Tds

This query is : Resolved

ARUN KUMAR MAITRA (Querist)
Follow

05 July 2012 If an employee works on a contract basis in a company He worked in their parent company for only four months i.e. upto 31.7.11and resigned and thereafter as per their advice joined their another group company on contract basis for five months only i.e. upto 31.12.2011 in accordance with the terms of the contract.The company made one time final payment after completion of the contract.Whether in such a case ,TDS should be calculated for the whole year on the basis of his average pay in the later company or it should be calculated on the basis of his average pay for his exact tenure i.e. for 5 months only.Are they supposed to consider ,the TDS made by their parent company,while calculating it? Can anyone clarify me this?

@VaibhavJ

@VaibhavJ (Expert)
Follow

05 July 2012 Parent Company will deduct TDS as applicable considering Four Months.

Group copany should consider previous incomes & TDS deducted by parent company and accordingly deduct TDS.

It is assumed that he was paid salary in both the company.

If payment was made u/s 194J then TDS to be deducted on amount aid by each company itself respectively.

ARUN KUMAR MAITRA

ARUN KUMAR MAITRA (Querist)
Follow

05 July 2012 Dear Joshi,

Thanks for your comments.However, you have not commented on whether the sister concern should calculate TDS based on nine months average pay by including the period served by the employee in the parent company or on the basis of 5 months average pay or on the tax due at the time of full & final payment.Please note that in the sister company, it was a contractual service for five months only.

Upgrade to CAclubindia Pro. Subscribe Now!

@VaibhavJ

@VaibhavJ (Expert)
Follow

05 July 2012 Sister co. should calculate TDS based on 9 month avg salary.

ARUN KUMAR MAITRA

ARUN KUMAR MAITRA (Querist)
Follow

05 July 2012 Thanks Joshi Ji.I fully agree with your comments.

CMA Ashutosh Kumar Gupta

CMA Ashutosh Kumar Gupta (Expert)
Follow

05 July 2012 (1) Contractual basis payment as not covered under salary income will be subjected to TDS under section 194J and accordingly in each of the company as the contract being separate TDS will be accounted for separately on each payment event,
(2) Whether sister companies or one being parent company and another being sister company and both being part of the same Group Companies, the concept of LEGAL ENTITY should prevail in my opinion as far as taxation is concerned. Each one of them is a separate assessee and to follow tax rules in one's repective capacity.
(3) However as far as Salary income is concerned, the parent company will do the TDS on salary income for the period and for the amount paid as salary as well as settlement and liable for TDS Certificate under Form 16 to be issued,
While doing TDS by the another company it will also consider the previous employment and TDS already done if any as the individual was under employment with two different companies during one assessment year i.e. to say to add back the salary income as disclosed of the previous employment in the parent company.