Implications of Budget 2009 TDS and TCS Rates F.Y 2009-10

TDS Rates

• For payment to residents and domestic companies,there will be no surcharge and cess on the basic rate of
  TDS. This simplifies TDS rates to a great extent.


• There are changes in TDS rates for payments to contractors and payment of rent. Those are explained
  below.

TDS on payment to contractors : Section 194C

• The proposed amendment is effective from 01-10-2009.


• Rate of deduction: Rate of deduction is now based on the status of payee and not on the basis of type of
  payment. Earlier the rate was 2% for payment to contractors and 1% for payment to sub-contractors
  and advertisement contracts. Now the rate is 1% for payments made to individuals and HUF and 2% in
  other cases.


• Contractor manufacturing is now covered as "work"and is liable to TDS under this section.
  
  
  
  • This is defined as manufacturing or supplying a product according to the requirement or
    specification of a customer by using material purchased from such customer, but does not include
    manufacturing or supplying a product according to the requirement or specification of a customer by
    using material purchased from a person, other than such customer
  
  
  • If the invoice mentions value of material separately then such value will be excluded for calculation of
    TDS, in all other cases TDS will apply to total invoice value.
  
  
  
  


• Persons carrying business of plying, hiring or leasing goods carriages.
  
  
  
  • Need not deduct TDS if contractor furnishes PAN.
  
  
  • Will have to furnish information as may be prescribed.
  
  
  
  

TDS on Rent : Section 194I

The proposed amendment is effective from 01-10-2009.

Rent	Earlier	Now
Plant and Machinery	10%	2%
Land building	15% for Indviduals / HUF and 20% for others	10%

eTDS Statement Filing: Section 200

• The proposed amendment is effective from
  01-10-2009. Currently section 200 specifies quarterly
  filing of eTDS statements.


• This is changed and now CBDT can specify the periodicity for which the statements are to be filed.

Processing of eTDS Statements: Section 200A

The proposed amendment is effective from 01-04-2010.

This new section introduces processing of eTDS Statements in the following manner.

• Sum deductible shall be calculated after making adjustment of arithmetical errors and apparent
  incorrect claims.


• Interest will be calculated.


• From the above actual amount paid will be deducted to arrive at TDS payable or refundable.


• Deductor will be informed about the TDS payable or refundable.


• Time limit for the processing is within one year of the financial year of filing of eTDS statement.


• CBDT will make a scheme of centralized processing of e-TDS Statements.

Time limit for Penalty proceedings : Section 201

• The proposed amendment is effective from 01-04-2010.


• A person is deemed to be an assesee in default for failure to deduct TDS in whole or part.


• The order for such default now will have to be passed.
  
  
  
  • Within two years from the end of the financial year in
    which the eTDS statement is filed.
  
  
  • Within four years from the end of the financial year in which payment is made or credit is given, in any
    other case.
  
  
  • For financial year commencing on or before 01-04-2007, this time limit is upto 31st March 2011.
  
  
  
  

TDS Rate when PAN not available: Section 206AA

• The proposed amendment is effective from 01-04-2010.


• If deductee fails to furnish PAN to deductor, the deductor shall apply highest of the following rates for
  deducting TDS.
  
  
  
  • (i) at the rate specified in the relevant provision of
    this Act; or
  
  
  • (ii) at the rate or rates in force; or
  
  
  • (iii) at the rate of 20%.
  
  
  
  


• Form 15G/ 15H declaration for no deduction of tax will become invalid if PAN is not mentioned therein.
  


• PAN will have to be mentioned in bills, vouchers and other documents communicated between deductor
  and deductee.


• If deductee furnishes invalid PAN or submits PAN belonging to someone else, it will amount to non
  furnishing of PAN.

Other Changes

• No TDS on zero coupon bonds issued by scheduled banks : Section 194A. Effective 01-04-2009


• No TDS for payments from New Pension Scheme :Section 197A. Effective 01-04-2009
  


• Quarterly statement for interest paid without deducting TDS is now to be submitted for "such
  periods as may be prescribed" : Section 206A Effective 01-10-2009.


• Quarterly statement regarding tax collection at sources are now to be submitted for " such periods as
  may be prescribed": Section 206C Effective 01-10-2009.

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