IMPLICATIONS OF BUDGET 2009 ON TDS & TCS
TDS Rates
- For payment to residents and domestic companies,there will be no surcharge and cess on the basic rate of TDS. This simplifies TDS rates to a great extent.
- There are changes in TDS rates for payments to contractors and payment of rent. Those are explained below.
TDS on payment to contractors : Section 194C
- The proposed amendment is effective from 01-10-2009.
- Rate of deduction: Rate of deduction is now based on the status of payee and not on the basis of type of payment. Earlier the rate was 2% for payment to contractors and 1% for payment to sub-contractors and advertisement contracts. Now the rate is 1% for payments made to individuals and HUF and 2% in other cases.
- Contractor manufacturing is now covered as "work"and is liable to TDS under this section.
- This is defined as manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer
- If the invoice mentions value of material separately then such value will be excluded for calculation of TDS, in all other cases TDS will apply to total invoice value.
- Persons carrying business of plying, hiring or leasing goods carriages.
- Need not deduct TDS if contractor furnishes PAN.
- Will have to furnish information as may be prescribed.
TDS on Rent : Section 194I
The proposed amendment is effective from 01-10-2009.
Rent | Earlier | Now |
Plant and Machinery | 10% | 2% |
Land building | 15% for Indviduals / HUF and 20% for others | 10% |
eTDS Statement Filing: Section 200
- The proposed amendment is effective from 01-10-2009. Currently section 200 specifies quarterly filing of eTDS statements.
- This is changed and now CBDT can specify the periodicity for which the statements are to be filed.
Processing of eTDS Statements: Section 200A
The proposed amendment is effective from 01-04-2010.
This new section introduces processing of eTDS Statements in the following manner.
- Sum deductible shall be calculated after making adjustment of arithmetical errors and apparent incorrect claims.
- Interest will be calculated.
- From the above actual amount paid will be deducted to arrive at TDS payable or refundable.
- Deductor will be informed about the TDS payable or refundable.
- Time limit for the processing is within one year of the financial year of filing of eTDS statement.
- CBDT will make a scheme of centralized processing of e-TDS Statements.
Time limit for Penalty proceedings : Section 201
- The proposed amendment is effective from 01-04-2010.
- A person is deemed to be an assesee in default for failure to deduct TDS in whole or part.
- The order for such default now will have to be passed.
- Within two years from the end of the financial year in which the eTDS statement is filed.
- Within four years from the end of the financial year in which payment is made or credit is given, in any other case.
- For financial year commencing on or before 01-04-2007, this time limit is upto 31st March 2011.
TDS Rate when PAN not available: Section 206AA
- The proposed amendment is effective from 01-04-2010.
- If deductee fails to furnish PAN to deductor, the deductor shall apply highest of the following rates for deducting TDS.
- (i) at the rate specified in the relevant provision of this Act; or
- (ii) at the rate or rates in force; or
- (iii) at the rate of 20%.
- Form 15G/ 15H declaration for no deduction of tax will become invalid if PAN is not mentioned therein.
- PAN will have to be mentioned in bills, vouchers and other documents communicated between deductor and deductee.
- If deductee furnishes invalid PAN or submits PAN belonging to someone else, it will amount to non furnishing of PAN.
Other Changes
- No TDS on zero coupon bonds issued by scheduled banks : Section 194A. Effective 01-04-2009
- No TDS for payments from New Pension Scheme :Section 197A. Effective 01-04-2009
- Quarterly statement for interest paid without deducting TDS is now to be submitted for "such periods as may be prescribed" : Section 206A Effective 01-10-2009.
- Quarterly statement regarding tax collection at sources are now to be submitted for " such periods as may be prescribed": Section 206C Effective 01-10-2009.