Justification-Report-for-TDS

TDS Rates for Assessment Year 2018-19

TDS Rates for Assessment Year 2018-19

In certain transactions, the person making payment is required to obtain TAN registration and deduct tax at source (TDS) while making payment. In this article, we look at transactions that require TDS deduction and the TDS rates for FY 2017 – 18.

TDS Rate for Salary

TDS on salary is the most common type of tax deducted at source. TDS on salary must be deducted by employers while paying salaries. The TDS rate for salary must be deducted based on the estimated total income of the employee at the following rate:

Calculating TDS on Salary

To calculate the TDS applicable on salary, follow the steps below:

  1. Request the employee to submit information required to compute the income tax payable and deductibles.
  2. Determine the Gross Salary.
  3. Deduct all deductions under Section 16.
  4. Determine the gross total income (Not being a loss under any such head other than the loss under the head Income from house property)
  5. Allow deduction under Section 80C to Section 80U.
  6. Compute income tax payable.
  7. Add surcharge and education cess, as applicable.

Note: Business loss is not allowed to be set off from salary income. However loss from house property can be set off from salary income in computing amount of TDS. No other loss can be set off from salary income in computing amount of TDS.

If the total income does not exceed the basic exemption, do not deduct tax. Else, deduct TDS from salary at the time of making salary payment.

TDS Rate for Deemed Dividends

TDS must be deducted on deemed dividends paid to residents by an Indian company. Whenever, an indian company or closely held company provides loan or advance to a shareholder in which shareholder holds atleast 10% voting power, the payment is treated as deemed dividend. Such deemed dividends are taxable in the hands of shareholders.

TDS on deemed dividends must be deducted at the rate of 10%. TDS on deemed dividend must be deducted at time of payment.

Dividends payable by a domestic company under Section 2(22)(a) to (d) does not attract TDS. However, Dividend Distribution Tax (DDT) maybe applicable.

TDS Rate for Commission or Brokerage

Whenever any person other than an Individual or HUF makes a commission or brokerage payment, TDS must be deducted. In case of professionals, if sales turnover exceeds Rs.25 lakhs in the previous financial year, TDS must be deducted on commission or brokerage payment. In all other cases, if the total turnover exceeds Rs.1 crore in the previous year, TDS must be deducted on commission or brokerage payments.

Commission or brokerage includes any payment made for services rendered (not being professional services) in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities.

TDS rate for commission or brokerage is 5% from 1/6/2017. No TDS is applicable on payment of upto Rs.15000.

TDS Rate for Rent

Any person except an individual or HUF is required to deduct TDS on rent paid. In case of professionals, if sales turnover exceeds Rs.25 lakhs in the previous financial year, TDS must be deducted on rent paid. In all other cases, if the total turnover exceeds Rs.1 crore in the previous year, TDS must be deducted on rent.

“Rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with plant, machinery or equipment, furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee. Advance payment of rent is also subject to TDS.

TDS rate for rent on plant or machinery is 2%. TDS rate for rent for land, building, furniture and other assets is 10%.

TDS on rent is not required for payment of upto Rs.1.80 lakhs of rent to each co-owner. TDS on rent is also not applicable for rental payments made to the Government, RBI or Corporation established under Central Act/ Mutual Fund specified under Section 10(23D) or local authority.

TDS Rate for Fee for Professional or Technical Services

Any person except an individual or HUF is required to deduct TDS on fee for professional or technical services. In case of professionals, if sales turnover exceeds Rs.25 lakhs in the previous financial year, TDS must be deducted on fee for professional or technical services. In all other cases, if the total turnover exceeds Rs.1 crore in the previous year, TDS must be deducted on fee for professional or technical services.

Under Income Tax Rules, Professional or Technical Services means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession. Some examples of professional or technical fee are:

  • Fees for professional services charged by CA, CS, CWA, Lawyers, Consultants, MBA, Actors, etc.
  • Fees for technical services charged by Engineers, Architects, Scientists, etc.,
  • Royalty
  • Non-compete fees
  • Remuneration or fees or commission paid to a director of a company

The TDS rate applicable for fee for professional or technical services is 10%.

TDS need not be deducted on payment of upto Rs.30,000 for each type of income separately. To apply threshold limit the above payments cannot be clubbed. Threshold limit do not apply to payment made to director.

TDS Rate on Payments to Contractors and Job Workers

TDS must be deducted on payments to contractors and job workers expect by an Individual or HUF. In case of any other person or business entity, if they are liable to get their accounts audited under Income Tax Act in the previous year, then they must deduct tax at source. Examples of payments to contractors and job workers include:

  • Payments for advertising (Print media, internet, mobile, TV, radio, hoardings, metro, cinema, making of ad films).
  • Payments for broadcasting and telecasting including production of programmes for such broadcasting or telecasting.
  • Payments for carriage of goods and passengers by any mode of transport other than by railways.
  • Payments for catering.
  • Payments for job work. Job work means manufacturing or supplying a product according to requirement or specification of a customer by using material purchased from such customer but does not include material purchased from a person other than such customer.
    • In case of job work, if cost of material is shown separately in the invoice then the same will not be considered for deducting TDS. However, if such cost of materials is not shown separately then the whole invoice value will be considered for deducting tax.

The TDS rate for payment to contracts and job workers differs based on the person from whom tax is deducted at source. If the payment is made to an individual or HUF, TDS rate of 1% is applicable. If payment is made to partnership firm or company, TDS rate of 2% would be applicable. 

TDS Rate for Property Sale

TDS must be deducted by all persons who are involved in purchase of property irrespective of having TAN registration. TDS on property sale is not required if the consideration is less than Rs.50 lakhs.

TDS rate for property sale is 1% of the payment made. TDS must be deducted by the buyer at the time of transfer of money to the seller or at the time of payment in cash or by issue of cheque or draft or by any other mode, whichever is earlier.

The TDS deducted must be deposited within 30 days from the end of the month in which deduction is made.

TDS Rate for Interest Paid

TDS must be deducted on interest paid to residents by all persons and entities other than individuals and HUFs on interest paid other than on securities. In case of professionals, if sales turnover exceeds Rs.25 lakhs in the previous financial year, TDS must be deducted on interest paid. In all other cases, if the total turnover exceeds Rs.1 crore in the previous year, TDS must be deducted on interest paid.

TDS rate applicable for interest paid is 10%. However, the following types of interest payment do not attract TDS:

  1. Interest paid to banks.
  2. Interest paid by a partnership firm to its partners.
  3. Interest on deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank.

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