Tax Ready Reckoner

Section 197 of the Income Tax Act, 1961 provides a mechanism for taxpayers to obtain certificates for either: Lower rate of TDS(than what is prescribed under the Act) Nil rate of TDS This section helps prevent excessive tax withholding when the taxpayer’s actual tax liability is lower than the standard TDS deduction rates. 1. Key Aspects […]

Section 197A of the Income Tax Act, 1961 provides specific situations where no Tax Deducted at Source (TDS) is required to be deducted, even when the payment would normally attract TDS under other provisions. Cases Where No TDS is Deducted A.  For Individual Residents (Section 197A(1)) Applies to: Interest income (other than interest on securities) under Section 194A Conditions:

Section 198 of the Income Tax Act, 1961 establishes a fundamental principle that any tax deducted at source (TDS) shall be considered as income received by the payee. This provision ensures that taxpayers get proper credit for taxes already deducted on their behalf. Key Provisions of Section 198 Basic Principle TDS is treated as income: The amount

1. Fundamental Principle TDS Credit Mechanism: Any tax deducted at source (TDS) is treated as: Payment of taxon behalf of the recipient Eligible for creditagainst final tax liability Adjustable in the yearthe income is taxable (may differ from deduction year) 2. Normal Rule (Section 199) Standard Credit: TDS credit is given in the financial year

1. Primary Responsibilities of Deductor Tax Deduction at Source: Must deduct correct % as per Income Tax Act Must deduct at the time of payment/credit(whichever is earlier) No deduction required if payee submits valid lower/NIL deduction certificate (u/s 197) Deposit to Government: Deposit TDS amount by 7th of next month(except March: due by 30th April) Late payment attracts 5%

1. Mandatory E-Filing Requirement All tax deductorsmust electronically file quarterly TDS statements Applies to: Corporate deductors Non-corporate deductors (if required to audit accounts u/s 44AB) Government offices 2. Statement Due Dates QUARTER PERIOD COVERED DUE DATE Q1 April-June 31st July Q2 July-September 31st October Q3 October-December 31st January Q4 January-March 31st May 3. Required Forms

1. Automated Processing by CPC-TDS Centralized Processing Center (CPC-TDS)processes all TDS returns Auto-validationof statements filed under Sections 200(3)/206C(3) Key validations: TAN-PAN matching Challan verification Rate vs amount consistency checks 2. Processing Stages STAGE ACTION TIMELINE 1. Initial Validation Syntax and format checks Immediate 2. Data Matching Cross-verification with: • Bank records • PAN database •

1. Legal Status of Default Deductor becomes “Assessee in Default”for: Failure to deduct TDS or Failure to deposit deducted TDS 2. Financial Penalties A.  For Non-Deduction COMPONENT CALCULATION Principal Amount Equal to TDS not deducted Interest 1% per month from due date of deduction to actual deduction date B.  For Non-Payment After Deduction COMPONENT CALCULATION Principal Amount

1. Legal Basis for TDS Certificates Section 203of the Income Tax Act, 1961 mandates that every deductor must issue a TDS certificate to the deductee. Rule 31of the Income Tax Rules, 1962 prescribes the format, timelines, and details required in these certificates. 2. Types of TDS Certificates FORM NO. APPLICABLE FOR DUE DATE Form 16 Salaries (Section 192) 31st

1. Legal Basis and Purpose Section 203Amandates obtaining a 10-digit alphanumeric TAN for entities deducting/collecting tax. Rule 114Agoverns the application process, replacing the redundant Rule 114AA (w.e.f. 8-12-2004). 2. Application Process Form 49B: Primary application form (online/offline). Online: Via NSDL TIN portal. Offline: Submit duplicate copies to TIN-FC centers. New Companies: Can apply via Form INC-7during registration (e-Biz portal).