Provision for Filing of Return of Income and Self-Assessment – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.
Provision for Filing of Return of Income and Self-Assessment – CA Inter Taxation Study Material
Question 1.
Answer the following with reference to the provisions of the Income-tax Act, 1961 for the assessment year 2021-22:
When will tax not required to be deducted at source on interest payable to a resident on any bond or security issued by a company though the aggregate amount of interest exceeds ₹ 5,000, the basic exemption limit under Section 193 of the Act? [May 2009, 2 Marks]
Answer:
| Section | Explanation |
| 197A | If a Declaration is Submitted by a Resident Individual along with his PAN on Form No. 15G (15H for Senior Citizen aged 60 years or more) in duplicate that his total income does not exceed minimum exemption limit. The tax will not be deducted at source on any land or security issued by a company, even when interest payable exceeds ₹ 5,000/- in a year. |
Question 2.
Answer the following with regard to the provisions of the Income-tax Act, 1961 for the assessment year 2021-22:
Enlist the instalments of advance tax and due dates thereon in case of Companies. [May 2009, 4 Marks]
Answer:
Due dates for instalments of payment of Tax by companies are as follows :
| Instalment | Due Dates | Percentage of Total Tax Payable |
| 1 | Upto 15th June | 15% |
| 2 | Upto 15th September | 45% (including already paid) |
| 3 | Upto 15th December | 75% – do – |
| 4 | Upto 15th March | 100% – do – |
Question 3.
Explain the consequences of failure to deduct tax at source and pay-ment of the same to the Government A/c under Income-tax Act, 1961 [Nov. 2009, 3 Marks]
Answer:
| Section | Explanation |
| 201 | When a person fails to deduct tax at source and or not depositing such amount in Government Account, he shall be treated as deemed assessee in default. As such he will be liable to pay tax along with interest. Further under law he may also face prosecution and or to pay penalty. |
| 40(a) | Such payment will be disallowed as expenditure u/s 40(a). |
Question 4.
Explain the consequences of not deducting tax and paying to Govt, account under Section 201 of the Income-tax Act, 1961. [Nov. 2010, 4 Marks]
| Section | Explanation | |
| 201 | When a person fails to deduct tax at source and or not depositing such amount in Government Account, he shall be treated as deemed assessee in default. As such he will be liable to pay tax along with interest. Further under law he may also face prosecution and or to pay penalty. | |
| 40(a) | Such payment will be disallowed as expenditure u/s 40(a). | |
Question 5.
Briefly discuss the provisions relating to payment of advance tax in case of capital gains and casual income. [May 2013, 4 Marks]
Answer:
Advance Tax is payable on all incomes including Capital Gains and casual Incomes. But these incomes are not regular and so cannot be estimated by the assessee in advance, before due dates for advance payment instalments. Most of casual Income items are such where tax is deducted at source; same is the case in few items where capital gain may arise.
But after arise of capital gain and casual income, the assessee is required to calculate whether any amount of advance tax payable is still due after taking into account tax deducted at sources. If it is so, the due amount can be deposited in next instalment and finally before 31st March.
Question 6.
Who is liable to pay Advance Tax? What is the procedure to compute the advance tax payable ? [May 2014, 4 Marks]
Answer:
Every such person is liable to pay advance tax whose tax liability is ₹ 10,000/- or more after estimating his taxable income for whole previous year at the rates applicable and amount of total estimated tax payable, is paid as advance tax in instalments after considering tax deducted at source, if any. Advance tax is payable in 4 instalments (15th June, 15th September, 15th December and 15th March). Balance, if any upto 31st March.
Question 7.
1. Explain briefly the provisions of advance tax on capital gains and casual income.
2. What are the consequences of failure to deduct or pay the tax under Section 201 of the Income-tax Act, 1961? [Nov. 2015, 4+4 Marks]
Answer:
| S.No. | Explanation | |
| 1 | Every such person is liable to pay advance tax whose estimated tax liability is ₹ 10,000/- or more for whole previous year at the rates applicable. Advance tax is payable in instalments after considering tax deducted at source, if any Advance tax is payable in 4 instalments (15th June, 15th September, 15th December and 15th March). Balance, if any upto 31st March. | |
| 2 | When a person fails to deduct tax at source and or not depositing such amount in Government Account, he shall be treated as deemed assessee in default. As such he will be liable to pay tax along with interest, further under law he may also face prosecution and or to pay penalty. Such payment will be disallowed as expenditure u/s 40(a). | |
Question 8.
Briefly discuss the provisions of Section 234B of the Income-tax Act, 1961 for short-payment or non-payment of advance tax. [May 2016, 4 Marks]
Answer:
| Section | Explanation | |
| 234B | According to provisions of section 234B, non-payment of Advance tax or payment of advance tax less than 90% of due, will attract interest @1% per month or part of the month w.e.f. 1st April following to date of assessment. The amount of not-paid or less-paid will be calculated after deduction of tax at source. | |
Question 9.
Discuss the provision under Income-tax Act for Payment of Advance Tax in case of Capital Gain. [Nov. 2016, 2 Marks]
Answer:
| Section | Explanation |
| 234C | Since Capital Gain cannot be estimated in advance, the amount of tax on capital gain is payable in following instalments of advance tax after arise of capital gain. If no payable instalment remains, the advance tax can be deposited upto 31st March. There will be no interest liability u/s 234C, if advance tax is deposited in the above manner. |
Question 10.
Discuss the provisions, relating to the premature withdrawal from Employees Provident Fund, under Section 192A, for Assessment Year 2021-22. [Nov. 2016, 4 Marks]
Answer:
| Section | Explanation |
| 192A | Premature withdrawal from Recognized Provident Fund by an employee before 5 years services attracts TDS @ 10% if such payment is ₹ 50,000/- or more. The employee has to furnish his PAN, otherwise tax will be deducted at maximum slab rate. In case of foreign employee surcharge and cess will also be deducted, if applicable.
However if there is change in employment and the accumulated balance is transferred to new employee there will be no TDS. Further if discontinuous of service before completion of 5 year is due to termination, ill health, closure of business and like there will be no TDS. |
Question 11.
What are the clarifications made by CBDT with respect to Section 206C(1F) relating to following issues:
1. Whether TCS on sale of motor vehicle is applicable only to luxury car?
2. Whether TCS is applicable on each sale or aggregate value of sale of Motor Vehicle, exceeding ₹10 Lakhs?
3. Whether TCS is applicable in case of an individual?
4. Whether TCS on sale of motor vehicle is at retail level also or only by manufacturer to distributor or dealer? [Nov. 2019, 4 Marks]
Answer:
| Section | Explanation |
| 206C | Provisions for tax collection at source (TCS) are applicable under section 206C as follows: 1. TCS on sale of Motor Vehicle is applicable when amount of sale consideration is more than ₹ 10 lacs to all not necessarily luxury car. 2. TCS is applicable on each sale of Motor ‘vehicle exceeding ₹ 10 lacs @ 0.75%. 3. TCS is applicable to all buyers, except Central/State Government, embassy / High Corn mission, representative of foreign Government, etc. 4. TCS is applicable only in retail transitions. It is not applicable on Sale of Motor Vehicles by manufactures to dealers or distributors. |
Question 12.
During the financial year 2020-21, the following payments/expendi-ture were made/incurred by Mr. Yuvan Raja, a resident individual (whose turnover during the year ended 31-3-2020 was ₹ 39,00,000) :
- Interest of ₹ 12,000 was paid to Rehman & Co., a resident partnership firm, without deduction of tax at source.
- Interest of ₹ 4,000 was paid as interest to Mr. RD. Burman, a non-resident, without deduction of tax at source.
- He had sold goods worth ₹ 5,00,000 to Mr. Deva. He gave Mr. Deva a cash discount of ₹ 12,000 later. Commission of ₹ 15,000 was paid to Mr. Vidyasagar on 2.7.2020. In none of these transactions, tax was deducted at source.
Briefly discuss whether any disallowance arises under the provisions of Section 40(a)(i)/40(a)(ia) of the Income-tax Act, 1961. [May 2011, 4 Marks]
Answer:
The assessee is a resident individual and his annual turnover is 39 lacs, which is less than ₹ 1 Crore, during immediately preceding previous year. Hence he was not under tax audit purview under Section 44AB.
| Section | Explanation |
| 40(a)(i) | Since assessee was not subject to tax audit in preceding previous year, payment of interest ₹ 12,000/- to Rehman & Co. does not attract provisions of disallowance. |
| 40(a)(i) | Interest of ₹ 4,000/- paid to Mr. R. D. Burman, a non-resident, without deduction of tax at source, will attract disallowance. |
| 40(a)(i) | Commission of ₹ 15,000/- paid to Mr. Vidyasagar is not subject to disallowance under Section 40(a)(z) because assessee was not under tax audit. |
Question 13.
State the applicability of TDS provisions and TDS amount in the following cases:
(a) Rent paid for hire of machinery by B Ltd. to Mr. Raman ₹ 2,10,000
(b) Fee paid to Dr. Srivatsan by Sundar (HUF) ₹ 35,000 for surgery per-formed to a member of the family. [Nov. 2011, 4 Marks]
Answer:
| S. No. | Explanation |
| (a) | Rent paid ₹ 2,10,000/- for hire of machinery exceeds ₹ 1,80,000/-, hence provisions of Section 194-1 for deduction of tax at source will apply. If buyer has furnished PAN, the TDS will be @ 1.5% of ₹ 2,10,000/-. ie. ₹ 3,150/- otherwise 20%. |
| (b) | Fee paid to Dr. Srivatsan ₹ 35,000/- for personal surgery of a member of HUF is not subject to deduction of tax at source. |
Question 14.
What are the provisions relating to tax deduction at source in respect of:
1. ABC and Co. Ltd. Paid ₹ 19,000 to one of its Directors as sitting fees on 01.01.2021.
2. Mr. X sold his House to Mr. Y on 01.02.2021 for ₹ 60,00,000? [May 2014, 2 + 2 = 4 Marks]
Answer:
| S. No. | Explanation |
| (a) | TDS @ 7.5% is to be deducted on ₹ 19,000/- paid to a Director by the company under Section 194J. |
| (b) | TDS @ 0.75% is to be deducted on ₹ 60 lacs under Section 194IA. |
Question 15.
State in brief the applicability of tax deduction at source provisions, the rate and amount of tax deduction in the following cases for financial year 2020-21:
- Payment of ₹ 27,000 made to Jacques Kallis, a South Asia cricketer, by an Indian newspaper agency on 02.07.2020 for contribution of articles in relation to the sport of cricket.
- Rent of ₹ 1,70,000 paid by a partnership firm for use of plant and machinery.
- Winning from horse race ₹ 1,50,000.
- ₹ 2,00,000 paId to Mr. A, a resident individual on 22.02.2021 by the State of Uttar Pradesh on compulsory acquisition of his urban land. [Nov. 2014, 4 Marks]
Answer:
| S. No. | Explanation |
| (a) | Payment of ₹ 27,000/- to a non-resident Cricketer is liable for TDS @ 2096 plus surcharge and less under Section 194E. Hence amount of tax is ₹ 27000 × 2096 = 5400 + 496 cess = 5616 |
| (b) | Rent ₹ 1,70,000/- for use of plant and machinery is not subject to TDS, because it does not exceed ₹ 1,80,000/- under Section 194-1. |
| (c) | Winning from horse race ₹ 1,50,000/- is subject to TDS @ 30%, because it exceeds ₹ 10,000/-, under Section 194BB. Amount of TDS is ₹ 1,50,000 × 3096 = ₹ 45,000 |
| (d) | Amount paid on compulsory acquisition of urban land is subject to TDS @ 7.596 under Section 194LA provided such payment exceeds ₹ 2.5 lacs. In the instant case the amount is ₹ 2 lacs, hence there is no TDS. |
Question 16.
Mr. Madan sold his house property in Surat as well as his rural ag-ricultural land for a consideration of ₹ 65,00,000 and ₹ 20,00,000 respec-tively, to Mr. Raman on 01.10.2020. He has purchased the house property 1 for ₹ 40,00,000 and the land for ₹ 15,00,000, in the year 2015. There was no difference in the stamp valuation. You are required to determine TDS implications, if any, assuming both persons Resident Indians. [May 2015, 4 Marks]
Answer:
- TDS is applicable on Sale Consideration of house property ₹ 65 lacs @ 0.7596 i.e. ₹ 48,750 (TDS).
- TDS is not applicable on sale of agricultural land ₹ 20 lacs.
Question 17.
Ashwin a resident Individual carrying on business, furnishes you the following information:
| Turnover During the Financial Year | Amount (₹) |
| 2019-2020 | 2,20,00,000 |
| 2020-2021 | 20,00,000 |
State whether tax deduction at source provisions are attracted for the under mentioned expenses incurred during the financial year 2020-21
| Particulars | Amount (₹) |
| Commission paid to Babloo | 8,500 |
| Payment to Vijay for repair of office building | 23,000 |
| Payment of fees for technical services, to Vivek | 35,000 |
All payments are made to residents. If tax has to be deducted at source, state the amount of tax to be deducted at source. [May 2016, 4 Marks]
Answer:
The turnover of Mr. Ashwin for preceding previous year is ₹ 220 lacs which exceeds 100 lacs, hence in tax audit under Section 44 AB. Accordingly normal provisions of TDS will apply as under :
- Commission paid to Babloo is under Section 194H, according to which 3.7596 TDS is applicable when amount of commission exceeds ₹ 15,000/-. In the instant case amount of commission paid is ₹ 8,500/- (below applicable limit of ₹ 15,000/-). Hence no TDS is applicable.
- Payment for repair of office building is eligible for TDS @ 0.75% under Section 194C if payment exceeds ₹ 30,000/-. In the instant case the amount paid is ₹ 23,000/- (less than ₹ 30,000/-) hence no TDS is applicable.
- Payment of fees for technical services amounting to ₹ 35,000/- is eligi-ble for TDS @ 7.5% under Section 194J, because the amount exceeds non-TDS limit of ₹ 30,000/-.
Question 18.
State with reason whether the following receipt is taxable or not under the provision of Income-tax Act, 1961? “TDS is not applicable in respect of payment of ₹ 1,00,000 to Mr. Pandey a resident, being interest on recurring deposit with SBI” [Nov. 2016, 2 Marks]
Answer:
Interest on recurring deposit with SBI ? one lac is to be included in Income from other Sources as taxable. It is also subject to TDS @ 7.5% under Section 194A because amount of interest exceeds ₹ 10,000/-.
Question 19.
Mr. Barun provides you the following information and requests you to determine the Advance Tax liability with due dates for the financial year 2020-21.
Estimated tax liability for the financial year 2020-21 ₹ 65,000
Tax deducted at source for this year ₹ 5,000 [Nov. 2016, 4 Marks]
Answer:
Amount payable as Advance Tax :
| Particular | Amount (₹) |
| Estimated Tax liability | 65,000 |
| Minus Tax Deducted at Source | 5,000 |
| Net Advance Tax Payable | 60,000 |
It will be paid in the following manner:-
| Instalment | Due Date. | Advance Tax Payable | Amount of |
| 1 | On or before 15 th June | 15% of Total 60,000 | 9,000 |
| 2 | On or before 15 th September | 45% of Total 60,000 minus already paid (27,000 – 9,000) | 18,000 |
| 3 | On or before 15 th December | 75% of Total 60,000 minus already paid (45,000 – 27,000) | 18,000 |
| 4 | On or before 15 th March | 100% of Total 60,000 minus already paid (60,000 – 45,000) | 15,000 |
| Total | 60,000 | ||
Note: Advance Tax is payable when estimated tax liability is ₹ 10,000/- or more.
Question 20.
Pallavi Bank Ltd., has paid interest of ₹ 9,000 to Mr. A, a resident Indian, from its Chennai branch and ₹ 8,000 from Bangalore branch. If there is no core banking services in the bank, is tax required to be deducted at source from such interest payments made on 31.3.2021? Will your y answer be different if there is core banking service present in the bank? Also, explain the provisions of the Income-tax Act, 1961 in this regard. [May 2017, 4 Marks]
Answer:
If there is no core banking services in the bank, no TDS is applicable, because interest amount is less than 10,000 in each branch separately. However, if core banking persists, TDS @ 7.5% is applicable on total interest ₹ 17,000/- (9,000 + 8000).
Question 21.
Mr. Sachal, a resident individual aged 54, furnishes income details as under:
- Wholesale Cloth business, whose turnover is ₹ 1,50,00,000, for which accounts are audited u/s. 44AB. Income from such business ₹ 8,10,000.
- Income from other sources ₹ 2,70,000.
- Tax deducted at source ₹ 25,000.
- Advance tax paid ₹ 1,03,000 on 14-3-2021.
Return of income will be filed on 11.12.2021. The assessee is willing to pay the requisite self-assessment tax. Calculate the interest payable under Section 234B of the Income-tax Act, 1961. Assume that the return of income would be processed on the same day of filing of return. [May 2017, 4 Marks]
Answer:
Computation of Taxable Income and Amount of Tax of Mr. Sachal:
| Income from Business | 8,10,000 |
| Income from other sources | 2,70,000 |
| Total Income | 10,80,000 |
Computation of Tax at existing rates :
| Particulars | Amount (₹) | Rate | Amount (₹) |
| On First | 2,50,000 | Nil | Nil |
| On Next | 2,50,000 | 5% | 12,500 |
| On Next | 5,00,000 | 20% | 1,00,000 |
| On Balance | 80,000 | 30% | 24,000 |
| 10,80,000 | 1,36,500 | ||
| Add : 4% Less | 5,460 | ||
| Total Tax | 1,41,960 | ||
| Less: Tax deducted at Source | 25,000 | ||
| Total Tax Payable | 1,16,960 | ||
| 90% of Total Tax Payable | 1,05,264 | ||
| Advance Tax paid | 1,03,000 (Below 90%) | ||
| Advance Tax Less paid (1,16,960- 1,03,000) | 13,960 |
Interest Payable under Section 234B @ 1% per month or part of the month from following 1st April to 11th December presumed date of assessment ie. 9months = 13,960× 1/100×9= 1256.40 (Rounded 1260) under Section 234B.
Important Note :
According to Finance Act, 2020, there are concessional alternate tax rate in which certain exemptions and deductions are not allowed. Since Mr. Sachal is not claiming any exemption/deduction, his total tax liability will be as under:
| Particulars | Amount (₹) | Rate | Amount (₹) |
| On First | 2,50,000 | Nil | Nil |
| On Next | 2,50,000 | 5% | 12,500 |
| On Next | 2,50,000 | 10% | 25,000 |
| On Next | 2,50,000 | 15% | 37,500 |
| On Balance | 80,000 | 20% | 16,000 |
| 10,80,000 | 91,000 |
| Particulars | Amount (₹) | Rate | Amount (₹) |
| Add : 4% Less | 3,640 | ||
| Total Tax | 94,640 |
If this tax structure is adopted, then amount of Advance Tax paid ₹ 1,03,000/ is higher than total payable tax. In such case Section 234B is not applicable and tax refund is due 1,03,000/- Advance Tax paid minus 94,640/- tax due ie. ₹ 8,360.
Question 22.
Under section 208, obligation to pay advance tax arises in every case where the advance tax payable is ₹ 10,000 or more. State exception to this rule. [Alov. 2017, 2 Marks]
Answer:
Under Section 208, advance tax is payable by every person whose estimated total tax liability is ₹ 10,000/- or more in a financial year. However as per Section 207(2), following persons are not liable to pay advance tax : a. Resident individual aged 60 years or more at any time during previous year.
b. A person who is not having taxable income under head “Profits and Gains of Business or Profession”.
Question 23.
Mr. Subramany is engaged in the business of producing and selling toys. During the previous year 2020-21 his turnover was ₹ 1.80 crores. He opted for paying tax as per presumptive taxation scheme laid down in Section 44AD. He has no other income during the previous year. Is he liable to pay advance tax and if so, what is the minimum amount of advance tax to be paid and the due date for payment of such advance tax? [Nov. 2017, 3 Marks]
Answer:
Mr. Subramany has opted for presumptive taxation scheme under Section 44AD. His turnover is 1.80 Crores and presumptive income is 8% of ₹ 1.80 Crores ie. ₹ 14,40,000/-. His tax liability with existing rates of tax will be as under :
| Particulars | Amount (₹) | Rate | Amount (₹) |
| On First | 2,50,000 | Nil | Nil |
| On Next | 2,50,000 | 596 | 12,500 |
| On Next | 5,00,000 | 2096 | 1,00,000 |
| On Balance | 4,40,000 | 3096 | 1,32,000 |
| 14,40,000 | 2,44,500 | ||
| Add : 496 Less | 9,780 | ||
| Total Tax | 2,54,280 |
He can deposit this amount as advance tax on or before 15th March. How-ever, amount paid upto 31 st March will also be treated as advance tax paid.
Important Note :
According to Finance Act, 2020, there are concessional alternate tax rate, according to which tax payable will be as under:
| Particulars | Amount (₹) | Rate | Amount (₹) |
| On First | 2,50,000 | Nil | Nil |
| On Next | 2,50,000 | 5% | 12,500 |
| On Next | 2,50,000 | 10% | 25,000 |
| On Next | 2,50,000 | 15% | 37,500 |
| On Next | 2,50,000 | 20% | 50,000 |
| On Balance | 1,90,000 | 25% | 47,500 |
| 14,40,000 | 1,72,500 | ||
| Add : 4% Less | 6,900 | ||
| Total Tax | 1,79,400 |
Question 24.
Mr. Dhanapal wishes to purchase a residential house costing ₹ 60 lakhs from Ms. Saipriya. The house is situated at Chennai. He also wants to purchase agricultural lands in a rural area for ₹ 65 lakhs. He wants to know whether there will be any obligation to deduct tax at source in these two situations. Both the buyer as well as the sellers are residents in India. Advise Mr. Dhanapal suitably. [Nov. 2018, 2 Marks]
Answer:
TDS is applicable @ 0.75% of Sales Consideration of residential house i.e. ₹ 60 lacs, because it exceeds 50 lacs, under Section 194-IA.
TDS is not applicable on agricultural land under section 194-IA, even when sales consideration exceeds ₹ 50 lacs.
Question 25.
Rahil & Co., a partnership firm is having a car dealership show-room. They have purchased cars for ₹ 2 crores from XYZ Ltd., car manufacturers, the cost of each car being more than ₹ 12 lakhs.
They sell the cars to individual buyers at a price yielding 10% margin on cost. State whether there will be any obligation to collect tax in the above two situations. [Nov. 2018, 2 Marks]
Answer:
- Under Section 206C, TCS is not applicable on Sale or Motor Vehicles by manufacturers to dealers or distributors. Hence purchase of cars for ₹ 2 Crore by dealer Rahul & Co. from manufacturer XYZ Ltd. will not attract TCS, even cost of each car exceeds ₹ 10 lacs.
- Sale of cars to individual buyers at a price of ₹ 13.2 lacs per car will attract TCS @ 0.75% under Section 206C, because value of each car exceeds ₹ 10 lacs.
Question 26.
Examine the TDS implications in the following cases along with reasons thereof:
1. Ms. Varsha received a sum of ₹ 95,000 on 31 st December 2020 towards maturity proceeds of LIC taken on 1st October 2014 for which sum assured was ₹ 80,000 and annual premium was ₹ 10,000.
2. Mr. Deepak transferred a residential house property to Mr. Karan for ₹ 45 lacs. The stamp duty value of such property is X 55 lacs.
3. XYZ Private Limited pays the following amounts to Mr. Narayan during previous year 2020-21:
(a) ₹ 22,000 towards fee for professional services.
(b) ₹ 18,000 towards royalty.
4. Payment of ₹ 1,75,000 made to Mr. Vaibhav for purchase of calendar according to specifications of M/s. ABC Limited. However, no material was supplied for such calendar by ABC Limited to Mr. Vaibhav.
5. Talent Private Limited pays ₹ 12,000 to Ms. Sudha, its director, towards sitting fee which is not taxable u/s 192.
6. Radha Limited is engaged for Shyam Limited only in the business of operation of call centre. On 18.03.2020, the total amount credited by Shyam Limited in the ledger account of Radha Limited is ₹ 70,000 regarding service charges of call centre. The amount is paid through cheque on 28.03.2020 by Shyam Limited. [May 2019, 7 Marks]
Answer:
| S.No. | Explanation |
| 1 | The policy was taken after 31 st March 2012 and annual premium exceeds 1096 of sum assured. Hence maturity proceeds are not exempt under Section 10 (10D). |
| 2 | The Sales Consideration is less than ₹ 50 lacs, hence tax deduction at source is not applicable under Section 194-IA, irrespective of stamp duty value more than ₹ 50 lacs. |
| 3 | TDS on professional services is applicable on payment exceeding ₹ 30,000/on each service under Section 194J. In the instant case professional fee ₹ 22,000/- and royalty ₹ 18,000/- are less than 30,000/- each. Hence no TDS. |
| 4 | Payment of ₹ 1,75,000/- for purchase of calendar is not in category of work contract, hence TDS under Section 194C is not applicable. It is a contract of Sale/purchase. |
| 5 | Sitting fee paid to Director of a company is entitled for TDS @ 7.5%, even the amount does not exceed 30,000 under section 194J. |
| 6 | Shyam Ltd. is required to deduct tax at source ‘ 1.5% of total amount 70,000/- under Section 194J on 18th March 2021, date of credit of service charges in its books. Date of actual payment is irrelevant. |
Question 27.
Examine & explain the TDS implications in the following cases along with reasons thereof, assuming that the deductees are residents and having a PAN which they have duly furnished to the respective deductors.
1. Mr. Tandon received a sum of ₹ 1,75,000 as pre-mature withdrawal from Employees Provident Fund Scheme before continuous service of 5 years on account of termination of employment due to ill-health.
2. A sum of ₹ 42,000 has been credited as interest on recurring deposit by a banking company to the account of Mr. Hasan (aged 63 years).
3. Ms. Kaul won a lucky draw prize of ₹ 21,000. The lucky draw was organized by M/s. Maximus Retail Ltd. for its customer.
4. Finance Bank Ltd. sanctioned and disbursed a loan of ₹ 10 crores to Borrower Ltd. on 31.3.2021. Borrower Ltd. paid a sum of ₹ 1,00,000 as service fee to Finance Bank Ltd. for processing the loan application.
5. Mr. Ashok, working in a private company, is on deputation for 3 months (from December, 2020 to February, 2021) at Hyderabad where he pays a monthly house rent of ₹ 52,000 for those three months, totaling to ₹ 1,56,000. Rent is paid by him on the first day of the relevant month. [Nov. 2019, 7 Marks]
Answer:
| S.No. | Explanation |
| 1 | As per Section 192A, withdrawal from recognized provident fund before completion of 5 years’ service is taxable if amount exceeds ₹ 50,000/-. But in the instant case termination of employment was due to ill health. As such provisions of TDS @ 7.5% are not applicable here. |
| 2 | As per Section 194A, there will be no TDS on interest on recurring deposit upto 50,000/- in case of Senior Citizen aged 60 years or more. In the instant case Mr. Hasan is aged 63 years, hence no TDS. |
| 3 | The amount of lucky draw comes under category of casual income. On such income TDS @ 30% is applicable if amount exceeds ₹ 10,000/-. Hence in the instant case TDS is applicable @ 30% on ₹ 21,000/-. |
| 4 | The sum of ₹ One lac paid by Borrower Ltd. to Finance Bank Ltd. is not covered in work contract, hence TDS is not applicable |
| 5 | According to Section 194-1, no TDS on payment of rent if the amount of rent credited/paid during a financial year does not exceed K 2,40,000/-. Hence in the instant case TDS is not applicable. |