Tax to be deducted at source.
1 Where any income or sum of the nature specified in column B of the Table below, is credited or paid or distributed by the person specified in column C during the tax year, to a resident, the person responsible for paying shall deduct income-tax,—
- (a) on the entire amount of such income or sum, where the amount or aggregate of amounts exceeds the threshold limit specified in column D;
- (b) at the rate specified in column D;
- (c) at the time of credit of such income or sum to the account of the payee or at the time of its payment in cash or by way of a cheque or a draft or by any other mode, whichever is earlier; and
- (d) subject to the provisions of sub-sections (4), (5), (6), (8) and (9).
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2 Rent
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Note 1.–– In serial number 2(i), the tax shall be deducted on such income at the time of—
- (a) credit of rent to the account of the payee; or
- (b) payment thereof in cash or by way of a cheque or a draft or any other mode, whichever is earlier, for the last month of the tax year or the last month of tenancy. tenancy. 3 Payment on transfer of certain immovable property other than agricultural land --able--
Note 1.––Consideration for transfer of any immovable property under serial number 3(i) shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property for the purposes of the threshold limit mentioned in column D. 50 Note 2.— In case of consideration on which provisions of both serial numbers 3(i) and 3(ii) are applicable, tax shall be deducted under 3(ii) only.
4 Income from capital market ---table---
5 Interest income Note 1.— In serial number 5(ii) and (iii), where the interest income credited or paid is in respect of—
- (a) time deposits with a banking company;or
- (b) time deposits with a co-operative society engaged in carrying on the business of banking; or
- (c) deposits with a public company formed and registered in India with the main object of carrying on business of long-term finance for construction or purchase of houses in India for residential purposes and is eligible for deduction under section 32(e), and the person mentioned in column C has not adopted core banking solutions, the threshold limit in column D shall be computed with reference to the income credited or paid by a branch of such person. Note 2.—The person responsible for making the payment referred to in serial numbers 5(ii) and (iii) of this Table, may at the time of making any deduction, increase or reduce the amount to be deducted for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the tax year.
6 Payments to contractors, fees for professional and technical services, etc.
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Note.––In serial number 6 (i), if any sum is paid or credited for carrying out any work specified in section 402(47)(e), tax shall be deducted at source—
- (a) on the invoice value excluding the value of material, if such value is specified separately in the invoice; or
- (b) on the whole of the invoice value, if the value of material is not specified separately in the invoice. 7 Dividend
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Note.––The tax shall be deducted at source before making any distribution or payment of dividend. 8 Other cases
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Note1.––The deduction of tax under serial number 8(ii) shall not apply to a transaction on which tax is deductible or collectible under any of the provisions of the Act. Note 2.––The provisions of serial number 8(iv) shall apply to any benefit or perquisite, whether in cash or in kind or partly in cash and partly in kind, provided to a resident. Note 3.––In respect of serial number 8(v)––
- (a) for deduction of tax, the provisions thereof shall take precedence over any other provisions of this Chapter;
- (b) any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant for the sale of goods or provision of services or both, facilitated by an e-commerce operator, shall be deemed to be the amount credited or paid by the e-commerce operator to the e-commerce participant and this amount shall be included in the gross amount of such sale or services for the purposes of deduction of income-tax under this serial number; *(c) e-commerce operator shall be deemed to be the person responsible for paying to e-commerce participant;
- (d) irrespective of anything contained in this Chapter, if— (i) tax has been deducted on a transaction under this serial number; or (ii) a transaction is not liable for tax deduction as provided in section 393(4) (Table: Sl. No. 11), then tax shall not be deducted on such transaction under any other provision of this Chapter;
- (e) clause (d) shall not apply to any amount or aggregate of amounts received or receivable by an e-commerce operator for— (i) hosting advertisements; or (ii) providing any other services, which are not in connection with the sale or services referred to in this serial number. Note 4.––In case of a transaction on which provisions of serial number 8(v) are applicable along with the provisions of serial number 8(vi) for deduction of tax, then tax on such transaction shall be deducted only under the provisions of serial number 8(vi). Note 5.—The provisions of serial number 8(iii) shall take precedence over any other provisions of this Chapter and tax shall be deducted under this provision. Note 6.—For serial numbers 8(iv) and (vi),—
- (a) where the consideration or benefit or perquisite is— (i) in exchange of another virtual digital asset where there is no part in cash, in respect of serial number 8(iv); or (ii) is wholly in kind; or (iii) is partly in kind and partly in cash, but such part in cash is not sufficient to meet the liability of deduction of tax in respect of the whole of such payment or benefit or perquisite, the person responsible for paying or providing shall ensure that the tax required to be deducted has been paid, before releasing such consideration or providing such benefit or perquisite, as the case may be.
- (b) “person responsible for providing” means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof.
393(2)
Where any income or sum of the nature specified in column B of the Table below, is credited or paid by the person specified in column D during the tax year, to a non-resident specified in column C, the person responsible for paying shall deduct income-tax on the amount of such income or sum,—
- (a) at the rate specified in column E;
- (b) at the time of credit of income or sum to the account of the payee or at the time of its payment in cash or by way of a cheque or a draft or by any other mode, whichever is earlier; and
- (c) subject to the provisions of sub-sections (4), (8) and (9).
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393(3)
Where any income or sum of the nature specified in column B of the Table below, is credited or paid by the person specified in column D during the tax year, to any person, the person responsible for paying the amount specified in column C, shall deduct income-tax on such amount—
- (a) at the rate specified in column E;
- (b) at the time of payment thereof in cash or by way of a cheque or a draft or by any other mode, or as specified therein; and
- (c) subject to the provisions of sub-sections (4), (5), (6), (8) and (9)
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3930(4)
The deduction of tax at source shall not be made under the provisions referred to in column B of the Table below, in respect of the income or sum, specified in column C:
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393(5)
Irrespective of anything contained in this Chapter, the tax shall not be deducted by any person from any amount payable to––
- (a) the Government; or
- (b) the Reserve Bank of India; or
- (c) a corporation established by or under a Central Act which is, under any law in force, exempt from income-tax on its income; or
- (d) a Mutual fund as specified at Schedule VII (Table: Sl. No. 20 or 21), where such amount is payable to it by way of— (A) interest; or (B) dividend in respect of any securities or shares owned by it or in which it has full beneficial interest; or (C) any other income accruing or arising to it.
393(6)
The deduction of tax shall not be made under provisions referred to in column C of the Table below, in the case of a person as specified in column B, if such person furnishes to the person responsible for paying any income or sum of the nature referred to in such provisions, a written declaration in duplicate in such form and manner as prescribed that the tax on such person’s estimated total income of the tax year in which such income or sum is to be included in computing his total income shall be nil.
---table--- Note.––The provisions of this sub-section shall not apply where the aggregate of amounts of any income or sum of the nature referred to in provision mentioned in column C of this Table, is credited or paid or likely to be credited or paid during the relevant tax year in which such income or sum is to be included, exceeds the maximum amount not chargeable to tax.
393(7)
The person responsible for paying any income or sum of the nature referred in sub-section (6) shall deliver or cause to be delivered, one copy of the declaration referred therein, received from the person to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, on or before the seventh day of the month following the month in which the declaration is furnished to him.
393(8)
Irrespective of anything contained in sub-section (6), the deduction of tax shall not be made from the interest paid by an Offshore Banking Unit on a borrowing or deposit made on or after 1st April, 2005, by a non-resident or a person not ordinarily resident in India.
393(9)
Irrespective of anything contained in this Chapter, the deduction of tax shall not be made from any payment to a person for, or on behalf of, the New Pension System Trust referred to in Schedule VII (Table: Sl. No. 41).
393(10)
In a case other than that referred to in section 392(2)(a), where under an agreement or an arrangement, if the tax chargeable on any income of the recipient referred to in this Chapter is to be borne by the payer, then, for the purposes of deduction of tax, the income shall be increased to an amount which after deduction of tax as per provisions of this Chapter becomes equal to the net amount payable under such agreement or arrangement.
393(11)
The credit of any income or sum 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 or sum, shall be deemed to be the credit of such income or sum to the account of the payee and the provisions of this section shall apply accordingly.
Section Summary:
This section outlines the rules for Tax Deducted at Source (TDS) on various types of income or payments made to residents and non-residents. It specifies the conditions under which TDS must be deducted, the applicable rates, and the timing of such deductions. The section also provides exceptions and special cases where TDS is not required.
Key Changes:
- Expanded Scope of TDS: The section now includes specific provisions for new categories like e-commerce transactions and virtual digital assets, which were not explicitly covered in the previous law.
- E-commerce Operator Responsibility: E-commerce operators are now deemed responsible for deducting TDS on payments made to e-commerce participants.
- Virtual Digital Assets: TDS is now applicable on transactions involving virtual digital assets, even if the payment is partly or wholly in kind.
- Threshold Adjustments: For certain payments (e.g., interest on deposits), the threshold limit for TDS is now computed branch-wise if the payer does not use core banking solutions.
- Precedence Rules: Specific provisions (e.g., serial number 8(v) for e-commerce) take precedence over other TDS provisions in case of overlapping applicability.
Practical Implications:
For Payers (Deductors):
- Must ensure TDS is deducted at the correct rate and time (whichever is earlier: credit or payment).
- Need to adjust for any excess or deficiency in TDS deductions during the tax year.
- E-commerce operators must now deduct TDS on payments to participants.
- For virtual digital assets, payers must ensure tax is paid before releasing consideration, even if the payment is in kind.
For Payees (Recipients):
- Residents can avoid TDS by submitting a declaration (Form 15G/15H) if their estimated total income is below the taxable limit.
- Non-residents are subject to TDS at specified rates unless exempted.
For Compliance:
- Payers must deliver declarations (e.g., Form 15G/15H) to tax authorities within the prescribed timeline.
- E-commerce operators must include payments made directly to participants in the gross amount for TDS purposes.
Critical Concepts:
- Threshold Limit: The minimum amount above which TDS is applicable. For example, TDS on rent is applicable only if the annual rent exceeds ₹2.4 lakh.
- E-commerce Participant: A person selling goods or providing services through an e-commerce platform.
- Virtual Digital Assets: Includes cryptocurrencies, NFTs, and other digital assets as defined under the law.
- Core Banking Solutions: A centralized banking system where all branches are interconnected. If not adopted, TDS thresholds are computed branch-wise.
Compliance Steps:
Identify Applicable TDS Provisions:
- Determine the nature of the payment (e.g., rent, interest, professional fees) and refer to the relevant table in the section.
- Check if the payment exceeds the threshold limit.
Deduct TDS:
- Deduct TDS at the specified rate at the time of credit or payment, whichever is earlier.
- For e-commerce transactions, include payments made directly to participants in the gross amount.
File Declarations:
- If the payee submits a declaration (Form 15G/15H), ensure it is delivered to the tax authorities within the prescribed timeline.
Adjust for Excess/Deficiency:
- Adjust TDS amounts for any excess or deficiency arising from previous deductions during the tax year.
Maintain Records:
- Keep detailed records of TDS deductions, declarations, and payments for audit and compliance purposes.
Examples:
Rent Payment:
- A company pays ₹30,000 monthly rent to a landlord. Since the annual rent exceeds ₹2.4 lakh, the company must deduct TDS at 10% (assuming no other rate applies) at the time of payment or credit, whichever is earlier.
E-commerce Transaction:
- An e-commerce operator facilitates the sale of goods worth ₹1 lakh by a participant. The operator must deduct TDS at 1% (₹1,000) on the gross amount, even if the payment is made directly by the buyer to the participant.
Virtual Digital Asset:
- A person sells an NFT for ₹5 lakh, receiving payment in another cryptocurrency. The buyer must ensure TDS is paid before releasing the consideration, even though no cash is involved.
Interest on Deposits:
- A cooperative society pays ₹50,000 as interest on a fixed deposit. If the society does not use core banking solutions, the TDS threshold is computed branch-wise. If the branch’s total interest payments exceed ₹40,000, TDS must be deducted.
This section ensures a systematic approach to TDS, covering a wide range of transactions and addressing modern economic activities like e-commerce and virtual digital assets.