India: Budget 2012: Highlights - Tax Deductable At Source (TDS)

Last Updated: 20 December 2012
Article by Anil Harish

Tax Rate And TDS On Payment Of Interest On ECB

Sec. 115A(1)(a)(iiaa) and Sec. 194LC:

By insertion of this sub-clause, the payment of interest as specified in new Sec. 194LC has been made taxable at the rate of 5% with effect from 1st July, 2012.

The new Sec. 194LC provides that on payment by specified companies to non-resident of interest on External Commercial Borrowing (ECB), tax shall be deducted at source at the rate of 5%.

Specified company includes Indian Companies engaged in:

(i) generation or distribution or transmission of power; or

(ii) operation of aircraft; or

(iii) manufacture or production of fertilizers; or

(iv) construction of road including toll road or bridge; or

(v) construction of port including inland port; or

(vi) construction of ships in a shipyard; or

(vii) construction of dam; or

(viii) developing and building a housing project Earlier the rate of tax on such interest payment was 20%. However, this relief has been provided for a limited period of three years, where monies are borrowed between 1st July, 2012 and 1st July, 2015.

Tax rate on income of non-resident sportsman and entertainer and TDS thereon Sec.

115BBA and Sec. 194E:

This Sec. provides for the rate of income tax payable on income received by any non- resident sportsman or sports association, not being a citizen of India, by way of participation in any game or sport in India, advertisement etc. The Finance Bill, 2012 has with effect from 1st July, 2012 proposed to include within the scope of this Sec., income received by an entertainer, not being a citizen of India and being a non-resident, from his performance in India.

Rate of Tax (w.e.f 1st July, 2012)

  • On non-resident sportspersons or sports associations has been increased from 10% to 20%.
  • On non-resident entertainers fixed at 20%

Consequently Sec. 194E has been proposed to be amended to provide for deduction of tax @ 20%, at the time of making such payment.

Sec. 115BBD: This Sec. provides the rate of income tax payable on the dividend income received by an Indian Company from a specified foreign company in the previous year relating to Assessment Year 2012-2013 i.e. financial year 2011-2012. The Finance Bill, 2012 has proposed to amend this Sec. w.e.f.1st April, 2013 to provide that the year in consideration shall now be Financial Year 2012-2013 and such income shall be assessed in Assessment Year 2013-2014.

Income from cash credits, unexplained investments, unexplained money, unexplained expenditure etc.

Sec. 115BBE: The Finance Bill, 2012 has proposed to introduce a new Sec. w.e.f.1st April, 2013 being Sec. 115BBE, which provides for the manner of taxation of the income of an assessee which relates to Sec.s 68, 69, 69A, 69B, 69C and 69D. These sections relate to cash credits, unexplained investments, unexplained money, unexplained expenditure etc.

This Sec. provides that if the total income of an assessee includes income relating to the abovementioned sections then, income tax shall be charged @ 30%. However, any income other than the income mentioned above shall be taxed in accordance with the other provisions of the Act.

TDS on interest paid on securities

Sec. 193:

This Sec. provides for deduction of tax on interest paid on securities. The proposed amendment shall replace clause (v) of the proviso to the section stating that no tax shall be deducted on any interest payable to an individual or HUF, who is resident, on any debenture issued by a public listed Company, provided such amount paid in the financial year does not exceed Rs. 5,000/- instead of Rs. 2,500/- and such amount shall be paid by an account payee cheque. This amendment shall come into effect from 1st July, 2012.

TDS on fees for professional and technical services

Sec. 194J: This Sec. provides for deduction of tax on any amount paid to any person by way of professional fees, fees for technical services, royalty etc. A new sub-Sec. (ba) is proposed to be inserted to extend the scope of the said section to include, payment of remuneration, fees or commission, by whatever name called, other than income paid as salary to a Director of a Company. This amendment shall come into effect from 1st July, 2012.

TDS on payment of compensation for compulsory acquisition of immovable property

Sec. 194LA:

This Sec. provides for deduction of tax at source on payment of compensation by any person to a resident on account of compulsory acquisition of any immovable property. However, there is an exception from deduction of tax at source where compensation paid is less than Rs. 1 Lakh.

By way of a proposed amendment the threshold for TDS shall be increased to payment of compensation up to Rs. 2 Lakhs from Rs. 1 Lakh. This amendment shall come into effect from 1st July, 2012.

Sec. 194LAA: The Finance Bill, 2012 proposes to insert a new Sec. being Sec. 194LAA which provides that tax shall be deducted @ 1% at source on the consideration paid by any person on purchase of immovable property. Therefore, on sale of immovable property, other than on compulsory acquisition, tax shall be deducted at source on amount of sale consideration.

Furthermore, the tax shall be deducted on higher of actual consideration and stamp duty ready reckoner value. Also, this Sec. provides that the sale agreement in respect of the sale shall not be registered unless the transferee furnishes proof of deduction of income tax in accordance with the provisions of this section and payment of such sum to the credit of the Central Government.

Fortunately, section 203A shall not apply to this provision and there will be no requirement for the buyer to get a TAN number or file TDS return accordingly.

TDS on payment of other sums

Sec. 195: This Sec. provides for deduction of tax on any interest or other sums paid to a non-resident. An amendment in sub-Sec. (1) proposes to exclude interest referred to in Sec. 194LB or 194LC from the ambit of this section. This amendment shall come into effect from 1st July, 2012.

A new Explanation 2‟ coming into effect retrospectively from 1st April, 1962 has been proposed to be inserted whereby obligation to deduct tax at source under the said Sec. applies and extends to all persons, resident or non-resident, whether or not the non-resident person has:

a. a residence or place of business or business connection in India or

b. any other presence in any manner whatsoever in India.

Therefore, by this retrospective amendment it is clarified that every person has a liability to deduct tax at source even if the person has no presence in India. This amendment is also contrary to the recent judgment of Supreme Court in the case of Vodafone.

A new sub-Sec. (7) has also been proposed to be inserted whereby the Board may notify in the Official Gazette, a class of persons or cases, where any person who is responsible for making payment to a non-resident, shall make an application to the Assessing Officer to determine the appropriate amount of such sum which shall be chargeable to tax, whether or not such payment to be made is chargeable under the provisions of the Act. This amendment shall come into effect from 1st July, 2012.

No deduction at source in certain cases

Sec. 197A: This Sec. provides for certain cases in which the deduction of tax at source is not required. Sub-Sec. (1C) provides that if a person of the age of Sixty Five years, has furnished a declaration in writing to say that the tax on his total income is nil then, no deduction of tax shall be required to be made on the income receivable by him u/s 193, 194, 194A, 194EE or 194K. An amendment has been proposed to be made to this sub-Sec. thereby reducing the prescribed age from Sixty Five to Sixty years. This amendment shall come into effect from 1st July, 2012.

Failure to deduct tax at source

Sec. 201: This Sec. provides for the consequences for failure to deduct tax at source or to pay the same. A new proviso has been inserted before the proviso to sub-Sec. (1) to say that any person who is responsible of deducting tax at source on the payment made to a resident and who fails to do so, shall not be penalised if the resident to whom such payment was made has furnished his return of income, taken into account such payment, paid the tax due on the same and has furnished a certificate from an accountant in this behalf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions