Dear All
I would like to bring specific changes applicable towards Tax Deduction at Source;
Changes effective 1st April 2009 (1st September 2009)
Please note that all tax deduction at source from payment to Residents other than Salaries would now not include SURCHARGE & CESS (w.e.f 1st April 2009). As the Finance Act received assent on 19th August 2009, we can make these new rates applicable from 1st September 2009 alone. Accordingly any tax deduction at source other than salary w.e.f. 1st September 2009 should be without SURCHARGE & CESS. This however would not apply for payment of Salary and payment to Non-residents. We have accordingly raised ticket to HSSA to make surcharge and cess ineffective in the master data w.e.f. 1st September 2009. However in case changes are not yet effected then while accounting/processing the payment, ensure not to recover surcharge and cess from all payments attracting TDS.
Changes effective from 1st October 2009
a) Section 194C
Apart from above, any payment to contractors/sub-contractors/advertisement contracts etc would now attract standard rate of 1% in case payment is to Individual or HUF. In all other cases deduction would attract at 2%. Therefore differentiation in rates of deduction for sub-contractor or advertisement contract has been done away.
Other threshold of Rs. 20000/- per contract and Rs. 50000/- for transactions during the year would continue.
In case of composite contract, if invoice specifies value of material and value of service separately then unlike earlier provision, deduction would now apply only on service portion and no deduction would be required on 'material' supplied and billed separately.
No deduction of tax at source would be required from payment to Transporters, if PAN is provided by them. If no PAN is provided deduction would apply @ 1%/2% as the case may be.
Any works contract requiring supply of material as per specification of buyer (visiting cards, printed labels, bags etc) will not attract deduction of tax.
b) Section 194 I
Rate of deduction of tax for payment for use of Plant, equipment, machinery will be 2% and ;
for use of any land, building, furniture/fixture would be 10% irrespective of type of payee.
c) Section 40 A (3)
Any payment in excess of Rs. 20,000/- in cash unless covered by exceptions provided u/r 6DD is disallowed in the hands of Company. The threshold of Rs. 20,000/- stands enhanced to Rs. 35,000/- in case payment is made to transporters.
A Section wise chart showing rates of deduction applicable w.e.f. 1st October 2009 is enclosed herewith for your convenience.
CAclubindia
