Section 195A

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Anil (Querist)
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19 August 2008 I have not understood the provision of Section 195A of Income Tax Act which says - Tax free income is to be grossed up for TDS purposes.

Kindly explain this with example.

Thanks.

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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20 August 2008 In case income is payable net of TDS and the TDS is to be borne by the person paying such income then the Tax at Source is to be deducted by grossing up the net amount payable. The same may be explained with the help of following example:

Amount paid to a Contractor ; Rs 100000/-
(With no TDS)

Amount(Grossed up with TDS);=100000/97.94%
=Rs 102103/-
TDS =102103*2.06%
= Rs. 2103/-

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