C - 6 P D - I B D: Hapter Rofit Linked Eductions Ndustrial Ased Eduction

[DIRECT TAXATION] AY 21-22
CHAPTER - 6
PROFIT LINKED DEDUCTIONS -
INDUSTRIAL BASED DEDUCTION
Chapter VI - A Deductions
Profit
Income
80 C Series 80D Series 80E Series 80G Series Linked
Series
Deductions
1. 80C
1. 80G
2. 80CCC 1. 80D 1. 80E 1. 80QQB
2. 80GG
3. 80CCD(1) 2.80DD 2. 80EE 2. 80RRB
3. 80GGA *As Below
4. 80CCD(1B) 3. 80DDB 3. 80EEA 3. 80TTA
4. 80GGB
5. 80CCD(2) 4. 80U 4. 80EEB 4. 80TTB
5. 80GGC
6. 80CCE
PROFIT LINKED DEDUCTIONS
Profit Linked Deductions
Industrial
Entity Based
Based
Deductions
Deductions
1. 80IA
1. 80JJA
2.80IAB
2.80JJAA
3. 80IAC
3. 80LA
4. 80IB
4. 80M
5. 80IBA
5. 80P
6. 80IC
6. 80PA
7. 80IE
Set - 1 Set - 2 Set - 3 Set - 4

80IA 80IB 80IC 80IE
80IAB 80IBA
80IAC
CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 1

AY 21-22 [DIRECT TAXATION]
PROFIT LINKED DEDUCTIONS – INDUSTRIAL BASED DEDUCTIONS
SECTION PARTICULARS
80IA Deduction in respect of Profit and Gains from Undertaking or Enterprises
engaged in Infrastructure Development, etc.
80IAB Deduction in respect of profit and gains of by an undertaking or enterprise
engaged in development of SEZ
80IAC Tax incentive for New start – up
80IB Deduction in respect of profit and gains from certain Industrial undertaking
other than Infrastructure development undertaking
80IBA Deduction in respect of profits and gains from housing projects
80IC Special provision in respect of undertaking or enterprise in special category
states.
80IE Tax holiday in respect of profits and gains from eligible business of certain
undertaking in North - Eastern states
Section 80 – IA
No Particulars Explanation
1 Eligible Assessee Every assessee shall be entitled to claim deduction under this
section whose gross total income includes any profits and gains
derived by an undertaking or enterprise from any eligible
business.
Engaged in
Dedn under Is Applicable Eligible
Eligible
80 - IA to Assessee
Business
Deduction in respect of profits and gains from undertakings or enterprises engaged in

infrastructure development, etc. – Sec. 80IA
The following are the undertakings to which Sec. 80 – IA is applicable
No Undertakings Section
1 Infrastructure Facilities 80 – IA(4)(i)
2 Telecommunication networks – Not Applicable 80 – IA(4)(ii)
3 Industrial Park / SEZ 80 – IA(4)(iii)
4 Power generation or generation and Distribution 80 – IA(4)(iv)
5 Reconstruction and revival of power generating plant 80 – IA(4)(v)
Eligibe
Business
Undertaking for
Power
Infrastructure Industrial Reconstruction
generation
Facility Parks or Revival of
Units PGP
2 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

A – ELIGIBLE BUSINESS – INFRASTRUCTURE ENTERPRISE

1 Infrastructure Any enterprise engaged in
Enterprise (i) developing
(ii) operating or maintaining
(iii) developing, operating and maintaining any infrastructure, if such
enterprise fulfills all the following conditions, namely –
No Particulars
1 It is owned by Indian company or a consortium of such
companies or by a authority or board or corporation or any
other body established or constituted under any Central or State
Act; and
2 It has entered into an agreement with the Central Government
or a State Government or a local authority or any other
statutory body for – (i) developing, or (ii) operating and
maintaining; or (iii) developing, operating and maintaining a
new infrastructure facility; and
3 It has started or starts operating and maintaining the
infrastructure facility on or after 01 - 04 – 1995
2 Meaning of
Infrastructure No Particulars
facility 1 A road, including toll road, a bridge or a rail system
2 A highway project including housing or other activities being
an integral part of the highway project
3 A water supply project water treatment system, irrigation
project, sanitation and sewerage system or solid waste
management system
4 A port, airport, inland waterway or inland port or navigational
channel in the sea
3 Extension of
No Particulars
Infrastructure
1 Structures at the ports for storage, loading and unloading etc.
Facility
will be included in the definition of port for the purpose of
Section 80 - IA, if the concerned port authority has issued a
certificate that the said structures form part of the port
2 Effluent treatment and conveyance system is a part of water
treatment system and would accordingly, qualify as an
infrastructure facility for the purpose of Section 80 - IA
4 Widening of In case the existing roads are widened by way of construction of

existing additional lanes as a part of a highway project by an undertaking, then
roads it shall be treated as a new infrastructure facility under section 80 - IA
regarded as (4)(i). However, simply relying of an existing road cannot be regarded
new as a new infrastructure facility.
infrastructure
facility -
Circular No.
4 of 2010,

dated 18 – 05
– 2010
5 Amount and  The amount of deduction available will be 100% of the profits and
period of gains derived from such business for 10 consecutive assessment
deduction years out of 20 years starting from year in which it develops and
begins to operate and maintains such infrastructure facility.
 However, in case of a port, airport, inland waterway or inland port
or navigational channel in the sea, 100% of profits and gains
derived from such business for any 10 consecutive assessment
years out of 15 years shall be eligible for deduction.
6 In case of However, where an enterprise which developed such infrastructure
transfer of facility transfers it to another enterprise, and such transferee enterprise
business operates and maintains it according to the agreement drawn up with
the Government, etc. this section will apply to the transferee enterprise
for the unexpired period of deduction (which was available to the first
enterprise)
7 Housing Where housing or other activities are an integral part of a highway
Projects project and the profits and gains have been calculated in accordance
with this section, the profits shall not be liable to tax if the following
conditions have been fulfilled –
No Particulars
1 The profit has been transferred to a Special Reserve Account
2 The same is actually utilized for the highway project excluding
housing and other activities before the expiry of 3 years
following the year of transfer to the Reserve Account; and
3 The amount remaining unutilized shall be chargeable to tax as
income of the year in which the transfer to the Reserve Account
took place
8 No deduction Nothing contained in this section shall apply to any enterprise which
admissible in starts the development or operation and maintenance of the
respect of infrastructure facility on or after 01.04.2017
infrastructure
enterprise on
or after
01.04.2017
QUANTUM AND PERIOD OF DEDUCTION,

100% of Profits derived from Eligible undertaking

B – ELIGIBLE BUSINESS – INDUSTRIAL PARKS

No Particulars Explanations
1 Industrial  Any undertaking which
Parks  develops,
 develops and operates, or
 maintains and operates an industrial park
2 Conditions
No Particulars
1 The undertaking begins to operate an industrial park, in
accordance with the scheme framed and notified by the
Central Government
2 The scheme is notified by the Government for the period
beginning on 1 - 4 - 1997 and ending on 31 - 3 - 2011 for
industrial parks
3 Amount of  The amount of deduction available will be 100% of the profits and
period of gains derived from such business for 10 consecutive assessment
deduction years out of 15 years starting from year in which it develops and
begins to operate and maintains such industrial park.
 However, where an undertaking develops an industrial park and
transfers the operation and maintenance to another undertaking
(transferee undertaking), the deduction to the transferee
undertaking shall be available for the remaining period in 10
consecutive assessment years, in such a manner as would have
been available to the transferor undertaking, as if the operation
and maintenance were not so transferred to the transferee
undertaking.

100% of Profits derived for any 10 consecutive AY out of 15 years beginning from the year
of operation

C – ELIGIBLE BUSINESS – POWER GENERATION UNDERTAKINGS
1 Power Any undertaking which –
generation No Particulars
undertakings A Is set up in any part of India for the generation or generation
and distribution of power. However, such undertaking must
begin to generate power at any time during the period
between 1 - 4 - 1993 and 31 - 3 - 2017
B Starts transmission or distribution by laying a network of
new transmission or distribution lines at any time during the
period from 1 - 4 - 1999 and 31 - 3 - 2017.
However, the deduction shall be allowed only in respect of
profits derived from the laying of such network of new lines
for transmission or distribution
C Undertakes substantial renovation and modernization of
the existing network of transmission or distribution lines at
any time during the period beginning on 1 - 4 - 2004 and
ending on 31 - 3 – 2017
2 Substantial An increase in the plant and machinery in the network of

renovation and transmission or distribution lines by at least 50% of the book value
modernization of such plant and machinery as on 01 - 04 - 2004.
3 Amount of The amount of deduction available will be 100% of the profit and
deduction gains derived from such business for 10 consecutive assessment
years out of 15 years starting from year in which it commences
business
4 Additional
Conditions No Particulars
A It is not formed by splitting up or reconstruction of
business already existence except as provided u/s 33B
(Rehabilitation Allowance)
B  The undertaking should not be formed by the transfer
of machinery and plant previously used for any
purpose.
 However, these conditions do not apply in case of
transfer, either in whole or in part of machinery or plant
previously used by a State Electricity Board, whether or
not such transfer is in pursuance of the splitting up or
reconstruction of such State Electricity Board, under Part
– XIII of the Electricity Act, 2003
5 Other exceptions
No Particulars
A  Such second – hand P&M is imported by the assessee
and
 such P&M is not previously used in India as well as
 no depreciation was allowed to any person prior to the
date of installation by the assessee
B Where the total value of the P&M previously used and now
transferred to the new business does not exceed 20% of the

total value of the machinery or plant used in the new
business, such P&M will be considered as new for this
purpose

of operation

D – ELIGIBLE BUSINESS – UNDERTAKINGS OWNED BY AN INDIAN
COMPANY AND SET UP FOR RECONSTRUCTION OR REVIVAL OF A POWER
GENERATING PLANT
1 Undertakings The benefit under this section is available to an undertaking owned by
owned by an an Indian company and set - up for reconstruction or revival of a
Indian power generating plant if –
company and
set up for No Particulars
reconstruction A Such Indian company is formed before 30 - 11 - 2005 with
or revival of a majority equity participation by public sector companies for
power the purposes of enforcing the security interest of the lenders to
generating the company owning the power generating plant
plant B Such Indian company has been notified before 31.12.2005 by
the Central Government for the purpose of this clause
C Such undertaking has begun to generate or transmit or
distribute power before 31.3.2011
2 Amount of The amount of deduction available will be 100% of the profits and
deduction gains derived from such business for 10 consecutive assessment
years out of 15 years.

of operation

OTHER PROVISIONS
1 Profits to be For the purpose of computing deduction under this section, the profits
computed as if and gains of the eligible business shall be computed as if such eligible
eligible business were the only source of income of the assessee during the
business was relevant previous years.
only source of
income - For the Profits need to be
Section 80 - S.80IA (5) purpose of computed as if EB
Dedn u/s 80IA is the only source
IA(5)
2 Audit of The deduction shall be allowed to the industrial undertaking only if

accounts - the accounts of the industrial undertaking for the relevant PY have
Section 80 - IA been audited by a Chartered Accountant before the specified date
(7) referred to in section 44AB and the assessee furnishes by this date
the report of such audit in the prescribed form duly signed and
verified by such accountant (Amended by Finance Act w.e.f. 01.04.2020
i.e. AY 2020 - 21 )
Dedn u/s 80IA

Accounts are
S.80IA (7) is allowed
audited by CA
only if
3 Inter - unit  Where any goods or service held for the purposes of the eligible
Transfer business are transferred to any other business carried on by the
Section 80 - IA assessee, or vice versa, and if the consideration for such transfer
(8) does not correspond with the market value of the goods or services
then the profits and gains of the eligible business shall be
computed as if the transfer was made at market value.
 However, if, in the opinion of the Assessing Officer, such
computation presents exceptional difficulties, the Assessing
Officer may compute the profits on such reasonable basis as he
may deem fit.
If Inter units Profits will be

S.80IA (8) Transfer is not computed by
made at MP applying MP
4 For the above In relation to any goods or services, means –

purposes No Particulars
“market A The price that such goods or services would ordinarily fetch
value” in the open market; or
B The arm’s length price as defined in section 92F(ii), where the
transfer of such goods or services is a specified domestic
transaction referred to in section 92BA.
5 Double The deduction claimed and allowed under this section shall not exceed
deduction not for the profits and gains of the eligible business. Further, where
admissible - deduction is claimed and allowed under this section for any
Section 80 - IA assessment year no deduction in respect of such profits will be
(9) allowed under any other section of this chapter.

Shall not exceed

Den u/s the profit from
S.80IA (9)
80IA Eligible
Business
6 Excessive  Where it appears to the Assessing Officer that the assessee derives
Profits more than ordinary profits from the eligible business due to close
derived by the connection between the assessee and any other person, or due to
assessee - any other reason, the Assessing Officer may consider such profits
Section 80 - as may be reasonable for the purpose of computing deduction
IA(10) under this section.
 However, in case of aforesaid arrangement involving a specified
domestic transaction referred to in section 92BA, the amount of
profits from such transaction shall be determined having regard to
arm’s length price as defined in section 92F(ii).
AO will
If AO found
consider only
80IA (10) Profit reported
reasonable
is Unreasonable
profits for Dedn
7 Power of The Central Government is empowered to declare any class of

Central industrial undertaking or enterprise as not being entitled to deduction
Government under this section. The denial of exemption shall be with effect from
to declare such date as may be specified in the notification issued in the Official
ineligible Gazette
undertakings -
Section 80 - CG has the I.U / Enterprice
IA(11) S.80IA (11) power to not entitled to
Declare Dedn
8 Amalgamation  If any eligible undertaking of an Indian company is transferred

or Demerger - under amalgamation or demerger, then, no deduction will be
Section 80 - IA allowed to the amalgamating or demerged company and the
(12) deduction will be allowed to the amalgamated or resulting
company for unexpired period.
 The provisions of this section will apply to the amalgamated or
resulting company as they would have applied to the
amalgamating or demerged company if the amalgamation or
demerger had not taken place.
If Amalgamation / Dedn available

Demerger then no Dedn to
S.80IA (12)
to amalgamating / Amalgamated /
Demerged Co. Resulting Co.
9 No However, the benefit of such transfer of deduction to the

recognition of amalgamated/ resulting company would not be available in respect of
amalgamation any enterprise or undertaking which is transferred in a scheme of
or demerger amalgamation or demerger effected on or after 01.04.2007.
on or after 1 -
4 - 2007 -
Section 80 -
IA(12A)

Dedn
Applicable till
available to
S.80IA (12A) 01.04.2007
Amalgamated
only
/ Resulting Co
10 Works The tax holiday under section 80 - IA would not be available in
contractors not relation to a business which is in the nature of a works contract
eligible for awarded by any person (including the Central or State Government)
deduction and executed by the eligible undertaking or enterprise.
Not Works
S.80IA
Applicable to Contractors

Summary – Section – 80 - IA
Year of
Period of Quantum of
Eligible Business commencement of
deduction deduction
eligible business
1) i) Developing or On or after 1.4.1995 Infrastructure 100% of the
ii) Operating and but not later than facility of road, or profits and gains
maintaining or 1.4.2017 a bridge or a rail derived from
iii) Developing, system or a such business for
operating and highway project or 10 consecutive
maintaining any a water supply assessment years.
infrastructure facility project:
2) Industrial parks Industrial parks: 10 consecutive
Notified by the CG assessment years
for the period on or out of 20 years
after 1.4.1997 & beginning from the
ending on 31.3.2011. year in which the
3) Power undertakings Generation or enterprise
generation and develops or begins
distribution: to operate the
Set up between eligible business.
1.4.1993 & 31.3.2017.
Other eligible
Transmission or businesses:
distribution: 10 consecutive
Start transmission assessment years
during the period out of 15 years
from 1.4.1999 & beginning from the
31.3.2017. year in which the
enterprise
Renovation and develops or begins
modernization of to operate the
existing network: eligible business.
Undertakes
substantial
renovation and
modernization
during the period on
or after 1.4.2004 and
ending on 31.3.2017.
4) Undertaking owned Company formed on
by an Indian or before 30th Nov,
Company set up for 2005 and begins to
Reconstruction or generate or transmit
revival of a power or distribute power
generating plant. before 31st March
2011 and notified
before 31.12.2005 by
CG.

Question for Understanding:-
Illustration 1
Evergreen Ltd. has two businesses. Business A is eligible for deduction u/s 80 – IA and
Business – B is not eligible for such deduction. The profit and loss of the above businesses for
the last three years are as under
Previous Year Business – A (80 – IA unit) Business - B

2017 – 18 (50,000) 1,40,000
2018 – 19 35,000 1,40,000
2019 – 20 60,000 1,00,000
2020 – 21 50,000 1,50,000
Compute the deduction u/s 80 – IA and total income for the AY 2021 – 22.
Solution
1 Total income In the above case, for the PY 2017 – 18 there is a loss in business – A.
for the PY Hence, there will be no deduction u/s 80 – IA as for this business. This
2017 - 18 loss will be set off in the same PY against income of Business – B in
accordance with section – 70 and the total income of that year of
Evergreen Ltd. shall be Rs. 90,000
2 Total income In the PY 2018 – 19 although there is a profit of Rs. 35,000 from
for the PY business – A there shall not be any deduction allowed u/s 80 – IA, as
2018 – 19 for the purpose of deduction it is deemed that such business is the only
source of income of the assessee. Therefore in this case there will be a
notional brought forward loss of Rs. 50,000 of Business – A from the PY
2017 – 18 (although it has actually been already set off), and this
notional loss can only be set off to the extent of Rs. 35,000. Balance Rs.
15,000 notional loss will be carried forward to 2019 – 20. However the
total income of Evergreen Ltd. for the year 2018 – 19 shall be Rs. 35,000
+1,40,000 = Rs. 1,75,000
3 Total income In the PY 2019 – 20, the profit of business – A is Rs. 60,000 and carry
for the PY forward of notional loss of his business is Rs. 15,000. Therefore,
2019 – 20 deduction u/s 80 – IA will be allowed at 100% on Rs. 45,000 (Rs. 60,000 –
Rs. 15,000). The total income of Evergreen Ltd. for the PY 2019 – 20 shall
be Rs. 1,15,000 (60,000 + 1,00,000 – 45,000)
4 Total income
for the PY No Particulars Amount
2020 – 21 1 Business – A 50,000
2 Business – B 1,00,000
3 Gross Total Income 1,50,000
4 Less: Deduction u/s 80 – IA (100% of Rs, 50,000) 50,000
5 Total Income 1,00,000

SECTION 80 - IAB
1 Eligible assessee Undertakings / Enterprises engaged in development of Special
Economic Zone (SEZ)
2 Amount of  100% of the profits from the business of developing SEZ.
Deduction  Deduction should not exceed the profits derived from the
business of developing SEZ
3 Period of Deduction is available for 10 consecutive assessment years out of
deduction 15 assessment years beginning from the year in which SEZ is
notified
4 Transfer of the Where the assessee transfers the operation or maintenance to
business another developer, then transferee shall be entitled to deduction
for the unexpired period of the total 10 years
5 Other common The provisions of Section 80 – IA (5) and Section 80 IA (7) to (12)
provisions shall apply for the purpose of deduction under this section
6 No deduction The provisions of this section shall not apply to an assessee, being
admissible after a developer, where the development of Special Economic Zone
31 - 03 – 2017 begins on or after 01.04.2017.
Dedn For 10
Eligible Developer Dedn 100%
unser 80 - CAY out of
Assessee of SEZ of PGBP
IAB 15AY

100% of Profits derived from a business of developing a SEZ for a period of any 10
consecutive AY out of 15 years beginning from the year in which the SEZ has been notified
by the Central Government
Section 80 - IAC
1 Eligible An assessee, being an eligible start up, whose gross total income
Assessee includes any profits and gains derived from eligible business.
2 Eligible It means a business carried out by an eligible start - up engaged in
business  innovation, development or improvement of products or processes
or services or a
 scalable business model with a high potential of employment
generation or wealth creation.
3 Eligible start – It means a company or a limited liability partnership engaged in
up eligible business which fulfills the following conditions, namely –
No Particulars
1 It is incorporated on or after 1 – 4 - 2016 but before 1 – 4 – 2021
2 The total turnover of its business does not exceed Rs. 100

crore in the previous year relevant to the assessment year for

which deduction under this section is claimed
3 It holds a certificate of eligible business from the Inter -
Ministerial Board of Certificates (IMBC) as notified in the
Official Gazette by the Central Government
4 Limited It means a partnership referred to Section 2(1)(n) of the Limited

liability Liability Partnership Act, 2008.
partnership
5 Quantum and A deduction of an amount equal to 100% of the profits and gains
period of derived from such business for 3 consecutive assessment years out of
deduction 10 years beginning from the year in which the eligible start - up is
incorporated.
6 Conditions This section applies to a start - up which fulfills the following
conditions, namely –
No Particulars
1  It is not formed by splitting up, or the reconstruction, of a
business already in existence.
 However, this condition shall not apply in respect of a start
- up which is formed as a result of the re - establishment,
reconstruction or revival by the assessee of the business of
any such undertaking as referred to in section 33B, in the
circumstances and within the period specified in that
section
2 It is not formed by the transfer to a new business of machinery
or plant previously used for any purpose
7 Import plant Any machinery or plant which was used outside India by any person
not to be other than the assessee shall not be regarded as machinery or plant
regarded as previously used for any purpose, if all the following conditions are
second hand fulfilled, namely –
plant - No Particulars
Explanation 1 1 Such machinery or plant was not, at any time previous to the
date of the installation by the assessee, used in India
2 Such machinery or plant is imported into India
3 No deduction on account of depreciation in respect of such
machinery or plant has been allowed or is allowable under the
provisions of this Act in computing the total income of any
person for any period prior to the date of the installation of the
machinery or plant by the assessee
8 Value of Where in the case of a start - up, any machinery or plant or any part
Second hand thereof previously used for any purpose is transferred to a new
machinery can business and the total value of the machinery or plant or part so
be 20% of transferred does not exceed 20% of the total value of the machinery or
total value of plant used in the business, then condition specified as above shall be
plant and deemed to have been complied with
machinery -
Explanation 2
9 Other The provisions of Section 80 - IA(5) & (7) to (11) shall apply to the start

common - ups for the purpose of allowing deductions under Section 80 - IAC
provisions (1).
Objective of the Amendment:
The existing provisions of section 80 – IAC of the Act provide for a deduction of an amount
equal to 100% of the profits and gains derived from the eligible business by an eligible
start – up for 3 consecutive AY out of 7 years, at the option of the assessee, subject to the
conditions that the eligible start – up is incorporated on or after 1.4.2016 but before 1.4.2021
and the total turnover of this business does not exceeds Rs. 25Crore.
In order to further rationalize the provisions relating to the start – ups, its proposed to
amend section – 80IAC of the Act so as to provide that,
No Particulars
1 The deduction under the said section 80 – IAC shall be available for an eligible start
– up for the period of 3 consecutive AY out of 10 years beginning from the year in
which it is incorporated
2 The deduction under the said section shall be available to an eligible start – up, if
the total turnover of its business does not exceed Rs. 100 crore in any of the previous
years beginning from the year in which is incorporated

 Deduction of an amount equal to 100% of the profits & gains derived from eligible
business
 Such deduction shall be allowed for 3 consecutive AY. For this purpose, the
assessee has a option to claim the deduction for any 3 consecutive AY out of 10
years beginning from the year in which the eligible start - up is incorporated

QUESTION FOR UNDERSTANDING

Illustration 1
XYZ LLP was incorporated on 1 - 4 - 2018 to carry on the business of innovation,
development, deployment and commercialization of new processes driven by technology. It
holds a certificate of eligible business from the notified IMBC. Its total turnover and profits
and gains from such business for the PY 2018 - 19 to PY 2027 - 28 are as follows:
PY PY PY PY PY PY PY PY PY PY
2018 - 2019 2020 2021 - 2022 2023 2024 - 2025 2026 2027
Particulars
19 – 20 – 21 22 – 23 – 24 25 - 26 - 27 - 28
(Rs. in crores)
Total 15.00 17.50 21.00 23.00 24.00 23.00 22.00 30.00 35.00 38.00
turnover
Profits / - 2.00 - 0.80 4.00 6.50 5.85 2.00 1.00 1.50 1.00 0.75
Losses
Is XYZ LLP eligible for any tax benefit under the provisions of the Income tax Act, 1961? If
yes, what is the benefit available?

Solution:
XYZ LLP is an eligible start - up since –
No Particulars
1 It is a limited liability partnership engaged in eligible business of innovation,
development, deployment and commercialization of new processes driven by
technology. It holds a certificate of eligible business from the notified IMBC.
2 It is incorporated during the period 1 - 4 - 2016 to 31 - 3 - 2021
3 It is total turnover does not exceed Rs. 25 crores in PY 2020 - 21
4 It holds a certificate of eligible business from the notified IMBC
Therefore, XYZ LLP, being an eligible start - up, is eligible for deduction under section 80 -
IAC of 100% of the profits and gains derived by it from an eligible business for any 3
consecutive assessment years out of 10 years beginning from the year in which the eligible
start up is incorporated i.e. PY 2018 - 19.
In the first two years i.e. PY 2018 - 19 and PY 2019 - 20, XYZ LLP has incurred a loss. In the
subsequent three years i.e. PY 2020 - 21, PY 2021 - 22 and PY 2022 - 23, XYZ LLP has earned
profits from eligible business and hence can claim 100% of its profits as deduction for any 3
consecutive assessment years under section 80 - IAC from the PY 2020 - 21 to PY 2024 - 25.
However for PY 2020 - 21, the profits eligible for deduction would be the profits after set - off
of brought forward losses of PY 2018 - 19 and PY 2019 - 20, i.e. Rs [4 – (2.0 +0.8)] = Rs. 1.2
crores.

[ DIRECT TAXATION] AY 21-22
CHAPTER - 6
SEC - 80IB SERIES
Profit
Income
Series
Deductions
1. 80C
1. 80G
2. 80CCC 1. 80D 1. 80E 1. 80QQB
2. 80GG
3. 80CCD(1) 2.80DD 2. 80EE 2. 80RRB
3. 80GGA *As Below
4. 80CCD(1B) 3. 80DDB 3. 80EEA 3. 80TTA
4. 80GGB
5. 80CCD(2) 4. 80U 4. 80EEB 4. 80TTB
5. 80GGC
6. 80CCE
Industrial Based Entity Based

Deductions Deductions
1. 80IA
1. 80JJA
2.80IAB
2.80JJA
3. 80IAC
3. 80LA
4. 80IB
4. 80M
5. 80IBA
5. 80P
6. 80IC
6. 80PA
7. 80IE
Set - 1 Set - 2 Set - 3 Set - 4

80IA 80IB 80IC 80IE
80IAB 80IBA
80IAC

SECTION PARTICULARS
80IA Deduction in respect of Profit and Gains from Undertaking or Enterprises engaged
in Infrastructure Development, etc.
80IAB Deduction in respect of profit and gains of by an undertaking or enterprise engaged
in development of SEZ
80IB Deduction in respect of profit and gains from certain Industrial undertaking other
than Infrastructure development undertaking
80IC Special provision in respect of undertaking or enterprise in special category states.
Section 80 - IB
1 Eligible This section will be applicable to assessee, whose gross total income
Assessee includes any profits and gains derived from any of the following business
activities –
No Particulars
1 An industrial undertaking including a small scale industrial
undertaking (SSI) in Jammu Kashmir
2 An undertaking which begins commercial production of mineral
oil or commercial production of natural gas in licensed blocks
3  An undertaking deriving profits from the business of
processing, preservation and packaging of
 fruits or vegetables or
 meat and meat products or
 marine or dairy products or
 from the integrated business of handling, storage and
transportation of food grains
Eligible Assessee
Under taking for

Undertaking for
Fruits &
I.U in JK Mineral oil &
Vegetables, Meat
Natural Gas
& Meat Products
2 Conditions The rate and period of deduction and the conditions required to be satisfied
to be by the different categories of businesses are given below:
fulfilled
amount of
deduction
and period
of deduction
2 CA DEEPAK P ANDIAN & CA ANEESH NOOR MOHAMMED

Eligible Assessee
Under taking for Fruits &

Industrial undertaking in Undertaking for Mineral
Vegetables, Meat & Meat
JK oil & Natural Gas
Products
A - AN INDUSTRIAL UNDERTAKING INCLUDING A SMALL SCALE INDUSTRIAL

UNDERTAKING (SSI) IN JAMMU AND KASHMIR - SUB - SECTION (2) AND (4)
1 Conditions In order to be eligible to claim deduction under section 80 - IB, an
industrial undertaking must fulfill the following conditions:
No Particulars
1 It manufactures or produces any article or thing or operates a
cold storage plant
2 In case of a manufacturing industrial unit, it should employ 10
or more workers (if manufacture is carried on with the aid of
power) or 20 or more workers (if manufacture is carried on
without the aid of power)
2 Period of From 1 – 4 - 1993 to 31 – 3 – 2012

commencement
3 Quantum and  The amount of deduction for an industrial undertaking in Jammu
period of and Kashmir will be 100% of the profits and gains derived from
deduction such industrial undertaking for the initial 5 years and thereafter
25% of such profits and gains (in case of a company, the rate is
30%).
 The total period of deduction should not exceed 10 consecutive
assessment years.
 Were the industrial undertaking is a co - operative society, the
deduction will be available for 12 assessment years (instead of 10),
including the initial assessment year.
 A negative list has also been provided in Part C of the Thirteenth
Schedule to specify the commodities which should not be
manufactured or produced by such undertakings. The list includes
Cigarettes/ cigars of tobacco, manufactured tobacco and substitutes,
distilled / brewed alcoholic drinks and aerated branded beverages
and their concentrates.

B - UNDERTAKING ENGAGED IN PROCESSING, PRESERVATION OR PACKAGING OF
FRUITS AND VEGETABLES OR MEAT AND MEAT PRODUCTS OR POULTRY OR
MARINE OR DAIRY PRODUCTS OR BUSINESS OF HANDLING, STORAGE AND
TRANSPORTATION OF FOOD GRAINS
1 Period of From 01.4.2001 (However, in case of meat and meat products or poultry
commencement or marine or dairy products period of commencement shall be on or
after 01.04.2009);
2 Amount and
period of No Particulars
deduction 1 Company assessee: 100% for first 5 years and 30% for next 5
years
2 Other assessee’s: 100% for first 5 years and 25% for next 5 years

 Industrial undertaking in industrially backward state and district notified by the
Central Government other than north eastern Region u/s 80 – IB (4)
 Undertaking engaged in processing, preservation of fruits etc. u/s 80 – IB (11A)
C - UNDERTAKINGS ENGAGED IN COMMERCIAL PRODUCTION OR REFINING OF

MINERAL OIL OR COMMERCIAL PRODUCTION OF NATURAL GAS IN LICENSED
BLOCKS
1 Conditions In order to claim deduction, the undertaking should be engaged in
commercial production or refining of mineral oil or commercial production
of natural gas in licensed blocks, the following further conditions should be
fulfilled
No Particulars
1  In case of an undertaking engaged in commercial production of
mineral oil – Where such operations are carried out in any part of
India, it begins commercial production on or after 01.04.1997 but
not later than 31.03.2017;
 The above deduction for commercial production of mineral oil
will not be available for blocks licensed under a contract awarded
after 31.3.2011 under the New Exploration Licensing Policy or in
pursuance of any law for the time being in force or by the Central
or a State Government in any other manner
2 In case of an undertaking engaged in commercial production of
natural gas in licensed blocks
i. The blocks are licensed under the VIII Round of bidding for
award of exploration contracts (“NELP - VIII”) under the New
Exploration Licensing Policy).
ii. The blocks are licensed under the IV Round of bidding for
award of exploration contracts for Coal Bed Methane blocks
and begins commercial production of natural gas on or after

01.04.2009 but not later than 31.03.2017
2 Note For the purposes of claiming deduction, all blocks licensed under a single
contract, which has been awarded –
No Particulars
1 Under the New Exploration Licensing Policy; or
2 In pursuance of any law for the time being in force; or
3 By Central or State Government in any other manner
Shall be treated as a single “undertaking”.

3 Amount 100% for first 7 years.
and period
of
deduction
D – OTHER COMMON PROVISIONS

1 Other The provisions of Section 80IA (5) and Section 80IA (7) to (12) shall apply
common to the eligible undertaking or enterprise under this section
provisions

100% of the profits for 7 consecutive years including the initial Assessment year

Section 80 - IBA
1 Eligible An assessee whose gross total income of includes any profits and gains
Assessee derived from the business of developing and building housing projects.
2 Quantum of An amount equal to 100% of the profits and gains derived from such
deduction business.
3 Conditions A housing project shall be a project which fulfill the following conditions,
namely
(a) The project is approved by the competent authority after

01.06.2016, but on or before 31.03.2021 (Amended by Finance Act,
2020 w.e.f. 01.04.2021 i.e. AY 2021 – 22);
(b) The project is completed within a period of 5 years from the date
of approval by the competent authority. However -
i. Where the approval in respect of a housing project is obtained
more than once, the project shall be deemed to have been
approved on the date on which the building plan of such
housing project was first approved by the competent
authority, and
ii. The project shall be deemed to have been completed when a
certificate of completion of project as a whole is obtained in
writing from the competent authority.
(c) The carpet area of the shops and other commercial establishments
included in the housing project does not exceed 3% of the
aggregate carpet area;
(d) the project is on a plot of land measuring not less than -
(i) 1,000 square meters, where such project is located within the
metropolitan cities of Bengaluru, Chennai, Delhi National
Capital Region (limited to Delhi, Noida, Greater Noida,
Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and
Mumbai (whole of Mumbai Metropolitan Region); or
(ii) 2,000 square meters, where such project is located in any
other place;
(e) The project is the only housing project on the plot of land as
specified in clause (d);
The carpet area of the residential unit comprised in the housing
(f) project does not exceed -
(i) 60 square meters, where such project is located within the
metropolitan cities of Bengaluru, Chennai, Delhi National
Capital Region (limited to Delhi, Noida, Greater Noida,
Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and
Mumbai (whole of Mumbai Metropolitan Region); or
(ii) 90 square meters, where such project is located in any other
place;
(g) The stamp duty value of a residential unit in the housing project
does not exceed Rs 45 lakh
Where a residential unit in the housing project is allotted to an
(h) individual, no other residential unit in the housing project shall be
allotted to the individual or the spouse or the minor children of
such individual.

The project utilizes -

(i) (i) Not less than 90% of the floor area ratio permissible in
respect of the plot of land under the rules to be made by the
Central Government or the State Government or the local
authority, as the case may be, where such project is located
within the metropolitan cities of Bengaluru, Chennai, Delhi
National Capital Region (limited to Delhi, Noida Greater
Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad
Kolkata and Mumbai, (whole of Mumbai Metropolitan
Region); or
(ii) Not less than 80% of such floor area ratio where such project
is located in any place other than the place referred to in sub -
clause (i); and
(j) The assessee maintains separate books of account in respect of the
housing project.
4 Works Nothing contained in this section shall apply to any assessee who executes
contractors the housing project as a works - contract awarded by any person
not eligible (including the Central Government or the State Government).
for deduction
5 Housing Where the housing project is not completed within the period 5 years and
project not in respect of which a deduction has been claimed and allowed under this
completed section, the total amount of deduction so claimed and allowed in one or
within 5 more previous years, shall be deemed to be the income of the assessee
years – chargeable under the head “Profits and gains of business or profession” of
deduction the previous year in which the period for completion so expires
deemed to be
wrongly
allowed
6 Double Where any amount of profits and gains derived from the business of
deduction not developing and building housing projects under any scheme for the
admissible housing is claimed and allowed under this section for any assessment
year, deduction to the extent of such profit and gains shall not be allowed
under any other provisions of this Act.
7 Meaning of
certain terms Term Meaning
Carpet Area Shall have the same meaning as assigned to it in
Section 2(k) of the Real Estate (Regulation and
Development) Act, 2016
Competent Means the authority empowered to approve the
authority building plan by or under any law for the time being
in force;
Floor area Means the quotient obtained by dividing the total
ratio covered area of plinth area on all the floors by the
area of the plot of land;
Housing Means a project consisting predominantly of
project residential units with such other facilities and
amenities as the competent authority may approve
subject to the provisions of this section;

Residential Means an independent housing unit with separate
unit facilities for living, cooking and sanitary
requirements, distinctly separated from other
residential units within the building, which is
directly accessible from an outer door or through an
interior door in a shared hallway and not by walking
through the living space of another household.
Stamp duty Means the value adopted or assessed or assessable
value by any authority of the Central Government or a
State Government for the purpose of payment of
stamp duty in respect of an immovable property.

100% of the profits derived from such business

SUMMARY – 80IB
Year of
No Eligible Business commencement of
deduction deduction
eligible business
1) An Industrial Begins to Not exceeding 10 100% of the
undertaking including manufacture or consecutive AYs
profits and gains
a small scale Industrial production of any (12 AYs in case of
derived from
undertaking (SSI) in article or thing or co – operative
such industrial
Jammu and Kashmir operate cold storage society) undertaking for
plant during the the initial 5 AYs
period 1 - 4 - 1993 and thereafter
and 31 - 3 - 2012. 25% (30% in case
of company) of
such profits and
gains.
2) Commercial Commercial 7 consecutive AYs 100% of the
production of mineral production of including the initial profits and gains
oil or commercial mineral oil: AY from such
production of natural On or after 1 April,
st business.
gas in licensed blocks 1997 but not later
than 31.3.2017
Commercial
production of natural
gas:
On or after 1st April,
2009 but not later
than 31.3.2017
3) Processing, Processing, 10 consecutive AYs 100% of the
preservation and preservation and beginning with the profits and gains
packaging of fruits or packaging of meat initial AY derived from
vegetables or meat and products or poultry such business for
meat products or or marine or dairy 5 AYs beginning
poultry or marine or products: with the initial
dairy products or from On or after 1.4.2009 AY 25% (30% in
the integrated business case of company)
of handling, storage Other eligible for remaining 5
and transportation of businesses: years.
food grains. On or after 01.04.2001

[DIRECT TAXATION] AY 21 - 22
CHAPTER - 6
PROFIT LINKED DEDUCTIONS - 80 – IC & IE
Profit
Income
Series
Deductions
1. 80C
1. 80G
2. 80CCC 1. 80D 1. 80E 1. 80QQB
2. 80GG
3. 80CCD(1) 2.80DD 2. 80EE 2. 80RRB
3. 80GGA *As Below
4. 80CCD(1B) 3. 80DDB 3. 80EEA 3. 80TTA
4. 80GGB
5. 80CCD(2) 4. 80U 4. 80EEB 4. 80TTB
5. 80GGC
6. 80CCE

1. 80IA
1. 80JJA
2.80IAB
2.80JJAA
3. 80IAC
3. 80LA
4. 80IB
4. 80M
5. 80IBA
5. 80P
6. 80IC
6. 80PA
7. 80IE
Set - 1 Set - 2 Set - 3 Set - 4

80IA 80IB 80IC 80IE
80IAB 80IBA
80IAC

AY 21 -
22 [DIRECT TAXATION]
SECTION PARTICULARS
80IA Deduction in respect of Profit and Gains from Undertaking or Enterprises engaged
in Infrastructure Development, etc.
80IAB Deduction in respect of profit and gains of by an undertaking or enterprise engaged
in development of SEZ
80IB Deduction in respect of profit and gains from certain Industrial undertaking other
than Infrastructure development undertaking
80IC Special provision in respect of undertaking or enterprise in special category states.
Section 80 - IC
1 Eligible Every assessee whose gross total income includes profits derived from
Assessee industrial undertaking engaged in eligible business is eligible for
deduction. The eligible business are –
1 In case of Undertaking It has begun or begins manufacture or
/ Enterprise located in production of any article or thing
notified areas under (except those specified in XIII
specified states Schedule) during specified period, or
undertakes substantial expansion
during that period
2 In case of Undertaking It has begun or begins manufacture or
/ Enterprise located in production of any article/ thing
any area under specified in XIV Schedule or
specified states commences any operation specified
therein during the specified period, or
undertakes substantial expansion
during that period
2 Notified Area  Export Processing Zone or

 Integrated Infrastructure Development Centre or
 Industrial Growth Centre or
 Industrial Estate or
 Industrial Park or
 Software Technology Park or
 Industrial Area or
 Theme Park, as notified by Board in accordance with scheme framed
by Central Government.
3 Specified Himachal Pradesh and Uttaranchal
States
4 Substantial It means increase in the investment in plant and machinery by 50% or
Expansion more of gross book value of plant and machinery (before taking

depreciation in any year) as on the first day of the previous year in which
substantial expansion is undertaken
5 Specified
Period and Particulars of Undertaking / Enterprise Located in States of
deduction Deduction Himachal Pradesh, Uttaranchal
Specified Period From 7 - 1 - 2003 to 31 - 3 – 2012
Deduction in  100% for first 5 years starting with initial
respect of profits assessment year and
and gains of  thereafter, 25% (30% in case of company) for
eligible business next 5 years.
6 Initial It means assessment year relevant to previous year in which undertaking/

assessment enterprise begins to manufacture or produce articles or things,
year commences operation or complete substantial expansion.
7 Conditions The eligible business must neither be formed by splitting up/
reconstruction of an existing business (except in section 33B cases) nor by
transfer of plant or machinery previously used. However, where value of
second hand plant and machinery doesn’t exceed 20% of total value of
plant or machinery used in that business, or, such second hand
machinery is the one imported by assessee on which no depreciation was
allowed under this Act, then this condition is not violated.
8 Other The provisions of Section 80 - IA(5) and Section 80 - IA (7) to (12) shall
provisions apply to the eligible undertaking or enterprise under this section

100% of the profits and gains for the first 5 AY and thereafter 25% (30% for companies) for
subsequent 5 AY is eligible for deduction

AY 21 -
Section 80 - IE
1 Special This section provides for an incentive to an undertaking which has during
provisions the period between 1st April, 2007 and 1st April, 2017, begun or begins, in
in respect any of the north - eastern states (i.e. the states of Arunachal Pradesh,
of certain Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura) –
undertakin No Particulars
gs in North 1 To manufacture or produce any eligible article or thing
- Eastern 2 To undertake substantial expansion to manufacture or produce any
States eligible article or thing
3 To carry on any eligible business
2 “Eligible Means the article or thing other than the following –

article or No Particulars
thing” 1 Goods falling under Chapter 24 of the First Schedule to the Central
Excise Tariff Act, 1985 which pertains to tobacco and manufactured
tobacco substitutes
2 Pan Masala as covered under Chapter 21 of the First Schedule to
the Central Excise Tariff Act, 1985
3 Plastic carry bags of less than 20 microns; and
4 Goods falling under Chapter 27 of the First Schedule to the Central
Excise Tariff Act, 1985 produced by petroleum oil or gas refineries
3 Substantial Means increase in the investment in the plant and machinery by at least
expansion 25% of the book value of plant and machinery (before taking depreciation
in any year), as on the first day of the previous year in which the
substantial expansion in undertaken.
4 “Eligible Means the business of –
business” No Particulars
1 Hotel (not below two star category)
2 Adventure and leisure sports including ropeways
3 Providing medical and health services in the nature of nursing
home with a minimum capacity of 25 beds
4 Running an old - age home
5 Operating vocational training institute for hotel management,
catering and food craft, entrepreneurship development, nursing
and Para - medical, civil aviation related training, fashion designing
and industrial training.
6 Running information technology related training centre
7 Manufacturing of information technology hardware; and
8 Bio – technology
5 Amount of 100% of the profits and gains of such business shall be liable for
deduction deduction
6 Period of 10 consecutive assessment years commencing with assessment year
deduction relevant to the previous year in which the undertaking begins to
manufacture or produce articles or things or completes substantial
expansion.

7 Conditions The following conditions have to be fulfilled by the undertaking for

claiming benefit of deduction under this section –
No Particulars
1 It should not be formed by splitting up, or the reconstruction, of a
business already in existence (except in circumstances provided in
Section 33B)
2 It should not be formed by the transfer to a new business of
machinery or plant previously used for any purpose
8 Exception This condition shall not apply in the following situations –

No Particulars
1 Such second hand plant or machinery is imported by the assessee
and such machinery was not previously used in India as well as no
depreciation was allowed to any person prior to the date of
installation by the assessee
2 Where the total value of any plant or machinery previously used
and now transferred to the new business does not exceed 20% of
the total value of the machinery or plant used in the new business,
such plant or machinery will be considered as new for this purpose
9 No double Where deduction has been allowed under this section in computing the
deduction total income of the assessee, no deduction shall be allowed under any other
section contained in Chapter VI A or Section 10AA in relation to the
profits and gains of the undertaking.
10 Cumulative No deduction shall be allowed to any undertaking under this section,
period not where the total period of deduction inclusive of the period of deduction
to exceed under this section or under section 80 - IC or under section 80 - IB, as the
years case may be, exceeds 10 assessment years.
11 Other The provisions contained in Section 80 - IA (5) and Section 80 - IA (7) to
common (12) shall apply to the eligible undertaking under this section.
provisions

An amount equal to 100% of profits derived from such business shall be allowed as
deduction for 10 Consecutive years beginning with the AY relevant to PY in which the
undertaking begins to manufacture or produce article or things or completes substantial
expansion

AY 21 -
Illustration 1
P Ltd. owns two undertakings. Undertaking – A is eligible for deduction under section 80 - IE
and Undertaking – B is not eligible for such deduction. Date of commencement of operation in
both the undertakings is 14th September 2016. The profits earned by both the undertakings are as
under:
Previous Year 2016 - 17 2017 - 18 2018 - 19 2019 - 20 2020 - 21
Undertaking –A (Rs. in lakhs) (6) (4) 5 8 9
Undertaking – B (Rs. in lakhs) (4) 10 9 6 (3)
Calculate total income of P Ltd. for the last three assessment years.
Solution:
Vide Section 80 - IE (6) read with Section 80 – IA (5) the deduction shall be calculated as if the
eligible business is the only source of income. The computation is given below –
AY GTI Deduction u/s 80 – IA Total Income
2018 – 19 5 + 9 – 4 = Rs. Net profit or loss of Undertaking A after set - Rs. 10 lakhs
10 lakhs off & carry forward = 5 – 6 – 4 = (Rs. 5 lakhs),
which will be notionally carried forward. In
view of negative profit, no deduction
admissible u/s 80 - IA
2019 – 20 8 + 6 = Rs. 14 Net profit or loss of Undertaking A after set - Rs. 11 lakhs
lakhs off & carry forward = 8 – 5 = Rs. 3 lakhs, which
will be admissible u/s 80 - IA
2020 – 21 9 – 3 = Rs. 6 Net profit or loss of Undertaking A after set - NIL
lakhs off & carry forward = Rs. 9 lakhs, but the
deduction under Chapter VI - A cannot exceed
the gross total income. Therefore, deduction
admissible u/s 80 - IA = Rs. 6 lakhs

SUMMARY OF DEDUCTIONS 80 – IC & IE
Year of
Section Eligible Business commencement of
deduction deduction
eligible business
80 – IC Undertakings which Manufacture or 10 AYs 100% for the
manufacture or produce produce article or commencing with first five AYs
specified article or thing thing from 7.1.03 the initial AY. and 25% (30%
or existing undertakings and ending before in the case of a
on their substantial 1.4.2012 company) for
expansion in the States of the next five
Himachal Pradesh and AYs.
Uttaranchal
80 – IE Undertaking begun or Between 1st April, 10 consecutive 100% of the
begins, in any of the 2007 and ending AYs commencing profits and
North – Eastern States before 1st April, with the initial AY gains derived
(i.e., the States of 2017 from such
Arunachal Pradesh, business.
Assam, Manipur,
Meghalaya, Mizoram,
Nagaland, Sikkim and
Tripura) –
1) to manufacture or
produce any eligible
article or thing;
2) to undertake
substantial expansion to
manufacture or produce
any eligible article or
thing;
3) to carry on any eligible
business.
CA DEEPAK P ANDIAN & CA ANEESH NOOR MOHAMMED 7

AY 21- 22 [DIRECT TAXATION]
Questions for Practice
Illustration 1
ABC Ltd., a developer, is engaged in the business of developing of Special Economic Zones,
notified on or after 1st April, 2006 under the SEZ Act, 2005. It was established in the previous year
2014 – 15. It had exercised its option for claiming deduction under section 80 - IAB from the
Assessment Year 2017 - 18. It received the following incomes during the previous year 2020 - 21:
No Particulars Rs
1 Income from the maintenance of SEZ 50,40,000
2 Income from lease rent From letting out of buildings along with other
amenities in SEZ 14,25,000
3 Interest received from bank deposits (from the refundable security deposits
received from lessees) 9,50,000
Case Particulars
A Calculate the amount of deduction available to ABC Ltd. for the AY 2021 - 22
B On 1st April, 2021, it transferred the operation and maintenance of the SEZ to another
company DEF Ltd. Now, DEF Ltd. wants to claim deduction under section 80 - IAB in
respect of the income derived from such maintenance of SEZ as was available for ABC
Ltd. Comment whether the contention of DEF Ltd. is valid in law?
[Nov 2019]
Solution
Case - A
Amount of deduction available u/s. 80 - IAB for the A.Y. 2021 - 22:
No Particulars Amount Rs
1 Income from the maintenance of SEZ 50,40,000
2 Income from lease rent From letting out of buildings along with other
amenities in SEZ - Refer note (1) 14,25,000
3 Deduction u/s.80 - IAB 64,65,000
Note
No Particulars
1  As per section 80 - IAB, deduction can be claimed only to the extent of profits and
gains derived by an undertaking from business of developing SEZ. Since direct nexus
can be established between developing SEZ and deriving rental income from letting
out of such buildings along with other amenities, such rental income can also be
claimed as deduction u/s.80IAB.
 Only profits and gains derived by an undertaking from business of developing SEZ can
claimed as deduction u/s.80 - IAB, hence, interest received from bank deposits cannot
be claimed as deduction.

Case – B
Transfer of undertaking
Where the undertaking in SEZ has been transferred to another assesse, the deduction under this
section can be continued to be claimed by the transferee for unexpired period of ten years. Thus,
DEF Ltd. can claim deduction u/s.80 - IAB in respect of the income derived from such
maintenance of SEZ as was available for ABC Ltd. (i.e, AY 2022 - 23 to AY 2026 - 27)
Illustration 2
X & Co. started two separate industrial undertaking, which prima face are eligible for deduction
under Section 80 - IB. For the year ending March 31, 2021, the profit of one unit was Rs.6 lakh
while the under unit suffered a loss of Rs.2 lakh. The Assessing Officer has allowed the deduction
under section 80 - IB on the net profit of 4 lakh. Discuss.
Answer:
For the purpose of determining the quantum of deduction under section 80 - IB for the initial
assessment year or any subsequent assessment year, the profits and gains from the eligible
business shall be computed as if such eligible business were the only source of income of the
assessee during the previous year relevant to the initial assessment year and to every subsequent
assessment year up to and including the assessment year for which the determination is to be
made.
Accordingly, deduction shall be admissible on the basis of Rs.6 lakh and not Rs.4 lakh. Thereafter
the deduction shall be restricted to the GTI. Therefore, the action of Assessing Officer is not
justified.
Illustration 3
A company has started a new industrial undertaking in Jammu & Kashmir in an old building
purchased by it for Rs.3,00,000 and has installed both new and second - hand machinery from
time to time to cope with the increase in production. The details of the machinery installed (old
and new) are furnished below. It wants to know whether it is eligible to any deduction under
section 80 - IB, if so for how many years?
Assessment Years
2012 - 13 2013 - 14 2014 - 15 2015 - 16 2016 - 17 2017 - 18

Machinery
Additions Additions Additions Additions Additions Additions
Rs. Rs. Rs. Rs. Rs. Rs.
New 2,50,000 2,50,000 2,00,000 2,50,000 1,00,000 1,00,000
Secondhand 1,50,000 - - - 1,50,000 -

Answer
One of the conditions to be fulfilled by an industrial undertaking is that it should not be formed
by transfer of machinery or plant previously used for any purpose.
If, however, the value of the transferred assets does not exceed 20% of the total value of the
machinery or plant used in the business, this condition is deemed to have been satisfied.
The deduction under section 80 - IB is available, even if the industrial undertaking is started in an
old building.
If assessee is not entitled to deduction under section 80 - IB in the year in which the industrial
undertaking is started, because value of old machinery exceeds 20% he will be eligible for the
deduction in the subsequent years, if the value of the old machinery in the subsequent years does
not exceed 20% of the total value of the machinery – Seeyan ply woods (Ker)
Second hand
Assessment New plant and
plant and Total (b) + (c) (c) as % of (d)
year machinery
machinery
(a) (b) (c) (d) (e)
2012 - 13 2,50,000 1,50,000 4,00,000 37.5%
2013 - 14 5,00,000 1,50,000 6,50,000 23.1%
2014 - 15 7,00,000 1,50,000 8,50,000 17.6%
2015 - 16 9,50,000 1,50,000 11,00,000 13.6%
2016 - 17 10,50,000 3,00,000 13,50,000 22.2%
2017 - 18 11,50,000 3,00,000 14,50,000 20.7%
On the basis of above, the assessee can claim deduction under section 80 - IB for the assessment
years 2014 - 15 and 2015 - 16.
Illustration 4
The profits and gains of an industrial undertaking established in specified areas and engaged in
carrying out certain activities are enjoying tax holiday. Specify such areas and the activities.
Answer:
There is tax holiday for establishing an under taking in the following areas:
1. Himachal Pradesh and Uttaranchal: If an undertaking
No Particulars
1 Begins to manufacture or produce any article or things; or
2 Undertakes substantial expansion in state of Himachal Pradesh and Uttaranchal, then
there is a tax holiday under section 80 - IC as under:
(a) 100% of profits and gains of the industrial undertaking for the first five
assessment years commencing from the initial assessment year.
(b) 25% (30% in case of a company of profits and gains for next 5 assessment year are
deductible under section 80 - IC.
2. North Eastern States: The deduction is available to undertakings under section 80 - IE if the –

No Particulars
1 Undertaking begun or begins to manufacture or produce any article or thing or
2 Undertakes substantial expansion.
The deduction of 100% of the profits derived from undertaking shall be available for 10 AY
Explanation: for the purposes of this section, -
No Particulars
1 “North - Eastern States” mean the States of Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;
2 “Eligible article or thing” means the article or thing other than the following:
(a) Goods which pertains to tobacco and manufactured tobacco substitutes;
(b) Pan masala;
(c) Plastic carry bags.
3 “Eligible business” means the business of:
(i) Hotel (not below two - star category);
(ii) Adventure and leisure sports including ropeways;
(iii) Providing medical and health services in the nature of nursing home with a
minimum capacity of 25 beds;
(iv) Running an old - age home;
(v) Operating vocational training institute for hotel management, catering and food craft,
entrepreneurship development, nursing and para - medical, civil aviation related
training, fashion designing and industrial training;
(vi) Running information technology related training centre;
(vii) Manufacturing of information technology hardware; and
(viii) Bio – technology
Illustration 5
Examine the correctness of the statement that "there exists no difference in the treatment of
income claimed under Section 10 with those claimed under Chapter VI - A of the Income - tax
Act"?
Answer:
The statement is incorrect. One apparent difference is, income eligible for exemption under
section 10 is not included in the total income and is excluded at the beginning itself. Whereas
incomes for which deduction is claimed under Chapter VI - A form part of total income of the
assessee by means of provisions contained in sections 80A and 80AB. Secondly, the losses
pertaining to the activities exempt under section 10 will have no tax treatment whereas the losses
pertaining to the activities under Chapter VI - A shall be set - off and carried forward.

Illustration 6
Gurudeu Engineers Pvt. Ltd. is running an industrial undertaking whose Profits are eligible for
deduction under Section 80 - IA of the Income - tax Act, 1961. During the year ended 31.3.2021, the
undertaking was engaged in eligible business referred to in Section 80 - IA(4), which however,
considered solely of executing works contract awarded by the State Government. Is the assessee
eligible to claim deduction under Section 80 - IA(4) in respect of Profits derived from this
undertaking?
Answer:
Explanation to section 80 - IA, provides as under:

Nothing contained in this section shall apply in relation to a business referred to in section 80 - IA
which is in the nature of a works contract awarded by any person (including the Central or State
Government) and executed by the undertaking or enterprise referred to in section 80 - IA(l).
Therefore, in view of the above said explanation to section 80 - IA, the Gurudev Engineers Pvt.
Ltd. is not eligible to claim deduction under section 80 - IA in respect of the profits derived from
this undertaking.
Illustration 7
Following issues have been raised by Navi Limited in connection with its eligibility for claiming
deduction under Section 80 - IB, for your consideration and advice, for the AY 2021 - 22:
No Particulars
1 It operates two separate industrial units, one unit is eligible for deduction u/s 80 - IB, while
the other unit is not eligible for such deduction. If the eligible unit has profit and the other
unit has loss, should it claim deduction after setting off the loss of the other unit against
profit of the eligible unit?
2 Its profit from one unit includes sale of import entitlement, duty drawback and interest
from customers for delayed payment. Is it permissible to claim deduction on these items of
income?
Answer:
No Particulars
1 As per section 80 - IB for the purpose of determining the quantum of deduction under
section 80 - IB for the initial assessment year or any subsequent assessment year, the
profits and gains from the eligible business shall be computed as if such eligible business
were the only source of income of the assessee during the previous year relevant to the
initial assessment year and to every subsequent assessment year up to and including the
assessment year for which the determination is to be made.
Accordingly, deduction shall be computed on the basis of profit of the eligible unit without
setting off the losses of the other unit. Thereafter the deduction shall be restricted to the
GTI
2 Profits of the business of the undertaking shall mean profit of the
undertaking under the head profits and gains of business and profession. In
case of LIBERTY INDIA, the Supreme Court recently held that export incentives
like duty drawback receipts, DEPB benefits are on account of statutory

provisions in the Custom Act/ Schemes framed by Central Government and do
not form part of profits of the eligible undertaking for the purposes of section 80 -
IA and 80 - IB. Therefore,
(i) Cash Compensatory Support (CCS),

(ii) Duty Drawback,
(iii) Profit on sale of import entitlement licenses
(iv) Duty Exemption Pass Book (DEPB)
Shall not form part of the profits of the business of undertaking for the purposes of
sections 10AA.
The same are also not eligible for deduction under sections 80 - IA, 80 - IAB, 80 - IB, 80 - IC
and 80 - IE.
Therefore it is not possible to claim deduction under section 80 - IB on profits f r o m
sale of import entitlement, duty drawback and interest from customers on delayed
payment.
Illustration 8
A company which is entitled to claim deduction under section 80 - IB has received duty
drawback under a scheme framed by the Central Government under the Customs Act, 1962. Can
such duty drawback form part of the profit of eligible undertaking for the purpose of deduction
under section 80 - IB?
Answer:
Section 80 - IB provides for allowing deduction in respect of profits and gains derived from
eligible business of the industrial undertaking. The issue under consideration is whether duty
drawback can be regarded as “profits and gains derived from eligible business of the industrial
undertaking.”
For a receipt to be treated as having been "derived from" the industrial undertaken
same should be directly and inextricably connected with the business of the industrial
undertaking. The connection should be direct and not remote.
The facts of the case are similar to the facts of the case in Liberty India. In case of LIBERTY
INDIA, the Supreme Court recently held that export incentives like duty drawback receipts,
DEPB benefits are on account of statutory provisions in the Custom Act/ Schemes framed by
Central Government and do not form part of profits of the eligible undertaking for the purposes
of section 80 - IA and 80 - IB.
Applying the same rationale to the present case, duty drawback would not form part of profit of
eligible undertaking for the purpose of deduction under section 80 - IB.

Illustration 9
X Ltd. has two units, unit 'N' and unit 'Y'. Unit 'N' engaged in the business of power generation
installed a windmill and had a profit of Rs.100 lakhs in Assessment Year 2021 - 22. X Ltd. claimed
depreciation of Rs.120 lakhs on windmill against the profit ofRs.100 lakhs from power generation
business which was eligible for deduction under section 80 - IA. Unit Y, engaged in
manufacturing of wires, non - eligible business, had a profit of Rs.70 lakhs for Assessment Year
2021 - 22.
The loss of?20 lakhs, i.e. balance depreciation not set off pertaining to unit 'N' was set off against
the profits of unit Y carrying on non - eligible business, by the assessee, X Ltd. The Assessing
Officer was of the view that depreciation relating to a business eligible for deduction under
section 80 - IA cannot be set - off against non - eligible business income. Hence, unabsorbed
depreciation should be carried forward to the subsequent year to be set off against eligible
business income of the assessee of that year.
Give your views on the correctness of the action of the Assessing Officer.
Answer:
It is a generally accepted principle that the deeming provision of a particular section cannot be
breathed into another section. Therefore, the deeming provision contained in section 80 - IA(5)
cannot override the provision of section 70(1).
In this case, X ltd. had incurred loss in eligible business (power generation) on account of
claiming depreciation of Rs.120 lacs. Hence, section 80 - IA becomes insignificant, since there is no
profit from which this deduction can be claimed.
It is thereafter that section 70(1) comes into play, whereby an assessee is entitled to set off the
losses from one source against income from another source under the same head of income.
Accordingly, X Ltd is entitled to the benefit of set off of loss of Rs.20 lacs (representing balance
depreciation not set - off) pertaining to Unit N engaged in eligible business of power generation
against profit of Rs.70 lacs of Unit Y carrying on non - eligible business. Therefore, the net profit
of Rs.50 lakhs would be taxable in the A.Y - 2021 - 22.
However, once - set - off is allowed under section 70(1) against Income from another
source under the same head, a deduction to such extent is not possible in any
subsequent assessment year for computing total income. However, for computing
deduction under section 80 - IA, this depreciation has to be deducted in subsequent
year. Accordingly, in AY 2022 - 23 the net profit of Unit N has to be reduced by Rs.20 lacs for
computing the profits eligible for deduction under section 80 - IA in that year.
The action of the Assessing Officer in not permitting set off of loss of eligible business against
profits of non - eligible business in this case is, therefore, not correct.

Illustration 10
VKS Ltd. is engaged in developing, operating and maintaining infrastructure facility which
qualifies for deduction under section 80 - IA of the Income - tax Act. The company is also
engaged in producing cement. Business of the infrastructure facility was commenced in the
financial year 2016 - 17. During the financial years 2016 - 17, 2017 - 18, 2018 - 19 2019 - 20 and 2020
- 21 profits/losses of the two businesses are as follows,
Financial Year Infrastructure facility Cement manufacturing
2016 - 17 (100) 120
2017 - 18 10 140
2018 - 19 20 130
2019 - 20 30 120
2020 - 21 75* 100
* includes freight subsidy of Rs.10 lakhs under the scheme of the Central Government.
Further Information:
No Particulars
1 Cement manufacturing unit transferred cement of certain quantity for an
aggregate price of Rs. 20 lakhs. Similar quantity was sold to outside customers for
Rs. 25 lakhs.
2 Profit of infrastructure facility business for financial year 2020 - 21 has been
arrived at after charging purchase of consumable stores amounting to Rs. 10 lakhs
from RR Ltd., a subsidiary company of VKS Ltd. as against fair market value of such items
amounting to Rs. 7 lakhs.
Compute the amount admissible as deduction under section 80 - IA for AY 2021 - 22. Give
working notes and the reasons in the context of statutory provisions for giving treatment to each
of the items.

Answer:
VKS Ltd. Assessment Year 2021 - 22 Computation of Profit from Infrastructure Facility Eligible
for Deduction under Section 80 - IA
No Particulars Rs
1 Profit for the year 75 Lakhs
2 Less: Freight subsidy of Rs.10 lakh shall be treated as Profits derived from
undertaking and eligible for deduction under section 80 - IA as per CBDT Nil
Circular. Therefore, no adjustment is required
3 Sub total 75 Lakhs
4 Less: As per 80 - IA(8), inter - unit sales made, to inflate the Profits and to
claim higher deduction shall be adjusted. Since, cement has been (5 Lakhs)
purchased at Rs.20 Lakhs as against market value of Rs.25 lakhs, Rs.5
Lakhs needs to be adjusted
6 Less: As per 80 - IA(10), the transactions with any other person needs to
be adjusted if it results in more profits to the assessee. There shall be no
adjustment as purchase price is Rs.10 lakhs as against FMV of Rs. 7 lakhs.
Hence, no adjustment since this results in reduction of profit. Nil
7 Eligible Profit for Deduction 70 Lakhs
8 Profit of infrastructure facility 70 Lakhs
9 Less: Bought Forward Losses (100 Lakhs - 60 Lakhs) 40 Lakhs
11 Deduction under section 80 - IA 30 Lakhs
Note: It is assumed that the assessee is having this as the only business since beginning.

[DIRECT TAXATION] AY 21- 22
CHAPTER - 6
ENTITY BASED DEDUCTION
Profit
Income
Series
Deductions
1. 80C
1. 80G
2. 80CCC 1. 80D 1. 80E 1. 80QQB
2. 80GG
3. 80CCD(1) 2.80DD 2. 80EE 2. 80RRB
3. 80GGA *As Below
4. 80CCD(1B) 3. 80DDB 3. 80EEA 3. 80TTA
4. 80GGB
5. 80CCD(2) 4. 80U 4. 80EEB 4. 80TTB
5. 80GGC
6. 80CCE

1. 80IA
1. 80JJA
2.80IAB
2.80JJAA
3. 80IAC
3. 80LA
4. 80IB
4. 80M
5. 80IBA
5. 80P
6. 80IC
6. 80PA
7. 80IE

PROFIT LINKED DEDUCTIONS – ENTITY BASED DEDUCTIONS
SECTION PARTICULARS
80JJA Deduction in respect of profit and gains from business of collecting and processing
of bio - degradable waste.
80JJAA Deduction in respect of employment of new employees.
80LA Deduction in respect of certain income of Off - shore banking units and
International Financial Service Centre
80M Deduction in respect of Inter – Corporate Dividends
80P Deduction in respect of income of co - operative societies.
80PA Deduction in respect of certain income of producer companies
Section 80 - JJA
1 Deduction
available to an No Particulars
assessee 1 This section provides for deduction in respect of profits and
engaged in gains from the business of collecting and processing bio -
business of degradable waste
collecting and 2 The deduction is allowable where the gross total income of an
processing of assessee includes any profits and gains derived from any of the
biodegradable following business
waste No Particulars
1 Collecting and processing or treating of bio - degradable
waste for generating power, or
2 Producing bio - fertilizers, bio - pesticides or other
biological agents, or
3 Producing bio - gas or
4 Making pellets or briquettes for fuel or organic manure
2 Amount and The amount of deduction is equal to the 100% of such profits and
period of gains for a period of 5 consecutive assessment years beginning with
deduction the assessment year relevant to the previous year in which the business
commences.

An amount equal to 100% of profits derived from the business mentioned above for a
period of 5 Consecutive AY beginning with the AY relevant to the PY in which such
business commences

Section 80 - JJAA
1 Eligible  All assessee, whose Gross Total Income includes any profits and gains
Assessee derived from the business and
 to whom provisions of Section 44AB applies.
2 Quantum and  Deduction is allowed @ 30% of additional employee cost incurred in
period of the course of such business.
deduction  The deduction is allowed for three assessment years including the
assessment year relevant to previous year in which such employment
is provided.
3 Emoluments Means any sum paid or payable to an employee in lieu of his employment
by whatever name called, but does not include –
No Particulars
1 Any contribution paid or payable by the employer to any pension
fund or provident fund or any other fund for the benefit of the
employee under any law for the time being in force; and
2 Any lump sum payment paid or payable to an employee at the
time of termination of his service or superannuation or voluntary
retirement, such as gratuity, severance pay, leave encashment,
voluntary retrenchment benefits, commutation of pension and the
like
4 Additional It means total emoluments paid or payable to additional employees

employee cost employed during the previous year:
However, in the case of an existing business, the additional employee cost
shall be nil, if -
No Particulars
1 There is no increase in the number of employees from the total
number of employees employed as on the last day of the
preceding year
2 Emoluments are paid otherwise than by an
 account payee cheque or
 account payee bank draft or
 by use of electronic clearing system through a bank account or
 through such other electronic mode as may be prescribed.
 Credit Card
 Debit Card
 Net Banking
 IMPS
 UPI
 RTGS
 NEFT
 BHIM
 Aadhar pay has been prescribed as mode of electronic
payment
5 Additional In the first year of a new business, emoluments paid or payable to

Employee employees employed during that previous year shall be deemed to be the
Cost in case of additional employee cost.
new business

6 Additional It means an employee who has been employed during the previous year
employee and whose employment has the effect of increasing the total number of
employees employed by the employer as on the last day of the preceding
year, but does not include –
No Particulars
1 An employee whose total emoluments are more than Rs. 25,000
per month; or
2 An employee for whom the entire contribution is paid by the
Government under the Employee’s Pension Scheme notified in
accordance with the provisions of the Employee’s Provident
Funds and Miscellaneous Provisions Act, 1952; or
3  An employee employed for a period of less than 240 days
during the previous year; or
 in case of an assessee engaged in the business of
manufacturing of apparel or footwear or leather products, an
employee employed for a period of less than 150 days during
the previous year;
 However, where an employee is employed during the
previous year for a period of less than 240 days or 150 days,
as the case may be, but is employed for a period of 240 days
or 150 days, as the case may be, in the immediately
succeeding year, he shall be deemed to have been employed
in the succeeding year and the provisions of this section
shall apply accordingly
4 An employee who does not participate in the recognized
provident fund
7 Conditions No deduction under shall be allowed –

for claiming No Particulars
deduction 1 If the business is formed by splitting up, or the reconstruction of
an existing business;
However, the above provision shall not apply in respect of a
business which is formed as a result of re - establishment,
reconstruction or revival by the assessee of the business in the
circumstances and within the period specified in section 33B
2 If the business is acquired by the assessee by way of transfer from
any other person or as a result of any business reorganization
3 Unless the assessee furnishes the report of the Charted
Accountant before the specified date referred to in section 44AB
giving such particulars in the report as may be prescribed.
(Amended by Finance Act, 2020 w.e.f. 01.04.2020 i.e. AY 2020 - 21)


Sec. 80JJAA provides 30% of additional employee cost as deduction per year for 3
Consecutive AY commencing from the PY in which such employment id provided. In
other words, the total deduction will be 90% of the additional employee cost, spread
over a period of 3 AY
Illustration 1
Ms. XYZ & Co. partnership firm started its business on 01.04.2020. During the PY 2020 - 21, it
appoints the following persons -
Emoluments (in
Date of appointment No. of employees Designation
Rs per person)
01.04.2020 4 Accounting Staff 20,000
01.06.2020 15 Technical Staff 25,000
01.07.2020 15 Supervisors 30,000
01.10.2020 25 Helpers 22,000
Determine the amount of deduction available under section 80JJAA for the AY 2021 - 22 if
turnover of XYZ & Co. for the previous year 2020 - 21 is Rs. 4 crore and tax audit under section
44AB is applicable.
Solution:
Computation of admissible deduction under Section 80JJAA for AY 2021 - 22
Emoluments
No Particulars eligible for
80JJAA
1 Accounting Staff appointed on 01.04.2019 - Rs. 20,000 x 4 x 12 months 9,60,000
2 Technical Staff appointed on 01.06.2019 - Rs. 25,000 x 15 x 10 months 37,50,000
3 Supervisors appointed on 01.07.2019 - Rs. 30,000 x 15 x 9 months - WN - 1 -
4 Helpers appointed on 01.10.2019 - Rs. 22,000 x 25 x 6 months - WN - 2 -
5 Total additional employee cost 47,10,000
6 Deduction admissible under Section 80JJAA - 30% of Rs. 47,10,000 14,13,000
Working Notes:
No Particulars
1 Deduction under section 80JJAA is not available in respect of employees whose total
emoluments are more than Rs. 25,000 per month
2 25 Helpers employed on 1.10.2020 do not qualify as additional employees for the PY 2020 -
21, since they are employed for less than 240 days in that year
3 25 Helpers employed on 1.10.2020 they would be treated as additional employees for

previous year 2021 - 22, if they continue to be employees in that year for a minimum
period of 240 days. Accordingly, 30% of additional employee cost in respect of such
employees would be allowable as deduction under section 80JJAA in the hands Ms. XYZ
& Co. for the AY 2022 – 23
Illustration 2
Mr. A has commenced the business of manufacture of computers on 1 - 4 - 2020. He employed
350 new employees during the PY 2020 - 21, the details of whom are as follows -
Total monthly
No. of
Date of employment Regular/ Casual emoluments per
No Employees
employer (Rs)
1 75 1.4.2020 Regular 24,000
2 125 1.5.2020 Regular 26,000
3 50 1.8.2020 Casual 25,500
4 100 1.9.2020 Regular 24,000
The regular employees participate in recognized provident fund while the casual employees do
not. Compute the deduction, if any, available to Mr. A for AY 2021 - 22, if the profit and gains
derived from manufacture of computers that year is Rs. 75 lakhs and his total turnover is Rs. 2.16
crores.
What would be your answer if Mr. A has commenced the business of manufacture of footwear on
1.4.2020?
Solution:
Mr. A is eligible for deduction under section 80JJAA since he is subject to tax audit under section
44AB for AY 2021 - 22, as his total turnover from business exceeds Rs. 1 crore and he has
employed “additional employees” during the PY 2020 - 21.
If Mr. A is engaged in the business of manufacture of computes
No Particulars Amount
1 Additional employee cost = Rs. 24,000 x 12 x 75 - See Working Note below 2,16,00,000
2 Deduction under section 80JJA = 30% of Rs. 2,16,00,000 64,80,000
Working Note:
Number of additional employees:
No No. of
Particulars
workmen
1 Total number of employees employed during the year 350
2 Less: Casual employees employed on 1 - 8 - 2020 who do not participate in 50
recognized provident fund
3 Less : Regular employees employed on 1 - 5 - 2020 since their total monthly 125
emoluments exceed Rs. 25,000
4 Less: Regular employees employed on 1 - 9 - 2020 since they have been 100 275
employed for less than 240 days in the PY 2020 - 21.
5 Number of “additional employees” 75

Notes:
No Particulars
1  Since casual employees do not participate in recognized provident fund, they do not
qualify as additional employees.
 Further, 125 regular employees employed on 1 - 5 - 2020 also do not qualify as
additional employees since their monthly emoluments exceed Rs. 25,000.
 Also, 100 regular employees employed on 1 - 9 - 2020 do not qualify as additional
employees for the PY 2020 - 21, since they are employed for less than 240 days in that
year.
 Therefore, only 75 employees employed on 1 - 4 - 2020 qualify as additional employees,
and the total emoluments paid or payable to them during the PY 2020 - 21 is deemed to
be the additional employee cost
2  As regards 100 regular employees employed on 1 - 9 - 2020, they would be treated as
additional employees for previous year 2021 - 22, if they continue to be employees in
that year for a minimum period of 240 days.
 Accordingly, 30% of additional employee cost in respect of such employees would be
allowable as deduction under section 80JJAA in the hands of Mr. A for the AY 2022 –
23
3 Mr. A is engaged in the business of manufacture of footwear
If Mr. A is engaged in the business of manufacture of footwear, then, he would be entitled to
deduction under section 80JJAA in respect of employee cost of regular employees employed
on 1 - 9 - 2020, since they have been employed for more than 150 days in the previous year
2020 - 21.
1 Additional employee cost = Rs. 2,16,00,000 + Rs. 24,000 x 7 x 100 3,84,00,000
2 Deduction under section 80JJAA = 30% of Rs. 3,84,00,000 1,15,20,000

Section 80 – LA
1 Eligible This section is applicable to the following assesses
Assessee No Particulars
a A scheduled bank having an Offshore Banking Unit in a SEZ; or
b Any bank, incorporated by or under the laws of a country outside
India, and having an Offshore Banking Unit in a SEZ; or
c A unit of an International Financial Services Centre (IFSC).
2 Eligible The deduction will be allowed on account of the following incomes

Income included in the gross total income of such assessees –
No Particulars
1 Income from an Offshore Banking Unit in a SEZ; or
2 Income from the business referred to in Section 6(1) of the Banking
Regulation Act, 1949 with
i. An undertaking located in a SEZ; or
ii. Any other undertaking which develops, develops and
operates or develops, operates and maintains a SEZ, or
3 Income from any unit of the IFSC from its business for which it has
been approved for setting up in such a centre in a SEZ
3 Quantum The deduction allowable from such income is -

and period
of No Eligible Assessee Quantum and period of deduction
deduction 1 A scheduled bank having an 100% of such income for 5
Offshore Banking Unit in a consecutive assessment years
SEZ; or beginning with the assessment year
relevant to the previous year in
which the permission for business
is obtained; and
2 Any bank, incorporated by or Thereafter, 50% of such income for
under the laws of a country the next 5 consecutive assessment
outside India, and having an years.
Offshore Banking unit in a
SEZ; or
3 Unit of an International 100% of such income for any 10
Financial Services Centre consecutive assessment years, at
the option of the assessee, out of 15
years, beginning with the
assessment year relevant to the
previous year in which the
permission, under section 23(1)(a)
of the Banking Regulation Act, 1949
or permission or registration under
the SEBI Act, 1992 or any other
relevant law was obtained.

4 Conditions
The following conditions have to be fulfilled for claiming deduction under
this Section –
No Particulars
1 The report of a Chartered Accountant in Form No. 10CCF certifying
that the deduction has been be correctly claimed in accordance with
the provisions of this section, should be submitted along with the
return of income
2 A copy of the permission obtained under section 23(1)(a) of the
Banking Regulation Act, 1949 should also be furnished along with
the return of income

For assessees mentioned in (a) & (b) above - Explanation 1 to Sec. 80LA:
 First 5 consecutive AYs beginning from the AY in which permission to operate or
registration of such unit has been obtained under Banking Regulations Act or
SEBI Act or any other Statute – deduction at 100% of such income and,
 Thereafter for next 5 consecutive AYs – deduction at 50% of such income
For assessees mentioned above in Point (c) – Explanation 1A to Sec. 80LA:
 100% of such income for any 10 consecutive AYs at the option of the assessee, out
of 15 years, beginning from the AY in which permission to operate or registration
of such has been obtained under Banking Regulations Act or SEBI Act or any
other Statute.

DEDUCTIONS IN RESPECT OF INTER - CORPORATE DIVIDENDS - SECTION 80M
1 Eligible Deduction under this section would be allowable to a domestic company if its
assessee gross total income includes in any previous year, any income by way of
dividends received from any other domestic company or foreign company or
a business trust
2 Quantum In computing the total income of such domestic company, a deduction of an
of amount equal to the amount of dividends received from other domestic
deduction company or foreign company or a business trust as does not exceed the
amount of dividend distributed by such company on or before the due date.
Example:
X Ltd. A domestic company received dividend of Rs.10 lakhs from “Y Ltd’, a
domestic company (100% subsidiary of X Ltd.) During the previous year
2020 - 21. On 15th may, 2021, X Ltd. Decides and distributed dividend of
Rs. 5 lakh.
In this case, X Ltd. would be eligible for deduction under section 80M in
respect of dividend received from Y Ltd. to the extent of Rs. 5 lakhs, being the
amount of dividend declared and distributed by X Ltd Hence, the deduction
under section 80M would be Rs. 5 lakh.
3 No Where any deduction, in respect of the amount of dividend distributed by
deduction domestic company, has been allowed under this section in any previous year,
no deduction shall be allowed in respect of such amount in any other
previous year.
Meaning of due date:
“Due date” means one month prior to the date of for furnishing the return of
income under section 139(1).
QUANTUM OF DEDUCTION – Sec. 80M (1)

Least of the following shall be allowed as deduction
 Dividend received by Domestic Company; or
 Dividend distributed by such Domestic Company on or before one month prior to the
due date for furnishing return of income u/s 139(1)

CHAPTER - 1
TAX DEDUCTED AT SOURCE - INTRODUCTION
TDS
TDS on TDS on TDS on

TDS on TDS on TDS on TDS on TDS on Procedural
Commissio Interest / Casual
Salary IMP Contract NR others Aspects
n Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

SECTION REFERENCE – INTRODUCTION TO TDS
SECTION PARTICULARS
190 Deduction at Source and Advance Payment
191 Direct Payment
SECTION REFERENCE – TDS ON SALARY
SECTION PARTICULARS
192 Salary
192A Premature withdrawal from employees Provident Fund
194F Repurchase of Units by Mutual Fund or UTI
SECTION REFERENCE – TDS ON COMMISSION
SECTION PARTICULARS
194D Insurance Commission
194G Commission etc. on sale of lottery tickets
194H Commission on Brokerage
SECTION REFERENCE – TDS ON IMP
SECTION PARTICULARS
194I Rent
194IA Payment of transfer of certain IMP other than agricultural land
194IB Payment of rent by certain Individuals and HUF
194IC Payment under specified agreement
194LA Payment of compensation on acquisition of certain IMP

SECTION REFERENCE – TDS ON INTERSET / DIVIDEND
SECTION PARTICULARS
193 Interest on Securities
194 Dividend
194A Interest other than Securities
194K Income in respect of units
SECTION REFERENCE – CONTRACT
SECTION PARTICULARS
194C Payment to Contractors and Sub – Contractors
194M Payment made by a Individual or HUF for a Contract work or by way of commission or brokerage or fees for professional services
SECTION REFERENCE – CASUAL INCOME
SECTION PARTICULARS
194B & 194 BB Winnings from Lotteries, Crossword puzzles and horse races
SECTION REFERENCE – NON RESIDENT
SECTION PARTICULARS
194E Payment to NR Sports man or sports association

SECTION REFERENCE – OTHERS
SECTION PARTICULARS
194DA Payment in respect of Life insurance Policy
194J Fees for professional and technical services
194N TDS on cash Withdrawal
194O Certain Payment by e – commerce operator to e – commerce participant
*SECTION REFERENCE – PROCEDURAL ASPECTS
SECTION PARTICULARS
195A Income Payable Net of Tax
196 Interest or dividend or other sums payable to government, reserve bank or certain corporation
197 Certificate of deduction of tax at a lower rate
197A No deduction in certain cases
198 Tax deducted is income received
199 Credit for tax deducted at source
200 Duty of persons Deducting Tax
200A Computerized processing of TDS statements
201 Consequences of failure to deduct or pay
202 Deduction only one mode of recovery
203 Certificate of Tax deducted
204 Person responsible for paying TDS
205 Bar against direct demand on assessee
206A Furnishing of statements in respect of payment of any income to residents without deduction of tax
206AA Mandatory requirement to furnishing PAN

TAX DEDUCTION AND TAX COLLECTION AT SOURCE

1 Tax deduction at source TDS is one of the means of recovery of income tax from the assessee in the previous year itself. In case of certain income,
tax is deducted at source by the payer at the prescribed rate at the time of credit or payment of such income to the payee.
The payee gets the benefit of TDS from his income tax liability. TDS is also known as “Withholding Tax”
2 Tax Collection at source In certain cases, tax is collected at source by the seller from buyer at the time of debiting the amount to account of the
buyer or the receipt of payment, whichever is earlier.
SECTION 190 - DEDUCTION AT SOURCE AND ADVANCE PAYMENT

1 Deduction at source and As per provisions of Section 4 of the Income Tax Act, the regular assessment in respect of any income is to be made in a
advance payment later assessment year. However the tax on such income shall be payable by deduction or collection at source or by
advance payment or by payment u/s 192(1A)
SECTION 191 - DIRECT PAYMENT

1 Direct Payment In case of income in respect of which provision is not made for deducting income tax at the time of payment, and in any
case where income tax has not been deducted in accordance with the provisions of the Act, income tax shall be payable by
the assessee directly
2 Tax payments in respect For the purposes for paying income - tax directly by the assessee, if the income of the assessee in any AY beginning
of ESOP to be paid by on or after 01.04.2021, includes income of the nature specified in Section 17(2)(vi) i.e. ESOP and such specified security
the assessee directly or sweat equity shares are allotted or transferred directly or indirectly by the current employer being an eligible start –
up referred in 80 – IAC, the income tax on such income shall be payable by the assessee within 14 days -
 After the expiry of 48 Months from the end of the relevant AY or
 From the date of the sale of such specified security or sweat equity share by the assessee or
 From the date of the assessee ceasing to be the employee of the employer who allowed or transferred him such
specified security or sweat equity share,
Whichever is the earliest

3 Assessee deemed to be  Who is required to deduct any sum in accordance with the provisions of this Act; or
in default on account of  Referred to in Section 192(1A), being an employer,
failure to deduct or pay  Does not deduct, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act,
tax: If any person and where the assessee has also failed to pay such tax directly, then, such person shall be deemed to be an assessee in
including the principal default within the meaning of Section 201(1), in respect of such tax
officer of a company
4 Tax can be recovered by As per Section 202, TDS is one of the modes of recovery and other modes of recovery may also be adopted against the
other modes assessee
5 Direct demand cannot be As per Section 205, if tax has been deducted at source, the assessee shall not be called upon to pay the tax himself to the extent
made to which tax has been deducted from that income

CHAPTER - 2
TDS ON SALARY
TDS
TDS on TDS on
TDS on TDS on TDS on TDS on TDS on TDS on Procedural
Interest / Casual
Salary Commission IMP Contract NR others Aspects
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

CHAPTER - 2
TDS ON SALARY
SECTION REFERENCE – TDS ON SALARY
SECTION PARTICULARS
192 Salary
192A Premature withdrawal from employees Provident Fund
194F Repurchase of Units by Mutual Fund or UTI
SECTION 192 – SALARY
S. 192
S. 192(1) S.192(1A) S.192(1B) S.192(1C) S.192(2D)
OR's option Computation Furnishing of

Basic Section to pay tax on of tax on ESOP Proof for
NMP NMP claiming Dedn
BY CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 1

192(1) – BASIC SECTION
1 Person Any person responsible for paying any income chargeable under the
responsible for head ‘Salaries’ shall be liable to deduct tax at source
deducting tax at
source
2 Time of tax Tax is deducted at source at the time of making payment of salary.
deduction
3 Rate of tax  The TDS is to be made at the average of income tax computed on the
deduction basis of the rates in force for the financial year in which the payment
is made.
 In other words, the total tax to be deducted, on the estimated income
of the employee for the relevant financial year, is divided by the
numbe6+r of months of his employment during that financial year.
 The employer may increase or reduce the amount of TDS for the
purpose of adjusting any excess or deficiency arising out of any
previous deduction or failure to deduct during the financial year.
COMPUTATION OF TDS ON SALARIES
The amount of tax to be deducted at source in case of ‘Salaries’ shall be higher of Amount - H of
Table I or Amount - G of Table II
No Table I Rs Table II Rs
1 Income under the head salaries A Income under the head salaries A
2 Less: Loss from house property B Less: Loss from house property B
3 Add: Income under any other head C
--- -
(Ignore loss of other head)
4 Gross Amount = D = A – B + C D Gross Amount C = A – B C
5 Less: Deductions under Chapter VIA E Less: Deductions under Chapter VIA D
6 Net amount on which tax is to be F Net amount on which tax is to be E
deducted = F = D – E deducted = E = C – D
7 Tax of - F xx Tax on - E xx
8 Less: Tax deduction under any other G Less: Relief under section 89 F
section and relief under section 89
9 Amount of tax to be deducted at source H Amount of tax to be deducted at source G
= H=F–G G=E–F

Illustration 1
Rajkumar is employed in a company in Ahmadabad. He received salary of Rs. 8,00,000 (computed)
from his employer during financial year 2020 - 21.
During financial year 2020 - 21, he made payments of Rs. 1,50,000 eligible for deduction under
section 80C
Compute the amount of tax deductible at source per month from the salary of Mr. Rajkumar, if Mr.
Rajkumar has following other incomes, as reported to the employer company:
1 Loss under the head House Property Rs. 60,000
2 Loss from business Rs. 50,000
3 Professional fees gross income Rs. 1,00,000 (TDS deducted Rs. 10,000)
4 Expense incurred to earn professional income Rs. 80,000
Ans:
Amount of tax to be deducted from salary income: Higher of the amount arrived at in (A) or (B)
below -
Computation of tax due on salary income after deducting loss from house property
1 Income from salary (Computed) 8,00,000
2 Less: Loss from house property 60,000
3 Gross total income (GTI) 7,40,000
4 Less: Deduction u/s 80C 1,50,000
5 Total Income (rounded off) 5,90,000
6 Tax due 30,500
7 Add: HEC @ 4% 1,220
8 Tax to be deducted at source 31,720

Computation of tax due on salary income including other incomes (not loss) but excluding loss
from house property
1 Income from salary (Computed) 8,00,000
2 Loss from house property (60,000)
3 Professional Income (Rs. 1,00,000 – Rs. 80,000) 20,000
4 Gross total income (GTI) 7,60,000
5 Less: Deduction u/s 80C 1,50,000
6 Total Income (rounded off) 6,10,000
7 Tax due 34,500
8 Add: HEC @ 4% 1,380
9 Total Tax 35,880
10 Less: Tax deducted at source under other sections 10,000
Therefore, amount of tax to be deducted at source = Rs. 31,720.

Monthly installments of TDS = Rs. 2,643.
SECTION – 192(1A) & (1B)
1 Tax on non - An employer shall have an option to pay tax on behalf of an employee,
monetary without making any deduction from his income, on the income in the
perquisites paid by nature of perquisites, which is not provided for by way of monetary
employer payment. Such tax shall be computed as under -
2 Tax on non -
monetary No Particulars Amount
perquisites 1 Non - monetary perquisites XXX
2 Average rate of income tax XXX
3 1x2 XXXX

Illustration 1
Mr. X aged 55 years derives taxable salary of Rs. 5, 05,000 which includes non – monetary
perquisites of Rs. 60,000 for the FY 2020 – 21. The employer has chosen to pay tax on value of non –
monetary Perquisites. You are approached to provide advice on the following issues:
No Particulars
1 The tax liability u/s 192(1A) to be borne by employer
2 The deductibility of such amount in the hands of employer in computation of business income
Solution
Computation of Tax liability of Mr. X
1 Salary (excluding non – monetary benefits) 4,45,000
2 Value of non – monetary benefits 60,000
3 Total Taxable salary 5,05,000
4 Total tax payable by the employee:
5 Income – tax payable on Rs. 5,05,000 (Rebate u/s 87A not applicable) 13,500
6 Add: HEC at 4% 540
7 Total tax Payable 14,040
Computation of tax to be borne by the employer u/s 192(1A)

1 Proportionate tax on the value of non – monetary benefits borne by employer – 1,668
Rs. 14,040 x 60,000/5,05,000
2 Average amount of tax p.m to be borne by the employer – Rs. 1,668/12 139
According to section 40(a)(v) while computing income from business, any tax on non – monetary
perquisites actually paid by the employer on behalf of the employee shall not be deductable.
Therefore, in this case a sum of Rs 1,668 is not deductable as expenses in the hands of the employer.

Illustration 2
An employee gets a salary of Rs. 5, 50,000 from his employer. Apart from the salary, he also gets
non – monetary perquisites whose valuation as per Rule - 3 Amounts to Rs. 80,000. Now the
taxable income under the head salaries shall be Rs. 5, 50,000 + Rs. 80,000 – Rs. 50,000 = Rs. 5, 80,000.
The employee has invested Rs. 60,000 in PPF. Calculate the monthly tax required to be deducted by
the employer u/s 192 (Assessee does not opt for Section 115BAC)
Solution
Computation of TDS shall be made as under
1 Annual Salary 5,50,000
2 Add: Non – monetary Perquisites 80,000
3 Gross salary 6,30,000
4 Less: Standard Deduction (50,000)
5 Income under the head Salary 5,80,000
6 Less: Chapter VIA deduction (60,000)
7 Total Taxable Income 5,20,000
8 Tax on Total Taxable income 16,500
9 Less: Rebate u/s 87A Nil
10 Add: Health & education cess @ 4% 660
11 Total Tax 17,160
12 Monthly TDS (Rs. 17,160 / 12) 1430
Illustration 3
In the above Illustration if the employer wants to exercise the option referred in section
192(1A), what would be the consequence of the same
Solution
In terms of section 192(1B), the average rate of tax on income under the head ‚Salaries‛ shall be
calculated as under
1 Income under the head Salary 5,80,000
2 Tax on above 29,640
3 Average rate of Tax 5.11%

Tax on perquisites at average rate of tax shall be 5.11% of Rs. 80,000 = Rs, 4,088 Employer has a
option to deposit tax of Rs. 4,088 from his own pocket. Now let us say that the employer deposits
Rs. 4,088 from his own pocket in terms of section 192(1A)
No Particulars
1 Now as per section 10(10CC), Rs, 4,088 is exempt income in the hands of employee. The
taxable income of employee shall remain to be Rs. 5,20,000
2 As per section 40 to Income tax Act, Rs 4,088 shall not be allowed as expenditure to the
employer and shall be disallowed, while computing the employer’s income
3 The employer shall deduct TDS of Rs. 17,160 – Rs. 4,088 = Rs. 13,072 Accordingly Rs. 1,089
shall be deducted every month from the employee’s salary
4 The employer shall also be every month tax to the credit of Central Govt of Rs. 4,088 / 12 = Rs.
341 in terms of section 192(1A) from his own pocket
5 The assessee shall be given the credit for the following tax which shall be regarded as TDS
1 TDS 13,068
2 Tax u/s 192(1A) 4,092
3 Total 17, 160
SECTION – 192(1C) - ESOP
1 Deferring TDS or For this purpose of deducing or paying tax, a person, being an
tax payment in eligible startup referred to in section 80 – IAC, responsible for
respect of income paying any income to the assessee being perquisite of the nature
pertaining to ESOP specified in Section 17(2)(vi) in any PY relevant to the AY, beginning
of start – ups – on or after 01.04.2021, shall deduct or pay, as the case may be, tax on
Section 192 such income within 14days –
(1C)(Inserted by No Particulars Amount
Finance Act, 2020 1 After the expiry of 48 Months from the end of the Xxx
w.e.f. 01.04.2020) relevant AY or
2 From the date of the sale of such specified security Xxx
or sweat equity share by the assessee or
3 From the date of the assessee ceasing to be the Xxx
employee of a person
4 1 or 2 or 3 Whichever is the Earliest Xxxx
on the basis of rates in force for the FY in which the said specified
security or sweat equity share is allotted or transferred

Illustration 1
Advise on the applicability of Sec. 192(1C) on the obligation to deduct tax, where the employees
have been allotted with ESOP during the PY 2020 - 21:
No Particulars
1 Ram is employed with Ishwar Ltd. on 01.03.2021. the company is not approved by the
Authority for the purpose of Sec.80 – IAC
2 Swatica is employed with Google India ltd, which complies with 80 - IAC requirements. She
does not sell the shares allotted and continues with the employment for 6 years after
allotment of shares
3 Keerthana is employed with Microsoft India Ltd. which complies with 80 - IAC requirements.
She continues with the employment for 7 years after allotment of shares but sold the shares
on 31 - 12 - 2025 to invest the proceeds as capital for her new business. It is further informed
that the value per shares at Rs. 500 in the year of allotment (AY 2021 - 22), has increased to
Rs.6000 per shares on the date of sale
4 Yash employed with Microsoft India Ltd. which complies with 80 - IAC requirements. He
continues to hold the shares but resigned from the employment of 31.12.2024
Solution
No Particulars
1  The perquisite is chargeable in the hands of Ram for the AY 2021 - 22, being the year of
allotment of shares.
 The benefit of deferral of deduction / payment of TDS till the occurrence of event shall
apply only to eligible start up covered by Sec.80 IAC.
 As the employer not covered by 80 IAC, deferral of TDS as provided u/s 192 (1C) cannot
be availed. In such cases regular provisions of TDS u/s 192 shall apply and accordingly,
tax shall be deducted in the PY 2020 - 21 itself
2  The perquisite is chargeable in the hands of Swatica for the AY 2021 - 22, being the year of
allotment of shares.
 Since the company is an eligible start - up and swatica continues with employment as well
held the shares, the occurrence of event as per Sec.192(1C) shall be the expiry of 48
months from end of the relevant AY.
 In the given case, the TDS obligation arise on 01 - 04 - 2026, being 48 months from the
end of the relevant AY in which shares were allotted (i.e, AY 2021 - 22) shall be complied
by the employer.
 TDS shall be deducted / paid within 14 days from the occurrence of event, which in this
falls on 14.04.2026( i.e, 14 days from 01 - 04 - 2026)

3  Though Keerthana continues with the employment, she has sold the shares on 31 - 12 -
2025.
 Accordingly, the TDS obligation triggers on 1.1.2026.
 In the given case, the due date for deduction or payment of shall be on or before
14.01.2026. in the year of deduction of tax, if the value of shares increases or falls is not
relevant for the purpose of sec. 192(1C).
 It may be noted that the tax liability on salary income (including the ESOP as perquisites)
is crystallized in AY 2021 - 22 itself and the Law only provides for deferment of deduction
/payment of tax.
 However, keerthana shall be subject to tax on the full value of consideration under the
head capital gains upon transfer (i.e, 31 - 12 - 2025 @ Rs.6000 per shares)
4 Though Yash continues to hold the shares, he ceases to be employee of the company, which
has allotted the shares. Accordingly, the TDS obligation triggers on 1.1.2025. in the given case,
the due date for deduction or payment of shall be on or before 14 - 01 - 2025
SECTION – 192(2D) - FURNISHING OF PROOF FOR CLAIMING DEDUCTION
1 Deductor to obtain  The person responsible for making the payment referred to in
proof or evidence Section 192(1) shall, for the purposes of estimating income of the
or particulars of assessee or computing tax deductible under Section 192(1), obtain
prescribed from the assessee the evidence or proof or particulars of
deductions / prescribed claims (including claim for set - off of loss) under the
exemptions / set - provisions of the Act in such form and manner as may be
off of losses prescribed.
claimed by the
 Rule 26C has been inserted in the Income Tax Rules, 1962, with
employee
effect from 1st June, 2016, to require furnishing of evidence of the
following claims by an employee to the person responsible for
making payment under section 192(1) in Form No. 12BB for the
purpose of estimating his income or computing the tax deduction
of tax at source.
No Nature of Claim Evidence or particulars
1 House Rent Name, address, and PAN of the
Allowance landlord(s) where the aggregate rent paid
during the previous year exceeds Rs. 1
lakh
2 Leave Travel Evidence of expenditure
Concession or
Assistance
3 Deduction of Name, address, and PAN of the lender
interest under the

head ‚Income
from house
property‛
4 Deduction under Evidence of investment or expenditure
Chapter VI - A
Illustration 1
LL Limited paid leave travel facility to its employees and considered exemption under section
10(5), based on the self - declaration furnished by the employees. The Assessing Officer held that
the company as an employer ought to have verified the genuineness of the claim of exemption by
obtaining from them, the proof of actual expenditure incurred by availing leave travel facility.
Accordingly, the Assessing Officer treated the assessee company as assessee in default. Decide the
correctness of action.
Solution
1 Section 192 Section 192 casts liability on the employer to deduct tax at source from the
salary paid to its employees.
In this case the employer has paid leave travel concession / facility to its
employees and the said concession /facility would be eligible for exemption
subject to the conditions laid down section 10(5) read with Rule 2B of the
Income - tax Rules, 1962
2 Section Section 192(2D) casts responsibility on the person responsible for paying any
192(2D) income chargeable under the head ‘Salaries’ to obtain from the assessee, the
evidence or proof or particulars of prescribed claims under the provisions of the
Act in the prescribed form and manner for the purposes of -
 Estimating income of the assesses; or

 Computing tax deductible under section 192(1)
3 Rule 26C Rule 26C of the Income - tax Rules, 1962 mandates a salaried assessee claiming,
inter alia, leave travel concession or assistance to furnish evidence of
expenditure incurred in relation there to the person responsible for making such
for payment under section 192(1), for the purpose of estimating his income for
computing the tax deductible under section 192

4 Conclusion In the given case LL Limited paid leave travel concession to its employees and
considered for exemption on the basis of mere self - declaration, instead of
verifying and obtaining the
Evidences / proof of actual expenditure. Thus, the action of the Assessing
Officer is correct law
OTHER PROVISIONS
1 Salary from  Where, during the financial year, an assessee is employed
more than one simultaneously under more than one employer, or
employer  where he has held successively employment under more than one
employer,
 he may furnish to the employer at his choice, such details of the income
under the head ‚Salaries‛ due to or received by him from the other
employer or employers,
 the tax deducted at source there from, and thereupon the employer
shall take into account the details so furnished for the purposes of
making the deduction
If EE employed At his choice he

Either of
with more than may furnish
the OR
one OR details to
2 Particulars to  An employer shall furnish to the employee a statement giving correct

be furnished by and complete particulars of perquisites or profits in lieu of salary
employer provided to him and the value thereof in such form and manner as may
be prescribed.
 Penalty on failure to furnish such particulars - Section 272 A(2) -
Rs. 100 for everyday during which failure continues. However, no
penalty is impossible if employer proves that there was sufficient
cause for such failure.
OR statement Failure
100 per
should showing perq Penalty u/s
furnish 272A (2)
day.
+ PILOS
3 Payment from  The trustees of such fund are required to deduct tax at source, if such
recognized payment is not exempt.
provident fund  In case of recognized provident fund, tax is deductible as if it were
or approved income chargeable under the head ‘Salaries’.
superannuation  In case of approved superannuation fund, tax is deducted at the
fund average rate of tax at which employee was liable to tax during 3

preceding years or for the period for which he was a member of the
fund, whichever is less.
4 TDS when the In that case, the value of such salary shall be calculated by applying
salary is telegraphic - transfer buying rate of such foreign currency (as adopted by
payable in SBI) as on the date on which tax is required to be deducted at source.
foreign
currency
SECTION 192 - SUMMARY
S. 192
Person
responsible for Time of tax Threshold
Rate of TDS No TDS
TDS Deduction limit
Deduction
SECTION 192A - PREMATURE WITHDRAWAL FROM EMPLOYEES PROVIDENT FUND
1 Person  The trustees of the Employees Provident Fund Scheme, 1952, or
responsible for  Any person authorized under the scheme to make payment of
deducting tax accumulated balance due to employees, shall,
at source  in a case where the accumulated balance due to an employee
participating in a recognized provident fund is
 includible in his total income owing to the provisions of rule 8 or Part A
of the Fourth Schedule not being applicable,
 shall be liable to deduct tax at source.
2 Time of tax At the time of payment accumulated balance due to the employee.
deduction
3 Rat of tax 10%. However, any person entitled to receive any amount on which tax is
deduction at deductible under this section do not furnish his PAN to the person
source responsible for deducting such tax, then, tax would be deductible at the
maximum marginal rate i.e. 42.744%.

4 No TDS in the No deduction under this section shall be made where the amount of such
following cases payment or, as the case may be, the aggregate amount of such payment to
the payee is less than Rs. 50,000.
SECTION 192A - SUMMARY
S. 192A
Person
responsible Time of tax Threshold
Rate of TDS No TDS
for TDS Deduction limit
Deduction
QUESTIONS FOR UNDERSTANDING
Illustration 1
Mr. Rajesh joins XYZ Ltd. on 01 - 04 - 2019 (salary being Rs. 80,000 per month). XYZ Ltd. maintains
recognized provident fund through provident fund trust (i.e. XYZ PF Trust) and contributes 12% of
salary towards provident fund. Mr. Rajesh makes a matching contribution. Besides he annually
contributes Rs. 1,50,000 towards public provident fund.
He resigns on 31 - 12 - 2020. Interest credited by XYZ PF Trust to provident fund account of Mr.
Rajesh during the PY 2019 - 20 and 2020 - 21 is Rs. 15,000 and Rs. 25,000 respectively (rate of interest
being less than 9.5%). According to the records of XYZ PF Trust, the amount accumulated in
provident fund account of Mr. Rajesh up to 31 - 12 - 2020 is Rs. 4,43,200 (i.e. contribution
by XYZ Ltd. Rs. 2,01,600, interest thereon: Rs. 20,000, contribution by Mr. Rajesh: Rs. 2,01,600,
interest thereon: Rs, 20,000). The accumulated balance is paid by XYZ PF Trust of Mr. Rajesh (after
TDS) on 15 - 01 - 2021.
Determine the amount of tax deduction u/s 192 and 192A for the financial year 2020 - 21 under the
following situations –

Situation Particulars
1 Mr. Rajesh submits the details if provident fund withdrawal to XYZ Ltd. with a request
to consider PF withdrawal while calculating TDS under section 192.
2 Mr. Rajesh does not submit the details of provident fund withdrawal to a XYZ Ltd
Solution
Mr. Rajesh leaves the employment of XYZ Ltd. before rendering continuous service for 5 years. It is
assumed that the following conditions are satisfied -
No Particulars
1 Before joining XYZ Ltd. on 01 - 04 - 2019, Mr. Rajesh was not employed by any other person
(if he was employed by any other person before 01 - 04 - 2019 and provident fund
accumulated from the old employer to the current employer, the period of previous
employment would also be considered for the purpose of 5 year time - limit)
2 After resigning from the service of XYZ Ltd. before 5 years on 31 - 12 - 2026, he is not going to
join another employer who maintains recognized provident fund (if he joins some other
employer and provident fund amount lying with XYZ PF Trust is transferred to the new
employer, nothing would be taxable on account of provident fund withdrawal)
3 The service of Mr. Rajesh has not been terminated on 31 - 12 - 2020 because of reasons which
are beyond his control (e.g. ill health of the employee, discontinuation of business by
employer, completion of project for which the employee was employed, etc.)
In the above 3 cases, tax is not deducible during 2020 - 21 under section 192A.
Assuming that none of the 3 cases given above is applicable, tax deduction by XYZ PF Trust under
section 192A will be as follows -
1 PF withdrawal (contribution by XYZ Ltd.) 2,01,600
2 Interest thereon 20,000
3 PF withdrawal (contribution by Mr. Rajesh) (not taxable) Nil
4 Interest thereon 20,000
5 Total 2,41,600
6 Tax deduction under section 192A by XYZ PF Trust (i.e. 10% of Rs. 2,41,600) 24,160
Note
It is assumed that Mr. Rajesh furnishes his PAN to XYZ PF Trust. If PAN is not available, tax will
be deductible at the maximum marginal rate (i.e. at 42.744% of Rs. 2,41,600).
Tax deduction by XYZ Ltd. during the financial year 2019 - 20 under the section 192

No Particulars Situation 1 Situation 2

1 Salary (Rs. 80,000 x 9) 7,20,000 7,20,000
2 Withdrawal from provident fund -
3  Contribution by XYZ Ltd. 2,01,600 -
4  Interest thereon 20,000 -
5 Gross Salary 9,41,600 7,20,000
6 Less: Standard deduction u/s 16ia 50,000 50,000
7 Income from salary 8,91,600 6,70,000
8 Income from other sources (being PF interest on contribution by 20,000 -
Mr. Rajesh)
9 Gross total income 9,11,600 6,70,000
10 Less: Deduction under section 80C (PPF contribution) 1,50,000 1,50,000
11 Net Income 7,61,600 5,20000
12 Income tax 64,820 16,500
13 Add: HEC @ 4% 2,593 660
14 Tax liability 67,410 17,160
15 Less: Tax deducted by XYZ PF Trust under section 192A 24,160 -
16 Tax deduction by XYZ Ltd. under section 192 43,250 17,160
Note 2
In Situation 2, the aggregate tax deducted under section 192 and 192A is Rs. 41,320 (i.e. Rs. 24,160 +
Rs. 17,160). However, his tax liability is not less than Rs. 67,410. The difference of Rs. 26,090 (it may
be more depending upon other incomes of Rajesh for the previous year 2019 - 20) can be paid as
advance tax or self - assessment tax
Illustration 2
Mr. Sharma an employee of M/ s. ABC Ltd. since 10 - 04 - 2017, resigned on 31 - 03 - 2021 and
withdrew Rs. 60,000 being the balance in his EPF account. Discuss with reasons whether the
provisions of Chapter XVII - B are attracted and if so. What is the net amount receivable by the
payee, Mr. Sharma?
Solution
As per section 192A,in a case where the accumulated balance due to an employee participating in a
recognized provident fund is includible in his total income owing to the provisions of Rule 8 of Part
A of the Fourth Schedule not being applicable, the trustees of the Employees, Provident Fund
Scheme, 1952 or any person authorized under the scheme to make payment of accumulated balance
due to employees are required to deduct income - tax@10% at the time of payment of accumulated
balance due to the employee. Tax deduction at source has to be made only if the amount of such
payment or aggregate amount of such payment of the payee is Rs. 50,000 or more.

Rule 8 of Part A of the Fourth Schedule, inter alia, provides that only if an employee has rendered
continuous service of five years or more with the employer, then accumulated balance in a
recognized provident fund payable to an employee would be excluded from the total income of
that employee.
In the present case, Mr. Sharma has withdrawn an amount exceeding Rs. 50,000 on his resignation
after rendering a continuous service of four years with M/s. ABC Ltd. Therefore, tax has to be
deducted at source @ 10% under section 192A on Rs. 60,000, being the amount withdrawn on his
resignation without rendering continuous service of a period of five years with M/s. ABC Ltd.
The net amount receivable by Mr. Sharma is Rs. 54,000 [i.e., Rs. 60,000 –Rs. 6,000, being tax
deducted at source].
Note - It is assumed that Mr. Sharma has furnished his permanent account number (PAN) to the
person responsible for deducting tax at source. Otherwise, tax would be deductible at the
maximum marginal rate. It may be noted that with effect from 1.6.2015 such employee can furnish
declaration in Form No.15G for non - deduction of tax at source under section 192A by virtue of
section197A (1A).
SECTION 194F - REPURCHASE OF UNITS BY MUTUAL FUND OR UTI
1 Repurchase of A person responsible for Paying to any person any amount on account of
Units by Mutual repurchase of units covered u/s 80CCB(2) shall deduct Tax at source at
Fund or UTI the rate of 20% at the time of payment of such amount
In order to provide more funds at the disposal of the tax payers for
dealing with the economic situations arising out of COVID – 19
pandemic, The rate of TDS u/s 194F has been reduced from 20% to 15%
(i.e. ¾ th of the specified rate) for payments to residents during the
period from 14th May, 2020 to 31.03.2021 - Section 197B

SECTION 192F - SUMMARY
S. 192F
Person
Rate of TDS No TDS
Deduction

CHAPTER - 3
TDS ON COMMISSION
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

CHAPTER - 3
TDS ON COMMISSION
SECTION REFERENCE – TDS ON COMMISSION
SECTION PARTICULARS
194D Insurance Commission
194G Commission etc. on sale of lottery tickets
194H Commission on Brokerage
SECTION 194D - INSURANCE COMMISSION

1 Person Any person responsible for paying to a resident any income by way of
responsible for remuneration or
deducting tax  reward,
at source  whether by way of commission or otherwise,
 for soliciting or procuring insurance business (including business
relating to the continuance, renewal or revival of policies of
insurance)
2 Time of tax
deduction No Particulars Amt
1 At the time of credit of such income to the account of the xxx
payee
2 At the time of payment thereof in cash or by issue of a xxx
cheque or draft or by any other mode
3 1 or 2 whichever is earlier xxxx
3 Rate of tax 5%. (3.75% applicable from 14.05.2020 to 31.03.2021)

deduction
4 No TDS No deduction shall be made where the amount of such income or, as the
case may be, 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, or to the payee, does not exceed Rs. 15,000.
5 No In case of reversal of commission paid to an agent on account of refund
adjustments of premium to the insured, the reversal (debits) cannot be adjusted
permissible against subsequent credit of insurance commission to the agent’s
for debits account. The full amount of commission credited will be liable to TDS,
because TDS is made from the amount credited or paid to payee’s
account.

SECTION 194D - SUMMARY
S. 194D
Person
Rate of TDS No TDS
Deduction
SECTION 194G - COMMISSION ETC. ON SALE OF LOTTERY TICKETS

1 Person Any person responsible for paying, to any person, who is or has been
responsible for  stocking,
deducting tax  distributing,
at source  purchasing or selling lottery tickets,
 any income by way of commission, remuneration or prize on such
tickets shall be liable to deduct at source.
2 Time of tax
payee
Note :-
where any 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
shall apply accordingly.
3 Rat of tax 5% (3.75% applicable from 14.05.2020 to 31.03.2021)
deduction
4 No TDS No deduction shall be made if such amount does not exceed Rs. 15,000.

SECTION 194G - SUMMARY
S. 194G
Person
Rate of TDS No TDS
Deduction
SECTION 194H - COMMISSION ON BROKERAGE
1 Person Any person, not being an individual or a Hindu undivided family,
responsible  who is responsible for paying, to a resident,
for deducting  any income by way of commission (not being insurance commission
tax at source referred to in Section 194D) or brokerage, shall be liable to deduct tax
at source.
2 In case of Individual or a Hindu undivided family, whose total sales, gross receipts or
Individual or turnover from the business or profession carried on by him exceed Rs. 1
HUF Crore in case of business or Rs. 50 Lakhs in case o profession during the
financial year immediately preceding the financial year in which such
commission or brokerage is credited or paid, shall be liable to deduct tax at
source under this section
2 Time of tax
payee
3 Rat of tax 5% (3.75% applicable from 14.05.2020 to 31.03.2021)

deduction
4 No TDS No deduction shall be made-
No Particulars
1 In a case where the amount of such income or, as the case may be,
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, or to, the payee, does not exceed Rs. 15,000

2 Any commission or brokerage payable by Bharat Sanchar Nigam
Ltd. or Mahanagar Telephone Nigam Ltd to their public call office
franchises
5 Meaning of ‚Commission or brokerage‛ includes any payment received or receivable,

Commission directly or indirectly, by a person acting on behalf of another person for
or brokerage services rendered (not being professional services) 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, not being securities.
SECTION 194H - SUMMARY
S. 194H
Person
Rate of TDS No TDS
Deduction
Illustration 1
Discuss the following issues in the context of the provisions of the Income tax Act, 1961, with
specific reference to clarification given by the Central Board of Direct Taxes-
No Particulars
1 Mudra Adco Ltd an advertising company, has retained a sum of Rs. 15 lakhs, towards
charges for procuring and canvassing advertisements, from payment of Rs. 1 crore due to
Cloud TV, a television channel, and remitted the balance amount of Rs. 85 lakhs to the
television channel. Would the provisions of tax deduction at source under section 194H be
attracted on the sum of Rs. 15 lakhs retained by the advertising company?

Ans
No Particulars
1 The issue of whether fees/ charges taken or retained by advertising companies from media
companies for canvassing/ booking advertisements (typically 15% of the billing) is
‘commission’ or ‘discount’ to attract the provisions of tax deduction at source has been
clarified by the CBDT vide its Circular No. 5/2016 dated 29-2-2016.
The relationship between the media company and the advertising agency is that of a
‘principal – to - principal’ and, therefore, not liable for TDS under section 194H. In view of
the same, the CBDT has clarified that no liability to deduct tax is attracted on payments
made by television channels to the advertising agency for booking or procuring of or
canvassing for advertisements.
Accordingly, in view of the clarification given by CBDT, no tax is deductible at source on
the amount of Rs. 15 lakhs retained by Mudra Adco Ltd the advertising company, from
payment due to Cloud TV, a television channel.
However, the Supreme Court, in Prasar Bharati, v. CIT [2018] 403 ITR 161 (SC) has held
that if the relationship between Doordarshan and its accredited agencies is that of a
principal and agent, then TDS provisions under section 194H would get attracted in
respect of retentions by accredited advertising agencies from payments remitted to
Doordarshan. Therefore, the applicability or otherwise of the CBDT Circular will depend
on the facts of the specific case
Illustration 2
B. Airways Ltd. sold tickets to the travel agents in India at a minimum fixed commercial price.
The agents were permitted to sell the tickets at a higher price but not exceeding the maximum
published price. Commission at the rate of 9% of minimum fixed commercial price was
deducted under section 194H by the company. The Assessing Officer contended that the liability
for tax deduction at source is attracted on the difference between the minimum fixed commercial
price and the maximum published price by treating it as ‚additional special commission" in the
hands of the agents.
Is the contention of Assessing Officer tenable in law?
Solution
As per the provisions of section 194H, a person is liable to deduct tax at source at the time of
creditor payment of commission to any resident, whichever is earlier.
In the present case, B. Airways Ltd. correctly deducted tax at source under section 194H from the
commission @ 9% of the minimum fixed commercial price paid to the travel agents, who were
allowed to sell the air tickets at any price higher than the minimum fixed commercial price
subject to a maximum published price. However, the Assessing Officer contended that the
airline company was required to deduct tax at source on the difference between the minimum
fixed commercial price and the maximum published price by treating it as ‚additional special
commission" in the hands of the agents

Illustration 3
A commission of Rs.50, 000 was retained by the consignee ‚Aspire Ltd‛ and not remitted to the
consignor ‚BGR Ltd‛, while remitting the sale consideration. Examine the obligation of the
consignor to deduct tax at source
Solution
Retention of commission by an agent amount to constructive payment of commission by
principal. Therefore, Section 194H is required to be compiled with by the principal. Accordingly,
in the given case, BGR Ltd is responsible to deduct tax on the commission retained by the
consignee agent amounting to Rs. 1,875 (being 3.75% of Rs. 50,000). The commission after
reducing TDS can only be retained by the consignee and the balance sale consideration has to be
given to the consignor.

CHAPTER - 4
TDS ON IMP
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

[ DIRECT TAXATION] AY 21- 22
CHAPTER - 4
TDS ON IMP
SECTION REFERENCE – TDS ON IMP
SECTION PARTICULARS
194I Rent
194IA Payment of transfer of certain IMP other than agricultural land
194IB Payment of rent by certain Individuals and HUF
194IC Payment under specified agreement
194LA Payment of compensation on acquisition of certain IMP
SECTION 194 – I - RENT
N Particulars Explanations
o
1 Person Any person,
responsibl  not being an individual or a Hindu undivided family, who is
e for responsible for paying to a resident
deducting  any income by way of rent,
tax at  shall be liable to deduct tax at source.
source
2 In case of Individual or a Hindu undivided family, whose total sales, gross receipts or
Individual turnover from the business or profession carried on by him exceeds exceed
or HUF Rs. 1 Crore in case of business or Rs. 50 Lakhs in case of profession, during
the financial year immediately preceding the financial year in which such
income by way of rent is credited or paid, shall be liable to deduct tax at
source under this section
3 Time of tax
payee
2 at the time of payment thereof in cash or by issue of a xxx
Note :-
Where any 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 provisions of this section shall apply
accordingly.
3 Rate of tax  2% (1.5% applicable from 14.05.2020 to 31.03.2021)for the use of any
deduction machinery or plant or equipment; and
 10% (7.5% applicable from 14.05.2020 to 31.03.2021) for the use of any
land or building (including factory building) or land appurtenant to a

building (including factory building) or furniture or fittings.
Rate of
TDS
Machinery /
Plant / Land / Building
Equipment
2% 10%
4 No TDS No tax shall be deducted at source

No Particulars
1 Where the amount of such income or, as the case may be, 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, or to,
the payee, does not exceed Rs. 2,40,000
2 Where the income by way of rent is credited or paid to a business
trust, being a real estate investment trust, in respect of any real estate
asset, referred to in Section 10(23FCA), owned directly by such
business trust
5 Meaning Rent’ means any payment under any lease, sub - lease, tenancy, or any other
of Rent agreement or arrangement for use (either separately or together) of any –
 land; or
 building (including factory building); or
 land appurtenant to a building (including factory building); or
 machinery, or
 plant; or
 equipment; or
 furniture
 fittings
Whether or not any or all of such assets are owned by the payee.

SECTION 194 I – RENT
S. 194 I
Person
Rate of TDS No TDS
Deduction
Illustration 1
ABC Ltd. Took on sub - lease a building from Mr. J, an individual, with effect from 1.9.2020 on a
rent of Rs.25, 000 per month. It also took on hire machinery from Mr. J with effect from 1.10.2020
on hire charges of Rs.15, 000 per month. ABC Ltd. Entered into two separate agreements with
Mr. J for sub - lease of building and hiring of machinery. The rent of building and hire charges of
machinery for the financial year 2020 - 21 were Rs. 1, 75,000 and Rs.90, 000 respectively, which
were credited by ABC Ltd. To the account of Mr. J in its books of account on 31.3.2021. Examine
the obligation of ABC Ltd. With regard to deduction of tax at source in respect of the rent and
hire charges.
Solution
As per section 194 - I dealing with deduction of tax at source from payment of rent, the rate of
TDS applicable is 1.5% for machinery hire charges and 7.5% for building lease rent. The scope of
the section includes within its ambit, rent for machinery, plant and equipment. Tax is required to
be deducted at source from payment of rent, by whatever name called, under any lease, sub -
lease, tenancy or any other agreement or arrangement for the use of building and machinery,
irrespective of whether such assets are owned or not by the payee.
The limit of Rs. 2,40,000 for tax deduction at source will apply to the aggregate rent of all the
assets. Even if two separate agreements are entered into, one for sub - lease of building and
another for hiring of machinery, rent and hire charges under the two agreements have to be
aggregated for the purpose of application of the threshold limit of Rs. 2,40,000. In this case, since
the payment for rent and hire charges credited to the account of Mr. J, the payee, aggregates to
Rs. 2,65.000 (Rs. 1,75,000 + Rs. 90,000), tax is deductible at source under section 194 - I. Tax is
deductible @ 7.5% on Rs. 1,75,000 (rent of building) and @1.5% on Rs. 90,000 (hire charges of
machinery).

SECTION 194 – IA - PAYMENT OF TRANSFER OF CERTAIN IMP OTHER THAN
AGRICULTURAL LAND
1 Person  Any person, being a transferee, responsible for paying to a resident
responsible transferor
for deducting  Any sum by way of consideration for transfer of any immovable
tax at source property. i.e. any land (other than land agricultural land) or any
building or part of a building.
2 Time of tax
payee
3 Rate of tax 1% (0.75% applicable from 14.05.2020 to 31.03.2021)

deduction
4 No TDS in the Tax is not required to be deducted at source where the total amount of
certain cases consideration for the transfer of immovable property is less than Rs. 50
lakh.
“Consideration for transfer of any immovable property” shall include
all charges of the nature of club membership fee, car parking fee,
electricity or water facility fee, maintenance fee, advance fee or any
other charges of similar nature, which are incidental to transfer of the
immovable property
5 No The provisions of section 203A containing the requirement of obtaining
requirement Tax deduction account number (TAN) shall not apply to the person
of tax required to deduct tax in accordance with the provisions of section
deduction 194 - IA.
account
number
6 Section not to Since tax deduction at source compulsory acquisition of immovable
apply where property is covered under section 194LA, the provisions of section
Section 194LA 194 - IA does not get attracted in the hands of the transferee in such cases.
applicable

SECTION 194IA - SUMMARY
S. 194IA
Person
Rate of TDS No TDS
Deduction
Illustration 1
DLF Ltd sells a flat to Mr. X for Rs. 49, 00,000 on 1 - 1 - 2021 through an agreement to sell. The
agreement to sell also provides that Mr. X has to pay Rs. 50,000 and Rs. 25,000 for electricity and
water meter respectively. The maintenance charges of flat are Rs. 6,000 per month and Mr. X has
to pay 24 months maintenance fees in advance as per the agreement to sell. DLF Ltd has also
entered another agreement with Mr. X that Mr. X shall pay the following to DLF Ltd before the
flat is registered in name of Mr. X.
No Particulars
1 Rs. 5,00,000 for car parking to be used exclusively by Mr. X
2 Rs. 3,00,000 for club membership fees
Answer
In view of the amendment made by Finance Act, 2019, the consideration for transfer of
immovable property shall be Rs. 49,00,000 + Rs. 50,000 + Rs. 25,000 + Rs. 1,44,000 + Rs. 5,00,000 +
Rs. 3,00,000 = Rs. 59,19,000. Mr. X shall deduct TDS @ 0.75% on Rs. 59,19,000.
Illustration 2
Ms. Rajalakshmi sells her house property in Chennai as well as her rural agricultural land for a
consideration of Rs.1 Crore and Rs.50 lakhs respectively to Mr. Suresh Raina on 11.09.2020. She
purchased the house property and land in 01.04.2019 for Rs.50 Lakhs and 15 lakhs respectively.
The stamp duty value (SDV) on the date of transfer was Rs.1.5 crores and 60 lakhs. Determine
the tax implications in the hands of Rajalakshmi and Suresh Raina and the TDS implications
assuming both are resident Indians for 2021 - 22.

Solution
1 Tax implication As per section 50C, the fill value of consideration on sale shall be the
in the hands of SDV of the house property, i.e Rs. 1.5 crores. Therefore Short term
Ms. Capital Gain of Rs.1 crore (Rs.1.5 crore –Rs. 50 lakhs being COA) shall be
Rajalakshmi chargeable to tax in AY 2021 - 22
As per Section 2(14) Rural Agricultural land is not a capital asset.

Therefore, the gains arising from sale of such land shall not be taxable
2 Tax In case IMP received for inadequate consideration, the difference
implications in between SDV and actual consideration shall be taxable under “IFOS”, If
the hands of such difference exceeds Rs. 50,000 and 10% of consideration. Therefore,
Mr. Suresh Rs. 50Lakhs (Rs. 1.5 Crores – Rs. 1 Crore) shall be taxable in the hands of
Raina Mr. Suresh Raina u/s 56(2)(x).
The definition of the term property u/s 56(2)(x) refers only to assets
which are Capital assets in nature. Since agricultural land is not a capital
asset, the provisions of section 56(2)(x) is not attracted in respect of
receipt of agricultural land for inadequate consideration
3 TDS Since the consideration for sale of house property exceeds Rs. 50 Lakhs,
implications in Mr. Raina is required to deduct tax @ 0.75% of the sale consideration
the hands of amounting to Rs. 75,000 u/s 194 – IA. TDS provisions u/s 194 – IA shall
Mr. Suresh not be attracted in respect of transfer of rural agricultural land
Raina
Illustration 3
Mr. X Sold his house property in Bangalore as well as his rural agricultural land for a
consideration of Rs. 60 lakh and Rs. 15 lakh, respectively to Mr. Y on 1 - 8 - 2020. He has
purchased the house property and the land in the year 2019 for Rs. 40 lakh and Rs. 10 lakh
respectively. The stamp duty value on the date of transfer, i.e. 1 - 8 - 2020, is Rs. 85 lakh and
Rs. 20 lakh for the house property and rural agricultural land, respectively. Examine the tax
implications in the hands of Mr. X and Mr. Y and the TDS implications, if any, in the hands of
MR. Y assuming that both Mr. X and Mr. Y are resident Indians.
Ans:
1 Tax As per section 50C, the stamp duty value of house property (i.e. Rs. 85 lakh)
implications would be deemed to be the full value of consideration arising on transfer of
in the hands property, since the stamp duty value exceed 110% of the consideration
of Mr. X received. Therefore, Rs. 45 lakh (i.e. Rs. 85 lakh – 40 lakh, being the
purchase price) would be taxable as short - term capital gains in the A.Y.
2021 - 22. Since rural agricultural land is not a capital asset, the gains arising
on sale of such land is not taxable in the hands of Mr. X
2 Tax In case immovable property is received for inadequate consideration, the
implications difference between the stamp value and the actual consideration would be
in the hands taxable under section 56(2) (x), if such difference exceeds Rs. 50,000 and 10%
of Mr. Y of the consideration.
Therefore, in this case, Rs. 25 lakh (Rs. 85 lakh – Rs. 60 lakh) would be
taxable in the hands of Mr. Y u/s 56(2) (x).

Since agricultural land is not a capital asset, the provisions of section

56(2)(x) are not attracted in respect of receipt of agricultural land for
inadequate consideration, since the definition of “property” under section
56(2) (x)includes only capital assets specified thereunder
3 TDS Since the sale consideration of house property exceeds Rs. 50 lakh, Mr. Y is
implications required to deduct tax at source under section 194 - IA. The tax to be
in the hands deducted under section 194 - IA would be Rs. 60,000, being 1% of Rs. 60
of Mr. Y lakh.
TDS provisions under section 194 - IA are not attracted in respect of transfer
of rural agricultural land
Illustration 4
No Illustrations Answers
1 Mr. A and Mr. B are the joint holders of a Now, Mr. X while making the payment
building situated at Rajouri Garden. Delhi to Mr. A and Mr. B is required to deduct
having equal share in the building. They sold tax under section 194 - IA @ 0.75% since
the house to Mr. X on 5 - 8 - 2020 for a the total consideration for transfer of an
consideration of Rs. 55 Lakh. It has immovable property is Rs.50 lakh or more
been decided that Mr. X will pay Rs. 27.5
lakhs to each seller i.e., Mr. A and Mr. B
2 Mr. Abhay and Mr. Kushal purchased a Now Mr. Abhay and Mr. Kushal both are
building situated in Ludhiana jointly. They required to deduct TDS @ 0.75% on the
bought it from Mr. Kumar for a total amount paid by them since the total
consideration of Rs. 60 lakhs on 11.11.2020. consideration is Rs. 50 lakh or more for
Mr. Abhay and Mr. Kushal are transfer of an immovable property
required to pay Rs. 30 lakh each
3 BKC Pvt. Ltd. acquired the land situated at BKC Pvt. Ltd. is required to deduct TDS
Yamuna expressway on 14.04.2020 from @1% on Rs. 2,50,00,000 at the time of issue
Raheja Builders and issued 10,00,000 equity of shares. Grossing up shall be done if the
shares having face value of Rs. 10 each at a agreement specifics that the burden of
premium of Rs. 15 each in TDS shall be borne by the buyer
consideration of the land
4 Mr. P, non - resident, sold his building Mr. Z will make the payment to Mr. P
situated at Mumbai to Mr. Z for a total after deduction of tax @ 20% plus
consideration of Rs. 1.25 crore. surcharge and health & education cess
(on the LTCG computed) under section
195. Section 194 - IA does not apply
where the payment is made to a non -
resident
5 Mr. Akash resident in India, sold his house Mr Rahul is required to deduct TDS @
situated in Kolkata to Mr. Rahul who is the 0.75% under section 194 - IA while
resident of USA for a total consideration of Rs. making payment to Mr Akash
2 crores on 20.12.2020
6 Mr. Deepak, resident in India, owned a house Now, Mr. Anand is not required to
in Jaipur. He sold the house to Mr. Anand, deduct TDS under section 194 - IA since
resident of Jaipur for a total consideration of the total consideration does not exceeds
Rs. 48 lakhs. However, the stamp duty value Rs. 50 lakh
of the said property is Rs.5 5 lakhs

SECTION 194 – IB - PAYMENT OF RENT BY CERTAIN INDIVIDUALS AND HUF
responsible for  being an individual or a Hindu undivided family (other than
deducting tax at those referred to in the second proviso to section 194 - I),
source  responsible for paying to a resident
 any income by way of rent shall be liable to deduct tax at source.
2 Time of tax The income tax shall be deducted on such income -
1 At the time of credit of rent, for the last month of the xxx
previous year or the last month of tenancy, if the
property is vacated during the year, as the case may
be, to the account of the payee, or
3 1 or 2 whichever is later xxxx

deduction
4 No TDS in the  No deduction shall be made where the amount of rent does not
following cases exceed Rs. 50,000 for a month or part of a month during the
previous year.
 Thus, tax is deductible at source when the amount of rent is more
than Rs. 50,000 per month (or part of month).
5 No requirement The provisions of Section 203A shall not apply to a person required to
of tax deduction deduct tax in accordance with the provisions of this section.
account number
6 If PAN not Rate of TDS 20% but amount of TDS cannot exceed rent payable for
available last month:
In a case where the tax is required to be deducted as per the provisions
of Section 206AA, such deduction shall not exceed the amount of rent
payable for the last month of the previous year or the last month of the
tenancy, as the case may be.
7 Meaning of Rent “Rent” means any payment, by whatever name called, under any
[Explanation] lease, sub - lease, tenancy or any other agreement or arrangement for
the use of any land or building or both.

SECTION 194IB – SUMMARY
S. 194IB
Person
Rate of TDS No TDS
Deduction

Illustration 1
Mr. A Chartered Accountant employed as CFO with Google India Ltd. draws a salary of
Rs.5,00,000 PM. He has taken an independent house from Mr. B with effect from 1 st June, 2020.
With this information, determine the amount of TDS u/s 194 - IB for the FY 2020 - 21 under the
following situations
No Particulars
1 If the amount of rent is Rs.40,000 pm
2 If the amount of rent is Rs.55,000 pm
3 If the amount of rent is Rs.55,000 pm and Mr. B does not furnish PAN
4 If the amount of rent is Rs.55,000pm;and Mr. A vacates the property by 31stjuly, 2020 and
Mr. B does not furnish PAN
5 In case Mr. A is carrying on the profession of chartered Accountancy (instead of
employment )and his gross receipts from the practice for the year ended 31st march 2020 is
Rs.60,00,000 and the rent paid for his residence to Mr. B is Rs.55000 pm
6 In case of payer is LLP instead of an individual, the amount of TDS u/s 194 IB
7 If the amount of rent is Rs.55000 pm. And Mr. A vacates the property by 31st December,
2020 and Mr. A wish to deduct tax for all the months by December, 2020

Solution
Computation of amount of TDS
TDS u/s
Case Remarks
194 - IB
1 Nil Section 194IB provides for tax deduction only where the amount of rent
exceeds Rs.50,000 per month or part of the month. In the given case, the
amount of rent is less than Rs. 50000 and thus sec 194 IB does not apply
2 20,625 The amount of rent exceeds Rs. 50000 pm. In this situation 3.75% of TDS on
Rs. 550000 (Rs.55000 X 10 months ) shall be deducted at source in the month
of March 2021 being the last month of the previous year for which rent is
payable.
3 55,000 Where the owner does not furnish the PAN, a higher rate of 20% shall be
apply instead of regular rate 3.75%. Thus the amount of TDS works to
Rs.1,10,000(Rs.550,000 X 20%) .however if the amount of TDS so computed is
higher than the amount of rent payable by tenant for the last month of
previous year (March, 2021) the amount of TDS shall be restricted to the
amount of rent payable for the last month by tenant. Accordingly in the given
case, even though the TDS sum works out to Rs.110,000 the same shall be
restricted to Rs.55,000 being the amount of rent payable for the month of
March 2021.
4 22,000 Rent for 2 months, June and July, 2020 works out to Rs.110000. Since PAN of
the landlord is not made available, the rate of TDS shall be at 20% which
works out Rs.22000.This sum shall be deducted at source at the time of
vacating the property, being july 2020.
5 Nil In this case where an individual or HUF whose gross receipts from profession
exceeds Rs. 50 lakhs the provision of sec 194 IB shall not apply. The rent so
paid shall be dealt for TDS u/s 194 - I, which works to Rs.41250 being 7.5% of
Rs.550000
6 Nil Where the payer other than individual or HUF, the provision of sec 194 - IB
shall not apply. Accordingly in the given case, A LLP is not subject to
Sec 194 - IB. The rent so paid shall be dealt for TDS u/s 1941.
7 14438 Accordingly to sec 194 - IB, tax shall be deducted either in this last month of
the previous year or the month of vacating of the property by the tenant, as
the case may be, whichever is earlier. In the given case, TDS at 3.75% on
Rs.385, 000 (Rs.55000 X 7 months) shall be made in December, 2020 being the
month of vacating the property.
Illustration 2
Mr. X, a salaried individual, pays rent of Rs. 60,000 per month to Mr. Y from June 2020. Is he
required to deduct tax at source? If so, when is he required to deduct tax? Also, compute the
amount of tax to be deducted at source. Would your answer change if Mr. X vacated the
premises on 31st December 2020? Also what would be your answer if Mr. Y does not provide his
PAN to Mr. X?

Ans:
1 Rent exceeds Since Mr. X pays rent exceeding Rs. 50,000 per month in the F.Y. 2020 - 21,
Rs. 50,000 he is liable to deduct tax at source @ 3.75% of such rent for F.Y. 2020 - 21
p.m under section 194 - IB. Thus, Rs. 22,500 - Rs. 60,000 x 3.75% x 10 has to
be deducted from rent payable for March, 2021
2 If Mr. X If Mr. X vacated the premises in December 2020 then tax of Rs. 15,750 -
vacated Rs.60,000 x 3.75% x 7 has to be deducted from rent payable for December
2020
3 In case Mr. In case Mr. Y does not provide his PAN to Mr. X tax would be deductible
Y does not @ 20% instead of 3.75%.
provide his
PAN
4 Case – 1 In case 1 above, this would amount to Rs. 1,20,000 - Rs. 60,000 x 20% x 10
but the same has to be restricted to Rs. 60,000 being rent for March 2021
5 Case – 2 In case 2 above, this would amount to Rs. 84,000 - Rs. 60,000 x 20% x 7 but
the same has to be restricted to Rs. 60,000, being rent for December 2020
Illustration 3
Mr. X, a salaried individual, pays rent of Rs. 55,000 per month to Mr. Y from June, 2020. Is he
required to deduct tax at source? If so, when is he required to deduct tax? Also, compute the
amount of tax to be deducted at source.
Would your answer change if Mr. X vacated the premises on 31st December, 2020?
Also, what would be your answer if Mr. Y does not provide his PAN to Mr. X?
Solution
1 Rent exceeds Since Mr. x pays rent exceeding Rs.50,000 per month in the F Y . 2 0 - 21.
Rs. 50,000 He is liable to deduct tax at source @ 3.75%of such rent for FY. 2020 - 21
p.m under section 194 - IB. Thus, Rs.20,625 - Rs. 55,000 x 3.75% x 10 has to be
deducted from rent payable for march, 2021
2 If Mr. X If Mr. x vacated the premises in December. 2020, then tax of Rs. 14,438 - Rs.
vacated 55,000 x 3.75% 7 has to be deducted from rent payable for December, 2020
3 In case Mr. In case Mr. Y does not provide his PAN to Mr. X, tax would be deductible
Y does not @ 20%, instead of 3.75%.
provide his
PAN
4 Case – 1 In case 1 above, this would amount to Rs. 1,10,000 - Rs. 55,000 x 20% x 10
but the same has to be restricted to Rs. 55.000, being rent for march, 2021
5 Case – 2 In case 2 above, this would amount to Rs. 77,000 Rs.55,000 x 20% x 7 but
the same has to be restricted to Rs. 55,000, being rent for December, 2020

Illustration 4
Mr. A owns a building situated at New Delhi which is given on monthly rent of Rs. 75,000 to
Mr. B. w.e.f. 01.06.2020 Rent is paid by Mr. B on first day of every month. Discuss whether TDS
provisions are applicable for the financial year 2020 - 21 in the following cases -
Case Particulars
1 Mr. B is carrying on business having annual turnover of business amounting Rs. 2.5
crores in preceding financial year. However, building is used by him for his residential
purposes
2 Mr. B is carrying on business having annual turnover of business amounting Rs. 0.5
crores in preceding financial year
3 Mr. B is a salaried employee. He gets house rent allowance from the employer. On the
basis of rent paid to Mr. A, he claims exemption under section 10(13A) pertaining to
house rent allowance
Ans:
The TDS provisions in three independent cases are discussed as under:
Case Particulars
1 In this case since the turnover of Mr. B exceeds 1 crore, he is liable to deduct tax at
source under section 194 - I @ 7.5%. Hence, the amount of tax to be deducted at source =
Rs. 75,000 x 10 x 7.5% = Rs. 56,250
2 In this case, since the turnover of Mr. B does not exceed 1 crore he is not liable to deduct
tax at source under Section 194 - I. However, Mr. B is required to deduct tax at source
under section 194 - IB. Tax is deductible at the time of payment / credit of rent for the last
month during the financial year 2020 - 21. The amount of tax deductible on 1st March,
2021 is as under:
Rs. 75,000 x 10 x 3.75% = Rs. 28,125
3 The answer will remain same as of case 2
Illustration 5
No Issues Tax Implication
1 A person stays in rented house He is liable to deduct TDS 5% on Rs. 55,000 and
from April 2020 to July 2020 and @ 3.75% on Rs. 1,65,000. The same shall be
paid rent @ Rs.55,000 per month. deducted from the rent of July, 2020.
2 A USA resident came to India for 2 TDS shall be deducted under section 194 - IB on
months and took guest house on Rs. 1,40,000 @ 3.75%.
rent and paid Rs. 1,40,000 for 2
months for June and July, 2020.
3 Mr. A is paying rent @ Rs. 48,000 Mr. A is required to deduct TDS under this
till February 2021. Rent is section on whole amount of rent paid, i.e., Rs.
increased to Rs. 52,800 per month 48,000 @ 5% and Rs. 5,32,800 % 3.75%.
w.e.f. March, 2021.
4 Mr. X is paying rent @ 52,000 per Mr. X is required to deduct TDS @ 20% under
month. However, the landlord, section 206AA since the landlord does not have
who is 80 years old, does not have PAN. TDS on Rs. 6,24,000 @ 20% shall be Rs.
PAN. 1,24,800. However, as per section 194 - IB(4),

total TDS cannot exceed the last month rent.

Therefore, total TDS shall be Rs. 52,000.
5 Mr. P is paying rent of Rs. 60,000 Mr. P is not required to deduct TDS under
per month. The house which is section 194 - IB since the rent to a person does
taken on rent is jointly owned by not exceed Rs. 50.000 per month.
Mr. Y and Mrs. Y. Mr. P pays per
month Rs. 30,000 each to both.
SECTION 194 – IC - PAYMENT UNDER SPECIFIED AGREEMENT
1 Person Any person responsible for paying to a resident
responsible for  any sum by way of consideration (not being consideration in
deducting tax at kind)
source  under a joint development agreement,
 is responsible for tax deduction under section 194 - IC.
2 Time of tax
1 At the time of credit of such sum to the account of the xxx
payee
3 Threshold limit Nil

4 Rate of tax Tax is deductible at the rate of 10% (7.5% applicable from 14.05.2020
deduction to 31.03.2021). If PAN of recipient is not available, tax is deductible at
the rate of 20%.
5 Meaning of Specified agreement under section 45(5A):
specified
agreement (joint No Particulars
development 1 It means a registered agreement in which a person owning
agreement) land or building or both, agrees to allow another person to
develop a real estate project on such land or building or both
2 The consideration, in this case, is a share, being land or
building or both in such project; Part of the consideration may
also be in cash

SECTION 194IC - SUMMARY
S. 194IC
Person
Rate of TDS No TDS
Deduction
Illustration 1
Mr. A, who has a piece of land, has entered into an agreement with M/s XYZ ltd, a real estate
developer. As per terms of the agreement, Mr. A is entitled to receive 20 flats whose stamp duty
value as on the date of completion is Rs. 70,00,000 and monetary consideration
Rs.30,00,000.compute the tax to be deducted for AY 2021 - 22.
Solution
Computation of Tax deductible under section 194 - IC
No Particulars
1 In respect of non - monetary consideration: Nil. This is not considered since sec 194 - IC
provides for deduction of tax only on monetary consideration received
2 In respect of monetary consideration : TDS Rs.3,00,000 being 10% of Rs.30,00,000(Assumed
that the transaction took place before 14th may, 2020)

SECTION 194 – LA - PAYMENT OF COMPENSATION ON ACQUISITION OF CERTAIN

IMP
1 Person Any person responsible for paying to a resident any sum,
responsible  being in the nature of compensation or the enhanced compensation or
for the consideration or the enhanced consideration on account of
deducting compulsory acquisition,
tax at  under any law for the time being in force, of any immovable property
source (other than agricultural land) shall be liable to deduct tax at source.
2 Time of tax
1 At the time of payment of such sum in cash xxx
2 By issue of a cheque or draft or by any other mode xxx

deduction
4 No TDS
No Particulars
1 No deduction shall be made where the amount of such payment or
as the case may be, the aggregate amount of such payments to a
resident during the financial year does exceed Rs. 2,50,000
2 No deduction shall be made under this section where such
payment is made in respect of any award or agreement which has
been exempted from levy of income tax under section 96 of the
Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013
SECTION 194LA - SUMMARY
S. 194LA
Person
Rate of TDS No TDS
Deduction

CHAPTER - 5
TDS ON INTEREST & DIVIDEND
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

CHAPTER - 5
TDS ON INTEREST / DIVIDEND
SECTION REFERENCE – TDS ON INTERSET / DIVIDEND
SECTION PARTICULARS
193 Interest on Securities
194 Dividend
194A Interest other than Securities
194K Income in respect of units
SECTION 193 - INTEREST ON SECURITIES

1 Person The person responsible for paying any income to a resident by way of
responsible interest on securities shall be liable to deduct tax at source.
for deducting
tax at source
2 Time of tax
payee
Note:
Where any income by way of interest on securities is credited to any
account, whether called “Interest payable account‛ or ‚Suspense
account‛ or by any other name, in the books of account of the person
3 Rate of tax 10% (7.5% applicable from 14.05.2020 to 31.03.2021).
deduction

NO TDS IN THE FOLLOWING CASES
No tax shall be deducted from –

No Particulars
1 Any interest payable on such 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
2 Any interest payable on any security of the Central Government or a State Government.
However, tax shall be deducted @ 10% if the interest payable on 7.75% Savings (Taxable)
Bonds, 2018 exceeds Rs. 10,000 during the financial year
3  Any interest payable to an individual or a Hindu undivided family,
 who is resident in India,
 on any debenture issued by a company in which the public are substantially
interested, if –
No Particulars
1 The amount of interest or, as the case may be, the aggregate amount of such
interest paid or likely to be paid on such debenture during the financial year by
the company to such individual or Hindu undivided family does not exceed Rs.
5,000 and
2 Such interest is paid by the company by an account payee cheque
4 Any interest payable to the Life Insurance Corporation of India in respect of any
securities owned by it or in which it has full beneficial interest; or
5 Any interest payable to the GIC and its subsidiary companies, in respect of any
securities owned by the corporation or such company or in which the corporation or such
company has full beneficial interest; or
6 Any interest payable to any other insurer in respect of any securities owned by it or in
which it has full beneficial interest
7 Any interest payable on
 any security issued by a company,
 where such security is in dematerialized form and is
 listed on a recognized stock exchange in India
8 Any interest is payable 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 banks),
 as notified by the Central Government;
Accordingly, the Central Government has, vide Notification No. 27 &28/2018, dated 18 -
06 - 2018 notified –
No Particulars
1 “Power Finance Corporation Ltd. 54EC Capital Gains Bond‛ issued by Power
Finance Corporation Ltd. (PFCL) and
2 ‚Indian Railway Finance Corporation Ltd 54EC Capital Gains Bond‛ issued by
Indian Railway Finance Corporation Ltd. (IRFCL)

 Thus, no tax is required to be deducted at source on interest payable on ‚Power

Finance Corporation Ltd 54EC Capital Gains Bond‛ and ‚Indian Railway Finance
Corporation Ltd. 54EC Capital Gains Bond.‛
 The benefit of this exemption would, however, be admissible in the case of transfer of
such bonds by endorsement or delivery, only if the transferee informs PFCL/ IRFCL
by registered post within a period of sixty days of such transfer
SECTION 193 – SUMMARY
S. 193
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction
SECTION 194 - DIVIDEND
1 Person  The principal officer of an Indian company or a
responsible for  company which has made the prescribed arrangements for the
deducting tax at declaration and payment of dividends (including dividends on
source preference shares) within India,
 shall, before making any payment by any mode in respect of any
dividend or before making any distribution or payment to a
shareholder,
 who is resident in India, of any dividend referred under section
2(22)(a) to 2(22)(e).
2 Rate of tax 10% (7.5% applicable from 14 - 05 - 2020 to 31 - 03 - 2021)
deduction
3 No TDS in the No TDS shall be made in the case of a shareholder, being an
following cases individual, if –
No Particulars
1 The dividend is paid by the company by any mode other
than cash; and
2 The amount of such dividend or, as the case may be, the
aggregate of the amounts of such dividend
distributed or paid or likely to be distributed or paid during
the financial year by the company to the
shareholder, does not exceed Rs. 5,000

4 Non – The provisions of this section shall not apply to such income credited
Applicability or paid to –
No Particulars
1 The LIC of India established under the LIC Act, 1956, in
respect of any shares owned by it or in which it has full
beneficial interest
2 The GIC of India or to any of its subsidiary companies in
respect of any shares owned by it or in which it has full
beneficial interest
3 Any other insurer in respect of any shares owned by it or in
which it has full beneficial interest
SECTION 194 - SUMMARY
S. 194
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction
SECTION 194A - INTEREST OTHER THAN SECURITIES

responsible  not being an individual or a Hindu undivided family,
for deducting  who is responsible for paying to a resident any income by way of
tax at source interest other than interest on securities,
 shall be liable deduct tax at source.
2 In case of An individual or a Hindu undivided family, whose total sales, gross

Individual or receipts or turnover from the business or profession carried on by him
HUF exceeds Rs. 1 Crore in case of business or Rs. 50 Lakhs in case of
profession during the financial year immediately preceding the financial
year in which such interest is credited or paid, shall be liable to deduct
income tax under this section
3 Time of tax
deduction

No Particulars Amt
payee
Note:
Where any income by way of interest as aforesaid is credited to any
account, whether called “Interest payable account” or “Suspense
account” or by any other name, in the books of account of the person
4 Rate of tax 10% (7.5% is applicable from 14.5.2020 to 31.3.2021)
deduction
5 Threshold No tax shall be deducted -
Limit Where the amount of such income or, as the case may be, the aggregate of
the amounts of the such income credited or paid or likely to be credited
or paid during the financial year to the account of, or to, the payee, does
not exceed –
No Particulars
1 Rs. 40,000 (Rs. 50,000 in case payee is senior citizen) where the
payer is a banking company (including any bank or banking
institution)
2 Rs. 40,000 (Rs. 50,000 in case payee is senior citizen) where the
payer is a co - operative society engaged in carrying on the
business of banking
3 Rs. 40,000 (Rs. 50,000 in case payee is senior citizen) on any
deposit with post office under any scheme framed and notified by
the Central Government
4 Rs. 5,000 in any other case
6 Note However, in case of interest on fixed time deposits (including recurring

deposits) with banking company or co - operative society referred to
above or interest on deposits with housing finance companies, the
aforesaid limits of Rs. 5,000/ Rs. 40,000 /Rs. 50,000 shall be computed
branch - wise.
7 Threshold However, the threshold limit will be reckoned with reference to the total
limit for non income credited or paid by banking company or the co - operative society
- deduction or the public company, as the case may be, (and not with reference to
of tax to be each branch), where such banking company or co - operative society or
reckoned public company has adopted core banking solutions
with
reference to
the aggregate
interest
credited or

paid by all
branches of a
bank/ co -
operative
bank/ public
company
which has
adopted CBS
No Particulars
1 To such income credited or paid to -
No Particulars
1 Any banking company or any co - operative society engaged in carrying on the
business of banking (including a co - operative land mortgage bank), or
2 Any financial corporation established by or under a Central, State or Provincial
Act, or
3 The Life Insurance Corporation of India established under the Life Insurance
Corporation Act, 1956, or
4 The Unit Trust of India established under the Unit Trust of India 1963, or
5 Any company or co - operative society carrying on the business of insurance; or
6 Such other institution, association or body or class of institutions, associations or
bodies which the Central Government notifies. (National Skill Development
Fund and Housing and Urban Development Corporation Ltd. (HUDCO), New
Delhi have been notified by the Central Government for this purpose)
However, no notification shall be issued on or after 1.04.2020.
2 To such income credited or paid by a firm to a partner of the firm;

3  To such income credited or paid 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;

Int paid by Co - operative bank -

Where the interest is to be
Paid to another
Paid to its members Paid to others
co - operative society
TDS to be deducted if
interest amount
TDS to be deducted if exceeds Rs. 40,000 in TDS to be deducted if
interest amount the FY and the total interest amount
exceeds Rs. 40,000 receipts of the payer exceeds Rs. 40,000
(Rs. 50,000 in case of Co - operative bank (Rs. 50,000 in case of
senior citizen) in the Exceeded Rs. 50 senior citizen) in the
FY crores in the FY
immediatly preceding
FY
4 To such income credited or paid in respect of deposits under any scheme framed by the
Central Government and notified by it in this behalf in the Official Gazette.
5 To such income credited or paid in respect of deposits (other than time deposits**) with a
banking company (including any bank or banking institution)
6 To such income credited or paid in respect of -
No Particulars
(a) Deposits with a primary agricultural credit society or primary credit society or a
co - operative land mortgage bank or a co - operative land development bank
(b) Deposits (other than time deposits**) with a co - operative society, other than co –
operative society or bank referred to in (a) above, engaged in carrying on the
business of banking
7 Income credited or paid by the Central Government under any provision of this Act or the
Estate Duty Act, 1953, or the Wealth - tax Act, 1957, or
8 To such income credited by way of interest on the compensation amount awarded by the
Motor Accidents Claims Tribunal
9 To such income paid by way of interest on the compensation amount awarded by the
Motor Accidents Claims Tribunal where the amount of such income or, as the case may
be, the aggregate of the amounts of such income paid during the financial year does not
exceed Rs. 50,000;
10 To such income which is paid or payable by an
 infrastructure capital company or
 infrastructure capital fund or a
 public sector company or
 scheduled bank
 in relation to a zero coupon bond
 issued by such company or fund or Public Sector Company or scheduled bank.
11 To any income by way of interest referred to in section 10(23FC).
However a co – operative society referred to point no (iv) and point no (vii) above shall

be liable to deduct tax at source if,
No Particulars
(a) The total sales, gross receipts or turnover of the co – operative society exceeds
Rs. 50Crore during the FY immediately preceding the FY in which interest is
credited or paid ; and
(b) The amount of interest or the aggregate of amount of such interest credited or
paid or likely to be credited or paid during the financial year is more than Rs.
50,000 in case of payee being a senior citizen Rs. 40,000 in case of any other case
**Time deposits mean deposits (including recurring deposits) repayable on the expiry of
fixed periods.
Where the interest is to be
Paid to another co -
Paid to its members Paid to others
operative society
TDS to be deducted if
interest amount TDS to be deducted if
exceeds Rs. 40,000 interest amount
(Rs. 50,000 in case of exceeds Rs. 40,000 in
TDS shall be
senior citizen) in the thr FY and the total
deducted if interest
FY AND the total receipts of the payer
amount exceeds Rs.
receipts of the payer societyExceeded Rs.
5,000
society exceeded Rs. 50 crores in the
50 crores in the immediatly preceding
immediatly preceding FY
FY

OTHER PROVISIONS
1 No TDS / The central Government may by notification in the official gazette
TCS at lower provide that the deduction of tax shall not be made shall be made at
rate for such lower rate from such payment to such person or class of persons as
notified may be specified in the said notification
persons
2 Other aspects
No Particulars
1 The person responsible for making the payment may, at the time
of making any deduction, increase or reduce the amount to be
deducted under this section for the purpose of adjusting any
excess or deficiency arising out of any previous deduction or
failure to deduct during the financial year
2 In case of banks following CBS software, TDS is to be made at the
time of actual credit given to depositor’s/ payee’s account and not
on daily or monthly basis when interest is credited to a provision
account for reporting purpose [Circular No. 3, dated 2 - 3 - 2010]
3 TDS u/s 194A of the Act on interest on fixed deposit made on
direction of courts [Circular No. 23/2015, dated 28 - 12 - 2015]: It
is clarified that interest on FDRs made in the name of Registrar
General of the court or the depositor of the fund on the directions
of the court, will not be subject to TDS under Section 194A till the
matter is decided by the court. However, once the court decides
the ownership of the money lying in the fixed deposit, the
provisions of section 194A will apply to the recipient of the
income
4 Deduction of tax at source on interest income accrued to minor
child, where both the parents have deceased [Notification No.
05/2017, dated 29 - 05 - 2017]: The Principal Director General of
Income tax (Systems) has specified that in case of minors where
both the parents have deceased, TDS on the interest income
accrued to the minor is required to be deducted and reported
against PAN of the minor child unless a declaration is filed under
Rule 37BA(2) that credit for tax deducted has to be given to
another person
5 Deduction of tax at source on interest on deposits made under
Capital Gains Accounts Scheme, 1988 where depositor has
deceased [Notification No. 08/2017, dated 13 - 09 - 2017]: The
Principal Director General of Income tax (Systems) has specified
that in case of deposits under the Capital Gains Accounts Scheme
1988 where the depositor has deceased
No Particulars
(a) TDS on the interest income accrued for and up to the
period of death of the depositor is required to be deducted
and reported against PAN of the depositor, and
(b) TDS on the interest income accrued for the period after
death of the depositor is required to be deducted and

reported against PAN of the legal heir
Unless a declaration is filed under Rule 37BA (2) that credit for tax
deducted has to be given to another person
3 Clarifications The Board has given the following clarifications in respect of TDS under
by CBDT in this section:
this regard  Interest payable under Land Acquisition Act: Any interest under
Land Acquisition Act, including the interest on enhanced / increased
compensation, shall be liable to TDS
 TDS in respect of interest on deposits in joint names: In case
deposits are held in joint names, then in absence of any contradictory
information, the interest of such deposits shall be aggregated with the
interest on deposits of that individual’s account who has a highest
interest income. Consequently, such individual shall get the
certificate and credit of TDS so deducted
SECTION 194A – SUMMARY
S. 194A
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction


Illustration 1
Examine the TDS implications under section 194A in the cases mentioned hereunder -
No Particulars
1 On 1 - 10 - 2020, Mr. Paresh made a 6 month fixed deposit of Rs. 12 lakh @ 10% p.a. with
XYZ Co - operative Bank. The fixed deposit matures on 31 - 3 - 2021
2 On 1 - 7 - 2020, Mr. Suresh made three nine month fixed deposits of Rs. 5,00,000 each
carrying interest @ 8% p.a. with Bapu Nagar Branch, Malviya Nagar Branch and Ambey
Nagar Branches of PNB Bank, a bank which has adopted CBS. The fixed deposits mature
on 31 - 03 – 2021
3 On 1 - 7 - 2020, Mr. Rajesh started a 9 months recurring deposit of Rs 1,80,000 per month @
6.25% p.a. with TP Bank. The recurring deposit matures on 31.03.2021. Interest on such
deposit amount is Rs. 42,590
Ans:
No Particulars
1 XYZ Co - operative Bank has to deduct tax at source @ 7.5% on the interest of Rs. 60,000 -
Rs. 12 lakhs x 7.5% x 6/12 under section 194A. The tax deductible at source under section
194A from such interest is, therefore, Rs. 4,500
2 PNB Bank has to deduct tax at source @ 7.5% under section 194A, since the aggregate
interest on fixed deposit with the three branches of the bank is Rs. 90,000 - Rs. 5,00,000 x 3
x 8% x 9/12, which exceeds the threshold limit of Rs. 40,000. Since PNB Bank has adopted
CBS, the aggregate interest credited/ paid by all branches has to be considered. Since the
aggregate interest of Rs. 90,000 exceeds the threshold limit of Rs. 40,000 tax has to be
deducted @ 7.5% under section 194A
3 Tax has to be deducted under section 194A by TP Bank on the interest of Rs. 42,590 falling
due on recurring deposit on 31.03.2021 Mr. Rajesh, since -
a) ‚recurring deposit‛ has been included in the definition of ‚time deposit‛; and
b) Such interest exceeds the threshold limit of Rs.40,000
Illustration 2
Maya bank credited Rs. 73,50,000 towards interest on the deposits in a separate account for
macro monitoring purposes by using core - branch banking solutions (CBS) software. No tax
was deducted at source in respect of interest on deposits so credited even where the interest in
respect of some depositors exceeded the limit of Rs. 40,000.
The Assessing officer disallowed 30% of interest expenditure, where the interest on time
deposits credited exceeded the limit of Rs. 40,000 and also levied penalty under section 271C.
Decide the correctness of action of the Assessing officer.

Solution
The explanation below section 194A (1) provides that where any income by way of interest other
than interest on securities is credited to any account, whether called ‚Interest payable account‛’,
or ‘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 provisions of section 194A, shall, thus, apply.
However, the CBDT has, vide Circular no.3/2010 dated 2.3.2010, clarified that explanation to
section 194A will not apply in cases of banks where credit is made to provisioning account on
daily/monthly basis for the purpose of macro monitoring only by the of CBS software.
Since no constructive credit to the depositor’s payee’s account takes place while calculating
interest on daily / monthly basis in the CBS software used by banks, tax need not be deducted at
source on such provisioning of interest by banks for the purposes of macro monitoring only.
In such cases, tax shall be deducted at source on accrual of interest at the end of the financial
year or at periodic intervals as per practice of the bank or as per the depositor’s or payee’s
requirement or on maturity or on encashment of time deposit, whichever event takes place
earlier and wherever the aggregate amount of interest income credited or paid or likely to be
credited or paid during the financial year by the bank exceeds the limits specified in section
194A i.e., Rs. 40,000.
In view of the above, the action of the assessing officer in disallowing the interest expenditure
credited in a separate account for macro monitoring purpose is not valid and consequent
initiation of penalty proceedings under section 271C is not tenable in law.

SECTION 194 – K
1 Person Any person responsible for paying to a resident any income in respect
responsible for of-
deducting tax at No Particulars
source 1 units of a Mutual Fund specified under section 10(23D); or
2 units from the Administrator of the specified undertaking; or
3 units from the specified company,
shall, be liable to deduct tax at source.
2 Time of tax
1 At the time of credit of such income to the account of xxx
the payee
2 At the time of payment thereof by any other mode xxx
Note:-
Where any 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 the credit of such income to the account of the payee and the
provisions of this section shall apply accordingly.
3 Rate of TDS 10% (7.5% applicable from 14-05-2020 to 31-03-2021)
4 No TDS in the The provisions of this section shall not apply
following cases No Particulars
1 where the amount of such income or, as the case may be, the
aggregate of the amounts of such income credited or paid or
likely to be credited or paid during the financial year by the
person responsible for making the payment to the account of,
or to, the payee does not exceed Rs. 5,000; or
2 it the income is of the nature of capital gains

SECTION 194K – SUMMARY
S. 194K
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction

CHAPTER - 6
TDS ON CONTRACT
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

CHAPTER - 6
TDS ON CONTRACT
SECTION REFERENCE – CONTRACT
SECTION PARTICULARS
194C Payment to Contractors and Sub – Contractors
194M Payment made by a Individual or HUF for a Contract work or by way of
commission or brokerage or fees for professional services
SECTION 194C - PAYMENT TO CONTRACTORS AND SUB – CONTRACTORS

1 Person Any specified person
responsible  responsible for paying any sum to any resident contractor
for  for carrying out any work (including supply of labour for carrying out
deducting any work)
tax at source  in pursuance of a contract between the contractor and a contractee
 shall be liable to deduct tax at source
2 “Specified
person” No Particulars
shall mean, 1 The Central Government or any State Government; or
2 Any local authority; or
3 Any corporation established by or under a Central, State or
Provincial Act; or
4 Any company, or
5 Any co - operative society
6 Any authority, constituted in India by or under any law, engaged
either for the purpose of dealing with and satisfying the need for
housing accommodation or for the purpose of planning,
development or improvement of cities, towns and villages or for
both; or
7 Any society registered under the Societies Registration Act, 1860 or
under any law corresponding to that Act in force in any part of
India; or
8 Any trust; or
9 Any university established or incorporated by or under a Central,
State or Provincial Act and an institution declared to be a
university under section 3 of the University Grants Commission
Act, 1956; or
10 Any Government of a foreign State or a foreign enterprise or any
association or body established outside India; or
11 Any firm, or
12 Any person, being an individual or a Hindu undivided family or an
association of persons or a body of individuals, if such person, -
A. Does not fall under above categories; and
B. Has total sales, gross receipts or turn over from business or

profession carried on by him exceeding Rs. 1 crore in case of
business or Rs. 50Lakhs 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
3 Time of tax
1 At the time of credit such sum to the account of the payee xxx
Note:-
Where any sum as aforesaid 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 shall apply accordingly.
4 Rate of tax
deduction No Particulars
1 1% (0.75% applicable from 14.05.2020 to 31.03.2021)where the
payment is being made or credit is being given to an individual or a
Hindu undivided family
2 2% (1.5% applicable from 14.05.2020 to 31.03.2021)where the
payment is being made or credit is being given to a person other
than an individual or a Hindu undivided family
Rate of TDS
Other than
Individual or
Individual or
HUF Contractor
HUF Contractor
1% 2%

THRESHOLD LIMIT
1 If the contract  No deduction shall be made from the amount of any sum credited or
does not exceed paid or likely to be credited or paid to the account of, or to, the
Rs. 30,000 contractor, if such sum does not exceed Rs. 30,000.
 However, where the aggregate of the amounts of such sums credited
or paid or likely to be credited or paid during the financial year
exceeds Rs. 1,00,000 the payer shall be liable to deduct tax at source
Illustration 1
ABC Ltd. makes the following payments to Mr. X. A contractor, for contract work during the
P.Y. 2020 - 21
Amount Date
Rs. 20,000 On 1.5.2020
Rs. 25,000 On 1.8.2020
Rs. 28,000 On 1.12.2020
On 1.3.2021.a payment of Rs. 30,000 is due to Mr. X on account of a contract work. Discuss
whether ABC Ltd. Is liable to deduct tax at source under section 194c from payments made to
Mr. X
Solution
No Particulars
1  In this case, the individual contract payments made to Mr. X does not exceed Rs.
30,000.
 However, since the aggregate amount paid to Mr. X during the PY. 2020 - 21 exceeds
Rs.1,00.000 (on account of the last payment of Rs. 30,000 Due on 1.3.2021, taking the
total from Rs. 73,000 to Rs. 1, 03,000), the TDS provisions under section 194C would get
attracted.
 Tax has to be deducted @ 0.75% on the entire amount of Rs. 1, 03,000 from the last
payment of Rs. 30,000 and the balance of Rs. 29,227 (i.e., Rs. 30,000 - Rs. 733) has to be
paid to Mr. X
Illustration 2
Alap Ltd. Has made following payments on various dates in financial year 2020 - 21 to vilambit
Ltd. towards work done under different contracts:
Contract number Date of payment Amount (Rs)

1 5.5.2020 20,000
2 6.6.2020 15,000
3 8.8.2020 25,000
4 10.12.2020 25,000
5 29.01.2021 17,000

Alap Ltd. Claims that it is not liable for deduction of tax at source under section 194C. Examine
the correctness of the claim made by the company. What would be the position if the value of the
contract no. 5 is Rs. 14,000 only and there was no further contract during the year?
Solution
No Particulars
1  As per section 194C(5), tax has to be deducted at source where the amount credited or
paid or likely to be credited or paid to a contractor or sub - contractor exceeds Rs.
30,000 in a single payment or Rs. 1,00,000 in aggregate during the financial year.
 Therefore, in the given case, even though the value of each individual contract does
not exceed Rs. 30,000, the aggregate amount exceeds Rs. 1, 00,000. Hence, Alap Ltd’s
contention is not correct and tax is required to be deducted at source on the whole
amount of Rs. 1, 02,000 from the last payment of Rs. 17,000 towards contract No. 5 on
account of which the aggregate amount exceeded Rs. 1, 00,000.
 However, no tax deduction is to be made if the value of the last contract is Rs. 14,000 as
the aggregate amount in such case would only be Rs. 99,000. Which is below the
aggregate monetary limit of Rs. 1, 00,000
Illustration 3
Dr. Z is an individual medical practitioner. His gross receipts from the medical practice for the
year ending 31st March, 2020 are Rs.75 lakhs. Whereas the gross professional receipts for the year
ending 31st March 2021 is 8 Lakhs. During the FY 2020 - 21, he makes the following payments to
a resident contractor for various activities.
Date of payment Amount paid or

Contract
Contractor Description of Contract or credit in the credited in the
No
books books
A Mr. X Medical equipment maintenance 01.07.2020 Rs.80,000
contract
B Mr. X Household personal equipment 31.07.2020 Rs.2,50,000
maintenance
C Mr. Y Clinic furnishing contract 13.08.2020 Rs. 29,500
D Mr. Y Clinic furnishing contract 01.09.2020 Rs.29,000
E Mr. Y Clinic furnishing contract 17.09.2020 Rs.28,000
F Mr. M Personal catering contract in 30.11.2020 Rs.3,00,000
connection with daughter’s
wedding
G Mr. Z Freight Contractor, who owns 12 14.12.2020 Rs.1,30,000
trucks as on 30.03.2021 &
furnished PAN payment on
31.03.2021
H Mr. Y Clinic furnishing contract 22.12.2020 23,500
Examine the liability to deduct tax and the amount of TDS u/s 194C for the AY 2021 - 22.

Ans:
In the case of individuals, the liability to deduct tax u/s 194C arises, only where the limits
provided u/s 194C are exceeded in the previous year immediately preceding the year in which
such payments or credit entries are made. In this given case, the gross receipts from profession
has exceeded RS.50 Lakhs in FY 2019 - 20 and therefore, the provisions of sec. 194C is applicable
in respect of payments covered there under made in the PY 2020 - 21. Gross receipts for the
current financial year 2020 - 21 is not relevant to determine the applicability of sec. 194C.
Accordingly, the liability to deduct tax is as follows.
1 Contract A Since the amount of individual contract exceeds Rs. 30,000, the provision of
sec. 194C is applicable and therefore, tax of Rs.600, being 0.75% shall be
deducted at source at the time of payment or passing credit entries in the
books, whichever is earlier
2 Contract B  In the case of individual or HUF, where the payment under a contract is
and F made for personal purpose, liability to deduct tax does not arise u/s
194C.
 And in this case liability to deduct tax under section 193M is not
attracted as the aggregate of contract payments during the PY 2020 - 21
does not exceed Rs.50, 00,000.
 Therefore, In the given case, the contract for maintenance of household
personal equipment and catering contract for daughter’s marriage does
not attract tax deduction at source
3 Contract C,  The liability to deduct tax in respect of payment made in pursuance of a
D, E, and H contract arises only where the amount of individual contract exceeds
Rs.30,000 or the aggregate amounts of all contracts with a resident
contractor exceeds Rs. 1,00,000 during the FY.
 In the given case, though the independent contract value of contract of
C,D,E and H does not exceeds Rs.30,000,th aggregate value of all these
contracts to Mr. Y exceeds Rs.1,00,000 during the FY.
 Therefore, Dr. Z is responsible to deduct tax u/s 194C. Practically, in
respect of the first 3 contracts viz, C, D and E, entire contract amount
would have been paid without deduction of tax.
 It is the responsibility of the payer to deduct entire amount of tax on all
contract from H.
 For contract H separately, TDS has to be deducted Accordingly, in the
given case the aggregate value of the contract of Rs.1,10,000 is subject to
TDS @0.75% amounting to Rs.825 from contract H
4 Contract G  Exemption from TDS provision for truck operators applies only if payee
owns not more than 10 trucks. In the given case, since the payee owns
more than 10 trucks, exemption from TDS provision is not applicable.
Accordingly, Rs.975 being 0.75% on 1,30,000 shall be deducted by the
payer .
 Therefore, the total amount of tax to be deducted by Dr. Z for the AY
2021 - 22 u/s194C is Rs.2400 (600+825+975).

DEFINITION OF WORK: “WORK” SHALL INCLUDE
No Particulars
1
No Particulars
1 Advertising
2 Broadcasting and telecasting including production of programs for such
broadcasting or telecasting
3 Carriage of goods or passengers by any mode of transport other than by railways
4 Catering
5 Manufacturing or supplying a product according to the requirement or
specification of a customer by using material purchased from such customer or
its associate being a person placed similarly in relation to such customer as is
the person placed in relation to the assessee under the provisions contained in
Section – 40A (2)(b) but does not include manufacturing or supplying a product
according to the requirement or specification of a customer by using material
purchased from a person, other than such customer or associate of such
customer**
**Note: Where any sum is paid or credited for carrying out any work mentioned in
clause (e), tax shall be deducted at source -
No Particulars
1 On the invoice value excluding the value of material, if such value is mentioned
separately in the invoice, or
2 On the whole of the invoice value, if the value of material is not mentioned
separately in the invoice
Objective of Amendment :-
It has been noted that some assessees are using the escape clause of the section by
getting the contract manufacturer to procure the RM supplied through its related
parties. As a result a substantial amount of income escapes the tax net
Therefore, to bring clarity in this section and plug the leakage, the definition of
“work” under section 194C amended to provide that in a contract manufacturing, the
Raw material provided by the assessee or its associate shall fall within the purview of
the work under section 194C. Associate is proposed to be defined to mean a person
who placed similarly in relation to customer as is the person placed in relation to the
assessee under the provisions contained in section 40A(2)(b) of the Act.

Illustration 1
No Illustration Answer
1 Blackberry Ltd. gives cloth to Mr. X and asks Mr. X to This is a works contract and
stitch shirts as per the specifications given by Blackberry TDS shall be deducted by
Ltd. Mr. X charges in his invoice Rs.200 per shirt for Blackberry Ltd. @ 0.75% on
stitching 10,000 shirts and raises a bill of Rs. 20,00,000 on Rs.20,00,000
01.09.2020
2 In the above Illustration 1, say Blackberry Ltd. sells cloth Now since value of material is
of Rs.50,00,000 to Mr. X and asks Mr. X to stitch shirts as separately mentioned in
per the specifications. invoice, TDS @ 0.75% will be
deducted by Blackberry Ltd.
CASE A: Mr. X raises a bill on Blackberry Ltd. as under: on Rs. 20,00,000.
No Particulars Rs.
1 Cloth 50,00,000
2 Stitching charge 20,00,000
3 Total 70,00,000
3 In the above Illustration 1, say Blackberry Ltd. sells cloth Now since material has been
of Rs.50,00,000 to Mr. X and asks Mr. X to stitch shirts as purchased by Mr. X from
per the specifications Blackberry Ltd. and value of
CASE B: Mr. X raises consolidated bill of Rs. 70,00,000 as material is not shown
under: separately in the bill, the
Blackberry Ltd. shall deduct
Sale of 10,000 shirts @ Rs. 700 per shirt = Rs. 70,00,000 TDS @ 0.75% on Rs. 70,00,000
4 Mr. X purchases cloth from Raymond’s for Rs. 50, 00,000 This will be treated as sale of
He stitches shirts as per specification of Blackberry Ltd. shirts and TDS is not required
and supplies to Blackberry Ltd. as per invoice given to be deducted since material
below: has been purchased from
other than the customer i.e.
No Particulars Rs. Blackberry Ltd
1 Material purchased 50,00,000
2 Stitching charge 20,00,000
3 Total 70,00,000
However, if Raymond is closely related to Blackberry i.e., if Raymond is a specified person as

referred to in section 40A(2)(b), then it will be treated as work contract as per amendment by
Finance Act, 2020 and TDS shall be deducted under section 194C.(Finance Act, 2020)

Illustration 2
Bharathi cements Ltd. Purchased, jute bags from raj kumar & co. The latter has to supply, he jute
bags with the logo and address of the assessee, printed on it. From 01.09.2020 to 20.03.2021 the
value of jute bags supplied is Rs. 8, 00,000, for which the invoice has been raised on 20.03.2021.
While effecting the payment for the same, is the assessee bound to deduct tax at source assuming
that the value of the printing component involved is Rs.1, 10,000. You are informed that the
assesse has not sold any material to Raj kumar & co. and that the latter has to manufacture the
jute bags in its plant using raw materials purchased by it from outside Rs.
Solution
No Particulars
1  As per the definition under section 194C,"work"shall not include manufacturing or
supplying a product according to the requirement or specification of a customer by
using Raw material purchased from a person, other than such customer or associate of
such customer. This is regardless of the quantum of expenditure incurred towards
printing or processing comprised in the bill amount.
 The problem clearly states that raj kumar & co. Has to manufacture the jute bags using
raw materials purchased from outsiders and that the assessee Bharathi cements ltd
has not sold any material to them. Therefore, in this case, it is a contract of sale. Hence,
the provisions of section194C are not attracted and no liability to deduct tax at source
would arise
1 Individual / No individual or Hindu undivided family shall be liable to deduct
HUF not liable income tax on the sum credited or paid to the account of the contractor
to deduct tax at where such sum is credited or paid exclusively for personal purposes
source if of such individual or any member of Hindu undivided family
payment is for
personal
purposes
2 No TDS when  No deduction shall be made from any sum credited or paid or likely
payment made to be credited or paid during the previous year to the account of the
to goods contractor during the course of business, of plying, hiring or leasing
transport goods carriages, where such contractor owns 10 or less goods
agency, if PAN carriages at any time during the previous year and furnishes a
furnished declaration to that effect along with his PAN, to the person paying
or crediting such sum.
 The person responsible for paying or crediting any sum to such
contractor shall furnish, to the prescribed income tax authority or the
person authorized by it, such particulars, in such form and within
such time as may be prescribed
3 No TDS on The CBDT has clarified that wherever in terms of the agreement/
Goods and contract between the payer and the payee, the GST component
Services Tax comprised in the amount payable to a resident is indicated separately,
(GST) tax shall be deducted at source under Chapter XVII – B of the Act on the
component amount paid/payable without including such GST component

Illustration 1
“T”, an individual owns five goods carriages from 1st April 2020 to 31st October,2020. On 1ST
November,2020, he purchased 6 more Goods carriages. On 1st January, 2021, he sold 8 goods
carriages. Mr. Murali, who makes following payment of transport charges to “T” during the
financial year 2020 - 21:
Date Amount
15th April 2020 Rs.35,000
15th July 2020 Rs.40,000
15 November 2020
th Rs.20,000
15th December 2020 Rs.20,000
15th February, 2021 Rs.50,000
Solution
No Particulars
1 No tax is deductible on payment made on 15th April 2020 if “T” furnishes a declaration that
he does not own more than 10 goods carriages and PAN
2 No tax is deductible on payment made on 15th July 2020 if “T” furnishes a declaration that
he does not own more than 10 goods carriages and PAN
3 Even if the Goods carriage vehicles owned by the assessee exceeds 10, no tax is deductible
on the payment made on 15th November, 2020 as the payment does not exceed Rs.30000
and the aggregate payment made during the financial year does not exceed Rs. 1,00,000
4  Tax at the rate of 0.75% i.e RS.150 is deductible from payment made on 15th December
as “T” owns more than 10 goods carriage on that date and the aggregate of the
payments made during the financial year exceeds the threshold of Rs.1, 00,000.
 Further Rs.150 is deductible even for payment made on 15thNovember 2020. Though,
aggregate payments did not exceed the threshold limit on 15th November 2020,tax shall
be deducted even for payment made on 15th November 2020 since it exceeded the limit
on 15th December 2020,
 Thus tax amount of Rs.300(Rs.150 for payment made in November and Rs.150 for
payment made in December) is deductible from the payment made on 15 th December
2020
5 Tax is also deductible from the payment made on 15th February, 2021 even though “T” did
not own more than 10 Goods carriage on 15th February 2021 because “T” owned more than
10 goods carriage during the financial year 2020 - 21 and the payment exceeds both the
specified threshold for individual and aggregate payments. Tax to be deducted is Rs.375
(Rs.50, 000 X 0.75%)

SECTION 194C - SUMMARY
S. 194C
Person
Rate of TDS No TDS
Deduction
Illustration 1
Tajmahal Hotels India Ltd, a company having registered office in Gangtok, Sikkim. The
company seeks your advice on the applicability of TDS provisions in the followings situation:
No Particulars
1 Payment of salary amounting Rs.12,00,000 to Mr. Rio, Chief chef, a sikkimese
2 Payment of Rs. 15,00,000 to Mr. shithal a sikkimese towards housekeeping contract
Solution
No Particulars
1  According to sec 192, employer being the payer, shall estimate the taxable salary and
deduct tax there on an average basis. In the process, the payer shall allow all the
exemptions, deductions permissible under law to the employee.
 Accordingly in given case exemption u/s 10(26AAA) shall be allowed to the employee,
who is a Sikkimese. According to sec 10(26AAA), entire income derived by a sikkimese
in the state of Sikkim is exempt from tax.
 Since there is no taxable salary income, the payer is not responsible to deduct tax on the
income, the payer is not responsible to deduct tax at source in accordance with sec. 192
2 According to sec 194 C, tax shall be deducted at source in respect of payment made under
contract on the gross value u/s 194C, the payer is not obligated to see whether the recipient
is subject to tax on the income derived - Refer ACC Ltd’s case. Accordingly a sum of
Rs.15,000 being 1% on 15,00,000, shall be deducted at source u/s 194C

SECTION 194 – M - PAYMENT MADE BY A INDIVIDUAL OR HUF FOR A CONTRACT

WORK OR BY WAY OF COMMISSION OR BROKERAGE OR FEES FOR PROFESSIONAL
SERVICES
1 Applicability Individual or Hindu undivided family (other than those who are required
to deduct income tax as per the provisions of section 194C, 194H or 194J)
responsible for paying any sum to any resident –
No Particulars
a For carrying out any work (including supply of labor for carrying
out any work) in pursuance of contract
b By way of commission (not being insurance commission referred
to in section 194D) or brokerage; or
c By way of fees for professional services
2 Time of tax
1 At the time of credit such sum to the account of the payee xxx

deduction
4 No TDS No such deduction under this section shall be made if such sum or, as the
case maybe, aggregate of such sums, credited or paid to a resident during a
financial year does not exceed Rs. 50 lakh.
5 No The provisions of section 203A containing the requirement of obtaining Tax
requirement deduction account number (TAN) shall not apply to the person required to
of tax deduct tax in accordance with the provisions of section 194 - M.
deduction
account
number
NON - APPLICABILITY OF TDS UNDER SECTION 194M
An individual or a Hindu undivided family is not liable to deduct tax at source under section
194M if –
No Particulars
1  They are required to deduct tax at source under section 194C for carrying out any work
(including supply of labour for carrying out any work) in pursuance of a contract
 i.e. an individual or a HUF whose total sales, gross receipts or turnover from the
business or profession carried on by him exceed Rs. 1 crore in case of business or 50
Lakhs in case of profession in the immediately preceding financial year and such
amount is not exclusively credited or paid for personal purposes of such individual or
HUF

2  They are required to deduct tax at source under section 194H on commission (not being
insurance commission referred to in section 194D) or brokerage
Lakhs in case of profession during the immediately preceding financial year
3  They are required to deduct tax at source under section 194J on fees for professional
services
Lakhs in case of profession during the immediately preceding financial year and such
amount is not exclusively credited or paid for personal purposes of such individual or
HUF
EXPLANATION
No Term Meaning
1 Contract It shall have the meaning assigned to it in the clause (iii) of the Explanation
to Section 194C;
2 Commission It shall have the meaning assigned to it clause (i) of the explanation to
or section 194H
brokerage
3 Professional It shall have the meaning assigned to it in the clause (a) of the explanation to
Services section 194J
4 Work It shall have the meaning assigned to it in the clause (iv) of the explanation
to section 194C
SECTION 194M - SUMMARY
S. 194M
Person
Rate of TDS No TDS
Deduction


Illustration 1
X is a salaried employee. He makes the following payments to a resident contractor for a work
contract for personal purpose. Amount of payment is Rs. 25,00,000 on 10th Aug 2020 and
Rs, 30,00,000 on 22 Nov 2020. Determine the amount of tax to be deducted at source if any.
Would your answer be different if X is a businessman and his books are not audited in the
immediately preceding financial year and payment to contractor is for businesses purposes.
Ans
No Particulars
1  Mr. X has made the payment to the contractor for personal purposes. Hence, tax is not
deductible under section 194C. Aggregate payment to the recipient during the financial
year 2020 - 21 is Rs, 55,00,000 (more than the threshold of Rs. 50,00,000 under section
194M).
 Tax is deductible under section 194M.The amount of TDS is 3.75% of Rs. 55,00,000.
Incase X a business man and whose turnover does not exceed Rs. 1 crore, he is not
required to deduct tax at source under section 194C but will be required to deduct tax
at source under section 194M and the answer shall remain same
Illustration 2
Examine whether TDS provisions would be attracted in the following cases, and if so, under
which section. Also, specify the rate of TDS applicable in each case. Assume that all payments
are made to resident.
Aggregate of payments
No Particulars of Payer Nature of payment
made in the FY 2019 - 20
1 Mr. Ganesh, an individual Contract payment for repair of Rs. 5 lakhs
carrying on retail business residential house
with turnover of Rs. 2.5 Payment of commission to Mr. Rs. 80,000
crores in the PY2019 – 20 Vallish for business purposes
2 Mr. Rajesh, a wholesaler Contract payment for Rs. 20,00,000 in January
trader who declares profits reconstruction of residential 2021, Rs. 15,00,000 in
u/s 44AD for PY 2019 - 20 house (made during the period February 2021 and Rs. 20
and PY 2020 - 21. Jan – Mar 2021) lakhs in March 2021
3 Mr. Satish, a salaried Payment of brokerage for Rs. 51 lakhs
individual buying a residential house in
March 2021
4 Mr. Dheeraj, a pensioner Contract payment made during Rs. 48 lakhs.
Oct to Nov 2020 for
reconstruction of residential
house

Answer:
Aggregate of
Nature of payments in Whether TDS provisions are
No Particulars of Payer
payment the FY 2019 - attracted?
20
1 Mr. Ganesh, an Contract payment Rs. 5 lakhs No, TDS u/s 194C is not
individual carrying for repair of attracted since the payment is
on retail business residential house for personal purpose and TDS
with turnover of Rs. u/s 194M is not attracted as
2.5 crores in the aggregate of contract payment
PY2019 - 20 to payee in the PY 2020 - 21
does not exceed Rs. 50,00,000.
Payment of Rs. 80,000 Yes, u/s 194H, since the
commission to payment exceeds Rs, 15,000
Mr. Vallish for and Mr. Ganesh’s turnover
business purposes exceeds Rs, 1 crore in PY 2019 -
20.
2 Mr. Rajesh, a Contract payment Rs. 55 lakhs Yes, u/s 194M, since the
wholesaler trader for reconstruction aggregate of payments (i.e. Rs.
who declares profits of residential 55 lakhs) exceed Rs. 50 lakh,
u/s 44AD for PY house Since, his turnover does not
2019 - 20 and PY exceed Rs. 1 crore Hence, TDS
2020 - 21.(His provisions u/s 194C are not
turnover does not attracted in respect of
exceed Rs. 1 crore) payments made in the PY 2020
- 21.
3 Mr. Satish, a Payment of Rs. 51 lakhs Yes, under section 194M, since
salaried individual brokerage for the payment of Rs. 51 lakhs
buying a made in March 2021 exceeds
residential house the threshold of Rs. 50 lakhs.
Since Mr. Satish is a salaried
individual, the provisions of
section 194H are not applicable
in this case.
4 Mr. Dheeraj, a Contract payment Rs. 48 lakhs TDS provisions u/s 194C are
pensioner made for not attracted since Mr.
reconstruction of Dheeraj is a pensioner and
residential house hence, not subject to tax audit.
TDS provisions u/s 194M are
also not applicable in this case,
since the payment of Rs. 48
lakhs, does not exceed the
threshold of Rs, 50 lakhs

CHAPTER - 7
TDS ON CASUAL INCOME
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

[ DIRECT TAXATION] AY 21 - 22
CHAPTER - 7
TDS ON CASUAL INCOME
SECTION REFERENCE – CASUAL INCOME
SECTION PARTICULARS
194B Winnings from Lotteries, Crossword puzzles
194 BB Winnings from horse races
SECTION 194B - WINNINGS FROM LOTTERIES, CROSSWORD PUZZLES
1 Person responsible The person responsible for paying to
for deducting tax at  any person any income by way of winnings from any lottery
source or
 crossword puzzle or
 card game and
 other game of any sort
2 Time of tax deduction At the time of payment of such income.
3 Rate of tax deduction 30%
4 Threshold limit No tax shall be deducted if such winning does not exceed
Rs. 10,000.
5 Penalty for failure to An amount of tax which such person has failed to pay.
pay tax payable by a
person under (1)
above - section 271C
6 Prosecution for  Rigorous imprisonment for a term not less than 3 months but
failure to credit of which may extend to 7 years and with fine.
Central Government  However, no penalty or prosecution is impossible, if the
the tax payable under person proves that there was reasonable cause for such
(1) above - Section failure
276B
Notes : -
1 Winnings In case where the winnings are wholly in
in kind kind or partly in cash and partly in kind
but the part in cash is not sufficient to
meet the liability of deduction of tax in
respect of whole of the winnings, the
person responsible for paying shall, before
releasing the winnings, ensure that tax has
been paid in respect of the winnings
2 Meaning of Card game and other game of any sort
card games includes any game show, an
entertainment programme on television or
electronic mode in which people compete
AY 21 -
to win prizes or any other similar game
SECTION 194B - SUMMARY
S. 194B
Person
Rate of TDS No TDS
Deduction
Illustration 1
Mr. Govind won the first prize in a lottery ticket and the prize was a Maruti car worth Rs.5 lacs.
what is the procedure to be adopted before handing over the Maruti car to Mr. Govind?
Solution
No Particulars
1  Section 194B provides that the person responsible for paying to any person, any income
by way of winnings from any lottery or crossword puzzle, card game or any other
game of any sort and the amount of winning exceeds Rs.10,000, tax shall be deducted
at source @ 30%.
 However, in case where the winning is wholly in kind, the person responsible for
paying the prize shall before releasing the winning, ensure that the tax has been paid in
respect of such winning.
 The karnataka high court in the case of CIT V. Hindustan lever Ltd. (2014) 361 - ITR 1
has held that where the winnings are wholly in kind, the responsibility cast u/s 194B is
to ensure that the tax is paid by the winner of the prize before the prize is released in
his favour. In this regard, the CBDT Circular no.763 dated 18/2/1998 clarifies that the
person responsible for paying the winnings shall, before releasing such winnings,
ensure that the tax is paid by the winner. He can do so, for example, by collecting from
the winner a sum equal to the tax deductible at source on the winnings in kind, before
releasing the winnings. For this purpose, the value of the winnings in kind shall be
taken as the cost incurred by the payer in acquiring the said winnings in kind.
 Therefore, in this case since the entire winning is in kind, it must be ensured that the
sum equal to the tax deductible at source (i.e., Rs. 1, 50,000, being @ 30% of Rs. 5 lacs) is
paid by Mr. Govind, before the car is released in his favour. This can be done by
collecting Rs. 1,50,000 from Mr. Govind before releasing the Maruti car to him and

remitting the said sum to the government account or verifying the tax payment by the
winner and thereafter releasing the prize
Illustration 2
Mr. Sawaroop won a motor car in a lucky draw held by Amway marketing. The marketing price
of the car was Rs. 4, 00,000. Amway Marketing erroneously gave the car to Mr. Swaroop without
deducting tax at source. Discuss the TDS implication.
Solution
No Particulars
1  In a case where the winning are wholly in kind, the person responsible for paying the
winning shall, before releasing such winning ensure that tax has been paid in respect of
the aggregate winnings.
 This can be done by way of collecting from the winner a sum equal to the tax
deductible at source on the winnings a sum equal to the tax deductible at source on the
winnings in kind and, thus, meeting the liability for TDS, before releasing the
winnings.
 For this purpose, the value of the winnings in kind shall be taken as the cost incurred
by the payer in acquiring the said winnings in kind. If the payer is unable to collect the
amount of TDS, it is the responsibility of the payer to remit the same to the
Government.
 Accordingly, in this given case, Amway Marketing is responsible to collect Rs.1, 20,000
being 30% Rs. 4 Lakhs, prize money towards TDS.
 Where the payer (Amway Marketing) is unable to collect the amount of TDS, the same
shall be remitted by Amway Marketing itself
Illustration 3
Mr. X, a non - resident, wins a Maruti car in a crossword puzzle on 13.02.2021 and the market
price of the car is Rs. 2,40,000. The said crossword puzzle was organized by Cadbury Ltd. Tax
rate under section 115BB is 30% (plus health & education cess of 4%).
Answer:
1 Where cadbury ltd.
In case the company Cadbury Ltd, recovers the tax from the
Recovers the tax from
winner amounting to 31.20%of Rs. 2,40,000, i.e., Rs. 74,880, then it
the winner
can release the car to the winner. The company in such a case
shall deposit tax of Rs. 74,880 and give a TDS certificate of Rs.
74,880 to the winner. (Alternatively, if the winner gives challan of
advance tax of Rs. 74,880 to Cadbury Ltd. and
certifies that the advance tax is paid on the winning of car, then
the car can be released).
2 Where cadbury ltd.
In case the tax cannot be recovered from the winner as per the
Does not recovers the
terms of the contest and as per the contest the company is to bear
tax from the winner
the tax, then Cadbury Ltd, will have to pay TDS as under before
releasing the car to the winner:

AY 21 -
No Particulars Computation
1 Tax (2,40,000 + tax) x 31.2/100
2 Tax 2,40,000 x 31.2/(100 - 31.2)
3 Tax 1,08,837
Therefore, TDS is Rs. 1,08,837 which shall be deposited by
Cadbury Ltd. In the hands of Mr. X, the income shall be Rs.
2,40,000 plus Rs. 1,08,837 i.e., Rs. 3,48,837. 31.20% tax thereon is
Rs.1, 08,837 which has been deducted at source.
Illustration 4
Mr. X, a non - resident, wins a Maruti car in a crossword puzzle and the market price of the car
is Rs. 2,40,000 and also cash prize of Rs. 80,000. The said crossword puzzle was organized by
Cadbury Ltd. Tax rate under section 115BB is 31.20%. In case the company Cadbury Ltd,
recovers the tax from the winner amounting to (31.20% of Rs. 3,20,000) minus (Rs. 80,000,00), i.e.,
Rs. 19,840 then it can release the car to the winner.
But in case the tax cannot be recovered from the winner as per the terms of the contest and as per
the contest the company can adjust the cash prize of Rs. 80,000 towards tax and cannot further
recover any tax, then Cadbury Ltd will have to pay TDS as under before releasing the car to the
winner:
No Particulars Computation
1 Tax (Taxable Winnings + Tax) x 31.20/100 –Rs. 80,000
2 Tax Where Tax represents the tax borne by the company (3,20,000 + tax) x
31.20/100 - [80,000] –tax
3 Tax 28,837
Therefore, TDS is Rs. 80,000 plus Rs. 28,837 which shall be deposited by Cadbury Ltd. In the
hands or Mr. X, the income shall be Rs. 2,40,000 plus Rs. 80,000 plus Rs. 28,837 i.e., Rs. 3,48,837.
31.30% tax thereon is Rs. 1,08,837 which has been deducted at source.
Key note:
The tax liability in the above two Illustrations is coming to be the same i.e. Rs. 1,08,837 because:
No Particulars
1 In the first Illustration, there is no cash prize of Rs. 80,000 but tax deposited of Rs. 1,08,837
is treated as income of the winner
2 In the second Illustration, there is a cash prize of Rs. 80,000 but tax deposited of Rs. 28,837
is treated as the income of the winner

SECTION 194BB - WINNINGS FROM HORSE RACES
responsible for  being a bookmaker or a
deducting tax at  person to whom a license has been granted by the Government
source  for horse racing in any race course or for arranging for wagering or
betting in any race course,
 shall be responsible for deducting tax at source.
2 Time of tax At the time of payment of such income.
deduction
3 Rate of tax 30%.
deduction
4 Threshold Limit No tax shall be deducted if such winnings do not exceed Rs. 10,000.
5 Meaning of the In the context of the provisions of section 194BB, the expression any
expression “horse ‘any horse race’ used therein must be taken to include, wherever the
race” circumstances so necessitate, more than one horse race. Therefore,
winnings by way of jack pot would also fall within the scope of section
194BB
SECTION 194BB - SUMMARY
S. 194BB
Person
Rate of TDS No TDS
Deduction

CHAPTER - 8
TDS ON NON - RESIDENT
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

CHAPTER - 8
TDS ON NR
SECTION REFERENCE – NON RESIDENT
SECTION PARTICULARS
194E Payment to NR Sports man or sports association
195 Other sums (Payable to NR)
SECTION 194E - PAYMENT TO NR SPORTS MAN OR SPORTS ASSOCIATION
1 Person Any person responsible for paying to a
responsible  non - resident sportsman (including an athlete), or an
for  entertainer, who is not a citizen of India or a
deducting  non - resident sports association or institution of income referred under
tax at source section 115BBA
2 Time of tax
payee
3 Rate of tax 20% (Plus HEC @ 4%) – Effective rate 20.8%

deduction
4 Income
referred to in No Particulars
section 1 Income received or receivable by a non - resident sportsman
115BBA (including an athlete) by way of -
No Particulars
1 Participation in any game or sport in India (However,
games like crossword puzzles, horse races etc. taxable
under section 115BB are not included herein) or
2 Advertisement or
3 Contribution of articles relating to any game or sport in
India in newspapers, magazines or journals
2 Guarantee amount paid or payable to a non - resident sports

association or institution in relation to any game or sport played in
India. However games like crossword puzzles, horse races etc.
taxable under section 115BB are not included herein
3 Income received or receivable by a non - resident entertainer (who
is not a citizen of India) from his performance in India

SECTION 194E – SUMMARY
S. 194E
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction
Illustration 1
Calculate the amount of tax to be deducted at source (TDS) on payment made to Ricky Ponting,
an Australian cricketer non - resident in India, by a newspaper for contribution of articles Rs.
25,000.
Solution
No Particulars
1  Under section 194E, the person responsible for payment of any amount to a non -
resident sportsman for contribution of articles relating to any game or sport in India in
a newspaper shall deduct tax @ 20%. Further, since Ricky Ponting is a non - resident,
health and education cess @ 4% on TDS would also be added.
 Therefore, tax to be deducted = Rs. 25,000 x 20.80% = Rs. 5,200

SECTION 195 - OTHER SUMS (PAYABLE TO NR)

1 Other sums - Any person responsible for paying to a non - resident,
Section 195  not being a company, or to a foreign company,
 any interest (other than interest referred under section 194LB or
under section 194LC or u/s 194LD) or
 any other sum chargeable under the provisions of this Act (not
being income chargeable under the head “salaries”)
 shall, 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 the issue of a cheque
or draft or by any other mode, whichever is earlier,
 Deduct income tax thereon at the rates in force.
However, in the case of interest payable by the
 government or a
 public sector bank or a
 public financial institution,
 deduction of tax shall be made only at the time of payment thereof
in cash or by the issue of a cheque or draft or by any other mode.
2 Addition of  The TDS rates are to be increased by surcharge only if a payment
surcharge and exceeding Rs 1 crore is made to a foreign company.
health and  HEC is required to be added to the amount of TDS in case payment
education cess is made to a non - resident or foreign company.
to the TDS
rates
3 Interest Where any interest or other sum as aforesaid is credited to any account,
Payable whether called “Interest payable account” or “suspense account” or by
Account or any other name, in the books of account of the person liable to pay such
Suspense income, such crediting shall be deemed to be credit of such income to
Account the account of the payee and the provisions of this section shall apply
accordingly.
4 The obligation The obligation to comply above provisions and to make deductions
to comply thereunder applies and shall be deemed to have always applied and
above extends and shall be deemed to have always extended to all persons,
provisions resident or non - resident, whether or not the non - resident person has –
No Particulars
1 A residence or place of business or business connection in India;
or
2 Any other presence in any manner whatsoever, in India
5 TDS on taxable  Where the person responsible for paying any such sum chargeable
portion only under this Act (other than salary) to a non - resident considers that
the whole of sum would not be income chargeable in the case of
recipient ,
 he may make an application in such form and manner to the
Assessing officer, to determine in such manner, as may be
prescribed,
 the appropriate proportion of such sum so chargeable, and upon
such determination, tax shall be deducted only on that proportion of
the sum which is so chargeable.

6 Application for The non - resident or foreign company may make an application in
no tax prescribed form to the Assessing officer for the grant of certificate
deduction authorizing him to receive such interest or other sum without deduction
of tax at source.
7 Payer to The person responsible for paying to a non - resident, not being a
furnish company, or to a foreign company, any sum, whether or not chargeable
prescribed under the provisions of this Act, shall furnish the information relating to
information payment of such sum, in such form and manner, as may be prescribed.
8 Penalty for  If a person who is required to furnish information under
failure to section 195 (6), fails to furnish such information, or furnishes
furnish inaccurate information the Assessing officer may direct that such
information or person shall pay, by way of penalty, a sum of Rs. 1 lakh.
furnishing  According to section 273B, no penalty shall be imposed for non -
inaccurate furnishing of information u/s 195 (6) or incorrect furnishing of
information u/s information thereunder, if the person proves that there was
195 - Section reasonable cause for doing so
271 – I
9 Furnishing of Accordingly, Section 195(6) has been amended to provide that the
Information person responsible for paying any sum, whether or not chargeable to
tax, to a non - corporate non - resident or to a foreign company, shall be
required to furnish the information relating to the payment of such sum
in the prescribed form and prescribed manner.
10 Payer to Every payer of income liable to TDS under this Section shall furnish the
furnish information relating to payment of any sum in such form and manner as
prescribed may be prescribed by the board.
information
11 Application by  The Board may, by notification in the official Gazette, specify a class
specified class of persons or cases,
of persons  where the person responsible for paying to a non - resident, not
being a company, or to a foreign company,
 any sum, whether or not chargeable under the provisions of this act,
 shall make an application in such form and manner to the
Assessing Officer, to determine in such manner, as may be
prescribed,
 the appropriate proportion of sum chargeable, and upon such
determination, tax shall be deducted on that proportion of the sum
which is so chargeable.

SECTION 195 – SUMMARY
S. 195
Person
Rate of TDS No TDS
Deduction

CHAPTER - 9
TDS ON OTHERS
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

CHAPTER - 9
TDS ON OTHERS
SECTION REFERENCE – OTHERS
SECTION PARTICULARS
194DA Payment in respect of Life insurance Policy
194J Fees for professional and technical services
194N TDS on cash Withdrawal
194O Certain Payment by E – commerce operator to E – commerce participant
SECTION 194DA - PAYMENT IN RESPECT OF LIFE INSURANCE POLICY
1 Person Any person
responsible  responsible for paying to a resident any sum under a life insurance
for deducting policy,
tax at source  including the sum allocated by way of bonus on such policy,
 Other than the amount not includible in total income under Section
10(10D) , shall be liable to deduct tax at source.
2 Time of tax Tax is deducted at source at the time of payment thereof
deduction
3 Rate of tax 5% (3.75% applicable from 14.05.2020 to 31.03.2021)on the amount of
deduction income comprised therein
4 Threshold Deduction shall be made where the amount of such payment or, as the
Limit case may be, the aggregate amount of such payments to the payee
during the financial year is less than Rs. 1,00,000.
SECTION 194DA – SUMMARY
S. 194DA
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction


Illustration 1
Examine the applicability of the provisions for tax deduction at source under section 194DA in
the following cases,
No Particulars
1 Mr. X, a resident, is due to receive Rs. 4.50 lakhs on 31. 03. 2021, towards maturity
proceeds of LIC policy taken on 1 – 04 - 2018, for which the sum assured is Rs. 4 lakhs and
the annual premium is Rs. 1,25,000
2 Mr. Y, a resident, is due to receive Rs. 3 lakhs on 31. 03. 2021 on LIC policy taken on
31.03.2012, for which the sum assured, is Rs. 2.8 lakhs and the annual premium are
Rs. 25,000
3 Mr. Z, a resident, is due to receive Rs. 95,000 on 1 - 08 - 2020 towards maturity proceeds of
LIC policy taken on 1 - 8 - 2014 for which the sum assured is Rs. 90,000 and the annual
premium were Rs. 12,000
Ans
No Particulars
1  Since the annual premium exceeds 10% of sum assured in respect of a policy taken
after 31.03.2012, the maturity proceeds of Rs. 4.50 lakhs due on 31.03.2021 are not
exempt under section 10(10D) in the hands of Mr. X.
 Therefore, tax is required to be deducted @ 3.75% under section 194DA on the amount
of income comprised therein, i.e. on Rs. 75,000 (Rs. 4, 50,000, being maturity
proceeds – Rs. 3,75,000, being the entire amount of insurance premium paid)
2 Since the annual premium is less than 20% of sum assured in respect of a policy taken
before 1 – 4 - 2012, the sum of Rs. 3lakhs due to Mr. Y would be exempt under section
10(10D) in his hands. Hence, no tax is required to be deducted at source under section
194DA on such sum payable to Mr. Y
3 Even though the annual premium exceeds 10% of sum assured in respect of a policy taken
after 31.03.2012, and consequently the maturity proceeds of Rs. 95,000 due on 1 - 08 - 2020
would not be exempt under section 10(10D) in the hands of Mr. Z, the tax deduction
provisions under section 194DA are not attracted since the maturity proceeds are less than
Rs. 1 lakh

SECTION 194 – J - FEES FOR PROFESSIONAL AND TECHNICAL SERVICES
1 Person Any person, not being an individual or a Hindu undivided family,
responsible for who is responsible for paying to a resident any sum by way of –
deducting tax at
No Particulars
source
1 Fees for professional services, or
2 Fees for technical services, or
3 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
4 Royalty, or
5 Any sum referred in Section 28(va),
Shall be liable to deduct tax at source.
2 In case of Individual or a Hindu undivided family, whose total sales, gross
Individual or receipts or turnover from the business or profession carried on by him
HUF exceeds Rs. 1 crore in case of business or 50 lakhs in case of
profession, during the financial year immediately preceding the FY
in which such sum by way of fees for professional or technical services
is credited or paid, shall be liable to deduct tax at source under this
section.
3 Time of tax
1 At the time of credit of such income to the account of xxx
the payee or at the time of payment thereof in cash
2 By issue a cheque or draft or by any other mode xxx
Note: -
Where any such sum 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 sum, such crediting shall be deemed to
be credit of such sum to the account of the payee and the provisions of
this section shall apply accordingly.
4 Rate of Tax *Refer Below
deduction
5 Threshold Limit **Refer Below

*RATE OF TAX DEDUCTION

Rate of TDS
No Nature of Income Existing Reduced rates
Rate (w.e.f. 14.05.2020 to 31.03.2021)
1 Fees for technical services (not being a
2% 1.5%
professional services)
2 Royalty where such royalty is in the
nature of consideration for sale,
2% 1.5%
distribution or exhibition of
cinematographic films
3 In case of a payee, engaged only in the
2% 1.5%
business of operation of call centre
4 In all other cases 10% 7.5%
Objective of the Amendment

It is noticed that large no of litigation on the issue of short deduction o tax treating assessee
in default where the assessee deducts tax u/s 194C, while the tax officers claim that tax should
have been deducted u/s 194J of the Act.
Therefore to reduce litigation, the rate of TDS in section 194J is reduced in case of fees or
technical services (other than professional services) to 2% from existing 10%. The TDS rate in
other cases u/s 194J would remain same at 10%. This amendment will take effect from 1st
April, 2020.
**THRESHOLD LIMIT
1 No deduction Where the amount of such sum or, as the case may be, the aggregate of
shall be made - the amounts of such sums credited or paid or likely to be credited or
paid during the financial year to the account of, or to, the payee, does
not exceed –
No Particulars
1 Rs. 30,000, in the case of fees for professional services, or
2 Rs. 30,000, in the case of fees for technical services, or
3 Rs. 30,000, in the case of royalty, or
4 Rs. 30,000, in the case of sum referred under section 28(va)
2 Individual / No individual or a Hindu undivided family shall be liable to deduct

HUF making income tax on the sum by way of fees for professional services in case
payment for such sum is credited or paid exclusively for personal purposes of such
personal individual or any member of Hindu undivided family
purposes – Not
liable to TDS


Illustration 1
M/s Vandhana Textiles Ltd. credited Rs. 28,000 towards fees for professional services and Rs.
22,000 towards fees for technical services to the account of Mr. Santhosh in its books of account
on 06.10.2020. The total sum of Rs. 50,000 was paid by cheque to Mr. Santhosh on 18.12.2020.
Further sum of Rs. 29,000 was paid to Ms. Swarna, director (not an employee of the company) as
remuneration on 31.03.2021. Examine the applicability of Sec 194J.
Solution
No Particulars
1  The requirement to deduct tax at source in respect of fees for professional or technical
services are covered u/s 194J in the case the amount exceeds Rs. 30, 000 in a financial
year.
 Further. The tax shall be deducted at source either on credit or payment, whichever is
earlier. The proviso to section 194J contemplates independent limit of Rs. 30, 000 each
towards:
No Particulars
1 Fees for professional services and
2 Fees for technical services
 In the given case, M/s Vandhana Textiles Ltd. has credited Rs. 28,000 towards fees for
professional services and Rs. 22000 towards fees for technical services to the account of
Mr. Santhosh in its books of account.
 As the fee for professional services or fee for technical services independently does not
exceeds Rs. 30,000 during the FY, the responsibility to deduct tax u/s 194J does not
arise.
 With regards to payment made to its director MS. Swarna, the entire sum shall be
subject to TDS u/s 194J as there is no limit prescribed
Illustration 2
XYZ ltd. makes a payment of Rs. 28,000 to Mr. Ganesh on2.8.2020 towards fees for professional
services and another payment of Rs. 25,000 to him on the same date towards fees for technical
services. Discuss whether TDS provisions under section 194J are attracted.
Solution
No Particulars
1 TDS provisions under section 194J would not get attracted, since the limit of Rs. 30,000 is
applicable for fees for professional services and fees for technical services, separately. It is
assumed that there is no other payment to Mr. Ganesh towards fees for professional
services and fees for technical services during the PY.2020 - 21

OTHER PROVISIONS
1 Meaning of It means services rendered by a person in the course of carrying on
Professional legal, medical, engineering or architectural profession or the
Services profession of accountancy or technical consultancy or interior
decoration or advertising or such other profession as is notified by the
Board for the purposes of Section 44AA or of this section.
2 Notified The services notified under section 194 - J are services rendered by
professional following persons in relation to the sports activities: Sports Persons,
services Umpires and Referees, Coaches and Trainers, Team Physicians and
Physiotherapists, Even Managers, Commentators, Anchors and Sports
Columnists
3 Payment for The Central Government vide NN. 20/2012, dated 13.06.2012 notifies
Acquisition of that no tax shall be deducted u/s 194J on the payment made by a
soft ware not person for acquisition of soft ware form another person, being a
liable for TDS resident where –
No Particulars
1 The software is acquired in a subsequent transfer and the
transferor has transferred the software without any
modification,
2 Tax has been deducted –
No Particulars
A u/s 194J on payment for any previous transfer of such
software or
B u/s 195 on payment for any previous transfer of such
software from a non – resident , and
3 The transferee obtains a declaration from the transferor that

the tax has been deducted either under sub clause (a) or (b) of
clause (ii) along with the PAN of the transferor.
Illustration 1
No Illustration Answers
1 Reliance imports software of Rs. 10 Reliance has to deduct TDS @ 10% under section
lakhs from Microsoft U.S.A. on 195 (or rate given in DTAA whichever is lower)
20.06.2020
2 Reliance purchases software for Rs. Microsoft India has itself produced the computer
10 lakh from Microsoft India on software. Reliance will deduct TDS @ 7.5% under
20.06.2020 section 194J
3 If in Illustration 2, Microsoft India then Reliance is not required to deduct TDS on
has imported the software from payment made to Microsoft India under section
Microsoft U.S.A. and Microsoft India 194J if:
has deducted TDS @ 10% under
section 195 (or rate given in DTAA

whichever is lower),
No Particulars
1 Microsoft India has not made any
notification in the software; and
2 Microsoft India gives a declaration to
Reliance that it has deducted TDS
under section 195 on payment made to
Microsoft U.S.A.
4 Reliance purchases software from Reliance is not required to deduct TDS on payment
HP India. HP India has purchased made to HP India if:
the software from Infosys India.
No Particulars
1 HP India has not made any modification
in the software.
2 HP India gives a declaration to Reliance
that it has deducted TDS under section
194J on payment made to Infosys India.
5 XYZ Ltd is a back office engaged as Services in the nature of call centre are covered
call centre for ICICI with effect from within the ambit of Sec 194J. Though, Sec 194J
01.06.2020. During the FY 2020 - 21, provides for 7.5% rate of TDS, in respect of call
ICICI has paid a sum of Rs. 2 Crores centre services, a special rate of 1.5% shall apply in
towards call centre services provided case the payee is engaged ONLY in the business
by XYZ Ltd. Determine the amount operation of call centre. Accordingly, in the given
of TDS u/s 194J. would your answer case, Rs. 3,00,000 being 1.5% on Rs. 2 crore shall be
differ if XYZ Ltd is also engaged in deducted as TDS by ICICI.
the business of providing cab In case, the payee is engaged in any other business
services to HDFC Ltd. along with call centre, the special rate of 1.5% shall
not apply. In the given case, since XYZ Ltd is also
engaged in cab services, TDS shall be Applied @
7.5%. Accordingly, ICICI shall deduct Rs. 15,00,000
as TDS u/s 194J

CLARIFICATIONS
1 Maintenance Tax will be deducted at source under section 194C in case of
contracts including routine or normal maintenance contracts including supply of
supply of spares – spares. However, tax will be deducted under section 194J in case
Liable to TDS u/s technical services are rendered
194C
2 Reimbursement of The actual expenses reimbursed cannot be deducted out of the bill
actual expenses liable amount for deducting tax at source as Section 194J refers to ‘any
to TDS sum paid’. However no TDS provisions will be attracted if
reimbursement is claimed separately
3 Payment made to Any payment made to recruitment agencies are for services
recruitment agencies rendered, hence liable to TDS under section 194J
4 Commission paid by Tax will be deducted at source under section 194J in respect of
media to advertising commission paid by the media to the advertising agency
agency
5 No TDS on Goods The CBDT has clarified that wherever in terms of the agreement/
and Services Tax contract between the payer and the payee, the GST has
(GST) component component comprised in the amount payable to a resident is
indicated separately, tax shall be deducted at source under
Chapter XVII - B of the Act on the amount paid/ payable without
including such GST component
SECTION 194J – SUMMARY
S. 194J
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction


Illustration 1
Explain in the context of provisions contained in Chapter XVII of the Act and also work out the
amount of tax to be deducted by the payer of income in the following cases
No Particulars
1 Payment of Rs. 5 lakhs made by JCP & Co. to Pingu Events Co. Ltd. for organization of a
debate competition on the subject ‚Preservation of Rural Heritage of Rajasthan‛
2 ‚Profit Commission‛ paid by a re - insurance company of Rs, 1 lakh to the insurer
company after the expiry of the term of insurance where there was no claim during the
treaty
3 KD, a part time director of DAF Pvt. Ltd. was paid an amount of Rs. 2,25,000 as fees which
was actually in the nature of commission on sales for the period 01.04.2020 to 30.06.2020
Answer
As per the relevant provisions contained in Chapter XVII of the Act, taxes to be deducted by the
payer of income in the above stated cases are as under -
No Particulars
1  Payment of Rs. 5 lakhs made by JCP & Co. to Pingu Events Co. Ltd. for organization of
a debate competition on the subject ‚Preservation of Rural Heritage of Rajasthan‛ shall
be liable for tax deduction u/s 194C of the Income tax Act, 1961.
 The same will not be covered in Section 194J.
 As per Explanation to section 194J, professional services includes, inter alia, services
rendered by a person in the course of carrying on such other profession as is notified
by the CBDT for the purpose of section 194J.
 Accordingly, in CBDT has, in exercise of the powers conferred by Explanation to
section 194J, notified the services rendered by, event managers in relation to that sports
activities as professional services for the purpose of section 194J.
 Since debate competition is not a sports event the service provided by event managers
will not be covered u/s 194J but will be covered under Section 194C and liable for tax
deduction under that section.
 Thus, amount of TDS = Rs. 5,00,000 x 1.5% - Rs. 7,500
2 ‚Profit Commission‛ paid by a re - insurance company of Rs. 1 lakh to the insurer
company after the expiry of term of insurance where there was no claim during the treaty
will not be liable for tax deduction at source, since the same does not fall within category
or remuneration or reward for soliciting or procuring insurance business under section
194D of the Act. Thus, amount of tax to be deducted at source shall be NIL
3  According to Section 194J of the Act, 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 shall be liable for tax deduction at source @ 7.5%.
 Hence, on Rs. 2,25,000 the company will be liable for tax deduction at source @ 7.5%,
i.e. Rs. 16,875
Illustration 2
East Bengal Club, a renowned football club, has engaged Raghu, a resident in India, as its coach
at a remuneration of Rs. 6 lakhs per annum. The club wants to know from you whether it is
liable to deduct tax at source from such remuneration.

No Particulars
1  Section 194J requires deduction of tax at source @ 7.5% from the amount credited or paid
by way of fees for professional services, where such amount or aggregate of such
amounts credited or paid to a person exceeds Rs. 30,000 in the F.Y. 2020 - 21.
 As per explanation (a) to section 194J, professional services include services rendered by
a person in the course of carrying on such other profession as is notified by the CBDT
for the purposes of section 194J.
 Accordingly, the CBDT has, vide Notification No. 88 dated 21.8.2008, in exercise of the
powers conferred by clause (a) of the Explanation to section 194J notified the services
rendered by coaches and trainers in relation to the sports activities as professional
services for the purposes of section 194J.
 Therefore, the club is liable to deduct tax at source under section 194J from the
remuneration Payable to the coach, Raghu
SECTION 194 – N - TDS ON CASH WITHDRAWAL
1 Person Every person, being, -
responsible for No Particulars
deducting tax at 1 A banking company to which the Banking Regulation Act,
source 1949 applies (including any Bank or Banking institution
referred to in section 51 of that Act); or
2 A cooperative society engaged in carrying on the business of
banking; or
3 A post office,
Who is responsible for paying any sum, being the Amount or
aggregate of amounts or, as the case may be, in cash, in excess
of Rs. 1 crore during the previous year to any person (here in
referred to as the recipient) from one or more accounts
maintained by the recipient with it shall deduct tax at source.
3 Time of tax At the time of payment of such sum

deduction
4 Rate of tax 2% of sum paid
deduction at Differential rate of deduction for recipients not having filed returns:
source However in case of a recipient who has not filed the returns of
income for all of the three AY relevant to the three PY for which the
TL for filing return of income u/s 139(1) has expired, immediately
preceding the PY in which payment of the sum is made to him, the
provision of the section shall apply with the modification that –
 the sum shall be the amount or the aggregate of the amounts of,
as the case may be, in cash exceeding Rs. 20 L during the PY; and
 the deduction shall be –

No Particulars
1 At 2% of the sum where the amount or the aggregate of
amounts of, as the case may be, being paid in cash exceeds
Rs. 20 L during the PY but does not exceed Rs. 1 crore ; or
2 At 5% of the sum where the amount or the aggregate of the
amounts, as the case may be, being paid in cash exceeds
Rs. 1 crore during the PY
5 Non –  Tax deduction at source shall not apply to any payment made to –
Applicability
No Particulars
1 Government
2 Any banking company or cooperative society engaged in
carrying on the business of banking or a post office
3 Any business correspondent of a banking company or co -
operative society engaged in carrying on the business of
banking, in accordance with the guidelines issued in this
regard by the Reserve Bank of India under the Reserve Bank of
India Act, 1934
4 Any white label automated teller machine operator of a
banking company or co - operative society engaged in carrying
on the business of banking in accordance with the
authorization issued by the Reserve Bank of India under the
Payment and Settlement Systems Act, 2007
6 Person to whom Rule 37BA provides the manner of giving credit for tax deducted and
credit is to be remitted to the Central Government i.e. it specifies the person to
given for tax whom credit for tax deducted is to be given and also the assessment
deducted and year for which the credit may be given. Accordingly, rule 37BA (3A)
paid provides that, for the purposes of section 194N, credit for tax deducted
at source shall be given to the person from whose account tax is
deducted and paid to the Central Govt. account for the assessment
year relevant to the PY in which such tax deduction is made.
7 No TDS or TDS *Refer below

at reduced rates
*The Central Government may specify in consultation with the Reserve Bank of India, by
notification in the Official Gazette, the recipient in whose case the provisions of this section shall
not apply or apply at reduced rate, if such recipient satisfies the conditions specified in such
notification.

Accordingly, the Central Government has, in consultation with the RBI, notified the following
class of persons, payment to whom would not attract liability to deduct tax at source u/s 194N :
a Cash Replenishment For availing exemption from applicability of TDS u/s 194N, CRAs
Agencies (CRAs) and and franchise agents of WLATMOs should maintain a separate
franchise agents of bank account from which withdrawal is made only for the
White Label purposes of replenishing cash in the Automated Teller Machines
Automated Teller (ATMs) operated by such WLATMOs. Further, the WLATMO
Machine Operators should furnish a certificate every month to the bank certifying that
(WLATMO’s) the bank account of the CRAs and the franchise agents of the
WLATMOs have been examined and the amounts being
withdrawn from their bank accounts has been reconciled with the
amount of cash deposited in the ATM’s of the WLATMO’s
b Commission agent or For availing exemption from the applicability of TDS u/s 194N, the
trader, operating commission agent/trader should intimate to the banking co. or co -
under Agriculture operative society or post office, his account number through which
Produce Market he wishes to withdraw cash in excess of Rs. 1 Crore in the previous
Committee (APMC), year along with his Permanent Account Number (PAN) and the
and registered under details of the previous year. Also, he should certify to the banking
any law relating to company or co - operative society or post office that the
Agriculture Product withdrawal of cash from the account in excess of Rs. 1 Crore
Market of the during the previous year is for the purpose of making payments to
Concerned State the farmers on account of purchase of agriculture produce.
Further, the banking company or co - operative society or post
office has to ensure that the PAN quoted is correct and the
commission agent or trader is registered with the APMC, and for
this purpose, collect necessary evidences and place the same on
record
c The authorized  Purchase of foreign currency from foreign tourists or non -
dealer and its residents visiting India or from resident Indians on their return
franchise agent and to India, in cash as per the directions or guidelines issued by
sub - agent; and RBI; or
Full - Fledged Money  Disbursement of inward remittances to the recipient
Changer (FFMC) beneficiaries in India in cash under Money Transfer Service
licensed by the RBI Scheme (MTSS) of the RBI;
and its franchise The exemption from the requirement to deduct tax u/s 194N
agent; would be available only if a certificate is furnished by the
Such persons should authorized dealers and their franchise agent or sub - agent ,and the
maintain a separate Full - Fledged Money Changers (FFMC) and their franchise agent
bank account from to the bank that withdrawal is only for the purposes specified
which withdrawal is above and the directions or guidelines issued by the RBI have been
made only for the adhered to
purposes of –

SECTION 194N – SUMMARY
S. 194N
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction


Illustration 1
X Ltd. is a manufacturing company (having Head Office at Delhi and branch of at Jaipur). X Ltd.
has a current account with SBI Delhi and overdraft account with a SBI Jaipur. The two accounts
are separately operated by Head Office and branch office. Head Office and branch office have
separate TAN and GSTIN, cash withdrawn by Head Office and branch office from these two
accounts is as follows
No Particulars
1 From SBI Delhi by Head Office on 10 July 2020: Rs. 15 lakh
2 From SBI Jaipur by brand office on 10 Oct 2020: Rs. 70 lakh
3 From SBI Delhi by Head Office on 10 January 2021: 40 lakh
Determine the amount of tax to be deducted at source.

X Ltd. has always submitted the return before the due date. What would be your answer if X
Ltd. has filed the returns for the 3 preceding years after the due date of furnishing the return of
income.
Ans
Total cash payment to X Ltd (Head Office and branch office) during the FY 20120 - 21 is Rs. 1.15
crore. Cash payment by SBI up to 9th January 2021 does not exceed Rs, 1 crore. It exceeds
Rs. 1 crore only after cash payment of Rs. 40 lakh on 10 Jan 2021. The excess amount is Rs. 15
lakh. Tax deductible by SBI on 10th January 2021 is Rs. 2,50,000 (being 2% of the excess amount of
Rs. 1.25 crore).
X ltd. has filed the returns for the 3 preceding years after the due date of furnishing the return
of income
First proviso is applicable to the recipients, who has not filed his return of income,
For all 3 AY relevant to the 3 PY (in respect of which the TL to file the return of income u/s
139(1) has expired) immediately preceding the PY in which the payment is made. In such a
case, the modified threshold limit of Rs. 20Lakhs would apply and the banker will have to
deduct tax at the differential rates as specified, namely,
No Particulars
1 2% of the sum paid, where it exceeds Rs. 20,00,000 but does not exceed Rs. one crore;
and
2 5% of the sum paid in cash exceeding Rs. 1 crore
Thus, the amount of TDS shall be as under:

Date of cash Amount (in Cumulative
Amount of TDS
withdrawal Lakhs) Amount
10.07.2020 15 15 Nil
10.10.2020 70 85 2% of Rs. 85L = Rs. 1,70,000
2% of Rs. 15 L and 5% of Rs. 25 L =
10.01.2021 40 125
Rs. 30,000 + Rs. 1,25,000 = Rs. 1,55,000

Illustration 2
Date Amount withdrawn

01 - 08 - 2020 10,00,000
15 - 09 - 2020 35,00,000
17 - 11 - 2020 25,00,000
28 - 01 - 2021 45,00,000
16 - 03 - 2021 30,00,000
He has not furnished his return of income for the previous years 2016 - 17, 2017 - 18 and 2018 -
19. Compute TDS to be deducted under section 194N.
Answer:
Since Mr. X has not filed returns of income for three previous years ending 31.3.2019 whose due
dates under section 139(1) have expired in the previous year immediately preceding the
previous year in which cash is withdrawn, the tax shall be deducted as follows:
Aggregate of Tax Deducted at Source

Amount
Date amount Tax to be
withdrawn Rate Computation
withdrawn deducted
01 - 08 - 2020 10 lakhs 10 lakhs - - -
15 - 09 - 2020 35 lakhs 45 lakhs 2% 45 lakhs 90,000
17 - 11 - 2020 25 lakhs 70 lakhs 2% 25 lakhs X 2% 50,000
28 - 01 - 2021 45 lakhs 115 lakhs 2% and 5% 30 lakh X 2% + 1,35,000
15 lakh X 5%
16 - 03 - 2021 30 lakhs 145 lakhs 5% 30 lakh X 5% 1,50,000
Illustration 3
Amount withdrawn by the assesse is as follows:
CASE I
No Date Amount
1 1.4.2020 Rs. 50 lakhs
2 30.6.2020 Rs. 40 lakhs
3 2.7.2020 Rs. 30 lakhs
CASE II
No Date Amount
1 1.4.2020 Rs. 120 lakhs
2 30.7.2020 Rs. 50 lakhs
CASE III
No Date Amount
1 1.4.2020 Rs. 30 lakhs
2 2.7.2020 Rs. 10 lakhs
3 31.12.2020 Rs. 150 lakhs

Cash withdrawn by a person falling in first proviso to section 194N

TDS shall be deducted as TDS shall be deducted as TDS shall be deducted as
follows: follows: follows:
- No TDS on Rs. 90 lakhs - On Rs. 20 lakhs @ 2% as - On Rs. 30 lakhs = Nil as
as new provision comes per old section = Rs. per old section
into force from 1.7.2020 40,000
(As per law in force up - On Rs. Rs. 50 lakhs @ 5% - On Rs. 10 lakhs @ 2% =

to 30.6.2020, no TDS on as per new section = Rs. Rs. 20,000
Rs. 90 lakhs) 2,50,000
On 2.7.2020, TDS shall - On first Rs. 60 lakhs @

be deducted as follows: 2% = Rs. 1,20,000
- On first Rs. 10 lakhs @ - On next Rs. 90 lakhs @
-
2% = Rs. 20,000 5% = Rs. 4,50,000
- On next Rs. 20 lakhs @
- -
5% = Rs. 1,00,000
Cash withdrawn by a person not falling in first proviso to section 194N

TDS shall be deducted as TDS shall be deducted as TDS shall be deducted as
follows: follows: follows:
- No TDS on Rs. 90 lakhs On Rs. 20 lakhs @ 2% = Rs. On Rs. 160 lakhs @ 2% = Rs.
as new provision comes 40,000 3,20,000
into force from 1.7.2020
(As per law in force up On Rs. 50 lakhs @ 2% = Rs.

to 30.6.2020, no TDS on 1,00,000
Rs. 90 lakhs)
- On Rs. 30 lakhs @ 2% = - -
Rs. 60,000

SECTION 194 – O - CERTAIN PAYMENT BY E – COMMERCE OPERATOR TO E –

COMMERCE PARTICIPANTS
1 Person Where sale of goods or provision of services of an e - commerce
responsible participant is facilitated by an e - commerce operator through its digital
for deducting or electronic facility or platform (by whatever name called), such e -
tax at source commerce operator shall deduct tax at source.
Meaning of certain terms:
Term Meaning
Electronic commerce It means the supply of goods or services or
both, including digital products, over digital
or electronic network.
E - commerce operator It means a person who owns, operates or
manages digital or electronic facility or
platform for electronic commerce.
E - commerce It means a person resident in India selling
participant goods or providing services or both,
including digital products, through digital or
electronic facility or platform for electronic
commerce.
Services" includes "fees for technical services" and fees for
"professional services", as defined in the Explanation to section 194J.
2 Time of tax E - Commerce operator shall deduct tax at source, at the time of credit of
deduction amount of sale or services or both to the account of an e - commerce
participant or at the time of payment thereof to such e - commerce
participant by any mode, whichever is earlier.
3 Rate of tax 1% (0.75% applicable from 01 - 10 - 2020 to 31 - 03 - 2021) of the gross
deduction amount of such sales or services or both. [5% in case recipient does not
have PAN]
Any payment made by a purchaser of goods or recipient of services
directly to an e - commerce participant for the sale of goods or provision
of services or both, facilitated by an e - commerce operator, shall be
deemed to be the amount credited or paid by the e - commerce operator
to the e - commerce participant and shall be included in the gross amount
of such sale or services for the purpose of deduction of income - tax
under this sub - section.
4 No TDS No deduction shall be made from any sum credited or paid or likely to
be credited or paid during the previous year if the following conditions
are satisfied —
No Particulars
1 E - commerce participant is an individual or Hindu undivided
family
2 Gross amount of such sale or services or both during the
previous year does not exceed Rs. 5,00,000; and
3 Such e - commerce participant has furnished his Permanent
Account Number or Aadhaar number to the e - commerce
operator

5 Tax under A transaction in respect of which tax has been deducted by the e -
other section commerce operator under this section, or which is not liable to deduction
not because of above threshold limit, then such sum shall not be liable to tax
deductible deduction at source under any other provision of this Chapter: However,
the said provisions shall not apply to any amount or aggregate of
amounts received or receivable by an e - commerce operator for hosting
advertisements or providing any other services which are not in
connection with the sale or services referred to in section 194 - O(1).
6 Removal of If any difficulty arises in giving effect to the provisions of this section, the
difficulty Board may, with the approval of the Central Government, issue
guidelines for the purpose of removing the difficulty. Every guideline
issued by the Board under section 194 - O(4) shall be laid before each
House of Parliament, and shall be binding on the income - tax authorities
and on the e - commerce operator.
7 E - Commerce operator shall be deemed to be the person responsible for paying to e -
commerce participant.
SECTION 194O – SUMMARY
S. 194O
Person
Rate of TDS No TDS
TDS Deduction limit
Deduction

Illustration 1
No Illustration Answer
1 Samsung India Ltd has sold Samsung India Ltd is the E - Commerce Participant and
1,000 television sets at Rs. Reliance Digital is the E - Commerce Operator. As per
50,000 each through Reliance section 194 - O(1), Reliance Digital shall deduct TDS of
Digital on 01.12.2020. 0.75% on Rs. 5,00,00,000 i.e. Rs. 3,75,000. Therefore
Reliance Digital receives Reliance Digital will remit Rs. 4,46,25,000 to Samsung
payment of Rs. 5,00,00,000 India Ltd after deducting TDS of Rs. 3,75,000
from various buyers and There is no liability of Samsung India Ltd to deduct
deducts commission of 10% TDS under section 194H on the commission it pays to
and wants to remit Rs. Reliance Digital since:
4,50,00,000 to Samsung India No Particulars
Ltd Advise 1 section 194 - O overrules the entire chapter of
TDS and
2 as per section 194 – O (3), a transaction on which
tax has been deducted by e - commerce operator
under section 194 - O(1), shall not be liable to tax
deduction under any other section. TDS has
been deducted on the entire transaction of Rs.
5,00,00,000
2 Suppose in Question 1, all As per section 194 - O, "E - Commerce Participant" means
facts remaining the same and a person resident in India. Samsung Japan is a non -
instead of Samsung India Ltd, resident and therefore it does not fall in definition of "E -
it was Samsung Japan, a non - Commerce Participant" and hence TDS under section 194 -
resident foreign company O shall not be deducted.
The tax liability of Samsung Japan and TDS obligation of
Reliance Digital shall be discussed in module of
International Taxation in chapter of Business connection
3 Suppose in Question 1, all As per section 194 - O, “E - commerce Operator” includes
facts remaining the same and resident as well as non - resident. Therefore, AMAZON
Instead of Reliance Digital, it USA being a non - resident is ‚E - commerce Operator‛
was AMAZON USA selling and is required to deduct TDS under section 194 - O @
products through its website 0.75% on Rs. 5,00,00,000
in India. AMAZON is a non-
resident
4 Suppose in Question 1, Section 194 - O does not distinguish as to whether buyers
Reliance Digital sold should be residents or non - residents. Therefore section
televisions of Rs. 4,00,00,000 194 - O shall apply and TDS shall be deducted on Rs.
to Indian buyers and Rs. 5,00,00,000
1,00,00,000 to foreign buyer
5 Mr. A, a resident Section 194 - O shall not be applicable since the gross sales
manufactures perfumes and do not exceed Rs. 5,00,000. Hence Flipkart shall not
sells through Flipkart. The deduct TDS provided that Mr. A gives his PAN/Aadhaar
total sales made by Mr. A to Flipkart. If he does not give PAN/Aadhaar to Flipkart,
through Flipkart are Rs. then TDS shall be deducted @ 5% on Rs. 5,00,000.
5,00,000 in previous year
31.3.2021. Flipkart deducts
commission @ 10% and remits TDS on commission paid to Flipkart is also not required to
Rs. 4,50,000 to Mr. A be deducted
6 Will your answer be different
Section 194 - O shall be applicable since exemption is only
if in Question 5, M/s ABC
in case of individuals and HUF whose gross sales through
partnership was there instead
E - Commerce Operator does not exceed Rs. 5,00,000.
of Mr. A
Flipkart will deduct TDS @ 0.75% under section 194 - O on
Rs. 5,00,000. M/s ABC shall not deduct TDS on
commission paid to Flipkart.
7 M/s ABC sells Women As per Explanation to section 194 - O(1), any payment by
Apparel through Myntra and purchaser directly to E - Commerce participant for sale of
total sales of M/s ABC goods facilitated by an E - Commerce Operators shall be
through Myntra are Rs. deemed to be the amount credited or paid by E -
2,00,00,000 during the Commerce Operator to E - Commerce participant and
previous year 31.3.2021. shall be included in gross amount of sale for purpose of
Myntra charges 10% tax deduction under section 194 - O.
commission on sales made by
Therefore Myntra shall pay TDS of 0.75% of Rs.
it. The payment gateway of
2,00,00,000 i.e. Rs. 1,50,000 to the credit of Government
Myntra is so designed that
and shall recover Rs. 1,50,000 from M/s ABC
Rs. 20,00,000 comes to
Myntra from customers and
Rs. 1,80,00,000 goes to M/s
ABC directly
8 A Chartered Accountant As per section 194 - O, "Services" include professional
renders professional advices services. Therefore Consult - CA will deduct 0.75% TDS
to various clients through on Rs. 1,00,00,000 and remit Rs. 79,25,000 to the
"Consult - CA", a website run Chartered Accountant. Section 194J shall not apply and
by E - Commerce Operator. TDS shall not be deducted @ 7.5%.
Various clients pays Rs.
1,00,00,000 to Consult - CA
and Consult - CA deducts
20% commission and remits
Rs. 80,00,000 to the Chartered
Accountant for the financial
year ending 31.3.2021

Illustration 2
X Ltd., Y, Z and C Ltd. (e - commerce participants) supply goods in India through Klipkart )a
Singapore based website) owned by Klipkart Ltd. Klipkart Ltd. wants to know tax to be
deducted under section 194 - O in the following different situations -
Case Particulars
1 During the financial year 2020 - 21, X Ltd, sells goods of Rs. 54 lakh through Klipkart
Ltd. Klipkart Ltd. transfers Rs. 45.9 lakhs (i.e., gross sales: Rs. 54 lakh minus
commission:15%) through RTGS on 31 - 03 - 2021.
2 The above payment is made by Klipkart Ltd. in 3 instalments –Rs. 23.8 lakh on 01 - 01 -
2021, Rs. 9.35 lakh on 01 - 03 - 2021 and the balance of Rs. 12.75 lakh is transferred to the
account of X Ltd. (in the books of Klipkart Ltd.) on 31 - 03 - 2021 (actual payment is made
through RTGS on 18 - 05 - 2021).
3 In Situation 2, assume that e - commerce participant is not X Ltd. but X, an individual.
4 During the financial year 2020 - 21, Y (an individual, e - commerce participant) supplies
services (aggregate value of which is Rs. 3.5 lakh) through Klipkart Ltd. Y has furnished
his PAN to Klipkart Ltd.
5 During the financial year 2020 - 21, Z (an individual, e - commerce participant) supplies
goods (aggregate value of which is Rs. 5 lakh through Klipkart Ltd. Z has Furnished his
PAN to Klipkart Ltd.
6 C Ltd. is an e - commerce participant. It supplies goods in India through Klipkart Ltd.
(i.e., e - commerce operator). During the financial year 2020 - 21, C Ltd. sells goods of Rs.
80 lakh through Klipkart Ltd., out of which Rs. 30 Lakh is directly received by C Ltd.
and Rs. 50 lakh is received first by Klipkart Ltd. and later on it is remitted to C Ltd. on
31 - 03 - 2021. Commission of C Ltd. in the two cases is 15%. C Ltd. gets the payment
directly from the customers as follows -
a) First payment of Rs. 18 lakh – it is received by C Ltd. on 06 - 10 - 2020.
b) Second payment of Rs. 12 lakh – received by C Ltd. on 10 - 01 - 2021.
Amount of Rs. 50 lakh is remitted by Klipkart Ltd. (after deducting 15% of Rs. 80 lakh
as commission) to C Ltd. on 31 - 03 - 2021.
Solution
Gross payment (before deducting commission) is subject to TDS under section 194 - O at the rate
of 0.75% (in non - PAN cases, tax is deductible at the rate of 5%). Tax is deductible under section
194 - O in different situations as follows -

Case Particulars
1 Tax is deductible at the rate of 0.75% of Rs. 54 lakh on 31 - 03 - 2021
2 one has to find out gross payment pertaining to Rs. 23.80 lakh, Rs. 9.35 lakh and Rs.
12.75lakh. in this situation, tax is deductible as follows -
Net
Date of payment to e - Amount of
amount of Gross Amount (i.e.,
commerce participant and TDS
payment net amount / 0.85)
date of TDS
1st January, 2021 23,80,000 28,00,000 21,000

1st March, 2021 9,35,000 11,00,000 8,250
31st March, 2021 12,75,000 15,00,000 11,250
Total 45,90,000 54,00,000 40,500
3 E - commerce participant is an individual. However, gross amount of sale through

Klipkart Ltd. during the year exceeds Rs. 5 lakh. Consequently, tax is deductible by
Klipkart Ltd. as discussed in Situation 2
4 E - commerce participant is Y (an individual). Gross amount of sales through e -
commerce operator does not exceed Rs. 5 lakh. Consequently, tax is not deductible
under section 194 - O.
5 E - commerce participant is Z (an individual) Gross amount of sales through e -
commerce operator does not exceed Rs. 5 lakh. Consequently, tax is not deductible
under section 194 - O
6 Even if the payment of Rs. 20 lakh is received directly by C Ltd. (e - commerce
participant), tax will be deducted by Klipkart Ltd. on the entire Rs. 60 lakh. Schedule for
tax deduction under section 194 - O is as follows -
Payment of Rs. 18 lakh - It is received by C Ltd. on 06 - 10 - 2020. Date of tax deduction
by Klipkart Ltd. is 06 - 10 - 2020 (amount of TDS is Rs. 13,500 being 0.75% of Rs. 18
lakh).
Payment of Rs. 12 lakh - It is received by C Ltd. on 10 - 01 – 2021date of deduction by
Klip kart Ltd. is 10.01.2021 (amount of TDS is Rs. 9000, being 0.75% of Rs. 12 lakh).
Amount of Rs. 12 lakh - Net amount of payment is Rs. 38 lakh (i.e., Rs. 50 lakh –
commission which is 15% of Rs. 80 lakh). Tax is deductible by Klipkart Ltd. on 31 - 03 -
2021 is 37500 (being 0.75% of Rs. 50 lakh).

CHAPTER - 10
QUESTIONS FOR OWN PRACTICE
Question 1:
Mr. Madusudan is regular in deducting tax at source and depositing the same. In respect of the
quarter ended 31st December, 2020 a sum of Rs. 80,000 was deducted at source from the
contractors. The Statement of tax deducted at source under section 200 was filed on 23 rd March,
2021 for the quarter ended 31.12.2020.
No Particulars
1 Is there any delay on the part of Mr. Madhusudan in filing the statement of TDS?
2 If the answer to (i) above is in the affirmative, how much amount can be levied on Mr.
Madusudan for such default under section 234E?
3 Is there any remedy available to him for reduction/waiver of the levy?
Answer:
No Particulars
1 Yes, there has been a delay on the part of Mr. Madhusudan in filing the statement of TDS.
As per section 200(3) read with Rule 31A, the statement of tax deducted at source for the
quarter ended 31st December, 2020 has to be filed on or before 31st January, 2021.
However, the same has been filed only on 23rd March. 2021. Hence, there has been a 51
day delay on the part of Mr. Madhusudan in filing the statement of TDS
2 As per section 234E of the Income-tax Act. 1961, where a person fails to file deliver or
cause to be delivered the statement of tax deducted at source within the prescribed time.
then, he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which
the failure continues.
The amount of fee shall not. however, exceed the amount of tax deductible
In this case since Mr. Madhusudan has delayed filing the statement of TDS by 51 days he
would be liable to pay a fee of Rs. 10,200 (Rs. 200 x 51 days) under section 234E. The said
fee does not exceed the tax deductible (Rs. 80,000, in this case).
3 The CBDT is empowered to issue general or special orders, whether by way of relaxation
of any of the provisions of sections 139,143,144,147 etc. otherwise, in respect of any class of
incomes or class of cases The CBDT may issue such order(s) from time to time. ifit
considers expedient to do so, for the purpose of proper and efficient management of the
work of assessment and collection of revenue. Section 234E is included in the list of
sections in respect of which the CBDT is empowered to issue order for relaxation of the
provisions of the Act.
Hence, the remedy available to Mr. Madhusudan is that he can file an application to the
CBDT under section 119 and seek waiver/reduction of the penalty levied/leviable under
section 234E.

Question 2:
Smt. Vijaya, proprietor of Lakshmi Enterprises, made turnover of Rs. 210 lakhs during the
previous year 2019-20. Her turnover for the year ended 31-3-2021 was Rs. 90 lakhs.
Decide whether provisions relating to deduction of tax at source are attracted for the following
payments made during the financial year 2020-21:
No Particulars
1 Purchase commission paid to one agent Rs. 25,000 on 13.6.2020 towards purchases made
during the year.
2 Payments to Civil engineer of Rs. 5, 00,000 on 23rd August, 2020 for construction of
residential house for self use.
Answer:
Since Smt. Vijaya's turnover from business was Rs. 210 lakhs in the immediately preceding
financial year (i.e., F.Y.2019-20), she is liable to deduct tax at source in the P.Y.2020-21,
irrespective of her turnover being only Rs. 90 lakhs in the F.Y.2020-21.
No Particulars
1 Tax @3.75% has to be deducted under section 194H in respect of purchase commission of
Rs. 25,000 to an agent for purchases made during the year, since the same exceeds the
threshold limit of Rs. 15,000 for non-deduction of tax at source thereunder.
2 Tax has to be deducted under section 194C in case of payment to resident contractors. The
rate of tax is 1% (0.75% from 14.5.2020-31.3.2021)if the payee is an individual or HUF and
2% (1.5% from 14.5.2020-31.3.2021) in case of payees, other than individuals and HUFs.
However, as per section 194C(4), no individual or Hindu undivided family shall be liable
to deduct income tax on the sum credited or paid to the account of the contractor where
such sum is credited or paid exclusively for personal purposes of such individual or any
member of the Hindu undivided family.
In this case, since Smt. Vijaya, an individual, makes payment of Rs. 5 lakh to a civil
engineer for construction of residential house for self use, she is not liable to deduct tax at
source under section 194C from such sum.

Question 3:
What is the rate at which the tax is either to be deducted or collected under the provisions of the
Act in the following cases?
No Particulars
1 A Partnership firm making sales of timber in September 2020 which was procured and
obtained under a forest lease.
2 Payment of income of Rs. 25 lakh on investments in the securities to the Foreign
Institutional Investor.
3 A nationalized bank receiving professional services from a registered society made
provision on 31-03-2021 of an amount of Rs. 25 lakh against the service charges bills to be
received.
4 Payment of Rs. 5 lakhs on 8th December, 2020 made to Mr. Phelps who is an athlete by a
manufacturer of a swim wear for brand ambassador.
Answer:
Applicable Rate of TDS / TCS
No Situation TCS/TDS Rate Note

1 Partnership firm selling timber obtained under TCS 1.875% 1
forest lease
2 Payment of income on investments in the securities TDS 20.8%
to the Foreign Institutional Investors. In case the 2
securities are Government securities 5.20%
3 Professional services rendered by a registered TDS 7.5% 3
society to a nationalized bank
4 Payment by a manufacturer of swim wear to its TDS 4
brand ambassador Mr. Phelps, an athlete 7.5%
If Mr. Phelps is a resident 20.8%
If Mr. Phelps is a non-resident
Notes:
No Particulars
1 As per section 206C(1), tax has to be collected at source@1.875% by the partnership firm,
being a seller, at the time of debiting of the amount payable by the buyer to the account of
the buyer or at the time of receipt of such amount, whichever is earlier.
2 As per section 196D, tax has to be deducted at source@20.8% (20% pluscess@4%) by any
person who is responsible for paying to a Foreign Institutional Investor, any income (other
than capital gains), at the time of credit of such income to the account of the payee or at the
time of payment of such income, whichever is earlier.
Alternatively if the said securities are assumed to be government securities and income
earned is in the nature of interest, tax is deductible @5.20% (i.e., 5% plus cess 4%) under
section 194LD.

3 Tax has to be deducted at source @7.5% under section 194J, by the nationalized bank at the
time of credit of fees for professional services to the account of the registered society (i.e.,
on 31.03.2021), even though payment is to be made after that date.
4 Tax has to be deducted at source @ 7.5% under section 194J in respect of income of Rs. 5
lakh paid to Mr. Phelps, an athlete, for advertisement, on the inherent presumption that
Mr. Phelps is a resident.
Alternatively, if Mr. Phelps is assumed to be a non-resident, who is not a citizen of India ,
tax has to be deducted at source @20.8% (20% plus cess 4%) under section 194E in respect
of income of Rs. 5 lakh paid to Mr. Phelps, an athlete, for advertisement referred under
section 115BBA.
Question 4:
Examine the liability for tax deduction at source in the following cases for the A.Y.2021-22:
No Particulars
1 Wings Ltd. has paid amount of Rs. 15 lacs during the year ended 31-3-2021 to Airports
Authority of India towards landing and parking Charges.
2 Omega Ltd., an event management company, organized a concert of international artists
in India. In this connection, it engaged the services of an overseas agent Mr. John from UK
to bring artists to India. He contacted the artists and negotiated with them for performance
in India in terms of the authority given by the company. He did not take part in event
organized in India. The company made the payment of commission equivalent to Rs. 1 lac
to the overseas agent.
3 Ramesh gave a building on sub-lease to Mac Ltd. with effect from 1-7-2020 on a rent of Rs.
20,000 per month. The company also took on hire machinery from Ramesh with effect
from 1-11-2020 on hire charges of Rs. 15,000 per month. The rent of building and hire
charges of machinery for the year 2020-21 were credited by the company to the account of
Ramesh in its books of account on 31-3-2021.
4 Rs. 2,45,000 paid to Mr. X on 01-02-2021 by Karnataka State Government on compulsory
acquisition of his urban land. What would be your answer if the land is agricultural land?

Answer:
1 TDS on landing The landing and parking charges which are fixed by the Airports
and parking Authority of India are not merely for the ‚use of the land‛. These
charges charges are also for services and facilities offered in connection with the
aircraft operation at the airport which include providing of air traffic
services, ground safety services, aeronautical communication facilities,
installation and maintenance of navigational aids and meteorological
services at the airport (Japan Airlines Co. Ltd. V. CIT/CIT v. Singapore
Airlines Ltd. (2015) 377 ITR 372 (SC)). Thus, tax is not deductible under
section 194-I which provides deduction of tax for payment in the nature
of rent.
Hence, tax is deductible @ 1.75% under section 194C by the airline
company, wings Ltd., on payment of Rs. 15 lacs made towards landing
and parking charges to the Airports Authority of India for the previous
year 2020-21.
2 TDS on services An overseas agent of an Indian company operates in his own country
of overseas and no part of his income accrues or arises in India. His commission is
agent outside usually remitted directly to him and is, therefore, not received by him
India. or on his behalf in India. The commission paid to the non-resident
agent for services rendered outside India is, thus, not chargeable to tax
in India.
Since commission income for contacting and negotiating with artists by
Mr. John, a non-resident, who remains outside India is not subject to
tax in India, consequently, there is no liability for deduction of tax at
source. It is assumed that the commission equivalent to Rs. 1 lakh was
remitted to Mr. John outside India.
3 TDS on rent for Tax is deductible on rent under section 194-I, if the aggregate amount
building and of rental income paid or credited to a person exceeds
machinery Rs. 2,40,000. Rent includes payment for use of, interalia, building and
machinery.
The aggregate payment made by Mac Ltd. to Ramesh towards rent in
P.Y.2020-21 is Rs. 2,55,000 (i.e., Rs. 1,80,000 for building and Rs. 75,000
for machinery). Hence, Mac Ltd. has to deduct tax @7.5% on rent paid
for building and tax @1.5% on rent paid for machinery.
4 TDS on Tax is deductible at source @7.5% under section 194LA, where payment
compensation is made to a resident as compensation or enhanced compensation on
for compulsory compulsory acquisition of any immovable property (other than
acquisition agricultural land).
However, no tax deduction is required if the aggregate payments in a
year does not exceed Rs. 2,50,000.
Therefore, no tax is required to be deducted at source on payment of
Rs. 2,45,000 to Mr. X. since the aggregate payment does not exceed Rs.
2,50,000.
Since the definition of immovable property specifically excludes
agricultural land, no tax is deductible at source on compensation paid
for compulsory acquisition of agricultural land.

Question 5:
Examine whether tax has to be deducted at source under the provisions of the Income-Tax Act,
1961 in the following situations. which have taken place during the year ended 31-3-2021.
No Particulars
1 M/s. Jiva& Co., a partnership firm, pays a sum of Rs.43,000 as interest on lean borrowed
from an Indian branch of a foreign bank.
2 Above firm has paid Rs. 42,000 as interest on capital to partner Mr. A. a resident in India,
and Rs. 44 000 as interest on capital to partner Mr. B, a non-resident.
3 The above firm paid Rs. 50,000 being share of profit of partner Mr. B, a non-resident.
Answer:
No Particulars
1 Section 194A requires deduction of tax on any income by way of interest, other than
interest on securities, credited or paid to a resident, at the rates in force.
However it specifically excludes from its scope, income credited or paid to any banking
company to which the Banking Regulation Act, 1949 applies.
An Indian branch of a foreign bank, transacting the business of banking in India, is a
banking company to which the Banking Regulation Act, 1949 applies Therefore, interest
payment to such bank will not attract tax deduction under section 194A.
Consequently, no tax is required to be deducted at source under section 194A on interest
of Rs. 43,000 paid by M/s. Jiva & Co.a partnership firm, on loan borrowed from an Indian
branch of a foreign bank at source.
2 Section 194A requiring deduction of tax on any income by way of interest, other than
interest on securities, credited or paid to a resident, excludes from its scope, income
credited or paid by a firm to its partner. Therefore, no tax is required to be deducted at
source under section 194A on interest on capital of Rs. 42,000 paid by the firm to Mr. A, a
resident partner.
Section 195, which requires tax deduction at source on payments to non-residents, does
not provide for any exclusion in respect of payment of interest by a firm to its non-resident
partner. Therefore, tax has to be deducted under section 195 at the rates in force in respect
of interest on capital of Rs. 44,000 paid to partner Mr. B. a non-resident.
3 As per section 10(2A), share of profit received by a partner from the total income of the
firm is exempt from tax. Therefore, the share of profit paid to non-resident partner is not
liable for tax deduction at source.
However, section 195(6) provides that the person responsible for paying any sum, whether
or not chargeable to tax, to a non-corporate non-resident or to a foreign company, shall be
required to furnish the information relating to payment of such sum in the prescribed
form and manner.

Question 6:
"Come Air Ltd." has paid a sum of Rs. 12 lakhs during the year ended 31-3-2021 to Airports
Authority of India towards landing and parking charges. The company has deducted tax at
source @1.5%under section 194C on the said payment and remitted the tax deducted within the
prescribed time. The Assessing Officer contended that landing and parking charges were levied
for use of the land of the airport and hence, the payment was in the nature of rent attracting TDS
@ 7.5% under section 194-1. Discuss the correctness or otherwise of the contention of the
Assessing Officer.
Answer:
The issue as to whether the charges fixed by the Airport Authority of India (AAI) for landing
and takeoff facilities and parking facility for the aircraft are for the "use of the land" by the airline
company come up before the Supreme Court in Japan Airlines Co. Ltd. v. CIT / CIT v. Singapore
Airlines Ltd. (2015) 377 ITR 372.
The Supreme Court observed that the charges which are fixed by the AAI for landing and take-
off services as well as for parking of aircrafts are not for the "use of the land". These charges are
for services and facilities offered in connection with the aircraft operation at the airport which
include providing of air traffic services, ground safety services, aeronautical communication
facilities, installation and maintenance of navigational aids and meteorological services at the
airport.
There are various international protocols which mandate all authorities manning and managing
these airports to construct the airport of desired standards which are stipulated in the protocols.
The services which are required to be provided by these authorities, like AAI, are aimed at
passengers' safety as well as for safe landing and parking of the aircrafts. Therefore, the services
are not restricted to merely permitting "use of the land" of airport. On the contrary, it
encompasses all the facilities that are to be compulsorily offered by the AAI in tune with the
requirements of the protocol.
The Supreme Court observed that the charges levied on air-traffic includes landing charges,
lighting charges, approach and aerodrome control charges, aircraft parking charges, aerobridge
charges, hangar charges, passenger service charges, cargo charges, etc. Thus, when the airlines
pay for these charges, treating such charges as charges for "use of the land" would tantamount to
adopting a totally simplistic approach which is far away from reality.
The Supreme Court opined that the substance behind such charges has to be considered and
when the issue is viewed from this angle, keeping the larger picture in mind, it becomes very
clear that the charges are not for use of the land per se and, therefore, it cannot be treated as
"rent" within the meaning of section 194-I. The Supreme Court, thus, concurred with the view
taken by the Madras High Court in Singapore Airlines case and overruled the view taken by the
Delhi High Court in United Airlines/Japan Airlines case.
Applying the rationale of the Supreme Court ruling to the facts of this case, the contention of the
Assessing Officer that landing and parking charges are levied for use of the land of airport and
hence _the charges are in the nature of rent to attract the provisions of tax deduction at source
under section 194-1 is not correct.
Question 7:
Mr. Harish Vice President of ABC Bank, sold his house property in Chennai as well as his rural
agricultural land for a consideration of Rs. 60 lakh and Rs. 15 lakh, respectively, to Mr. Suresh, a
retail trader of garments, on 10.10.2020. Mr. Harish had purchased the house properly and rural
agricultural, and in December 2018 for Rs. 40 lakh and Rs. 10 lakh, respectively. The stamp duty
value on the date of transfer, i.e., 10.10.2020, is Rs. 85 lakh and Rs.20 lakh for the house property
and rural agricultural land, respectively.
No Particulars
1 Determine the tax implications in the hands or Mr. Harish and Mr. Suresh, if the date of
agreement for sale oh house property and rural agricultural land is 1.7.2020 and the stamp
duty value on the said date was Rs. 75 lakh and Rs. 15 lakh respectively. On the said date,
Mr. Suresh made payment of Rs. 5 lakh by way of account payee cheque to Mr. Harish for
purchase oh house property. Also, discuss the TDS implications, if any, in the hands of Mr.
Suresh, assuming that both Mr. Harish and Mr. Suresh are resident Indians.
2 Would your answer be different if Mr. Harish is a property dealer and sold the house
property in the course of his business?
Answer:
a) Tax implications on sale of rural agricultural land and house property representing a
capital asset in the hands of Mr. Harish, a salaried employee
No Particulars
1 Tax implications in the hands of Mr. Harish, a salaried employee
Since rural agricultural land is not a capital asset, the gains arising on sale of such land is
not taxable in the hands of Mr. Harish. However, capital gains would arise on sale of
house property, being a capital asset.
As per section 50C(1), the stamp duty value of house property on the date of agreement
(i.e., Rs. 75 lakh) would be deemed to be the full value of consideration arising on transfer
of property. Therefore. Rs. 35 lakh (i.e., Rs. 75 lakh – Rs. 40 lakh, being the purchase price)
would be taxable as short-term capital gains in the A.Y.2021-22.
It may be noted that as the date of agreement is different from the date of registration and
part of the consideration was received on or before the date of agreement by way of
account payee cheque, the stamp duty value on the date of agreement is to be adopted as
the deemed sale consideration.
2 Tax implications in the hands of the buyer – Mr. Suresh, a retail trader
The house property purchased would be a capital asset in the hands of Mr. Suresh, who is
a retail trader of garments. The provisions of section 56(2)(x) is attracted in the hands of
Mr. Suresh who has acquired the immovable property, being a capital asset, for
inadequate consideration. For the purpose of section 56(2)(x). Mr. Suresh can take the
stamp duty value on the date of agreement instead of the date of registration since he has
paid a part of the consideration by account payee cheque on the date of agreement.

Therefore, Rs. 15 lakh, being the difference between the stamp duty value of the property
on the date of agreement (i.e., Rs. 75 lakh) and the actual consideration (i.e., Rs. 60 lakh)
would be taxable as per section 56(2)(x) under the head "Income from other sources" in
the hands of Mr. Suresh, since such difference exceeds the higher of Rs. 50,000 or 10% of
consideration.
As rural agricultural land is not a capital asset, the provisions of section 56(2)(x) are not
attracted in respect of acquisition of agricultural land for inadequate consideration. since
the definition of ‚property" under section 56(2)(x) includes only capital assets specified
thereunder.
3 TDS implication in the hands of the buyer, Mr. Suresh
Since the sale consideration of the house property exceeds Rs. 50 lakh, Mr. Suresh is
required to deduct tax at source under section 194-IA. The tax deduction under section
194-IA would be Rs. 45,000, being 0.75% of Rs. 60 lakh.
TDS provisions under section 194-IA are not attracted in respect of transfer of rural
agricultural land.
b) Tax implications on sale of house property representing stock-in-trade in the hands of Mr.
Harish, a property dealer
No Particulars
1 Tax implications in the hands of Mr. Harish for A.Y.2021-22
If Mr. Harish is a property dealer who has sold the house property in the course of his
business, the provisions of section 43CAwould be attracted since the house property
represents his stock-in-trade and he has transferred the same for a consideration less than
the stamp duty value.
For the purpose of section 43CA,Mr. Harish can take the stamp duty value on the date of
agreement instead of the date of registration, since he has received part of the sale
consideration by an account payee cheque on the date of agreement and it exceeds 110%of
consideration. Therefore, Rs.35 lakh, being the difference between the stamp duty value
on the date of agreement (i.e., Rs. 75 lakh) and the purchase price (i.e., Rs.40 lakh), would
be chargeable as business income in the hands of Mr. Harish
2 TDS implications and taxability in the hands of Mr. Suresh forA.Y.2021-22
There would be no difference in the TDS implications or taxability in the hands of Mr.
Suresh, whether Mr. Harish is a property dealer or a salaried employee. Therefore, the
provisions of section 56(2)(x) would be attracted in the hands of Mr. Suresh who has
received house property, being a capital asset, for inadequate consideration. The TDS
provisions under section 194-IAwould also be attracted since the actual consideration for
house property exceeds Rs. 50lakh.

Question 8:
Siddharth Hospitals Pvt. Ltd. has recently been recognition by several insurance companies to
admit and treat patients on cashless hospitalization basis. Payment to the assessee hospital will
be made by Third Party Administrators (TPA) who will process the claims of the patients
admitted and make payments to the various hospitals including the assessee. All TPAs are
corporate entities. The assessee wants to know whether the TPAs are bound to deduct tax at
source under section 194J or under section 194C?
Answer:
This issue has been clarified by the CBDT Circular No. 8/2009 dated 24.11.2009. As per
provisions of section 194J(1), any person, who is responsible for paying to a resident any sum by
way of fees for professional services, shall, 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, deduct an amount equal to 10% (7.5% form 14.5.2020-31.3.2021) of
such sum as TDS.
Further as per clause (a) of Explanation to section 194J "professional services" includes services
rendered by a person in the course of carrying on medical profession.
The services rendered by hospitals to various patients are primarily medical services and,
therefore, the provisions of section 194J are applicable on payments made by TPAs to
hospitals etc. Further, for invoking provisions of section 194J, there is no stipulation that the
professional services have to be necessarily rendered to the person who makes payment to
hospital. Therefore. TPAs who are making payment on behalf of insurance companies to
hospitals for settlement of medical/ insurance claims etc. under various schemes including
Cashless Schemes are liable to deduct tax at source under section 194J on all such payments to
hospitals etc.
In view of the above, all such transactions between TPAs and hospitals would fall within the
ambit of provisions of section 194J.
Question 9:
Examine in the context of provisions contained in Chapter XVII-B of the Act and also work out
the amount of tax to be deducted by the payer of income in the following cases:
No Particulars
1 Payment of Rs.5lakh made by JCP & Co. to Pingu Events Co. Ltd. on 4th September. 2020
for organizing a debate competition on the subject "Preservation of Rural Heritage of
Rajasthan".
2 KD, a part time director of DAF Pvt. Ltd. was paid an amount of Rs.2,25,000 as fees which
was actually in the nature of commission on sales for the period 1.7.2020 to 30.9.2020.

Answer:
No Particulars
1 The services of Event Managers in relation to sports activities alone have been notified by
the CBDT as "professional services" for the purpose of section 194J. In this case, payment
of Rs. 5 lakh was made to an event management company for organization of a debate
competition. Hence, the provisions of section 194J are not attracted.
However, TDS provisions under section 194C relating to contract payments would be
attracted and consequently, tax has to be deducted @1.5% under section 194C. The tax
deductible under section 194C would be Rs.7,500, being 1.5% of Rs. 5 lakh.
2 Section 194J provides for deduction of tax at source @7.5% on any remuneration or fees or
commission, by whatever name called, paid to a director, which is not in the nature of
salary in respect of which tax is deductible at source under section 192.
Hence, tax is to be deducted at source under section 194J @7 5% by DAF Pvt. Ltd. on the
commission of Rs. 2,25,000 paid to KD, a part-time director. The tax deductible under
section 194J would be Rs.16,875, being 7.5% of Rs. 2,25,000.
Question 10:
Examine the applicability of the provisions relating to deduction of tax at source in the following
transactions:
No Particulars
1 Max Limited pays Rs. 1,02,000 to Mini Limited, a resident contractor who, under the
contract dated 15th October, 2020, manufactures a product according to specification of
Max Limited by using materials purchased from Max Limited.
2 A company operating a television channel makes payment of Rs. 5 lakh to a former Indian
cricketer on 10th March, 2021 for making running commentary of a one-day cricket match.
3 EL Ltd., a foreign company, pays outside India, salary to its employee, Mr. Reghvan, a
foreign national and a non-resident, for services rendered in India.
Answer:
No Particulars
1 The definition of "work" under section 194C includes manufacturing or supplying a
product according to the requirement or specification of a customer by using material
purchased from such customer or its associate. In the instant case. Mini Limited
manufactures the product as per the specification given by Max Limited by using the raw
materials purchased from Max Limited. Therefore, it falls within the definition of
"work" under section 194C. Consequently, tax is to be deducted on the invoice value
excluding the value of material purchased from such customer if such value is mentioned
separately in the invoice. If the material component is not mentioned separately in the
invoice, tax is to be deducted on the whole of the invoice value.
2 Provisions for deduction of tax at source under section 194J are attracted in respect of
payment of fees for professional services, if the amount of such fees exceeds Rs. 30,000 in
the relevant financial year. The service rendered by a commentator in relation to sports

activities has been notified by the CBDT as a professional service for the purposes of
section 194J vide its Notification No. 88 dated 21st August.2008.Therefore, tax is required
to be deducted @7.5% from the fee of Rs. 5 lakhs payable to the former cricketer.
3 Section 195 requires deduction of tax at source by any person responsible for making
payment to a non-resident, any interest or any other sum chargeable the Income-tax Act,
1961 (other than income chargeable under the head Salaries’)
Section 192(1) requires 'any person" responsible for paying income under the head
‚Salaries‛ to deduct tax at source. Therefore, even if the payer is a foreign company,
section 192 would be applicable.
TDS provisions under section 192 are attracted, if the salary payable to a non-resident is
chargeable to tax in India. Under section 9(1)(ii), income which falls under the head
‚Salaries‛ shall be deemed to accrue or arise in India, if it is earned in India. Salary
payable for service rendered in India shall be regarded as income earned in India.
Therefore, salary paid to Mr. Raghavan, a non-resident, attracts tax liability in India, as he
has rendered services in India and the salary is attributable to such services.
Therefore, the foreign company, EL Limited, is liable to deduct tax at source under section
192 from salary of Mr. Raghavan.
Question 11:
Examine in the following cases the obligation of the person paying the income in respect of tax
deduction at source and indicate the due date for payment of such tax, wherever applicable.
No Particulars
1 MNO Ltd., the employer, credited salary due for the financial year 2020-21 amounting to
Rs. 3,40,000 to the account of Q an employee, in its books of account on 31.3.2021. Q has
not furnished any information about his income/loss from any other head or proof of
investments/payments qualifying for deduction under section 80C.
2 T. an individual whose total sales in business during the year ended 31.3.2020 was
Rs.2.20crores, paid Rs.9lacs by cheque on 1.1.2021to a contractor (an individual), for
construction of his factory building. No amount was credited earlier to the account of the
contractor in the books of T.
3 BCD Ltd. credited Rs. 28,000towards fees for professional services and Rs. 27,000 towards
fees for technical services to the account of HG in its books of account on 6.10.2020. The
total sum of Rs. 55,000was paid by cheque to HGon18.12.2020.

Answer:
No Particulars
1 Section 192 requires deduction of tax from salary at the time of payment. Thus, the
employer is not required to deduct tax at source when salary has not been paid but is
merely credited to the account of the employee in its books of account MNO Ltd.
therefore, is not required to deduct tax at source in respect of the salary merely credited to
the account of employee Q which is not paid.
If salary has been paid during the year to Q, then. MNO Ltd has to obtain from Q. the
evidence/proof/particulars of prescribed claims (including claim for set-off of loss) under
the provisions of the Act in such form and manner as may be prescribed.
If Q has not furnished any information about his income/loss under any other head or
proof of investments/expenditure qualifying for deduction under section 80C then the
employer has to deduct tax without considering any claim for any expenditure or set-off of
losses or deduction under section 80C.
2 An individual who has total sales, gross receipts or turnover from the business carried on
by him exceeding Rs. 1 crore in the immediately preceding financial year 2019-20 is liable
to deduct tax at source under section 194C for the financial year 2020-21 in respect of the
payment made to contractor exceeding Rs. 30,000 in a single contract and Rs. 1,00,000 in
aggregate of contracts during the financial year. Since, turnover of the individual T is Rs.
2.20 crores in the financial year 2019-20 and as the payment during financial year 2020-21
to the contractor has exceeded the limits prescribed in section 194C, tax has to be deducted
under section 194C.
The rate of tax deduction is 0.75% as the contractor is an individual.
3 The limit of Rs. 30,000 for non-deduction of tax under section 194J would apply separately
for fees for professional services and fees for technical services. This means that if a person
has rendered services falling under both the categories, tax need to be deducted if the fee
for each category does not exceed Rs. 30,000 even though the aggregate of the amounts
credited to the account of such person or paid to him for both the categories of services
exceed Rs. 30,000. Therefore, BCD Ltd. is not required to deduct tax at source in respect of
the fees either at the time of credit or at the time of payment.

Question 12:
Examine the liability for tax deduction at source in the following cases for the assessment year
2021-22:
No Particulars
1 Mr. Anand has been running a sole proprietary business with turnover of Rs.202 lakhs for
the A. Y.2020-21. He pays a monthly rent of Rs.15,000 for the office premises to Mr. R, the
owner of building and an individual. Besides, he also pays service charges of Rs.6,000 per
month to Mr. R towards the use of furniture, fixtures and vacant land appurtenant thereto.
2 By virtue of an agreement with a nationalized bank, a catering organization receives a sum
of Rs. 50,000 per month towards supply of food, water, snacks etc. during office hours to
the employees of the bank.
3 An Indian company pays gross salary including allowances and monetary perquisites
amounting to Rs. 7,30,000 to its General Manager. Besides, the company provides non-
monetary perquisites to him whose value is estimated at Rs. 1,20,000. General manager is
not opting for the provisions of section 115BAC.
4 A notified infrastructure debt fund eligible for exemption under section 10(47) of the
Income-tax Act 1961 pays interest of Rs. 5 lakhs to a company incorporated in USA. The
US Company incurred expenditure of Rs. 12,000 for earning such interest. The fund also
pays interest of Rs. 3 lakhs to Mr. X, who is a resident of a notified jurisdictional area.
Answer:
No Particulars
1 Where the payer is an individual or HUF whose total sales, gross receipts or turnover from
the business carried on by him exceed Rs. 1 crore during the financial year immediately
preceding financial year in which such rent was credited or paid, is liable to deduct tax at
source. Since the turnover from business of Mr. Anand was Rs. 202 lakhs for the A.Y.2020-
21, he is liable to deduct tax at source under section 194-1 in respect of rental payment
during the F.Y 2020-21.
Accordingly Mr. Anand is liable to deduct tax at source under section 194-1 on the rental
payments made. Section 194-1 provides that rent includes any payment by whatever name
called, for the use of land or building together with furniture, fittings etc. Therefore, in the
given case apart from monthly rent of Rs. 15,000 p.m., service charge of Rs. 6,000 p.m. for
use of furniture and fixtures would also attract TDS under section 194-1. Since the
aggregate rental payments of Rs. 2,52,000 to Mr. R during the financial year 2020-21
exceeds Rs. 2.40,000, Mr. Anand is liable to deduct tax at source @10% under section 194-1
from rent paid to Mr. R for April month and @7.5% from the rent paid for May. 2020 to
March, 2021.
2 The definition of "work" under Explanation to section 194-C includes catering services and
therefore, TDS provisions under section 194C are attracted in respect of payments to a
caterer. As the payment exceeds Rs. 30,000, the nationalized bank is required to deduct tax
at source at 2% on the payments made to catering organization for April, 2020 and 1.5%
for May, 2020 to March, 2021. If the catering organization is an individual or HUF, then the
tax deduction shall be @1% and 0.75% for the respective months.

3
1 Gross salary, allowances and monetary perquisites 7,30,000
2 Non-Monetary perquisites 1,20,000
3 Sub total 8,50,000
4 Less: Standard deduction under section 16(ia) 50,000
6 Tax Liability 75,400
7 Average rate of tax (Rs. 75,400 / Rs. 8,00,000 x 100) 9.425%
The company can deduct Rs. 75,400 at source from the salary of the General Manager at
the time of payment.
Alternatively, the company can pay tax on non-monetary perquisites as under -Tax on
non-monetary perquisites = 9.425% of Rs. 1,20,000 = Rs. 11,310
Balance to be deducted from salary = Rs. 64,090
If the company pays tax of Rs. 11,310 on non-monetary perquisites, the same is not a
deductible expenditure as per section 40(a). the amount of tax paid towards non-monetary
perquisite by the employer, however, is not chargeable to tax in the hands of the employee
as per section 10(10CC).
4 As per section 194LB, tax would be deductible @5% on gross interest paid/credited by a
notified infrastructure debt fund, eligible for exemption under section 10(47), to a foreign
company.
In the first case, since the payment is to a foreign company, health and education cess @4%
has to be added to the applicable rate of TDS. Therefore, the tax deductible under section
194LB would be Rs. 26,000 (i.e., 5.20% of Rs. 5 lakhs).
However, in case the notified infrastructure debt fund pays interest to a person who is a
resident of a notified jurisdictional area, section 94A will apply. Accordingly, tax would be
deductible @30% (plus health and education cess @4%) under section 94A, even though
section 194LB provides for deduction of tax at a concessional rate of 5%. Therefore, the tax
deductible in respect of payment of Rs. 3 lakh to Mr. X, who is a resident of a notified
jurisdictional area, would be Rs. 93,600, being 31.2% of Rs. 3,00,000.

Question 13:
The following issues arise in connection with the deduction of tax at source under Chapter XVII-
B. Examine the liability for tax deduction in these cases:
No Particulars
1 An employee of the Central Government receives arrears of salary for the earlier 3 years
He enquires whether he is liable for deduction of tax on the entire amount during the
current year.
2 A T.V. channel pays Rs.10 lakh on 1.9.2020 as prize money to the winner of a quiz
programme. 'Who will be a Millionaire"?
3
State Bank of India pays Rs.50,000 per month as rent to the Central Government for a
building in which one of its branches is situated.
4 A television company pays Rs.80,000 to a cameraman on 6th January. 2020 for shooting of a
documentary film.
5 A State Government pays Rs.22,000 on 2.7.2020 as commission to one of its agents on sale
of lottery tickets.
6 A Turf Club awards a jack-pot of Rs.5 lakh to the winner of one of its races on 1.2.2021.
Answer:
No Particulars
1 As per section 192, tax is deductible at source by any person who is responsible for paying
any income chargeable under the head Salaries'. However, as per sub-section (2A) of that
section, the employee will be entitled to relief u/s 89 and consequently he will be required
to furnish to the person responsible for making the payment, such particulars in the
prescribed form (i.e., Form No.10E). The person responsible for making the payment shall
compute the relief and take into account the same while deducting tax at source from
salary.
2 Under section 194B, the person responsible for paying by way of winnings from any card
game and other game in an amount exceeding Rs. 10,000 shall at the time of payment
deduct income-tax at 30%. Therefore, tax of Rs. 3 lakh has to be deducted at source from
the prize money of Rs. 10 lakh payable to the winner.
3 Section 194-1, which governs the deduction of tax at source on payment of rent, exceeding
Rs. 2,40,000 p.a„ is applicable to all taxable entities except individuals and HUFs, whose
total sales gross receipts or turnover from the business or profession carried on by him
does not exceed Rs. 1 crore in case of business and Rs. 50 lakhs in case of profession during
the financial year immediately preceding financial year in which such rent was credited or
paid, is liable to deduct tax at source. Section 196, however, provides exemption in respect
of payments made to Government from application of the provisions of tax deduction at
source.
Therefore, no tax is required to be deducted at source by State Bank of India from rental
payments to the Government.

4 If the cameraman is an employee of the T.V. company, the provisions of section 192 will
apply. However, if he is a professional, TDS provisions under section 194-J will apply. Tax
at 7.5% will have to be deducted at the time of credit of Rs. 80,000 or on its payment,
whichever is earlier.
5 Under section 194G, the person responsible for paying to any person, stocking,
distributing, purchasing or selling lottery tickets shall at the time of credit of the
commission or payment thereof, whichever is earlier, amounting to more than Rs. 15,000,
deduct income-tax at source @3.75%.
Accordingly, tax @3.75% under section 194G amounting to Rs. 825 has to be deducted
from commission payment of Rs. 22,000 to the agent of the State Government.
6 The TDS on payment by way of winnings from horse race is governed by section
194BB.Under this section, the person responsible for payment shall, at the time of
payment, deduct tax at source @ 30%, if the payment exceeds Rs.10,000.
Accordingly, tax @30% amounting to Rs. 1,50,000 has to be deducted from the winnings of
Rs. 5 lakh payable to the winner of the race.
Question 14:
Examine and compute the liability for deduction of tax at source, if any. In the cases stated
hereunder, for the financial year ended 31s' March, 2021
No Particulars
1 On 20.6.2020, Mr. X, a resident, made three separate transactions for acquiring house
property at Mumbai from Mr. Y for a consideration of Rs.90lakhs, an urban plot in Kolkata
from Mr. C for a sum of Rs.49,50,000 and rural agricultural land from Mr. D for a
consideration of Rs.60lakhs.
2 On 17.6.2020, a commission of Rs.50,000 was retained by the consignee 'ABC Packaging
Ltd.' and not remitted to the consignor 'XYZ Developers', while remitting the sale
consideration. Examine the obligation of the consignor to deduct tax at source.
3 Raj is working with AB Ltd. He is entitled to a salary of Rs. 55,000 per month w.e.f.
14.2020. He has a house property which is self-occupied. He paid an interest of Rs. 80,000
on loan, during the previous year 2020-21 The loan was taken for construction of house.
He has notified his employer AB Ltd. that there will be a loss of Rs. 80,000 in respect of this
house property for financial year ended 313.2021 Raj is not opting for the provisions of
section 115BAC.

Answer:
of TDS
1 Since the consideration for transfer of house property at Mumbai exceeds Rs.
50 lakhs, Mr. X, being the transferee, is required to deduct tax @0.75% under
section 194-IA on Rs. 90 lakhs, being the amount of consideration for transfer 67,500
of property, at the time of credit to the transferor account or payment,
whichever is earlier.
Mr. X is not required to deduct tax as source under section 194-IA from the
consideration of Rs. 49,50,000 paid to Mr. C for transfer of urban plot, since Nil
the consideration is less than Rs. 50 lakhs.
Mr. X is also not required to deduct tax at source under section 194-IA from
the consideration of Rs. 60 lakhs paid to Mr. D for transfer of rural
agricultural land, since the same is specifically excluded from the scope of Nil
immovable property for the purpose of tax deduction under section 194-IA.
Note - Section 194-IA requires every transferee responsible for paying any
sum as consideration for transfer of immovable property (land, other than
agricultural land, or building or part of building) to deduct tax. at the rate of
0.75% of such sum, at the time of credit of such sum to the account of the
resident transferor or at the time of payment of such sum to the resident
transferor, whichever is earlier. However, no tax is required to be deducted
where the consideration for transfer of an immovable property is less than
Rs.50 lakhs.
2 Section 194H requires deduction of tax at source @5% (3.75% from 14.5.2020
to 31.3.2021) from commission and brokerage payments to a resident.
However, no tax is to be deducted at source where the amount of such
payment does not exceed Rs. 15,000.
In the given case, 'ABC Packaging Ltd.', the consignee, has not remitted the
commission of Rs. 50,000 to the consignor 'XYZ Developers' while remitting
the sales consideration.
Since the retention of commission by the consignee/agent amounts to
constructive payment of the same to him by the consignor/principal,
deduction of tax at source is required to be made from the amount of
commission [CBDT Circular No.619 dated 4/12/1991].
Therefore, XYZ Developers has to deduct tax at source on Rs. 50,000 at the
rate of 3.75%. 1,875
3 Section 192 provides that tax is required to be deducted on the payment
made as salaries. Tax is to be deducted on the estimated income at the
average of income tax computed on the basis of the rates in force for the
financial year in which payment is made.
The employee may declare details of his other incomes (including loss under
the head Income from house property" but not any other loss) to his
employer. In this case, since Mr. Raj has notified his employer AB Ltd. of loss
from self-occupied house property, the employer has to take the same into
consideration for deduction of tax at source.
Therefore, AB Ltd. is required to deduct tax at source on the salary of Rs.
55,000 per month paid to Mr. Raj, in the following manner:

1 Income under the head salaries (Rs. 55,000 x 12) 6,60,000
2 Less: Standard deduction under section 16(ia) 50,000
19,240
4 Income under the head "house property" (80,000)
5 Gross total income 5,30,000
6 Less: Deduction under Chapter VI-A Nil
7 Total Income 5,30,000
8 Tax on Rs. 5,30,000 18,500
9 Add: Health and Education cess@4% 740
Question 15:
A foreign company seconded some employees to the assessee, an Indian collaborator. These
employees worked with the Indian collaborator throughout the P.Y. 2020-21. The employees
were in receipt of salary from the Indian collaborator. They were also in receipt of special
allowance directly from the foreign company in foreign currency outside India. The Indian
collaborator deducted tax under section 192, on the component of salary paid by it, without
taking into account the special allowance paid abroad by the foreign company in foreign
currency to these employees. For this reason, the Revenue authorities treated the Indian
collaborator as an 'assessee-in-default’ under section 201 for non-deduction of tax at source on
the "special allowance" component of salary paid by the foreign company.
Is such treatment by the Revenue Authorities and the consequent levy of interest and penalty
justified?
Answer:
Section 9(1)(ii)provides that any income which falls under the head ‚salaries‛ is deemed to
accrue or arise in India, if it is earned in India. The Explanation thereto further clarifies that
income payable for services rendered in India shall be regarded as income earned in India.
Section 192(1) requires the person responsible for paying any income chargeable under the head
-Salaries' to deduct income-tax. at the time of payment, at the average rate of income-tax
computed on the basis of the rates in force for the financial year on the amount payable.
Since the TDS provisions relating to payment of income chargeable under the head "Salaries"
form an integrated code along with the charging and computation provisions under the Act,
section 192(1) has to be read with section 9(1)(ii) and the Explanation thereto. Therefore, if any
payment under the head "Salaries" falls within section 9(1)(ii), then TDS provisions under
section 192 gets attracted. Consequently, the Indian tax deductor assessee is duty bound to
deduct, from the portion of salary paid by it, tax at source under section 192(1) on the entire
salary paid to the employee, including special allowance paid abroad to the employee by the
foreign company.

It was so held by the Apex Court in CIT, NewDelhi .EliLilly & Co.(India)P Ltd.(2009) 312ITR225.
In this case, all the employees are resident in India, since they have worked with the Indian
collaborator throughout the previous year 2020-21. If the tax due on special allowance received
from the foreign company is paid by the recipient-employees, then, the Indian collaborator
would not be treated as an assessee-in-default under section 201(1), if these resident-employees
have furnished a return of income under section 139on or before the due date of filing return of
income, disclosing such income, and have also furnished a certificate to this effect from an
accountant in the prescribed form. However, interest under section 201(1A)@1% per month or
part of month shall be payable by the Indian collaborator from the date on which such tax was
deductible to the date of furnishing of return by such resident employee.
In cases where the tax has not been paid by the recipient employee, the Assessing Officer can
proceed under section 201(1)to recover the shortfall in payment of tax and interest thereon
under section 201(1A).
However, no penalty under section 271C would be attracted, if the Indian collaborator was
under the genuine and bona fide belief that it was not under any obligation to deduct tax at
source from the special allowance paid by the foreign company. This is provided for under
section 273

CHAPTER - 10
PROCEDURAL ASPECTS
TDS
TDS on TDS on
Interest / Casual
Dividend Income
- 194I
- 193 - 194DA
- 192 - 194D - 194IA
- 194 - 194C - 194B - 194E - 194J * Refer
- 192A - 194G - 194IB
- 194A - 194M - 194BB - 195 - 194N Below
- 194F - 194H - 194IC
- 194K - 194O
- 194LA

CHAPTER - 10
PROCEDURAL ASPECTS
*SECTION REFERENCE – PROCEDURAL ASPECTS
SECTION PARTICULARS
195A Income Payable Net of Tax
196 Interest or dividend or other sums payable to government, reserve bank or certain
corporation
197 Certificate of deduction of tax at a lower rate
197A No deduction in certain cases
198 Tax deducted is income received
199 Credit for tax deducted at source
200 Duty of persons Deducting Tax
200A Computerized processing of TDS statements
201 Consequences of failure to deduct or pay
202 Deduction only one mode of recovery
203 Certificate of Tax deducted
204 Person responsible for paying TDS
205 Bar against direct demand on assessee
206A Furnishing of statements in respect of payment of any income to residents without
deduction of tax
206AA Mandatory requirement to furnishing PAN
SECTION 195A - INCOME PAYABLE NET OF TAX
1 Income In a case where under an agreement or other arrangement (other than
Payable agreement under section 192(1A) whereby employer agrees to pay tax on non -
‘net of tax’ monetary perquisites provided to employees), the tax chargeable on any
income is to be borne by the payer, then the amount on which tax shall be
deducted is determined as follows –
Amount on which tax has to be deducted at source = Income net of tax

/ 100% - Rate of TDS

2 Example As per an agreement, the income payable net of tax is Rs. 95,000. The rate of tax
is 5%. In such a case, the amount on which tax has been charged shall be
determined as follows -
(Income net of tax)/ (100% - Rate of TDS) = Rs. 95,000 / (100% - 5%) = Rs. 1,00,000.
Illustration 1
'X’ while making payment "net of tax" to a non - resident for providing technical services on a
world bank aided project had deducted tax out of such payments as per rates prescribed but says
that the payee is not entitled for the TDS certificate. Examine.
Solution
No Particulars
1  A payment made of net of tax" in terms of section 195A, refers to an
agreement/arrangement, where the tax chargeable on any income is borne by the payer of
the income, and for the purpose of deduction of tax at source, such income is increased to
such an amount as would after deduction of tax thereon, be equal to the net amount
payable under the agreement.
 As per section 198, any sum deducted in accordance with the provisions of chapter XVII -
B of the income - tax act. 1961 is deemed to be income received while computing the
income of the payee. Further, section 199, provides that credit for the tax deducted at
source and paid to the central government shall be given to the person from whose
income the deduction was made on the production of certificate furnished under section
203 of the income - tax act.
 As per section 203, every person deducting tax at source shall furnish to the payee a
certificate in the prescribed form within the prescribed time.
 Even in a case where x undertakes to pay the tax on the grossed up amount, the non -
resident shall be entitled for issue of certificate for tax deducted at source in respect of
payment made net of tax this has been clarified vide CBDT circular no. 785 dated
24.11.1999.
 Therefore, X has a legal obligation to issue TDS certificate to the non - resident, even if he
has made payment of income "Net of tax" to him

SECTION 196 - INTEREST OR DIVIDEND OR OTHER SUMS PAYABLE TO GOVERNMENT,

RESERVE BANK OR CERTAIN CORPORATION
1 Interest or dividend No deduction of tax shall be made by any person from any sums
or other sums payable to
payable to
Government, No Particulars
Reserve Bank or 1 The Government or
certain corporation 2 The Reserve Bank of India, or
3 A corporation established by or under a Central Act which is,
under any law for the time being in force, exempt from income
tax on its income, or
4 A Mutual Fund specified under section 10(23D)
5 Where such sum is payable to it by way of interest or divided
in respect of any securities or shares owned by it or in which it
has full beneficial interest, or any other income accruing or
arising to it.
No TDS Dedn
If any sum
Payable to
Interest or
Dividend in
MF Covered
Govt RBI Corporation respect of any
u/s 10(23D)
Securities
owned by it

SECTION 197 - CERTIFICATE OF DEDUCTION OF TAX AT A LOWER RATE
1 Applicability Section 197, 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 the
 Section 192,
 Section 193,
 Section 194,
 Section 194A,
 Section 194C,
 Section 194D,
 Section 194G,
 Section 194H,
 Section 194I,
 Section 194J,
 Section 194LA,
 Section 194LBB,
 Section 194LBC,
 Section 194M,
 Section 194O and
 Section 195 of the Act.
2 Application The assessee can make an application to the Assessing Officer for the
by the deduction of tax at a lower rate or for non - deduction of tax.
assessee
Can make for Dedn of Tax
Assessee an to AO at lower Rate or
Application for non - Dedn
3 Certificate by If the Assessing Officer is satisfied that the total income of the recipient
Assessing justifies the deduction of Income tax at lower rates or no deduction of
Officer income tax, as the case may be, he may give to the assessee a certificate to
this effect. However, as per section 206AA, such certificate will be issued
only if the applicant furnishes his PAN.
TI of Receipient Lower AO will issue

If AO
justifies Dedn rate or a certificate
Satisfied
at Nil Rate u/s 197
4 TDS at the The person responsible for paying the income shall deduct income tax at
rate specified such lower rates or deduct no tax as specified in the certificate until such
in the certificate is cancelled by the Assessing Officer.
certificate

If Assessee Certificate Deductor should As per the

received u/s 197 deduct TDS Certificate
SECTION 197A - NO DEDUCTION IN CERTAIN CASES
S.197A
Offshore Banking NPS Trust u/s

Form 15G / 15H
Unit 10(44)
1 No tax No deduction of tax shall be made under
deduction  section 192A or
u/s 192A,  Section 193 or
193, 194A,  Section 194A or
194D,  Section 194D or
194DA,  Section 194DA or
and 194I  Section 194I
 in the case of the person (not being a company or firm), if such, person
furnishes to the person responsible for paying any income of the nature
referred to in Section 192A or Section 193 or Section 194A, or Section
194D, or Section 194DA, or Section 194I, a declaration in writing in
duplicate in form 15G/ 15H to the effect that the tax on his estimated total
income of the PY in which such income is to be included in computing his
total income will be Nil.
 However, the above provision shall not apply (except in case of senior
citizen) where the aggregate of the amounts of such incomes credited or
paid or likely to be credited or paid during the PY in which such income is
to be included exceeds the maximum amount which is not chargeable to
the Income tax.
by any assessee Then NO For

If 15G/15H TDS
other than firm
should be
specific
form given
or company deducted sections

2 No No tax deduction at source shall be made by the offshore banking unit from
deduction interest paid to a non - resident or not ordinarily resident on deposit made by
when him, or on borrowing made by such unit from him.
payment
made by Offshore NR/NOR on
If interest
No TDS Banking Deposits made
off shore paid by
Unit to by them
banking
unit to
NR/NOR
3 No TDS No deduction of tax shall be made from any payment to any person for, or on
from behalf of, the new pension system trust referred to in section 10(44).
income of
New on or behalf of
Fom any To any
No TDS NPS trust u/s
Pension payment person
10(44)
System
Trust
4 Payer to The payer shall deliver to the
furnish
 Principal chief commissioner or
such
 chief commissioner or
declaration
 Principal Commissioner or
 Commissioner of Income tax,
 one copy of such declaration on or before seventh day of the month next
following the month in which the declaration is furnished to him.
However, as per Section 206AA, such declaration shall become invalid if no
PAN is furnished by deductee.
S.197A
S.192A S.193 S.194A S.194D S.194DA S.194I
applicable to
PAYMENT MADE TO SPECIFIED ASSOCIATIONS ETC. – NOT LIABLE / LIABLE AT LOWER

RATE OF TDS
No deduction of tax shall be made or deduction of tax shall be made at such lower rate, from
such payment to such person or class of persons including institutions, associations or body or
class of institutions, associations or bodies as may be notified by the Central Government in the
official gazette, in this behalf

No TDS or Lower TDS
Payment to Payment to Specified Payments to

Investment Fund Securitisation Trust Scheduled bank
Notification No Explanation
Notification No. Payment made to investment fund – not liable for TDS:
51/2015 dated 25 - 6 No deduction of tax under Chapter XVII of the said Act shall be made on
- 2015 the payments of the nature specified in Section 10(23FBA) of the said Act
received by any investment fund as defined in clause (a) of the explanation 1
of Section 115UB of the said Act.
Notification No. Payment of nature specified u/s 10 (23DA) made to securitization trust –
46/2016 dated 17 - 6 not liable for TDS:
- 2016 No deduction of tax under Chapter XVII of the said Act shall be made on the
payments of the nature specified in Section 10 (23DA) of the said Act
received by any securitization trust as defined in clause (d) of the
explanation to Section 115TC of the said Act.
Notification No. Specified payments made to scheduled banks or payment systems
47/2016 dated 17 - 6 company authorized by RBI – not liable for TDS:
– 2016 No deduction of tax under Chapter XVII of the said Act shall be made on the
payments of the nature specified below in case such payment is made by a
person –
No Particulars
1 To a bank listed in the second schedule to the Reserve Bank of India
Act, 1934 excluding a foreign bank, or
2 To any payments systems company authorized by the RBI under
section 4(2) of the payment and settlement systems at Act 2017
Namely –
No Particulars
1 Bank guarantee commission
2 Cash management service charges
3 Depository charges on maintenance of DEMAT accounts
4 Charges for warehousing services for commodities
5 Underwriting service charges

6 Clearing charges (MICR charges) including inter - change fee or any

other similar charges by whatever name called charged at the time of
settlement or for clearing activities under the payment and
settlement systems Act, 2007
7 Credit card or debit card commission for transaction between
merchant establishment and acquirer bank
SECTION 198 - TAX DEDUCTED IS INCOME RECEIVED
1 Tax  All sums deducted in accordance with the foregoing provisions of this
deducted is Chapter shall, for the purpose of computing the income of an assessee, be
income deemed to be income received.
received -  It has been provided that for the purpose of computing the income of an
Section 198 assessee, the tax paid under section 192(1A) (tax paid on non - monetary
perquisites), shall not be deeded to be income received.
 Similarly, the sum deducted in accordance with the provisions of Section
194N for the purpose of computing the income of an assessee, shall not be
deemed to be income received
Any sum
Should be deemed S.192(1A)
Deducted Except
as Income Received & S.194N
as TDS
SECTION – 199 - CREDIT FOR TAX DEDUCTED

1 Credit of Any deduction made in accordance with the foregoing provisions of this
TDS on Chapter and paid to the Central Govt.
furnishing  shall be treated as a payment of tax on behalf of the person from whose
of certificate income the deduction was made, or
of  of the owner of the security, or
deduction  of the depositor or
of tax at  of the owner of property or
source  of the unit holder, or
 of the share holder, as the case may be.
Shall be
Any TDS payment Respective
treated
deducted of Tax by person
as

2 Credit of tax Any sum referred to in section 192 (1A) and paid to the Central Government
paid under shall be treated as the tax paid on behalf of the person in respect of whose
section 192 income such payment of tax has been made
(1A)
Tax paid
Tax paid u/s Shall be
on behalf employee
192(1A) treated as
of
3 Mode and The Board may, for the purposes of giving credit in respect of tax deducted or
year in tax paid in terms of the provisions of this Chapter, make such rules as may be
which credit necessary, including the rules for the purposes of giving credit to a person
available other than those referred above and also the assessment year for which such
credit may be given
SECTION 200 - DUTY OF PERSONS DEDUCTING TAX
Duties of Deductor
Furnishing of TDS
Depositing of TDS Furnishing of
Quarterly Statements
or Tax within PTL within PTL
correction statement
1 Depositing Any person deducting any sum in accordance with the foregoing provisions of
of TDS this Chapter shall pay within the prescribed time, the sum so deducted to the
within credit of the Central Government or as the board directs.
prescribed
time TDS to the
Should be
deducted credit of within PTL
deposited
CG
2 Depositing Any person, being an employer referred u/s 192(1A), shall pay within the
of tax prescribed time, the tax to the credit of the Central Government or as the Board
under directs.
192(1A)
within Should be
Tax u/s within
deposited to the
prescribed deducted 192(1A) PTL
credit of CG
time

3 Governme  In case of an office of the Government,

nt  where the sum deducted in accordance with the foregoing provisions of
deductor this Chapter or tax referred to in Section 192(1A),
to furnish  has been paid to the credit of the Central Govt. without the production of a
prescribed challan, the Pay and Accounts Officer or the Treasury Officer or the
statement Cheque Drawing and Disbursing Officer or any other person, by whatever
to the name called, who is responsible for crediting such sum or tax to the credit
prescribed of the Central Govt.,
authority,  shall deliver or cause to be delivered to the prescribed income tax
where tax authority, or to the person authorized by such authority,
deducted  a statement in such form,
has been  verified in such manner,
paid  Setting forth such particulars and within such time as may be prescribed.
without
production Statement
In case of If TDS without
should be
of challan Govt Office paid challan
furnished
Penalty for delay in submission of prescribed statement - Section 272A:

 Rs. 100 for each day of continuing default, subject to the limit of the amount
of tax deductible or collectible in respect of which the statement is to be
furnished.
 According to Section 273B, no penalty shall be impossible if the assessee
proves that there was reasonable cause for the said failure.
4 Furnishing Any person deducting any sum or, as the case may be, any person being an
of employer referred under section 192(1A) shall, after paying the tax deducted
prescribed to the credit of the Central Govt. within the prescribed time, prepare such
statements statements for such period as may be prescribed and deliver or cause to be
delivered to the prescribed income tax authority or the person authorized by
such authority,
 such statement in such form and
 verified in such manner and
 setting forth such particulars and
 Within such time as may be prescribed.
Statements
After paying the should
Deductor within
tax deducted file
PTL
5 Correction The person may also deliver to the prescribed authority a correction statement
statement for rectification of any mistake or to add, delete or update the information
to be furnished in the statement delivered under this section in such form and
furnished verified in such manner as may be specified by the authority.

or to add delete or Deductor

If above Contains
update the can file a
statement any MAFR
information CS
Consequences of non -
furnishing of TDS
Returns
Fees u/s 234E Penalty u/s 234H
SECTION – 234- E – FEE FOR DEFAULT IN FURNISHING STATEMENTS
1 Fees for Rs. Where a person fails to deliver or cause to be delivered a statement within the
200 per day time limit prescribed under section 200(3) / 206C(3), he shall be liable to pay, by
for delay in way of fee, a sum of Rs. 200 for every day during which the failure continues.
furnishing
statements Rs. 200 for During which failure
Fees u/s 234E
every day continues
2 Fees cannot The amount of fee referred above shall not exceed the amount of tax deductible
exceed tax or collectible, as the case may be.
payable
Amt of fees Should not Amt of tax deductible or
u/s 234E exceed collectible
3 Fees to be The amount of fee referred above shall be paid before delivering or causing to
paid before be delivered a statement in accordance with section 200(3) / 206C(3)
furnishing
statements Amt of fees Should be Before delivering TDS /
u/s 234E paid TCS statement

SECTION – 234- H – PENALTY FOR FAILIURE TO FURNISH STATEMENTS
1 Applicability Without prejudice to the provisions of the Act, the AO may direct that a
person shall pay by way of penalty, if, he –
 Fails to deliver cause to be delivered a statement within the time limit
prescribed in Section 200(3) or 206(3) or
 Furnishes incorrect information in the statement which is required to be
delivered or caused to be delivered u/s 200(3) or 206C(3)
Penalty will be If deductor or furnish statements within

u/s 234H attrackted collector fails to PTL or furnish incorrect info
2 Amount of The penalty shall be a sum which shall not be less than Rs. 10,000 but which
Penalty may extend to Rs. 1, 00,000. However According to section 273B, no penalty
shall be imposable if the assessee proves that there was reasonable cause for
the said failure
Penalty u/s Minimum

Maximum Rs. 1,00,000
234H Rs. 10,000
3 No penalty to No penalty shall be levied for the figure referred to in (1)(a) above if, the
be imposed person proves that after paying tax deducted along with the fee and interest,
in certain if any, to the credit of CG he had delivered or cause to be delivered the
cases statements referred to in section 200(3) or 206C(3) before the expiry of a
period of 1 year from the time prescribed for delivering or causing to be
delivered such statement
Before the
No penalty u/s
expiry of period Form the PTL
234H
of 1 year
SECTION 200A - COMPUTERIZED PROCESSING OF TDS STATEMENTS
TDS Intimation Within 1 Year

will be u/s will be from the end of
Statement generated the FY in which
processed 200A
filed u/s 200 under 200A statement is filed

Processing of
TDS returns
Any incorrect
claim Intimation
Sum payable
Any AE apparent from Interest shall be
or refund Due
any prepared
information
1 Processing of Where a statement of tax deduction at source or a correction statement has
TDS statements been made by a person deducting any sum (hereafter referred to as
deductor) under section 200, such statement shall be processed in the
following manner, namely:
No Particulars
1 The sum deductible under this Chapter shall be computed after
making the following adjustments, namely -
 Any arithmetical error in the statement; or
 An incorrect claim, apparent from any information in the
statement
2 The interest, if any, shall be computed on the basis of the sums
deductible as computed in the statement
3 The fee, if any, shall be computed in accordance the provisions of
section 234E
4 The sum payable by, or the amount of refund due to, the
deductor shall be determined after adjustment of the amount
computed under (b) and (c) above against any amount paid
under section 200 or Section 201 or Section 234E and any amount
paid otherwise by way of tax or interest of fee
5 An intimation shall be prepared or generated and sent to the
deductor specifying the sum determined to be payable by, or the
amount of refund due to, him; and
6 The amount of refund due to the deductor shall be granted to the
deductor
2 Notes
1 Time limit for No intimation shall be sent after the expiry of
sending one year from the end of the FY in which the
intimation statement is filed

2 Meaning of ‚An incorrect claim apparent from any

incorrect claim information in the statement‛ shall mean a
claim, on the basis of an entry, in the
statement –
a) Of an item, which is inconsistent with
another entry of the same or some other
item in such statement
b) In respect of rate of deduction of tax at
source, where such rate is not in
accordance with the provisions of this
Act
3 Scheme for For the purposes of processing of statements, the Board may make a
centralized scheme for centralized processing of statements of tax deducted at source
processing of to expeditiously determine the tax payable by, or the refund due to the
statements deductor.
Note: *tax paid in excess of that deducted / deductible at source – refund:
In case a deductor has paid tax in excess of that deducted by him, or, that
deductible by him, inadvertently, then, section 200A provides for the
refund of such excess tax paid to the deductor – Circular No. 2/2011 dated
27 - 4 - 2011.
SECTION 201 - CONSEQUENCES OF FAILURE TO DEDUCT OR PAY
Consequences
Prosecution
Assessee in Interest u/s
Penalty u/s 271C preceedings u/s
default 201(1A)
276B

ASSESSEE IN DEFAULT
1 Person The following persons shall be deemed to be an assessee in default if they do
deemed to not deduct the whole or any part of the tax or after deducting fails to pay the
be assessee tax –
in default No Particulars
1 Any person who is required to deduct any sum according to the Act,
or
2 An employer paying tax on non - monetary perquisites under section
192(1A)
Or after Or ER fails Then A'EE

Any Fails to
deducting fails to pay tax will treat as
Person deduct tax to pay tax on NMP AID
2 Deductor However, such person who fails to deduct the whole or any part of the tax on
not to be the sum paid/ credited to a payee shall not be deemed to be an assessee in
treated as default in respect of such tax if such payee, -
assessee in No Particulars
default 1 Has furnished his return of income under section 139
2 Has taken into account such sum for computing income in such
return of income; and
3 Has paid the tax due on the income declared by him in such return of
income
And the person furnishes a certificate to this effect from Chartered Accountant
in such form as may be prescribed
3 Time - limit No order shall be made u/s 201(1) deeming a person to be an assessee in
for deeming default for failure to deduct the whole or any part of the tax from a person
the assessee resident in India, at any time after the expire of –
to be in No Particulars Amt
default 1 Seven years from the end of the financial year in which Xxx
payment is made or credit is given
2 Two years from the end of the financial year in which the Xxx
correction statement is delivered under the proviso to Section
200(3)
3 1 or 2 Whichever is later xxxx

Scope of this provision:

It must be noted that the aforesaid time limits do not apply to order where –
No Particulars
1 The deductor has deducted but not deposited the tax deducted at
source, as this would be a case of defalcation of government dues
2 The employer has failed to pay the tax wholly or partly, under section
192(1A) as the employee would not have paid tax on such perquisites
3 The deductee is a non - resident as it may not be administratively
possible to recover the tax from the non - resident
INTEREST UNDER 201(1A)
1 Liable to pay The defaulter shall be liable to pay simple interest as follows -
interest i. Rate of Interest and amount on which payable:
Cases Particulars
In case of non Interest at 1% per month or part thereof on amount of
- deduction such tax for the period from the date on which such tax
was deductible/ collectible to the date on which such is
deducted, and
In case of non Interest at 1.5% per month or part thereof on amount of
- payment such tax for the period from the date on which such tax
was deducted to the date on which such tax is actually
paid.
Rate of
Interest
In case of non - In case of non -

Dedn Payment
Interest @ 1% p.m. Interest @ 1.5% p.m.

or part thereof or part thereof
2 Time of Such interest shall be paid before furnishing the periodical statement
payment of
interest
3 Mandatory Such interest is of mandatory nature thus it is mandatory for the Assessing
nature of Officer to charge the interest on non - compliance of deduction of payment of
Interest tax. Further, it is the responsibility of the assessee in default to pay such
interest, the Revenue need not to issue any notice for the same – Kanoi
Industries P Ltd. v. Asst. CIT [2003] 261 ITR 188 (Cal.).

It has been provided that in case of any person, including the principal officer
of a company, who fails to deduct the whole or any part of the tax in
accordance with the provisions of this Chapter on the sum paid to a payee or
on the sum credited to the account of a payee, and not deemed to be an
assessee in default under section 201, the interest shall be payable from the
date on which such tax was deductible to the date of furnishing of return of
income by such payee
4 Tax & Where the tax has not been paid after it is deducted, the amount of the tax
Interest to be together with the amount of simple interest shall be a charge upon all the
‘charge’ on assets of the person or the company
assets

Illustration 1
An amount of Rs. 40,000 was paid to Mr. Dastur, an advocate on 1st July 2019 towards fees for his
professional services without deducting tax at source. Later on, a further sum of Rs 50,000 due to
him on 28 Feb 2021 from which tax at 7.5% (amounting to Rs. 6,750) the entire amount of Rs. 90,000
was deducted at source. The tax so deducted was deposited on 25th June 2020. Compute interest
chargeable by the deductor u/s 201(1A).
Ans:
Interest under section 201(1A) would be computed as follows (amount in Rs):
No Particulars Amt
1 1% on tax deductible but not deducted i.e. 1% on Rs. 3,000 for 8 months 240
1.5% on tax deducted but not deposited i.e. on Rs. 6,750 for 4 months 780
2 Total Interest 1260

PENALTY & PROCECUTION
1 Penalty No penalty shall be charged unless the Assessing Officer is satisfied that such
person has failed to deduct and pay the tax without good and sufficient
reasons.
Penalty OR has failed to Without good

Only if AO
will be deduct and pay & sufficient
satisfied that
Levied tax Reasons
2 Penalty for  If any person fails to deduct at source the whole or any part of the tax,
failure to then he shall be liable to pay, by way of penalty impossible by the Joint
deduct tax at Commissioner, a sum equal to the amount of tax which such person failed
source - to deduct or pay as aforesaid.
Section 271C  According section 273B, no penalty shall be impossible if the assessee
proves that there was reasonable cause for the said failure.
 Penalty for failure to pay to the credit of Central Government the tax
deducted at source is governed by the provisions of Section 221.
If any person
Penalty = Amt of
fails to deduct Penalty u/s 271C
tax not deducted
TDS
3 Prosecution  If a person fails to pay to the credit of the Central Government the tax
for failure to deducted/ collected at source by him, then he shall be punishable with
pay to the rigorous imprisonment for a term not less than 3 months but extending
credit of up to 7 years with fine.
Central  However, no prosecution shall be there if defaulter proves that there was
Government reasonable cause for such failure.
tax deducted  Prosecution to be made even if tax, interest and penalty paid: Once the
at source assessee fails to pay the TDS within the specified time limit, prosecution
[Section proceedings could be initiated against him under section 276B even if
276B] interest and penalty have been paid for the delay. Further, no separate
notice is required to be given by the Department before treating any
officer of the company as liable for prosecution in respect of offence by
such company – Madhumilan Syntex Ltd. v. UOI [2008] 290 ITR 199 (SC).
RI for a term not less
If any person Prosecution
than 3M but
fails to pay the proceedings
extending up to 7 yrs
deducted tax u/s 276B
with fine

202 - DEDUCTION ONLY ONE MODE OF RECOVERY

Deduction only one mode of recovery (Section 102)
No Particulars
1 Recovery of tax through deduction at source is only one method of recovery
2 The Assessing Officer can use any other prescribed methods of recovery in addition to tax
deducted at source
SECTION 203 - CERTIFICATE OF TAX DEDUCTED

1 Certificate Every person deducting tax shall, furnish to the payee, a certificate to the effect
to be that tax has been deducted, and
furnished to  specifying the amount so deducted,
payee  the rate at which the tax has been deducted and
within  such other particulars as may be prescribed.
prescribed
time - Amt of TDS
TDS
OR should - Rate of TDS
certificate
furnish
prescribing - Such other
Particulars
2 Employer to Every person, being an employer, referred to in section 192 (1A) shall, within
furnish such period, as may be prescribed furnish to the person in respect of whose
certificate income such payment of tax has been made, a
of tax paid  certificate to the effect that tax has been paid to the Central Government,
on non - and
monetary  specify the amount so paid,
perquisites  the rate at which the tax has been paid and
 Such other particulars as may be prescribed.
3 Penalty for A sum of Rs. 100 for every day during which the failure continues. According
failure to section 273B, no penalty shall be imposable if the assessee proves that there
furnish was reasonable cause for the said failure.
such
certificate - Penalty for non Rs. 100 per every
Penalty u/s
- furnishing of day During which
Section 272A(2)
TDS certificate FC
272A(2)

SECTION 204 - PERSON RESPONSIBLE FOR PAYING TDS

According to Section 204, the person responsible for paying taxes deducted at source means -
No Nature of payment / income - Person responsible for paying -

1 ‚Salaries‛, other than payments by
the Central / State Government No Particulars
1 The employer himself, or
2 If the employer is a company, the company
itself, including the principal officer thereof
2 ‚Interest on securities‛, other than The local authority, corporation or company, including
payments made by or on behalf of the principal officer thereof;
the Central/ State Government
3 Any sum payable to a non - resident The authorized person responsible for remitting such
Indian, being any sum representing sum to the non - resident Indian or for crediting such
consideration for the transfer by him sum to his Non - resident (External) Account
of any foreign exchange asset, which maintained in accordance with the FEMA, 1999, and
is not a short - term capital asset. any rules made thereunder;
‚Authorized person‛ shall have the meaning assigned
to it in Section 2(c) of FEMA, 1999
4 Furnishing of information relating to The payer himself, or if the payer is a company, the
payment to a nonresident, not company itself including the principal officer thereof.
being a company, or to a foreign
company, of any sum, whether or
not chargeable under the provisions
of this Act.
5 Credit, or, as the case maybe, The payer himself, or if the payer is a company, the
payment of any other sum company itself including the principal officer thereof.
chargeable under the provisions of
this Act.
6 Credit, or, as the case maybe, The drawing and disbursing officer or any other
payment of any other sum person, by whatever name called, responsible for
chargeable under the provisions of crediting, or paying such sum.
this Act made by or on behalf of the
Central / State Government
7 In case of a person not resident in The person himself or any person authorized by such
India person or the agent of such person in India including
any person treated as an agent under section
163.(Inserted by Finance Act, 2020 w.e.f. 01.04.2020)

205 - BAR AGAINST DIRECT DEMAND ON ASSESSEE
Where tax is deductable at source under any of the aforesaid sections, the assessee shall not be
called upon to pay the tax himself to the extent to which tax has been deducted from that income.
SECTION 206A - FURNISHING OF STATEMENTS IN RESPECT OF PAYMENT OF ANY

INCOME TO RESIDENTS WITHOUT DEDUCTION OF TAX
1 Periodical  Any banking company or
Statement  Co - operative society or
to be  public company referred to in the proviso to in Section 194A(3)(i)
furnished  Responsible for paying to a resident any income not exceeding RS. 40,000,
in respect of  where the payer is a banking company or a co - operative society, and
interest  Rs. 5,000 in any other case by way of interest (other than interest on
paid to securities),
resident  shall prepare such statement in such form,
without  containing such particulars for such period,
TDS  verified in such manner and
 within such time, as may be prescribed, and deliver or cause to be
delivered the said statement to the
 prescribed income tax authority or to the person authorized by such
authority
Should furnish The details of without

Specified
statement interest paid deducting
person
regarding to residents TDS
2 Periodical The Board may require any person, other than a person mentioned above,
statement to responsible for paying to a resident any income liable for deduction of tax at
be source under Chapter XVII,
furnished  to prepare such statement in such form, containing such particulars,
in respect of  for such period,
other  verified in such manner and
payments to  within such time, as may be prescribed, and
resident  deliver or cause to be delivered the said statement to the income tax
without authority or the authorized person.
TDS
Any person other to submit in respect
CBDT may
than specified periodical of other
require
person statement payments

3 Correction The person responsible for paying to a resident any income referred above may
of statement also deliver to the income tax authority, a correction statement for rectification
to be of any mistake or to add, delete or update the information furnished in the
furnished statement delivered under the said sub - section to such form and verified in
such manner, as may be prescribed.
Contains or to add delete or Deductor

If above
any update the can file a
statement CS
MAFR information
4 Penalty in A sum of RS. 100 every day during which the failure continues.
case of According to section 273B, no penalty shall be imposable if the assessee proves
failure to that there was reasonable cause for the said failure.
deliver such
statements Penalty for non -
within time furnishing of Penalty u/s Rs. 100 for
- Section statement u/s 272A(2) every day
272A (2) 206A
SECTION 206AA - MANDATORY REQUIREMENT TO FURNISHING PAN

1 PAN to be Every deductee (from whose income tax is to be deducted) shall furnish his
furnished PAN to the deductor and both shall indicate the same in all the
correspondence, bills, vouchers and other documents which are sent to each
other.
2 Consequences If the PAN is not furnished, then –
of failure to No Particulars
furnish PAN 1 TDS to be made at higher rate: the tax shall be deducted at the
highest of following rates –
No Particulars
1 At the rate specified in the relevant provision of this Act
2 At the rate or rates in force, as per the annual Finance Act
3 At the rate of 20%.(5% in case where the tax is required to be
deducted u/s 194 - O) Amended by Finance Act 2020
w.e.f.01.04.2020 i.e AY 2020 - 21
2 Any declaration under section 197A shall become invalid. In that case
also, the tax shall be deducted at the higher rate as computed in (a)
above

3 No certificate under section 197 for deduction of tax at lower rate

shall be granted
3 Wrong PAN Where the PAN provided to the deductor is invalid or does not belong to the
shall amount deductee, it shall be deemed that the deductee has not furnished his PAN
to ‘No PAN’ and the aforesaid provisions shall apply accordingly.
4 Non – The provisions of this section shall not apply to a non - resident, not being a
applicability company, or to a foreign company, in respect of –
No Particulars
1 Payment of interest on long term bonds as referred to in section
194LC; and
2 Any other payment subject to such conditions as may be prescribed
Notification Relaxation from deduction of tax at higher rate under section 206AA - Rule 37BC
No. 53/2016 1) In the case of a non - resident, not being a company or a foreign company
dated 24 - 6 – (hereafter referred to as ‘the deductee’) and not having permanent account
2016 number the provisions of section 206AA shall not apply in respect of payments
in the nature of interest, royalty, fees for technical services and payments on
transfer of any capital asset, if the deductee furnishes the details and the
documents specified in Rule 37BC (2) to the deductor.
2) The deductee referred to in Rule 37BC (1) shall in respect of payments specified
therein, furnish the following details and documents to the deductor namely –
No Particulars
1 Name, email id, contact number
2 Address in the country or specified territory outside India of which the
deductee is a resident
3 A certificate of his being resident in any country or specified territory
outside India from the Government of that country or specified territory if
the law of that country or specified territory provides for issuance of such
certificate
4 Tax identification Number of the deductee in the country or specified
territory of his residence and in case no such number is available, then a
unique number on the basis of which the deductee is identified by the
Government of that country or the specified territory of which he claims to
be a resident

CHAPTER - 1
TAX COLLECTED AT SOURCE
SECTION REFERENCE
SECTION PARTICULARS
206C Profits & Gains from the business of trading in alcoholic liquor, forest produce,
scrap etc.
206C(1) TCS by ‘Seller’ of Specified Goods.
206C(1A) Non Applicability of TCS
206C(1F) TCS @ 1%/0.75% on motorcar if consideration exceeds Rs. 10,00,000
206C(1C) TCS by licensor / Lessor
206C(1G)(a) TCS on remittance on Foreign currency by an authorized dealer (AD) under
liberalized remittance scheme (LRS) of Reserve Bank of India (RBI)
206C(1G)(b) Sale of overseas tour programme package ( OTPP/ package)
206C(1G) Certain common provision for obligation(s)
206C(1H) TCS on sale of goods where consideration exceeds Rs.50 Lakhs.

TAX COLLECTION AT SOURCE BY SELLER OF SPECIFIED GOODS – S.206C (1)
Applicability of TCS
Sale of
Goods
6 Specified Motor Licensor / Autherised Seller of
where
Goods Vehicle Lessor Dealer OTPP
Con. > Rs.
50 L
1 Tax Every seller shall collect tax at source from the buyer at the time of –
Collection at No Particulars Amt
source by 1 Debiting of the amount payable by the buyer to the Xxx
'Seller' of account of the buyer; or
specified 2 Receipt of such amount from the buyer in cash or by Xxx
goods - cheque or draft or any other mode
Section 3 1 or 2whichever is earlier Xxxx
206C(1)
2 Rate of TCS *Refer Table Below
3 Non -  No collection of tax shall be made in the case of a resident buyer,
applicability  if such buyer furnishes to the person responsible for collecting tax,
of TCS -  A declaration in writing in duplicate in the prescribed form and
Section verified in the prescribed manner
206C(1A)  to the effect that goods referred above 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
*RATES OF TCS BY SELLER: THE TAX SHALL BE COLLECTED AT FOLLOWING

PERCENTAGE OF THE AFORESAID AMOUNT –
Rate of TCS
No Nature of specified goods Reduced rates

Existing Rates (Applicable from 14 - 5
- 2020 to 31 - 3 - 2021)
1 Tendu leaves 5% 3.75%
Timber obtained under a forest lease or
2 2.5% 1.875%
under any other mode; or
Any other forest produce not being timber or
3 2.5% 1.875%
Tendu leaves
4 Alcoholic Liquor for human consumption; or 1% 1%
5 Scrap 1% 0.75%
6 Minerals, being coal or lignite or iron ore 1% 0.75%

Notes
No Particulars
1 "Seller" with respect to Section 206C(1)/(1F) means the
 Central Government,
 a State Government or
 any local authority or corporation or authority established by or under a Central, State
or Provincial Act, or
 any company or firm or
 co - operative society and also includes
 an individual or a Hindu undivided family whose total sales, gross receipts or turnover
from the business or profession carried on by him exceed Rs.1 crore in case of business
or Rs.50 lakh in case of profession during the financial year immediately preceding
the financial year in which the goods of the nature specified in the Table in sub -
section (1) are sold
2 Buyer doesn't include, -
No Particulars
1 A public sector company, Central or State Government, an embassy, a High
commission, legation, commission, consulate and the trade representation, of a
foreign State and a club; or
2 A buyer in retail sale of such goods purchased for his personal consumption
3 Scrap" means waste and scrap from the manufacture or mechanical working of materials
which is definitely not usable as such because of breakage, cutting up, wear and other
reasons
Selling 6 Then, Seller is

Seller is Specified Buyer liable to
Goods to collect TCS

MOTOR VEHICLE – S. 206C (1F)
Sale of
Goods
6 Specified Motor Licensor Autherised Seller of
where
Goods Vehicle /Lessor Dealer OTPP
Con. > Rs.
50 L
1 Tax collection at  Every person, being a seller,
source @ 1%/ 0.75% on  who receives any amount as consideration
motorcar if  for sale of a motor vehicle of the value exceeding
consideration exceeds Rs.10,00,000,
Rs.10,00,000 - Section  shall, at the time of receipt of such amount,
- 206C(1F)  collect from the buyer, a sum equal to 1% (0.75%applicable
from 14 - 05 - 2020 to 31 - 03 - 2021)of the sale consideration as
income - tax.
2 "Buyer" means A person who obtains in any sale, goods of the nature specified in
the said sub - section, but does not include,—
No Particulars
1 The Central Government, a State Government and an
embassy, a High Commission legation, commission,
consulate and the trade representation of a foreign State;
or
2 A local authority as defined in Explanation to Section
10(20); or
3 a public sector company which is engaged in the business
of carrying passengers
Selling For a Value Then, Seller

Seller is Motor exceeding is liable to
Vehicle Rs. 10L collect TCS

No Illustrations Answer
1 Whether TCS @ 1% /0.75% is To bring high value transaction within the tax net, section
in sale of motor vehicle at 206C has been amended to provide that the seller shall
retail level or also on sale of collect tax @ 1% /0.75%from the purchaser on sale of motor
motor vehicle by vehicle of the value exceeding Rs. 10 Lakhs. This is
manufactures to brought to cover all transaction of retail sales and
dealers/distributors accordingly, section 206C (1F) will not apply on sale of
motor vehicles by manufactures to dealers/distributors
2 Whether TCS @ 1% /0.75% is No, as per section 206(1F), the seller shall collect tax @ 1%
in sale of motor vehicle is /0.75% from the purchaser on sale of motor vehicle of the
applicable only to luxury value exceeding Rs. 10 Lakhs
cars?
3 Whether TCS @ 1% /0.75% is Government, institution notified under United Nation
applicable in the case of sale (privileges and immunities) Act 1947, and Embassies,
to Government Department, consulates, High Commission, legation, commission and
Embassies, consulates and trade representation of foreign state shall not be liable to
United Nation Institution, of levy of TCS @1% /0.75% under section 206C(1F)
motor vehicle or any other
goods or provision of services
4 Whether TCS is applicable on Tax is collected at source@ 1% /0.75%on sale of
each sale of motor vehicle or consideration of motor vehicle exceeding Rs. 10 Lakhs. It
on aggregate value of sale is applicable to each sale and not an aggregate value on
during the year sale made during the year
5 Whether TCS @ 1% /0.75% is The definition ‚Seller‛ as given in clause (C) of the
in sale of motor vehicle is Explanation below sub-section (11) of section 206C shall be
applicable in case of an applicable in case of sale of motor vehicles also
individual
6 How would the provisions of The provisions of TCS on sale of motor vehicle exceeding
TCS on sale of motor vehicle Rs 10 lakh is not dependent on mode of payment. Any sale
be applicable in a case where of motor vehicle exceeding 10 Lakh would attract TCS 1%
part of the payment is made /0.75%
in cash and part is made in by
cheque
7 Motor Vehicle worth Rs. 20 Tax at the rate of 1% at the time of booking and at the rate
Lakhs is sold and for which of 1% on remaining Rs. 15,00,000 at the time of delivery
and for which payments are shall be collected at source.
made in installments, one at
the time of booking and other
at the time of delivery. At the
time of Booking Rs. 5,00,000
are paid and Rs. 15,00,000 is
paid on the time of delivery.

LICENSOR & LESSOR – 206C (1C)
Sale of
Goods
where
Con. > Rs.
50 L
TAX COLLECTION AT SOURCE BY LICENSOR/ LESSOR - SECTION 206C (1C)
1 Person liable  Every person, who grants a lease or a licence or
to collect tax  enters into a contract or otherwise transfers any right or interest either
at source in whole or in part in any
 parking lot or toll plaza or mine or quarry, to licensee or lessee,
 Other than a public sector company
 for the use of such parking lot or toll plaza or mine or quarry for the
purpose of business,
 shall be liable to collect tax at source
2 Time of tax Such tax shall be collected at source at the time of –

collection
No Particulars Amt
1 Debiting of the amount payable by the licensee/lessee to xxx
the account of licensee or lessee; or
2 Receipt of such amount from license or lessee in cash or by xxx
cheque or draft or any other mode
3 Rate of tax 2%(1.5% applicable from 14 - 05 - 2020 to 31 - 03 - 2021)

collection
4 Note “Mining and quarrying‛ shall not include mining and quarrying of
mineral oil. ‚Mineral oil‛ includes petroleum and natural gas
- Parking Lot
Then, Licensor
Licensor or Grant Lease - Toll plaza or Lessor is
Lessor or Licence for - Mine liable to collect
TCS
- Quarry
Illustration
Govt grants lease of coal mine to Lalu Yadav and charged Rs. 1 crore for lease of coal mine. Lalu
Yadav sold coal of Rs. 10,00,000 to Sadhu Yadav. Sadhu Yadav sold coal of Rs. 15, 00,000 to Tata
Steel
Solution
Govt will collect TCS at 2% on Rs. 1 crore from Lalu Yadav. Lalu Yadav shall pay Rs. 1, 02,00,000
to Government

AUTHORIZED DEALER – S. 206C (1G) (A)
Sale of
Goods
where
Con. > Rs.
50 L
TCS ON REMITTANCE OF FOREIGN CURRENCY BY AN AUTHORIZED DEALER (AD)

UNDER LIBERALISED REMITTANCE SCHEME (LRS) OF RESERVE BANK OF INDIA
(RBI) - SECTION 206C (1G)(A) - INSERTED BY FINANCE ACT, 2020 W.E.F. 01 - 10 – 2020
1 Transaction  Receipt for remittance, under LRS, out of India,
liable to TCS  for a buyer,
 in respect of a purpose other than tour program package (‚other
remittance‛),
 if the remittance is Rs.7 lakhs or more.
2 Person liable to Every person being an authorised dealer (AD) is obliged to collect tax
collect tax at at source.
source
3 Authorised A Person authorised by the RBI under Section 10(1) of the FEMA Act,
dealer means 1999 to deal in foreign exchange or foreign security‛
4 Rate of TCS
No Particulars
1 Other remittance: 5% (10% in Non - Pan cases) of amount in
excess of Rs.7 lakhs
2 Remittance out of loan obtained from any financial
institution defined in section 80E for pursuing education, if
the remittance is more than Rs. 7 lakhs: 0.5% in excess of Rs. 7
lakhs (5% in Non - PAN cases).
5 When tax to be
No Particulars Amt
collected
1 Tax is to be collected at the time when the amount is xxx
debited to buyer's account
2 receipt of the amount for remittance xxx
6 No TCS The authorized dealer shall not collect the sum on an amount in respect
of which the sum has been collected by the seller.
Rs. 7L or more
Then, AD is
Authorized Remitting for for a purpose
liable to
Dealer a Buyer other than
collect TCS
OTPP

Illustration 1
X Ltd., Y Ltd., Z Ltd., D Ltd., and E Ltd. want to know the amount of tax collection at source in
the different cases given below –
No Particulars
1 On 30 - 10 - 2020, X wants to transfer Rs. 15 lakh to USA through X Ltd. (an authorized
foreign exchange dealer). The money will be transferred under LRS of RBI.
2 On 05 - 10 - 2020, Y wants to transfer Rs. 2 lakh to Canada through Y Ltd. (an authorized
foreign exchange dealer). further, on 01 - 12 - 2020, he wants to transfer Rs. 6 lakh to
Germany through Y Ltd.
3 On 01 - 10 - 2020, Z wants to transfer Rs. 4 lakh to Singapore through Z Ltd. (an authorized
foreign exchange dealer).Further, on 01 - 01 - 2020,he wants to transfer Rs. 6 lakh to Japan
through D Ltd.(another authorized foreign exchange dealer)
4 On 10 - 09 - 2020, SA Ltd. transfers Rs. 8 lakh to Canada through E Ltd. (an authorized
foreign exchange dealer). Further, on 01 - 03 - 2021, SA Ltd. transfers Rs. 6.5 lakh to USA
through E Ltd.
In none of the cases given above, remittance is out of loan obtained from a financial institution
for the purpose of pursuing any education.
Solution
Under section 206C (1G), an Authorized dealer who receives an amount (or aggregate of
amounts) of Rs. 7 lakh (or more) in a financial year for remittance out of India under the
Liberalized Remittance Scheme (LRS) of RBI, is required of collect tax at source. TCS rate is 5% (a
non - PAN/Aadhaar, it is 10%). If, however, tax is deducted by the remitter of money under any
provision of the Act, TCS provisions of section 206C (1G) are not applicable. TCS requirement in
the given cases is as follows —
No Particulars
1 Tax will be collected at source by X Ltd. @ 5% of [Rs. 15 lakh –Rs. 7 lakh] i.e. Rs. 8 lakh on
30 - 10 - 2020.
2 On 05 - 10 - 2020 Y Ltd (the authorized dealer) does not know whether the total remittance
by Y through it will exceed Rs. 7 lakh. Consequently, TCS is not required on 05 - 10 - 2020.
However, on 01 - 12 - 2020, the aggregate amount transferred by Y through Y Ltd. during
the financial year 2020 - 21, exceeds Rs. 7 lakh. Consequently, TCS @ 5% will be collected
on [Rs. 8 lakh – Rs. 7 lakh] i.e. Rs. 1 lakh on 01 - 12 - 2020.
3 Z Ltd. (authorized dealer) receives Rs. 4 lakh from Z for remittance to Singapore on 01 - 10
- 2020. As the amount does not exceed the threshold limit of Rs. 7 lakh, TCS is not required
by Z Ltd. from payment received from Z. Moreover, D ltd. (another authorized dealer)
receives Rs. 6 lakh from Z for remittance to Japan. As the amount of remittance by Z
through D Ltd. does not exceed Rs. 7 lakh, TCS is not required even by D Ltd.
4 The provisions of tax collection at source under section 206C(1G) by authorized dealer are
not applicable in case of remittance before 01 - 10 - 2020. Therefore, remittance of Rs. 8
lakh on 10.09.2020 is not subject to TCS. However, on remittance of Rs. 6.5 lakh on 01 - 03 -
2021.TCS provisions of section 206C(1G) are applicable (as aggregate remittance by S Ltd.
through E Ltd. during the financial year 2020 - 21 is more than Rs. 7 lakh). TCS on 01 - 03 -
2021 will be 5% of Rs. 6.5 lakh.

Illustration 2
G Ltd. and H Ltd. want to know their TCS obligation under section 206C(1G) below -
No Particulars
1 X takes an education load from HDFC Bank for his son’s MBA Course in Havard
University. Out of the sanctioned loan, Rs. 65 lakh is remitted by X through G Ltd. (an
authorized agent) on 16 - 12 - 2020.
2 Y’s son wants to complete his graduation from the London School of Economics. Total cost
of education (including boarding and lodging) is Rs. 1.50 crore. Y takes loan of Rs. 80 lakh
from PNB and the balance amount is financed out of his past savings. On 01 - 03 - 2021, he
remits Rs. 1.1 crore through H Ltd. (an authorised agent) as follows –
No Particulars
1 Rs. 60 lakh is remitted out of loan sanctioned by PNB; and
2 Rs. 50 lakh is remitted out of past savings of Y.
Solution
No Particulars
1 G Ltd. will collect tax at source @ 0.5% of Rs. 65 lakh – Rs. 7 lakh i.e Rs. 58 lakh within the
parameters of Sec. 206C(1G.)
2 H Ltd. will collect tax at source under section 206C(1G) as follows -
No Particulars Rs.
1 Remittance of Rs. 60 lakh out of education loan (0.5% of Rs. 53 lakh i.e. 26,500
Rs. 60 lakh – Rs. 7 lakh)
2 Remittance of Rs. 50 lakh out of sources other than education loan - 5% 2,15,000
of Rs. 43 lakh (Rs. 50 lakh – Rs. 7 lakh
3 Total 2,41,5000

SELLER OF OTPP – S. 206C(1G) (B)
Sale of
Goods
where
Con. > Rs.
50 L
SALE OF OVERSEAS TOUR PROGRAMME PACKAGE (OTPP/PACKAGE) -

SECTION 206C (1G)(B)
1 Meaning of  Any tour package which offers visit to a country or countries or
Overseas Tour territory or territories outside India and
Programme  includes expenses for travel or hotel stay or Boarding or lodging or
Package (OTPP)  any other expenditure of similar nature or in relation thereto.
2 Person liable to Seller of OTPP is obliged to collect tax on the amount
collect tax at received/receivable for sale of OTPP, from the buyer
source
3 Buyer  Buyer, though not defined for the purpose, could be any person
who purchases OTPP.
 It could be any Individual/ Firm/ LLP/ company or any other
person.
 It could be a Resident/ Non - Resident or a citizen/non/citizen.
4 Rate of TCS 5% on the amount received/receivable for OTPP. It could include all
expenses/charges included in the price of tour package.
5 When tax to be
collected No Particulars Amt
1 At the time of debit of amount to buyer’s account Xxx
2 Receipt Xxx
3 1 or 2 whichever is earlier Xxxx
For Visit to a Then, Seller of

Seller of OTPP To any Buyer country OTPP is liable
outside India to collect TCS

CERTAIN COMMON PROVISIONS FOR OBLIGATION(S) u/s 206C(1G)

No Particulars
1 If the buyer (i.e. Remitter/OTPP Purchaser) is obliged to deduct tax under some other
provision and has deducted tax, then TCS Provision shall not apply.
2 If the buyer is any one of the following, TCS provision would not apply –
 Central Government (CG),
 State Government,
 An embassy,
 A High Commission,
 A legation,
 A commission,
 A consulate,
 Trade representation of foreign State, and
 Local authority - as defined in Explanation below section 10(20)
SALE OF GOODS WHERE CONSIDERATION EXCEEDS Rs. 50 LAKHS – 206(1H)
Sale of
Goods
where
Con. > Rs.
50 L
TCS ON SALE OF GOODS WHERE CONSIDERATION EXCEEDS Rs. 50 LAKH -

SECTION 206C (1H)
1 Person liable  Every person, being a seller,
to collect tax at  who receives any amount as consideration for sale of any goods of
source the value or aggregate of such value exceeding Rs. 50 lakh in any
previous year,
 other than the goods being exported out of India or goods covered in
Section 206C(1)/(1F)/(1G)
 shall collect tax at source
2 Meaning of Seller means a person whose total sales, gross receipts of turnover from
seller the business carried on by him exceed Rs. 10 crore rupees during the
financial year immediately preceding the financial year in which the sale
of goods is carried out, not being a person as the Central government
may, by notification in the Official Gazette, specify for this purpose,
subject to such conditions as may be specified therein.
Thus, seller does not cover:
No Particulars
1 Any person not carrying on business
2 Any person carrying on business whose turnover does not
exceed Rs. 10 crores in preceding financial year; and
3 Person(s) notified by Central Government, for the purpose,
subject to fulfillment of conditions specified in the Notification
3 Meaning of "Buyer" means a person who purchases any goods, but does not
buyer include, -
No Particulars
1 The Central Government, a State Government, an embassy, a
High Commission, legation,
commission, consulate and the trade representation of a foreign
State; or
2 A local authority as defined in the Explanation to Section 10(20);
or
3 a person importing goods into India or any other person as the
Central Government may, by notification in the Official Gazette,
specify for this purpose, subject to such conditions as may be
specified therein
4 Rate of TCS  0.1% (0.075% applicable from 01 - 10 - 2020 to 31 - 03 - 2021) of the

sale consideration exceeding Rs. 50 lakh
 If the buyer has not provided the Permanent Account Number or the
Aadhaar number to the seller, the rate of TCS shall be 1%.
5 When tax to be The collection is to be made at the time of receipt of consideration for
collected sale of goods.
6 Non – TCS provisions shall not apply, if the buyer is liable to deduct tax at
Applicability source under any other provision of this Act on the goods purchased by
him from the seller and has deducted such amount.
If the seller
Seller is Where Con. >
satisfied some Seller is liable
Selling Any Rs. 50L in any
other condition to collect TCS
Goods PY And
then
ANALYSIS OF SECTION 206C (1H)
No TCS shall be
collected u/s 206C
(1H)
1.If goods are If Seller is

covered u/s providing
If seller is 206C(1) * services to the If buyer is
exporting goods
2. Motor Vehicle buyer even if the importing goods
to a Foreign
total services from abroad
Buyer 3. Overseas tour
exceeds Rs.
program
50,00,000
package

*Goods covered under section 206C (1)

 Alcoholic Liquor for Human Consumption
 Tendu Leaves
 Timber Obtained under forest Lease
 Timber obtained by any mode other than forest lease
 Any other forest produce
 Scrap
 Minerals, being coal or lignite or iron ore
Illustration 1
Discuss whether tax is required to be collected at source in following independent cases:
Consideration for sale of goods

Turnover of Turnover of the
(excluding exports) during –
Seller seller during seller in FY Buyer
FY 2020 - 21 2019 - 20 1 - 4 - 2020 and 1 - 10 - 2020 and
30 - 9 – 2020 31 - 3 - 2021
P Rs. 12 crore Rs. 9 crore A Ltd. Rs. 30 lakh Rs. 40 lakh
Q Rs. 9 crore Rs. 11 crore B Ltd. Rs. 40 lakh Rs. 20 lakh
Solution
TCS liability under section 206C (1H) is discussed as under -
Seller TCS liability

P Since the turnover in FY 2019 - 20 does not exceed Rs. 10 crore, hence no TCS Liability.
Q Since the turnover in FY 2019 - 20 exceeds Rs. 10 crore, hence tax is to be collected at
source @ 0.075% of Rs. 10 lakh (Rs. 60 lakh – Rs. 50 lakh).

CHAPTER - 2
PROCEDURAL ASPECTS OF TCS
SECTION REFERENCE
SEC PARTICULARS
206C(2) TCS is one of the modes of the recovery
206C(3) Payment of Tax to the credit of Central Government
206C(3A) Government collector to furnish prescribed statement to the prescribed authority,
where Tax collected has been paid without production of challan.
206C(3B) Filling of TCS correction Statement
206C(4) Credit of Tax collected
206C(5) Tax collection certificate to be furnished
206C(5B) Filling of return
206C(5D) Defective return
206C(6) Failure to collect Tax
206C(6) Persons deemed to be assessee in default
206C(7) Liable to pay interest
206C(8) Charge on asset
206C(9) Tax collection at lower Rate
&
206C(10)
PROCEURAL ASPECTS OF TCS
Collector furnishes
Collector collects tax as Collector deposits such Qurterly Return of TCS
per the provisions of tax to the credit of the intimating PAN of the
section 206C Central Government collectee and details of
TCS collected and paid
Prescribed income tax Collectee files return of

authority updates such Collector generates and income of claims credits of
information in tht general issues TCS certificate to TCS without the need of
account of the collectee - Collectee producing TCS certificate
S. 285BB in Form 26AS - S. 206C (5)

PROCEDURAL ASPECTS – DUTIES OF COLLECTOR
Duties of Collector
Payment of TCS Furnishing of

TCS Certificate Filing of Return
collected Statement
1 TCS is one of The power to recover tax by collection under this section shall be without
the modes of prejudice to any other mode of recovery
recovery -
Section
206C(2)
2 Payment of Any person collecting any amount under section 206C shall pay the
tax to the amount so collected to the credit of Central Government within the
credit of prescribed time
Central
Government to the
TCS Should be within
credit of
- Section Collected deposited PTL
CG
206C(3)
3  Any person collecting any tax at source as per the provisions of this
Furnishing of
statements Chapter, shall pay within prescribed time, the sum so collected to the
within credit of the Central Government or as the Board directs.
prescribed
Any Collecting Furnish within
time
Person TCS statement PTL
Penalty for failure to furnish statements, etc. - Section 271H

4 Government In case of an office of the Government, where the amount collected above
collector to been paid to the credit of the Central Government without the
furnish production of a challan, the Pay and Accounts Officer or the Treasury
prescribed Officer or the Cheque Drawing and Disbursing Officer or any other
statement to person, by whatever name called, who is responsible for crediting such
the tax to the credit of the Central Government, shall deliver or cause to be
prescribed delivered to the prescribed income - tax authority, or to the person
authority, authorised by such authority,
where tax  a statement in such form,
collected has  verified in such manner,
been paid  setting forth such particulars and
without  Within such time as may be prescribed.
production of
challan - Statement
In case of If TCS without
should be
Section Govt Office paid challan
furnished
206C(3A)

5 Penalty for A sum of Rs. 100 for every day during which the failure continues
failure to subject to the limit of the amount of tax collectible in respect of which the
furnish above statement is to be furnished.
statement - According to section 273B, no penalty shall be imposable if the assessee
Section proves that there was reasonable cause for the said failure
272A(2)
If TCS
Penalty u/s Rs. 100 for
stateme not filed
272A (2) every Day
nt
6 Filing of TCS The person may also deliver to the prescribed authority under the said
correction proviso, a correction statement for rectification of any mistake or to add,
statement - delete or update the information furnished in the statement delivered
Section under the said proviso in such form and verified in such manner, as may
206C(3B) be specified by the authority
or to add delete or
If above Contains
update the file a CS
statement any MAFR
information
7 Credit of tax  The buyer or licensee or lessee is entitled to avail credit of the tax
collected - collected at source, which is deposited by the seller or Lessor to the
Sec. 206C(4) account of the Central Government, on his behalf in a particular
assessment year in accordance with the rules as may be prescribed by the
Board from time to time
8 Tax collection Every person collecting tax at source shall within prescribed period
certificate to furnish to the person on whose credit tax is collected at source (i.e. buyer
be furnished or licensee/lessee), a certificate to the effect that tax has been collected,
- Section specifying amount and rate of such deduction/collection, and other
206C(5) particulars.
 The prescribed income - tax authority or the person authorized by such
authority shall, within the prescribed time after the end of each financial
year, prepare and deliver to the buyer/licensee or lessee, a statement in
the prescribed form specifying the amount of tax collected and such other
prescribed particulars
- Amt of TCS
Collecting TCS
Every - Rate of TCS
TCS should certificate
person
furnish prescribing - Such other
Particulars
9 Penalty for  A sum of Rs. 100 for every day during which the failure continues.
failure to  According to section 273B, no penalty shall be imposable if the
furnish any assesse proves that there was reasonable cause for the said failure
certificate or
return Penalty for Penalty Subject to
Rs. 100 for
required to Failure to furnish u/s 272A section
certificate
every day
(2) 273B
be furnished
- Section
272A(2)
10 Filing of  Any person collecting tax (other than in a case where the seller is a
return - company, the Central Government or a State Government) may
Section deliver the return to the prescribed income - tax authority in
206C(5B) accordance with the scheme specified by the Board on a floppy,

diskette, magnetic cartridge tape, CD - ROM or any other computer

readable media.
 Where the person collecting tax is a company or the Central
Government or State Government such person shall deliver such
return on computer media under the said scheme.
 These returns shall be furnished after the end of each financial year
within the prescribed time and in the manner as may be specified in
the scheme
11 Defective  Where the Assessing Officer considers that the return delivered or
return - caused to be delivered is defective,
Section  he may intimate the defect to the person collecting tax and
206C(5D)  give him an opportunity of rectifying the defect within a period of 15
days from the date of such intimation or such extended time as he
may allow and
 if the defect is not rectified within the said period of 15 days or,
extended period allowed,
 then, such return shall be treated as an invalid return and the
provisions of this Act shall apply as if such person had failed to
deliver the return

TCS – REMITTANCE CHART
Remittance - Rule 37CA
TCS by an
office of the TCS by others
Govt
With in one week

Without
from the last day of
production of IT With IT Challan
the month in which
Challan
collection is made
Within 7 days
Same day from the end of
the month of
collection
PAO / TO /
CDDO
Submit Submit
Quarterly Quarterly
Statement in Statement in
Form 24G to Form 27EQ to
agency DGIT
authorized by (systems) -
PDIT Rule - 31AA
(Systems)
Where Where
statements statements Quarter ended
Other Quater
relates to relates to Other March
March Months
On or before 15
On or before days from end 15th July / Oct
15th May
30th April of the relevant / Jan
month

FAILURE TO COLLECT TCS - CONSEQUENCES
Consequences of TCS not

Collected or Collected TCS is not
Paid
Procecution
Deemed as Liability to Charge on Penalty u/s
proceedings
AID pay Interest Asset 271CA
u/s 276B
1 Failure to  Any person responsible for collecting the tax who fails to collect the
collect tax - tax in accordance with the provisions of this section,
Section  shall be liable to pay the tax to the credit of the Central government
206C(6) in accordance with the above provisions
2 Person  If any person responsible for collecting tax in accordance with the
deemed to be provisions of section 206C(1)/(1C) does not collect the whole or any
assessee in part of the tax or
default -  after collecting, fails to pay the tax as required by or under this Act,
Section  He shall, without prejudice to any other consequences which he may
206C(6A) incur, be deemed to be an assessee in default in respect of the tax.
or after
Fails to Then A'EE
Any Collecting
Collect will treat
Person fails to pay
tax as AID
tax
3 Assesse not However, any person responsible for collecting tax in accordance with
treated as the provisions of section 206C(1)/(1C), who fails to collect the whole or
AID any part of the tax on the amount received from a buyer or licensee or
lessee or on the amount debited to the account of the buyer or licensee or
lessee shall not be deemed to be an assessee in default in respect of
such tax if such buyer licensee or lessee –
No Particulars
1 Has furnished his return of income under section 139
2 Has taken into account for computing income in such return of
income; and
3 Has paid the tax due on the income declared by him in such
return of income, and the person furnishes a certificate to this
effect from a CA in such form as may be prescribed
Further, no penalty shall be charged under section 221 from such person
unless the Assessing Officer is satisfied that the person has without good
and sufficient reasons failed to collect and pay the tax.
4 Liable to pay  If the person responsible for collecting tax does not collect the tax or
interest - after collecting the tax fails to pay it,
Section  he shall be liable to pay simple interest at the rate of 1% p.m. or part
206C(7) thereof on the amount of such tax
 from the date on which such tax was collectible to the date on which
the tax as actually paid and such interest shall be paid before

furnishing the quarterly statement for each quarter
However, in case any person responsible for collecting tax in accordance

with the provisions of this section,
 fails to collect the whole or any part of the tax on the tax on the
amount received from a buyer or licensee or lessee or on the amount
debited to the account of the buyer or licensee or lessee
 but is not deemed to be an assessee in default u/s 206C(6A),
 the interest shall be payable from the date on which such tax was
collectible to the date of furnishing of return of income by such buyer
or licensee or lessee
5 Charge on Where the tax has not been paid as aforesaid, after it is collected, the
assets - amount of the tax together with the amount of simple interest thereon
Section referred to in Section 206C(7) shall be a charge upon all the assets of the
206C(8) person responsible for collecting tax
TCS AT LOWER RATE
1 Tax  Where the Assessing Officer is satisfied that the total income of the
collection at buyer or licensee or lessee justifies the collection of the tax at any
lower rate - lower rate than the specified relevant rate,
Section  the Assessing Officer shall, on an application made by the buyer or
206C(9) & licensee or lessee in this behalf,
206C(10)  Give to him a certificate for collection of tax at such lower rate.
Can make for Collection of Tax

Assessee an to AO at lower Rate or for
Application non - Collection
The person responsible for collecting the tax shall collect the tax at the
rates specified in such certificate until such certificate is cancelled by the
Assessing Officer
If Assessee Certificate Collector should As per the

received u/s 206C(9) Collect TCS Certificate

PENALTY AND PROCECUTION
1 Penalty for  If any person fails to collect the whole or any part of the tax then, such
failure to person shall be liable to pay, by way of penalty imposable by the Joint
collect tax at Commissioner, a sum equal to the amount of tax which such person
source - failed to collect as aforesaid.
Section  According to Section 273B, no penalty shall be imposable if the
271CA assessee proves that there was reasonable cause for the said failure.
 Penalty for failure to pay to the credit of Central Government the tax
collected at source is governed by the provisions of Section 221
Penalty = Subject to
Penalty for non - S.
Amt not section
collection of TCS 271CA
collected 273B
2 Prosecution  If a person fails to pay to the credit of the Central Government the tax
for failure to deducted/ collected at source by him, then he shall be punishable
pay to the with rigorous imprisonment for a term not less than 3 months but
credit of extending up to 7 years with fine.
Central  However, no prosecution shall be there if defaulter proves that there
Government was reasonable cause for such failure.
tax deducted  Prosecution to be made even if tax, interest and penalty paid: Once
at source - the assessee fails to pay the TDS within the specified time limit,
Section 276B prosecution proceedings could be initiated against him under section
276B even if interest and penalty have been paid for the delay.
Further, no separate notice is required to be given by the Department
before treating any officer of the company as liable for prosecution in
respect of offence by such company – Madhumilan Syntex Ltd. v.
UOI [2008] 290 ITR 199 (SC).
RI for a term not less
If any person Prosecution
than 3M but
fails to pay the proceedings
extending up to 7 yrs
deducted tax u/s 276B with fine

CHAPTER - 3
PROCESSING OF TCS STATEMENT
SECTION REFERENCE
SEC PARTICULARS
206CB Processing of Statement of Tax collected at Source
206CC Requirement to furnish Permanent Account Number by Collectee
PROCESSING OF STATEMENTS OF TAX COLLECTED AT SOURCE - SECTION 206CB
Intimation Within 1 Year from

TCS
will be u/s will be the end of the FY
Statement
processed 206CB generated in which statement
filed u/s 206C
under 206CB is filed
Processing of
TCS returns
Any incorrect
claim Sum payable Intimation
Any AE apparent Interest or refund shall be
from any Due prepared
information
No Particulars Particulars
1 Processing of Where a statement of tax collection at source or a correction statement has
TCS been made by a person collecting any sum (herein referred to as collector)
Statement under section 206C, such statement shall be processed in the following
manner, namely : —
No Particulars
1 The sums collectible shall be computed after making the following
adjustments, namely:
No Particulars
1 any arithmetical error in the statement
2 an incorrect claim, apparent from any information in the
statement
2 The interest, if any, shall be computed on the basis of the sums

collectible as computed in the statement
3 the fee, if any, shall be computed in accordance with the
provisions of section 234E

4 The sum payable by, or the amount of refund due to, the collector,
shall be determined after adjustment of the amount computed
under (b) and (c) above against any amount paid under section
206C or section 234E and any amount paid otherwise by way of tax
or interest or fee
5 An intimation shall be prepared or generated and sent to the
collector specifying the sum determined to be payable by, or the
amount of refund due to, him under clause (d); and
6 The amount of refund due to the collector in pursuance of the
determination under clause (d) shall be granted to the collector.
2 Notes
1 Time limit for No intimation shall be sent after the expiry of
sending one year from the end of the FY in which the
intimation statement is filed
2 Meaning of ‚An incorrect claim apparent from any
incorrect claim information in the statement‛ shall mean a
claim, on the basis of an entry, in the
statement –
No Particulars
a Of an item, which is inconsistent with
another entry of the same or some
other item in such statement
b In respect of rate of deduction of tax
at source, where such rate is not in
accordance with the provisions of this
Act
3 Scheme for The Board may make a scheme for centralized processing of statements of
centralized tax collected at source to expeditiously determine the tax payable by, or
processing of the refund due to, the collector, as required under section 206CB(1).
statements

REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER BY COLLECTEE
SECTION 206CC
1 Collectee to furnish Any person paying any sum or amount, on which tax is collectible
PAN to Collector at source under Chapter XVII - BB (herein referred to as collectee)
shall furnish his Permanent Account Number to person
responsible for collecting such tax (herein referred to as collector).
2 TCS at higher rate if If PAN is not furnished by collectee to collector, then tax shall
PAN is not collected at the higher of the following rates, namely: -
furnished No Particulars
1 At twice the rate specified in the relevant provision of this
Act; or
2 At the rate of 5%.
3 Declaration without No declaration under section 206C (1A) shall be valid unless the
PAN not to be valid person furnishes his Permanent Account Number in such
declaration.
4 TCS at higher rate In case any declaration becomes invalid under section, 206CC(2),
in case of invalid the collector shall collect the tax at source in accordance with the
declaration above provisions.
5 Lower TCS No certificate under section 206C (9) shall be granted unless the
certificate not to be application made under that section contain the PAN of the
granted unless PAN applicant.
furnished
6 Quoting of PAN The collectee shall furnish his PAN to the collector and both shall
indicate the same in all the correspondence, bills, vouchers and
other documents which are sent to each other.
7 Invalid PAN means Where the PAN provided to the collector is invalid or does not
No PAN belong to the collectee, it shall be deemed that the that the collectee
has not furnished his Permanent Account Number to the collector
and the provisions of section 206CC(1) shall apply accordingly.
8 Non applicability The provisions of this section shall not apply to a non - resident
in case of non - who does not have permanent establishment in India.
resident collectee
Explanation
“Permanent Establishment” includes a fixed place of business through which the business of
the enterprise is wholly or partly carried on.

CHAPTER - 2
COMMON PROVISIONS OF TDS & TCS
AS PER RULE 30, THE DUE DATES FOR PAYMENT OF TAX DEDUCTED OR COLLECTED
AT SOURCE ARE FOLLOWS -
No Sums deducted by an office of the Sums deducted by any other deductor

government
1 where the tax is paid without Where the income or amount is credited or
production of an income - tax challan: paid in the month of March : on or before 30th
on the same day; April ; and
2 Where tax is paid accompanied by an In any other case: on or before 7 days from the
income - tax challan: on or before 7 days end of the month in which the deduction is
from the end of the month in which the made; or income - tax is due u/s 192(1A).( In
deduction is made or income - tax is case of TCS, the due date is as given in (b)
due under section 192(1A). above, for all cases i.e. on or before 7 days from
end of the month in which collection is made)
DUE DATES OF ISSUANCE OF TDS CERTIFICATES - RULE 31
From No. of TDS

TDS on Periodicity Due date
certificate
Salaries Form No. 16 Annually By 15thimmediately following
financial year.
Other Form No. 16 A (in case of Quarterly Within 15 days from the due date
payments TCS Form No. 27D) for furnishing quarterly statement of
TDS under Rule 31A.
DUE DATES OF ISSUANCE OF TCS CERTIFICATES - RULE 37D
Certificate of tax collected at source under section 206C(5) in Form No. 27D shall be furnished by
the collector within 15 Days from the due date for furnishing the quarterly statement of TCS
under Rule 31AA.

DUE DATES FOR FURNISHING QUARTERLY TDS AND TCS STATEMENT
The relevant provisions are discussed as under -
Due dates for

Due dates for quarterly TDS
quarterly TCS
No Quarterly statements statements - Rule31A (Govt
statements - Rule
deductor& other deductor)
31AA
1 Quarter ending 30 June
th 31 July
st 15th July
2 Quarter ending 30th Sept 31st October 15th October
3 Quarter ending 31 Dec
st 31 January
st 15th January
4 Quarter ending 31st 31st May of the FY immediately 15th may of FY
March following the FY which the deduction immediately following
is made the FY in which the
collection is made.
Note:
No Particulars
1 Due dates for furnishing statement of TCS are same as due dates for furnishing statement
of TDS applicable to others
2 Form: 24Q (TDS salaries); 27Q(TDS on non - salaries for non - resident or not ordinarily
resident or foreign company); 26Q (TDS non - salaries for other assesse); 27EQ (TCS)

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[DIRECT TAXATION] AY 21-22

PROFIT LINKED DEDUCTIONS

Profit Linked Deductions

Set - 1 Set - 2 Set - 3 Set - 4

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 1

Deduction in respect of profits and gains from undertakings or enterprises engaged in

2 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

A – ELIGIBLE BUSINESS – INFRASTRUCTURE ENTERPRISE

4 Widening of In case the existing roads are widened by way of construction of

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 3

QUANTUM AND PERIOD OF DEDUCTION,

4 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

B – ELIGIBLE BUSINESS – INDUSTRIAL PARKS

QUANTUM AND PERIOD OF DEDUCTION,

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 5

2 Substantial An increase in the plant and machinery in the network of

transferred to the new business does not exceed 20% of the

QUANTUM AND PERIOD OF DEDUCTION,

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 7

QUANTUM AND PERIOD OF DEDUCTION,

8 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

2 Audit of The deduction shall be allowed to the industrial undertaking only if

Dedn u/s 80IA

If Inter units Profits will be

4 For the above In relation to any goods or services, means –

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 9

Shall not exceed

7 Power of The Central Government is empowered to declare any class of

8 Amalgamation  If any eligible undertaking of an Indian company is transferred

If Amalgamation / Dedn available

9 No However, the benefit of such transfer of deduction to the

10 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 11

12 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

Question for Understanding:-

Previous Year Business – A (80 – IA unit) Business - B

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 13

QUANTUM AND PERIOD OF DEDUCTION,

14 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

crore in the previous year relevant to the assessment year for

4 Limited It means a partnership referred to Section 2(1)(n) of the Limited

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 15

Objective of the Amendment:

QUANTUM AND PERIOD OF DEDUCTION,

16 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

QUESTION FOR UNDERSTANDING

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 17

18 CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED

PROFIT LINKED DEDUCTIONS

Profit Linked Deductions

Industrial Based Entity Based

Set - 1 Set - 2 Set - 3 Set - 4

CA DEEPAK PANDIAN & CA ANEESH NOOR MOHAMMED 1

Under taking for

2 CA DEEPAK P ANDIAN & CA ANEESH NOOR MOHAMMED

Under taking for Fruits &

A - AN INDUSTRIAL UNDERTAKING INCLUDING A SMALL SCALE INDUSTRIAL