TDS Provisions – An Analysis with the help of Cricket Game

TDS stands for Tax deducted at source It was introduced to collect tax at the source from where an individual’s income is generated. The government uses TDS as a tool to collect tax to minimize tax evasion by taxing the income (partially or wholly) at the time it is generated rather than at a later date.

As per the Income Tax Act, any company or person making a payment is required to deduct tax at source if the payment exceeds certain threshold limits.

1. Basic Concept of TDS

In India the sport of Cricket is very well known in every street. Similar is the concept of TDS…..Surprised? Real along and you will realize.

Just like a field of cricket has many fielders, batsman, bowler, umpire, boundaries. The main aim of the bowler and the fielders is to get the batsman out and the aim of the batsman is to hit the ball out of the boundaries. In the game between Income tax and taxpayers, Income Tax is the bowler and all the TDS provisions are the fielders which are the placed so that the batsman (taxpayer) does not hit a boundary (escape the provisions of the tax).

Another Basic thing about TDS is that if payment or Income goes above the prescribed limit then TDS has to be deducted on the Whole Amount and not on the differential amount. For example- Under Section 194J- Payment to Professionals Limit is Rs 30,000 and if payment is Rs 40,000 then TDS has to be deducted on Rs 40,000 and not on Rs 10,000.

The TDS is calculated as – Rate of deduction * Payment made or Received during the year B] The provisions of TDS

I. Section 192- TDS on Salary

This section is the wicket keeper in the field because the wicket keeper rarely misses any opportunity to catch the ball and similarly this provision is very hard to escape because in Form 16 the tax payable is already calculated and the TDS is already deducted by the employer and there is nothing that a taxpayer can do. One can say that in this case the taxpayer is that type of Batsman who gets run out without facing a ball.

TDS on salary is calculated at the applicable rates i.e after the employee has given the details of the income the employer calculates the annual salary for the year of the employee and deducts TDS on the basis of the applicable slab rates. For Example- If the average tax rate for Mr A is 5.2% for the year then TDS will be deducted at the rate of 5.2%.

II. (A) Section 194A- Interest other than Interest on Securities(by Bank)

In a cricket match the batsman never always go for the big hits the real investment for the batsman is in singles and doubles, job of the fielders in the 30 yard circle is to stop these singles. Similarly the savings of the taxpayer are kept in bank accounts in the form of saving deposits or time deposits hence this section is on the interest on saving account or Time deposit or Deposit in a post office or a Co-Operative bank.

To stop these singles and doubles and to restrict the batsman from scoring more 194A has been placed which provides that Tax has to deduct on Interest Earned on Savings Deposit, Time Deposits, or from a co-operative bank society.

Here the batsman has no chance rather than settling for a single because the bank always deducts tax at source before crediting the interest to the taxpayer.

The rate of TDS- 10% on the Interest Received.

The limit of Deduction of TDS is Rs 10,000 for Taxpayers who are of the age below 60 years and from the Financial Year 2018 the limit has been increased to Rs 50,000 for senior citizens.

II. (B)Section 194A- Interest other than interest on securities ( by others):

The batsman always tries to look for the gaps in the field and the place where he finds the gap is always in the slips i.e beside the wicketkeeper so that He can get maximum runs.

Similar is the case here, The Taxpayer tries to find the gap by showing unsecured loans or advances given to his or her relatives so that he can hit the ball in the gap a get a boundary(Tax evasion) but Income Tax already has a fielder in the Slips and that is 194A which says that if interest is received from others i.e on the types of advances given above TDS has to be deducted.

Rate of TDS- 10% on the Interest Received

Limit for Deduction- Rs 5000

III. Section 194C- Payment to a Contractor

This Section is on TDS under Section 194C to be deducted on Payment to a Contractor. Whenever any payment is made to a contractor TDS has to be deducted if a specified Limit is reached

Limit of deduction of TDS-

a) In case of Single payment – Rs 30,000

b) If the aggregate value of transaction durung the year exceeds Rs 75,0000

Rate of Deduction-

a) 1% in case of Individuals and HUF

b) 2% for Others

IV. 194H – TDS on commission and Brokerage

This section is on TDS to be deducted on Commission or Brokerage paid.

Rate- 5% on the commission paid

Limit- Rs 15000

V. 194I- TDS on rent paid

During the slog overs (last overs of the innings) the batsman tires its level best to hit the balls over the boundaries and score as many runs as they can.

Similar is the case here, during the finalisation of books, to reduce the tax, expenses are added and one of those expenses is Rent paid. So Income Tax has a fielder to catch these Expenses before they cross the boundary (Evade Tax).

This section has 2 parts- TDS on Rent

a) Rent paid for land and building, Furnishing and fittings-

Limit- Rs 1,80,000 and Rate- 10%

b) Rent paid for Plant and Machinery, Equipment-Limit- Rs 1,80,000 and Rate – 2%

VI. 194 IA- TDS on Purchase of Immovable Property (other than agriculture land)

Purchase and Sale of Immovable property is a long term planning and this is a big shot planned by the taxpayer to clear the boundary (Evade Tax) but this fielder(Section) is standing on the boundary to catch out the taxpayer.

Rata of Tax – 1%

Limit – Rs 50,00,000.

In order to catch hold of the black money rotated in these transactions there is also a provision in this act which provides that no Cash Payment above Rs 20,000 shall be made on purchase of Immovable Property.

VII. 194 IB- Rent paid for Land and Building paid by Individual and HUF not covered in Tax audit:

In case when the batsman gets injured while batting a runner comes in to run on behalf of the batsman.

Similar is the case here for tax planning rent is paid or taken from those assessess who are not covered under tax audit. But for this kind of Shot(Tax planning) Income tax has a fielder(Section 194IB) which is for Rent paid for Land and Building paid by Individual and HUF not covered in Tax audit.

Rate – 5%

Limit-Rs 50,000 per month or part thereof

VIII. 194J- TDS on payment made to professionals/ Technical Services

There is a rule of taking a strategic time out between the match where the batsman takes valuable points from the coach on how to play the match further. Similar is the case here, professionals(like CA’s) are those who guide the way for the taxpayer, the Income Tax department want to know which professionals have been hired by the batsman(taxpayer) and so 194J provides that TDS has to be deducted on payment made to professionals/ Technical Services. Rate- 10% of the amount paid Limit- Rs 30,000. Above were the provisions which are applicable to almost each taxpayer. A Cricket match can be played with only 11 players but a team has a squad of 15 players, similarly Income Tax also has other sections to catch the taxpayers from scoring freely (Tax Evasion).

IX. Other Important Points a) Returns

Like there are innings in cricket similarly there are returns that need to filed quarterly Each quarter is like a new inning for the batsman (Taxpayer) like runs needs to be scored in each inning, returns are to be filed for each quarter. The time limit for filing a TDS return is 31st of the next month (For Example- Due date for the quarter Apr-June is 31st July) and for the last quarter i.e Jan-Mar the due date is 31st May.

2. Due Date of TDS Payment

Payments are just like overs of the cricket. There are 6 balls in a over and from the 7th Ball a new starts similarly the due date for making payment of TDS is 7th of the next month.

3. Importance of Form 26AS

In cricket there is a scoreboard which keeps the track record of the runs scored similarly Form 26AS keeps the track record of all the transactions on which TDS was deducted of a taxpayer. One can say that it’s a summary where the Taxpayer can see how much his TDS has been deducted.

4. Penalties

When any batsman does not follow the rules he is penalised by the 3rd Umpire for misconduct. In the provisions of TDS the 3rd Umpire is Penalties in TDS. A penalty of Rs 200 per day has to be paid by the taxpayer for non-filing of Return.

5. Relationship between the Deductor and the deductee

The Deductor and the deductee are the 2 batsman playing on the wicket. The 2 players have to play very responsibly and has to work together so that a long lasting partnership is made. If the deductor or the deducteee make any mistake then they have to suffer from the non-compliance provision of the Act.

CONCLUSION

In Every Cricket Match there is a umpire who gives all the decisions some of which are in the favour of the Batsman and some in the favour of the bowler and the umpire of this match is the Government who regulates the players on the field (Department and Taxpayer) For Every Batsman more important are singles and doubles rather than boundaries. The taxpayer need to get his score board ticking so as to last long on the wicket and score more runs. Similarly the tax payers should comply with the provisions and should focus on singles and doubles rather than going for the big shots( major tax planning) as each ball cannot be hit for a six and one who always looks for big shots(Tax planning) gets out early(Caught by the department). So to remain on the wicket for a long time the taxpayer should follow the provisions of TDS and should wait for the loose ball to hit the big shots.

Author Bio: Abhinav Sharma, working as CA Final Student, Article Assistant at R.B.Sharma and Co.

Recent Achievements–Past Treasurer of WICASA (CA students association of Aurangabad) & Won the best paper presenter award in the National Conference for CA Students on GST: The Road Ahead.