a
resident at the time of
payment either in cash or by
issue of a cheque or draft or
at the time of credit to the
account of the person , sec
193

TDS is to be made on
payment of dividends
before making any
payments in cash or cheque
or warrant in respect of any
dividend or before making
any payment or distribution
to a shareholder, resident in
India , sec 194

TDS on interest other than


interest on securities. Such as
interest on fixed deposits or
time deposits with banks, post
offices, or NBFCs. Banks will
deduct TDS on interest accrued
more than Rs 10,000 on FDs,
term deposits, recurring
deposits at the time of payment
or credit thereof, 194A

Winnings from any lottery,


crossword puzzle, card
game, or any such game
exceeding Rs 10,000 is
liable for TDS at the time of
payment thereof, 194B

Winnings from horse Race


will require TDS at the time
of payment thereof on an
amount exceeding Rs 5,000
194BB

Payments made to contractors for


any work including supply of labour
for carrying out any work in
pursuance of a contract will require
TDS at the time of credit or
payment by cash or cheque.194C
TDS will be deducted @ 1% for
payment to HUF or Individual and
@2% to any other person. No
deduction to be made if payment is
less than Rs 30,000.194C(5)

Payments of Commission to any


resident or payment of brokerage
will require TDS at the time of
credit to the account of the payee
or at the time of payment in cash
or cheque or draft@ 10% on an
amount exceeding Rs 5,000 194H

Payment of rent by a person other


than an individual or HUF at the
time of payment will deduct TDS
@ 2% for use of machinery or
plant or equipment and
10% for use of any building, land,
factory building or furniture or
fittings where the payment is
more than Rs 180,000 in the FY
194-I

A transferee responsible for


paying a transferor any
consideration for transfer of
immoveable property( other
than agricultural land) will
deduct TDS at the time of
payment@ 1% where the
consideration for the transfer of
the immoveable property is
more than Rs 50,00,000 194-IA

Any payment by a person not


being an individual or HUF to a
resident any amount by way of:
fees for professional services or
fees for technical services,
royalty, know-how, patent,
copyright, trademark, shall at the
time of payment deduct TDS
@10% on the amount exceeding
Rs 30,000 194J

Certificate for deduction of


TDS at lower rate may be
given by the assessing officer
to the recipient of income or
deductee if he is satisfied on
the application of the
recipient of income that lower
deduction or no deduction is
justified. 197

Double taxation relief


The GOI may enter into
agreement with any country
or territory for granting
relief in respect of income
on which tax is paid in India
and that country or
territory, 90(1)(a)(i)

Relief may also be allowed


in respect of I-T chargeable
under the I-T act 1961 and
the corresponding law in
force in that country, 90(1)
(a)(ii)

The agreement between GOI and


a foreign country or a specified
territory can also be for:
i) avoidance of double taxation of
income under the I-T act and
corresponding act in that country
or
2)For exchange of information for
prevention of evasion, or
avoidance of tax chargeable under
the I-T act or under their act or for
investigation of such cases

the I-T act and under the


corresponding law in force in that
country or territory.
Where such agreement has been
entered into by the GOI with the
foreign country or territory for
granting relief of tax or for
avoidance of double taxation in
respect of the assessee to whom
such agreement applies the
provisions of the act will apply to
the extent they are more beneficial
to that assessee, 90(2)

To claim benefits of double


taxation avoidance
agreements between India
and the foreign country the
concerned assessee has to
provide a certificate from
the govt of that country
regarding his proof of
residence

Any specified association in


India may enter into an
agreement with any specified
association in the specified
territory outside India and the
GOI may make such provision
by announcement in the official
gazette for the granting of relief
90A

The same provisions of section


90(1) will apply to 90(A)

If any person who is resident in


India proves that his income
accrued or arose during that PY
outside India where there is no
agreement under section 90 he
shall be entitled to the deduction
under the Indian I-T payable by
him on such doubly taxed income
at the Indian rate of tax or the
rate of tax of the said country
which ever is lower 91(1)

Procedure to be followed in seeking


information from a foreign country regarding
information about a specific person
1. Application has to made to the concerned
tax officer of that country regarding the
information and in what context.
2. The application must contain all
necessary particulars and evidences against
the person to enable the officer to send the
details

3. The application from


India must be routed
through the Joint Secretary,
Foreign tax division, CBDT
who may seek further
inputs from the requesting
party.

4. All remedies under the


domestic tax system must
be exhausted before making
any kind of request for
information from the foreign
tax authorities which must
be highlighted in the
application being made.

5. Necessary particulars and


columns in the prescribed
application must be
diligently filled in by the
requesting party with
specific reference to the
confidentiality clause. If
this column is left
unattended the foreign tax
authority may not part with

Tax information exchange


agreement (TIEA)
Under this clause there is
automatic exchange of
information on areas that
mandatorily need to be
exchanged or
communicated to the
contracting country in
accordance with the

The purpose behind DTAA is to


avoid double tax injuries, tax
evasion, money laundering, and
generation of black money. To
promote economic ties through
investments, JVs, and trade. To
create conducive environment
for creation of more jobs,
industry competitions, and
growth in GDP.