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Tax view on July 2009 Union Budget - TDS

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TDS Rates

  1. Applicable for AY 2010-11 (FY 2009-10).
  2. 194-I: Rental Payments
    1. Earlier rates:
      1. Plant and Machinery = 10%
      2. Land or building or furniture or fittings to Individual/HUF = 15%
      3. Land or building or furniture or fittings to Others = 20%
    1. Revised Rates
      1. Plant and Machinery = 2%
      2. Land or building or furniture or fittings to anyone = 10%
  1. 194-C: Contracts
    1. Earlier rates:
      1. Contracts = 2%
      2. Sub-Contracts = 1%
      3. Advertisement Contracts = 1%
    1. Revised Rates
      1. Contracts to Individuals/HUF = 1%
      2. Contracts to others = 2%

Surcharge and Cess

  1. No surcharge or Cess is applicable for TDS. Only the specified TDS rates should be considered for deduction
  2. Applicable for AY 2010-11 (FY 2009-10).

Payment to Transporters:

  1. For any Transporters, if they Provide the PAN number, the TDS on contract payments is NIL.
  2. But, if they do not provide the PAN during the payment, 1% TDS has to be made for Individuals/HUF and at 2% for others.
  3. Payments to transporters without deducting TDS (as they have quoted PAN) should be reported by Deductor with PAN details to the Income Tax Department in the prescribed format.
  4. Applicable for AY 2010-11 (FY 2009-10).

Compulsory PAN (Section 206AA)

  1. It is mandatory to quote PAN in all correspondence, bills and vouchers exchanged between Deductor and deductee.
  2. TDS shall be made at a flat rate of 20% (or actual rate, whichever is higher) for any payments, where assessee has not quoted the PAN during the payment.
    1. This is applicable even in case where assessee gives Form 15G/15H u/s 197A.
    2. This is also applicable for Non resident Payments.
  3. Assessing officer shall not rise the letter for lower/no deduction, If assessee doesn’t quote a PAN.
  4. Applicable for AY 2011-12 (FY 2010-11). Means the payments made on or after 01st April 2010.

TDS reconciliation (Section 200A)

  1. A new section 200A is introduced.
  2. TDS return filed by the deductor will be processed by the following way:
    1. TDS deductible will be computed on the basis of data in TDS statement, after adjusting any arithmetic error or an incorrect claim.
    2. The interest, if any, shall be computed on the basis of the sums deductible on the basis of data in TDS statement.
    3. Any amount payable by / refund to Deductor shall be determined.
    4. Intimation shall be sent to Deductor on Amount payable / refundable.
    5. The amount refundable, if any shall be granted to Deductor.

 TDS returns

  1. Currently returns has to be filed Quarterly in Form 24Q/26Q/27Q/27EQ
  2. Currently government is not allowed to decide the Periodicity of TDS returns, as the power is limited only for structure of forms and the manner.
  3. In order to provide administrative flexibility in deciding the periodicity of such TDS related statements, the existing provisions are modified, so as to allow the Government to prescribe periodicity of such TDS statements besides prescribing their form and manner.
  4. Applicable from 01st October 2009.

Computerized processing of TDS returns

  1. Currently every TDS return involves manual-cum-computerized processing inside the department.
  2. To make the process efficient, department will computerize whole process, where statements regard to TDS will be processed.
    1. This will be on the same lines, how IT returns processing has been computerized in Income Tax Department.
    2. This processing will allow manual interference for
      1. Any arithmetical error in the statement.
      2. An incorrect claim, if such incorrect claim is apparent from any information in the statement, for example, in respect of rate of deduction of tax at source where such rate is not in accordance with the provisions of the Act.
    1. A Centralized Processing Center may be established in this regard.
  1. Applicable for AY 2011-12 (FY 2010-11).

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