Principles of

Taxation Laws

Deduction of Tax at Source

Section 192, 194B, 194BB, 194I

Advance Tax
Section 207-211

Submitted to: - Submitted by: -

Ms. Manika Chaudhary Himanshu Bindal
UILS B.Com. LL.B.(H)
284/19
Section E

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 Acknowledgement
I would like to express my special thanks of gratitude to my teacher Ms. Manika Chaudhary as
well as our director Dr. Shruti Bedi who gave me the opportunity to make a project on:

1. Deduction of Tax at Source (Section 192, 194B, 194BB, 194I).

2. Advance Tax (Section 207-211).

Secondly, I would like to thank my parents who, with their endless support, helped me
complete the work assigned in the appropriate time and with utmost care.

And lastly, I would like to express my gratitude towards my friends who also provided me with
all the help I needed while compiling this project on time.

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 Table of Contents

DEDUCTION OF TAX AT SOURCE & ADVANCE PAYMENT (SECTION 190)........ 1

SALARY (SECTION 192) ...................................................................................................... 1

WINNINGS FROM LOTTERIES, CROSSWORD PUZZLES AND HORSE RACES

(SECTION 194B, 194BB) ........................................................................................................ 4

RENT (SECTION 194I) .......................................................................................................... 6

ADVANCE TAX (SECTION 207-211) .................................................................................. 8

BIBLIOGRAPHY .................................................................................................................... 9

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 Deduction Of Tax At Source & Advance Payment
(Section 190)
The total income of an assessee for the previous year is taxable in the relevant assessment year.
For example, the total income for the P.Y. 2022-23 is taxable in the A.Y. 2023-24. However,
income-tax is recovered from the assessee in the previous year itself through –

1. Tax deduction at source (TDS)

2. Tax collection at source (TCS)
3. Payment of advance tax

Another mode of recovery of tax is from the employer through tax paid by him under section
192(1A) on the non-monetary perquisites provided to the employee.

These taxes are deductible from the total tax due from the assessee. The assessee, while filing
his return of income, has to pay self-assessment tax under section 140A, if tax is due on the
total income as per his return of income after adjusting, inter alia, TDS, TCS, relief of tax
claimed under section 89, tax credit claimed to be set off in accordance with the provisions of
section 115JD, any tax or interest payable according to the provisions of section 191(2) and
advance tax.

Salary (Section 192)

I. Applicability of TDS under Section 192
This section casts an obligation on every person responsible for paying any income
chargeable to tax under the head ‘Salaries’ to deduct income-tax on the amount payable.

II. Manner of deduction of tax

• Such income-tax has to be calculated at the average rate of income- tax
computed on the basis of the rates in force for the relevant financial year in
which the payment is made, on the estimated total income of the assessee.
Therefore, the liability to deduct tax at source in the case of salaries arises only
at the time of payment.

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• However, in case an employee intends to opt for concessional rate of tax under
section 115BAC and he intimates to the deductor, being his employer, of such
intention, then, the employer shall compute his total income, and deduct tax
thereon in accordance with the provisions of section 115BAC. If such intimation
is not made by the employee, the employer shall deduct tax at source without
considering the provision of section 115BAC of the Act.

• Average rate of income-tax means the rate arrived at by dividing the amount of
income-tax calculated on the total income, by such total income.

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

in sections 192(1A) and (1B). These sections provide that the employer may
pay this tax, at his option, in lieu of deduction of tax at source from salary
payable to the employee. Such tax will have to be worked out at the average rate
applicable to aggregate salary income of the employee and payment of tax will
have to be made every month along with tax deducted at source on monetary
payment of salary, allowances etc.

• An employer, being an eligible start up, responsible for paying any income to
the assessee by way of perquisite being any specified security or sweat equity
shares allotted or transferred free of cost or at concessional rate to the assessee,
has to deduct or pay, as the case may be, tax on the value of such perquisite
provided to its employee within 14 days from the earliest of the following dates:

1. After the expiry of 48 months from the end of the relevant

assessment year; or
2. from the date of the sale of such specified security or sweat
equity share by the assessee; or
3. from the date of the assessee ceasing to be the employee of the
employer who allotted such shares.

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 Such tax has to deducted or paid on the basis of rates in force for the financial
year in which said specified security or sweat equity share is allotted or
transferred.

• In cases where an assessee is simultaneously employed under more than one

employer or the assessee takes up a job with another employer during the
financial year after his resignation or retirement from the services of the former
employer, he may furnish the details of the income under the head “Salaries”
due or received by him from the other employer, the tax deducted therefrom and
such other particulars to his current employer. Thereupon, the subsequent
employer should take such information into consideration and then deduct the
tax remaining payable in respect of the employee’s remuneration from both the
employers put together for the relevant financial year.

• In respect of salary payments to employees of Government or to employees of

companies, co-operative societies, local authorities, universities, institutions,
associations or bodies, deduction of tax at source should be made after allowing
relief under section 89(1), where eligible.

• A tax payer having salary income in addition to other income chargeable to

tax for that financial year, may send to the employer, the following particulars
of:

1. such other income and of any tax deducted under any other provision;
2. loss, if any, under the head ‘Income from house property’.

The employer shall take the above particulars into account while calculating
tax deductible at source.

• It is also provided that except in cases where loss from house property has been
adjusted against salary income, the tax deductible from salary should not be
reduced as a consequence of making the above adjustments.

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III. Furnishing of statement of particulars of perquisites or profits in lieu of salary by
employer to employee
Sub-section (2C) provides that the employer shall furnish to the employee, a statement
in Form No. 12BA giving correct and complete particulars of perquisites or profits in
lieu of salary provided to him and the value thereof. The statement shall be in the
prescribed form and manner. This requirement is applicable only where the salary
paid/payable to an employee exceeds ` 1,50,000. For other employees, the particulars
of perquisites/profits in lieu of salary shall be given in Form 16 itself.

IV. Circular issued by CBT

Every year, the CBDT issues a circular giving details and direction to all employers for
the purpose of deduction of tax from salaries payable to the employees during the
relevant financial year. These instructions should be followed.

V. Requirement to obtain evidence or proof of claims from the employee by the

employer
Sub-section (2D) casts responsibility on the person responsible for paying any income
chargeable under the head “Salaries” to obtain from the assessee, the evidence or proof
or particulars of prescribed claims (including claim for set-off of loss) under the
provisions of the Act in the prescribed form and manner, for the purposes of

1. estimating income of the assessee; or

2. computing tax deductible under section 192(1).

Winnings From Lotteries, Crossword Puzzles And

Horse Races (Section 194B, 194BB)
I. Rate of tax on casual income
Any income of a casual and non-recurring nature of the type of winnings from lottery,
crossword puzzle, card game and other game of any sort, races including horse races,
etc. will be charged to income-tax at a flat rate of 30% [Section 115BB].

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 II. TDS on winning from lotteries, crossword puzzles etc.
According to the provisions of section 194B, every person responsible for paying to
any person, whether resident or non-resident, any income by way of winnings from
lottery or crossword puzzle or card game and other game of any sort, is required to
deduct income-tax therefrom at the rate of 30% if the amount of payment exceeds
10,000. Winnings by way of jackpot would also fall within the scope of section 194B.

III. Winnings partly in cash and partly in kind

In a case where the winnings are wholly in 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.

IV. Person responsible for deduction of tax under Section 194BB

Section 194BB casts responsibility on the following persons to deduct tax at source –

1. a bookmaker; or
2. a person to whom a license has been granted by the Government under any
law for the time being in force –

a) for horse racing in any race course; or

b) for arranging for wagering or betting in any race course.

V. Threshold limit and rate of TDS under Section 194BB

The obligation to deduct tax at source under section 194BB arises when the
abovementioned persons make payment to any person of any income by way of
winnings from any horse race in excess of 10,000. The rate applicable for deduction of
tax at source is 30%.
Tax will have to be deducted at source from winnings from horse races even though the
winnings may be paid to the person concerned in instalments of less than 10,000.
Similarly, in cases where the book-maker or other person responsible for paying the
winnings, credits such winnings and debits the losses to the individual account of the
punter, tax has to be deducted @30% on winnings before set-off of losses. Thereafter,
the net amount, after deduction of tax and losses, has to be paid to the winner.

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VI. Meaning of expression “horse race”
In the context of the provisions of section 194BB, the expression ‘any horse race’ used
therein must be taken to include, wherever the circumstances so necessitate, more than
one horse race.

Rent (Section 194I)

I. Applicability and rate of TDS
Any person other than individual or HUF, who is responsible for paying to a resident
any income by way of rent, shall deduct income tax at the rate of:

1. 2% in respect of rent for plant, machinery or equipment;

2. 10% in respect of other rental payments (i.e., rent for use of any land or
building, including factory building, or land appurtenant to a building,
including factory building, or furniture or fittings).

However, an individual or HUF whose total sales, gross receipts or turnover from the
business or profession carried on by him exceed ` 1 crore in case of business and ` 50
lakhs in case of profession during the financial year immediately preceding financial
year in which such rent was credited or paid, is liable to deduct tax at source.

II. Time of deduction

This deduction is to be made at the time of credit of such income to the account of the
payee or at the time of payment thereof in cash or by issue of cheque or draft or by any
other mode, whichever is earlier.
Where any such income is credited to any account, whether called “Suspense account”
or by any other name, in the books of account of the person liable to pay such income,
such crediting shall be deemed to be credit of such income to the account of the payee
and the provisions of this section will apply accordingly.

III. Threshold limit

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 No deduction need be made where the amount of such income or the aggregate of the
amounts of such income credited or paid or likely to be credited or paid during the
financial year to the account of the payee does not exceed 2,40,000.

IV. Meaning of rent

“Rent” means any payment, by whatever name called, under any lease, sub- lease,
tenancy or any other agreement or arrangement for the use of (either separately or
together) any –
a) land; or
b) building (including factory building); or
c) land appurtenant to a building (including factory building); or
d) machinery; or
e) plant; or
f) equipment; or
g) furniture; or
h) fittings,

whether or not any or all of the above are owned by the payee.

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 Advance Tax (Section 207-211)
I. Introduction
Advance tax is the second exception to the general rule that income earned during the
Previous Year is chargeable to tax in the immediately coming Assessment Year,
advance tax is another method of collection of tax by the central government in the
form of prepaid taxes. It is based upon the “Pay as you Earn” scheme. Under this
scheme, advance tax is payable during Financial Year immediately preceding the
relevant Assessment Year on estimated income, i.e., when income is earned and it is
given in instalments.

II. Liability to pay advance tax (Section 207)

The advance tax shall be payable during Financial Year in respect of the total income
of the assessee of that Financial Year which is otherwise chargeable to tax in the
immediately coming Assessment Year. Such income shall be taxable according to
provisions of Sections 208 to 219 and shall be referred to as current income.

III. Condition to pay advance tax (Section 208)

The advance tax shall be payable during any Financial year if the amount of tax payable
by such assessee during that Financial Year is Rs. 10,000 or more.

Further, any assessee who has opted for a scheme of computing business income under
Section 44AD on a presumptive basis @ 8% of turnover shall be exempted from
payment of advance tax related to such business.

Example: For the financial year 2021-2022 tax payable by M is Rs. 15,000 then he is
liable to pay tax in the same financial year.

IV. Computation of advance tax (Section 209)

The amount of advance tax payable by an assessee in any financial year shall be
computed in the following manner:

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 STEP I: Estimate the current income of the financial year for which advance tax is
payable. Estimated current income means income likely to be earned during the current
financial year. It includes all incomes under five heads of income. It also includes
agricultural income in any case or class of cases where it is required to be added for
deductions under Sections 80C-80U and carried forward losses will be adjusted.

STEP II: Calculate tax on such estimated current income at the rate for that financial
year.

STEP III: Add education cess and SHEC, if applicable.

STEP IV: Add surcharge, if applicable.

STEP V: Allow relief under Sections 89, 90, 90A, 91.

STEP VI: Deduct TDS or TCS during that financial year from any income.

STEP VII: The balance amount is called advance tax and where it is Rs. 10,000 or
more it shall be payable in the current financial year.

In the case of Mitsui Engg. & Ship Building Co. Ltd. vs CIT1, it has been held by the
courts that the assessee is not liable to pay advance tax to the extent the tax was
deductible or collectible but not actually deducted or collected.

V. Payment of advance tax [Section 210(1)]

Every person who is liable to pay tax shall, of his own, pay appropriate percentage,
calculated in accordance with the provision of Section 209, on or before the due date
mentioned under Section 211.

VI. Payment of advance tax and due dates (Section 211)

Advance tax on the current income calculated in the manner laid down in Section 209
shall be payable by:

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(2001) 79 ITD 481 (Del).

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 a) All the assessees, other than the assessee referred to in clause (b), who is
liable to pay the same, in four instalments during each financial year and the
due date of each instalment and the amount of such instalment shall be as
specified in the table below.
b) An eligible assessee in respect of an eligible business referred to in Section
44AD, to the extent of the whole amount of such advance tax during each
financial year on or before 15th March:

Due Date Assessee other than The eligible assessee in

mentioned in column 3 respect of an eligible
business referred to in
Section 44AD

On or before June 15 of Up to 15% of advance tax -

the current year
On or before September Up to 45% of advance tax -
15 of the current year
On or before December Up to 75% of advance tax -
15 of the current year
On or before March 15 of Up to 100% of advance Up to 100% of advance
the current year tax tax

Though the last date for paying the last instalment of advance tax is 15th March but if it
is paid on or before 31st March, it shall be treated on advance tax paid during the current
financial year.

Upward and downward revision of instalment [Section 210(2)]

A person who pays any instalment of advance tax may increase or decrease remaining
instalments, where his estimated current income has increased or decreased and
accordingly advance tax payable has increased or decreased.

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 Payment of advance tax in accordance with an order of the assessing officer
[Section 210(3)]
Where in the opinion of the assessing officer, the assessee is liable to pay advance tax
and fails to do so then he may pass an order in writing directing the assessee to pay
advance tax provided following conditions are fulfilled:

a) The assessee is already assessed by way of regular assessment in respect of

the total income of any previous year.
b) In the opinion of the assessing officer, the assessee is liable to pay advance
tax and has failed to do so.
c) Such order must be in writing and must specify instalments in which
advance tax should be paid.
d) Such order shall be treated as demand notice under Section 156 requiring
the assessee to pay advance tax in instalments on or before the due dates
mentioned in the order.
e) Such order may be passed at any time during the financial year but not after
last day of February.

VII. Computation of tax by assessing officer [Section 209]

For passing an order under Section 210(3), assessing officer shall take higher of the
following as the current income of the assessee:

a) The total income of the latest previous year in respect of which assessee has
been assigned by way of regular assessment. However, such income also
includes agricultural income of such previous year for rate purposes; or
b) The total income returned by the assessee for any subsequent previous year
(where the return is filed after the last regular assessment). However, such
income also includes the agricultural income of such previous year for rate
purposes.

VIII. Revised order by the assessing officer [Section 210(4)]

Where an order is passed by the assessing officer under Section 210(3) and later on:

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 a) A return of income is submitted by the assessee under Section 139 or in
accordance with a notice under Section 142 for a higher amount;
b) A regular assessment is made in respect or of any later financial year for a
higher amount,

Then assessing officer may revise his order under Section 210(4) and issue a demand
notice under Section 156 to such assessee on the basis of income declared in the return
or assessed by regular assessment.

However, the following conditions must be fulfilled:

a) Such order must be passed after passing an order under Section 210(3) but
before March 1 of the relevant financial year.
b) On receiving such order, the assessee has to pay tax in instalment on/before
due dates under Section 211, coming after the date of the amended order.

IX. Lower estimate by assessee [Section 210(5)]

Where notice is issued by the assessing officer and assessee is not satisfied by such
order and feels that his estimated current income and advance tax payable by him is
less than mentioned in the notice then:

a) Assessee can submit his own estimate of lower current income and advance
tax payment by him; and
b) He shall give intimation in the prescribed form [Form 28A] to assessing
officer on or before the date of the last instalment under Section 211.

X. Higher estimate by assessee [Section 210(6)]

Where the assessee feels that his estimated current income and advance tax payable is
more than calculated by the assessing officer and mentioned in the notice, then he shall
pay higher advance tax on the basis of his calculations. However, there is no need to
give any intimation.

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 Bibliography
• Jyoti Rattan, Taxation Laws (Bharat Law House Pvt. Ltd., Delhi, 15th edition,
2023).
• Advance tax, Tax Deduction at Source and Introduction to Tax Collection at
Source, available at: https://resource.cdn.icai.org/71147bos57143-cp9.pdf (Last
Visited on 16th March, 2024).

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