/ GST Compliance

New TDS provisions under GST for Metal Scrap

GST bank account

Summary of the GSTN Notification No. 25/2024-CT on TDS for Metal Scrap under GST : 

On October 9, 2024, the government issued Notification No. 25/2024-CT, introducing TDS compliance for the supply of metal scrap under the GST framework, effective from October 10, 2024.

Key Points of TDS @2% on Metal Scrap Purchases

  1. Applicability of TDS @2% on Metal Scrap Purchases
    • TDS at 2% (split as CGST 1% and SGST 1% or IGST 2%) is to be deducted on purchases of metal scrap from registered suppliers in B2B transactions.
    • Applicable only when the supply value of scrap goods exceeds ₹2.5 lakhs.
  2. Calculation Basis: TDS should be calculated on the value of supply (excluding CGST, SGST, IGST, UTGST, and TCS under Income Tax). The deducted TDS will reflect in the supplier’s GSTR-2A and, upon filing, will be credited to their electronic cash ledger.
  3. Return and Filing: Buyers deducting TDS must file Form GSTR-7 by the 10th of the following month, along with payment of TDS liability. GSTR-7A acts as a TDS certificate for the supplier, similar to Form 16A under Income Tax.
  4. Claiming TDS: Suppliers can claim the TDS credit monthly as it reflects in their Cash Ledger and can be used for tax payments or refunded immediately. The deductor is required to file a monthly TDS return in Form GSTR-7.  TDS certificates are issued to suppliers (deductees) in Form GSTR-7A.
  5. Registration: Buyers must register separately for TDS under GST using Form REG-07. Required documents include the DDO/Tax Deductor’s  PAN, Aadhar, and proof of business premises. Per the advisory dated October 22, 2024, taxpayers must select “Others” under the “Constitution of Business” and specify “Metal Scrap Dealers.”
  6. Effective Date: The TDS on metal scrap is applicable from October 10, 2024.
  7. Inter-Branch Transactions: TDS also applies to inter-branch sales and purchases of scrap.
  8. Exceptions: TDS under GST is not applicable to:
    • Imports of metal scrap.
    • Purchases from unregistered persons (subject to RCM @18% instead).
  9. Applicable Chapters: The provision applies to metal scraps under Chapters 72-81 of the Customs Tariff Act, covering iron, steel, copper, nickel, aluminum, lead, zinc, tin, and other base metals.
/ GST Compliance

TDS & GST Provisions for Metal Scrap Transactions

Online utility of Traces(TDS), income tax, GST, ESI, PF

New TDS & GST Provisions for Metal Scrap Transactions and do this on GST Portal now

The amendments regarding the applicability of TDS on metal scrap transactions, effective from October 10, 2024, bring several key implications for businesses and the broader metal scrap industry: Overall, this amendment will significantly impact the metal scrap industry by increasing compliance obligations, improving tax tracking, and contributing to the government’s goal of curbing tax evasion in the scrap supply chain.  With the provisions introduced by Notification No. 25/2024-Central Tax, companies have limited time to ensure compliance before the TDS requirements become effective. Immediate action is required to align accounting systems, train staff, and ensure proper record-keeping and reporting mechanisms for metal scrap transactions.

The Notification No. 25/2024-Central Tax, issued by the Ministry of Finance on October 9, 2024, introduces amendments to Notification No. 50/2018-Central Tax dated September 13, 2018, under the provisions of Section 51 of the Central Goods and Services Tax Act, 2017. These changes specifically focus on the TDS provisions under the GST regime, with a clear emphasis on businesses dealing in metal scrap.

1. TDS Applicability on Metal Scrap Transactions:

  • The inclusion of clause (d) now mandates TDS compliance for businesses dealing with metal scrap, covering metals categorized under Chapters 72 to 81 of the Customs Tariff Act, 1975.
  • This ensures that registered recipients of metal scrap must deduct tax at source under the CGST Act, increasing transparency and accountability throughout the supply chain.
  • Businesses receiving supplies of scrap metal will need to assess each transaction to determine TDS applicability, ensuring they remit the correct tax amounts.

2. Exemptions for Specified Persons:

  • The revised third proviso continues to grant exemptions from TDS for specific transactions involving entities outlined under Section 51(1) of the CGST Act. However, an exception is made for metal scrap recipients, ensuring that this sector is included under the TDS framework.
  • This indicates a targeted focus on the metal scrap industry to improve tax compliance while maintaining flexibility for other specified entities.

3. Enhanced Compliance for the Metal Scrap Industry:

  • Bringing metal scrap transactions under TDS will require businesses to adopt stricter compliance practices, such as:
    • Maintaining proper documentation of transactions.
    • Ensuring timely tax deductions at source.
    • Regularly filing TDS returns.
  • The amendment promotes better monitoring and compliance within the sector, which is often considered high-risk for tax evasion due to the nature of cash-based or informal transactions.

4. Operational Impact on Businesses:

  • Businesses engaged in the purchase and sale of scrap metal must review their internal processes and systems to integrate the TDS deduction process.
  • Failure to comply with the new requirements could result in penalties, interest, and other legal consequences under the CGST Act.

FAQ on TDS to be deducted when metal scrap is purchased from registered suppliers. 

Effective Date: October 10, 2024:

New TDS & GST Provisions for Metal Scrap Transactions and do this on GST Portal now

TDS & GST Provisions for Metal Scrap Transactions and do this on GST Portal now

TDS UNDER GST_page-0003

/ NRI

Application of a Certificate of Lower/NIL TDS Deduction

Benefits-of-lower-deduction-certificate-for-nris

All about the application of a Certificate of Lower/NIL TDS Deduction

We first try to understand the case before providing you with a complete list of details required to issue the CA certificate for transferring funds when remitting funds out of India with different sources of funds. This way, the online process of 15cb and online filing of form 15ca are completed with minimal exchange of unnecessary details, saving both of us a significant amount of time. Despite the time difference between different time zones, we try to be available even at odd hours to answer your questions.

A Lower Deduction Certificate of TDS is a provision under Section 197 of the Income Tax Act, 1961 that allows taxpayers to request deduction of tax at source (TDS) at a lower rate or even nil rate. This can be beneficial for taxpayers whose effective tax liability is lower than the standard TDS rate.

Purpose: Section 197 helps in reducing the TDS burden for individuals and entities whose actual tax liability is lower than the amount being deducted at the applicable TDS rate. This ensures that they do not face liquidity issues due to higher TDS deductions.

How long does it take to issue these certificates?

The amount of time it takes to issue these certificates is determined by how quickly we get the appropriate information. We’ve also released 15ca and 15cb in the same day.

Who Can Apply?

Any taxpayer, including individuals, companies, or other entities, can apply for a lower or nil deduction of TDS. Common scenarios where this application is made include:

  • Loss-making businesses: Companies with no taxable income or those with business losses.
  • Low-profit businesses: Businesses with profit margins lower than the applicable TDS rates.
  • Assessees with carried-forward losses: Taxpayers who have losses from previous years that they can set off against current income.

What is the difference between a lower/nil TDS deduction certificate and a higher/nil TDS deduction certificate?

If a resident makes a payment to a non-resident, withholding tax at the appropriate rate must be deducted. However, if the income tax rate applicable to that nonresident on such income is less than the applicable withholding tax rate, that NRI can request that the income tax authorities issue a lower/NIL TDS deduction certificate based on his circumstances to avoid the hardship of paying a higher TDS rate.

How long does it take to get a NIL/Lower TDS certificate, and who issues them?

When a nonresident sells an immovable property (held for a long time) in India, the buyer is required to deduct withholding tax at the rate of 20% (plus edu cess, surcharge, and so on) from the sale consideration. To obtain a refund of the extra TDS deducted, the nonresident seller must file his tax return in India, which he can only do after the end of the fiscal year. It could take months or years to complete the process and receive the refund. To avoid this hassle, a person can apply to the income tax authorities for a lower or nil TDS deduction certificate for NRI, depending on his situation. This service is now available on the internet. Nonresidents who use this service can avoid paying a large withholding tax.

Lower TDS Deduction Certificate

Application Requirements a lower/nil TDS deduction certificate: The taxpayer needs to submit several documents while applying, such as:

    • PAN card and address proof of the deductee (person receiving the payment).
    • Tax deduction and collection account number (TAN) and PAN of the deductor (person making the payment).
    • Form 13: The application form for requesting lower or nil TDS.
    • Copies of Income Tax Returns (ITRs) for the past 3 years.
    • Audited balance sheet, profit and loss account, and audit report for the past 3 financial years.
    • Original letter of authority (if an agent or CA is applying on behalf of the taxpayer).

Assessment by the Assessing Officer (AO):

  • The AO evaluates the current and projected income of the taxpayer, and the estimated tax liability for the ongoing financial year. Based on this assessment, the AO determines whether lower or no TDS is applicable. AO is required to process the application and issue the certificate within 30 days from the date of application.

Is it necessary for an NRI to be present in order to obtain a reduced deduction certificate?

Not precisely; he can appoint someone to act on his behalf and have it completed in his present residence country. You can delegate end-to-end TDS management to IFCCL.

How can I get a TDS exemption certificate for a property sold by an NRI?

To acquire a NIL or No TDS Certificate, a calculation must be provided along with other papers to satisfy the Assessing Officer that the assigned property sale resulted in no capital gain.

Use of the Certificate: Once issued, the certificate must be attached to the invoice submitted to the deductor, serving as proof for lower tax deduction. The certificate is valid only for the specific financial year mentioned and must be reapplied for each subsequent year.

How to Get a Certificate of Nil/Lower TDS Deduction with Our Help?

Despite the fact that this online facility was only launched recently, we have already obtained these Lower/Nil TDS deduction certificates for many of our clients. We will ask you to send us the necessary documents so that we can file the application for TDS deduction details online and a lower/NIL TDS deduction certificate on your behalf. We will continue to follow up with you and keep you updated on the status of your application. We will do our best to obtain the certificates as soon as possible.

/ TDS

All about TDS Lower Deduction Certificate provision

TDS

Completed Understanding the Lower Deduction Certificate of TDS

A Lower Deduction Certificate of Tax Deducted at Source is a certificate issued under Section 197 of the Income Tax Act, 1961. It allows a taxpayer to have tax deducted at a lower rate or not at all, under specific conditions.  Here’s a detailed breakdown of Section 197 Lower Deduction Certificate of TDS provision:

Objective of Section 197 Lower Deduction Certificate of TDS :

Section 197 enables a taxpayer to receive payments with either a lower rate of Tax Deducted at Source or no Tax Deducted at Source at all. The Lower Deduction Certificate of TDS  provision is particularly beneficial for taxpayers who anticipate that their total income tax liability for the financial year will be lower than the rate at which tax is normally deducted at source.

Income Covered U/s 197 of the Income Tax Act

  • Taxpayers whose income falls under the following categories can file an application under Section 197 for Nil or lower deduction of Tax Deducted at Source (TDS) i.e Salary Income, Interest on Securities, Dividends, Interest Other than Interest on Securities, Contractors’ Income, Insurance Commission, Fee for Professional or Technical Services, Compensation on Acquisition of Immovable Property, Income with Respect to Units of Investment Fund, Commission/Remuneration/Prize on Lottery Tickets, Commission or Brokerage, Rent,  Income of Non-Residents, Income in Respect of Investment in Securitization Trust.

Application of Lower Deduction Certificate of TDS

Lower TDS Deduction Certificate

Any person can apply for a Nil or Lower Tax Deducted at Source certificate. Common scenarios where applications are made include:

  • Loss-making businesses that do not have taxable income.
  • Businesses with profit margins lower than the standard rate of tax deduction.
  • Taxpayers carried forward losses that can offset future income.

Application Process of Lower Deduction Certificate of TDS

Step 1 : Taxpayer has to apply for a Lower Deduction Certificate to respective AO, the taxpayer must furnish various details and documents, such as:

  • Scan Copy of PAN and address proof of the deductee.
  • Copy of TAN and PAN of the deductor.
  • Signed and filled Form 13 (the application form for a lower/NIL Tax Deducted at Source certificate).
  • Copies of ITRs for the last three years.
  • Original Letter of Authority (if applying via a representative).
  • Copies of the Balance Sheet, Statement of Profit & Loss Account, and Audit Report for the last three years.

Step 2 : The Assessing Officer reviews the application to determine the existing and estimated tax liability.

Following basic step involves to be taken by AO to close the Lower Deduction Certificate of TDS.

  • Assessing Officer make appropriate assessing the taxpayer’s existing and projected income for the current FY.
  • AO Considering any tax payable on the estimated income of taxpayer.
  • Assessing Officer reviews & Disposing of the application within 30 days of receipt.

Usage & Validity of Lower Deduction Certificate of TDS

  • Once issued, the Lower Deduction Certificate must be attached to the invoices raised to the deductor. This justifies the lower rate of tax deduction or nil deduction when payments are made.
  • The Lower Deduction Certificate of TDS certificate is only valid for the assessment year mentioned on it. Taxpayers must reapply each year if they wish to continue receiving the benefit of lower or nil Tax Deducted at Source in subsequent years.

This provision helps taxpayers manage their cash flows more efficiently by reducing the immediate tax outgo and aligning the Tax Deducted at Source with their actual tax liability.

What are the Situations Where a Lower Deduction Certificate is Beneficial or recommended?

Benefits-of-lower-deduction-certificate-for-nris

Obtaining a Lower Deduction Certificate u/s 197 of the Income Tax Act, 1961, can be highly beneficial in various situations. Here are some common scenarios where an LDC can provide significant advantages:

  • Businesses that are incurring losses may not have any taxable income for the year. An Lower Deduction Certificate prevents unnecessary Tax Deducted at Source deductions, improving cash flow and reducing administrative burden.
  • Assessees who have carried forward losses from previous years to offset against future income can benefit from an Lower Deduction Certificate. It ensures that tax is not deducted on income that will be set off against these losses.
  • Assessees with a net total income below the applicable basic exemption limit (e.g., senior citizens, individuals with no significant income) can avoid Tax Deducted at Source deductions that they would otherwise have to claim back through a refund.
  • Non-resident sellers of property in India can benefit from an Lower Deduction Certificate when receiving payments from Indian buyers. This avoids high TDS rates and potential cash flow issues, as the non-resident might have lower tax liability or might be eligible for capital gains exemptions.
  • Foreign companies receiving payments from Indian customers, where the foreign company does not have a Permanent Establishment in India, can use an Lower Deduction Certificate to avoid higher Tax Deducted at Source rates u/s 195. This ensures compliance with Indian tax laws while avoiding excess tax withholding.

Forms for Lower Deduction and Non-Deduction of TDS

form 13

Non-Deduction of Tax Deducted at Source

  • Income Tax Forms Required: Income tax Form 15G and Form 15H. Objective of filling if Form 15G & Form 15H is to declare that no Tax Deducted at Source should be deducted since individual’s total income is below the taxable limit. For filling Procedure of Form 15G & Form 15H, we needed to submit required form to the bank or financial institution where the fixed deposit or other income-generating account is held.
  • Usage:
    • Income tax Form 15G: For individuals below 60 years of age and HUF.
    • Income tax Form 15H: In case an individuals who are 60 years and above (senior citizens).

Lower Deduction of Tax Deducted at Source

  • Form Required: Form 13 – Objective of filling if form 13 is to apply for Nil/Lower deduction of Tax Deducted at Source (TDS). An application must be filed with the Income Tax Officer using Form 13. Upon satisfaction, the tax officer issues a certificate under Section 197 for lower deduction of Tax Deducted at Source.
  • In Summary we can say that Lower Deduction of Tax Deducted at Source: Apply using Form 13 to the Income Tax Officer for a certificate under Section 197. Non-Deduction of Tax Deducted at Source: Submit Form 15G (for individuals below 60 and HUFs) or Form 15H (for senior citizens) to the bank or financial institution.

Expert Assistance with Lower Deduction Certificate Application

You may face navigating the complex process of obtaining an Lower Deduction Certificate can be challenging. Our team at Rajput Jain & Associates Chartered Accountants is equipped to help you through every step of this process. We ensure that you benefit from lower or nil Tax Deducted at Source rates, optimizing your tax position and improving your financial management. Our Services Include:

  • Evaluating your financial situation to determine eligibility for an Lower Deduction Certificate.
  • Assisting with the collection and preparation of required documents, such as PAN, TAN, Form 13, ITR copies, balance sheets, and profit & loss statements.
  • Filing the application on your behalf and handling any follow-up with the Assessing Officer (AO).
  • Providing ongoing support to ensure compliance with tax regulations and advising on best practices to minimize tax liability.

Contact us today to learn more about how we can assist you in obtaining a Lower Deduction Certificate and enhance your financial efficiency.

Comprehensive study about TDS & TCS chapter

/ TDS

TDS on Rent Payment u/s 194-I, 194-IC, 194IB & 195

TDS

All about TDS on Rent Payments u/s 194-I, 194-IC, 194IB & 195

Tax Deducted at Source (TDS) on rent involves deducting a certain percentage of tax from the rent payments made to landlords. This mechanism ensures tax collection at the source of income, aiding in timely tax payment and compliance.

Section 194-I: TDS on Rent Payments to Resident Landlords

  • Applicability: Section 194-I applies when the annual rent paid or payable exceeds Rs. 2,40,000. Applicable to individuals or Hindu Undivided Families (HUFs) not liable to tax audit under Section 44AB.
  • Any person other than an individual or HUF (not subject to audit) making rent payments to resident Indians. Individuals or HUFs covered under Section 44AB during the preceding financial year are liable to deduct TDS. TDS is required if the annual rent exceeds Rs. 2,40,000.
  • TDS Rates: 2% for the use of any plant, machinery, or equipment. 10% for the use of any land, building (including factory buildings), furniture, or fittings.
  • TDS must be deducted either at the time of crediting the rent to the landlord’s account or during the actual payment, whichever is earlier.
  • Security deposits are not subject to TDS if refundable. However, if adjusted against rent, they become liable to TDS. Payments for warehousing charges, renting business centers, and regular hotel accommodations under agreements attract TDS under Section 194-I.

Section 194-IC: TDS on Payments under Joint Development Agreements

  • Applicability: Section 194-IC applies to payments made under Joint Development Agreements (JDAs).
  • Who Must Deduct TDS: Any person paying consideration (not in kind) to a resident under a JDA.
  • TDS Rate: 10% on the consideration paid. 20% if the recipient does not provide PAN.
  • Time of Tax Deduction: TDS is deducted either at the time of crediting the payment to the payee’s account or at the time of actual payment.

Section 194IB: TDS on Rent Paid to Resident Landlords by Individuals/HUFs

  • Applicability: Section 194-IB applies when the rent paid by individuals or HUFs (not liable to audit under Section 44AB) exceeds Rs. 50,000 per month. The responsibility to deduct and pay TDS lies with the tenant.
  • TDS Rate & deposit: 5% if the recipient provides their PAN. 20% if the recipient does not provide PAN (under Section 206AA). TDS is deposited at the end of the financial year or at the end of the tenancy, whichever is earlier.
  • Payment and Filing Process: The tenant deposits the deducted TDS using a Challan-cum-statement in Form 26QC. A TDS certificate is issued to the landlord in Form 16C.
  • Time of Tax Deduction: TDS is deducted at the time of credit or payment, whichever is earlier. For the last month of the tenancy or the financial year, TDS is deducted at the time of credit or payment.
  • No Requirement for TAN: Unlike other sections, individuals or HUFs do not need a Tax Deduction and Collection Account Number (TAN) to deduct TDS under Section 194-IB.

TDS on Rent Payments Under Section 195: For Non-Resident Indian (NRI) Landlords

When making rent payments to Non-Resident Indian (NRI) landlords, tenants must adhere to the TDS requirements under Section 195 of the Income Tax Act. This ensures that tax is collected from the source of income.

  • Applicability: This section applies to rent payments made to non-resident landlords (NRIs). There is no minimum threshold for the rent amount. The responsibility to deduct and pay TDS lies with the tenant.
  • TDS Rate: The TDS rate depends on the applicable tax rate for NRIs, which is usually 30% plus Education Cess (4%). Alternatively, a beneficial tax treaty rate between India and the NRI’s country of residence may apply.
  • NRI landlord should provide a Tax Residency Certificate (TRC) from their country of residence to avail any beneficial DTAA rates. A beneficial tax treaty rate between India and the NRI’s country of residence may apply if the NRI provides a valid Tax Residency Certificate (TRC).
  • The tenant must deposit the deducted TDS on a monthly basis as per the general TDS provisions. The tenant is required to file a quarterly TDS return using Form 27Q. The tenant issues a TDS certificate to the NRI landlord in Form 16A. The quarterly TDS return must be filed by the following dates:
    • Quarter-1: 31st July
    • Quarter-2: 31st October
    • Quarter-3: 31st January
    • Quarter-4: 31st May of the next financial year.
  • Both tenant and landlord should keep records of rent payments and TDS certificates for tax filing purposes. Failure to deduct or deposit TDS can attract penalties under the Income Tax Act.

Summary of TDS Process Under Section 195 : For Non-Resident Indian (NRI) Landlords

Aspect Details
Applicability Rent payments to NRI landlords, no minimum threshold
TDS Rate 30% plus Education Cess (4%) or beneficial DTAA rate
Form for TDS Deposit Monthly deposit
Form for TDS Return Quarterly TDS return using Form 27Q
Form for TDS Certificate Form 16A
Frequency of TDS Deposit Monthly
Frequency of Return Filing Quarterly (due dates: 31st July, 31st October, 31st January, 31st May)
Responsibility Tenant
Penalties for Non-Compliance Penalties for failure to deduct/deposit TDS
Record Keeping Both tenant and landlord must maintain records

tds rate chart 24-25

Differences between Section 194I & Section 194IB:

Aspect Section 194I Section 194IB
Person responsible for TDS deduction (Individual and HUF) who are covered under Section 44AB (a) and (b) For other Assessee – no condition (Individual and HUF) who are not covered under Section 44AB (a) and (b) For other Assessee – Section not applicable
Monetary Limit Rs. 2,40,000/- per annum INR  50,000/- per month
Applicable on which asset Land, Building, Plant and machinery, furniture and fitting Land and building only
TDS Rate 2% for plant and machinery <br> 10% for land, building, furniture and fitting 5% on land and building
Time Limit of TDS deduction At the time of credit or payment, whichever is earlier At the time of credit for the rent of the last month or the last month of tenancy, or at the time of payment, whichever is earlier
Time Limit for payment of TDS Within 7 days from the end of the month in which it was deducted. <br>(For March – 30th April instead of 7th April) 30 days from the end of the month in which TDS is deducted
TAN required Yes No
Form to be filed 26Q 26QC

Difference Between Section 194IB & 195 with reference to Rent Payments

Understanding the differences between Section 194IB and Section 195 of the Income Tax Act is crucial for tenants making rent payments, as the requirements for TDS vary significantly depending on whether the landlord is a resident or a non-resident. The primary distinctions between Section 194IB and Section 195 revolve around the residency status of the landlord, the applicable TDS rates, the forms used for TDS deposits and certificates, and the frequency of TDS deposit and filing.  Tenants have different TDS requirements with regard to rent payments to resident and non-resident landlords under Sections 194IB and 195 of the Income Tax Act, respectively.

Aspect Section 194IB (Resident Landlords) Section 195 (NRI Landlords)
Applicability Rent to resident landlords, exceeding Rs. 50,000 per month Rent to non-resident landlords, no minimum threshold
TDS Rate 5% (20% if PAN not provided) 30% plus Education Cess 4% (or as per applicable DTAA)
Form for TDS Deposit Form 26QC Monthly deposit; Form 27Q for quarterly TDS return
TDS Certificate Form  Income Tax Form 16C Income Tax Form 16A
Frequency of TDS Deposit Within 30 days from the end of the month in which TDS is deducted Monthly
Frequency of Return Filing Annually or at the end of the tenancy Quarterly
Onus of Deduction and Payment Tenant Tenant

Penalties for Non-Compliance of TDS Provisions :

  • Section 201(1A): Interest for late deduction or late payment (1% per month for late deduction, 1.5% per month for late payment). The penalty is calculated for each day the failure continues, starting from the due date until the date of actual filing.
  • Under Section 234E: Late fees of Rs. 200 per day for delayed return filing, capped at the TDS amount. The total amount of penalty cannot exceed the amount of TDS or TCS payable for the respective period for which the return is to be filed. The late fee is mandatory and is automatically levied for delays in filing TDS/TCS statements.
  • Section 271H: Penalty ranging from Rs. 10,000 to Rs. 1,00,000 for non-filing or incorrect information.

TDS & TCS Rate chart for FY 2024-25

Comprehensive study about TDS & TCS chapter

/ CBDT

Recent Official Tax (Income Tax + TDS) Updates from CBDT

Is you don’t willing to Pay Income Tax for the FY 2022-23.

Recent Official Tax Updates from CBDT India (Income Tax + TDS)

Introduce of Income Tax

Income tax is a form of direct tax levied by the government on the income of individuals and entities. It is a critical source of revenue for the government, enabling it to fund various public services and infrastructure projects, such as healthcare, education, transportation, and defense. The income tax system is governed by specific laws and regulations, which outline how the tax is calculated, collected, and administered.

The main motive of collecting income tax is to fund government expenditures on public services and infrastructure, such as buildings, roads, and other development projects. Income tax in India is collected by the central government and distributed to state governments to support various regional development activities.

Income tax is administered by the CBDT and governed by the Income Tax Act of 1961.

The Indian tax system categorizes income into six main sources:

  • Income from Salary: Earnings from employment.
  • Income from Business or Profession: Profits generated by businesses or professional services.
  • Income from Capital Gains: Profits from the sale of assets or investments.
  • Income from Other Sources: Any income that does not fall into the other categories, such as interest earned on savings.
  • Income from House Property: Rental income or income from property ownership.
  • Income from Lottery, Horse Race, etc.: Winnings from lotteries, betting, and gambling activities.

Different types of income are taxed at different rates, and the government provides various deductions that can reduce taxable income. After accounting for these deductions, the taxable income of an individual can be calculated.

Income tax in India is charged based on the income earned by the individual, using a slab system. There are two slab systems available:

Old Vs New tax regime - Recent Update 1

  • Old System: Includes various exemptions and deductions.
  • New System: Introduced with an annual Budget, offering lower tax rates but with fewer exemptions and deductions.

New Vs old income tax system

Taxpayers have the option to choose between these two systems.

Individuals must file their income tax returns (ITRs) electronically using the appropriate form, depending on their source of income:

  • ITR-1: For salaried individuals.
  • ITR-2: For individuals and HUFs not having income from business or profession.
  • ITR-3: For individuals and HUFs having income from business or profession.
  • ITR-4: For presumptive income from business and profession.
  • ITR-5: For partnership firms.
  • ITR-7: For persons including companies required to furnish returns under sections 139(4A) to 139(4D).

Income Tax Notices 

Income tax notices

Even those earning below the taxable threshold can file returns. Non-compliance with income tax provisions can result in severe penalties, including fines and imprisonment.

Income Tax Return Forms for Assessment Year 2024-25

Common Offline Income  Tax Utility for filing ITR return – ITR 1, ITR 2 and ITR 4 for the AY 2024-25.

How to Access Income Tax Notifications:

Income Tax Government Portal:

  • Visit the official Income Tax Department website (https://www.incometaxindia.gov.in) for the latest notifications, circulars, and updates.
  • The portal provides comprehensive resources, including downloadable forms, FAQs, and detailed guides on various tax provisions.

Central Board of Direct Taxes Announcements:

  • Regularly check the “What’s New” section on the Income Tax Department website for the latest announcements and updates from the Central Board of Direct Taxes.

Income Tax Circulars and Amendments:

  • Access the “Notifications” section for detailed circulars and amendments. This section is frequently updated to reflect the latest changes in tax laws and procedures.

By staying informed through these official channels, taxpayers can ensure compliance with the latest tax laws and take advantage of any new benefits or provisions introduced by the government.

TDS in India

Tax Deducted at Source (TDS) in India is a direct tax mechanism where the payer deducts a certain percentage of tax before making a payment to the payee. This system ensures that tax is collected at the source of income, thereby facilitating regular inflow of revenue to the government and reducing the burden of lump-sum tax payments for the taxpayer at the end of the financial year.

Key Features of Tax Deducted at Source:

Scope and Applicability:

  • Tax Deducted at Source is applicable to various types of income, including salaries, interest payments by banks, dividends, rent, asset sales, and other specified payments.

TDS Rate: 

tds rate chart 24-25

Management and Governance:

  • Tax Deducted at Source is managed by the Central Board of Direct Taxes (CBDT) and is governed by the Income Tax Act of 1961.

Filing Requirements:

  • Tax Deducted at Source returns must be filed quarterly by the deductors. These returns can be e-filed for convenience and efficiency.

Purpose:

  • The main purpose of Tax Deducted at Source is to ensure that tax is collected in advance and to prevent tax evasion. It helps in spreading the tax payment liability over the year rather than a lump-sum payment at the end of the year.
  • It provides a steady source of revenue to the government throughout the year.

Rates and Deductions:

  • Different rates of Tax Deducted at Source apply to different types of payments and transactions. These rates are specified under various sections of the Income Tax Act.
  • For example, sections 194IA, 194IB, and 194IC govern Tax Deducted at Source on the sale of assets, while section 302 governs Tax Deducted at Source on dividends.

Refunds:

  • If the tax deducted is higher than the actual tax liability of the individual, a refund can be claimed. This is typically processed through the filing of an income tax return.

Compliance and Penalties:

  • Non-compliance with Tax Deducted at Source provisions can attract significant penalties, including fines and imprisonment. This stringent measure ensures that tax evasion is minimized as the responsibility of tax deduction lies with the payer.

Form 26AS:

  • The details of Tax Deducted at Source deducted are reflected in Form 26AS, which is an annual consolidated tax statement. Taxpayers can use this form to verify the tax deducted and claim credit for the same when filing their income tax returns.

Specific Sections related to TDS:

  • Section 194IA: TDS on the sale of immovable property.
  • Section 194IB: Tax Deducted at Source on rent paid by individuals or HUF not covered under tax audit.
  • Section 194IC: TDS on consideration for joint development agreements.
  • Section 302: Governs TDS on dividends.

By ensuring that tax is deducted at the source, the Tax Deducted at Source system helps streamline tax collection, improve compliance, and reduce the possibility of tax evasion. The periodic filing of Tax Deducted at Source returns and the reflection of these deductions in Form 26AS provide transparency and facilitate easier tax management for both the taxpayers and the tax authorities.

Income tax rate in case of capital Gain regulation in India

LTCG new capital gain

New Capital Gains Taxation Regime

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TDS RATE CHART for the FY 2024-25

Tax Deducted at Source (TDS) RATE CHART for the FY 2024-25

TDS rate

Q.: How can the TDS be deposited?

A corporate assessee and other business assessees are required to pay taxes (including TDS) via internet or debit cards electronically. The deductor must fill in the Challan No. ITNS 281 to deposit the tax.

Other deductors may deposit the tax so deducted in any branch of the Reserve Bank of India, the State Bank of India, or any authorised bank.

Q.: When is the deadline for submitting TDS?

Taxes deducted during the month must be deposited on or before the due date the following dates.

Type of Deductor Mode of payment of TDS Due Date for deposit of TDS
 

 

Office of Government

 Without Income-tax Challan  

On the same day on which tax is deducted
With Income-tax Challan ITNS 281 Within 7 days from the end of the month in which tax is deducted
Other Deductor With Income-tax Challan ITNS 281
·   For April-February Month: Within 7 days from the end of the month in which tax is deducted
·   For March Month: On or before April 30

Q.: What are the ramifications of failing to deduct or pay TDS?

If any person who is responsible for deducting tax at source fails to deduct the whole or any part of the tax or fails to deposit the same to the credit of the Central government after deduction, he is considered to be an assessee-in-default.

If the deductor does not deduct tax at source, the deductor is liable for paying an amount of tax he failed to deduct at an interest rate of 1% for each month or part thereof. In the event that the tax deducted is not deposited at the origin, however, the applicant will be liable to pay interest of 1,5% on or part of the tax that he did not deposit with the central government loan for each month.

Apart from this in accordance with Article 40(a)(ia) of the law, the taxable income of the buyer will not be paid for at least 30 percent of the purchasing value that was responsible for TDS.

Q.: If the buyer pays tax due on the income reported in the return of income, is the seller considered as the assessee in default?

According to Section 201 of the Income-tax Act, a deductor who fails to deduct tax at source is not considered in default if the payee has taken such amount into account when computing income in the return and has paid the tax due on such disclosed income. A certificate is to be obtained in Form No. 26A and submitted electronically by the deductor from the chartered accountable.

Thus, the buyer is not considered an assessee-in-default if the seller has taken the purchase amount into account when calculating his income and has paid the tax due on the income declared in the return.

Q.: What is the deadline for submitting a TDS return?

The tax deducted at source statement required by this provision must be filed with the Income-tax Department on or before the following due date:

Quarter Due Date
April- June 31st July of the Financial Year
July- September 31st October of the Financial Year
October- December 31st January of the Financial Year
January- March 31st May of the financial year immediately following the financial year in which deduction is made

If you fail to file your TDS return on time, you will be charged a late filing fee under Section 234E. The price for failing to provide the TDS/TCS Statement would be charged at the rate of Rs. 200 per day that the failure continues. The amount of the fee, however, must not exceed the total amount deductible or collectible, as applicable. The cost must be paid before the late TDS/TCS Statement may be submitted.

A person who fails to file the TDS return or fails to file it by the required date is subject to a penalty under Section 271H. If you provide inaccurate information on your TDS return, you will face a penalty under Section 271H. The minimum penalty for failing to file a TDS return or providing inaccurate information is Rs. 10,000, with a maximum penalty of Rs. 100,000.

Q.: What are the ramifications of being an assessee in default under the Income Tax Act of 1961?

The following are the consequences of being an assessee in default:

  • Interest levied under Section 220.

Simple interest at the rate of one percent per month is payable on any amount not paid within the time period specified in the notice under Section 156.

Furthermore, this interest can only be levied until the Purchaser of the Goods files the ROI. However, if all three of the following requirements are met, the Principle Chief Commissioner / Chief Commissioner / Principle Commissioner/Commissioner might lower the interest:

  • Payment of such sum has/would cause actual hardship to the assessee.
  • The assessee’s default was caused by circumstances beyond his or her control.
  • Assessee has cooperated in the assessment/recovery procedures investigation.

  • Section 221 imposes a penalty.

The Assessing Officer may order the payment of a penalty, which can be any sum up to the amount owed in tax arrears. If the AO is satisfied that the default was for good and sufficient reasons, he or she may refuse to direct the penalty.

  • Sections 222, 227, 229, and 232 govern recovery proceedings.

Apart from penalties, recovery proceedings must be initiated against the assessee/person responsible under the Act’s sections 222 (Certificate to Tax Recovery Officer), 227 (Recovery through State Government), 229 (Recovery of penalties, fines, interest, and other sums), or 232 (Recovery by suit or under other law not affected).

  • Proceedings for Prosecution.

Depending on the nature and severity of the default, the repercussions may include prosecution under Chapter XXII of the Income Tax Act of 1961 sections 276BB and 276C. If a person fails to pay the tax collected to the credit of the Central Government, he shall be punished by rigorous imprisonment for a time of not less than three months but not more than seven years, as well as a fine (Section 276BB).

Reduction in TDS rates w.e.f October 1, 2024

Reduction in TDS rates

Reduction in TDS rates w.e.f October 1, 2024

TCS Rate Chart for FY 2024-25

TDS Rate chart for FY 2024-25

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Section 194C : TDS on car hire charges

TDS

Section 194C : TDS on car hire charges

Tax Deducted at Source to be deducted on payment made on car hire. Tax Deducted at Source on car hire charges is needed to be deducted u/s 194C. When a person makes a payment to contractor on a contract, Business owner has to deduct Tax Deducted at Source on such payment made for car hire charges.

Applicability of Tax Deducted at Source provisions on Car Hire Charges under Section 194C

When there is a contract between a contractor & specified persons and a payment is made to the contractor for undertaking any ‘work’, a Tax Deducted at Source is to be deducted as per the specified rate.

Note: A contract between specified persons & a subcontractor will also be liable to Tax Deducted at Source u/s 194C.

Meaning of Car hire charges: Section 194C

A car hired for a specific purpose at a charges that includes without any maintenance or running cost falls under the purview of Section 194C.

Meaning of specified persons for purpose of TDS on car hire charges?

A specified person, as per Section 194C includes:

  • Firm;
  • Trust;
  • Local Authority;
  • Central Govt;
  • State Govt;
  • Company;
  • Co-operative society;
  • Any State authority responsible for providing housing accommodation or planning or development of cities, towns, etc.
  • Society
  • University
  • An individual, body of individual, association of person or Hindu Undivided Family has total sales, turnover or gross receipts of more than INR One Crore (in case of business) or INR 50,00,000/- (For Profession).
  • Govt of a foreign country or a non-resident corporate entity or any other association or body of such foreign State;

Rate & Amount for Tax Deducted at Source deduction for Car Hire Charges u/s 194C of the Income Tax Act, 1961

Sec 194C TDS on car hire charges.

The rate of Tax Deducted at Source to be deducted is as under: –

  • Tax Deducted at Source shall be deducted at the following rates U/s 94C depending on whether the payment is made to an Individual/ Hindu Undivided Family or other than Individual/ Hindu Undivided Family:
    • Credit/ Payment is made to a person other than an Individual/ Hindu Undivided Family  – Two Percentage.
    • Credit/ Payment is made to an Individual/ Hindu Undivided Family – One Percentage
  • No Surcharge & HEC shall be added to the above-mentioned rates.

According to Section 206AB: Tax Deducted at Source @ 20 shall be deducted where the payee does not give Permanent account number to the deductor.

Time of Tax Deducted at Source deduction on payment of Car Hire Charges u/s 194C

  • Tax Deducted at Source needs to be deducted whichever event takes place earlier.

What is deeming provisions of Tax Deducted at Source on Car Hire Charges?

Where the amount is credited to the Suspense A/c in the books of Accounts of the person who is liable to make payment to the payee, it will be deemed to be credited to the A/c of the payee & Income tax provisions for Tax Deducted at Source on car hire charges will applicable.

Celling for Tax Deducted at Source deduction on Car Hire Charges u/s 194C

Celling for Tax Deducted at Source deduction on Car Hire Charges u/s 194C is as follows :

    • Payment should not exceed Rs. 30,000 in case of a single transaction and;
    • Aggregate payments made during the relevant FY should not exceed Rs. 1,00,000.
  • In case it exceeds celling, then the TDS rate as provided u/s 194C will be applicable, i.e., 1% or 2%.

Income Tax deduction Exemption for limit under Section 194C:

  • Amount doesn’t exceed INR 30k : Where the amount credited/ paid does not exceed INR 30k in a one single transaction, No Tax Deducted at Source shall be deducted.
  • Non-Resident Contractor: In case payment made to a Non-Resident contractor shall not attract Tax Deducted at Source u/s 194C. But,  Non-Resident Contractor shall be governed by Income Tax Provisions of Sec 195.
  • Amount Not exceed in total of INR. 1 lakhs: Further, no Tax Deducted at Source  shall be deducted, where the amount or aggregate of amounts credited/ paid to the recipient during the Financial Year not exceed INR 1,00,000.
  • Business of leasing, or Hiring or plying goods carriage: Where contractor owned 10 or less carriages in the PY & a declaration is provided with Permanent account number to the person paying or crediting the amount to the Deductor.
  • In case the payment made towards Personal Purpose: In case consideration paid by an individual or Hindu Undivided Family is on a/c of personal purpose, No Tax Deducted at Source is to be deducted on such consideration.

Important Judgements related to the Car hire for Section 194C

  • Where Car hire charges are paid without any maintenance or running cost, it will be covered u/s 194C. (Akshatam Construction LLP v. DCIT )
  • Car was hired for transporting employees & visitors, it will be covered u/s 194C.(TATA AIG General v. Income-tax Officer)

The Central Board of Direct Taxes Clarification: Circulars

  • Tax Deducted at Source on payment made for car hire charges shall be deducted on invoice value, excluding the value of GST (if such value is mentioned separately in the invoice) – CBDT  Circular No. 23/ 2017.
  • But, Tax Deducted at Source shall be deducted on entire invoice value (if the value of Goods and Services Tax is indicate in invoice separately) – CBDT Circular No. 23/ 2017

Tax Deducted at Source on car hire charges is needed to be deducted u/s 194C @ 1% or 2% for payments to residents of India.

Car purchase

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TDS u/s 194Q on payments made to Kachha Arahitia

TDS

Tax Deducted at Source under section 194Q on payments made to Kachha Arahitia

Meaning of Kachha Arahitia

  • A kachha arahtia enters into a privity contract. in order for his constituent and the third party to be held responsible for one another, moreover that A kachha arhatia acts only as an agent of his constituent and never acts as a principal.
  • On the other hand, Pacca Arhtia makes himself answerable under the contract to both his constituents and the third party. A pacca arhatia, on the other hand, is entitled to substitute his own goods towards the contract made for the constituent and buy the constituent’s goods on his personal account & so kachha arahtia acts as a principal as regards his constituent.

Tax Deducted at Source u/s 194Q on payments made to Kachha Arahitia

FAQs TDS on Purchases (Section 194Q)

  • Kachha Arahitia are involved in selling crops on behalf of farmers. Kachha Arahitia are agents for an unnamed principal. The Kachha Arahitia remuneration consists solely of commission & Kachha Arahitia is not interested in P&L made by his constituent. The Kachha Arahitia does not have any dominion over the goods.
  • Tax Deducted at Source under section 194Q is deducted by the purchasers from Kachha Arahitias. Buyer in such cases is treating kachha Arahitias as a seller so covering transaction under section 194Q for the purposes of Tax Deducted at Source. Sale transaction by the Kachha Arahitia is not part of his business receipts/ turnover.
  • The Centralized Processing Centreof the Income Tax department (CPC) while processing the returns of Kachha Arahitia raises the objection that the sales/ turnover is not declared in the gross receipts.
  • Central Board of Direct Taxes in its circular: No 452 (1986) had clarified in Para 4 of circular that so far as Kachha Arahitias are concerned the turnover does not include the sales effected on behalf of principals & only commission (gross) has to be considered for the purpose of Income tax section 44AB.
  • So some clarification is required on this issue from the Central Board of Direct Taxes , on whether Tax Deducted at Source required to be deducted on the transaction of sale via Kachha Arahitias.
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Due Date extended for TDS Return for Q1-23-24 till 30 Sept.

TDS

Due Date Extension for filling TDS Return Form 26Q, 27Q & 27EQ for Q1 FY 2023-24 till Sept. 30, 2023

  • Recent announcements from the Central Board of Direct Taxes (CBDT) have extended deadlines for submitting specific TDS/TCS (Tax Deducted at Source/Tax Collected at Source) statements. This action is made possible by Circular 9/2023, dated June 28, 2023, which offers taxpayers relief and relaxes the requirements for compliance.

tds-return-due-dates.1

  • We would like to invite your attention to CBDT Circular No. 9/2023 dated June 28, 2023 whereby an order has been issued under section 119 of Income Tax Act 1961 for extension of time limits for the submission of Form 26Q, 27Q & 27EQ pertaining to Q1 of the financial year 2023-24 till September 30, 2023 from July 31, 2023.
  • Please note that the revised file formats are applicable for Form 26Q, 27Q & 27EQ for Q1 of F.Y. 2023-24 and accordingly statements prepared using updated RPU & validated with updated FVU versions will only be accepted. The updated RPU & FVU are expected to be made available on TIN website by September 1, 2023.
  • In view of the above, all the deductors/collectors are hereby advised to file statements (i.e. 26Q, 27Q & 27EQ) for the period of Q1 of FY 2023-24 (using updated RPU & FVU) during the period from September 1, 2023 to September 30, 2023.

tcs-return-due-dates 2

  • The CBDT wants to lighten taxpayers’ burdens by streamlining compliance procedures. Several benefits come with this extension, such as lessened compliance pressure, avoidance of penalties, more accuracy, and increased efficiency in tax reporting. The extra time should be used wisely by taxpayers in order to ensure accurate and prompt submission of TDS/TCS statements.

Online Corrections in TDS/TCS Statements Guidelines

Online Corrections in TDS TCS Statements

New Latest TDS Rate Chart for AY 2024-25 (FY 2023-24):

TDS rate chart .

To obtain the most recent TDS rate chart for AY 2024-25, I recommend consulting official sources such as the Income Tax Department of India’s website or notifications issued by the Central Board of Direct Taxes (CBDT). These sources typically provide updated tax rate charts and guidelines for TDS deductions applicable to different types of income and taxpayers.

TDS Chart 2023-24

TDS Chart 2023-24_

TDS & TCS Rate chart for FY 2024-25