09 June 2014
Our CHA (Proprietor) paid Custom Duty of Rs. 1230437.00 on our behalf & raised a separate debit note of Rs. 1230500.00 (Excess Rs. 63.00).
Should we deduct TDS on the full amount or not? As our CA suggested to deduct TDS and the reason for deduction did not explain.
10 June 2014
No, You are not required to deduct TDS on Custom Duty reimbursement to CHA on the basis of Debit Note beacuase,
Tax deduction at source means the tax required to be paid by the assesses, is deducted by the person paying the income to him. Thus, the tax is deducted at the source of income itself. The income tax act enjoins on the payer of such income to deduct the given percentage of income as income tax and pay the balance amount to the recipient of such income. The tax so deducted at source by the payer is to be deposited in the income tax department account. The tax so deducted from the income of the recipient is deemed to be payment of income tax by the recipient at the time of his assessment.
For example, person responsible for paying any income which is chargeable to tax under the head 'Salaries' is required to compute the tax liability in respect of such income and deduct tax at source at the time of payment.If the employee has any other income,he needs to inform the employer so that employer can take that income into consideration while computing his tax liability but he will not take into account losses except loss from house property.
Similarly, person responsible for paying any income by way of 'interest on securities' or any other interests are required to deduct tax at source at the prescribed rates at the time of credit of such income to the account of the payee or at the time of payment,whichever is earlier.
Hence as per you case you are just reimbursing the Custom duty Hence need not to deduct TDS.
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