Until now, we all were aware that for professional expenses – 10% tds should be deducted, for contract expenses – 1% /2 % tds should be deducted, for interest expenses, 10% tds should be deducted etc., but from current financial year, this is wrong. As per the recent changes in Income tax rules, In case the deductee (receiver of payment) has not filed his income tax return of last year within the due date and his total TDS/TCS claim (total tds/tcs as per deductee’s form 26AS) for last year was INR 50,000/- or more, then TDS should be deducted at TWICE the applicable rate or 5% whichever is higher.
Example – say, your contractor has not filed his ITR for last year, then it is your responsibility to deduct TDS @ 5% instead of 1 % or 2%. If this is not followed, deductor (payer) will be at fault and penal proceedings can be initiated against the payer apart from expense disallowance due to short deduction of TDS.
Deductees (payment receivers) who have not filed the last year ITR within the due date and the total tds/tcs as per their Form 26AS of last year is INR 50,000/- or more, such persons are known as SPECIFIED PERSONS.
Same provisions also apply for TCS.
Now the question is, how the deductor (payer) will know if the deductee (payee) is a specified person. Income Tax website has a provision to check if a person is a specified person and hence, TDS deductors and TCS collectors are advised to check this specified
person list once in April or at the time of first payment/collection and again in December.
Applicability:
On all types of TDS payments and TCS collections except salary.
Rate:
Twice of Normal TDS/TCS rate or 5% whichever is higher
In light of these provision, add automated solution to check if the vendor has filled the return.
Suggested by Gurusamy Subramanian
New TDS Provision
Until now, we all were aware that for professional expenses – 10% tds should be deducted, for contract expenses – 1% /2 % tds should be deducted, for interest expenses, 10% tds should be deducted etc., but from current financial year, this is wrong. As per the recent changes in Income tax rules, In case the deductee (receiver of payment) has not filed his income tax return of last year within the due date and his total TDS/TCS claim (total tds/tcs as per deductee’s form 26AS) for last year was INR 50,000/- or more, then TDS should be deducted at TWICE the applicable rate or 5% whichever is higher.
Example – say, your contractor has not filed his ITR for last year, then it is your responsibility to deduct TDS @ 5% instead of 1 % or 2%. If this is not followed, deductor (payer) will be at fault and penal proceedings can be initiated against the payer apart from expense disallowance due to short deduction of TDS.
Deductees (payment receivers) who have not filed the last year ITR within the due date and the total tds/tcs as per their Form 26AS of last year is INR 50,000/- or more, such persons are known as SPECIFIED PERSONS.
Same provisions also apply for TCS.
Now the question is, how the deductor (payer) will know if the deductee (payee) is a specified person. Income Tax website has a provision to check if a person is a specified person and hence, TDS deductors and TCS collectors are advised to check this specified person list once in April or at the time of first payment/collection and again in December.
Applicability:
On all types of TDS payments and TCS collections except salary.
Rate:
Twice of Normal TDS/TCS rate or 5% whichever is higher
In light of these provision, add automated solution to check if the vendor has filled the return. Suggested by
Gurusamy Subramanian