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Surcharges on TDS!!

Rajeev (EO) (54 Points)

26 July 2009

As per recent budget provisions, 10 % Surcharge on Personal Income Tax (above 10 Laks) stands withdrawn.. If I understand correctly, TDS surcharge for any payment to Individuals (Say payment by a company to Professional Consultant ) also stands abolished,irrespective of the amount. Am I correct in my inference??

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6 Replies

chintan mehta (Chartered Accountant) (445 Points)
Replied 26 July 2009

it stands only to individual.. not to any professional who earns income from his profession ( income from business and profession) , or which is a firm of professional.

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Rajeev (EO) (54 Points)
Replied 27 July 2009

but profit from proprietorship firm gets taxed as that of individual only..

Anubhav Bansal (CA) (223 Points)
Replied 27 July 2009

Rajeev,

I think you are mixing up 2 provisions at a time. You correctly interpreted that the surcharge for Individuals stands abolished, but in case of TDS from 1/10/09 the rates will be flat i.e. rate of deduction of tax will be flat as prescribed no addition of surcharge or cess whoever the deductee is. Thus abolishing surcharge and cess from TDS is for all.

Rajeev (EO) (54 Points)
Replied 27 July 2009

Anubhav,

Can u tell me the source of this information (i.e. from 01/10/09 onwards....no cess or surcharge..)...Thanks !!

Anubhav Bansal (CA) (223 Points)
Replied 27 July 2009

Rajeev

Please read the memoredum to the budget you will find the same written there. Also I am pasting the extract of the same. Read the last poin of this extract.

A. Under the existing provisions of section 194-I of the Income-tax Act, TDS on rental payments is prescribed at the rate of–

(a) 10% for the use of any machinery or plant or equipment,

(b) 15% for the use of any land or building or furniture or fittings, if the payee is an individual or HUF and

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(c) 20% if the payee is other than an individual or HUF.

The current rates need a downward revision as they are leading to blocking of working capital funds in many cases. It is

therefore proposed to rationalise and reduce the TDS rates on rental payments as under:

(a) 2% for the use of any machinery or plant or equipment,

(b) 10% for the use of any land or building or furniture or fittings for all persons.

Nature of Payment (194-I) Existing Proposed rate*

rate (w.e.f. 1-10-2009)

Rent —

a. rent of plant, machinery or equipment 10% 2%

b. rent of land, building or furniture to an individual and 15% 10%

Hindu undivided family

c. rent of land, building or furniture to a per son other than an 20% 10%

individual or Hindu undivided family

* The rate of TDS will be 20 per cent in all cases, if PAN is not quoted by the deductee w.e.f. 1.04.2010.

B. Under the existing provisions of section 194C of the Income-tax Act, TDS at the rate of 2% is deducted on payment for

a contract. However, in the case of a sub-contract, TDS is deducted at the rate of 1%. Further, in the case of payment for an

advertising contract, TDS is required to be deducted at the rate of 1%.

In order to reduce the scope for disputes regarding classificaton of contract as sub contract, it is proposed to specify the

same rate of TDS for payments to both contractors as well as sub-contractors. To rationalise the TDS rates and to remove multiple

classifications it is also proposed to provide same rate of TDS in the case of payment for advertising contracts. To avoid hardship

to small contractors/sub-contractors most of whom are organized as individuals/HUFs, it is proposed to prescribe following rates

of TDS:

(a) 1% where payment for a contract are to individuals/HUF

(b) 2% where payment for a contract are to any other entity.

Nature of Payment (194C) Existing Proposed rate**

rate (w.e.f. 1-10-2009)

Payment to —

a. Individual/HUF contractor 2% 1%

b. Other than individual/HUF contractor 2% 2%

c. Individual/HUF sub-contractor 1% 1%

d. Other than individual/HUF sub-contractor 1% 2%

e. Individual/HUF contractor/sub-contractor for advertising 1% 1%

f. Other than individual/HUF contractor/ sub-contractor for advertising 1% 2%

g. Sub-contractor in transport business 1% nil*

h. Contractor in transport business 2% nil*

* The nil rate will be applicable if the transporter quotes his PAN. If PAN is not quoted the rate will be 1% for an individual/

HUF transporter and 2% for other transporters upto 31.3.2010.

** The rate of TDS will be 20 per cent in all cases, if PAN is not quoted by the deductee w.e.f. 1.04.2010.

C. Further some of the rates of TDS specified for resident taxpayers have been reduced and converged to 10 per cent.

D. In order to ease the computation of TDS, it is proposed to remove surcharge and cess on tax deducted on non-salary

payments made to resident taxpayers.

a. Rationalisation of TDS rates:

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S G (Director) (30 Points)
Replied 11 August 2009

Under Section 194C, tax is required to be deducted on payments to transport contractors engaged in the business of plying, hiring or leasing goods carriages. However if they furnish a statement that they do not own more than two goods carriages, tax is not to be deducted at source. W.e.f 01.10.09 and 01.04.10 can the undertaking be taken without pan no. is it valid, no TDS is to be deducted.Pl clarify?