Q-1 What is TDS/TCS and what are their prescribed rates under various sections ?

A-1 Under the Income Tax Act, 1961, every person has to pay tax on his total income. The
tax on total income is collected by different means. Tax deduction of tax at source (T.D.S.) is one of
the methods of collecting tax. T.D.S. is similar to the Pay as you Earn Scheme (P.A.Y.E.). It is known
as withholding Tax in many other countries. TCS is done from buyers of certain prescribed articles, e.g
Alcoholic liquor , forest produce , coal lignite , iron ore , bullion & jewellery, parking lots , toll plaza etc.
while TDS is normally resorted to expedite tax collection and prevent tax evasion , the aim of TCS is to
bring into the tax net the hard-to-tax categories.
Section wise rate of TDS/TCS
Nature of payments made to resident

Threshol
d Limit

Company
Firm Coop Soc.
Local
Authority

Individ
ual
HUF

If No
PAN or
Invalid
PAN

Sec. Description

Amount

Rate

Rate

Rate

192

Salary

Interest Payable By Banks

10,000/-

10%

10%

20%

194
A

Interest Payable By Others

5,000/-

10%

10%

20%

194
B

Winning from Lotteries / Crossword

Puzzle

10,000/-

30%

30%

30%

Payment to Contracts Single

Transaction

30,000/-

2%

1%

20%

194
C

Average Rate

TDS Rate Chart Cont.

Nature of payments made to resident

Threshol
d Limit

Company
Firm Coop Soc.
Local
Authority

Individ
ual
HUF

If No
PAN or
Invalid
PAN

Rate

Rate

Rate

Sec.

Description

Amount

194H

Commission / Brokerage

5,000/-

10%

10%

20%

Rent

1,80,000
/-

10%

10%

20%

Rent Plant / Machinery

1,80,000
/-

2%

2%

20%

Professional Fees

30,000/-

10%

10%

20%

Director Fees ( w.e.f July 1, 2012)

10%

10%

20%

194

Dividend

10%

10%

20%

194B
B

Winning from horse race

5,000/-

30%

30%

30%

194F

Repurchase Units By MFs

1,000/-

20%

20%

20%

194G

Commission Lottery

1,000/-

10%

10%

20%

194I

194J

TCS Rate Chart

Nature of payments made to resident

Description

Amount

Alcoholic Liquor for human Consumption

1.00%

Timber obtained under a forest lease, or any other mode, other

forest produce

2.50%

Scrap

1.00%

Parking Lots, Toll Plaza Lease and Mine Quarry Lease

2.00%

Tendu Leaves

5.00%

Minerals , being coal or lignite or Iron Ore. Effective July 1, 2012

1.00%

Bullion or Jewellery(if the sale consideration is paid in cash

exceeding Rs 5. Lacs in Jewellery and Rs 2. Lacs in case of Bullion)
Effective July 1, 2012

1.00%

Q-2 Why is there so much emphasis on TDS provisions?

A-2 Tax evasion is a world wide phenomenon. Governments rely on
withholding tax as a powerful instrument to prevent tax evasion. Besides, it
serves the following objectives:
1. Tax is collected prior to receiving income.
2. Improved cash-flow for the government.
3. Widening and deepening of tax net.
4. Sharing of tax collection responsibility.

Q-3 How does TDS system work?

A- 3 Persons deducting taxes (deductors) from specified payments,
remit them to government account and persons from whose income, tax
was deducted (deductees) get credit for the same in their assessments.

Q-4 What are the forms to be used for filling quarterly TDS/TCS returns?
A-4 Following are the forms for TDS and TCS and their periodicity:
Form
Particulars
Periodicity

24Q

Quarterly statement for tax deducted at source from Salaries

26Q

Quarterly statement of tax deducted at source in respect of all payments other Quarterly
than Salaries

27Q

Quarterly statement of deduction of tax from interest, dividend or any other Quarterly
sum payable to non-residents

27EQ

Quarterly statement of collection of tax at source

Quarterly

Quarterly

Q-5 What are the due dates for filing quarterly TDS Returns?
A- 5 The due dates for filing quarterly TDS returns, both electronic and paper are
under:
Quarter Due

Date Due

April to June

July 15

July to September

October 15

October to December

January 15

January to March

June 15

Q-6 What is due date for payment to government account of tax deducted / collected
at source
A-6 As per Rule 30 following Time limit has been prescribed for payment of tax deducted /
collected will be as under. All sums deducted / collected shall be paid to the credit of the
Central Government within seven days from the end of the month in which the deduction /
collection is made except the payment / credited during the month of march which may be
upto 30th April of the next financial Year.

a)
b)

By Government Deductors
On the same day where the tax is paid without production of an income-tax challan.
On or before 7 Days from the end of the month of the deduction made or IT is due u/s
192(1A).

By other than Government Deductors

Sl No.

Quarter of the financial year

ended on

(1)

Date for quarterly

payments

(2)

(3)

30th June

7th July

30th September

7th October

31st December

7th January

31ST March

30th April

Q-8 What are the advantages of TDS for the tax payers?
A-8 TDS provisions help the tax payers in spreading of tax incidence and
provide for a simple and convenient means of tax payment. This mode of tax collection
causes minimum inconvenience.

Q-9 What are the responsibilities of a person deducting tax?

A-9 Persons deducting tax are required to do the following:

Get a (new reformatted) TAN.

Deduct tax in accordance with Income-Tax (IT) provisions.

Obtain PAN of payees.

Remit the tax deducted within the due dates.

Issue TDS certificates in Forms 16 or 16A / 16AA within time.

File statutory statements of TDS within due dates.

Q-10 Are there any other duties or responsibilities on tax deductor?

A-10 Yes. If the deductor accepted any declaration from payees, in Forms
15H, 15G etc., he / it has to forward these forms within seven days, from the end of
the month in which the deductor has received it, to the concerned Commissioner of
Income-Tax (CIT) or Chief Commissioner of Income-Tax (CCIT).

Q-11 What is the difference between deduction and collection of tax at source?
A-11 Deduction of tax is done from various payments in order to tax payees
income. Collection of tax is done from buyers of certain prescribed articles, e.g.
Alcoholic liquor, forest produce etc. While TDS is normally resorted to expedite tax
collection and prevent tax evasion, the aim of TCS is to bring into the tax net the
hard-to-tax categories. Both, help in bringing incomes in tax net.
Q-12 What is education cess?
A-12 Finance Act (2) 2004 introduced an additional surcharge, to be called the
Education Cess to finance the Governments commitment to universalise quality basic
education, is being levied at the rate of two per cent on the amount of tax deducted or
advance tax paid, inclusive of surcharge.This additional surcharge of 2% of Income-Tax
and surcharge payable is levied as Educational Cess on Income-Tax. An additional
cess @ 1% has been intorduced by Finance Act, 2007.
Q-13 What are the steps involved in TDS?
A-13 Following steps are involved in deduction of tax at source:
(1) Deduction of tax on specified payments.
(2) Remitting the tax to government account.
(3) Obtaining PAN of payees.
(4) Issue of TDS certificate to the person from whose Income-Tax is deducted.
(5) Filing of required statements of TDS within due dates.

Q-14 Who are the persons exempt from TDS?

A -14 Tax is not required to be deducted at source where the amount is payable to:
The Government.
The R.B.I.
A Corporation established under Central Acts, whose income is exempt from tax.
Mutual Fund specified Under Section 10(23D).
No tax was deductible at all on the portion of dividend diverted to the State Government as it
is not assessable under the Income-tax Act. The entire tax deducted at source clearly
pertains to the dividend payable to the assesee and it has been found as a fact that the
enitre burden of this amount had fallen on the assessee corporation. (CIT v. Punjab
Financial Corporation (2004) 198 CTR 691 (P&H))

Q-15 What is the departmental structure for TDS?

A- 15 Assessing Officer (A.O.) is the first link in the chain. Usually an ITO/ACIT/DCIT
has jurisdiction over persons deducting tax in a specific area. Sometimes special officers are
assigned jursidiction of persons having large TDS payments. A.Os. in turn report to a Joint
Commissioner of Income-Tax (JCIT/Additional Commissioner of Income-Tax (Addl.CIT), who
has the authority to levy penalties. He is supervised by the CIT(TDS) and CCIT in turn, who is
responsible to Central Board of Direct Taxes (CBDT), the highest body in the field of direct
taxes in India.
Q-16 Can an ITO(TDS) issue summons?
A-16 Yes. As per CBDT Circular and CCITs notification dated 15.9.95, the TDS
Officer receiving returns of TDS u/s 206, had powers to conduct surveys and issue
summons for production of books and documents under s. 131 and 133A of I.T.Act.
Reckitt & Coleman of India Ltd. & Another v. ACIT (TDS), (2001) 251 ITR 306 (Cal.)

Q-17 What is mean by following TDS terminology regularly used for TDS purpose ?

1)
2)
3)
4)
5)
6)
7)
8)

A-17
TAN
OLTAS
TIN
UIN
CIN
UTN
FVU
CSN

9)

BBC

Tax Deduction Account Number

On Line Tax Accounting System
Tax Information Network
Unique Identification Number
Challan Identification Number
Unique Transaction Number
File Validation Utility (File validated by using NSDL website)
Challan Serial Number (Given by bank branch where TDS is
deposited)
Bank Branch Code (A unique seven digit code alloted by R.B.I.
To each branch of bank)

TDS SURVEYS / VERIFICATION/SPOT VERIFICATION/ INSPECTION U/S 131A

OBJECTIVES OF TDS SURVEY
Q-18 Can ITO (TDS) conduct surveys/verifications/inspections ? If yes , than
under what section and is there any decision to support.
A-18 Yes, Prescribed Income-Tax authority received return or quarterly
statements of TDS is empowered to conduct survey and issue summons for production
of books and documents. CBDT circular dated February 12, 1991 and notification dated
September 15, 1999 confer these powers. Reckitt & Colman of India Ltd. & Another
v. ACIT (TDS) & other, 251 ITR 306 (Cal.)

 Q-19 What are the objects of TDS Survey / Spot

Verification etc ?
A-19 Survey / spot verification is most important
tool to enforce compliance of the TDS/TCS Provision.
TDS / TCS Survey / Inspection is aimed at verifying whether
assessee is deducting / collecting tax at source as per the provisions
of the Ch . XVII - B & BB of the Act and also that the same is being
deposited to Govt . T reasury in time as stipulated .
In addition to enforcing compliance of TDS provisions it also helps
in identifying defaults u /s 40(a )(i )/(ia )/(iii ) of the Act and
broadening of tax base .

Q-20 WHY TWO

NOMENCLATURES i.e TDS
Survey and verification

A-20
In context of TDS, terms Survey and spot verifcation (also
called spot Inspection) are used interchangeably.
As per provisions of section 133 A of the I.T. Act 1961 survey
an Income tax authority may enter only those places/premises
where business or profession is carried out.
However there are many deductors like Government DDOs,
Trusts, NGOs etc who are not carrying out business or
profession hence legally surveys u/s 133A can not be
authorised for such premises. In such cases spot verifcations /
Inspections are carried out u/s 131(1) of the Act.
In practice TDS surveys as well as spot verifcations serve same
purpose.

Q-21 What are SCOPE OF TDS SURVEY /SPOT

VERIFICATION

A-21

To inspect books of accounts or other documents to verify

compliance of TDS/TCS provisions.
To collect such information as may be relevant to proceedings
u/s 201/201(1A), levying penalty for TDS defaults,
launching of prosecution under section 276B/276 BB of the
I.T. Act, 1961 and also for recovery of outstanding demand.
The scope of the TDS survey is to verify the compliance of TDS
provisions with respect to the specifed sums debited by the
deductor or credited by the collector in the books of accounts
regularly maintained by him as opposed to a regular IT survey
where the focus is on detecting tax evasion/ tax avoidance by the
Assessee.

A-22

Q-22 WHAT IS MEANT BY TDS

COMPLLANCE?

TDS compliance includes:i. Deductions or collection of tax at source on specifed

payments/credits/advances or specifed receipts/debits whichever is
earlier
ii. Deductions/ collection of tax under the correct section and at correct rate
as contained in Chapter XVIIB & BB of the I.T. Act, 1961
iii. Remit TDS/TCS on or before the prescribed dates to the Central
Governement Account.
iv. Filing of quarterly TDS/TCS statements in prescribed forms on or before
prescribed dates.
v. Payment of interest due u/s 201(1A) in case of delayed payment

Q-23 WHAT ARE THE SCOPES OF TDS

SURVEY
A-23
Survey is possible even to enquire about tax deducted a
source : Reckitt and Colmn of India Ltd . V s . ACIT
[2001] 251 ITR 306 ( Cal ).
Residential premises can also be covered if some
business/professional work/document is being done/kept
there.
Business or residential premises of third parties, including a
Chartered Account, a pleader, or Income Tax Practitioner,
of whom the assessee may be a clien, are not palces which
could be entered into for the purpose of section 133A.
( Circular No .7- D dt 3/5/1967)

Q-24 What are the CRITERIONS FOR SELECTING A CASE FOR

TDS SURVEY/SPOT VERIFICATION ?
A-24
Analysis of ITD data with TDS Assessing ofcer

Cases in Procesution list ( Tendency to withhold TDS/TCS

after deduction)
Habitual late filers / non filers (late fling/ non fling is closely
linked to late payment)
Cases showing negative trend in payment (under partiular
section or on gross pament for specifed period as compared to
preceding FY)
Trend of TDS payment in stark contrast to other deductors in
similar business

CRITERIONS FOR SELECTING A CASE FOR TDS

SURVEY/SPOT VERIFICATION
Analysis of data with terrtorial Assessing Ofcers
Negative growth in TDS payment as against healthy growth in
Advance tax payment
Cases of high self Assessment tax and huge unpaid SA Tax
(indicates liquidity crisis which is linked to withholding of TDS/TCS)
Cases reported by the Assessing ofcer with huge disallowance u /s
40( a )( ia) of the Act
Cases of Sick units or units with negative operating margins (As
Indicated in Audit report u/s 44AB of the Act)
Examination of Audit reports fled along with applications u/s 197
of the Act.

CRITERIONS FOR SELECTING A

CASE FOR TDS SURVEY/SPOT
VERIFICATION
Analysis of Information received from third parties
Grievance petition fled by the deductee
Tax evasion petitions (regarding non deduction of
TDS)
Analysis of newspaper reports /information
available through internet
Analysis of case law decided in favour of revenue

Q- 25 What are the requirements of the TDS survey team ?

A-25
Team must be conversant with business model of the assessee by
studying tax report / Internet reports
Team must be prepared with structured questionnaire for statement
Team must be ready with the data from the ITD system/return of
income
Team must be ready with the list of documents that are required on
arrival to start verifcation
Since TDS verifcations are based on the recorded transactions, element
of suprise is not essential. Rather it is desirable to inform the
deductor in advance about proposed date and time of the verifcation.
It ensure presence of concerned persons and readiness of requested
documents on arrival of the team.

CONDUCTING TDS SURVEYS

BE PROFESSIONAL
Execute operations in professional way
Function like a team.........Delegate tasks to members
Dont sit idle (it sends a very wrong message to
assessee)
Be courteious yet frm in your approach
Keep the Range head updated of the progress
Collect only those documents that are required (avoid
garbage)
Record statement covering each and every aspect

Q-26 How to REPORT AFTER TDS SURVEYS

?

A-26
BE PRECISE YET CLEAR
With facts of the case and issues
With legality involved in the issues
With tax efect involved, issue-wise

BE PRECISE YET CLEAR

It is important to report the fndings of survey in time
Do send relevant fndings to territorial AOs

Q-27 What would be the IMPACT OF TDS

SURVEYS
A-27

Help in augmenting TDS collection by way of

P lugging in non-deduction / Short deduction u/s. 201(1)
C harging of intereset u/s 201(1A)
Levying of penalty u/s.271C
Launching prosecution u/s. 276B / compounding of ofences
Helps in widening & deepening of tax base
Helps in correct interpretation (194C v. 194J/194I/194H)
Helps in improving compliance levels across business comnunity
Helps in educating them about various provisions

IMPACT OF TDS SURVEYS

INFORMATION SHARING WITH
ARMS OF DEPARTMENT like

OTHER

Assessment wing
Investigation wing
DIT (CIB)
DIT (System) [To improve ITD System Efcinecy for better
data handling]
CBDT [For legislative changes]

Experiences of CIT(TDS), charge Ahmedabad, Gujarat.

T.D.S. Surveys / verifications a tool for deterrence and revenue augmentation.
T.D.S. Surveys / verifications are increasingly being used
To determine the extent of T.D.S. Default committed by deductors/collectors.
To verify as to whether the deductors are uploading the quarterly TDS statements on
or before prescribed dates and that too correctly.
To verify the segment wise payment of TDS
Salary u/s 192,
Contract u/s 194C,
Professional and technical Services u/s. 194J,
Interest u/s. 194A,
Commission u/s. 194H etc,
TCS u/s. 206C of the I.T. Act.

Excellent result during the F.Y. 2012-13 in the CIT(TDS), charge , Ahmedabad Gujarat
No of surveys/ verifications
Default detected
155
Rs.37.27 Crores

Amount Collected
Rs.33.29 Crores

S . No .

Name of the assessee

TDS default detected

( in Rs .)

Recovery made ( in
Rs .)

M/s. Jaihind Projects Ltd., Ahmedabad

4.51,00,000/-

.4.07,00,000/-

M/s. D. Com Systems Ltd.

2,,26,68,706/-

2,26,00,000/-

Space Application
Ahmedavad

3,03,93,343/-

3,03,93,343/-

M/s. Shree Tarun Steel ,Ahmedabad

1,49,18,744/-(TCS)

1,00,000/-

Kemrock Industries & Exports Ltd.,

Baroda
Mekaster
Engineering
Ltd.,
Panchmahal

2,85,00,000/-

25,00,000/-

7
8
9

Centre

(ISRO),

M/s. Desai Construction Pvt.Ltd.,

Surat
M/s. Shah Virchand Govindji Jewellers
P.Ltd.
Taluka
Development
Office,
Gandhinagar, Harij, Idar, Vadali,
Chansma,
Mehsana,
Radhanpur,
Kalol, Talod, Prantij, Jamnagar, Anjar
& Gandhidham

3,07,80,608/- In F.Y. 2012-13 recovery

of Rs.1,04,77,000/- has
been made by attaching
bank accounts and 60
debtors.
2,05,48,500/2,05,48,500/2,16,39,270/-

2,16,39,270/-

4,92,70,747/-

4,97,70,747/-


Majority of the deductors/ collectors are withholding TDS and depositing the
same
after the survey has been conducted.

Employers not deducting TDS from salary u/s. 192 on pro rata basis or average rate basis as
required by C.B.D.T Circular No 8/2010 dated 13-12-2010.

TCS surveys, traders in scrap in substantial number of cases are neither recovering TCS nor
collecting Form 27C, nor submitting the forms within the prescribed time limit to office of the Chief
CIT/CIT.

Railways and Ship Breakers at alang have been deducting TCS on sale of scraps @ 1% .

Timber merchants at gandhidham , kandla has been deducting TCS @ 1%.

Taluka Panchayts Gujarat have not been deducting TDS on salary on pro rata/average basis.

Copy of the order passed U/s 201(1)(1A) and CIT(A) order confirming the same in the case of
scrap dealer group.- Circulated to all AOs of TDS Charge and All concerned CsIT(Appeals)

CBDT Circular dated 21-05-2012 is very important from department point of view on
scrap.

My views for betterment of TDS augmentation and cover-up the lacuna in the Act &
Rules

The issue of T.C.S. On scrap has become totally debatable issue and most of the I.T. A.Ts. Have been
deciding the issue against the department. It is therefore proposed that the term scrap needs to be
more exhaustive and clarificatory definition in the Act itself rather than by way of instruction by the
C.B.D.T.

TDS verification though covered under the provision of section 131A it is suggested that a clear cut
statutory provision should be brought as well as procedure should be defined in the Income-tax Rules.
Amendment needs to be made in respect of salary / commission paid by company to its directors , in
the sense that it should be made on payment/credit , whichever is earlier. Presently the surveys on
most of companies reveals that such companies have been making provisions of salary, commission,
remuneration etc and no TDS is being made in the relevant year by misusing the lacuna in the
provision.