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types of TDS and their rates

savita (account OFFICER) (52 Points)

22 April 2009

Hi,

Tell me the various types of TDS and the rates applicable for particular TDS.

If i deduct a TDS on Transport Freight what accounting entry will come .

Thank you,

Savita.

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12 Replies

Harsh (Student) (24 Points)
Replied 23 April 2009

Hi Savita,

Following are the Rates for the Financial Year 2008-09

Current Rates for the Tax Deduction at Source
The TDS amount is subject to 3% Education Cess. There is a surcharge if the recipient is:

An individual, HUF, AOP or BOI and aggregate of payment or credit subject to tax deduction exceeds Rs. 10,00,000, and
An artificial juridical person, a firm/domestic company and the aggregate payment or credit subject to tax deduction exceeds Rs. 1 crore.

Example: If the TDS rate is 20% then the TDS rate with edu cess is 20.6%. If the TDS rate is 20% and there is also a surcharge of 2%, then the net TDS rate with surcharge is 22.66% (20% Plus 2% plus 0.66%).

Salaries (section 192). The TDS is based on the tax at the applicable rate on the estimated income of employee for the year. Employer must not deduct TDS on all the non-taxable allowances like conveyance allowance, rent allowance, medical allowance and the deductible investments under sections like 80C, 80CC, 80D, 80DD, 80DDB, 80E, 80GG and 80U. No tax is required to be deducted from source unless the estimated salary exceeds the amount not chargeable to tax. The employer can increase or decrease the amount to be deducted to make the adjustments for any previous deficiency or excess deduction.

Rent of land, building or furniture to a resident (section 194-I). If the annual rent together with advance rent credited/paid exceeds Rs. 1,20,000 per annum, you must deduct TDS at 15.45% (includes 3% edu Cess) if the rent paid to an individual or HUF or at 20.6% (includes 3% edu cess) in case of others. (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lac or professional receipts is less than Rs 10 lac are not required to deduct the TDS).
Surcharge. If gross receipts subject to TDS of an individual or HUF exceed Rs. 10 lac, there is an additional surcharge of 1.5%. In case of others if the gross receipts exceed Rs. 1 crore, there is an additional surcharge of 2%.

[CIRCULAR NO. 4/2008, DATED 28-4-2008. The Central Board of Direct Taxes has through this circular has clarifiedthat tax deduction atsource (TDS) under sections 194-I of Income-tax Act would be required to be madeon the amount of rent paid/payable without including the service tax.]

Rent of plant, machinery or equipment to a resident (section 194-I). The rate of TDS for all with effect from 1st June 2007 is 10.3%, and the surcharge is 1%. [CIRCULAR NO. 4/2008, DATED 28-4-2008. The Central Board of Direct Taxes has through this circular has clarifiedthat tax deduction atsource (TDS) under sections 194-I of Income-tax Act would be required to be madeon the amount of rent paid/payable without including the service tax.]

Winnings from lottery or crossword puzzle or card game or any other game (section 194B). If the payment to a resident or non-resident (in cash or kind or partly in cash and kind) exceeds Rs. 5,000, you must deduct TDS at 30.9% (includes 3% edu cess) of the prize. Surcharge rate is 3%.

Winnings from Horse race (section 194BB). If the payment to a resident or non-resident exceeds Rs. 2,500, you must deduct TDS at 30.9% of the prize. Surcharge rate is 3%.

Payments to resident contractors and subcontractors (section 194C). If any contract value exceeds Rs 20,000 or Rs. 50,000 in the aggregate during the financial year, you must deduct TDS at 2.06% of the payment if payment to contractor (for contracts other than advertising contracts) and 1.03% for the advertising contracts and 1.03% for sub-contractor. (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lacs or professional receipts is less than Rs 10 lac are not required to deduct the TDS). Surcharge rate is 0.2% for contractor (other than advertising contracts) and 0.1% for sub-contractor and advertising contracts.

The section 194C is applicable only when the contract is either a "work contract" or a "contract for supply of labour for works contract". The expression "work" includes advertising, broardcasting and telecasting including production of programmes, carriage of goods and passenders by any mode of transport other than by railways, and catering.

When Tax has to be Deducted at Source. Tax is to be deducted either at the time of credit of such sum to the account of the payee, or at the time of payment thereof, whichever is ealier. Even when the account is by any other name in the books of account of payer, it is treated as credit of such income to the account of the payee.

Payment made to a travel agent /or an airline. This payment is not subject to TDS (section 194C(1)). However, provisions of section 194C apply when a plane or bus or any other mode of transport is chartered by one of the entities mentioned in section 194C.

Professional and Technical Services to a resident (section 194J). If the payment by way of fees for professional services, or fees for technical services or royalty exceeds Rs. 20,000 in a financial year, the payer must deduct TDS rate is 10.3%. Surcharge rate is 1%. (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lac or professional receipts is less than Rs 10 lac are not required to deduct the TDS).
(As per CBDT notification dated 21/8/08, in relation to the sports activities, Sports Persons, Umpires and Referees, Coaches and Trainers, Team Physicians and Physiotherapists, Event Managers, Commentators, Anchors and Sports Columnists provide Professional Services for the purpose of section 194J).

Interest other than interest on securities (section 194A). If aggregate amount of interest payable or creditable during the financial year exceeds Rs. 5000 (or Rs. 10,000 in case paid by a banking company, cooperative society engaged in banking or post office on notified deposit schemes), you must deduct TDS at 20.6% if payment to a domestic company or at 10.3% for resident other than domestic company. (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lacs or professional receipts is less than Rs 10 are not required to deduct the TDS. Also TDS is not deductible when interest is credited or paid by a firm to its partners, and others mentioned in section 194A). The surcharge rate for domestic company is 2% and for others it is 1%.

Interest on securities (section 193). If aggregate amount of interest payable or creditable during the financial year exceeds Rs 5,000, you must deduct TDS at 20.6% if payment to domestic company (10.3% for others). (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lacs or professional receipts is less than Rs 10 lac are not required to deduct the TDS). The surcharge rate for domestic company is 2% and for others it is 1%.

From June 1, 2008, tax will not be deductible at source under the provisions of section 193 if the interest is payable on any security issued by a company and if the security is in dematerialized form and is listed in a recognised stock exchange in India issued by a company.

Insurance Commission to a resident (section 194D). If aggregate sum payable during the year exceeds Rs 5,000, you must deduct TDS at 20.6% if payment to domestic company (10.3% for others). (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lacs or professional receipts is less than Rs 10 lac are not required to deduct the TDS). The surcharge rate for domestic company is 2% and for others it is 1%.

Commission on sale of lottery tickets (section 194G). If the payment to a resident or non-resident exceeds Rs 1,000, you must deduct TDS at 10.3% of commission. (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lacs or professional receipts is less than Rs 10 lac are not required to deduct the TDS). The surcharge rate is 1%.

Commission and brokerage to a resident (section 194H). You must deduct TDS at 10.3% of commission and brokerage. (Exception: Individuals and HUF whose sales/gross receipts in business is less than Rs 40 lacs or professional receipts is less than Rs 10 lac are not required to deduct the TDS). The surcharge rate is 1%.

Income in respect of Units. You must deduct TDS at 10.3%. Surcharge rate is 1%.

Dividend to a resident (section 194). Where payments or distributions by a company to its shareholders are deemed as dividends (under section 2(22)(e)), payment exceeds Rs. 1000, you must deduct TDS at 20.6%, and the surcharge rate is 2%.
For any other dividend TDS rate is nil.

Payment to a non-resident sportsman or sports association (section 194E). You must deduct TDS at 10.3%. Surcharge rate 1%