Regarding: tax on tds
This query is : Open
04 August 2013
Please think about it and answer me whether income tax rules have to be amended or not?
All amount in rupess
Let me say for an individual annual income amount from 3 sources is X,Y,Z
Let me say TDS on income 10%, X,Y,Z on T1,T2,T3.
Gross income is X+Y+Z
Taxable income will be B=X+Y+Z- tax exempted amount.
The tax on B will vary from 10 to 30%. Total Tax(TT) will be calculated accordingly.
If TT > T1+T2+T3 then one has to pay tax and if it is less one will get refund.
In the above mode of calculations T1, T2, T3 (TDS amount) are also subjected to 10 to 30% taxation.
My question is since TDS amount is already with income tax department and tax also has to be paid to the same department why should one pay tax on the already paid TDS amount.
My logic is as follows.
Initially 100% tax liability is there since no part of the income is removed as TDS.
Now if the tax is 10% and TDS is 10 %
The person will get 90% and 10% goes as tax in the form of TDS.T1
From this income a part of tax liability has come down since 10% is allotted as tax T1
Now what income should be added to Y ?
According to me since some tax liability has reduced to the extent of 10%
X-T1+Y is the income for next tax calculation .
But from Y say 10% of TDS has been allocated as T2
Tax liability on Y has come down by 10%
X-T1+Y-T2 is the tax liability for the next calculation.
If you do not agree to above argument I think the following argument will convince you
Let me say due to some gross error 100% TDS got deducted on income Z.T3=Z. This person has not received any interest at all for income Z. Now logically what is his tax liability for this income? According to me it is 0. (Z-T3 is zero)
Now as per the calculation X+Y+Z what happens to income Z in the above scenario?
According to the calculations it is 10 or 20 or 30% depending on the income slab and this person is forced to pay on an income which is nil. He will get T3 back since TDS will be more than calculated tax but not the tax levied on TDS.
According to me take Gross income X+Y+Z for calculation purposes to find the tax bracket.
From total calculated tax amount subtract not only TDS but also the inherent tax levied on TDS.
When I was studying in 7th Std., my father's peon used to come to collect the lunch dubba for my father. He used to say to my mother, government KAAT , POOT KE PAISA DEDHA HAI Aur KATTA HUWA PAISE PE BE TAX LAGATHA HAI.( It was in tamil he used to say which I have translated to hindi. Cut PANNI PAISA KDUKKARAN Cut PANNINA PAIASALEYUM TAX VANGARAN). That time I never understood what hesays, but now I feel his words are true for the following reasons.
1. Whether the income tax rule clearly says tax has to be paid monthly or yearly, if yearly then
2. Why no interest on the monthly TDS if tax has to be paid yearly ? (Whatever argument I have put forth above T1, T2 etc is valid in case of monthly deductions also. If X is monthly salary and T is TDS , for 1st month no TDS so 100 percent tax liability, for 2nd month X-T is the tax liability and so on. For calculating income tax bracket you take into account Gross Amount X and calculate the taxable income and tax. According to my contention not only TDS but inherent tax levied on the TDS amount depending on the tax slab has to be subtracted)
3. Whatever TDS is cut by the government for tax, to reduce the tax burden at the end of the financial year, can be accomplished by the employee, if the government pays the full monthly salary and the employee opens an RD ( Let me say TDS_RD). In nationalized banks the minimum monthly installment is Rs. 100 and minimum period 6 months with interest 8.4% for an RD. He can meet the tax demand at the end of the financial year and also ends up with interest on TDS which at present the government refuses to pay.
4. Since TDS has become compulsory to me it appears government is BLOCKING some part of the money towards tax as TDS, refuses to pay INTEREST on that amount and in final tax calculations levies INHERENT tax on that amount and has framed the income tax rules accordingly.
5. If a government employee takes temporary advance to buy some material, but could not complete the purchase due to some reasons (Say lack of stock) he has to return the money within a specified time and take fresh advance otherwise it will be taken as misuse of government money, the employee may get a memo and the amount will be deducted from his salary with interest.
Now the same government is misusing employee's money as TDS for the reasons cited above.
6. I agree TDS helps to bring non tax payers into taxable net, but the present rules on TDS needs MODIFICATONS so that the FINAL TAX CALCULATION is LOGICALLY CORRECT. IF the INHERENT tax levied on the TDS is removed it is as good as paying interest also and employees will not have any objection for multiple TDS deduction. To overcome the loss if any the income tax slab or rate can be modified.
All amount in rupess
Let me say for an individual annual income amount from 3 sources is X,Y,Z
Let me say TDS on income 10%, X,Y,Z on T1,T2,T3.
Gross income is X+Y+Z
Taxable income will be B=X+Y+Z- tax exempted amount.
The tax on B will vary from 10 to 30%. Total Tax(TT) will be calculated accordingly.
If TT > T1+T2+T3 then one has to pay tax and if it is less one will get refund.
In the above mode of calculations T1, T2, T3 (TDS amount) are also subjected to 10 to 30% taxation.
My question is since TDS amount is already with income tax department and tax also has to be paid to the same department why should one pay tax on the already paid TDS amount.
My logic is as follows.
Initially 100% tax liability is there since no part of the income is removed as TDS.
Now if the tax is 10% and TDS is 10 %
The person will get 90% and 10% goes as tax in the form of TDS.T1
From this income a part of tax liability has come down since 10% is allotted as tax T1
Now what income should be added to Y ?
According to me since some tax liability has reduced to the extent of 10%
X-T1+Y is the income for next tax calculation .
But from Y say 10% of TDS has been allocated as T2
Tax liability on Y has come down by 10%
X-T1+Y-T2 is the tax liability for the next calculation.
If you do not agree to above argument I think the following argument will convince you
Let me say due to some gross error 100% TDS got deducted on income Z.T3=Z. This person has not received any interest at all for income Z. Now logically what is his tax liability for this income? According to me it is 0. (Z-T3 is zero)
Now as per the calculation X+Y+Z what happens to income Z in the above scenario?
According to the calculations it is 10 or 20 or 30% depending on the income slab and this person is forced to pay on an income which is nil. He will get T3 back since TDS will be more than calculated tax but not the tax levied on TDS.
According to me take Gross income X+Y+Z for calculation purposes to find the tax bracket.
From total calculated tax amount subtract not only TDS but also the inherent tax levied on TDS.
When I was studying in 7th Std., my father's peon used to come to collect the lunch dubba for my father. He used to say to my mother, government KAAT , POOT KE PAISA DEDHA HAI Aur KATTA HUWA PAISE PE BE TAX LAGATHA HAI.( It was in tamil he used to say which I have translated to hindi. Cut PANNI PAISA KDUKKARAN Cut PANNINA PAIASALEYUM TAX VANGARAN). That time I never understood what hesays, but now I feel his words are true for the following reasons.
1. Whether the income tax rule clearly says tax has to be paid monthly or yearly, if yearly then
2. Why no interest on the monthly TDS if tax has to be paid yearly ? (Whatever argument I have put forth above T1, T2 etc is valid in case of monthly deductions also. If X is monthly salary and T is TDS , for 1st month no TDS so 100 percent tax liability, for 2nd month X-T is the tax liability and so on. For calculating income tax bracket you take into account Gross Amount X and calculate the taxable income and tax. According to my contention not only TDS but inherent tax levied on the TDS amount depending on the tax slab has to be subtracted)
3. Whatever TDS is cut by the government for tax, to reduce the tax burden at the end of the financial year, can be accomplished by the employee, if the government pays the full monthly salary and the employee opens an RD ( Let me say TDS_RD). In nationalized banks the minimum monthly installment is Rs. 100 and minimum period 6 months with interest 8.4% for an RD. He can meet the tax demand at the end of the financial year and also ends up with interest on TDS which at present the government refuses to pay.
4. Since TDS has become compulsory to me it appears government is BLOCKING some part of the money towards tax as TDS, refuses to pay INTEREST on that amount and in final tax calculations levies INHERENT tax on that amount and has framed the income tax rules accordingly.
5. If a government employee takes temporary advance to buy some material, but could not complete the purchase due to some reasons (Say lack of stock) he has to return the money within a specified time and take fresh advance otherwise it will be taken as misuse of government money, the employee may get a memo and the amount will be deducted from his salary with interest.
Now the same government is misusing employee's money as TDS for the reasons cited above.
6. I agree TDS helps to bring non tax payers into taxable net, but the present rules on TDS needs MODIFICATONS so that the FINAL TAX CALCULATION is LOGICALLY CORRECT. IF the INHERENT tax levied on the TDS is removed it is as good as paying interest also and employees will not have any objection for multiple TDS deduction. To overcome the loss if any the income tax slab or rate can be modified.
08 August 2013
Dear Mr. Raman your concepts are not clear. TDS deducted is REDUCED from the tax liability to arrive at the NET TAX LIABILITY/REFUND. There is NO double taxation.
Let me explain computation of income and tax:
Income A Rs. 1 lakh(TDS deducted Rs. 1000)
Income B Rs. 2 lakh(TDS deducted Rs. 2000)
Total Income A+B+C = Rs. 3 lakhs
Tax on total income = Rs. 5,000
LESS: TDS Rs. 3,000
Net liability Rs. 2,000
So now you have to pay only Rs. 2,000 since you had already paid Rs. 3,000 by way of TDS.
Let me explain computation of income and tax:
Income A Rs. 1 lakh(TDS deducted Rs. 1000)
Income B Rs. 2 lakh(TDS deducted Rs. 2000)
Total Income A+B+C = Rs. 3 lakhs
Tax on total income = Rs. 5,000
LESS: TDS Rs. 3,000
Net liability Rs. 2,000
So now you have to pay only Rs. 2,000 since you had already paid Rs. 3,000 by way of TDS.
12 August 2013
Dear Mr.Bhardwaj
I agree my concepts may not be clear about TDS and Tax.
But on what clear concept is the tax payer subjected to 10% tax on TDS when TDS money is already with the tax department and tax has to be paid to the same department.
In the above calculations Rs.1000 and Rs.2000 is already with income tax department as TDS. If TAX bracket is 10%, tax payer is asked to pay Rs.100 (ON TDS 1000) and Rs. 200 on (TDS 2000) which is already with the income tax department.
Income A+B+C is true when no TDS is present.
When TDS comes into picture
Income B gets added not to A but to A-1000
and income C gets added not to A+B, but
to A-1000 + B-2000.
Taxable income becomes A-1000+B-2000+C
Tax on total income Rs.5000.
Less TDS Rs.3000 and Tax on TDS Rs.300
Tax to be paid Rs.5000-3300=Rs.1700
I agree my concepts may not be clear about TDS and Tax.
But on what clear concept is the tax payer subjected to 10% tax on TDS when TDS money is already with the tax department and tax has to be paid to the same department.
In the above calculations Rs.1000 and Rs.2000 is already with income tax department as TDS. If TAX bracket is 10%, tax payer is asked to pay Rs.100 (ON TDS 1000) and Rs. 200 on (TDS 2000) which is already with the income tax department.
Income A+B+C is true when no TDS is present.
When TDS comes into picture
Income B gets added not to A but to A-1000
and income C gets added not to A+B, but
to A-1000 + B-2000.
Taxable income becomes A-1000+B-2000+C
Tax on total income Rs.5000.
Less TDS Rs.3000 and Tax on TDS Rs.300
Tax to be paid Rs.5000-3300=Rs.1700
13 August 2013
Please understand the computation of income:
Income from Salary (A)
Income from House Property (B)
Income from Business or Profession (C)
Capital Gain (D)
Income from Other Sources (E)
Gross Total Income (F = A+B+C+D+E)
Less: Deductions (G)
Total Income (F-G)
Tax on total income (as per slab rate)
Less: TDS
Less: Advance Tax
Tax Payable/Refund
TDS deducted earlier is reduced from TAX LIABILITY and NOT from the total income. TDS is a TAX. Accordingly it will be deducted from the TAX LIABILITY of the assessee. It is NOT an income, so it will not be reduced from total income.
Income from Salary (A)
Income from House Property (B)
Income from Business or Profession (C)
Capital Gain (D)
Income from Other Sources (E)
Gross Total Income (F = A+B+C+D+E)
Less: Deductions (G)
Total Income (F-G)
Tax on total income (as per slab rate)
Less: TDS
Less: Advance Tax
Tax Payable/Refund
TDS deducted earlier is reduced from TAX LIABILITY and NOT from the total income. TDS is a TAX. Accordingly it will be deducted from the TAX LIABILITY of the assessee. It is NOT an income, so it will not be reduced from total income.
13 August 2013
50 years before a poor peon working in a government office was asking this question. Why Government cuts a part of my salary and takes tax on the amount which is cut and it is with the government? (Govt. Pahar Katke dedha hai aur ho paisa pe tax kyon le raha hai? Ho paisa to uske pass hai?) I feel even today his question was logical.
TDS it seems is cleverly worded? Why should I pay tax on already deducted TDS, I was told TDS is not the final tax liability?
TDS is not an income and a tax and so you say it can not be reduced from income.
The fact is TDS money is with the Income Tax department. Employee gets less income because of TDS? TDS has been made compulsory and with no interest.
One Taxable income and one TDS there is no ambiguity.
Multiple income with multiple TDS causes injustice to tax payers.Monthly salary and monthly TDS also falls in the above class. A monthly RD (equivalent to TDS amount)will help tax payers to pay TAX at the end of the year and earn them some interest also.
Government is misusing tax payers money in this context. The above Tax computation needs some modification.
I have paid TAX as per the above computation of income for the past 38 years and I am happy even after retirement my income is at taxable level thanks to 6th pay commission and thanks are due to income tax department for online return filing due to which if refund is due the tax payer gets his refund.
Thank you very much for promptly answering my questions.
Today's weekly forecast for me in Times of India, Bombay Times says "Don't be so keen to get to the bottom of the financial mystery. You might be disappointed with what you find. Some things are best left alone. Today you might discover that money and riches do not equal happiness.
Though I am not convinced I will end this discussion here and I am happy to be an Indian citizen and for our constitution which gives me freedom to question the government.
TDS it seems is cleverly worded? Why should I pay tax on already deducted TDS, I was told TDS is not the final tax liability?
TDS is not an income and a tax and so you say it can not be reduced from income.
The fact is TDS money is with the Income Tax department. Employee gets less income because of TDS? TDS has been made compulsory and with no interest.
One Taxable income and one TDS there is no ambiguity.
Multiple income with multiple TDS causes injustice to tax payers.Monthly salary and monthly TDS also falls in the above class. A monthly RD (equivalent to TDS amount)will help tax payers to pay TAX at the end of the year and earn them some interest also.
Government is misusing tax payers money in this context. The above Tax computation needs some modification.
I have paid TAX as per the above computation of income for the past 38 years and I am happy even after retirement my income is at taxable level thanks to 6th pay commission and thanks are due to income tax department for online return filing due to which if refund is due the tax payer gets his refund.
Thank you very much for promptly answering my questions.
Today's weekly forecast for me in Times of India, Bombay Times says "Don't be so keen to get to the bottom of the financial mystery. You might be disappointed with what you find. Some things are best left alone. Today you might discover that money and riches do not equal happiness.
Though I am not convinced I will end this discussion here and I am happy to be an Indian citizen and for our constitution which gives me freedom to question the government.
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