Section 194N : TDS on Cash Withdrawal

What is Section 194N?

TDS on Cash Withdrawal u/s Section 194N is applicable when the aggregate amount of cash withdrawals are more than Rs 1 crore during a financial year. This section will apply to all the sum of money or an aggregate of sums withdrawn from a particular payer in a financial year. The Government introduce Section 194N in the Union Budget 2019 in order to discourage cash transactions in the country and promote the digital economy.

The budget 2020 has reduced the threshold limit for TDS to Rs 20 lakh for taxpayers who have not filed their income tax returns for past 3 years. Such taxpayers withdrawing cash in excess of Rs 20 lakh but less than Rs 1 crore have to pay 2% as TDS. For withdrawal more than Rs 1 crore TDS @ 5% is required to be deducted .
Tip
The budget 2020 has reduced the threshold limit for TDS to Rs 20 lakh for taxpayers who have not filed their income tax returns for past 3 years. Such taxpayers withdrawing cash in excess of Rs 20 lakh but less than Rs 1 crore have to pay 2% as TDS. For withdrawal more than Rs 1 crore TDS @ 5% is required to be deducted .

Who shall deduct TDS on Cash Withdrawal?

The following payers are shall deduct TDS under this section:

  • Any bank (private or public sector)
  • A co-operative bank
  • A post office

The provisions under section 194N are not applicable in case payment to the following person:

  • Central or State GovernmentBanking Company
  • Co-operative Banks
  • Business correspondents authorised by RBI
  • White label ATM operators
  • Any other person notified by goverment
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Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
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Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
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Rate of TDS u/s 194N

The rate of TDS on cash withdrawal u/s 194N is 2% on the amount exceeding Rs. 1 crore. TDS will be deducted when the payment would be made by the Bank, Co-operative society, or Post Office i.e. TDS will be deducted at the time of making the payment. The limit of Rs 1 crore in a financial year is with respect to per bank or post office account and not a taxpayer’s individual account.
For example if cash withdrawn by Mr. Arjun is Rs. 1cr then in that case TDS will not be deducted. Since the amount does not exceed Rs 1cr.

Here is a detail example to help you understand the provision:

XYZ ltd has made the following cash withdrawals for FY 2019-20

  • 85 Lakhs on 25th August 2019
  • 30 Lakhs on 10th September 2019
    There will be two separate calculations:
  1. The threshold limit of Rs. 1 crore
    Aggregate cash withdrawal in a financial year
    85 lakhs + 30 lakhs = 1.15 crore
    Therefore Section 194N will be applicable in this case.

2. Calculation of TDS

The tax deduction would be made for any cash withdrawal exceeding 1 crore after 01 September, 2019.

Transactions Amount (Rs.)
Cash Withdrawal on 25th August 85 Lakhs
Cash Withdrawal on 10th September 30 Lakhs
Total Cash withdrawal in FY 2019-20 1.15 crore
Less: Threshold Limit of 1 crore (1 crore)
Amount eligible for TDS u/s 194N 0.15 crore
TDS @ 2% 30,000

TDS Certificate

Deductors of tax shall quarterly issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the TDS while filing Income Tax Return.

TDS Return

The Deductor liable to deduct tax under section 194N of the Income Tax Act shall file quarterly return in Form 26Q. The deductor, after filing the Form, should provide Form 16A to the deductee.

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FAQs

Whether the limit of Rs. 1cr is for single account or for all accounts maintained with a bank?

The limit of Rs. 1cr is overall limit for all accounts (like saving A/c, current A/c etc) maintained by a person with one bank. The limit is per bank rather than per account.

How the TDS under Section 194N will be reflected under Form 26AS?

Form 26AS is a statement for such income on which tax is deducted and deposited to government by deductor. However, cash withdrawal cannot be considered as an income. Therefore, the government has simultaneously amended section 198 of the Income Tax Act wherein it is clarified that cash withdrawal shall not be deemed to be the income of the person.

Section 194LA : TDS on Payments of Compensation on Acquisition of certain Immovable Property

What is Section 194LA?

Section 194LA relates to the TDS provisions applicable on the payment of compensation at the time of acquisition of certain type of immovable property. Any person, who is responsible for paying to a resident, any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land) shall, deduct TDS at the rate of 10%.

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Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
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Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
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When to deduct TDS under Section 194LA?

The payer is liable to deduct TDS u/s 194LA if the aggregate amount of payment during the financial year exceeds INR 2,50,000. The payer shall deduct TDS within earlier of the below mentioned dates –

  • At the time of payment of the amount in cash; or
  • At the time of payment of the amount in cheque or draft or any other mode.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS

  • The Deductor is liable to deduct TDS @ 10% under section 194LA of the Income Tax Act, 1961.
  • No surcharge, education cess or SHEC shall be added to the above rate. Hence, TDS shall be at the basic rate.
  • The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Cases where there is no need to deduct TDS under Section 194LA

TDS is not deductible under section 194LA in following cases when –

  • The person is paying an amount to a ‘non-resident’ person.
  • Aggregate consideration during the Financial Year is less than INR 2,50,000.
  • Payment is in respect of any award / agreement which is exempt from income tax.
  • The payee has filed an application in Form No. 13 to the Assessing Officer and has obtained a certificate for No / lower deduct of tax.
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TDS Certificate

Deductors of tax shall issue TDS certificate to the deductee in Form 16A on Quarterly basis for TDS u/s 194LA. The due dates to issue of TDS certificates is 15 days from due date of filing TDS return. Deductor can download TDS Certificate from TRACES. The certificate shall be given on a quarterly basis. The due dates for receipt of TDS certificates are as below:

TDS For Quarter Due-Date
Q1 April to June 15th August
Q2 July to September 15th November
Q3 October-December 15th February
Q4 January to February 15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
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TDS Return (26Q) for Non-Salary Payments (Annual)
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TDS Return

Filing TDS returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. In case of TDS on non salary payments TDS Return Form 26Q is to be filed. Due dates for TDS returns are as follows:

Quarter Due-Date
Q1 31st July
Q2 31st October
Q3 31st January
Q4 31st May

FAQs

What is a compulsory acquisition?

Compulsory acquisition is the power of government to acquire the land from its owner without the willing consent of owner in order to benefit the society.

How can I claim TDS refund?

You need to file a TDS refund claim when the deductor has deducted more tax than the actual liability. You can claim the difference amount by filing an income tax return.

TDS u/s 193 : Interest on Securities

What is Section 193?

TDS on interest on securities is deducted under section 193 of the Income Tax Act. It requires to deduct TDS on interest on securities @ 10%. Let us first understand the meaning of interest on securities. Interest on securities means the interest on:

  • Any security of the Central Government or a State Government
  • Debentures or other securities issued by or on behalf of a local authority or a company or a corporation [established by a Central, State or Provincial Act]
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Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
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Who shall deduct TDS on interest on securities?

The person who is responsible for paying interest on securities to a resident shall deduct the tax component from the interest amount at the time of payment or credit to the account of payee/deductee/receiver whichever is earlier.
TDS mechanism covers Payments made to non-residents. However, tax in such a case is to be deducted as per section 195. Further provisions of section 193 are not applicable to the non-resident.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS u/s 193

The payer shall deduct tax at the rate of 10% from the sum of interest. However, if the payee does not furnish his Permanent Account Number (PAN), then the payer has to deduct tax at the higher of the following:

  • Rate specified in the relevant provision of the Income-tax Act.
  • The rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Due Date to deposit TDS with Government

Particulars Time Limit to deposit TDS
If the amount is credited in the month of March On or before 30th April
If the amount is credited in the month other than March Within 7 days from the end of the month in which deduction is made.

Penalty on Late Remittance of TDS

  • Penalty u/s 201(1A) for late deduction/late payment of TDS
    • Late Deduction: If TDS has not been deducted then in that case interest will be levied @1% per month or part of a month on the amount of TDS from the date on which tax was deductible to the date of actual deduction
    • Late Payment: If TDS has been deducted but not deposited to the government in such case interest will be charged @1.5% per month or part of a month on the amount of TDS from the date in which TDS was deducted to the date in which TDS was deposited.

No TDS deduction u/s 193 under following cases:

The following are exempt from TDS deduction:

  • A National Defence Bond held by a resident, the rate of interest for which is 4.25%.
  • National Defence Loans availed during the period of 1968 or 1972, at an interest rate of 4.25%.
  • Interest payable on National Defence Loan.
  • Payment of Interest on 7-year National Savings Certificate.
  • Interest payable on debentures issued by a company wherein the public is substantially interested, provided that the sum of interest is confined to Rs 5000; and the company deposits the interest courtesy an account payee cheque (applicable for resident individual, resident or HUF).
  • Overdue interest on any security of the Central Government or State Government if the interest is not above Rs. 10,000 for a financial year [will not be applicable for 8% Savings (Taxable) Bonds, 2003].
  • Payment of Interest on certain notified debentures issued by any institution/authority, public sector company or any co-operative society.
  • Interest payable to certain companies established under the General Insurance Business Act or any other insurer.
  • Interest payable on dematerialized security issued by a company provided that the security is listed on a recognized stock exchange as per the regulations of the Securities Contracts (Regulation) Act, 1956.
  • Interest payable on 6.5% gold bonds, 1977 or 7% gold bonds, 1980 held by a resident individual if the total nominal value of such bonds is limited to a sum of Rs. 10,000 during the period to which the interest relates.
  • Payee, who is not a company or a firm, has issued Form no 15G/15H.
  • The payee is in the custody of a certificate that permits no deduction or less deduction of tax.

TDS Certificate

Deductors of tax shall issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. You can download a certificate from here. The due dates for receipt of TDS certificates are as below:

TDS for the Quarter Due-Date
April-June 15th August
July-September 15th November
October-December 15th February
January-March 15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
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TDS Return

The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q within the following due dates:

Quarter Due-Date
April to June 31st July
July to September 31st October
October to December 31st January
January to March 31st May

FAQs

Is it mandatory to file TDS return by deductor?

Yes, the government considers it mandatory for the deductors of tax to specify the details of TDS payments made to the government in the form of a return. In addition TDS returns must be filed on a quarterly basis.

What is the TDS rate if PAN not available?

All transactions liable for TDS will have tax deduction at a higher rate of 20% if the Permanent Account Number (PAN) of the payees is not available.

Whether assessee liable to deduct TDS u/s 193 on provision of interest in case payee is not known?

In a case where a person who is to receive interest cannot be identified at a stage at which provision for ‘interest accrued but not due’ is made. In such case there was no obligation upon the assessee to deduct tax at source. Therefore there could not be any question of levy of penalty and interest under section 201 upon the assessee.

Section 194 : TDS on Dividend from Equity Shares

What is Section 194?

Under Budget 2020 applicable from 1st April 2020 i.e. FY 2020-21, the Finance Minister abolished Dividend Distribution Tax (DDT). As a result, the dividend received on equity shares and mutual funds which were earlier exempt is now taxable at slab rates. It is taxable in the hands of the shareholder. Since the income would be taxable in the hands of the shareholder, TDS would be applicable. As a result, the Finance Minister made an amendment to the existing Section 194 to add a provision to deduct TDS on Dividend from Equity Shares.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

The Company paying a dividend on equity shares should deduct TDS under section 194. The deduction is at 10% on the number of dividends, only if a resident shareholder’s total dividend in a financial year exceeds INR 5,000. Section 194 is applicable from 1st April 2020 i.e. FY 2020-21 onwards.

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Section 194 – TDS on Dividend from Equity Shares

  • Deductor
    • The company distributing dividends to the investors of equity shares should deduct TDS on such dividends. The deductor must deposit the TDS and file the TDS Return on TRACES.
  • Deductee
    • Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Sec 194. Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K. NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
  • Nature of Payment 
    • Sec 194 covers the payment of Dividend on Equity Shares to a resident shareholder exceeding INR 5000 in a financial year.
  • Time of Payment
    • TDS shall be deducted at the time of credit of income to payee account or at the time of payment, whichever is earlier. If the payee of the amount credits the amount to be paid to “suspense account” or any other account, it is considered as ‘deemed payment’ and the payer must deduct TDS on such credit.
  • Rate
    • Deductor should deduct TDS u/s 194 at the rate of 10% if the dividend amount exceeds INR 5000. If the payee does not provide the PAN, TDS shall be deducted at the rate of 20%
  • TDS Certificate
    • Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the tax deducted while filing Income Tax Return.
  • TDS Return
    • After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES. The details of the dividend payment are part of this report. The deductor, after filing the report, should provide Form 16A to the deductee.
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
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TDS Return (26Q) for Non-Salary Payments (Quarterly)
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[Rated 4.8 stars by customers like you]

FAQs

Is TDS required to be deducted on dividend paid to NRI shareholder ?

Section 195 applies to the dividend paid to NRI investors/shareholders, as per provisions of the Income Tax Act. Hence, TDS needs to be deducted on the dividend at 20% on equity shares and equity mutual funds. Therefore, TDS has to be deducted at 10% as per Sec 194 and Sec 194K for an NRI shareholder.

What is Dividend Distribution Tax (DDT) ?

DDT is the tax paid on declaration, distribution or payment of dividend by an Indian Company at the rate of 15%. Since the Indian Company pays DDT, the dividend income is exempt in the hands of the shareholder or investor.
However, the Budget 2020 applicable abolished DDT from 01.04.2020 i.e. FY 2020-21. The dividend is now taxable in the hands of the shareholder or investor. The company is liable to deduct TDS at 10% if the dividend is in excess of INR 5000.

ITR Documents Checklist : House Property Income

House property is any Land or Building or land attached to the building. The land could be a courtyard, parking space, or compound. A taxpayer needs to report income earned from such Property while filing ITR. Hence it is important to keep supporting documents checklist while calculating Income tax. It also includes:

  • Residential houses/Flats
  • Shops
  • Office space
  • Factory sheds
  • Farmhouses
  • Godowns
  • Cinema building
  • Workshop building
  • Hotel building etc.

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You can file ITR-1 if you have earned income from one property. However, you need to file ITR-2 if you own more than one property. You can file ITR online using ITR Utilities or through registered e-Return Intermediary (ERI) like Quicko.

Earned House Property Income in a year?
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House Property Income Documents Checklist

PAN

Income Tax Department (ITD) issues Permanent Account Number (PAN). It is an alphanumeric ID of a taxpayer who is liable to pay taxes. PAN enables the department to link all transactions of the “Person” with his “Income”. Hence it is the most essential document while filing ITR.

Aadhaar

Aadhaar (Aadhaar Card) a 12 digit unique identification number issued by the UIDAI (Unique Identification Authority of India). It is mandatory for Resident Individuals to provide details of Aadhaar while filing ITR.

Utility Bill

While filing ITR taxpayers have to disclose the address of all the properties owned by them. Utility Bill contains property addresses and thus serves as a proof of address.

Rent Agreement

Rental Income is taxable income. Therefore, rent agreement between the owner and the tenant for a particular house property serves as proof of income earned during the financial year.

Form 16A 

Form 16A will be provided if TDS is deducted on your rental income. While filing your ITR you can claim this TDS using Form 16A.

Home loan repayment certificate/ Interest Certificate from the bank

This certificate consists of capital amount, repayment amount, the interest charged, and co-ownership details. This serves as proof for claiming a deduction on Interest Repayment and Principal Repayment. And reduces your net taxable house property income.

Municipal Tax Receipts

Municipal tax is paid on properties. Taxes paid on let out properties can bring down your net taxable rental income. Therefore, Municipal Tax receipts are required while calculating the income from house property.

31st July
ITR filing Due Date for taxpayers having House Property Income.
31st July
ITR filing Due Date for taxpayers having House Property Income.

FAQs

How to calculate self-occupied house property income?

A Self Occupied House Property is the one that you use as your own residence. This property can be in use by your children, spouse, and/or parents. Since there is no Income from such House Property, the gross annual value of this property is NIL (zero).

How do you calculate Income from House Property?

The assessee must be the owner of the properties. Identify the Gross annual value (GAV) of the house property. For self-occupied property, the GAV would be nil while for let out property the GAV will be the total rent received. Deduct municipal taxes paid by you (owner) towards the house property. Now you will realize the Net annual value of the house property. From NAV, deduct standard deduction of 30% and interest paid by you on a house loan. This will give you your Income from house property.
GAV- Municipal tax = NAV
NAV- Standard deduction- interest on borrowed capital= Income from house property.

What happens if I delay filing my ITR?

Firstly, If your income falls under the taxable bracket you have to file your ITR without fail. Secondly, If you missed the deadline to file the ITR you can still file it but you may attract penalties. Moreover, If you don’t pay your taxes on time then if you are claiming any refunds they will get delayed. You will get lesser time to revise your ITR. and Lastly, You will have to pay interest on the taxable amount if you delay filing your ITR.

Who is required to file ITR?

Every taxpayer whose income exceeds the Basic Exemption limit needs to file ITR. If your age is below 60 years and your income is more than rupees 2.5 lakh p.a then you are eligible to file your ITR.

What are the documents required to file ITR?

Following are the basic documents required to file ITR:
-PAN
-Aadhaar
-Form 26AS
-Bank Account Details
-Tax Payment Challan
-Original Return (if filed)

Section 194O : TDS on E-Commerce Sales

What is Section 194O?

Under Budget 2020, a new TDS section 194-O was introduced. With the increase in e-commerce sales, there has been a drastic increase in the number of sellers who sell goods and services through e-commerce platforms. It is important that the sellers pay taxes on such income. Thus, Budget 2020 introduced a new section 194O to deduct TDS on e-commerce sales.

It is mandatory to deduct TDS u/s 194O by the e-Commerce operator on payments made to the e-Commerce seller (Individual/HUF) at the rate of 1% on the gross amount of sales if it exceeds INR 5,00,000 in a Financial Year. Section 194O is applicable from 1st October 2020.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 5%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 5%

Let us understand Section 194O in detail

Deductor

E-Commerce Operator is a person who owns, manages, and operates a digital platform for the sale of goods and services online. Therefore, e-Commerce Operators should deduct TDS on making payments to e-commerce sellers. Hence, the TDS should be deposited with the income tax department and a TDS Return should be filed.

Deductee

E-Commerce Participant or E-Commerce Seller is a person resident in India who sells goods and services on an e-commerce platform. An E-Commerce Seller receiving payment for goods as well as services sold will receive the amount after the deduction of TDS under Sec 194O. E-Commerce Sellers, not resident in India making e-commerce sales will receive the amount after deduction of TDS under Sec 195

Nature of Payment

E-Commerce Operator is required to deduct TDS on the Gross Sales of goods or services. The Gross Sales includes GST and commission charged by the e-commerce operator.
Further, If the buyer of goods or services has made a direct payment to the e-commerce seller, it shall be deemed that the payment has been made by the e-commerce operator and the amount shall be included in the Gross Sales on which TDS is required to be deducted.

Time of Payment

TDS shall be deducted at the time of credit of the amount to the account of an e-commerce participant or at the time of payment, whichever is earlier.

Rate

If the Deductee is a resident Individual or HUF also the Gross Sales exceed Rs. 5,00,000 in the financial year, deduct TDS u/s 194O at the rate of 1% on Gross Sales. In case of any other deductee, deduct TDS at the rate of 1% on Gross Sales irrespective of the number of gross sales.
If the deductee does not provide the PAN or Aadhar, then TDS shall be deducted at the rate of 5% irrespective of the gross sales amount.

TDS Certificate

Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. Using Form 16A, the deductee can claim credit of the tax deducted while filing Income Tax Return

TDS Return

After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES to report details of dividend payment. Once the return is filed, the deductor should provide Form 16A to the deductee

Example 1

Rahul is a registered e-commerce seller on Amazon India. For May 2020, here are the details of his sales on Amazon:

  • Total Sales = Rs. 5,90,000
  • GST @ 18% included in the above sales = Rs. 90,000
  • Commission @ 6% charged by Amazon included in above sales = Rs. 35,400
  • Sales from Rahul to Rohan through Amazon. However, Rohan directly made payment to Rahul of Rs. 20,000 (including GST)

Solution

  • E-Commerce Operator – Amazon India
  • E-Commerce Seller – Rahul
  • Gross Sales = Rs. 5,90,000 + Rs. 20,000 = Rs. 6,10,000
  • Since Gross Sales exceeds Rs. 5,00,000 and Rahul is a resident Individual, Amazon India should deduct TDS @ 1% on Gross Sales before making payment to Rahul
  • TDS = 1% of 6,10,000 = Rs. 6,100
  • Payment to Rahul = 6,10,000 – 35,400 – 6,100 = Rs. 5,68,500
  • Amazon would deposit TDS of Rs. 6,100 with the Income Tax Department also file TDS Return Form 26Q
  • If Rahul has not provided PAN or Aadhar, then TDS should be deducted @ 5% irrespective of gross sales amount
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Example 2

ABC Private Limited is a registered e-commerce seller on Amazon India. For May 2020, additionally, here are the details of its sales on Amazon:

  • Total Sales = Rs. 1,18,000
  • GST @ 18% included in the above sales = Rs. 18,000
  • Commission @ 6% charged by Amazon included in above sales = Rs. 7,080
  • Sales from ABC Private Limited to Rohan through Amazon. However, Rohan directly made payment to ABC Private Limited of Rs. 20,000 (including GST)

Solution

  • E-Commerce Operator – Amazon India
  • E-Commerce Seller – ABC Private Limited
  • Gross Sales = Rs. 1,18,000 + Rs. 20,000 = Rs. 1,38,000
  • Amazon India should deduct TDS @ 1% on Gross Sales before making payment to ABC Private Limited. TDS should be deducted irrespective of the sales amount
  • TDS = 1% of 1,38,000 = Rs. 1,380
  • Payment to ABC Private Limited = 1,38,000 – 7,080 – 1,380 = Rs. 1,29,540
  • Amazon would deposit TDS of Rs. 1,380 with the Income Tax Department and file TDS Return Form 26Q
  • If ABC Private Limited has not provided PAN, then TDS should be deducted @ 5%
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FAQs

When is TDS under Sec 194O not required to be deducted by the E-Commerce Operator?

E-Commerce Operator is not required to deduct TDS under Sec 194O if all the following conditions are satisfied:

> The E-Commerce Seller is a resident Individual or resident HUF and
Gross Sales do not exceed INR 5,00,000 and
> E-Commerce Seller has provided their PAN or Aadhaar to the e-commerce operator

Is E-Commerce Operator required to deduct TDS on payment to Non-Resident E-Commerce Seller?

The definition of e-commerce participant as per Sec 194O includes a person resident in India. Thus, E-Commerce Operator is not required to deduct TDS on payment to a Non-Resident E-Commerce Seller under Sec 194O. However, TDS must be deducted under Section 195 as per the prescribed rates.

Whether the TDS is to be deducted for Non-Resident selling well through e-Commerce Portal u/s 194O?

E-commerce Participant is defined a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce. And thus No TDS is required to be deducted when Participant is Non Resident.

Section 194K : TDS on Dividend from Mutual Funds

What is Section 194K?

Under Budget 2020 applicable from 1st April 2020 i.e. FY 2020-21, Dividend Distribution Tax – DDT was abolished. As a result, the dividend received on equity shares and mutual funds which were earlier exempt under Section 10(35) of the Income Tax Act is now taxable at slab rates. It is taxable in the hands of the shareholder. Since the income would be taxable in the hands of the shareholder, TDS would be applicable. As a result, the Finance Minister introduced a new Section 194K to deduct TDS on Dividend from Mutual Funds.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

The person paying dividends on mutual funds should deduct TDS u/s 194K. The deduction is at 10% on the number of dividends, only if a resident shareholder’s total dividend in a financial year exceeds INR 5,000. Section 194K is applicable from 1st April 2020 i.e. FY 2020-21 onwards.

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Section 194K – TDS on Dividend from Mutual Funds

  • Deductor
    • Mutual Fund distributing dividends to the investors of equity mutual funds should deduct TDS on such dividends. The deductor must deposit the TDS and file the TDS Return on TRACES.
  • Deductee
    • Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K. Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Section 194. NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
  • Nature of Payment 
    • Sec 194K covers Payment of Dividend on Equity Mutual Funds to a resident shareholder exceeding INR 5000 in a financial year.
  • Time of Payment
    • TDS shall be deducted at the time of credit of income to payee account or at the time of payment, whichever is earlier. If the payee of the amount credits the amount to be paid to “suspense account” or any other account, it is considered as ‘deemed payment’ and the payer must deduct TDS on such credit.
  • Rate
    • Deductor should deduct TDS u/s 194K at the rate of 10% if the dividend amount exceeds INR 5000. If the payee does not provide the PAN, TDS shall be deducted at the rate of 20%
  • TDS Certificate
    • Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the tax deducted while filing Income Tax Return.
  • TDS Return
    • After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES. The details of the dividend payment are part of this report. The deductor, after filing the report, should provide Form 16A to the deductee.
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
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TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

What is the meaning of ‘Income’ under Section 194K?

As per the Income Tax Act, ‘Income’ includes dividend paid on units of mutual funds specified under 10(23D) of Income Tax Act, units of mutual funds from a specified company or units of mutual funds from the administrator of the specified undertaking

There was confusion about whether the TDS under Section 194K on “Income from Mutual Funds” would include only dividends; or also include capital gains on the sale of MFs. On 4th Feb 2020, CBDT issued a clarification on this issue.

CBDT Clarification TDS at 10% should be deducted on Dividend Income only and not on Income from Capital Gains on the sale of Mutual Funds. Here is the official clarification from CBDT.

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FAQs

Are Capital Gains from the sale of Mutual Funds subject to TDS under Sec 194K ?

Sec 194K mentions TDS on ‘Income’ from Mutual Funds. There was confusion about whether capital gains income on the sale of MFs should be subject to TDS u/e 194K. However, the CBDT issued an official clarification on 02nd February 2020. Therefore, TDS needs to deducted at 10% on Dividend Income only. Additionally, it is not applicable for Income from Capital Gains on the sale of Mutual Funds.

Is TDS required to be deducted on dividend paid to NRI shareholder ?

Section 195 applies to the dividend paid to NRI investors/shareholders, as per provisions of the Income Tax Act. Hence, TDS needs to be deducted on the dividend at 20% on equity shares and equity mutual funds. Therefore, TDS has to be deducted at 10% as per Sec 194 and Sec 194K for an NRI shareholder.

How can I download utility to convert Form 16 / 16A text file into PDF?

TRACES provides the text file to PDF converter utility on their webpage. Hence, to convert text files of documents and reports into PDF, you must download the TRACES Utility. TRACES utility can be used:

  • To convert Form 16 (Part A and Part B) text file into PDF
  • To convert Form 16A text file into PDF
  • To convert Form 27D text file into PDF
  • Convert Transaction based Report text file into PDF
  • Convert Justification Report text file into excel file
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Steps to Download Text File to PDF Converter Utility from TRACES

  1. Log in to TRACES

    Log in to TRACES – Enter User Id, Password, TAN or PAN and captcha

  2. Navigate to Requested Downloads

    Go to Downloads > Requested Downloads

  3. Download TRACES Utility

    Click on the ‘Click here’ button to download the TRACES Utility

TRACES Utility Purpose System Requirements
PDF Convertor utility V 1.4 L Convert Form 16 Part A / Form16A into PDF JAVA 8 update 45, JRE 1.6 or above
Pop up blocker should be enabled
PDF Convertor utility V 1.1 L (Part B) Convert Form 16 Part B JAVA 8 update 45, JRE 1.6 or above
Pop up blocker should be enabled
Transaction based Report PDF Convertor V 1.1 Convert Transaction based Report into PDF JAVA 8 update 45, JRE 1.6 or above
Pop up blocker should be enabled
Form 27D PDF Convertor V 1.0 Convert Form 27D into PDF JAVA 8 update 45, JRE 1.6 or above
Pop up blocker should be enabled
TRACES Justification Report Utility V 2.2 Convert Justification Report from.txt format to .xls format MS Excel 2007-2010
Macro enabled
TRACES Offline Correction Generation Utility V 1.3 Steps to convert the Offline Correction file into an excel MS Excel 2003 or later
Winzip 17 or below

FAQs

How can I download Form 16 / Form 16A in PDF format?

The deductor can download Form 16 or Form 16A from his account on TRACES. However, this file is a text file. To convert it into PDF format, you need to download the ‘PDF Convertor Utility’ from TRACES.

Is Form 16 mandatory for all employees?

The provisions in the Income Tax Act make it compulsory for an employer to issue Form 16 to his employee if TDS has been deducted from his salary. Form 16 is the certificate issued under section 203 of the Income-tax Act for tax deducted at source (TDS) from income under the head ‘salary’.

What are the different uses of the TRACES utility?

1. To convert Form 16 (Part A and Part B) text file into PDF
2. To convert Form 16A text file into PDF
3. To convert Form 27D text file into PDF
4. Convert Transaction based Report text file into PDF
5. Convert Justification Report text file into excel file

How to Download Form 16A from TRACES?

TRACES is the online portal for filing TDS Returns, correction of TDS Returns, and downloading TDS documents. Form 16A is a TDS Certificate issued by a deductor for non-salary payments like professional fees, brokerage, commission, interest, rent, contractual payment, etc. It contains details of the nature of payment and TDS deducted on it. The deductor can download Form 16A from his account on TRACES. To do so, it is necessary that the status of the submitted return i.e. Form 26Q should be ‘Statement Processed with Default’ or ‘Statement Processed without Default’.

TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

While Form 16A is TDS Certificate for non-salary payments, Form 16 a is TDS Certificate for salary payments. A deductor can download both from their account on TRACES.

How to Download Form 16A?

  1. Login to TRACES

    Login to TRACES – Enter User Id, Password, TAN or PAN and captcha

  2. Navigate to Form 16A

    Go to Downloads > Form 16A

  3. Select Financial Year and PAN

    Select the Financial Year and PAN for which you want to download the TDS certificate. Click on ‘Go’. The deductor can request for Form 16A using the option ‘Search PAN’ or ‘Bulk PAN’

  4. Details of authorised person

    The details of the Authorised Person will appear on the screen. These details are populated from the profile information on TRACES. Further, these details would be printed on Form 16A. Click on Submit

  5. Select either of the following for KYC validation:

    1. Digital Signature Support KYC validation – Select if you want to use KYC validation using DSC
    2. Normal KYC Validation (without Digital Signature) – Select if you want to use KYC validation without using DSC

  6. KYC Validation using DSC option

    Select the Financial Year, Quarter and Form Type for KYC validation using DSC. Click on ‘Validate DSC’

  7. Enter password of DSC

    Enter the password of DSC and click on ‘ok’. Select the DSC certificate and click on ‘Sign.’ Enter the following details:
    1. Enter the Token number of the TDS Return filed for the Financial Year, Quarter and Form Type selected in Step 5 above
    2. Select the checkbox for Nil Challan or Book Adjustment
    3. Enter the challan details – BSR Code, challan serial number, challan amount, date on which tax is deposited
    4. Enter unique PAN-Amount combination – Enter PAN as entered in TDS Return and amount deposited
    5. Click on Proceed
    Note: Enter the details of the latest TDS return or TDS correction return filed

  8. Option 2: Normal KYC Validation without using DSC

    Select the Financial Year, Quarter and Form Type for KYC validation using DSC. Enter the Authentication Code if you have finished the validation earlier and you have the authentication code
    Enter the following details:
    1. Enter the Token number of the TDS Return filed for the Financial Year, Quarter and Form Type selected in Step 5 above
    2. Select the checkbox for Nil Challan or Book Adjustment
    3. Enter the challan details – BSR Code, challan serial number, challan amount, date on which tax is deposited
    4. Enter unique PAN-Amount combination – Enter PAN as entered in TDS Return and amount deposited
    5. Click on Proceed

  9. Success page

    Success page will appear on the screen once the KYC details are validated. Two Unique Request Numbers are generated separately for Form 16A. You can download the file from tab ‘Downloads’

  10. Navigate to Requested Downloads

    Enter the Request Number or Request Date or View All. Select the applicable row. If the status is ‘Available‘, click on the download button

  11. Download TRACES utility

    Click on HTTP Download button. A zip file is downloaded. Please do not extract the file. Go to Downloads > Requested Downloads. Click on the ‘Click here’ button.

  12. Enter verification code

    1. Click on TRACES PDF Converter 1.4L to download utility for Form 16A

  13. Extract the zip file and open JAR file. Follow the steps to download pdf of Form 16A

    1. Select zip file of Form 16A
    2. Enter your TAN as the password for the input file
    3. Select the folder to save the output pdf file
    4. Select digital certificate to digitally sign the PDF files – this is not mandatory
    5. Certificate details will be displayed under the certificate store
    6. Click on the button ‘Proceed’
    7. The pdf file of Form 16A is saved in the selected folder
    8. The password to open Form 16A is TAN number in Capital letters i.e. ABCD12345E

FAQs

I am a professional service provider and my TDS has been deducted u/s 194J. How can I download Form 16A?

You cannot download Form 16A on your own. You should request your deductor to provide you with Form 16A since he has deducted the TDS and filed TDS Return. He can download Form 16A at the end of each quarter from TRACES. However, you can download the tax credit statement from your account on the income tax website. It contains details of total income and TDS deducted on it.

Is Form 16A different from Form 16 Part A?

Yes. Form 16A is different from Form 16 Part A.
The employer issues Form 16 TDS Certificate to the employee with details of Salary Income and TDS deducted on it. It comprises of two parts – Part A and Part B. Form 16 Part A contains all the TDS information – employer’s details, employee details, tax details, and assessment year.
The deductor issues Form 16A TDS Certificate for non-salary payments like professional fees, brokerage, commission, interest, rent, contractual payment, etc. It contains details of the nature of payment and TDS deducted on it.

What are the different ‘Request Status’ to download Form 16A on TRACES?

1. Submitted – Successful submission, Request in processing
2. Available – Form 16A available for Downloading
3. Disabled – Duplicate request submitted for downloading
4. Failed – User is advised to contact CPC(TDS)
5. Not Available – All PAN mentioned in the statement is invalid

What is the difference between Form 16 and Form 16A?

Form 16 and Form 16A both are TDS Certificates. They are the proofs of tax deduction at source provided by the deductor. Both certificates are essential documents to file ITR. This article explains the difference between both the TDS certificates.

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Difference Between Form 16 and Form 16A

Form 16Form 16A
It is a Certificate of TDS on Salary Income. It is a Certificate of TDS on Income other than Salary.
Form 16 is applicable to Salary Income earned by an individual.Form 16A is applicable to income such as interest, dividends, commission, professional charges, rent, etc.
Employer issues Form 16 to an employee. Deductor (Payer) issues Form 16A to a deductee (Payee). 
It is issued on an annual basis.It is issued on a quarterly basis.
When your income from salary exceeds Rs. 2,50,000 employer is required to deduct TDS and issue Form 16.  When your income (other than salary) exceeds a certain threshold, a payer is required to deduct TDS from payments and issue Form 16A.
Form 16 certificate has two parts- Part A and Part B. Part A contain information of TDS deducted. Whereas Part B includes details of salary paid, other incomes.Form 16A certificate has only one part. It contains details of Deductor and Deductee, Nature of Payment, Amount Paid, TDS, and Challan details.
You can easily file your Income Tax Return annually using Form 16.It can be used to file an income tax return. Form 16A will provide TDS deduction details from a different source of incomes. 

You will also find TDS details in Form 26AS Tax Credit statement. You can also figure out TDS on salary from your salary slips. If there are any discrepancies you can contact your Employer/ Deductor to make corrections. Deductors can download Form 16 and Form 16A from TRACES.

FAQs

What is the due date to receive Form 16?

Employer issues Form 16 after the end of the financial year. The due date is 15th June of the next financial year.

What is the due date to receive Form 16A?

Form 16A is issued by the deductor/payer after the end of the quarter in which TDS was deducted. The due date is 15 days from the date of filing of TDS return by the deductor.

Can I file ITR if I don’t have Form 16?

Yes, you can file ITR even without Form 16. All you need to do is calculate your taxable salary based on salary slips while filing ITR.