Observations on compliance of
TDS provisons : Coverage – Expenses liable for the deduction of Tax
1.Lorry Freight Paymets :-
Lorry Freight Ist Paymet
Lorry Freight Balance
Lorry Freight Detention
Lorry Freight Extra
Local Lorry Freight
*(Attach Vendors: It has been
decided to make the deduction of tax at source on all the payments to them.
Market Lorries :- In case of
payments made to market lorries the deduction should be made only when the
Individual payment exceeds
amt. Rs. 20000/-.(i.e one transaction value)
**Contract : Written as well
as verbal.
***Attach vendor
interpretation : Lorry being hired at more than one ocassion or has the
expectation of
Being hired at more than one
ocassion in the near future.
Observation/Solution :-
1. Payments has been made in a sum exceeding
Rs. 20000/- otherwise than by a crossed cheque drawn on a
Bank or a crossed bank draft
resulting violation of Section 40A(3).
Solution : 1. Try to convince
vendors the conequences of such a practice.(by narrating the
consequences)
2. In case of attached vendors make the
payment through bank.
2. In some cases dedution of tax at source has
not been made at the time of making balance payment.
Solution : Following practice should be followed in computing the value
of TDS to be deducted :-
Step 1. The advance paying party should mention the amt. To be deducted
on account of TDS.(On the basis of
Total freight value)
Step 11. The balance paying branch should add (1) lorry freight extra,(2)
lorry detention charges, or(3) other
Charges in addition to total
freight value and re-compute the final value of TDS to be deducted.
Step 111. Make the payment net of tax.(i.e Balance payment required to be
made – Recomputed TDS value)
2. Local Booking &
Delivery Expense
Local Booking Expenses
Local Delivery Expenses
Make
the deduction of tax at source on all the payments made to a attach vendor
whether the payment
required to be made comes to
amount Rs.500 or 5000.
3. Rent
Observation :-
It is noticed in some cases
that the rent agreements are drafted in such a manner that these covers the
consid
-eration for using Godwon as
well as reimbursement on account of Electricity, water and office maintenance
Charges. But these charges
are not considered for the purpose of arriving at the value on which the
deduction
Of tax at source has to be
made.
Advise :-
If the vendor / landlord
provides the bill in respect of electricity and water charges then we shall
not take these
Payments into account for the
purpose of arriving at the value the deduction is to be made. Secondely in
such
Case it will be our
electricity and water charges and will not form part of rent.
If the vendor/ landlord fails
to provide the bill in respect of electricity and water charges then we will
treat it as part
Of rent and accordingly make
the deduction tax at source as per prescribed rate by Govt.
Dont advise the vendors to
draft the rent agreements in a partuclar way.
4. Commission :-
Observation :-
Generally it was noticed that
a settlement of the sum on account of brokerage or Commission is made below
What
is being invoiced by the broker or
commission agent (brokerage for taking Godwon on hire). The
Settled amt. Is paid without
giving credit the deduction of tax at source on Commission or Brokerage.
Advise :- It is advised to consider
the amt. Of deduction to be made on
account of TDS.
5. Octroi Expenses
Wagon Freight Payments
No deduction of tax at source
was made on the payments made through agents.
Advise :-(For Octroi as well
as for Wagon Freight Expenses )
Deduction
of tax at source is required to be made where Octoi/W.Freight payments has been made
through
Agents. Note that no deduction of tax is required to be made where the sum on account of Octrio and Wagon
Freight has been paid
directly to Govt. Bodies.
Sum on
which the deduction of tax is required to be made
:-(where payments has been made through agents).
Total invoice value –
Octroi/Wagon Freight.
* Note that if the invoice
shows a consolidated sum of money to be paid (i.e does't shows the
octroi/W.Freight
And service charges
separetaly) the deduction of tax at
source has to be made on the total invoice value.
6. Other Contractural
Payments :-
Security Charges
Repairs & Maintenance Charges
Construction Payments
Photocopy Expenses
Other Payments
It seems that the branch
executives are not aware about the payments on which the deduction of tax at
source is
Required to be made. They
feel difficulty on deciding as to whether the deduction of tax at source is
required to be
Made or not in respect of
contractural payments.
A brief story of Contract
payments is as below :-
WORKS
CONTRACT :- This word represents the following
combinations :-
Contract/Sub Contract :-
1.Entire Labour Payments (Security Charges, Loading/ Unloading etc.)
:-2. Labour as
well as Supply(Photocopy Exp./Construction Contracts) where amt. Can't be
segregated between Labour and Supply separately.
:-3. Labour as
well as Supply(Repairs & Maintenance Exp.) where amt. Can be segregated
between
Labour and Supply(Spare parts, Accessories etc.).
Apply
the following rules :-(In respect of above interpretations)
:-1. Make the
deduction of tax at source on all the labour payments.
:-2. Make the
deduction of tax at source on all the Contractural payments.
:-3. Make the
deduction of tax at source on labour payments only.(i.e no need to
deduct
The tax
at source on sums which represents consideration for supply).
Note :- One factor leading to
the deduction of tax at source is Service Tax. Generally all the payments
will require
Deduction of tax at source which represents consideration for
service tax too.(i.e payments made for invoices in
Whcih service tax is charged
will automatically require deduction of tax at source).
7. General Observations :-
1. In some cases it is observed that one party
is engaged with our organization through various modes(i.e it is
Engaged in ,local booking,
local delivery,local lorry freight or in any other way). In such cases
It is not possible to
determine the value of transactions with such a party since the transactions
got settled directly
In cash.
Advise :-
It is advised to deal the
transactions with such a party through a ledger account so that the total
value of tr.
Can be determined for the
purpose of arriving at the value on which the deduction of tax at source has
to be
Made.
3. In large no's of cases it is observed that
the accounting entry relating to the deduction of tax at source is
Passed in our FA system
separately from the transaction(which is directly in cash) on which such
deduction is
Made.
In such a situation it is very
difficult to assess whether the deduction of tax at source has been made
Or not having regard to nature of payment and
volume of transactions.
Advise :-
In such a situation it is
being advised to pass the accounting entries through J.V's vouchers.( i.e a
linkage can
Be established between the
payments and the amt. Of deduction of tax at source if any).
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