Why pay tax for an already paid tds amount?
This query is : Resolved
31 July 2013
Why pay TAX again for an already deducted amount of TDS? (TDS is Tax Deducted at Source)
Income TAX calculation for individuals in INDIA in the present format, does not take into account TDS amount while calculating tax liability and in case of income from multiple sources you end up paying 10% , 20% or 30% etc ., (Depending on the slab) for TDS amount also i.e. You are paying TAX on TAX.
(All amounts in Rs.)
Eg. A senior citizen gets say 30,000 per month pension with 1000 TDS in pension amount and has 3 FD’s giving him interest from savings bank with 10% TDS on the interest paid.
FD1=10000 TDS =1000
FD2=15000 TDS=1500
FD3=150000 TDS=15000
Now let us calculate his tax liability and total tax. Let us take for senior citizens no tax upto 3,50,000.
And 10% Tax for below 1,00,000 and 20% above 1,00,000 on the taxable income.
Income 30000 p.m
Annual Income 3,60,000
SR. Citz., no other deductions
TAX =360000-350000=10000
TAX 10 % =1000
TDS 1000 for pension amount.
If he has no other income then TDS and TAX to be paid are same and TAX to be paid by him is nil.
If he has the following income then
FD1 interest 10,000 TDS 1000
FD2 interest 15,000 TDS 1500
FD3 interest 1,50,000, TDS 15,000
Income = 360000+10000+15000+150000
Taxable amount = 535000-350000=185000
TAX=10000+17000=27000
TDS =1000+1000+1500+15000=18500
TAX to be paid by him on return filing =27000-18500=18500 = 8500
Let us calculate his tax as per the amount received by him (i.e. Excluding TDS)
Actual amount received by the person= 359000+9000+13500+135000=516500
Taxable income =516500-350000=166500
TAX to be paid =10000+13300=23300-18500=4800
Difference = (8500-4800) = 3700 = 20% of TDS
So this senior citizen is compelled to pay TAX on TAX (TDS) equivalent to 20%
My contention is that while calculating Tax liability on total income for individuals, 100% Tax exemptions are given for professional tax, employment tax etc ., Tax Deducted at Source should also be exempted, otherwise it leads to paying Tax on Tax. I fully agree that TDS is a convenient way of advance tax payment and helps the individuals the cumbersome task of Tax calculation. But it is a TAX.
Tax Liability for the above calculations excluding TDS will be
Taxable income =535000-18500(TDS) = 516500-350000=166500 and TAX to be paid 4800
Actual income tax rates in effect at present are different. To show the logic of my contention I have given the above example. By present income tax rate, the above person may end up paying 10% of TDS amount as tax which he has not received. Ie Rs.1850.
For argument sake I say that if this person donates the TDS amount to say PM’s relief fund or some charity organization he need not pay any TAX on that amount, since TAX exemption rules already give exemption for such type of amount.
In conclusion I wish to say that either TDS should be exempted from Tax Liability calculations or from calculated Total Tax, the tax on the TDS amount has to be subtracted.
Income TAX calculation for individuals in INDIA in the present format, does not take into account TDS amount while calculating tax liability and in case of income from multiple sources you end up paying 10% , 20% or 30% etc ., (Depending on the slab) for TDS amount also i.e. You are paying TAX on TAX.
(All amounts in Rs.)
Eg. A senior citizen gets say 30,000 per month pension with 1000 TDS in pension amount and has 3 FD’s giving him interest from savings bank with 10% TDS on the interest paid.
FD1=10000 TDS =1000
FD2=15000 TDS=1500
FD3=150000 TDS=15000
Now let us calculate his tax liability and total tax. Let us take for senior citizens no tax upto 3,50,000.
And 10% Tax for below 1,00,000 and 20% above 1,00,000 on the taxable income.
Income 30000 p.m
Annual Income 3,60,000
SR. Citz., no other deductions
TAX =360000-350000=10000
TAX 10 % =1000
TDS 1000 for pension amount.
If he has no other income then TDS and TAX to be paid are same and TAX to be paid by him is nil.
If he has the following income then
FD1 interest 10,000 TDS 1000
FD2 interest 15,000 TDS 1500
FD3 interest 1,50,000, TDS 15,000
Income = 360000+10000+15000+150000
Taxable amount = 535000-350000=185000
TAX=10000+17000=27000
TDS =1000+1000+1500+15000=18500
TAX to be paid by him on return filing =27000-18500=18500 = 8500
Let us calculate his tax as per the amount received by him (i.e. Excluding TDS)
Actual amount received by the person= 359000+9000+13500+135000=516500
Taxable income =516500-350000=166500
TAX to be paid =10000+13300=23300-18500=4800
Difference = (8500-4800) = 3700 = 20% of TDS
So this senior citizen is compelled to pay TAX on TAX (TDS) equivalent to 20%
My contention is that while calculating Tax liability on total income for individuals, 100% Tax exemptions are given for professional tax, employment tax etc ., Tax Deducted at Source should also be exempted, otherwise it leads to paying Tax on Tax. I fully agree that TDS is a convenient way of advance tax payment and helps the individuals the cumbersome task of Tax calculation. But it is a TAX.
Tax Liability for the above calculations excluding TDS will be
Taxable income =535000-18500(TDS) = 516500-350000=166500 and TAX to be paid 4800
Actual income tax rates in effect at present are different. To show the logic of my contention I have given the above example. By present income tax rate, the above person may end up paying 10% of TDS amount as tax which he has not received. Ie Rs.1850.
For argument sake I say that if this person donates the TDS amount to say PM’s relief fund or some charity organization he need not pay any TAX on that amount, since TAX exemption rules already give exemption for such type of amount.
In conclusion I wish to say that either TDS should be exempted from Tax Liability calculations or from calculated Total Tax, the tax on the TDS amount has to be subtracted.
31 July 2013
TDS is not final tax liability and this can be adjusted against final tax liability so you never pay tax on tax.
If your final tax liability is more than TDS, you have to pay balance amount.
If your final tax liability is less than TDS, you will entitled for refund of TDS amount exceeding final tax liability.
If your final tax liability is more than TDS, you have to pay balance amount.
If your final tax liability is less than TDS, you will entitled for refund of TDS amount exceeding final tax liability.
02 August 2013
You have misunderstood the TDS concept. TDS is to be deducted because if it is not deducted then there are many people who will neither file their return nor they will show their taxable income. Once TDS is deducted it goes in the general account of Central Government for development of the country.
Hence, you have to calculate your final tax liability as per your status and then from the tax payable you have to deduct the TDS. Hence, this is not double tax payment. You have paid only once in the form of TDS and then balance you have to pay.
The TDS rates are moderate and it is maximum 10% for general and for salaried persons it is based on their salary and other perquisites.
For other matters and scenario the expert has explained and I agree with him that no double tax is paid.
Hence, you have to calculate your final tax liability as per your status and then from the tax payable you have to deduct the TDS. Hence, this is not double tax payment. You have paid only once in the form of TDS and then balance you have to pay.
The TDS rates are moderate and it is maximum 10% for general and for salaried persons it is based on their salary and other perquisites.
For other matters and scenario the expert has explained and I agree with him that no double tax is paid.
02 August 2013
I fully agree that TDS on FD brings non tax payers to pay tax.
Compulsory TDS deduction of 20% for non PAN Card holders, without bothering whether the person has any income or not is what irritated me. Even if I give 15H form I was told that 20 % TDS will be cut from the interest rate. This happened when my daughter was studying and put some FD amount on her name and she was not having PAN card.
According to me taxing a person on the amount he has not received is not correct. When income tax return for m is filled TDS amount gets subtracted from the total calculated tax and if it is higher than the TDS amount one has to pay tax and lower one will get . This TDS amount finally goes as Tax when it is higher than TDS, but what about the TAX levied on this TDS amount in my Examples on Sr. Citzen emoluments it amounts to Rs. 1850. (TDS 18500). My contention is that in these cases this amount also has to be subtracted from total tax.
Regarding interest on TDS amount, if one opens an RD in a nationalized bank and the same TDS amount is deposited per month in the name of the employee by the end of the financial year the employee may able to pay his TAX due as well as get some interest on the amount. In this scenario whether the income tax rules denying interest on the TDS amount as well as levying hidden tax on that amount is it Right?
I feel it amounts to cheating the honest tax payers.
The idea of raising these questions in this web site is if I am logically correct the web site can bring it to the attention of the government to rectify this anomaly.
Raman
Compulsory TDS deduction of 20% for non PAN Card holders, without bothering whether the person has any income or not is what irritated me. Even if I give 15H form I was told that 20 % TDS will be cut from the interest rate. This happened when my daughter was studying and put some FD amount on her name and she was not having PAN card.
According to me taxing a person on the amount he has not received is not correct. When income tax return for m is filled TDS amount gets subtracted from the total calculated tax and if it is higher than the TDS amount one has to pay tax and lower one will get . This TDS amount finally goes as Tax when it is higher than TDS, but what about the TAX levied on this TDS amount in my Examples on Sr. Citzen emoluments it amounts to Rs. 1850. (TDS 18500). My contention is that in these cases this amount also has to be subtracted from total tax.
Regarding interest on TDS amount, if one opens an RD in a nationalized bank and the same TDS amount is deposited per month in the name of the employee by the end of the financial year the employee may able to pay his TAX due as well as get some interest on the amount. In this scenario whether the income tax rules denying interest on the TDS amount as well as levying hidden tax on that amount is it Right?
I feel it amounts to cheating the honest tax payers.
The idea of raising these questions in this web site is if I am logically correct the web site can bring it to the attention of the government to rectify this anomaly.
Raman
03 August 2013
If you provide form 15H and bank deducts TDS then it is the fault of bank not the IT Department.
RBI has recently made circular that the bank should issue the acknowledge if you submit form 15H. If even after issuing acknowledge, bank do not comply with the law, you may take action against the defaulting bank.
RBI has recently made circular that the bank should issue the acknowledge if you submit form 15H. If even after issuing acknowledge, bank do not comply with the law, you may take action against the defaulting bank.
03 August 2013
As far as 20% of TDS is concern, It is a law to bring the tax bracket wide.
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