What Are The TDS Rates For FY 2006-07, FY 2007-08 And FY 2008-09?

The TDS rates for FY 2008-09 in excel chart can be found here


TDS rate for FY 2006-07 & 2007-08 is given below

You can view the rates of detailed TDS rates for FY 2006-07 and FY 2007-08 here

Tags: TDS

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Seven Answers A Resident Must Know Before Buying Property From A Non Resident?

Since the immovable property sale by non resident entails payment of sale consideration by the buyer who is resident Indian , tax has to be deducted at source and paid to government as per section 195 of the I T Act before paying the sum to the non resident seller of the property .
1. Who is responsible for deduction of tax?
As per section 195 of the I T Act , the person who is paying any sum to non resident , is responsible for deducting tax before making payment or crediting the payment in his accounts. So, the buyer of the property is responsible for deducting tax.
2.What are the consequences of non deduction of tax?
A resident buyer of the property from a non resident ,but fails to deduct the tax at the time of payment or credit of the amount to his account, shall be liable for penalty equal to the amount of tax not deducted or after deducting not depositing the tax .
A person is also liable for prosecution for such failure.
3.Can the resident buyer be assessed under I T Act for income arising to a non resident?
Yes, Clause ( C ) of section 163(1) of the I T Act says
“

For the purpose of this Act , agent in relation to a non-resident ,
include any person in India –
(a)…….
(b)……..
(c ) from or through
whom the non-resident is in receipt of any income , whether directly or
indirectly ; or……

So , a buyer through whom the income to non-resident arises can be treated as agent of the non-resident and therefore can be assessed as “representative assessee” as per section 160(1) of the I T Act.
4.What is the amount on which tax has to deduct?
Tax at source on Gross amount of payment or only on the gains.
Supreme Court set the confusion at rest by its order in Transmission Corporation (239 ITR 587) where in it has been ruled that tax should be deducted on the income embedded in the payment.

But confusion regarding quantum still remains there , regarding the decision about the computation of gain. The points for confusion for the deductor are knowledge of cost. The seller , may also claim exemption u/s 54 or 54EC , which may make his gains tax exempt, in that case there is no need of deduction of tax .Therefore, solution to sort out such problem are taking one of the following steps :

1. TDS should be deducted only after making an application in Form 13 before A.O u/s 195(2) for determination of the amount on which tax has to be deducted.
2. Even Non Resident seller can also make an application in Form 13 before A.O u/s 195(3) for determination of quantum of tax to be deducted .

5. What is the rate of deduction?
The rate of deduction in case of 20 % . plus Education Cess 3 %.
6.When is the amount required to be deducted and deposited?
The amount is required to be deposited
1. Within one week from the end of month in which the payment was made.
2. Within two months from the end of month in which credit was made.
7. What are other formalities under I T Laws to be done?
1. Get a Tax Deduction Number (TAN )by applying in Form 49B to Utitsl or NSDL.
2. File a statement of tax deduction in Form 27Q of the I T Act quoting TAN .
3. Issue a certificate of deduction in Form 16A to the Non Resident within one month from the end of month in which payment was made.

Have You Read These Answers?

40 Questions You Ever Wanted to Know About TAN Answered !

30 Questions on eTDS You Can't Afford Not To Know.

What Are The Laws Regarding Repatriation Of Sale Proceeds of Property Purchased by NRI ?

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Sub Letting Business May Invite TDS At Two Stages!

We are marketing service apartments we receive payments from company after deduction of TDS @ 15.45 (TDS on Rent ) and we make the payments to owners after deduction of our commission whether we have to deduct TDS on payments made to owners and TDS made by the companies for our payments is it correct . Ravishankar.B , Banglore

The rent of apartment is covered u/s 194I of the I T Act. In your case , you take the apartment on rent ,make it serviceable and then put on rent to other persons. For this , other persons pay you rent. In other words , you are subletting , off~course , with some enhancement in living condition of the apartment.Therefore, section 194I applies at two stages. Once when you receive the payments and once when you pay the rent to the owners. Remember , if you are individual or HUF , then you are not liable to deduct the tax at source if your sales, gross receipts or turnover of the business or profession exceeds Rs 40 lakhs. Otherwise , you are liable to deduct the tax if the rent(aggregate) exceeds Rs 1.20 Lakhs.

If you want that the TDS provision should not apply at two level, the business has to be re framed in a way that you get the commission and the rent goes directly to the owner. So who ever , takes apartment on rent, it has to be shown that the rental agreement is with the owner and you are only looking after servicing and other aspects for which you are charging commission from the original owner.

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What To Do If The A.O Does Not Respond To Your Application For Lower Deduction Certificate?

For a company, TDS on its income every year far exceeds its tax liability, resulting in refund which is about Rs. 30 lakhs every year. In order to avoid the delay in getting back the heavily blocked amount as refund which usually is about 1 to 2 years, it applied for a certificate u/s 197 before the A.O for a lower tds rate. The A.O is not acting on the application (on the extant oral instruction from CIT possibly for the reason that it could impact the annual revenue collection figures). The A.O is also not passing any wriiten order / reply to the application filed. What is the remedy under the Act? Whether it can move the matter under the I.T Ombudsman Scheme? MANIAN & RAO, Madurai
The deliberate inaction by the A.O on an application made by the assessee for certificate u/s 197 is very unfortunate . The provision under section 197 does not give any discretion to sit on the application because the provison uses the word "shall " . Read the provision u/s 197

197. (1) Subject to rules made under sub-section (2A), 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, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D,194G 194H, 194-I 194J194K 194LAand 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax , as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate.

Therefore, inaction in not giving any order is an illegal act. You should write to the A.O that in case he does not dispose off the application with in seven days from the receipt of reminder, you will be constrained to apply before Add.Commissioner/JtCIT concerned. If even ADCIT/JCIT does not give you relief after seven days , write to Commissioner of the charge.

After failing even from that level ,following remedy lies for you
1. File an application with the grievance cell ,stating the full facts. The grievance cell is a mechanism whose data goes to CBDT and even chief commissioner of income tax are accountable for its disposal.

2. A softer approach is to write to CIT concerned and if he does not respond writing to his superior enclosing the proof of filing application with him.
3. As far as jurisdiction of ombudsman is concerned , there is no specific mention of such wrong doing within the purview of him, still there is clause "O" of section 9 of The Income Tax Ombudsman Guidelines 2006 which says
"9 . Grounds on which complaint shall be filed
i. (o) any other matter relating to violation of the administration instruction and circulars issued by the Central Board Of Direct Taxes in relation to income tax administration"

In this regard , circular no 774 dated 17.3.1999 is important to refer. The said circular warns A.Os , not issue the certificate u/s 197 in case where payment has already been done and TDS is made. But the point to be noted is that the said circular states under point 3 circumastances when the certificate should not be issued. In other words , in all other cases not falling under the condition mentioned in the circular , should be issued by the A.O.So, you can file application under clause (o) of Section 9 of The Income Tax Ombudsman Guidelines 2006. The said circular is as under

Circular No: 774, Date of Issue: 17/3/1999
Subject: Issue of certificate under section 197(1) of the I. T. Act.

Section 197(1) of the Act envisages that, where tax is deductible at source in terms of sections 192, 193, 194, 194A, 194D, 194-I, 194K and 195 of the Income-tax Act, and the recipient justifies the deduction of tax at any lower rate or no deduction of tax to the satisfaction of the Assessing Officer, the Assessing Officer shall issue an appropriate certificate. It has come to the notice of the Board that in certain charges a practice has developed to issue certificates under section 197(1) of the Income-tax Act even after the credit or payment of amounts subject to tax deduction at source. This is not in accordance with the provisions of law. It is, therefore, clarified that the certificate issued under section 197(1) of the Income-tax Act will be applicable only in respect of credit or payments, as the case may be, subject to tax deduction at source, made on or after the date of such certificate. Therefore, no certificate under section 197(1) of the Income-tax Act should be issued after the amounts subject to tax deduction at source stand credited or paid, whichever is earlier. In other words, henceforth application requesting for certificate under section 197(1) should not be acted upon if submitted after credit/payment of the amount subject to tax deduction at source. However, assessees having genuine hardship in submitting such applications on time may refer to the Board for condonation of delay in terms of section 119(2)(b) of the Income-tax Act.

(Sd.) Narottam Mishra, Deputy Secretary (Budget). [F. No. 275/98-IT(B)]

4. Another remedy is to amke an application under Right to Information Act. These days A.Os have been made Public Information officer and Jt.CIT/Add.CIT as CPIO. You can ask the A.O under RTI the reasons why no order for granting or rejecting the certificate was issued on your application. Since there is time limit within which a reply is to be given , something will move from otherwise inefficent official.

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What Are the Types Of TDS For Which Form 15G or 15H Can Not Be Filed?

I am doing an internship in a software company. Supposing I will be paid 25k per month and am working for ONLY 2 MONTHS. Is there any way where I can get exempt from tax. I heard that form 15G is something for that. But .. Am I eligible to fill that form?? I had NOT paid any tax before and don't have a pan card too. I am sure that my income for this financial year won't exceed 1lakh(which I heard is the max amount for which tax is not applicable). Sasidhar Kasturi , Hyderabad

Section 197A of the I T Act provides that persons suffering tax at source in case of certain types of income earned by them can get relief from TDS if declaration in Form 15 G or 15 H are filed by resident individuals .The said provision is as under

197A. (1) Notwithstanding anything contained in section 194 or section 194EE, no deduction of tax shall be made under any of the said sections in the case of an individual, who is resident in India, if such individual furnishes to the person responsible for paying any income of the nature referred to in section 194 or, as the case may be, section 194EE, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.

(1A) Notwithstanding anything contained in section 193 or] section 194A or section 194K, no deduction of tax shall be made under any of the said sections in the case of a person (not being a company or a firm), if such person furnishes to the person responsible for paying any income of the nature referred to in section 193 or section 194A or section 194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.

The aforesaid provision makes it clear that relief is given for income suffering tax at source as per

1. section 193 -interest on securities
   
2. section 194- Dividend
   
3. section 194A-Interest other than "interest on securities"
   
4. section 194EE-Payments in respect of deposits under National Savings Scheme, etc
5. section 194K-Income in respect of Units
   

So, if somebody is getting income which suffers tax at source under the aforesaid sections, can file Form 15G or 15H as the case maybe and get relief from deduction of tax at source. Therefore , it is clear that section 197A is not applicable in case of any other type of deduction of tax at source . In other words 15G or 15H can not be filed in case of following types of TDS

192	Salary
194B	Winnings from lottery or crossword puzzle
194BB	Winnings from horse race
194C	Payments to contractors and sub-contractors
194D	Insurance commission
194E	Payments to non-resident sportsmen or sports associations
194F	Payments on account of repurchase of units by Mutual Fund or Unit Trust of India
194G	Commission, etc., on the sale of lottery tickets
194H	Commission or brokerage
194I	Rent
194J	Fees for professional or technical services
194L	Payment of compensation on acquisition of capital asset
194LA	Payment of compensation on acquisition of certain immovable property
195	Other sums

In your case , the payment of internship may fall either as salary or professional fee which are covered u/s 192 and 194J respectively. In any case , the payment to you does not fall within the five types of payments covered u/s 197A of the I T Act. So, you can not file Form 15G for the non deduction of tax at source.

The solution to your problem?
The only solution is to file an application with the ITO having jurisdictions over you in Form 13 as per section 197 for NIL deduction certificate. The A.O will issue a certificate in terms of Rule 28AA. Please remember these days , ITO(TDS) having jurisdiction over you , are authorised to issue such certificate of lower tax or NIL tax . SO , contact the TDS wing for such certificates.

Lastly, if you do not succeed , get PAN allotted , file return and claim refund of tax.


Have you read these answers?

• Is Internship Earning Taxable ?

• How To Know If Stipend or Scholarship or Fellowship Awarded To You Is Tax Exempt?

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Will The Payment Made For Sharing Space Be Liable To TDS?

A, B, & C are three companies. A has given entire Building on a rental basis to B. B is paying entire rent amount to A. This Building is shared by B & C collectively, for which B is raising Debit note on C, on a monthly basis. Now my question is whether C is liable to deduct tax on Debit note raised by B for rental income (TDS U/s 194 I) and whether B is required to charge Service Tax on the debit note raised on C. Dinesh Sharma, Navi Mumbai

The rent payment exceeding Rs 1,20,000 in a year suffers tax at source u/s 194I. The rent definition was enlarged with effect from 13th July 2006 as under

Explanation.For the purposes of this section,
(i) 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;
(ii) 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.

The explanation makes it clear that all kinds of payments-by whatever name called, under any lease, sub-lease,tenancy or any other agreement or arrangement for the use of (either separately or together) are covered.

Therefore, in my opinion, when B pays rent to A , TDS provision u/s 194I applies and it also applies when C pays (credits ) for his share to A , because what in effect is happening is that there is an arrangement between B & C regarding use of space taken on rent from A by B. Thus , these payments are well covered in explanation " sub-lease or any other agreement or for the use .
Service Tax on Debit Note?
Renting of immovable property is liable to service tax but not all renting falls under service tax. "Renting of immovable property" has been defined u/s 65(90a) of the Finance Act in following words

"renting of immovable property includes renting ,letting,leasing,licensing
or other similar arrangements of immovable property for use in the course or
furtherance of business or commerce but...."

In my opinion, the service arrangement for rented property between B and C can not fall under the category of "service " given by B to C . Therefore , prima facie' , the debit note raised on C should not be covered under Service Tax.

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No TDS On Service Tax Included in Gross Rent U/s 194I!

A long awaiting clarification regarding the deduction of tax at source on the service tax component included in gross value of rent has come out in form of circular from CBDT vide CIRCULAR NO. 4/2008, DATED 28-4-2008 which is given below for readers

Representations/letters have been received in the Board seeking clarification as to whether TDS provisions under section 194-I of the Income-tax Act will be applicable on the gross rental amount payable (inclusive of service tax) or net rental amount payable (exclusive of service tax).
2. The matter has been examined by the Board. As per the provisions of 194-I, tax
is deductible at source on income by way rent paid to any resident. Further rent
has been defined in 194-I as 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 or 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;
3. Service tax paid by the tenant doesn't partake the nature of income of the landlord. The landlord only acts as a collecting agency for Government for collection of service tax. Therefore it has been decided that tax deduction at source (TDS) under sections 194-I of Income-tax Act would be required to be made on the amount of rent paid/payable without including the service tax.
4. These instructions may be brought to the notice of all officers working in your region for strict compliance.
5. These instructions should also be brought to the notice of the officers responsible for conducting internal audit and adherence to these should be checked by the auditing parties.
[F.No.275/73/2007-IT(B)]

I am surprised that the problem has been only partially been given attention to. Even in case of other provision of TDS u/s 194C or 194J , the service tax component creates the same problem and the service tax is not an income for the payee. The logic given in point 3 of this circular is also applicable to other cases , and in author's view restricting the circular to 194I is letting the problem and controversy persist. The circular must be revised by CBDT to mitigate the problem faced by taxpayer.

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How To File Return If Employer Does Not Issue TDS Certificate?

I had resigned from my company in Feb-2008 on a short notice.They did not receive my resignation and so I put it through e-mail for record.Now they are not issuing me Form-16 for filling returns from April 2007 to Feb 2008.Please help me out how to file returns in such case without form-16.How should I also include tax paid by another company for month of march 2008.I have just a salary slip for same. Sunil, Delhi

You will b happy to know that for filing return you do not need Form 16 as the return has been made annexure less. Read this story .Therefore, as far as filing of return is concerned, just fill up form ITR1 or ITR 2 and claim whatever tax is deducted form you .

Can you claim TDS credit without Form 16?

yes, because the TDS made by your employer will reflect automatically in assessing officer, s computer . Even you can check up the TDS made by your employer. Read How to Confirm If Your TDS was deposited by Deductor?

What to do with erring employer?

Send them a letter stating that you will be filing complaint with Commissoner (TDS) that they have not issued TDS certificate despite deducting tax . There is express provision of penalty for failure to issue certificate of deduction of tax .Read Non Issue of TDS Certificate Will Make Deductor Liable To Penalty

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Is Payment For Import Of Software liable To TDS?

I want to import a software from Singapore which is worth Rs. 2,00,000 & has no import duty, My question is 1) do i have to deduct TDS before making the payment to the party in Singapore? 2) if yes then what is the % of TDS i have to deduct before making the final payment. Rajen Tiwari, Kolkata

A copyrighted product is different from a copyright. While the payment for use of copyright of a non resident by a resident is deemed to be received in India u/s 9(1) as it is well covered under the definition of royalty" , the purchase of a copyrighted product falls under the category of sale of goods , which is not covered u/s 9(1) ,.Therefore,the payment for import of software is not an income of non resident taxable under Income Tax Act. That being so , there can not be TDS because for application of TDS provision the payment on which tax is to be withhold has to be taxable under I T Act.

Banglore bench of Income Tax Tribunal was seized of similar issue and it gave verdict in favour of assessee that there is no need to deduct tax at source if there is purchase of copyrighted software and not the copyright. In case of Mphasis BFL Ltd. v. Income-tax Officer (Taxation), Ward 19(2), Bangalore [2006] 9 SOT 756 (Bang.), the Banglore bench of the tribunal considered its own decision in following cases on the same issue

(a) Samsung Electronics Co. Ltd. v. ITO [2005] 94 ITD 91 (Bang.).
(b) Lucent Technologies Hindustan Ltd. v. ITO [2004] 82 TTJ (Bang.) 163. and held

This Bench in the case of Samsung Electronics (P.) Ltd. (supra) ruled that a ready made off the shelf computer programme does not grant any right to utilise the copyright of the computer programme and accordingly, the payments for its import would not constitute royalty income in India and no tax needs to be deducted under section 195 of the Act. The Tribunal observed that the appellant had imported off the shelf software from different suppliers in USA, Sweden and France and after observing the agreement between the parties held that, what the appellant had acquired is only a copy of the copyrighted articles, i.e., software, whereas the copyright remains with the owner, i.e., foreign parties. The incorporeal right to software, i.e., copyright remained with the owner and the same was not transferred to the appellant. The right to use of copyright is totally different from right to use the programme embedded in cassette or CD or it may be software. The Tribunal also held that the appellant had acquired a readymade off the shelf computer programme for being used in business. No right was granted to the appellant to utilise the copyright of the computer programme. The appellant had merely purchased a copy of the copyrighted article, namely, a computer programme/software. In view of the above, it was held that the remittances made by the appellant for purchase of software does not give rise to any income in India and no tax needs to be deducted under section 195 of the Act.

5.2 Similarly this Bench in the case of Lucent Technologies Hindustan Ltd. (supra) held that there was no liability to deduct tax in India on import of software which is a copyrighted product as distinguished from copyright.

5.3 The Special Bench also held that software supplied is goods. Though an information technology product is normally regarded as an intangible asset, once technology is put on a media, then it becomes goods liable to custom duty. Finally, the Special Bench held that the payments for hardware and software were lump-sum payments and no separate consideration should be attributed towards software as “royalty”.

5.4 Keeping in view that there should be a consistent approach on an issue, it is held that payments made for import of software is not royalty and tax was not required to be deducted at source. Hence the demand raised under section 201 for non-deduction of tax at source is cancelled.

Therefore, if you are simply importing software and there is no purchase of right to use the Copyright of computer programme , there is no liability to deduct the tax , as decided by hon'able tribunal in the aforesaid cases.

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Is Payment To US Based Writer Or Director By Animation Movie Producing Company Liable To TDS?

One of our clients is in to the business of producing animation films for which it enters into contracts with non resident US Individuals in various capacities as writer, director, distributor co-producers etc. Whether the payments to such individuals be considered as Technical Service Fees for TDS. If yes, then what rate should be charged considering DTAA & IT Act. If no, then what procedure should be followed. Is there any provision for no deduction or lower deduction of tax. if yes, then wats the provision & the procedure. An early reply is sought. Amaresh, Bangalore

You have asked the question in very general manner because the decision whether a specific service falls under technical service is to be seen case to case. Let us first see what is the meaning of Technical Service as explained under Income Tax Act .As per Explanation to section 9(1)(vi) of the I T Act , the fees for technical service means

Explanation 2.For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) ....

So basically technical services mean

* Managerial services
* Technical services
* consultancy services
* Services of providing technical or other professional manpower

None of these are related to service given by a writer,director ,producers or distributor who are all USA based non resident individual as per your question. Therefore prima facie' the payments to them for any services does not fall within technical fee .

However , there still lies the scope of taxing this income in hands of non resident under section 9(1)(i) which is very widely worded

all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.

Since the animation movie is being produced in India, the source of income is certainly in India. Therefore fee paid to US bases non residents are taxable in India as per I T Act .

But saving grace is DTAA between India and USA !

It is legally settled that DTAA overrides I.T Act .Following cases laws should be referred to in this regard

Union of India vs Azadi Bachao Andolan 263ITR 706 SC

CIT vs P.V.L. Kulandagan Chettiar [2004] 267ITR654 SC

So we have to see what is the Double Taxation Avoidance Agreement in this regard. As is clear the services given by Writers,Director,Distributor and Producer do not fall within the definition of technical fee , I find the services given by these individual falls under the term" Independent personal services" as defined in Clause 15 of DTAA between US and India. This clause says

Article 15 - Independent personal services - 1. Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State from the performance in the other Contracting State of professional services or other independent activities of a similar character shall be taxable only in the first-mentioned State except in the following circumstances when such income may also be taxed in the other Contracting State :

(a) if such person has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or

(b) if the persons stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 90 days in the relevant taxable year.

2. The term professional services includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.

From the aforesaid Clause 15 of DTAA , it is clear that :if

* Writers ,Directors ,Distributors are Individuals
* They are tax resident of US .
* They are having no fixed base in India or
* They are not in India for 90 days.

In that case, the income from performance of any professional or independent services in India is taxable only in US . Therefore, no tax is deductible at source in India.

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Can You Deposit TDS /TCS Online ?

E- Payment of taxes were made mandatory for corporates & to those assessee to whom Section 44AB applies with effect from 01.04.2008. My question is that whether Payment of TDS will come under this or not and if TDS payments are to be made through E- Payment, then please the procedure involved. K.Muthuswamy, Chennai.

The wordings given in the notification for making the payment of tax online mandatory, it is indeed not clear if the TDS is also made mandatory . However, the TDS is not a tax which is paid, but for deductor responsibility is to "Deposit" it. In my view the TDS/TCS is not covered under this mandatory rule. But there is facility for depositing tax deducted at source as well. Click here as per your choice

CHALLAN NO./ITNS 281 for (TDS/TCS) from corporates or non-corporates.

CHALLAN NO./ITNS 280	(payment of Income tax & Corporation Tax)
CHALLAN NO./ITNS 282	(payment of Security Transaction Tax, Hotel Receipts Tax, Estate Duty, Interest Tax, Wealth Tax, Expenditure Tax /Other direct taxes & Gift tax)
CHALLAN NO./ITNS 283	(payment of Banking Cash Transaction Tax and Fringe Benefits Tax)

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Should Tax Be Deducted From Frieght Paid To Non Resident Shipping Companies?

We ship our goods by sea and pay Ocean freight to shipping lines in INR. Do we have to deduct TDS from shipping lines? (They refuse so accept it because they say they are exempt from Income Tax in India) .Hirendra Vikani, Rajkot

First of all , the statement of the shipowner that they are exempt from tax is not entirely correct. There is specific provision u/s 172 of the I T Act to assess "shipping business of non-residents". However, there may be cases that income of foreign ship may not be taxable in India on account of Double Taxation Avoidance Agreement with the country of origin of the ship. Read this posting and related circular in this regard.

TDS on freight payment to non resident shipping companies?

There are three provisions which are to be considered for deciding the issue whether the tax is to be deducted at source.

• Section 172 provides for assessment of profit of shipping business of non resident ;
• Section 194C : deals with TDS on contract or sub-contract.Freight is one of them.
• Section 195 : deals with TDS on any sum paid to non resident.

Section 194C is definitely not applicable , because that provision applies only in case of residents . That leaves us Section 172 and section 195 . While section 172 is not related to TDS , the issue becomes simple if the TDS on freight payment to non resident shipping companies has to be made. The answer comes from following Board circular no 723 dated 19/9/1995 which clarifies that TDS should not be made in case of non resident shipping companies as they are being assessed u/s 172

1.Representations have been received regarding the scope of sections 172, 194C and 195 of the Income-tax Act, 1961, in connection with tax deduction at source from payments made to the foreign shipping companies or their agents.

2.Section 172 deals with shipping business of non-residents. Section 172(1) provides the mode of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. An analysis of the provisions of section 172 would show that these provisions have to be applied to every journey a ship, belonging to or chartered by a non-resident, undertakes from any port in India. Section 172 is a self-contained code for the levy and recovery of the tax, ship-wise, and journey wise, and requires the filing of the return within a maximum time of thirty days from the date of departure of the ship.

3.The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable. The recovery of tax is to be regulated, for a voyage undertaken from any port in India by a ship under the provisions of section 172.

4.Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. This section applies to payments made by a person referred to in clauses (a) to (j) of sub-section (1) to any resident (termed as contractor). It is clear from the section that the area of operation of TDS is confined to payments made to any resident. On the other hand, section 172 operates in the area of computation of profits from shipping business of non-residents. Thus, there is no overlapping in the areas of operation of these sections.

5. There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or charterers for carriage of passengers etc., shipped at a port in India. Since, the agent acts on behalf of the non-resident ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of sections 194C and 195 will not apply.

Thus the answer is that no deduction of tax is required u/s 195 in case of freight to non resident shipping companies

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Is No Objection Certificate Required From IT Department Before Remiting Payments to Non Residents?

We are in process of constructing a hotel in Gurgaon. to provide Civil, Architect, Horticulture Consultancy we appoint a firm from Singapore to advice to construct the hotel. now we want to make some advance to him. now bank is asking for certificate from CA.
1. TDS u/s 195 will apply or not?
2. What will be TDS Rate ?
3. For all such remittance we need CA certificate ?
4. What is the basis on which we have not to deduct TDS.
Aishwarya Goyal, Gurgaon

Since the non resident company is giving you consultancy to be used in constructing hotel , it is definitely liable to tax at source in India. The rate is 10 % as per Double Taxation Avoidance Agreement between India and Singapore. Article 12 of the DTAA between two countries states

Article 12 : Royalties and fees for technical services - 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent.

Whether certificate from C.A required for remittance?

Yes, the remittance to non resident concern is permitted by RBI only when you submit to the

bank two documents

1. A certificate from a chartered accountant
2. An undertaking by the remitter in prescribed format.

CBDT issued circular no 10 of 2002 wherein the prescribed formats of the accountant's certificate (read C.A) and the the undertaking are given . The circular is as under

Circular No. 759 dated 18-11-1997 was issued by the Central Board of Direct Taxes to dispense with the requirement of a No Objection Certificate from income-tax authorities for remittance to a non-resident as required by the Reserve Bank of India. By the aforesaid circular, remittances were allowed to be made by the RBI without insisting upon a No Objection Certificate from the Department provided the person making the remittance furnished an undertaking in duplicate accompanied by a certificate from an accountant. The format of the application and the certificate has been circulated to the authorised dealers by the Reserve Bank of India through their Circular No. AD (MA Series) Circular No. 48 dated 29-11-1997.

2. However, it has recently been observed that often the certificates have been issued prescribing nil deduction of tax at source in certain cases where tax was liable to be deducted or prescribing deduction of tax at a lower rate than was payable on the basis of the provisions of the Act and the applicable DTAC. The certificate does not provide for necessary details or the reasons for adopting a certain rate for deduction of tax. This results in unnecessary calling of information from the assessees at a later stage and thus gives rise to an avoidable perception of grievance on the part of the tax payer. Therefore, in order to streamline the procedure as well as to ensure the correct deduction of tax at source, the proforma of the undertaking to be given by the remitter and the certificate to be issued by a chartered accountant have been re-considered and new formats are being prescribed which are enclosed as Annexures A and B to this circular. The revised proforma for undertaking as well as the certificate shall to apply in terms of Circular No. 759, dated 18-11-1997 of CBDT. Other requirements of the Circular remain unchanged. It is reiterated that the persons making the remittances shall submit the undertaking and certificate as per Annexures A and B to the Reserve Bank of India/authorised dealer banks, who shall in turn forward the same to the Assessing Officer mentioned in the undertaking.

3. The Reserve Bank of India is being requested to circulate the amended format of the undertaking and the certificate to their authorised dealers.

4. This circular comes into effect with immediate effect.

The forms ?

Click here to get the forms required as per CBDT circular no 10 of 2002 .

Therefore, now you do not need no objection certificate from I T authorities , but those tow documents have to be submitted to the authorised dealer who in turn will send one copy to the A.O concerned.

Who should sign the Undertaking?
The undertaking given by the remitter has to be signed by the person authorised to sign return of income of the concern or a person authorised by such person.

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Should DDO Insist Upon Evidence Of Payment For Deduction u/s 80DD?

I have query regarding Section 80E of Income Tax Act for the deduction of Interest paid on Higher Education Loan. One has not claimed as deduction interest paid on higher ed. loan in P.Y.2006-07 and filed return without claiming Section 80E. Now whether he can take benefit of the interest paid in 2006-07 while filling the return of A.Y.2008-09. Also please advise whether employer can consider the interest paid in P.Y. 2006-07 while deducting tax for the A.Y.2008-09 as same was not claimed and considered while deduction tax at source in A.Y.2007-08. So how an employee can get the benefit of unclaimed interest on higher ed. loan of A.Y.2007-08. Sabir F. Mulla , Ahmedabad

I do not think that the interest paid on educational loan for FY 2006-07 i.e Asst Yr 2007-08 can b e claimed in Asst Yr 2008-09. However , assessee has two ways to claim the deduction which he forgot to claim by mistake . These are