| unit 1 payment of tax and refunds

TAX5

Unit 1Payment of tax and refund Q1) What is direct and indirect tax?A1)Taxes in India can be categorized as direct and indirect taxes. Direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that somebody else collects on your behalf and pays to the government eg restaurants, theatres and e-commerce websites recover taxes from you on goods you purchase or a service you avail. This tax is, in turn, passed down to the government. Direct Taxes are broadly classified as:

Income Tax – This is taxes an individual or a Hindu Undivided Family or any taxpayer other than companies, pay on the income received. The law prescribes the rate at which such income should be taxed

Corporate Tax – This is the tax that companies pay on the profits they make from their businesses. Here again, a specific rate of tax for corporates has been prescribed by the income tax laws of India

Indirect taxes take many forms: service tax on restaurant bills and movie tickets, value-added tax or VAT on goods such as clothes and electronics. Goods and services tax, which has recently been introduced is a unified tax that has replaced all the indirect taxes that business owners have to deal with.

Fig.1: Head of income

Explain the case if someone fails to deposit tax in govt. account after deduction and penalty for failed to quote such TAN in challans for payment of tax?

ANSWhere the employer has deducted the tax at source but failed to deposit wholly or partly, the tax so deducted in government account, the following statutory provisions are attracted: - a) Interest u/s 201(1A)- The deductor is treated as an assessee in default and interest u/s 201(1A) is leviable @ 1.5% for every month or part of the month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. Further, the tax along with the simple interest u/s 201(1A) becomes a charge upon all the assets of the deductor. b) Penalty u/s 221- Penalty to the extent of tax not deposited is leviable by the A.O. as discussed earlier. c) Prosecution proceedings u/s 276 B- Where the deductor has failed to deposit tax deducted at source, in Government account without a reasonable cause then he is punishable with rigorous imprisonment for a term.which shall not be less than 3 months, but which may extend to 7 years and with fine.Failure to apply for T.A.N or to quote T.A.N.Where a person who is responsible to deduct tax at source has failed, without reasonable cause: - a) To apply for T.A.N. within prescribed period or b) After allotment, failed to quote such TAN in challans for payment of tax or TDS certificate or returns of TDS (as required u/s 206)- then a penalty u/s 272BB of a sum of Rs.10,000 and is imposable by the assessing officer. However, a reasonable opportunity of hearing must be given to the employer/deductor. Q2) What is TCS? Who is liable for TCS? Give the Existing Provision and Proposed Amendment.A2)The Finance Bill, 2020 has proposed a new sub-section (1H) under Section 206C requiring every seller whose total turnover in the business carried on exceed Rs.10 crore in the preceding financial year to collect tax at source at the rate of 0.1% of the sale consideration exceeding Rs.50 lakhs in respect of sale of any goods. Thus, under this provision, every seller whose turnover has been more than Rs.10 crore in the preceding year will be required to collect at source, from every buyer on purchase of goods by such buyer if the total purchases by such buyer exceeds Rs. 50 lakhs. It may be noted that the tax is required to be collected only in respect of the sale value exceeding Rs.50 lakhs during the year. In case such buyer does not have the PAN Number or Aadhar Number, then the rate of collection shall be 1% under Section 206CC of the Act. Further, the obligation to collect this TCS is on receipt of consideration for sale of any goods. Thus, the liability for depositing this TCS will be when the payment is received from the buyer. This provision thus it is different than the other provisions of TDS and TCS whereby obligation of the deductor or the collector arises at the time of credit or debit or payment or receipt whichever is earlier. The Finance Act, 2020 has amended the provisions relating to TCS with effect from October 1, 2020 to provide that a seller of goods shall collect tax at the rate of 0.1 per cent (0.075 per cent up to March 31, 2021) if the receipt of sale consideration from a buyer exceeds Rs 50 lakh in the financial year.Section 206C(1H) envisages that TCS at the rate of 0.10% of the sale consideration received in excess of ₹ 50 Lakhs shall be collected by the seller. As such, TCS shall be collected on Total Sale Value received less ₹ 50 lakh.Rate of TCS is reduced 0.075% for the period from 01.10.2020 to 31.03.2021. Liable for TCS10 crores will be liable to collect tax at source from all the buyers whose purchases during the year is more than Rs. 50 lakhs. This will mean that on each and every invoice, where the sale exceeds Rs. 50 lakhs, there will be a separate charge of TCS from such buyer. Existing Provision:TCS currently applicable on the following:

Sale of certain goods: liquor, scrap, tendu leaves, luxury motor vehicles etc.

Grant of lease or licence for parking lot, toll plaza or mine or quarry

TCS so collected is allowed as credit to the buyer of goods or lessee or licensee

TCS not to apply if goods are used for manufacture or production of other articles or generation of power

Proposed Amendment:

TCS is proposed to be extended to the following:

Remittances made under Liberalized Remittance Scheme (LRS) of RBI

Overseas Tour Program Packages

Sale of goods (other than goods already subjected to TCS)

Q3) What is sale of goods under TCS and Buyers/service recipients excluded from new TCS provisions?A3)Sale of Goods

Seller of all goods (other than those goods already covered under TCS)

Gross receipts/ turnover of seller more than Rs. 10 Crores in previous financial year

Liable to collect TCS @ 0.1% of sale consideration exceeding Rs. 50 Lakhs in a year from each buyer Rate of TCS will be 1% if buyer does not provide PAN or AADHAR. Rate of TCS is reduced 0.075% for the period from 01.10.2020 to 31.03.2021.

No exclusion provided for goods used by the buyer in manufacture or production of other articles or generation of power

Buyers/service recipients excluded from new TCS provisions

TCS not to apply if buyer is liable to deduct TDS under any other provision and has deducted such amount

Certain categories of buyers/service recipients excluded (Government empowered to notify more exclusions in due course)

Q4) Give the Difference Between TDS and TCS? What is TDS and TCS under GST?A4)Tax Deducted at Source and Tax Collected at Source are both incurred at the source of income.

TDS is the tax which is deducted on a payment made by a company to an individual, in case the amount exceeds a certain limit. TCS is the tax which is collected by sellers while selling something to buyers.

TDS deduction is applicable on payments such as salaries, rent, professional fee, brokerage, commission, etc. TCS deduction is applicable on sales of goods like timber, scrap, mineral wood, and so on.

TDS is applicable only on payments that exceed a certain amount. TCS is applicable on sales of specific goods which don’t include production or manufacturing material.

TDS and TCS under GSTThis applies to e-commerce businesses. Every e-commerce company has to collect some tax on the net transaction value of their sales. This rule came into force in October 2018.The rate for TCS in this situation would be 1% (0.5% CGST + 0.5% SGST). Alternatively, it could also be 1% of IGST. Q5) How to estimate your Tax Refund?A5)A tax refund or tax rebate is a repayment on taxes when the tax liability is less than the taxes paid, and taxpayers can often get a tax repayment on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes as well as estimated taxes that they paid plus the refundable tax credits that they claim.Taxpayers may select to have their refund directly deposited into their bank account have a check mailed to them, or have their refund applied to the year’s income tax. Tax filers may now split their tax refund with direct deposit in up to three different accounts with three separate financial institutions and this has given taxpayers an opportunity to save and spend some of their refund. To estimate your Tax Refund:

Your tax refund is the amount of money you can expect to receive from the Internal Revenue Service (IRS) or your state tax authority after you file your return.

A refund results when the amount of taxes you have paid in advance, along with tax credits for which you are eligible, exceed your tax liability.

Steps to Determine Your Tax Refund?a) Calculate your income: For starters, you will need to gather documentation of your taxable income for the year. This includes salary, commissions, bonuses and so on from your job, money received from renting out property, gains on investments, gambling winnings, unemployment benefits and so on.b) Itemized or Standard Deduction: Common itemized deductions include expenses such as real estate taxes, medical expenses, mortgage interest, and student loan interest. You can choose to either claim your itemized deductions or claim the standard deduction, which is the following for tax returns c) Determine Your tax Liability: Take your total income from step one and subtract either your standard deduction amount or the sum of the itemized deductions you calculated in step 2. Compare the result to the 2016 federal tax brackets listed below, and this will allow you to estimate your tax liability.d) Subtract tax Credits: A tax credit is an amount of money a taxpayer is able to subtract from taxes owed to the government. ... Unlike deductions and exemptions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax owed.e) Calculate tax withholding: To determine the total amount of taxes withheld, you will need a pay stub and any other documents showing how much you have paid in taxes to date. Multiply this amount as necessary to cover the entire year.f) Compute the amount of your refund: Subtract the total taxes withheld you determined in Step 5 from your tax liability after credits as calculated in step 4. If the result is a negative number, that amount is what you overpaid in taxes and can expect to have refunded.

Q6) Explain Interest on delayed refunds?A6)Section 56 of Central Goods and Services Act 2017 - Interest on delayed refundsIf any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under subsection (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax:

Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date ofrefund.

For the purposes of this section, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).

Q7) What are the duties of person deducting tax at source and rights of taxpayers?

A7)

Deduct Tax at Correct Rate and deposit in Government Account – Sec. 200 Every person responsible for deducting tax at source shall at the time of payment or credit of income, whichever is earlier, verify whether the payment being made is to be subject to deduction of tax at source. If it is so, he must deduct such tax as per the prescribed rates. Further he is required to deposit such tax deducted in the Central Government Account within the prescribed time as specified in Rule 30.

Issue a TDS certificate Further, such person is required to issue a certificate of tax deduction at source u/s 203 to the person from whose income the TDS has been done, in the prescribed proforma i.e. Form No.16A within prescribed time (as discussed earlier).

File Prescribed Return/Quarterly Statement A return of TDS is a comprehensive statement containing details of payments made and taxes deducted thereon along with other prescribed details. For deductions made prior to 01.04.2005 earlier every deductor was required as per the provisions of Section 206 (read with Rule 36A and 37) to prepare and deliver an annual return, of tax deducted at source. However, w.e.f. 01.04.2005 there is no requirement to file annual returns and instead Quarterly statements of T.D.S. are to 42 43 be submitted in form 26Q by the deductors.

Q8) What is TDS? What are the provisions enjoining deduction of tax at source?A8)Tax deducted at source (TDS) and Tax collection at source (TCS), as the very names imply aim at collection of revenue at the very source of income. It is essentially an indirect method of collecting tax which combines the concepts of “pay as you earn” and “collect as it is being earned.” Its significance to the government lies in the fact that it prepones the collection of tax, ensures a regular source of revenue, provides for a greater reach and wider base for tax. At the same time, to the taxpayer, it distributes the incidence of tax and provides for a simple and convenient mode of payment. The concept of TDS requires that the person on whom responsibility has been cast, is to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The deducted sum is required to be deposited to the credit of the Central Government. The recipient from whose income, tax has been deducted at source, gets the credit of the amount deducted in his personal assessment on the basis of the certificate issued by the deductor.While the statute provides for deduction of tax at source on a variety of payments of different nature, in this booklet, an attempt is being made to discuss various provisions of TDS on payments of nature other than salaries and of Tax collection at source. Provisions enjoining deduction of tax at sourceInterest on securities – Sec. 193 Where any payment is made in the nature of “Interest on Securities,” the person responsible for making such payment of income or crediting the income has to make deduction of tax at source before making such payment or crediting whichever is earlier. The deduction is to be done as per rates in force on the amount of interest payable. However, payments from certain categories of bonds, debentures etc. is exempt from TDS. These include the following: i) National Defence Bonds 1972 (4.1/4%), a) National Defence Loan 1968, or National Defence Loan1972 (4.3/4%), b) National Development Bonds, ii) 7year (IV Issue) National Saving Certificates, iii) Any interest payable on debentures issued by any institution or authority or any Public Sector Company or any Co-operative Land Mortgage Bank or Co-operative Land Development Bank, as may notified by Central Government in Gazette, iv) Gold Bonds 1977 (6.1/2%), Gold Bonds 1980 (7%),v) Interest on any Security of Central Government or State Government, (However, w.e.f. 1.6.07 exemption will not be available if interest payment exceeds rupees ten thousand during the F.Y. on 8% savings (Taxable) Bonds, 2003. 10 11 vi) Any interest payable to an individual, resident of India, on debentures issued by a Public Limited Company where the debentures issued by a Public Limited Company where the debentures are listed in a recognised stock exchange, if the interest is paid by an account payee cheque and its amount does not exceed Rs. 2500/- during the financial year, vii) Any interest payable to LIC, viii) Any interest payable to GIC or any of its four companies, ix) Any interest payable to any insurer in respect of any securities owned by it or in which it has full beneficial interest. No TDS to be made from any Regimental Fund or non-public fund established by any Armed forces since income of these organizations is exempt u/s 10(23AA). Q9) Explain deposition of tax and credit of TDS ?A9) Deposition of Tax Where tax has been deducted under Sections 193,194,194A,194B,194BB, 194C, 194D, 194E, 194EE, 194F, 194G, 194H, 194I, 194J, 194K, 195, 196A, 196B, 196C and 196D, it is duty of the person deducting tax at source to deposit the amount of tax so deducted within the prescribed time in any branch of Reserve Bank of India or State Bank of India or any authorised bank accompanied by prescribed Income-tax challans as per the time limit and mode specified in Rule 30. Vide Income-tax (6th Amendment) Rule, 2010 new Rule 30, 31, 31A and 21 AA, pertaining to time and mode of payment of TDS, Certificate of deduction of tax, statement of deduction of tax, statement of collection of tax etc. have been introduced w.e.f. 1/4/2010(Pl. ref. notification No. 41/2010 F. No. 142/27/2009-SO(TPL) dt. 31/5/2010. With respect to time and mode of deposition of tax new Rule 30 provides the following:“Time and mode of payment to Government account of tax deducted at source or tax paid under sub-section (1A) of section 192. (1) All sums deducted in accordance with the provisions of Chapter XVII-B by an office of the Government shall be paid to the credit of the Central Government. (a) on the same day where the tax is paid without production of an income-tax challan; and(b) on or before seven days from the end of the month in which the deduction is made or income-tax is due under sub-section (1A) of section 192, where tax is paid accompanied by an income-tax challan. (2) All sums deducted in accordance with the provisions of Chapter XVII-B by deductors other than an office of the Government shall be paid to the credit of the Central Government. (a) On or before 30th day of April where the income or amount is credited or paid in the month of March; and (b) In any other case, on or before seven days from the end of the month in which-(i) the deduction is made; or(ii) income tax is due under sub section (1A) of section 192(3) Notwithstanding anything contained in sub rule (2), in special cases, the Assessing Officer may, with the prior approval of the Joint Commissioner, permit quarterly payment of the tax deducted under section 192 or section 194A or section 194D or section 194H for the quarters of the financial year specified to in column (2) of the Table below by the date referred to in column (3) of the said

Fig: Deposition of TaxTAX DEDUCTION AND COLLECTION ACCOUNT NUMBER (TAN) A person deducting tax at source, if not already allotted, a TAN(or a tax collection account number) should apply for allotment of TAN in Form No. 49B. The application has to be made in duplicate to the Assessing Officer (AO) or to any particular Assessing Officer where this duty is assigned by the ChiefCommissioner or the Commissioner to that A.O. The application should be made within one month from the end of the month in which the tax is deducted for the first time. TAN should be quoted in all the TDS Certificates, challans, quarterly statements, correspondence, etc. Noncompliance with the provision of Section 203A invites rigorous imprisonment for a term not less than 3 months but which may extend to 7 years and with a fine of Rs.10,000/-. Section 203 A, Rule 114 A; and Rule 114AA.

Sign Up