Unit -4

TDS,TCS,Advance Payment of TAX

TDS (Tax deduction at sources)
With a view to reducing the problems of tax
evasion, the act has made provisions to deduct
tax on certain incomes at the time when the
income earner receives them.
Assessee is responsible for making payment of
such incomes are required to deduct income tax
at the prescribed rates before actual payment of
income.
Scheme of TDS
Salary and other than salary( Interest,
dividend, rent, lottery winnings, winnings of
races, compensation etc.
a person who is required to deduct tax at
source, does not deduct or after deducting fails
to pay, the whole or any part of tax, then such
person shall be deemed to be an assessee in
default in respect of such tax u/s 201(10) and
will be liable for payment of tax, interest
penalty.
Interest penalty
If assessee is liable to pay tax then he must pay it, not
paying or delaying, the Section 201 of the IT explains
about the interest charged on such person on late
payments on TDS.
Situation Interest rates Period of interest

Delay in deduction of 1% per month or From the month in

TDS part thereof which TDS was
deducted to the date
of deduction
Delay on payment of 1.5% per month or From the month in
TDS part thereof which TDS was
deducted to the date
of payment of tax
Interest penalty
For defaults furnishing return of income (Sec.
234A)- if the return is furnished after due date
or is not furnished, and you have outstanding
tax liability, IT-department can panelize by
charging interest and assessee is liable to pay
interest.
Interest is not charged- if you have failed to file
the return on time but paid your taxes on time.
Delay in filling income tax return- 234A
Delay in payment of advance tax-234B
Interest penalty

Rate of interest 1% per month or part of the

month. (Simple interest) any
fraction of a month will be
treated full month for
calculating interest.

Period of interest From Ist day after the due date

of filling the return till the date
of actual filling of the return

Amount on which interest is Outstanding tax amount

payable
When & how tax is to be deducted at source from
salary
Who is the tax payer Employer

Who is the recipient Employee

Payment covered Taxable salary of the employee

At what time tax has to be At the time of payment

deducted at source
Maximum amount which can be The amount of exemption limit
paid without tax deduction
Rate of deduction at source Normal rates application to an
individual
TDS tax rate
Salary-Normal rates applicable for an individual
Interest on securities- 10% (no TDS from the amount
of interest payable- debentures issued by co-operative
society and any security from Government.
Interest other than securities- 10% (no TDS when
amount of interest credited up to 10,000 from Banks,
Dividend received – 10% (provision not applicable
when dividend covered by section 115-O)
Winnings from lotteries/card games – 30% (provision
not applicable when amount of payment is Rs. 10,000 or
less)
TDS tax rate
Winnings from horse races- 30% (provision not
applicable when amount of payment is Rs. 10,000 or
less)
National Saving scheme- 10% (no, TDS if interest is
Rs. 2500 or less
Fee for professional & Technical services– 10%
(provision not applicable when amount of payment is
Rs. 30,000 or less)
Payment of LIC – 1% (provision not applicable when
policy payments are exempted u/s 10(10 D, like –
payment u/s 80-DD, keyman insurance policy) , In case
the sum is received against death , will be exempted
TDS
Whatever amount of tax is deducted at sources
shall be deposited in Government treasury
within the stipulated time.
The recipient of income is liable to pay tax on
the gross amount and the amount deducted at
sources is adjusted against his final tax liability
TDS certificate- Given to employee in Form
No. 16 annually on or before may 31st after the
end of financial year.
Tax Collected at source (TCS)
It is to be collected by the seller from the buyer
at the time of sale of specified category of
goods.
TCS is set for business or trade in Alcoholic
liquor, forest produce, scrap etc. Various lease,
license and contracts related to areas like
parking lots, mines and toll plaza also fall under
the umbrella of CST.
Tax Collected at source (TCS)
The seller or collector is required to deposit it in
any certified bank.
TCS implemented to control tax evasion and
also to facilitate proper tax collection in India.
Seller means government/local authority/ Firm/
company/co-operative societies
Individual or HUF ( if covered u/s 44AD)
Tax Collected at source (TCS)
Buyer means who obtains in any sales by way of
auction, or tender or any other mode, but will
not include
A) Public sector companies
B) Government
C) Clubs such as sports clubs and social clubs.
d) A buyer in the retail sale of such goods
purchased for personal consumption.
Goods and transactions classified under
TCS
Alcoholic liquor-1%
Timber obtained under forest lease/or any other
mode -2.5%
Scrap -1%
Parking lot, toll plaza – 2%
Minerals like- Coal and Iron-1%
Advance payment of tax
Income tax should be paid in advance instead of
lump sum payment at year end.
Scheme of advance payment of tax = ‘Pay as you
earn’
Advance tax is paid on income that is not subject
to TDS
Businessmen and Professionals will have to pay
taxes in advance, same for companies
Every person is liable to pay advance tax if tax
liability is Rs. 10,000 or more.
Advance payment of tax
Income earned during 2017-18 is taxable in the
assessment year 2018-19, tax on such income is
payable during the previous year 2017-18 under
the scheme of advance tax.
Who should file it ?
Advance tax is applicable when an individual
has sources of income other than salary.
Assessee has to pay advance tax on total
income after adjusting losses.
How to pay advance tax?
It can be paid through payment challans at bank
branches authorized by the I-T department.
individual may also pay it online.
APT
Assessee not required to pay advance tax-
(a) Senior citizens not having income from
business or profession are not liable for advance
tax
(b) Every assessee, who has opted for the
scheme of computing business income under
section 44AD on presumptive basis at the rate
of 8% of turnover, is exempted related to such
business
income is calculated on presumptive basis rather than on
actual basis and declare income on certain percentage
Scheme of Presumptive Taxation (44AD)
To reduce the tax burden and to provide relief
from tedious work to small tax assessee.
Businesses adopting the scheme are exempt from
getting their books of account audited. They can
declare income at a prescribed rate.
Eligibility criteria- Individual, HUF and Firm.
Firm or individual’s annual turnover in the
previous year should not exceed Rs. 2 crore.
Compute their income on estimation basis and
calculated at the rate of 8% of total annual
turnover of business of the previous year
Section 44ADA

Professionals : 50% of sales with turnover less

than 50 lakh per annum
The benefit of presumptive taxation available to
professionals.
Interest penalty-default in payments of advance
tax-234B
If assessee who is liable to pay, has failed to pay, it is
also payable if an assessee has paid advance tax but the
amount of advance tax paid is less then 90% of assessed
tax.
Interest- payable on non payment @ 1% per month or
part thereof
Amount on which interest is payable- it is payable on
x. x =assessed tax as reduced TDS on any income taken
into account in computing advance tax.
Note- Interest u/s 234B is not applicable if AD paid
during the financial year (Previous) is 90% or more of x
Interest is not payable if x is less than Rs. 10,000
Interest penalty- for deferment of advance tax-
234C
Assessee has not paid advance tax or underestimated
installments. Interest is to be computed
Interest payable u/s 234C Rate of interest Period Amount on
of which
interest interest is
payable
If advance tax paid on or before Simple interest@ 1% 3 15% (a-b)-c
June 15th is less than 12% (a-b) per month months

If advance tax paid on or before Simple interest@ 1% 3 45% (a-b)-d

Sep15th is less than 36% (a-b) per month months

If advance tax paid on or before Simple interest@ 1% 3 75% (a-b)-e

Dec 15th is less than 75% (a-b) per month months

If advance tax paid on or before Simple interest@ 1% 100% (a-b)-

march 15th is less than 100% (a- f
b)
Interest penalty- for deferment of advance tax-
234C
a= Tax on total income declared in the return filed
b= Tax deducted
c= Amount of advance tax paid on or before June
15th of the financial year
d= Amount of advance tax paid on or before Sep
15th of the financial year
e= Amount of advance tax paid on or before Dec
15th of the financial year
f= Amount of advance tax paid on or before
March 15th of the financial year
If advance tax paid is more than required?
If amount paid as advance tax is higher than
total tax liability, the assessee will receive the
excess amount as a refund. interest@6% per
annum will also be paid by the I-T Department
on the excess amount. (if the amount is more
than 10% of the tax liability)
Payment of advance tax

Due date of installment Amount payable

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

payable

On or before Sep 15 Up to 45% of advance tax

On or before Dec 15 Up to 75% of advance tax

On or before March 15 Up to 100% of advance tax

Payment of advance tax -Taxpayer who have opted
for Presumptive Taxation scheme (Business
Income)
Due date of installment Amount payable

By 31st March 100% of the advance tax