UNIT 5
COMPUTERISED ACCOUNTING PRACTICES
The process of levy of certain charges by an authority on any kind of income held by goods, services and transaction is known as taxation. As far as goods and services are concerned, various types of taxes are applicable at different stages, one of which is VAT.
What is VAT (Value Added Tax):
VAT is a type of indirect tax which is levied on consumers on the sale of goods and services, and at the time of sales. VAT plays a huge role in the GDP of the economy.
Now, the question arises why is it an indirect tax? It is because the government imposes tax on the sales and hence it needs to be levied on consumer i.e. the end users of the products and services. But since the government collects it from the sellers/ producers, the collection of tax moves from consumers to producers and ultimately to government. Hence it is an indirect tax.
It is also a multistage tax where the tax is levied at each step of production of goods that involve sale/ purchase. VAT is levied on local as well as imported goods.
Features of VAT in India:
Example:
Suppose Ram owns a restaurant and spends Rs.50,000 towards obtaining raw materials. Input tax is 10%, so input tax becomes 10% of Rs.50,000 = Rs.5,000
Now after selling the food made by using the purchased raw materials, Ram was able to make Rs.1,00,000. Supposing 10% output tax, output tax becomes Rs.10,000
So, final VAT payable by Ram comes out to be Rs.10,000 – Rs.5,000 = Rs.5,000.
Accounting Entries for VAT
For recording, you have to pass following journal entries of VAT.
1. When Goods are bought and payment has to be made both for purchase value and VAT input or its already paid, at that time, following journal entry will be passed.
Purchase Account Dr. (Value of Purchase)
VAT Input Account Dr. (VAT on Purchase)
Cash or Bank or Name of Creditor Account Cr. (Value of Purchase + VAT input)
Reason of this Journal Entry:
We have bought the goods, it increases our current asset. Increase of asset will always debit. VAT input is also our current Asset or Negative Current Liability because We paid this to our creditor or supplier (for paying govt.) but still our net liability has not been fixed. If we received VAT output same to VAT input, then VAT Input account will automatically written off. If VAT input will be more than VAT Output, we have to Get money from Govt. So, VAT input account will be Debit. If we are final consumer, we need not show the VAT Input account, its cost will be included in purchase account. So, purchase expense will increase and debit in our journal entry.
2. When Goods are Sold and payment is receivable both for Sale Value and VAT Output or its already received at that time, following journal entry will be passed
Cash or Bank or Name of Customer Account Dr. (Value of Purchase + VAT output)
Sale Account Cr. (Value of Sale)
VAT Output Account Cr. (VAT on Sale)
Reason of this Journal Entry:
When we sell any goods we receive cash or bank. If we sell the goods on credit, we have to get money from our customer. So, Receivable money from our customer is just like given loan. So, it is also increase of our current asset. So, in case of cash sale, we will debit cash or bank account. In case of credit sale, we will debit to debtor or customer account. We will credit to sale account because in sale, we transfer the ownership of goods to other party. So, it is decrease of our current asset. So, sale account will be credit. All the amount of VAT which we will receive on sale will not go to our pocket. It is the money of Govt. Because Govt. can not get the money of tax from each part, so, we have obtained the tax on the behalf of Govt. So, it is increase in our current liability. So, this account will credit.
3. When payment made for Net VAT (Payable) to Government. At that time, following journal entry will be passed.
Net VAT Payable Account Dr. ( Excess of VAT Output over VAT Input)
Bank Account Cr.
Reason of this Journal Entry:
When we will debit VAT Payable account, it means, we are decreasing our current tax liability. Every payment through bank account will decrease our current asset, so bank account will credit. We have to show only excess of VAT output over VAT Input because the VAT which we have to pay already through purchasing need to pay again. So, we will deduct VAT input from VAT output.
Definition: Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994.
Description: In this case, the service provider pays the tax and recovers it from the customer. Service Tax was earlier levied on a specified list of services, but in the 2012 budget, its scope was increased. Services provided by air-conditioned restaurants and short term accommodation provided by hotels, inns, etc. were also included in the list of services.a
It is charged to the individual service providers on cash basis, and to companies on accrual basis. This tax is payable only when the value of services provided in a financial year exceeds the prescribed limit. This tax is not applicable in the state of Jammu & Kashmir.
Features of Service Tax
The salient features of levy of service tax are:
1. Scope: It is livable on taxable services ‘provided’ or ‘to be provided’ by a service provider. The services ‘to be provided’ in future are taxed only if payment in its respect is received in advance.
Two separate persons required (Payment to employees not covered): For charge of service tax, it is necessary that the service provider and service recipient should be two separate persons acting on ‘principal to principal basis’. Services provided by an employee to his employer are not covered service tax and, therefore, salaries or allowances paid to them cannot be charged to service tax.
2. Rate: It is livable @ 12% of the value of taxable services. Education cess @ 2% and Secondary and Higher Education cess @ 1 % are chargeable on the amount of service tax, thus, making the effective rate of service tax at 12.36% of the value of taxable service.
Update: While presenting the Budget 2015, the FM had increased the Service Tax Rate from 12.36% to 14%. This new rate of Service Tax @ 14% was applicable from 1st June 2015. Moreover from 15th Nov 2015, Swachh Bharat Cess @ 0.5% also got applicable. Budget 2016 has proposed to impose a Cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services. The new effective service tax rate in India could henceforth be 15%.
3. Taxable services: Service tax is livable only on the taxable services. Taxable services mean the services taxable under section 65(105) of the Finance Act, 1994.
4. Value: For the levy of the service tax, the value shall be computed in accordance with section 67 read with Service Tax (Determination of Value) Rules, 2006.
5. Free services not taxable: No service tax is livable upon the services provided free of cost.
6. Payment of service tax: The person providing the service (i.e. the service provider) has to pay service tax in such manner and within such period as is prescribed in the Service Tax Rules, 1994. The service tax is to be paid only on the receipt of payment towards the value of taxable services.
7. Procedures: Provisions have been made for registration, assessment including self assessment, rectifications, revisions, appeals and penalties on the service provider.
8. CENVAT credit: The credit of service tax and excise duty across goods and services is allowable in accordance with the CENVAT Credit Rules, 2004. Accordingly, output service provider (i.e. provider of any taxable service) can avail credit not only of the service tax paid on any input service consumed for rendering any output service but also of the excise duty paid on any inputs and capital goods used for rendering output service. CENVAT credit so availed can be utilized for payment of service tax on taxable output service.
9. Services provided by an unincorporated association/body to its members also taxable
[Explanation to Sec. 65]: ‘Taxable service’ includes any taxable service provided or to be provided by any unincorporated association or body of persons to a member thereof, for cash, deferred payment or any other valuable consideration. Hence, the services (falling under any category of taxable service) provided or to be provided by any unincorporated association/body to member thereof shall be liable to service tax. This provision is an exception to the ‘principle of mutuality’.
10. Performance of statutory activities/duties, not ’service’: An activity performed by a sovereign /public authority under provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such entities.
11. Import/Export of services: While import of services is chargeable to tax u/s 66A, the export of services has been made exempt from tax. Import/export provisions are discussed separately.
Accounting Entries for Service Tax
A. Journal Entries of Service Tax in the Books of Service Provider
1. When service provider receives the money from service user. This money can be divided into two parts. One is the fees for service uses and other is the service tax on services. Service provider will pass following journal entry:
Bank Account Debit .
Party of Service Account credit.
Service Tax Collected Account Credit.
Service tax collected account is the liability account because this amount is not of service provider. This amount will be deposited in Govt. account.
2. When service provider will pay the collected service tax to Govt. service tax department, following entry will be passed.
Service Tax Collected Account Debit
Bank Account Credit
B. Journal Entries of Service Tax in the Books of Service User
Like any other expenses, service tax is also expense of service user. Service user takes the service of internet, mobile, electricity and others. All these total bill have the amount of service tax which he had paid with these expenses. So, when we pass the entry of these expenses payment, there is no need to pass extra service tax expenses payment's journal entry. But if we track the total payment of service tax or any other purpose, we can show it in the payment journal entry with following ways.
Expenses of Service Used Account Debit
Service Tax Input Account Debit
Bank Account Credit
C. Journal Entries of Adjustment of Service Tax
As per the Service tax law, service tax works like VAT. If service user uses services for output of services, then he has the right to get the credit of his input service tax. For example, Mr A is a computer tutor. He uses internet for coaching students. So, he has the right to get service tax credit. For this, he has to record both service tax input and total service tax collected. After deducting total service tax input from service tax collected, he will deposit net amount to govt. account.
1. As service user of internet, Mr. A pay the bill of internet including service tax input.
Internet expense Account Debit.
Service Tax Input Account Debit.
Bank account Credit
2. As the service provider of commercial coaching, he has used internet services. He has received tuition fees with service tax.
Bank Account Debit
Tuition Fees Income Account credit
Service Tax Collected Account Credit
3. For doing the adjustment of service tax, following entry will be passed
Service Tax Collected Debit
Service Tax Input Account Credit
Service Tax Payable Account Credit
4. For paying net service tax payable account in govt. account
Service Tax payable Account Debit
Bank Account Credit
Concept of CENVAT
Object of CENVAT
3. System of allowing the credit of the taxes/duties paid on the inputs was
introduced in order to avoid the cascading effect of taxation.
4. Cascading effect in simple terms means duty on duty.
5. During the course of manufacture of a final product, the raw material passes through various stages of production, there being value addition at each stage and at every stage duty is levied. This results in cascading effect of duty, the ultimate burden of which is borne by the consumers.
6. Example of cascading effect
B purchases a raw material for Rs.11,000 (inclusive Rs.1,000 excise duty). He makes value addition of Rs.20,000 and excise duty on final product is 12%. In a normal taxation scheme, with no CENVAT credit, the cost of final product would be Rs.34,720 [Rs.11,000+Rs.20,000+12% of (Rs11,000+20,000)].
7. Under CENVAT scheme, the cost of raw material is taken net of excise duty and therefore the cost of final product will be Rs.33,600 [input (Rs.11,000 – Rs.1,000) + Value addition Rs.20,000 + Excise duty on final product [12% of (Rs.10,000 + Rs.20,000)]. Thus, the CENVAT scheme avoids cascading effect.
Features of CENVAT Scheme
8. Objective - To avoid cascading effect.
9. Manufacturer and Service Provider – Both eligible.
10. Duty paid on inputs, Input services and Capital goods are available.
11. Credit only if final products are dutiable/services provided are taxable.
12. Cross sectional credit is allowed amongst goods and services.
13. Time limit for taking CENVAT Credit.
14. Refund of CENVAT Credit: The CENVAT Credit can be refunded to manufacturer/service provider if inputs/input services are used for manufacturing final products or for provision of output services which are exported.
15. Documents and Accounts: The CENVAT Credit can be taken only on the basis of specified documents and maintenance of proper records in relation to such inputs, capital goods and input services.
16. Burden of proof: The burden to prove that the CENVAT credit that has been taken, is admissible as per the Rules framed in this behalf, lies on the manufacturer/provider of output service.
Accounting Entries for CENVAT
Part 1: Journal entries for recording CENVAT Credit
Illustrative transaction: If assesses receives services worth Rs. 10,000/- and service tax paid thereon is Rs 1,450/- (Rs10,000*14.5%). Accounting entry to be passed shall depend upon the categorization of this service. We have discussed all the cases below to explain how to pass entry in each case/categorization.
Case 1: Input services used exclusively for providing taxable services : 100% cenvat credit is available.
Expense A/c Dr | 10000 |
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Cenvat credit 100% A/c Dr | 1450 |
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To party A/c |
| 11450 |
Case 2: Input services used exclusively for providing non-taxable and/or exempt services: 100% cenvat credit to be reversed.
Option1 |
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| Option2 |
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Expense A/c Dr | 11450 |
| 1 | Expense A/c Dr | 10000 |
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cenvat credit reversed Dr | 1450 |
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| Cenvat credit reversed Dr | 1450 |
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To party |
| 11450 |
| To party |
| 11450 |
To cenvat credit reversed |
| 1450 |
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| 2 | Expense A/c Dr | 1450 |
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| To cenvat credit reversed |
| 1450 |
Note: Either of the two options as provided hereinabove can be followed. Both will achieve the same purpose as required under law.
Case 3: Input services are used commonly in providing taxable as well as non taxable activities: reversal ratio shall apply.
| Option 1 |
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| Option2 |
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1 | Expense A/c Dr | 10145 |
| Expense A/c Dr | 10145 |
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| Common CENVAT Credit A/c Dr | 1450 |
| Common CENVAT Credit A/c Dr | 1305 |
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| To party |
| 11450 | To Party |
| 114 |
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| 50 |
| To Reversal on Common CENVAT |
| 145 |
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| Credit A/c |
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2 | Reversal on common CENVAT | 145 |
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| Credit A/c Dr |
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| To Common CENVAT Credit A/c |
| 145 |
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Second entry under this option may be passed as a |
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consolidated entry on monthly basis adjusting reversal |
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for a month by a single entry. |
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Note: CENVAT Credit reversal ratio computed on the basis of turnover is assumed to be 10% for the purpose of passing above entry.
Part 2: Examples on entries to be passed for recording CENVAT Credit
Example1: If assessee receives services of commission agent and pays Rs 25,000/- and service tax paid thereon is Rs 3,625/- (Rs25,000*14.5%) and use the same exclusively for procurement of service contract worth Rs 25,00,000/- for providing construction services which are taxable services.
In such a case, Rs 3625/- shall be available as cenvat credit in respect of service tax paid on input service exclusively used for providing taxable services
Following entry shall be passed for recording CENVAT Credit:
Commission charges A/c Dr | 25000 |
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Cenvat credit 100% A/c Dr | 3625 |
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To party A/c |
| 28625 |
Example 2: Assesses is receiving architectural services worth Rs 30,000/- for providing services to government department. In this case, particular services provided by assessed to government department are exempt from service tax. Service tax paid thereon on architectural services is Rs 4,350/-(30,000*14.5%). Assessee is using architectural services exclusively for providing service to government department which is exempt. In this case, assesses has to reverse 100% cenvat credit on input services used exclusively for providing exempt services.
Following entries shall be passed:
Option-1 |
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| Option-2 |
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Architectural expense A/c Dr | 34350 |
| 1 | Architectural expense A/c Dr | 30000 |
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Cenvat credit reversed Dr | 4350 |
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| Cenvat credit reversed Dr | 4350 |
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To party |
| 34350 |
| To party |
| 34350 |
To cenvat credit reversed |
| 4350 |
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| 2 | Expense A/c Dr | 4350 |
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| To cenvat credit reversed |
| 4350 |
Note: Either of the two options can be followed. Both shall achieve the same purpose as required by law.
Example 3: If a hotel receives laundry services and pay Rs 55000/- and service tax paid thereon is Rs 7,975/- (Rs55000*14.5%) and provide the same to its customers who are diplomats. Output laundry service provided by hotel is exempt. In this case, input services i.e. laundry services are used exclusively for providing services to diplomats which is exempt service, therefore, Rs 7,975/- shall not be available as cenvat credit as service tax paid thereon attributable to input services, which is used exclusively for providing exempt services.
Following entry shall be passed for such services.
Option-1 |
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| Option-2 |
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Laundry exp A/c Dr | 62975 |
| 1 | Laundry exp A/c Dr | 55000 |
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CENVAT Credit reversed Dr | 7975 |
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| CENVAT Credit reversed Dr | 7975 |
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To Party |
| 62975 |
| To Party |
| 62975 |
To CENVAT Credit reversed |
| 7975 |
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| 2 | Laundry Exp A/c Dr | 7975 |
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| To CENVAT Credit reversed |
| 7975 |
Note: Either of the two options can be followed. Both will achieve the same purpose as required by law.
Introduction
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
Rates for deduct of tax at source
Taxes shall be deducted at the rates specified in the relevant provisions of the Act or the First Schedule to the Finance Act. However, in case of payment to non-resident persons, the withholding tax rates specified under the Double Taxation Avoidance Agreements shall also be considered
TDS RATES
Particulars | TDS Rates (in %) |
1. In the case of a person other than a company |
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1.1 where the person is resident in India- |
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Section 192: Payment of salary | Normal Slab Rate |
Section 192A: Payment of accumulated balance of provident fund which is taxable in the hands of an employee. | 10 |
Section 193: Interest on securities |
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a) any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act; | 10 |
b) any debentures issued by a company where such debentures are listed on a recognised stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made thereunder; | 10 |
c) any security of the Central or State Government; [i.e. 8% Savings (Taxable) Bonds, 2003 and 7.75% Saving (Taxable) Bonds, 2018] | 10 |
d) interest on any other security | 10 |
Section 194: Income by way of dividend | 10 |
Section 194A: Income by way of interest other than "Interest on securities" | 10 |
Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort | 30 |
Section 194BB: Income by way of winnings from horse races | 30 |
Section 194C: Payment to contractor/sub-contractor |
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a) HUF/Individuals | 1 |
b) Others | 2 |
Section 194D: Insurance commission | 5 |
Section 194DA: Payment in respect of life insurance policy w.e.f. 1/9/2019, the tax shall be deducted on the amount of income comprised in insurance pay-out | 5 |
Section 194EE: Payment in respect of deposit under National Savings scheme | 10 |
Section 194F: Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India | 20 |
Section 194G: Commission, etc., on sale of lottery tickets | 5 |
Section 194H: Commission or brokerage | 5 |
Section 194-I: Rent |
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a) Plant & Machinery | 2 |
b) Land or building or furniture or fitting | 10 |
Section 194-IA: Payment on transfer of certain immovable property other than agricultural land | 1 |
Section 194-IB: Payment of rent by individual or HUF not liable to tax audit | 5 |
Section 194-IC: Payment of monetary consideration under Joint Development Agreements | 10 |
Section 194J: Fees for professional or technical services: i) sum paid or payable towards fees for technical services ii) sum paid or payable towards royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films; iii) Any other sum Note: With effect from June 1, 2017 the rate of TDS would be 2% in case of payee engaged in business of operation of call center. | 2 2 10 |
Section 194K: Income in respect of units payable to resident person | 10 |
Section 194LA: Payment of compensation on acquisition of certain immovable property | 10 |
Section 194LBA(1): Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | 10 |
Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] | 10 |
Section 194LBC: Income in respect of investment made in a securitisation trust (specified in Explanation of section115TCA) | 25 in case of Individual or HUF |
Section 194M: Payment of commission (not being insurance commission), brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J. Tax shall be deducted under section 194M with effect from 1/09/2019 when aggregate of sum credited or paid during a financial year exceeds Rs. 50 lakh. | 5 |
Section 194N: Cash withdrawal during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in business of banking or a post office: i) in excess of Rs. 1 crore ii) in excess of Rs. 20 lakhs* * for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired. The deduction of tax under this situation shall be at the rate of: a) 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year; or b) 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year. | 2 2/5 |
Section 194-O: Payment or credit of amount by the e-commerce operator to e-commerce participant | 1 |
Any Other Income | 10 |
1.2 where the person is not resident in India*- |
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Section 192: Payment of Salary | Normal Slab Rate |
Section 192A: Payment of accumulated balance of provident fund which is taxable in the hands of an employee. | 10 |
Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort | 30 |
Section 194BB: Income by way of winnings from horse races | 30 |
Section 194E: Payment to non-resident sportsmen/sports association | 20 |
Section 194EE: Payment in respect of deposits under National Savings Scheme | 10 |
Section 194F:Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India | 20 |
Section 194G: Commission, etc., on sale of lottery tickets | 5 |
Section 194LB: Payment of interest on infrastructure debt fund | 5 |
Sec. 194LBA(2): Payment of the nature referred to in Section 10(23FC)(a) | 5 |
Section 194LBA(2): Payment of the nature referred to in Section 10(23FC)(b) | 10 |
Section 194LBA(3): Payment of the nature referred to in section 10(23FCA) by business trust to unit holders | 30 |
Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)]. | 30 |
Section 194LBC: Income in respect of investment made in a securitization trust (specified in Explanation of section115TCA) | 30 |
Section 194LC: Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond) | 5 or 4* * In case where interest is payable in respect of Long-term Bond or Rupee Denominated Bond listed on recognised stock exchange located in IFSC |
Section 194LD: Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor | 5 |
Section 195: Payment of any other sum to a Non-resident |
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a) Income in respect of investment made by a Non-resident Indian Citizen | 20 |
b) Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen | 10 |
c) Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-Section (1) of Section 112 | 10 |
d) Income by way of long-term capital gains as referred to in Section 112A | 10 |
e) Income by way of short-term capital gains referred to in Section 111A | 15 |
f) Any other income by way of long-term capital gains [not being long-term capital gains referred to in clauses 10(33), 10(36) and 112A | 20 |
g) Income by way of interest payable by Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC) | 20 |
h) Income by way of royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern where such royalty is in consideration for the transfer of all or any rights (including the granting of a license) in respect of copyright in any book on a subject referred to in the first proviso to sub-section (1A) of Section 115A of the Income-tax Act, to the Indian concern, or in respect of any computer software referred to in the second proviso to sub-section (1A) of Section 115A of the Income-tax Act, to a person resident in India | 10 |
i) Income by way of royalty [not being royalty of the nature referred to point h) above] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy | 10 |
j) Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy | 10 |
k) Any other income | 30 |
Section 196B: Income from units (including long-term capital gain on transfer of such units) to an offshore fund | 10 |
Section 196C: Income from foreign currency bonds or GDR of an Indian company (including long-term capital gain on transfer of such bonds or GDR) | 10 |
Section 196D: Income of foreign Institutional Investors from securities (not being dividend or capital gain arising from such securities) | 20 |
2. In the case of a company- |
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2.1 where the company is a domestic company- |
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Section 193: Interest on securities |
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a) any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act; | 10 |
b) any debentures issued by a company where such debentures are listed on a recognised stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made thereunder; | 10 |
c) any security of the Central or State Government; [i.e. 8% Saving (Taxable) Bonds, 2003 and 7.75% Saving (Taxable) Bonds, 2018] | 10 |
d) interest on any other security | 10 |
Section 194: Dividend | 10 |
Section 194A: Income by way of interest other than "Interest on securities" | 10 |
Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort | 30 |
Section 194BB: Income by way of winnings from horse races | 30 |
Section 194C: Payment to contractor/sub-contractor |
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a) HUF/Individuals | 1 |
b) Others | 2 |
Section 194D: Insurance commission | 10 |
Section 194DA: Payment in respect of life insurance policy w.e.f. 1/9/2019, the tax shall be deducted on the amount of income comprised in insurance pay-out | 5 |
Section 194EE: Payment in respect of deposit under National Savings scheme | 10 |
Section 194F: Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India | 20 |
Section 194G: Commission, etc., on sale of lottery tickets | 5 |
Section 194H: Commission or brokerage | 5 |
Section 194-I: Rent |
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a) Plant & Machinery | 2 |
b) Land or building or furniture or fitting | 10 |
Section 194-IA:Payment on transfer of certain immovable property other than agricultural land | 1 |
Section 194-IC:Payment of monetary consideration under Joint Development Agreements | 10 |
Section 194J: Fees for professional or technical services: iv) sum paid or payable towards fees for technical services v) sum paid or payable towards royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films; vi) Any other sum Note: With effect from June 1, 2017 the rate of TDS would be 2% in case of payee engaged in business of operation of call center. | 2 2 10 |
Section 194K : Income in respect of units payable to resident person | 10 |
Section 194LA: Payment of compensation on acquisition of certain immovable property | 10 |
Section 194LBA(1): Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | 10 |
Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] . | 10 |
Section 194LBC: Income in respect of investment made in a securitisation trust (specified in Explanation of section115TCA) | 10 |
Section 194M: Payment of commission (not being insurance commission), brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J. Tax shall be deducted under Section 194M with effect from 1/09/2019 when aggregate of sum credited or paid during a financial year exceeds Rs. 50 lakh. | 5% |
Section 194N: Cash withdrawal during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in business of banking or a post office: iii) in excess of Rs. 1 crore iv) in excess of Rs. 20 lakhs* * for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired. The deduction of tax under this situation shall be at the rate of: a) 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year; or b) 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year. | 2 2/5 |
Section 194-O: Payment or credit of amount by the e-commerce operator to e-commerce participant | 1 |
Any Other Income | 10 |
2.2 where the company is not a domestic company*- |
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Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort | 30 |
Section 194BB: Income by way of winnings from horse races | 30 |
Section 194E: Payment to non-resident sports association | 20 |
Section 194G: Commission, etc., on sale of lottery tickets | 5 |
Section 194LB: Payment of interest on infrastructure debt fund | 5 |
Section 194LBA(2): - Payment of the nature referred to in Section 10(23FC)(a) | 5 |
Section 194LBA(2): Payment of the nature referred to in Section 10(23FC)(b) | 10 |
Section 194LBA(3): Business trust shall deduct tax while distributing any income received from renting or leasing or letting out any real estate asset owned directly by it to its unit holders. | 40 |
Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)]. | 40 |
Section 194LBC: Income in respect of investment made in a securitisation trust (specified in Explanation of section115TCA) | 40 |
Section 194LC: Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond) | 5 or 4* * In case where interest is payable in respect of Long-term Bond or Rupee Denominated Bond listed on recognised stock exchange located in IFSC |
Section 194LD:Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor | 5 |
Section 195: Payment of any other sum |
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a) Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-section (1) of Section 112 | 10 |
b) Income by way of long-term capital gains as referred to in Section 112A | 10 |
c) Income by way of short-term capital gains referred to in Section 111A | 15 |
d) Any other income by way of long-term capital gains [not being long-term capital gains referred to in clauses 10(33), 10(36) and 112A | 20 |
e) Income by way of interest payable by Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC) | 20 |
f) Income by way of royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1976 where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to sub-section (1A) of Section 115A of the Income-tax Act, to the Indian concern, or in respect of any computer software referred to in the second proviso to sub-section (1A) of Section 115A of the Income-tax Act, to a person resident in India | 10 |
g) Income by way of royalty [not being royalty of the nature referred to in point f) above] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy— |
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A. where the agreement is made after the 31st day of March, 1961 but before the 1st day of April, 1976 | 50 |
B. where the agreement is made after the 31st day of March, 1976 | 10 |
h) Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy— |
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A. where the agreement is made after the 29th day of February, 1964 but before the 1st day of April, 1976 | 50 |
B. where the agreement is made after the 31st day of March, 1976 | 10 |
i) Any other income | 40 |
Section 196B: Income from units (including long-term capital gain on transfer of such units) to an offshore fund | 10 |
Section 196C: Income from foreign currency bonds or GDR of an Indian company (including long-term capital gain on transfer of such bonds or GDR) | 10 |
Section 196D: Income of foreign Institutional Investors from securities (not being dividend or capital gain arising from such securities) | 20 |
How to pay Tax Deducted/Collected at source?
Tax deducted or collected at source shall be deposited to the credit of the Central Government by following modes:
a) All corporate assesses; and
b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
2. 2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch.
Accounting Entry for TDS
TDS means tax deducted at source. If tax is deducted from assessee's income and deposited in the Govt. account, its journal entries will be in the books of company. For example ABC company used the service of MR. N person. Now, ABC company will pay the amount of MR. N person. If TDS will apply as per income tax law, ABC will deduct TDS and net amount will pay to Mr. N person. At that time following journal entries will be passed in books of ABC company and Mr. N Person.
In the Books of ABC Company
1. When company pays the money and deduct the TDS.
Indirect Expense Account Debit
Mr. N Person Account Credit
TDS of Mr. N Person Account Credit
Explanation of Above Entry with Example: Suppose, ABC have to pay Rs. 1,00,000 pay rent to Mr. A person. Suppose, it TDS is Rs. 5000. Now, the net liability of Mr. N person will be of Rs. 95000. and TDS liability will be Rs. 5000 because both amount is payable to different persons. So, Mr. N person account will be credited with Rs. 95000 and TDS account will be credited with Rs. 5000. Because total Rent is the indirect expense, so Rs. 1,00,000 will be debited. Company will follow the law and total amount will be divided between assessed and govt.
Rent Account Debit 1,00,000
Mr. N Person Account Credit 95000
TDS Credit 5000
Before Actual Payment to Creditor for expense and TDS, both will be shown in the liability side.
Liability Side of Balance Sheet
Mr. N Person Account (Creditor for Rent ) = Rs. 95000
TDS = Rs. 5000
2. When Payment is done to Creditor for our expense and TDS, then following entry will be passed.
Mr. N Person Account Debit 95,000
TDS Account Debit 5000
Bank Account Credit 1,00,000
In the Books of Mr. N Person (Assessee)
1. When his earning from Rent is due.
ABC Company Account Dr. 95000
TDS Dr. 5000
Rent Account Cr. 100000
2. When Assessee Gets net amount of his rent
Bank Account Dr. 95000
ABC Company Account Cr. 95000
3. When Govt. Refunds the TDS to Assessee
When Mr. N Person fills his regular income tax return and he refunds some of his TDS. Suppose, it is the Rs. 1500
Bank Account Dr. 1500
Refund of TDS Cr. 1500
Important Note: Payment of income tax is the personal liability of any person. So, we do not record the income tax of an individual assessee. But when TDS is deducted it just like drawing of person. So, it will be debited. When we get the refund of TDS, it is just like increase of capital because rent was our earning. If we deduct TDS, it means, it is decrease of our earning and capital. Refund is just like increase of our earning and capital.
