Budget 2012 – TDS – Amendments and Implications

Newly Inserted Sections

  1. Section 194LAA
  2. Section 194LC

Amendments in existing Sections

  1. Section 193
  2. Section 194E
  3. Section 194J
  4. Section 194LA
  5. Section 195
  6. Section 197A
  7. Section 234E

     Newly inserted sections

  • Section 194LAA – Under Budget 2012, a new section has been inserted for deduction of Tax at source on transfer of immovable property (other than agricultural land). Under this , any person  , being a transferee (other than those referred in Section 194LA ) responsible for paying to any resident transferor any sum by way of consideration , then the transferee shall at the time of making payment or crediting any sum thereon, shall deduct tax, at the rate of 1% of such sum if it exceeds –
  1. Rs. 50lacs in case the property is situated in a specified area
  2. Rs. 20lacs in case the property is situated in any area other than the specified area.

STAMP DUTY PAYMENT Further, if the value on transfer of immovable property or the consideration paid on such the transfer is less than value assessed by the State Government in respect of payment of stamp duty, then the value being assessed by the State Government shall be the consideration paid for the transfer of such immovable property i.e. value assigned by SVA(Stamp Valuation Authority) will prevail. REGISTRATION The registering officer shall not register the transfer of immovable property unless the transferee produces proof of deduction and payment of TDS. BENEFIT TO TRANSFEREE

  1. Single one page challan is required for payment of TDS which would include details of both transferor and transferee (including PAN) and other property details.
  2. Transferee is not required to obtain any TAN (Tax Deduction and Collection Account Number) as it’s a one time transaction.

This amendment will take effect from 1st October, 2012.

  •  Section 194LC – This new Section takes into account taxability of income by way of Interest from an Indian “Specified” Company to Non – Resident (not being a Company / Foreign Company) . Payments made under this situation shall be liable to TDS @ 5 per cent at the time of credit of such income to payee account / time of payment of cash / time of issue of cheque or draft.

Specified Company means an Indian Company engaged in

  1.  Power generation /distribution / transmission
  2. Aircraft operations
  3. Fertilizer manufacture
  4. Construction of road/ bridge/port/ships/dams/housing project

  Amendments in existing Sections

  • Section 193  – Interest on Securities

Under the amended section 193 , a Company in which public is substantially interested  who is responsible to pay interest on debentures to any Individual  or HUF, is not required to deduct Tax at source , if the aggregate consideration does not exceed the amended threshold of Rs. 5000 , provided such payment is made by an Account Payee cheque . It is to be noted that the amended Section 193 also takes HUFs into purview with an increase in limit by Rs.2500  

  • Section 194E – Payment to Non – Resident Sportsmen / Sports Association

Under the amended section 194E, every  non-resident entertainer, apart from non – resident sportmen /sports association is required to deduct tax at source, on the income received by way of sports or entertainment @ 20 per cent. The amendment has been brought in existence so that tax can be imposed on  Non – Resident wrestlers, celebrities appearing in talent hunts & mega soaps, off-ground performers in Indian Premier League.  

  • Section 194J – Fees for Professionals or Technical services

Section 194J, following revision in the proposed budget has been inserted with a fresh sub-section (ba) which makes any person, other than an Individual or HUF to deduct tax at source on payment of remuneration to a Director at @10 percent.  

  • Section 194LA – Payment of Compensation on acquisition of certain Immovable property

Under the provision of the section 194LA, a person responsible for paying any compensation or consideration for compulsory acquisition of immovable property (other than agricultural  land) is required to deduct tax at the rate of 10% in case the consideration exceeds  two  lakh  rupees,  contrary to the existing limit of Rs. 1 lacs .  

  • Section 195 –  Sums payable to Non – Residents

With  the insertion of Section 194LB and 194LC pertaining specific deduction of tax at source under their respective jurisdiction , the words “any interest “ used in Section 195 will be substituted by “any interest (not being interest referred to u/s 194LB or 194LC )”.  

  • Sec 197A – No Deduction to be made in certain cases

Sec 197A will stand effective as formulated, with the only exception that the the age of individual resident in India covered in this section will be reduced to sixty years to promote a wider coverage to the inherent benefit of not deducting tax at source in cases where such individual declares in writing that tax on his estimated total income  will be Nil.

  •  Sec 234E – Levy of Fee in certain cases
W.e.f 1st July,2012, a fee extending to an amount of Rs 200/day of default will be levieble upon persons responsible for deducting tax at source u/s 192/collecting tax at source on trading of  alcoholic liquor, forest produce or scrap, only in a situation where he fail to deliver statements, as required.

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