TDS on payments to non-residents who do not furnish PAN shall deducted at DTAA rate if such rate less than 20%

What is the legal position on S.206AA! In this article, the provision of section 206AA, Tax Payers difficulties and CIT's probable response are discribed as under:

Where TDS has been deducted on the strength of the provisions of DTAAs and such rate is lower than 20%, the provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist on the tax deduction @ 20% where non-resident deductee has not furnished his PAN.

Provision: The section 206AA provides (in simple words) that when an Indian resident makes any payment to any Non-Resident of India (NR) the NR should provide his Permanent Account Number (PAN). If the NR does not have a PAN, the Indian payer should deduct tax at the rate of 20% or the appropriate rate – whichever is higher.

Tax Payer difficulties: Generally, the NR service provider insists that the Indian tax has to be borne by the Indian payer. The NR is not concerned about Indian law. We have no jurisdiction over an NR. In any case, NR wants to avoid doing anything with Indian Income-tax department. How can we ask him to obtain PAN! If he does not obtain PAN, we have to suffer this tax @ 20%. This may be well beyond our profits in the business. We cannot afford to pay this tax.

CIT’s probable response: Well, if an Indian resident were to do business with a U.S., U.K. or German Company, can the he say that he does not want to do anything with the other country’s income-tax department! If some one wants to do business with India, he has to abide by the Indian law. 

TDS on Salary ­ Key points an employee should know

Recently this article published in www.caclubindia.com by CMA Ramesh Krishnan.  This article is specialy for salaried Employee, which is as under :

Introduction: Taxation on salary is the vital area which should know not only by the employer but also employee should aware about this area. Section.192 of the Income tax act is crucial section under TDS which deals with the TDS deduction on Salary. This section describes the complete process of tax deduction from salary of employees. In this article, I will try to highlight some major points which a person as an employee should know and cooperate with employer to comply with the requirement of section 192 and ensure the correct deduction of tax from his/her salary.

1. Declaration of the Income details: Every employer need to collect the declaration from each employee about the income other than his/her salary income from their organization. This declaration needs to be given by the employee either beginning of the every financial year (April) or at the time of joining with new employer whichever is earlier. This declaration should be in the form 12C as per rule 26B and it should contain-
a. Employee name/PAN/Residential status
b. Income other than Salary like House property/Business/Capital gain/ Other sources
c. TDS or advance tax payment paid or deducted if any

2. Declaration of Investments and other deduction: Apart from the income details the employee has to declare his/her investment/savings details which eligible under chapter VI­A , such as various section like 80C/80D/80DD/80DDB/80E/80G/80U/80TTA etc. This will be declared in the form of 12B, In this form employee has to declare the following details-
a. Income from his/her previous employment (if he joining mid of the financial year)
b. Projected investment which eligible for chapter VI­A for the financial year
c. House property interest details (self occupied/let out)
d. Rent payment in case of claiming HRA exemption u/s.10(13A)
e. Children with education details for claiming Children education & hostel expenses allowance u/s.10(14)

This declaration also needs to submit with employer in the beginning of the financial year or at the time of joining whichever is earlier.

This above 2 declarations is the responsibility of the employee to give without fail with the employer to ensure proper & correct TDS deduction from the salary of an employee. 

After receiving those declarations, responsibility starts with employer. from here I will continue the article in Frequently asked questions (FAQ) mode-

How the employers calculate the tax of employee?
Ans: Employer will follow the steps like
a. Employer first arrive the Salary income of the employee in working organization with considering the eligible deductions/exemptions/allowance under the head Salaries.
b. Second step, in case employee joined mid of the financial year, employer adds the salary income of the employee from their previous employment.
c. After that employer will add the Income other than salary declared by the employee in form 12C with considering the deductions mentioned in the form.
d. Then they will arrive the eligible deduction under chapter VI­A as per employee declaration
e. Finally employer need to calculate the employee`s total tax liability for the year. During final liability, employer need to consider the any tax deducted from his income already during the financial year from any source and any advance tax paid by employee on his/her own. This TDS/advance tax only consider based on the payment proof or certificate from the deductor.

Based on the arrived tax liability, employer starts deduct the TDS from the employee`s salary in the equal monthly installment for the year or remaining period incase joined during mid of the year. 

What will happen if the employee fails to declare these forms? 
Ans: If employee fails to declare these forms, employer will consider the Salary income for the
present employment without giving the exemptions/deductions to arrive the tax liability. It will lead
the more or excess TDS deduction from the employee`s salary.

What is the consequence if the employee not declaring the Other Incomes and previous employment income to employer?
Ans: If the employee not declaring the other income details and previous employment details, there will not be any problem for the employer because employer has responsibility to ensure the TDS deduction from the salary paid from their company only. However, employee may get the huge tax burden and interest liability u/s.234B & 234C in the year end or at the time of filling the income tax return. If the employee fails to declare the previous employment income details, there may be chance of considering deduction under Chapter VI­A and basic exemption and house property interest deduction double time by the both employer and finally while consolidating salary from the both employer, it will be allowed one time and end up the employee with huge tax liability.

What is the consequence if employee declares wrong details in the declaration?
Ans: Giving incorrect or wrong information in the declaration will lead the excess or short deduction of tax and put the employee in to trouble during year end or income tax filling stage.

What are the documents need to be submitted with employer along with declaration?
Ans: Declarations need to be submitted first however supporting documents for other incomes and deductions during the year end to finalise the tax workings mostly by Jan/Feb/Mar, because employer responsibility to ensure to collect the proper documents for any deductions/exemptions.  Incase employee declared the details and not produce the documents with the employer also will lead the huge tax liability at the year end and gives the burden to employee.

Whether employee needs to produce the Original proof with employer?
Ans: Yes. Employee needs to submit the original proof of documents with employer for his all exemption and deductions claim to avoid the double deductions in multiple time.

Whether rent receipts & agreement is mandatory to claim the HRA exemption?
Ans: Yes. Original rent receipts are mandatory to claim the HRA exemption, rental agreement can be provided as optional but receipts are the base for claiming the exemption

What will deduction for rent if salary structure not having HRA portion?
Ans: Incase salary structure not having HRA component, then employee can opt the deduction u/s.80GG of rent paid subject to maximum of Rs.2500 per month deduction

Whether original medical bills required claiming the medical reimbursement?
Ans: Yes. Medical reimbursement of Rs.15000 per annum maximum exemption allowed, to avail this employee has to submit original medical bills with employer .However fixed medical allowance is fully taxable.

Whether proofs are require for claiming Leave Travel Allowance?
Ans: Previously it is mandatory to submit the document proofs but after the Supreme Court judgment in case of CIT vs Larsen & Toubro Ltd in 2009, for claiming LTA, proofs are not required only declaration if enough to claim the same.

What is the solution after submit the proofs also employer missed to consider or fail to submit the proofs but employee has the original documents?
Ans: Incase employee submitted all the documents but employer not consider or missed to consider the deductions and exemptions or employee fail to submit the documents before employer deduct the tax, then employee can claim the exemption and deductions based on the proof available with him/her in their Income tax return. However Leave Travel Concession or Allowance cannot claim by employee on their own in the income tax return since that need employer confirmation about the leave details etc.

Whether the employer can allow the 80G deduction during tax calculation?
Ans: Employer can allow the donations which are eligible for 100% deduction such as Government scheme like National defence fund, Prime Minister relief fund, Earth quake relief fund etc. but other donations which are comes under 50% eligibility need to be claimed by the employee in the income tax return directly.

How employee can ensure the TDS deducted from the employer has been deposited?
Ans: In the normal course the employer has to deposit the TDS deducted from the employee`s salary within 7th of the following month except March deduction (March deduction can be paid within 30th of April) every month employee cannot check whether paid or not however quarterly once employer has to submit the TDS return the same will be reflect in to employee`s form 26AS, So employees can login in their form 26AS and check whether TDS deducted from their salary has been deposited or not. If not, they can check with their employer accordingly.

Conclusion: The above points and information are very basic information to know as an employee to ensure their TDS from salaries. Basically the cooperation between the employer and employee in the TDS deduction will make more effective to minimize the error and ensure the proper deduction.

What happen if non-filing of Form within 300 Days u/s. 180(1)(c) of the Companies Act.

Let’s Start with Example of Section 180(1) (c) of the Companies Act, 2013 corresponds to section 293 of the companies Act, 1956 and the said section has been brought into effect from 12th September 2013. Section 293 of the Companies Act, 1956 Was Applicable Only To Public Companies i.e. Private Limited Companies Were Exempted from this requirement and therefore Private Limited Copanies could borrow any sums of money upto any limit without the need of seeking any approval from the members of the company.

*Now Section 180 is Applicable To All Companies i.e. public as well as private. So w.e.f. 12th September, 2013 onwards even private companies have to seek the approval of their members if they are intending to borrow monies in excess of their paid up share capital and free reserves.

THE RELEVANT SECTION 180(1) (C) STATES AS FOLLOWS:

180. (1) The Board of Directors of a company shall exercise the following powers only with the consent of the Company by A Special Resolution, namely:—

(c) To Borrow Money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up share capital and free reserves, apart from temporary loans obtained from the company’s bankers in the ordinary course of business: 

Explanation: For the purposes of this clause, the expression “temporary loans” means loans repayable on demand or within six months from the date of the loan such as short-term, cash credit arrangements, the discounting of bills and the issue of other short-term loans of a seasonal character, but does not include loans raised for the purpose of financial expenditure of a capital nature; So after reading of the above section implies that it has become Mandatory for private Companies to obtain approval of their members by way of Special Resolution passed at the general meeting that the company is allowed to borrow monies in excess of the paid up share capital and free reserves of the company, specifying thereby the maximum amount upto which monies could be borrowed by the company.

Since the section has been made effective from 12th September 2013, it would be imperative for private companies to get such special resolution passed at the earliest, since sub-section (5) above clearly stipulates that the onus of complying the provisions of this section is upon the private company since the lender can claim that he has acted in good faith.

Important TDS due dates for the month of March 2015

Important TDS due dates in the month of March 2015 has been given below: 

Due dates of TDS (tax deducted at source) for month of March:

Due date for tds deductible in the month of March is 30.04.2015. No separate date provided for deduction made on 31.03.2015. This due date(30.04.2015) is not applicable for tds deducted only on 31.03.2015 but also for tds deducted in full month of March(01.01.2015 to 31.03.2015). However for Govt. deductor, depositing tax through challan, due date for tax deducted in Month of March,15 remains 07.04.2015 

Due date for ETDS return for quarter ending on 31.03.2015:

Due date to deposit form 24Q ETDS return (salary TDS) for quarter ending 31.03.2015 is 15.05.2015.

Due date to deposit form 26Q Etds return (other than salary TDS) for quarter ending 31.03.2015 is 15.05.2015.

Due date to Issue Form 16 / form 16A for quarter/ year ending on 31.03.2015

Due date to issue form 16 (salary TDS certificate) for year ending 31.03.2015 is 31.05.2015.

Due date to issue form 16 (other than salary TDS) for quarter ending 31.03.2015 is 30.05.2015. 

Source: www.tdsman.com

CBDT directs Chief CIT(TDS) to take follow-up actions with banks for deposit of TDS of March, 2015

Recently, CBDT has issued a letter all Chief Commissioner of Income Tax (TDS)-Delhi, Mumbai, Kolkata, C_bennai, Bengaluru & Ahmedabad as well as Pr. Chief Commissioner of Income Tax- Hyderabad, Pune, Nagpur, Bhubaneswar, Guwahati, Patna, Kochi, Chgandigarh, Lucknow, Kanpur, Bhopal & Jaipur to take follow-up actions with banks for deposit of TDS of March, 2015 as Monitoring of Budget Collection- Follow up of TDS to be paid by the banks.




Amendment to Sec.80-IB taking away tax benefit - Gujrat HC

Amendment made in section 80-IB(9) by adding an Explanation was not clarificatory, declaratory, curative or made "small repair" in the Act, but on the contrary takes away the accrued and vested right of the Petitioner which had matured after the judgments of ITAT. Therefore, the Explanation added by Finance (No.2) 2009 was a substantive law. Explanation added to Section 80-IB(9) by Finance Act (No.2) of 2009 is clearly unconstitutional, violative of Article 14 of the Constitution of India and is liable to be struck down

The disputed question was as to whether the benefits of tax holiday of seven years was available on each undertaking which has now been taken away by the amendment made in section 80-IB(9) by adding on Explanation that provides that all blocks licensed under a single contract shall be treated as a single undertaking

ITAT had found in favour of petitioner-assessee that each well/cluster of wells was a separate undertaking entitled to seven years tax holiday.

The Revenue had challenged the decision of the ITAT before the High Court and thereafter, they have a remedy before the Apex Court.

But, arbitrarily, the 100% tax deduction benefit could not be withdrawn by the Finance Minister or the legislature by amending Section 80-IB(9) of the Act retrospectively from an anterior date.

The amendment in such cases where already tax benefit had accrued and vested in the assessee could not be taken away by giving retrospective amendment to Section 80-IB(9) which is nothing but a substantive provision inserted by amendment and it can only operate prospectively and not retrospectively.

Explanation added to Section 80-IB(9) by Finance Act (No.2) of 2009 is clearly unconstitutional, violative of Article 14 of the Constitution of India and is liable to be struck down.

Source: www.taxmann.com

Latest e-TDS/TCS RPU Utility from Fin. Year 2007-2008.

Finally NSDL has provde JAVA base Utility Ver. 1.0 as CBDT Income Tax Return Utility to TDS Deductors for Preparing TDS/TCS Quarterly Statement from Financial Year 2007-2008 and on-wards.  This new latest e-TDS/TCS Return Preparation Utility is fully based on JAVA Plate-form (RPU Ver. 1.0). Apart from this new utility, we already working with RPU utility ver. 4.5 and 4.2 for preparation of e-TDS/TCS Return.  This new RPU JAVA Base Utility is very simple with following Key features :

Key features of RPU 1.0

  • NSDL e-TDS/TCS Return Preparation Utility in JAVA platform.
  • Preparation of Regular TDS/TCS Statement(s) for Form 24Q, 26Q, 27Q & 27EQ pertaining to Financial Year 2007-08 onwards (for all quarters).
  • NSDL RPU is a freely downloadable utility.
  • Incorporation of latest FVU Version 4.5 and 2.141.

Download New JAVA base RPU Utility Ver. 1.0 (Click Here)

Central Action Plan for the First Quarter TDS Statement for the Asstt. Year 2016-17.

Recently CBDT has issued a letter to all CCITs about Action Plan for 1st Quarter i.e. April, 2015 to June, 2015 of the Financial Year 2015-16.  The CBDT exhibit the Interim Action Plan for the First Quarter of Financial Year 2015-16.  In this action Plan key result for Assessment Units (including Central Charges, Int'I Taxation, TDS and Exemptions is takes place.  The CBDT further states about International Taxation and Transfer Pricing with all dates, which are as under :


Download Action Plan Letter (Click Here)

Tax Calculator for Salaried Employee with TDS Certificates & Tax Calculation For Asstt. Year 2015-16

TAX CALCULATION SOFTWARE FOR SALARIED EMPLOYEE
FOR ASSTT. YEAR 2015-16

We would like to inform you that with reference to circular No. 17/2014 dated 10.12.2014 issued by Income Tax Department to calculate Income Tax with all qualifying Deduction from Annual Salaries for Financial Year 2014-15 under section 192 of the Income Tax Act, 1961. Salaried employee can easily calculate their Tax liability and generate Form 16.  This is the final updated Tax Calculation utility for every salaried employee for the Asstt. Year 2015-16 with Form 16, monthwise salary statement, tax calculation sheet.

Facility of this software:
It is easy wat to Calculate Income Tax including Month-wise Salary Statement and Form 16 (Annexure "A" and "B") in TRACE format. This utility helps to employee to calculate tax liability with all applicable deductions, exemptions etc.

This utility covered by Deduction of Chapter-VIA and other Deductions as per circular of Income Tax Department for Salaried Employee.

This Software is based on Income Tax circular issued by Income Tax Department for Salaried Employee for Assessment Year 2015-16.

Physical Requirements:
  • OS required Windows-2000, XP, Vista, Windows-7, Windows-8 etc.
  • MS Office-7 or Above Version is required.
  • Printing Facility Provides on Inkjet, Ledger Printer and other printers.
  • Required Standard A4 Size Paper Sheets.
Data Entry:
  • Only  "White" Cells are provide for input data.
  • Press Mouse Buttons for applications which you want to operate.
Key Features:
  • It maintain Each Employee Data.
  • It Calculate Gross Income as per current D.A. Rates automatically as per Government D.A. Rates.
  • It Provides Facility to Enter Data Manually along with all Arrears etc.
  • It Calculate Tax Liability.
  • It Display Month-wise Salary Statement for Asstt. Year 2013-14.
  • It Generate TDS Certificate (Form 16) Automatically with Annexure "B".