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Consideration of service tax while deducting TDS
Consideration of service tax while deducting TDS
Whether Service Tax should be considered while deducting Income tax at source (TDS) or not ?
Often we have no clarity on the question that while making the payment of rent or professional or technical fees, the deduction of income tax at source (TDS) should be made on which amount? Including service tax or excluding service tax? (more…)
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TDS on School bus fees to be deducted U/s. 194C - HC
TDS on School bus fees to be deducted U/s. 194C – HC
CA Sandeep Kanoi
In the case of ACIT (TDS) Vs. Lotus Valley Education Society it was held by Allahabad High Court that explanation-III to sub section (2) of Section 194-C clearly provides that ‘work’ includes carriage of goods and passengers by any mode of transport other than by railways, so TDS on School Bus Fees Paid to Transporters is governed by Section 194C and not by Section 194I. (more…)
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FAQs on TDS on Rent Under Section 194-I of Income tax Act, 1961
FAQs on TDS on Rent Under Section 194-I of Income tax Act, 1961
QUESTION AND ANSWERS ON S. 194I
Q.1. who is liable to deduct TDS on Rent?
A.1. Any person, other than an individual or a HUF, is responsible for paying to resident in India, any income by way of the rent, amounting in aggregate to more than Rs. 180000 in a financial year. However w.e.f. 01/06/2002, individuals and HUF who were covered under section 44AB (a) and (b) in the preceding previous year,…
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Don't Take TDS Lightly
Don’t Take TDS Lightly
CA Siddhi Rajani
Nowadays delay in payment of TDS and in TDS return Filing makes an assessee liable to Late Payment Interest, Late Payment Penalty, Late Filing Fees, Late Filing Penalty and Further makes him liable to prosecution under the provision of the Income Tax Act, 1961. In this article we are discussing some of these provisions which makes it clear that TDS cannot be taken lightly and we…
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New Post has been published on Indian Tax Updates
New Post has been published on http://www.indiantaxupdates.com/2014/02/04/tds-service-tax-amount-new-rule/
TDS on Service Tax Amount under New Rule
TDS not to be Deducted on Service Tax Component shown Separately
Whether to deduct TDS on Service Tax Amount? This question had always put deductor in difficulty. The question always comes that whether TDS is to be deducted on the entire amount of the invoice i.e. including service tax or only on the payment made towards services i.e. excluding service tax.
Since there was no clarification on this, deductor, to be in safer side tends to deduct TDS on the entire invoice amount including service tax except in the case of rent under section 194I.
Circular No. 4/2008 : CBDT had earlier issued a Circular No. 4/2008 dated 28.04.2008 clarifying that TDS is to be deducted under section 194I of the Income-tax Act, 1961 on the amount of rent paid/payable without including the service tax amount.
Representations/letters have been received by CBDT seeking clarification whether such principle can be extended to other provisions of the Act also.
Verdict on the same question was given by the Rajasthan High Court dated 01.07.2013, in the case of CIT(TDS) Jaipur vs Rajasthan Urban Infrastructure – 2013-TIOL-663-HC-RAJ-IT. Court held that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.
Circular 01/2014 : Following the above judgment, CBDT vice Circular 01/2014 dated 13.01.2014 has decided that wherever in terms of the agreement/ contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source on the amount paid/payable without including such service tax amount.
TDS on Service Tax under New Rule
Two points have to be complied to escape from deducting TDS on service Tax:
Applicable only to resident deductee; and
Service Tax is to be Shown Separately in the Invoice.
Lets see how this new rule works:
Service Tax shown separately Service Tax not shown Separately Value of Services: 40,00,000
Service Tax @ 12.36%: 4,94,400
Total Invoice Amount: 44,94,400
TDS @ 10% 4,00,000
(Only on Value of Services)
Value of Services: 44,94,400
Total Invoice Amount: 44,94,400
(Including Service Tax)
TDS @ 10% 4,49,440
(On Value of Services + Service Tax Amount)
Before this Circular even if you have shown service tax separately, TDS is to be deducted as per case 2 except under section 194I.
Circular 01/2014 dated 13.01.2014 reproduced hereunder:
Download (PDF, 32KB)
Deduction of Tax at source on Service Tax on professional and technical fees
The payments made under section 194-I differ significantly from payment made under section 194J in the way that in the case of 194-I TDS has to be deducted on any income paid as rent. However, in the case of section 194J TDS has to be deducted on any sum…
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TDS U/s. 194C applies on Bus rent paid by assessee school to transporter for carrying students
A careful consideration of the assessment order would reveal that AO while holding that assessee is liable for deduction of tax at source under the provisions of sec. 1941 of the Act has mainly rested his case on the ground that is the “rent” as defined…
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