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ADVANCE TAX, TAX DEDUCTION AT SOURCE & TAX COLLECTION AT

SOURCE
Q. No. Questions & Answers
1. Examine the applicability of tax deduction at source provisions, the rate and amount
of tax deduction in the following cases for the F.Y. 2023-24:
(i) Payment made by a company to Mr. Ram, sub-contractor, ₹3,00,000 with outstanding
balance of ₹1,20,000 shown in the books as on 31.3.2024.
(ii) Winning from horse race ₹1,50,000 paid to Mr. Shyam, an Indian resident.
(iii) ₹2,00,000 paid to Mr. A, a resident individual, on 22-02-2024 by the State of Uttar
Pradesh on compulsory acquisition of his urban land.
(Nov. 2014, ICAI SM, Modified MTP July 2021, MTP May 2023 Series II)
Ans. (i) Provisions of tax deduction at source under section 194C are attracted in respect
of payment by a company to a sub-contractor. Under section 194C, tax is deductible
at the time of credit or payment, whichever is earlier @ 1% in case the payment is
made to an individual.
Since the aggregate amount credited or paid during the year is ₹4,20,000, tax is
deductible @ 1% on ₹4,20,000.
Tax to be deducted = ₹4,20,000 × 1% = ₹4,200
(ii) Under section 194BB, tax is to be deducted at source, if the winnings from
horse races exceed ₹10,000. The rate of deduction of tax at source is 30%.
Hence, tax to be deducted = ₹1,50,000 × 30% = ₹45,000.
(iii) As per section 194LA, any person responsible for payment to a resident, any sum
in the nature of compensation or consideration on account of compulsory
acquisition under any law, of any immovable property, is required to deduct tax at
source, if such payment or the aggregate amount of such payments to the resident
during the financial year exceeds ₹2,50,000.
In the given case, there is no liability to deduct tax at source as the payment made
to Mr. A does not exceed ₹2,50,000.
2. Answer the following:
(i) Explain briefly the provisions of advance tax on capital gains and casual income.
(Nov. 2015)
(ii) What are the consequences of failure to deduct or pay the tax under section 201
of theIncome Tax Act, 1961? (Nov. 2009, Nov. 2010, Nov. 2015)
(iii) What is the difference between TDS and TCS under the Income Tax Act, 1961?
(May 2015)
Ans. (i) Advance tax is payable by an assessee on his/its total income, which includes capital
gains and casual income like income from lotteries crossword puzzles, etc.
Since, it is not possible for the assessee to estimate his capital gains, or income from
lotteries etc., it has been provided that ‘if any such income arises after the due date
for any installment, then, the entire amount of the tax payable (after considering tax
deducted at sources) on such capital gains or casual income should be paid in the
remaining installmentsof advance tax, which are due.
Where no such installment is due, the entire tax should be paid by 31 st March of the
relevant financial year.

Note:
In case of casual income, the entire tax liability is fully deductible at source @ 30% under
section 194B and 194BB. Therefore, advance tax liability would arise only in respect of the
surcharge, if any, health and education cess element of such tax, if the same along with tax
liability in respect of other income, if any, is ₹10,000 or more.
(ii) Any person, including principal officer of a company, responsible for deducting tax at
sourceshall be deemed to be an assessee in default in respect of such tax, if he does
not deduct or after deducting fails to pay, the whole or any part of the tax as required
by or under the provisions of the Income Tax Act, 1961.

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However, no penalty shall be charged under section 221 from such person, unless
the Assessing Officer is satisfied that such person, without good and sufficient
reasons, has failed to deduct and pay such tax.
As per section 201(1A), a person who fails to deduct tax or after deduction, fails to
pay the tax, is liable to pay simple interest @ 1% for every month or part of a month
on the amount of such tax from the date on which such tax was deductible to the date
on which such tax is actually deducted and simple interest @ 1.5% for every month
or part of month from the date on which tax was deducted to the date on which such
tax is actually paid. Such, interest should be paid before furnishing the statement of
tax deducted at source under section 200(3).
Where such tax has not been paid after it is deducted, the amount of tax together with
the amount of simple interest thereon shall be a charge upon all the assets of the
person, or the company, as the case may be.
(iii) TDS is Tax Deducted at Source i.e., tax deducted at origin of income where person
giving income deducts tax on it.
TCS is Tax Collection at Source i.e., tax collected at source of income of origin.
3. (a) Examine & explain the TDS implications in the following cases along with
reasons thereof, assuming that the deductees are residents and having a PAN
which they have duly furnished to the respective deductors:
(1) Mr. Kunal received a sum of ₹10,20,000 on 28.02.2024 as pre-mature withdrawal
from Employees Provident Fund Scheme before continuous service of 5 years on
account of termination of employment due to ill-health.
(2) Indian Bank sanctioned and disbursed a loan of ₹12 crores to B Ltd. on 31 -12-
2023. B Ltd. paid a sum of ₹1,20,000 as service fee to Indian Bank for processing
the loan application.
(3) Mr. Agam, working in a private company, is on deputation for 5 months (from
October, 2023 to February, 2024) at Mumbai where he pays a monthly house rent
of ₹32,000 for those five months, totalling to ₹1,60,000. Rent is paid by him on the
first day of the relevant month.
(b) Mr. Subhash engaged in the business of trading of electrical appliances. His turnover
for F.Y. 2022-23 and F.Y. 2023-24 was ₹12 crore and 9.5 crore, respectively. During
the previous year, XYZ Ltd. placed order for purchase of electric appliances for ₹55
lakhs on 01.08.2023. He again placed order for ₹35 lakhs on 01.11.2023. Mr. Subhash
delivered both the orders within 15 days of receipt of orders.
Discuss, whether Mr. Subhash is required to collect tax at source, on the
consideration received from XYZ Ltd.
[(May 2021 RTP, MTP May 2023 Series II, MTP NOV. 2023(SERIES-I)]
Ans. (a) TDS implications:
(1) On pre-mature withdrawal from EPF
No tax is deductible under section 192A even though the employee, Mr. Kunal,
has not completed 5 years of continuous service, since termination of employment
is on account of his ill-health. Hence, Rule 8 of Part A of the Fourth Schedule is
applicable in this case.
(2) On payment of service fee to bank
Even though service fee is included in the definition of “interest” under section
2(28A), no tax is deductible at source under section 194A, since the service fee
is paid to a banking company, i.e., Indian Bank.
(3) On payment of rent by a salaried individual
Mr. Agam, a salaried individual, is not liable to deduct tax at source @ 5% under
section 194-IB on ₹1,60,000 (being rent for 5 months from October 2023 to
February 2024) from the rent of ₹32,000 payable on 1st day of every month, since
the monthly rent does not
exceed ₹50,000.
(b) As per section 206C(1H), tax is required to be collected at source @ 0.1% on the sale

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consideration exceeding ₹50 lakhs at the time of receipt of consideration. Tax is

required to collected at source by a seller, being a person whose total turnover from
the business exceeds ₹10 crore during the financial year immediately preceding the
financial year in which sale of goods is carried out.
As per section 194Q buyer who will responsible for paying more than ₹50 lakhs in a
previous year to any resident for purchase of goods deduct the TDS @ 0.1% of sum
exceeding ₹50 lakhs at the time of credit or payment, whichever is earlier. Here, buyer
means a person whose Total Sales, Gross Receipt or Turnover during the immediately
preceding the financial year in which the purchase of goods carried out.
However, tax is not required to be collected by if the buyer is liable to deduct tax at
source under any provision of the act on the goods purchased by him.
Since in this questions provision of section 206C(1H) and section 194Q both are
attracted therefore, provision of section 194Q will prevail and buyer will be liable to
deduct the TDS. So, if the turnover of XYZ Ltd. in the immediately preceding financial
year is more than ₹10 crore then tax will be deducted ₹4,000 (40 lakhs × 0.1%).
4. Ashwin doing manufacture and wholesale trade furnishes you the following
information:
Total turnover for the financial year
Particulars (₹)
2022-23 1,05,00,000
2023-24 95,00,000
Examine whether tax deduction at source provisions are attracted for the below
said expenses incurred during the financial year 2023-24:
Particulars (₹)
Interest paid to UCO Bank on 15.8.2023 41,000
Contract payment to Raj (2 contracts of ₹12,000 each) on 12.12.2023 24,000
Shop rent paid (one payee) on 21.1.2024 2,50,000
Commission paid to Balu on 15.3.2024 7,000
(May 2016, ICAI SM)
Ans. As the turnover of business carried on by Ashwin for F.Y. 2022-23, has exceeded ₹1 crore,
he has to comply with the tax deduction provisions during the financial year 2023 -24,
subject to, the exemptions provided for under the relevant sections for applicability of TDS
provisions.
Interest paid to UCO Bank
TDS under section 194A is not attracted in respect of interest paid to a banking company.
Contract payment of ₹24,000 to Raj for 2 contracts of ₹12,000 each.
TDS provisions under section 194C would not be attracted if the amount paid to a
contractor does not exceed ₹30,000 in a single payment or ₹1,00,000 in the aggregate
during the financial year. Therefore, TDS provisions under section 194C are not attracted
in this case.
Shop Rent paid to one payee: Tax has to be deducted @ 10% under section 194-I
as the annual rental payment exceeds ₹2,40,000.
Commission paid to Balu: No, tax has to be deducted under section 194-H in this case
as the commission does not exceed ₹15,000.
5. Answer the following:
(i) Miss Tara, resident individual aged 32 years, is a social media influencer. She makes
videos reviewing various electronics items and posts those videos on social media.
On 1st December 2023, XYZ Ltd., an Indian company manufacturer of electronic cars
gave her a brand-new car having fair market value of ₹6 lakhs to promote on her
social media page. She used that car for 7 months for her personal purposes, recorded
a video reviewing the car and then returned the car to the company.
You are required to discuss the applicable provisions in the Income-tax Act
regarding the deduction of tax at source in respect of such transaction.

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(ii) Ms. Aruna is a Chief Executive Officer of a multi-national company. She hires Mr.
Suresh for supply of her housing staff (like gardener, chefs and drivers etc.) and
makes the following payments to him: ₹25,00,000 on 10 th August, 2023 & ₹30,00,000
on 22nd November, 2023.
Determine of amount of tax to be deducted/collected at source, if any.
Would your answer be different if Ms. Aruna is business woman and her books
are not audited in immediately preceding financial year and payment to Mr.
Suresh is for business purposes.
(iii) By virtue of an agreement with Nationalised Bank, MS ABC Pvt. Ltd., a company
engaged in catering business received ₹60,000 p.m. towards supply of food, water,
snacks, etc. during office hours to the employee of the bank.
Discuss the TDS implication of this transaction/agreement. (May 2023)
Ans. (i) As per the provision of section 194-R, every person, who is responsible for providing
any benefit or perquisite whether convertible into money or not, arising from
business, or profession, by such resident, to deduct tax at source @ 10% of the value
or aggregate of value of such benefit or perquisite, before providing such benefit or
perquisite. No TDS is deducted if:
(a) In case of a resident where value or aggregate value of such benefit or perquisite
does not exceed ₹20,000 in a financial year; or
(b) In case of an individual or HUF, whose total sales, gross receipts or turnover from
business or profession does not exceed ₹1 crore in case of business or ₹50 lakhs
in case of profession, during the financial year immediately preceding the
financial year in which such benefit or perquisite, as the case may be, is provided
by such person.
In this case Miss Tara is a social media influencer who reviews the electronic item and
post a video on social media, an Indian company gave its electronic car fair market
value of ₹6 lakh to miss Tara to promote its car on social media. She used the car for
7 months and then returned it to company so no TDS shall be applicable u/s 194-R
because the influencer returns the product to the company. If the product is returned
to the manufacturing company after using it then it willnot be treated as perquisite.
If it retained then it is a taxable perquisite. In this case as the product is returned by
her so this doesn’t amount to perquisite in the course of business and profession so
TDS u/s 194-R is not to be deducted by company.
(ii) In this case, Ms Aruna would not deduct the TDS under section 194C because the
payment made to the Mr. Suresh (a contractor for supply of labor) for personal
purposes & also she is an individual not having turnover of her business more
than ₹1 crore or gross receipt from profession more than ₹50 lakh during the
immediately preceding Previous year. Therefore, TDS will be deducted under section
194-M provided the amount exceeds ₹50 lakh. Here, two times payment is made by
Ms Aruna in a P.Y 2023-24.
₹25,00,000 on 10th august and ₹30,00,000 on 22nd November 2023 since the total
payment made to contractor is ₹55,00,000 therefore TDS @ 5% is deducted of
₹55,00, 000. i.e., ₹2,75,000 is deducted as TDS under section 194-M.
✓ If she is business women and she made a payment to contractor i.e., Mr. Suresh
for the supply of housing staff but her books are not audited in the immediately
preceding year therefore it can be inferred that her business had a turnover of
less than ₹1 crore in the immediately preceding previous year in that case still
the answer would remain same i.e., TDS would be deducted under section 194-
M @ of 5% i.e., total amount of TDS is ₹2,75,000.
(iii) In this case Ms. ABC Pvt. Ltd. engaged in a catering business received ₹60,000 p.m. in
respect of supply of food, water snacks to the employee of Nationalised Bank. Since
catering business comes under the definition of “Work” and it is assumed here that
the turnover of Ms. ABC Pvt. Ltd. is more than ₹1 crore in the immediately preceding
previous year i.e., F.Y. 2022-23 in addition to that here the payment made is more
than ₹30,000 p.m. is made to Ms. AMC Pvt. Ltd. therefore TDS @ 2% (since it is a
company) of ₹7,20,000 = ₹14,400 is to be deducted by Nationalised bank.

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6. An amount of ₹40,000 was paid to Mr. X on 1.7.2023 towards fees for professiona l
services without deduction of tax at source. Subsequently, another payment of
₹50,000 was due to Mr. X on 28.2.2024, from which tax @ 10% (amounting to
₹9,000) on the entire amount of ₹90,000 wasdeducted. However, this tax of ₹9,000
was deposited only on 22.6.2024. Compute the interest chargeable under section
201(1A). (RTP NOV. 2020, MTP Nov. 2022 series II)
Ans. Interest under section 201(1A) would be computed as follows:
Particulars (₹)
1 % on tax deductible but not deducted i.e., 1 % on ₹4,000 for 8 months. 320
1½ % on tax deducted but not deposited i.e., 1½ % on ₹9,000 for 4 months. 540
860

7. Answer the following:

State the applicability of TDS provisions and TDS amount in the following cases:
(i) Rent paid for hire of machinery by B. Ltd to Mr. Raman ₹2,60,000 on
27.09.2023.
(ii) Fee paid on 01.12.2023 to Dr. Srivatsan by Sundar (HUF) ₹35,000 for surgery
performed to a member of the family.
(iii) ABC and Co. Ltd. paid ₹19,000 to one of its directors as sitting fees on 01-01-
2023. (Nov. 2011, ICAI SM)
Ans. (i) Since the rent paid for hire of machinery by B. Ltd to Mr. Raman exceeds ₹2,40,000,
the provisions of section 194-I for deduction of tax at source are attracted.
The rate applicable for deduction of tax at source under section 194-I on rent paid
for hire of plant and machinery is 2% assuming that Mr. Raman had furnished his
permanent account number to B. Ltd
Therefore, the amount of tax to be deducted at source = ₹2,60,000 × 2% = ₹5,200.
Note: In case Mr. Raman does not furnish his Permanent Account Number to B. Ltd., tax shall
be deducted @ 20% on ₹2,60,000, by virtue of provisions of section 206AA.
(ii) As per the provisions of section 194J, a Hindu Undivided Family is required to
deduct tax at source on fees paid for professional services only if the total sales, gross
receipts or turnover from the business or profession exceed ₹1crore in case of
business and ₹50,00,000 in case of profession as the case may be in financial year
preceding the current financial year and such payment made for professional
services is not exclusively for the personal purpose of any member of Hindu
Undivided Family.
Section 194M, provides for deduction of tax at source by a HUF (which is not
required to deduct tax at source under section 194J) in respect of fees for
professional service if such sum or aggregate of such sum exceeds ₹50,00,000
during the financial year.
In the given case, the fees for professional service to Dr. Srivatsan is paid on
01.12.2023 for a personal purpose, therefore section 194J is not attracted, if the
payment or aggregate of payments exceed ₹50,00,000 in 2023 -24. However, since
the payment has not exceeded ₹50,00,000 in this case, there is no liability to deduct
tax at source under section 194M also.
(iii) Section 194J provides for deduction of tax at source @ 10% from any sum paid by
way of any remuneration or fees or commission, by whatever name called, to a
resident director, which is not the nature of salary on which tax is deductible under
section 192. The threshold limit of ₹30,000 up to which the provisions of tax
deduction at source are not attracted in respect of every other payment covered
under section 194J is, however, not applicable in respect of sum paid to a director.
Therefore tax @10% has to be deducted at source under section 194J in respect of
sum of ₹19,000 paid by ABC LTD. to its director.
Therefore, the amount of the tax to be deducted = 19,000 × 10% = ₹1900
8. Answer the following:
Briefly discuss the provision relating to payment of advance tax in case of capital

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gains and casual income. (May 2013, ICAI SM)

Ans. The proviso to section 234C contains the provisions for payment of advance tax in case
of capital gains and casual income.
Advance tax is payable by an assessee on his/its total income, which includes capital gains
and casual income like income from lotteries, crossword puzzles etc.
Since it is not possible for the assessee to estimate his capital gains, income from lotteries,
etc., it has been provided that if any such income arises after the due date for any
installment, then the entire amount to tax payable (after considering tax d educted at
source) on such capital gains or casual income should be paid in the remaining
installments of advance tax which are due.
When no such installment is due, the entire tax should be paid by 31st March of the
relevant financial year.
But, if the entire tax liability is so paid, no interest liability under section 234C would arise
for deferment of advance tax.
Working Note: In the case of casual income (winnings from lotteries, crossword puzzles, card
games, gambling, betting, races including horse races etc.), the entire tax liability is fully
deductible at source @ 30% under section 194B and 194BB. Advance tax liability would arise
only in respect of the health and education cess element of such tax, if the same, along with tax
liability in respect of other income, if any, is ₹10,000 or more.
9. Answer the following:
(1) State with reason whether the following receipt is taxable or not under the provision
of Income Tax Act, 1961? TDS is not applicable in respect of payment of ₹1,00,000 to
Mr. Pandey a resident, being interest on recurring deposit with SBI.
(2) Mr. Barun provides you the following information and requests you to
determine the Advance Tax liability with due dates for the financial year 2023-
24:
Estimated tax liability for the financial year 2023-24 ₹65,000
Tax deducted at source for this year ₹5,000
(May 2009, Nov. 2016)
Ans. (1) Taxability of receipt under the provision of the Income Tax Act, 1961:
Taxable/Non-Taxable Reason
Taxable Interest of ₹1 lakh on recurring deposit is an income
chargeable to tax as Income from Other Source in the hands
of the recipient, Mr. Pandey, a resident in India.
(2) Determination of Advance Tax Liability of Mr. Barun:
Particulars (₹)
Estimated tax liability for the financial year 2023-24 65,000
Less: Tax Deducted at Source (5,000)
Tax Payable 60,000
Due date of Amount payable (₹)
installment
On or before 15th June, Not less than 15% of advance tax liability 9,000
2023 (15% of ₹60,000)
On or before 15th Not less than 45% of advance tax liability 18,000
September, 2023 (45% of ₹60,000 - ₹9,000)
On or before 15th Not less than 75% of advance tax liability less 18,000
December, 2023 amount paid in earlier installment.
(₹45,000, being 75% of ₹60,000 – ₹27,000)
On or before 15th March, Whole of the advance tax liability less amount 15,000
2024 paid in earlier installments.
(₹60,000, being 100% of ₹60,000 – ₹45,000)
10. (1) Pallavi Bank Ltd. has paid interest of ₹9,000 to Mr. A, a resident Indian, from its
Chennai branch and ₹8,000 from Bangalore branch. If there is no core banking
services in the bank, is tax required to be deducted at source from such interest

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payments made on 31.03.2024? Will your answer be different if there is core

banking service present in the bank? Also, explain the provisions of the Income
Tax Act, 1961 in this regard.
(2) Mr. Sachal, a resident individual aged 54, furnishes income details as under,
assuming he opted to shift out of the default tax regime u/s 115BAC(1A).
(a) Wholesale cloth business, whose turnover is ₹150 lakhs, for which accounts
are audited u/s 44AB. Income from such business ₹8,10,000.
(b) Income from other sources ₹2,70,000.
(c) Tax deducted at source ₹25,000.
(d) Advance tax paid ₹1,03,000 on 14.03.2024.
Return of income will be filed on 11.12.2024. The assessee is willing to pay the
requisites self-assessment tax. Calculate the interest payable under Section 234B
of the income tax act, 1961. Assume that the return of income would be processed
on the same day of filling of return.
(May 2017, Modified Nov. 2019 RTP)
Ans. (1) TDS need not be deducted if there is no core banking services.
If core banking services is present TDS need to be deducted if interest on FD & RD
exceeds ₹10,000 p.a.
As per the provision of section 194A, tax is required to be deducted at source where
the amount of interest or the aggregate of the amount of interest credited or paid
during the financial year by a banking company, Co-operative Society engaged in
banking business or post office exceed ₹40,000 and ₹50,000 in case of senior citizen
and ₹5,000 in any other case.
The limit of ₹40,000/₹50,000/₹5,000 is computed on branch wise unless the bank has
CBS system.
In the present case TDS need not to be deducted by the bank if there is no core banking
services.
If core banking services is present even then the answer will remain the same and TDS
need not to be deducted because interest on FD & RD does not exceeds ₹40,000 p.a.
(2) Computation of interest payable under section 234B by Mr. Sachal:
Particulars (₹)
Tax on total income of ₹10,80,000 [Business income of ₹8,10,000 1,36,500
(W.N .1) + income from other sources of ₹2,70,000]
Add: Health and Education cess and SHEC @ 4% 5,460
Tax on total Income 1,41,960
Less: Tax Deducted at Source (25,000)
Assessed Tax 1,16,960
90% of assessed tax 1,05,264
Advance tax paid on 14.03.2024 1,03,000
Interest under section 234B is leviable since advance tax of ₹1,03,000
paid is less than ₹1,05,264, being 90% assessed tax.
Number of months from 1st April, 2023 to 11th December, 2024, being
the date of processing of return. 9
Interest under section 234 @ 1% per month or part of a month for 9 1,256.4
months on ₹13,960 (i.e., difference between assessed tax of ₹1,16,960
and advance tax of ₹1,03,000 paid being ₹13,960 which is rounded off
to ₹12,400)
Interest under Section 234B rounded off 1,260
Working Note:
1. The presumptive income computed under section 44AD would be ₹12 lakh, being 8% of
₹150 lakhs. However, since Mr. Sachal has got his books of account audited under section
44AB, he can declare lower income of ₹8,10,000.
• It is assumed that the same represents the date of determination of total income under
section 143(1).
• Rounded off under Rule 119A of Income tax Rules, 1962.

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11. Answer the following Question:

(1) Mr. Dhanapal wishes to purchase a residential house costing ₹60 lakhs from Ms.
Saipriya.The house is situated at Chennai. He also wants to purchase agricultural lands
in a rural area for ₹65 lakhs. He wants to know whether there will be any obligation
to deduct tax at source in these two situations. Both the buyer as well as the sellers
are residents in India. Advise Mr.Dhanapal suitably. (Modified May 2015)
(2) Rahil & Co., a partnership firm is having a car dealership show-room. They have
purchased cars for ₹2 crores from XYZ Ltd., car manufactures, the cost of each car
being more than ₹12 lakhs. They sell the cars to individual buyers at a price yielding
10% margin on cost. State whether there will be any obligation to collect tax in
the above two situations. (Nov. 2018)

Ans. (1) Since the sale consideration of residential house exceeds ₹50 lakh, Mr. Dhanapal is
required to deduct tax at source @ 1% of sale consideration of ₹60 lakh under section
194-IA.
TDS provisions under section 194-IA are not attracted in respect of transfer of
rural agricultural land, even if the consideration exceeds ₹50 lakh.
(2) Every person, being a seller, who receives any amount as consideration for sale of a
motor vehicle of the value exceeding ₹10 lakhs, is required to collect tax at source @
1% of the sale consideration from the buyer.
TCS provisions will, however, not apply on sale of motor vehicles by manufactures to
dealer/distributors. Hence, XYZ Ltd., the manufacturer seller need not collect tax at
source on sale of cars to the dealer, Rahil & Co., even in the value of each car exceeds
₹10lakhs.
However, TCS provisions would be attracted when Rahil & Co., sells cars to
individual buyers, since the value of each car exceeds ₹10 lakhs. Rahil & Co. has to
collect tax @ 1% of the consideration on sale of each car to an individual buyer.
12. Examine the TDS implications in the following cases along-with reasons thereof:
(1) Ms. Varsha received a sum of ₹95,000 on 31 st December, 2023 towards maturity
proceeds of LIC taken on 1 st October, 2018 for which sum assured was ₹80,000 and
annual premium was ₹10,000.
(2) Mr. Deepak transferred a residential house property to Mr. Karan for ₹45 lacs. The
stamp duty value of such property is ₹55 lacs.
(3) XYZ Private Limited pays the following amounts to Mr. Narayan during previous
year 2023- 24:
(A) ₹22,000 towards fee for professional services.
(B) ₹18,000 towards royalty.
(4) Payment of ₹1,75,000 made to Mr. Vaibhav for purchase of calendar according to
specifications of M/s. ABC Limited to Mr. Vaibhav.
(5) Talent Private Limited pays ₹12,000 to Ms. Sudha, its director, towards sitting fee
which is not taxable u/s 192.
(6) Radha Limited is engaged for Shyam Limited only in the business of operation of call
Centre. On 18.03.2024, the total amount credited by Shyam Limited in the ledger
account of Radha Limited is ₹70,000 regarding service charges of call centre. The
amount is paid through cheque on 28.03.2024 by Shyam Limited.
[May 2019, MTP NOV. 2023 (SERIES-I)]
Ans. TDS Implications:
(1) On payment of LIC maturity proceeds: The annual premium exceeds 10% of sum
assured in respect of a policy taken after 31.03.2012, and consequently, the maturity
proceeds of ₹95,000 would not be exempt u/s 10(10D) in the hands of Ms. Varsha.
However, tax deduction provisions u/s 194-DA are not attracted since the maturity
proceeds are less than ₹1 lakh.
(2) On payment of sale consideration for purchase of residential house property:
Under section 194-IA TDS is deducted @ 1% of sales consideration or Stamp duty
value of immovable property whichever is higher if the amount of sales consideration
or SDV is more than ₹50 lakh. Here, the Sales consideration is less than₹45 lakhs but

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SDV is more than ₹50 lakh therefore TDS @ 1% of ₹55,00,000 i.e., ₹55,000 is to be
deducted by Mr. Karan.
(3) On payment of fee for professional services and royalty: Under section 194J, the
threshold limit of ₹30,000 is specified separately for, fees for professional services
and royalty. Therefore, XYZ Private Limited is not required to deduct tax at source
under section 194J either on fee of ₹22,000 for professional services or on royalty of
₹18,000 paid to Mr. Narayan, since the payment under each category does not exceed
the independent threshold ₹30,000 specified thereunder.
(4) On payment for purchase of calendar according to specifications: As per section
194C, the definition of work does not include the manufacturing or supply of product
according to the specification by customer in case the material is purchased from a
person other than the customer. Therefore, M/s ABC Limited is not required to deduct
tax at source in respect of payment of ₹1,75,000 to Mr. Vaibhav, for purchase of
calendar according to its specifications, since it did not supply the material for such
calendar. Hence, the contract is a contract for sale and not a works contract.
(5) On payment of sitting fees to the director: Talent Private Limited is required to
deduct tax at source @ 10% on sitting fees of ₹12,000 paid to its director, since the
threshold limit of ₹30,000 u/s 194J is not applicable in respect of fees paid to a
director of a company.
(6) On payment of call centre service charges: Since Radha Limited is engaged only in
the business of operation of call centre, Shyam Limited is required to deduct tax at
source @ 2% on the amount of ₹70,000 u/s 194J on 18.03.2024, i.e., at the time of
credit of call centre service charges to the account of Radha Limited, since the said
date is earlier than the payment date i.e., 28.03.2024.
13. State in brief the applicability of tax deduction at source provisions, the rate and
amount of tax deduction in the following cases for the financial year 2023-24 under
the Income- tax Act, 1961. Assume that all payments are made to residents:
(1) Sanjay, a resident Indian individual, not deriving any income from business or
profession makes payments of ₹12 lakh in January, 2024, ₹20 lakh in February, 2024
and ₹20 lakh in March, 2024 to Mohan, a contractor for reconstruction of his
residential house.
(2) ABC Ltd. makes the payment of ₹1,50,000 to Ramlal, an individual transporter who
owned 6 goods carriages throughout the previous year. He does not furnish his PAN.
[Nov. 2020, Modified MTP MAY 2024(SERIES-I)]
Ans. TDS implications
(1) On payments made to contractor
Tax is deductible @ 5% under section 194M, since payments to Mr. Mohan, a
contractor, for reconstruction of his residential house exceeds ₹50 lakhs in aggregate
during the F.Y.2023-24.
Amount of tax to be deducted = 5% of ₹52 lakhs = ₹2,60,000
(2) Payment to transporter who has not furnished PAN
Under section 194C, no tax is deductible in respect of payments to a transporter, who
owns ten or less goods carriages at any time during the year and furnishes a
declaration to that effect along with his PAN to the person paying or crediting such
sum.
However, in this case, this exemption from TDS would not be available, since Ramlal
has not furnished his PAN to ABC Ltd. As per section 206AA, due to non-furnishing
of PAN, tax would be deductible at a higher rate of 20% and not @ 1% provided under
section 194C.
∴ Amount of tax to be deducted = ₹1,50,000 × 20% = ₹30,000
14. Discuss the liability of tax deduction at source under the Income-tax Act, 1961 in
respect of the following cases with reference to A.Y. 2024-25:
(i) ABC Ltd. is a producer of natural gas. During the year, it sold natural gas worth
₹26,50,000 to M/s Deep Co., a partnership firm. It also incurred ₹1,70,000 as freight
for the transportation of gas. It raised the invoice and clearly segregated the value of

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gas as well as the transportation charges.

(ii) ABC LLP paid job charges to XYZ, a partnership firm for doing embroidery work
on the fabric supplied by the ABC LLP during the previous year 2023-24 as
under:
BILL NO. DATE AMOUNT (₹)
1 30-04-2023 27,000
57 30-06-2023 25,000
105 30-09-2023 28,000
151 30-12-2023 32,000
[DEC. 2021, MTP NOV. 2023(SERIES-II)]
Ans. (i) Since ABC Ltd., being the producer of the natural gas, sells as well as transports the
gas to M/s. Deep Co., the purchaser, till the point of delivery, where the ownership of
gas is simultaneously transferred to M/s. Deep Co., the manner of raising the invoice
(whether the transportation charges are embedded in the cost of gas or shown
separately) does not alter the basic nature of such contract which remains essentially
a ‘contract for sale’ and not a ‘works contract’ as envisaged in section 194C.
Therefore, in such circumstances, the TDS provisions would not be attracted on
₹1,70,000, being the component of gas transportation charges paid by M/s. Deep Co.
to ABC Ltd.
Alternate Answer:
The above solution is based on Circular No. 9/2012 dated 17.10.2012, wherein it has
been clarified that in case the Owner/Seller of the gas sells as well as transports the
gas to the purchaser till the point of delivery, where the ownership of gas to the
purchaser is simultaneously transferred, the manner of raising the sale bill, does not
alter the basic nature of such contract which remains essentially a 'contract for sale'
and not a 'works contract' as envisaged in section 194C of the Act.
Since, the question is silent on the timing of the transfer of ownership of the gas to the
purchaser, an assumption that the ownership of the gas to the purchaser is transferred
before its transportation is possible. In such a case, the transportation of g as after
transfer of ownership may be considered as a separate contract for transportation of
gas i.e., ‘works contract’ u/s 194C, and hence TDS @ 2% has to be deducted by M/s.
Deep Co. on ₹1,70,000 i.e., ₹3,400.
(ii) In this case, the individual contract payments (through the bills dated 30.4.2023,
30.6.2023 and 30.9.2023) made by ABC LLP to XYZ does not exceed ₹30,000. However,
since the aggregate amount paid to XYZ during the P.Y. 2022-23 exceeds ₹1,00,000 (on
account of the last payment of ₹32,000, due on 30.12.2023, taking the total from
₹80,000 to ₹1,12,000), the TDS provisions under section 194C would get attracted on
the entire sum of ₹1,12,000.
Tax has to be deducted @ 2% (since payment is to a firm, XYZ) on the entire amount
of ₹1,12,000, from the last payment of ₹32,000 on 30.12.2023.
Hence, TDS u/s 194C = ₹2,240.
15. Answer the following:
Briefly discuss the provisions of Section 234B of the Income Tax Act, 1961 for short
payment or non-payment of advance tax. (May 2016)
Ans. Interest u/s 234B is attracted for non-payment of advance tax or payment of advance tax
of an amount less than 90% of assessed tax (i.e., Tax on total income less TDS). Interest
liability could be 1% per month or part of the month from 1 st April following the financial
year up to the date of determination of income, i.e., self-assessment u/s 140A.
Such interest is calculated on the amount of difference between the assessed tax and the
advance tax paid.
Assessed tax is the tax calculated on total income less TDS & TCS.
16. (a) Discuss the provision under Income Tax Act for payment of Advance Tax in
case of Capital Gain.
(b) Discuss the provisions, relating to the premature withdrawal from Employee’s

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Provident Fund, under section 192A, for A.Y. 2024-25. (Nov. 2016)
Ans. (a) Provisions for payment of advance tax in case of capital gains (1st Proviso to
Section 243C):
Advance tax is payable by an assessee on his/its total income, which includes capital
gains also. Since it is not possible for the assessee to estimate his capital gains, it has
been provided that if any such income arises after the due date for any installment,
then entire amount of the tax payable (after considering tax deducted at source) on
such capital gains should be paid in the remaining installments of advance tax, which
are due.
Where no such installment is due, the entire tax should be paid by 31st March of
the relevantfinancial year.
No interest liability under Section 234C would arise if the entire liability is so paid.
(b) TDS provisions relating to premature withdrawal from EPF under Section 192A.
Section 192A provides that where the accumulated balance due to an employee
participating in arecognized provident fund is includible in his total income owing to:
✓ An employee making withdrawal from recognized provident fund before
continuous service of five years (other than the cases of termination due to ill
health, contraction or discontinuance of business, cessation of employment etc.).
✓ Not opting for transfer of accumulated balance to new employer, tax is required
to be deducted @ 10% at the time of payment of accumulated balance due to the
employee by the trustees of the Employee Provident Fund Scheme, 1952 or any
person authorized under the scheme to make payment of accumulated balance
due to employees.
Tax deduction at source under this section has to be made only if the amount
of such
payment or aggregate amount of such payment of the payee is ₹50,000 or more.
Any person entitled to receive any amount on which tax is deductible under this
section has to furnish his Permanent Account Number (PAN) to the person
responsible for deducting such tax. In case of fails to do so, tax would be
deductible at the rate of 20% plus surcharge as applicable plus cess as applicable.
17. What are the clarifications made by CBDT with respect to Section 206C(1F)
relating to following issues:
(1) Whether TCS on sale of motor vehicle is applicable only to luxury car?
(2) Whether TCS is applicable on each sale or aggregate value of sale of motor
vehicle, exceeding ₹10 lakhs?
(3) Whether TCS is applicable in case of an individual?
(4) Whether TCS on sale of motor vehicle is at retail level also or only by manufacture
to distributor or dealer? (Nov. 2019)
Ans. (1) No, as per section 206C(1F), the seller shall collect tax @ 1% from the purchaser on
sale of any motor vehicle of the value exceeding ₹10 lakhs.
(2) Tax is to be collected at source @ 1% on sale consideration of a motor vehicle
exceeding ₹10 lakhs. It is applicable to each sale and not to aggregate value of sale
made during the year.
(3) The definition of Seller also includes as individual or a HUF whose Total Sales, Gross
Receipts or Turnover from the Business or Profession carried on by him exceed the
monetary limits specified under section 44AB(a)/(b) during the financial year
immediately preceding the financial year in which the goods of the nature specified in
the Table in (1) are sold. Hence it is applicable on individual.
(4) To bring high value transactions within the tax net, section 206C has been amended
to provide that the seller shall collect the tax @ 1% from the purchaser on sale of motor
vehicle of the value exceeding ₹10 lakhs. This is brought to cover all transactions of
retail sales and accordingly it will not apply on sale of motor vehicles by
manufacturers to dealers/distributors.

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18. (1) What are the provisions relating to tax deduction at source in respect of:
(a) ABC and Co. Ltd. paid ₹19,000 to one of its directors as sitting fees on 01.01.2024.
(b) Mr. X sold his House to Mr. Y on 01.02.2024 for ₹60 lacs?
(2) Who is liable to pay Advance Tax? What is the procedure to compute the Advance
Taxpayable? (May 2014)
Ans. (1) (a) TDS @ 10% (i.e., ₹1,900) has to be deducted at source u/s 194-J from sitting
fees paid to directors (W.N.1).
(b) TDS @ 1% (i.e., ₹60,000) has to be deducted at source u/s 194-IA from payment
made by Mr. Y to Mr. X. (W.N.2).
(2) Under section 208, obligation to pay advance tax arises in every case where the tax
liability is ₹10,000 or more. An assessee has to estimate his current income and
calculate tax liability as per the rates in force on that income. If any tax has been
deducted at source, the same may be reduced from his tax liability and only the
balance may be paid as advance tax.
Working notes:
(1) No exemption limit of ₹30,000 is applicable for deduction of tax on any remuneration or
fees or commission payable to a director of a company.
(2) It is assumed here that stamp duty value of the house property is equal to sales
consideration received.
19. Answer the following:
During the financial year 2023-24, the following payments/expenditure were
made/incurred by Mr. Yuvan Raja, a resident individual (whose turnover during the
year ended 31.03.2023 was ₹99 lacs.):
(1) Interest of ₹45,000 was paid to be Rehman & Co., a resident partnership firm,
without deduction of tax at source.
(2) ₹8,00,000 was paid as salary to resident individual without deduction of tax at source.
(3) Commission of ₹16,000 was paid to Mr. Vidyasagar on 02.07.2023. In none of these
transactions, tax was deducted at source.
Briefly discuss whether any disallowance arises under the provisions of section
40(a)(i)/40(a)(ia) of the Income Tax Act, 1961. (May 2011)

Ans. Disallowance under section 40(a)(i)/40(a)(ia) of the Income tax act, 1961 is attracted
where the assessee fails to deduct tax at source as is required under the Act, or having
deducted tax at source., fails to remit the same to the credit of the Central Government
within the stipulated time limit.
The assessee is a resident individual, who was not subjected to tax audit during the
immediately preceding previous year i.e., 2022-23 (as his turnover is less than ₹1 crore
in that year) and theTDS obligations have to be considered bearing this is mind.
(1) The obligation to deduct tax source from interest paid to a resident arises under
section 194A in the case of an individual, only where he was subject to tax audit under
section 44AB in the immediately preceding previous year i.e., 2022-23. From the data
given, it is clear that he was not subject to tax audit under section 44AB in the P.Y.
2022-23. Hence, disallowance under section 40(a)(ia) is not attracted in this case.
(2) The disallowance of 30% of the sums payable u/s 40(a)(ia) would be attracted in
respect of all sums on which tax is deductible under Chapter XVII -B. Section 192, which
requires deduction of tax at source from salary paid, is covered under Chapter XVII -B.
The obligation to deduct tax at source u/s 192 arises, in the hands all assessee -
employer even if the turnover amount does not exceed INR 1 crore in the immediately
preceding previous year.
Therefore, in the present case, the disallowance under section 40(a)(ia) is attracted
for failure to deduct tax at source under section 192 from salary payment. However,
only 30% of the amount of salary paid without deduction of tax at source would be
disallowed.

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(3) The obligation to deduct tax at source under section 194-H from commission paid in
excess of ₹15,000 in financial year to a resident arises in the case of an individual, only
where he was subject to tax audit under section 44AB in the immediately preceding
previous year. From the data given, it is clear that he was not subject to tax audit under
section 44AB in the P.Y. 2022-23. Hence, there is no obligation to deduct tax at source
under section 194H during the P.Y. 2023-24. Mr Raja is not required to deduct tax
u/s 194M as commission does not exceeds ₹50L akh during P.Y 2023 -24.
Therefore, disallowance under section 40(a)(ia) is not attracted in this case.
20. (1) Under section 208, obligation to pay advance tax arises in every case where the
advance tax payable is ₹10,000 or more. State exception to this rule.
(2) Mr. Subramany is engaged in the business of producing and selling toys. During
the previous year 2023-24, his turnover was ₹1.80 crore. He opted for paying tax
as per presumptive taxation scheme laid down in Section 44AD. He has no other
income during the previous year, is he liable to pay advance tax and if so, what
is the minimum amount of advance tax to be paid and due date for payment of
such advance tax assuming he has exercised the option of shifting out the default
tax regime provided under section 115BAC(1A). (Nov. 2017)
Ans. (1) Under section 208, obligation to pay advance tax arises in every case where the
advance tax payable is ₹10,000 or more. However, as per section 207(2), this
requirement will not apply:
(a) In case of a resident individual, who is of the age of 60 years or more during the
previous year; and
(b) who does not have any income chargeable to tax under the head “Profit and Gains
of Business or Profession”.
(2) Computation of advance tax liability in the hands of Mr. Subramany opting for
presumptive taxation scheme under section 44AD.
As per section 211(1)(b), an eligible assessee, opting for computation of Profits or
Gains of Business on Presumptive basis in respect of an eligible business referred to in
section 44AD, shall be required to pay advance tax of the whole amount on or before
15th March of the financial year. Thus, Mr. Subramany is required to pay advance tax
for F.Y. 2023-24 on or before 15 th March, 2024.
However, any amount paid by way of advance tax on of before 31 st March shall also be
treated as advance tax paid during that financial year on or before 15th March.
The advance tax liability is computed as follows:
Total Income being 8% of ₹1,80,00,000, since Mr. Subramany is an eligible assessee
opting or presumptive taxation scheme under section 44AD (Total income comprises
of only income under the head Profit and Gains of Business or Profession, since Mr.
Subramany is not having any other income during the previous year).
Particulars (₹)
The advance tax liability is computed as follows:
Total Income being 8% of ₹1,80,00,000, since Mr. Subramany is an
eligible assessee opting or presumptive taxation scheme under section
44AD (Total income comprises of only income under the head Profit
and Gains of Business or Profession, since Mr. Subramany is not having
any other income during the previous year)
Tax liability
Up to ₹2,50,000 Nil
₹2,50,001 to ₹5,00,000 @5% 12,500
₹5,00,001 to ₹10,00,000 @20% 1,00,000
Above ₹10,00,000 @30% 1,32,000 2,44,500
Add: Health and Education cess @4% 9,780
Total Tax Payable 2,54,280
Accordingly, Mr. Subramany is required pay ₹2,54,280 as minimum amount of
advancetax by 15th March 2024.

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Note: The presumptive rate of tax would be 8% of total turnover or gross receipts. However,
the presumptive rate of 6% of turnover or gross receipts will be applicable in respect of amount
which is received:
✓ By an account payee cheque.
✓ By an account payee bank draft.
✓ By use of electronic clearing system —
▪ Through a bank account;
▪ Or through such other prescribed electronic modes.
The question does not specify whether any part of the turnover has been received by such
modes. Accordingly, the solution has been worked out considering presumptive income @ 8%
of turnover.
It can be assumed that the whole amount of turnover is received through banking channel /
digital means i.e., by an account payee cheque/bank draft or use of ECS through a bank
during the previous year. In such a case, Mr. Subramany’s total income would be ₹10,80,000
(being 6% of ₹1,80,00,000). Tax liability would be ₹1,41,960 (₹1,36,500 (₹1,12,500 + 30% of
₹80,000) + ₹5,460 (4% of ₹1,36,500)), which has to be paid by way of advance tax on or before
15th March, 2024.
21. Examine the TDS implications u/s 194A in the cases mentioned hereunder–
(1) On 1.10.2023, Mr. Harish made a six-month fixed deposit of ₹10 lakh @ 9% p.a. with
ABC Co-operative Bank. The fixed deposit matures on 31.3.2024.
(2) On 1.6.2023, Mr. Ganesh made three nine months fixed deposits of ₹3 lakh each,
carrying interest @ 9% with Dwarka Branch, Janakpuri Branch and Rohini Branch of
XYZ Bank, a bank which has adopted CBS. The fixed deposits mature on 28.2.2024.
(3) On 1.10.2023, Mr. Rajesh started a six months recurring deposit of ₹2,00,000 per
month @ 8% p.a. with PQR Bank. The recurring deposit matures on 31.3.2024.
(ICAI SM)
Ans. (1) ABC Co-operative Bank has to deduct tax at source @ 10% on the interest of
₹45,000 (9% × ₹10 lakh × ½) under section 194A. The tax deductible at source
under section 194A from such interest is, therefore, ₹4,500.
(2) XYZ Bank has to deduct tax at source @ 10% u/s 194A, since the aggregate interest
on fixed deposit with the three branches of the bank is ₹60,750 ₹3,00,000 × 3 × 9% ×
9/12], which exceeds the threshold limit of ₹40,000.
Since XYZ Bank has adopted CBS, the aggregate interest credited/paid by all
branches has to be considered. Since the aggregate interest of ₹60,750 exceeds the
threshold limit of ₹40,000, tax has to be deducted @ 10% u/s 194A.
(3) No tax has to be deducted under section 194A by PQR Bank on the interest of
₹28,000 falling due on recurring deposit on 31.3.2024 to Mr. Rajesh, since such
interest does not exceed the threshold limit of ₹40,000.
22. ABC Ltd. makes the following payments to Mr. X, a contractor, for contract work
during the P.Y.2023-24:
₹20,000 on 1.5.2023
₹25,000 on 1.8.2023
₹28,000 on 1.12.2023
On 1.3.2024, a payment of ₹30,000 is due to Mr. X on account of a contract work.
Discuss whether ABC Ltd. is liable to deduct tax at source under section 194C
from payments made to Mr. X. (ICAI SM)
Ans. In this case, the individual contract payments made to Mr. X does not exceed ₹30,000.
However, since the aggregate amount paid to Mr. X during the P.Y. 2023 -24 exceeds
₹1,00,000 (on account of the last payment of ₹30,000, due on 1.3.2024, taking the total
from ₹73,000 to ₹1,03,000), the TDS provisions under section 194C would get attracted.
Tax has to be deducted @ 1% on the entire amount of ₹1,03,000 from the last payment of
₹30,000 and the balance of ₹28,970 (i.e., ₹30,000 – ₹1030) has to be paid to Mr. X.
23. Certain concessions are granted to transport operators in the context of cash
payments u/s 40A (3) and deduction of tax at source u/s 194-C. Elucidate.
(ICAI SM)

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Ans. Section 40A(3) provides for disallowance of expenditure incurred in respect of which
payment or aggregate of payments made to a person in a day exceeds ₹10,000, and such
payment or payments are made otherwise than by account payee cheque or account
payee bank draft or use of electronic clearing system through bank account or through
other prescribed electronic modes.
However, in case of payment made to transport operators for plying, hiring or leasing
goods carriages, the disallowance will be attracted only if the payment made to a person
in a day exceeds ₹35,000. Therefore, payment or aggregate of payments up to ₹35,000 in
a day can be made to a transport operator otherwise than by way of account payee cheque
or account payee bank draft or use of electronic system through bank account or through
other prescribed electronic modes, without attracting disallowance u/s 40A(3).
Under section 194C, tax had to be deducted in respect of payments made to contractors
at the rate of 1%, in case the payment is made to individual or Hindu Undivided Family or
at the rate of 2%, in any other case.
However, no deduction is required to be made from any sum credited or paid or likely to
be credited or paid during the previous year to the account of a contractor, during the
course of the business of plying, hiring or leasing goods carriages, if the following
conditions are fulfilled:
(1) He owns ten or less goods carriages at any time during the previous year;
(2) He is engaged in the business of plying, hiring or leasing goods carriages;
(3) He has furnished a declaration to this effect along with his PAN.
24. Examine the applicability of the provisions for tax deduction at source under
section 194DA in the following cases:
(1) Mr. X, a resident, is due to receive ₹4.50 lakhs on 31.3.2024, towards maturity
proceeds of LIC policy taken on 1.4.2021, for which the sum assured is ₹4 lakhs and
the annual premium is ₹1,25,000.
(2) Mr. Y, a resident, is due to receive ₹3.95 lakhs on 31.3.2024 on LIC policy taken
on 31.3.2012, for which the sum assured is ₹3.50 lakhs and the annual premium is
₹30,100.
(3) Mr. Z, a resident, is due to receive ₹95,000 on 1.8.2023 towards maturity proceeds of
LIC policy taken on 1.8.2017 for which the sum assured is ₹90,000 and the annual
premium was ₹10,000. (ICAI SM)
Ans. (1) Since the annual premium exceeds 10% of sum assured in respect of a policy taken
after 31.3.2012, the maturity proceeds of ₹4.50 lakhs due on 31.3.2024 are not
exempt under section 10(10D) in the hands of Mr. X. Therefore, tax is required to
be deducted @ 5% under section 194DA on the amount of income comprised
therein i.e., on ₹75,000 (₹4,50,000, being maturity proceeds - ₹3,75,000, being the
entire amount of insurance premium paid).
(2) Since the annual premium is less than 20% of sum assured in respect of a policy
taken before 1.4.2012, the sum of ₹3.95 lakhs due to Mr. Y would be exempt under
section 10(10D) in his hands. Hence, no tax is required to be deducted at source
under section 194DA on such sum payable to Mr. Y.
(3) Even though the annual premium exceeds 10% of sum assured in respect of a
policy taken after 31.3.2012, and consequently, the maturity proceeds of ₹95,000
due on 1.8.2023 would not be exempt under section 10(10D) in the hands of Mr.
Z, the tax deduction provisions under section 194DA are not attracted since
the maturity proceeds are less than ₹1 lakh.

25. Moon TV, a television channel, made payment of ₹50 lakhs to a production house
for production of programme for telecasting as per the specifications given by the
channel. The copyright of the programme is also transferred to Moon TV. Would
such payment be liable for tax deduction at source under section 194C? Discuss.
Also, examine whether the provisions of tax deduction at source under section 194C
would be attracted if the payment was made by Moon TV for acquisition of
telecasting rights of the content already produced by the production house.
(ICAI SM)

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Ans. In this case, since the programme is produced by the production house as per the
specifications given by Moon TV, a television channel, and the copyright is also transferred
to the television channel, the same falls within the scope of definition of the term ‘work’
under section 194C. Therefore, the payment of ₹50 lakhs made by Moon TV to the
production house would be subject to tax deduction at source under section 194C.
If, however, the payment was made by Moon TV for acquisition of telecasting rights of the
content already produced by the production house, there is no contract for ‘’carrying out
any work”, as required in section 194C(1). Therefore, such payment would not be
liable for tax deduction at source under section 194C.
26. Mr. X sold his house property in Bangalore as well as his rural agricultural land for
a consideration of ₹60 lakh and ₹15 lakh, respectively, to Mr. Y on 1.8.2023. He has
purchased the house property and the land in the year 2022 for ₹40 lakh and ₹10
lakh, respectively. The stamp duty value on the date of transfer, i.e., 1.8.2023, is ₹85
lakh and ₹20 lakh for the house property and rural agricultural land, respectively.
Examine the tax implications in the hands of Mr. X and Mr. Y and the TDS
implications, if any, in the hands of Mr. Y, assuming that both Mr. X and Mr. Y are
resident Indians. (ICAI SM)

Ans. (i) Tax implications in the hands of Mr. X:

As per section 50C, the stamp duty value of house property (i.e., ₹85 lakh) would
be deemed to be the full value of consideration arising on transfer of property,
since the stamp duty value exceeds 110% of the consideration received.
Therefore, ₹45 lakh (i.e., ₹85 lakh – ₹40 lakh, being the purchase price) would be
taxable as short-term capital gains in the A.Y.2024-25.
Since rural agricultural land is not a capital asset, the gains arising on sale of such
land is not taxable in the hands of Mr. X.
(ii) Tax implications in the hands of Mr. Y:
In case immovable property is received for inadequate consideration, the
difference between the stamp value and actual consideration would be taxable
under section 56(2)(x), if such difference exceeds the higher of ₹50,000 and 10%
of the consideration.
Therefore, in this case ₹25 lakh (₹85 lakh – ₹60 lakh) would be taxable in the
hands of Mr. Y under section 56(2)(x).
Since agricultural land is not a capital asset, the provisions of section 56(2)(x)
are not attracted in respect of receipt of agricultural land for inadequate
consideration, since the definition of “property” under section 56(2)(x) includes
only capital assets specified there under.
(iii) TDS implications in the hands of Mr. Y:
Since the sale consideration of house property or the stamp duty value of house
property exceeds ₹50 lakh, Mr. Y is required to deduct tax at source under section
194-IA. The tax to be deducted under section 194-IA would be ₹85,000, being 1%
of ₹85 lakhs (higher of ₹60 lakhs or ₹85 lakhs).
TDS provisions under section 194-IA are not attracted in respect of transfer of
rural agricultural land.

27. Mr. X, a salaried individual, pays rent of ₹55,000 per month to Mr. Y from June, 2023.
Is he required to deduct tax at source? If so, when is he required to deduct tax? Also,
compute the amount of tax to be deducted at source.
Would your answer change if Mr. X vacated the premises on 31st December, 2023?
Also, what would be your answer if Mr. Y does not provide his PAN to Mr. X?
(ICAI SM)
Ans. Case 1: Since Mr. X pays rent exceeding ₹50,000 per month in the F.Y. 2023-24, he is liable
to deduct tax at source @ 5% of such rent for F.Y. 2023-24 under section 194-IB. Thus,
₹27,500 [₹55,000 × 5% × 10] has to be deducted from rent payable for March, 2024.
Case 2: If Mr. X vacated the premises in December, 2023, then tax of ₹19,250 [₹55,000
× 5% × 7] has to be deducted from rent payable for December, 2023.

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In case Mr. Y does not provide his PAN to Mr. X, tax would be deductible @ 20%, instead
of 5%. In case 1 above, this would amount to ₹1,10,000 [₹55,000 × 20% × 10] but the
same has to be restricted to ₹55,000, being rent for March, 2024.
In case 2 above, this would amount to ₹77,000 [₹55,000 × 20% × 7] but the same has
to be restricted to ₹55,000, being rent for December, 2023.
28. XYZ Ltd. makes a payment of ₹28,000 to Mr. Ganesh on 2.8.2023 towards fees for
professional services and another payment of ₹25,000 to him on the same date
towards fees for technical services. Discuss whether TDS provisions under section
194J are attracted. (ICAI SM)
Ans. TDS provisions under section 194J would not get attracted, since the limit of ₹30,000 is
applicable for fees for professional services and fees for technical services, separately. It
is assumed that there is no other payment to Mr. Ganesh towards fees for professional
services and fees for technical services during the P.Y.2023-24.
29. Examine whether TDS provisions would be attracted in the following cases, and
if so, under which section.
Also, specify the rate of TDS applicable in each case. Assume that all payments
are made toresidents.
Particulars of the Nature of payment Aggregate of
payer payments made in
the F.Y. 2023-24
(1) Mr. Ganesh, an individual Contract Payment for repairof ₹5 lakhs
carrying on retail businessresidential house.
with turnover of ₹2.5 Payment of commission to ₹80,000
crores in the P.Y. 2022-23.Mr. Vallish for business
purposes.
(2) Mr. Rajesh, a wholesale Contract Payment for ₹20 lakhs in January,
trader whose turnover reconstruction of residential 2023, ₹15 lakhs in
was ₹95 lakhs in P.Y. house (made during the Feb 2024 and ₹20
2022-23. period January-March, 2024). lakhs in March 2024.
(3) Mr. Satish, a salaried Payment of brokerage for ₹51 lakhs
individual. buying a residential house in
March, 2024.
(4) Mr. Dheeraj, a pensioner. Contract payment made ₹48 lakhs
during October-November
2023 for reconstruction of
residential house.
Ans.
Particulars of Nature of Aggregate of Whether TDS provisions
the payer payment payments in the are attracted?
F.Y.2023-24
(1) Mr. Ganesh, Contract ₹5 lakhs No; TDS under section 194C
an individual Payment for is not attracted since the
Carrying on Repair of payment is for personal
retail residential. purpose. TDS under section
business 194M is not attracted as
with aggregate of contract
turnover of payment to the payee in the
₹2.5 crores P.Y.2023-24 does not exceed
In the P.Y. ₹50 lakh.
2022-23. Payment of ₹80,000 Yes, u/s 194H, @ 5% since
commission to the payment exceeds
Mr. Vallish for ₹15,000, and Mr. Ganesh’s
business turnover exceeds ₹1 crore in
purposes. the P.Y. 2022-23.

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(2) Mr. Rajesh, a Contract ₹55 lakhs Yes, under section 194M,
wholesale Paymentfor Since the aggregate of
trader whose reconstruction payments (i.e., ₹55 lakhs)
turnover was of residential exceed ₹50 lakhs. Since, his
₹95 lakhs in house. turnover does not exceed ₹1
P.Y. 2022-23. crore in the P.Y. 2022-23,
TDS provisions under
Section 194C are not
attracted in respect of
Payments made in the P.Y.
2023-24.
(3) Mr. Satish, a Payment of ₹51 lakhs Yes, under section 194M,
salaried brokerage for Since the payment of ₹51
individual. buying a lakhs made in March 2024
residential exceeds the threshold of ₹50
house. lakhs. Since Mr. Satish is a
salaried individual, the
provisions of section 194H
are not applicable in this
case.
(4) Mr. Dheeraj, Contract ₹48 lakhs TDS provisions under section
a pensioner. payment for 194C are not attracted since
reconstruction Mr. Dheeraj is a pensioner.
of residential TDS provisions under section
house. 194M are also not applicable
in this case, since the payment
of ₹48 lakhs does not exceed
the threshold of ₹50 lakhs.
30. Briefly explain the provisions relating to tax deduction at source on cash
withdrawal under section 194N of the Income-tax Act, 1961. (Nov. 2020)
Ans. (1) Section 194N, inserted with effect from 1.9.2019, requires that every person,
being:
✓ banking company to which Banking regulation Act (including any bank and
banking institution referred under section 51 of the act);
✓ a co-operative society engaged in carrying on the business of banking; or
✓ a post office;
who is responsible for paying any sum or aggregate of sums in cash exceeding ₹1
crore during the previous year to any person from one or more accounts
maintained by such recipient-person with it, to deduct tax at source @ 2% of sum
exceeding ₹1 crore.
(2) This deduction is to be made at the time of payment of such sum.
(3) If the recipient has not furnished the returns of income for all the three assessment
years relevant to the three previous years, for which the time limit of file return of
income under section 139(1) has expired, immediately preceding the previous year
in which the payment of the sum is made, the sum shall mean the amount or the
aggregate of amounts, as the case may be, in cash > ₹20 lakhs during the previous
year, and the tax shallbe deducted at the rate of —
• 2% on amount withdrawn exceeds ₹20,00,000 during the previous year but doesn’t
exceed ₹1 crore (₹3 crore in case recipient is a cooperative society).
• 5% on amount withdrawn exceeding ₹1 crore (₹3 crore in case recipient is a
cooperative society).
(4) Liability to deduct tax at source under section 194N shall not be applicable to
any payment made to –
✓ the Government;
✓ any banking company or co-operative society engaged in carrying on the business
of banking or a post-office;

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✓ any business correspondent of a banking company or co-operative society

engaged incarrying on the business of banking;
✓ any white label ATM operator of a banking company or co-operative society
engaged incarrying on the business of banking;
✓ such other person or class of persons notified by the Central Government
in consultation with the RBI.
31. Compute the amount of tax deduction at source on the following payments made by
M/s. S Ltd.during the financial year 2023-24 as per the provisions of the Income-tax
Act, 1961.
Sr. No. Date Nature of Payment
(i) 1-10-2023 Payment of ₹2,00,000 to Mr. “R” a transporter who owns 8
goods carriages throughout the previous year and furnishes a
declaration to this effect along with his PAN.
(ii) 1-11-2023 Payment of fee for technical services of ₹25,000 and Royalty of
₹20,000 to Mr. Shyam who is having PAN.
(iii) 30-06-2023 Payment of ₹25,000 to M/s X Ltd. for repair of building.
(iv) 01-01-2024 Payment of ₹2,00,000 made to Mr. A for purchase of diaries
made according to specifications of M/s S Ltd. However, no
material wassupplied for such diaries to Mr. A by M/s S Ltd. or
its associates.
(v) 01-01-2024 Payment made ₹2,30,000 to Mr. Bharat for compulsory
acquisition of his house as per law of the State Government.
(vi) 01-02-2024 Payment of commission of ₹14,000 to Mr. Y.

Ans. (i) No tax is required to be deducted at source under section 194C by M/s S Ltd.
on payment to transporter Mr. R, since he satisfies the following conditions:
(1) He owns ten or less goods carriages at any time during the previous year;
(2) He is engaged in the business of plying, hiring or leasing goods carriages;
(3) He has furnished a declaration to this effect along with his PAN.
(ii) As per section 194J, liability to deduct tax is attracted only in case the payment
made as fees for technical services and royalty, individually, exceeds ₹30,000
during the financial year. In the given case, since, the individual payments for fee of
technical services i.e., ₹25,000 and royalty ₹20,000 is less than ₹30,000 each, there
is no liability to deduct tax at source. It is assumed that no other payment towards
fees for technical services and royalty were made during the year to Mr. Shyam.
(iii) Provisions of section 194C are not attracted in this case, since the payment for
repair of building on 30.06.2023 to M/s. X Ltd. is less than the threshold limit of
₹30,000.
(iv) According to section 194C, the definition of “work” does not include the
manufacturing or supply of product according to the specification by customer in
case the material is purchased from a person other than the customer or associate
of such customer.
Therefore, there is no liability to deduct tax at source in respect of payment of
₹2,00,000 to Mr. A, since the contract is a contract for ‘sale’.
(v) As per section 194LA, any person responsible for payment to a resident, any sum
in the nature of compensation or consideration on account of compulsory
acquisition under any law, of any immovable property, is responsible for deduction
of tax at source if such payment or the aggregate amount of such payments to the
resident during the financial year exceeds ₹2,50,000.
In the given case, no liability to deduct tax at source is attracted as the payment made
does not exceed ₹2,50,000.
(vi) As per section 194H, tax is deductible at source if the amount of commission or
brokerage or the aggregate of the amounts of commission or brokerage credited or
paid during the financial year exceeds ₹15,000.
Since the commission payment made to Mr. Y does not exceed ₹15,000, the
provisions of section 194H are not attracted.

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32. Answer the following:

(i) Miss Tara, a resident individual aged 32 years, is a social media influencer. She makes
videos receiving various electronic items and posts those videos reviewing various
electronic items and posts those videos on social media. On 1 st December 2023, XYZ
Ltd., an Indian company manufacturer of electronic cars gave her a brand -new car
having fair market value of ₹6 lakhs to promote on her social media page. She used
that car for 7 months for her personal purposes, recorded a video reviewing the car
and then returned the car to company. You are required to discuss the applicable
provision in the Income–tax Act regarding the deduction of tax at source in
respect of such transaction.
(ii) Ms. Aruna is a Chief Executive Officer of a multi-national company. She hires Mr.
Suresh for supply of her housing staff (like gardener, chefs and drivers etc.) and
makes the following payments to him: ₹25,00,000 on 10 th August, 2023 and
₹30,00,000 on 22 nd November, 2023. Determine of amount of tax to be
deducted/collected at source, if any.
Would your answer be different if Ms. Aruna is business woman and her books
are not audited in immediately preceding financial year and payment to Mr.
Suresh is for business purposes.
(iii) By virtue of an agreement with Nationalized Bank, Ms ABC Pvt. Ltd., a company
engaged in catering business received ₹60,000 p.m. towards supply of food, water,
snacks, etc. during office hours to the employees of the bank. Discuss the TDS
implication of this transaction/agreement. (May 2023)
Ans. (i) As per the provision of section 194-R, Every person, who is responsible for providing
any benefit or perquisite whether convertible into money or not, arising from
business, or profession, by such resident, to deduct tax at source @ 10% of the value
or aggregate of value of such benefit or perquisite, before providing such benefit or
perquisite. No TDS is deducted if:
• In case of a resident where value or aggregate value of such benefit or perquisite
does not exceed ₹20,000 in a financial year
• In case of an individual or HUF, whose total sales, gross receipts or turnover from
business or profession does not exceed ₹1 crore in case of business or ₹50 lakhs
in case of profession, during the financial year immediately preceding the financial
year in which such benefit or perquisite, as the case may be, is provided by such
person.
In this case Miss Tara is a social media influencer who reviews the electronic item
and post a video on social media, an Indian company gave its electronic car fair
market value of ₹6 lakh to miss Tara to promote its car on social media. She used the
car for 7 months and then returned it to company so no TDS shall be applicable under
section 194-R because the influencer returns the product to the company. If the
product is returned to the manufacturing company after using it then it will not be
treated as perquisite. If it retained then it is a taxable perquisite
In this case as the product is returned by her so this doesn’t amount to perquisite in
the course of business and profession so TDS u/s 194-R is not to be deductedby
company.
(ii) In this case, Ms Aruna would not deduct the TDS under section 194C because the
payment made to the Mr. Suresh (a contractor for supply of labour) for personal
purposes & also she is an individual not having turnover of her business more than
₹1 crore or gross receipt from profession more than ₹50 lakh during the immediately
preceding previous year. Therefore, TDS will be deducted under section 194-M
provided the amount exceeds ₹50 lakh. Here two times payment is made by Ms Aruna
in a P.Y. 2023-24. ₹25,00,000 on 10th august and 30,00,000 on 22nd November 2023
since the total payment made to contractor is ₹55,00,000 therefore TDS @ 5% is
deducted of ₹55,00,000, i.e., ₹2,75,000 is deducted as TDS under section 194-M.
If she is business women and she made a payment to contractor, i.e., Mr. Suresh for
the supply of housing staff but her books are not audited in the immediately

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preceding year therefore it can be inferred that her business had a turnover of less
than ₹1 crore in the immediately preceding previous year in that case still the answer
would remain same i.e., TDS would be deducted under section 194-M @ of 5%, i.e.,
total amount of TDS is ₹2,75,000.
(iii) In this case, Ms ABC Pvt. Ltd. engaged in a catering business received ₹60,000 p.m. in
respect of supply of food, water snacks to the employee of Nationalised Bank. Since
catering business comes under the definition of “Work” and it is assumed here that
the turnover of Ms. ABC Pvt. Ltd. is more than ₹1 crore in the immediately preceding
previous year i.e., F.Y. 2022-23 in addition to that here the payment made is more
than ₹30,000 p.m. is made to Ms. AMC Pvt. Ltd. therefore TDS @ 2% (since it is a
company) of ₹7,20,000 = ₹14,400 is to be deducted by Nationalised bank).
33. (a) State in brief the applicability of provisions of tax deduction at source, the rate
and amount of tax deduction in the following cases for the financial year 2023 -
24 under Income-tax Act, 1961. Assume that all payments are made to residents:
(i) Mr. Mahesh has paid ₹6,00,000 on 15.10.2023 to M/s Fresh Cold Storage Pvt. Ltd.
for preservation of fruits and vegetables. He is engaged in the wholesale business
of fruits & vegetable in India having turnover of ₹3 Crores during the previous
year 2022-23.
(ii) Mr. Ramu, a salaried individual, has paid rent of ₹60,000 per month to Mr. Shiv
Kumar from 1 st July, 2023 to 31 st March, 2024. Mr. Shiv Kumar has not furnished
his Permanent Account Number.
(b) Examine the following transactions with reference to applicability of the
provision of tax collected at source and the rate and amount of the TCS for the
Assessment year 2024-25:
(i) Mr. Kalpit bought an overseas tour programme package for Singapore for himself
and his family of ₹5 lakhs on 01-11-2023 from an agent who is engaged in
organising foreign tours in course of his business. He made the payment by an
account payee cheque and provided the permanent account number to the seller.
Assuming Kalpit is not liable to deduct tax at source under any other provisions of
the Act.
(ii) Mr. Anu doing business of textile as a proprietor. His turnover in the business is
₹11 crores in the previous year 2022-23. He received payment against sale of
textile goods from Mr. Ram of ₹75 lakhs against the sales made to him in the
previous year and preceding previous years. (Assuming all the sales are domestic
sales and Mr. Ram is neither liable to deduct tax on the purchase from Mr. Anu nor
he deducted any tax at source). (Dec. 2021)
Ans. (a)
(i) The arrangement between Mr. Mahesh, the customer and M/s. Fresh Cold Storage
Pvt. Ltd., the cold storage owner, is basically contractual in nature and main object
of the cold storage is to preserve perishable goods by mechanical process and
storage of such goods is only incidental. Hence, the provisions of section 194C will
be applicable to the amount of ₹6 lakh paid by Mr. Mahesh to the cold storage
company.
Accordingly, tax has to be deducted @ 2% on ₹6 lakh.
TDS u/s 194C = 2% × ₹6 lakh = ₹12,000
(ii) Mr. Ramu, being a salaried individual, has to deduct tax at source @ 5% u/s 194-
IB on the annual rent paid by him from the last month’s rent (rent of March, 2024),
since the rent paid by him exceeds ₹50,000 p.m.
Since his landlord Mr. Shiv Kumar has not furnished his PAN to Mr. Ramu, tax has
to be deducted @ 20% instead of 5%. However, the same cannot exceed ₹60,000,
being rent for March, 2024.
TDS u/s 194-IB = ₹5,40,000 (₹60,000 × 9) × 20% = ₹1,08,000, but restricted to
₹60,000, being rent for March, 2024.
(b)
(i) Since Mr. Kalpit purchased the overseas tour program package after 1.10.2023 and

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the amount of the tour program package is under the threshold limit of ₹7 lakhs,
the Tax @ 5% is required to be collected u/s 206C(1G) by the seller of an overseas
tour program package, even if payment is made by account payee cheque.
Accordingly, tax has to be collected @ 5% on ₹5 lakh.
TCS = 5% × ₹5 lakh = ₹25,000
Note:
The rate of TCS @5% without any threshold limit is applicable on the overseas tour
program package if it is bought before 1.10.2023. On the other hand, For overseas tour
packages purchased after 1.10.2023, a 5% TCS rate is applicable if the package value is
up to ₹7 lakhs and TCS @20% is applicable if the package value exceeds ₹7 lakhs.
(ii) Mr. Anu is required to collect tax @ 0.1% u/s 206C(1H) from Mr. Ram since his
turnover in the P.Y.2022-23 exceeds ₹10 crores, and the sales receipts from Mr.
Ram in the P.Y.2023-24 exceeds ₹50 lakhs. Tax has to be collected by Mr. Anu on
₹25 lakhs, being the amount exceeding ₹50 lakhs, at the time of receipt. Since
receipt is in the P.Y.2023-24, TCS provisions are attracted even though part of the
sales may relate to the preceding previous years.
TCS = 0.1% × ₹25 lakhs = ₹2,500.
34. Examine & explain the TDS implications in the following cases along with reasons
thereof, assuming that the deductees are residents and having a PAN which they
have duly furnished to the respective deductors.
(1) Mr. Tandon received a sum of ₹1,75,000 as pre-mature withdrawal from Employees
Provident Fund Scheme before continuous service of 5 years on account of
termination of employment due to ill-health.
(2) A sum of ₹42,000 has been credited as interest on recurring deposit by a banking
company to the account of Mr. Hassan (aged 63 years).
(3) Ms. Kaul won a lucky draw prize of ₹21,000. The lucky draw was organized by
M/s. Maximus Retail Ltd. for its customer.
(4) Finance Bank Ltd. sanctioned and disbursed a loan of ₹10 crores to Borrower Ltd. on
31.03.2024. Borrower Ltd. paid a sum of ₹1,00,000 as service fee to Finance Bank Ltd.
for processing the loan application.
(5) Mr. Ashok, working in a private company, is on deputation for 3 months (from
December, 2023 to February, 2024) at Hyderabad where he pays a monthly house
rent of ₹52,000 for those three months, totaling to ₹1,56,000. Rent is paid by him on
the first day of the relevant month. (Nov. 2019)
Ans. (1) According to Rule Number 9 of Schedule IV and Section 111 of the Income Tax Act,
the rules of unrecognized provident fund would be applicable in case of withdrawal
before the completion of five years. All the four components of EPF will be taxable. The
amount of tax liability would have to be recomputed for each of the financial years at
the tax rates that were applicable to the withdrawal in those respective years. There
are certain cases when withdrawal before five years does not become taxable.
These cases are as follows:
(a) If terminated due to employee’s ill health.
(b) Due to discontinuous of the employer’s business.
(c) Or any other reason beyond the control of the employee.
In the present case, Mr. Tandon’s termination is due to ill health. Therefore,
withdrawal is not taxable and hence no TDS implication for the same.
(2) As per the section 194A, no tax is required to be deducted at source in the case of
senior citizens where the amount of interest or the aggregate of the amount of interest
credited or paid during the financial year by a banking company, Co-operative Society
engaged in banking business or post office does not exceed ₹50,000. In the given case,
since Mr. Hasan aged 63 years is a senior citizen receiving interest on recurring
deposit of ₹42,000 below the specified limit hence no TDS is required to be made.
(3) According to the provisions of section 194B, every person responsible for paying to
any person, whether resident or non-resident, any income by way of winnings from
lottery or crossword puzzle or card game and other game of any sort, is required to

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deduct income tax therefrom at the rate of 30% if the amount of payment exceeds
₹10,000. Here Ms. Kaul won a lucky draw prize of ₹21,000, TDS is required to be made
on entire ₹21,000 @ 30% i.e., ₹6,300
(4) According to section 2(28A), interest means interest payable in any manner in
respect of any moneys borrowed or debt incurred (including a deposit, claim or other
similar right or obligation) and includes any service fee or other charge in respect of
the moneys borrowed or debt incurred or in respect of any credit facility which has
not been utilized. From the above definition, it is clear that processing fees is included
in the definition of interest u/s 2(28A). No tax is deductible at source under section
194A, since the service fee are paid to a banking company, i.e., Finance Bank Ltd.
(5) Mr. Ashok, a salaried individual, is liable to deduct tax at source @ 5% under section
194IB on ₹1,56,000 (being rent for 3 months from December 2023 to February 2024)
from the rent of ₹52,000 payable on 1st February, 2024, since the monthly rent exceeds
₹50,000.
35. State Government of Madhya Pradesh grants a lease of coal mine to ABC Co. Ltd., an
Indian company, on 1.10.2023 and charged ₹8 crores for the lease. ABC Co. Ltd. sold
coal for ₹2 crores to Mahapower Ltd., another Indian company, during the previous
year 2023-24. Mahapower Ltd. furnishes a declaration to ABC Co. Ltd. that the coal
is to be utilized for the purpose of generation of power. The turnover of ABC Co. Ltd.
and Mahapower Ltd. for the F.Y. 2022-23 amounted to ₹11 crores and ₹12 crores,
respectively. What is the amount of tax required to be deducted or collected at
source in respect of the above transactions, if any? (RTP Nov. 2022)

Ans. Section 206C(1C) provides for collection of tax @2% by every person who grants a lease
in any mine or a quarry to another person for the use of such mine or quarry for the
purposes of business. Accordingly, State Government of Madhya Pradesh is required to
collect tax at source of ₹16,00,000, being 2% on ₹8 crores, being the charges for lease of
coal mine.
Under section 206C(1), seller of certain goods, inter alia, coal is required to collect tax
from the buyers @1%. However, no collection would be made under section 206C(1), in
case of a resident buyer, if such buyer furnishes to the person responsible for collecting
tax, a declaration to the effect that goods are to be utilized for the purpose of generation
of power.
In the present case, ABC Co. Ltd. is not required to collect tax at source u/s 206C(1) in
respect of coal sold to Mahapower Ltd. since Mahapower Ltd. has furnished a declaration
to ABC Co. Ltd. that the coal is to be utilized for the purpose of generation of power.
As per section 206C(1H), tax is to be collected in respect of sale of goods other than the
goods which have been covered under section 206C(1). In case of goods which are
covered under section 206C(1) but exempted under section 206C(1A), tax will not be
collectible under either section 206C(1) or section 206C(1H).
Section 194Q requires any person, being a buyer who is responsible for paying any sum
to resident for purchase of any goods of the value exceeding ₹50 lakhs in any previous
year, to deduct tax @ 0.1% of such sum exceeding ₹50 lakhs. The provisions of section
194Q do not apply in respect to those transactions where tax is collectible under section
206C [except under section 206C(1H).
Buyer means a person whose turnover from the business carried on by him exceeds ₹10
crores during the financial year preceding the financial year in which goods are purchased.
In this case, since Mahapower Ltd.’s turnover for P.Y. 2022-23 exceeds ₹10 crores, it is a
buyer as per section 194Q. Since, tax is not required to be collected on sale of coal to
Mahapower Ltd., the provisions of section 194Q would apply and Mahapower Ltd. is
required to deduct tax of ₹15,000 under section 194Q, being 0.1% of ₹1.5 crores, being
the sum exceeding ₹50 lakhs.
36. Briefly discuss the provisions of tax deducted at source and compute the amount of
TDS under the Income-tax Act in respect of the following payments:

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(i) ₹51,000 paid to Mr. A, a resident individual as interest income on compensation

awarded by Motor Accidents Claims Tribunal by a transport company.
(ii) Ms. Asha deposited ₹35,00,000 @10% p.a. on 1.7.2023 with ABC Co-operative bank
limited.
(iii) Mr. Naresh won ₹15,00,000 in Kon Banega Crorepati.
(iv) Mr. Avinash deposited ₹2,00,000 @ 11% p.a. on 1.5.2023 for half year with Hike
Investment LLP. (MTP Series I)

Ans. (i) Tax has to be deducted at source by the transport company @ 10% under section
194A on payment of ₹51,000 made to Mr. A, a resident individual, as interest income
on compensation awarded by Motor Accidents Claims Tribunal by a transport
company, since the interest paid exceeds the specified threshold of ₹50,000.
Tax to be deducted = ₹51,000 × 10% = ₹5,100
(ii) Tax has to be deducted at source by the ABC Co-operative Bank @ 10% under section
194A on interest of ₹2,62,500 [₹35,00,000 × 10% p.a. × 9/12] on deposits made by
Ms. Asha, since the same exceeds the specified threshold of ₹40,000.
Tax to be deducted = ₹2,62,500 × 10% = ₹26,250
(iii) Tax has to be deducted @ 30% under section 194B on payment of ₹15,00,000 made
to Mr. Naresh for winnings in Kon Banega Crorepati.
Tax to be deducted = ₹15,00,000 × 30% = ₹4,50,000
(iv) Tax has to be deducted at source by Hike Investment LLP @ 10% under section 194A
on interest of ₹11,000 [₹2,00,000 × 11% × 6/12] on deposits made by Mr. Avinash,
since the same exceeds the specified threshold of ₹5,000.
Tax to be deducted = ₹11,000 × 10% = ₹1,100
37. Examine TDS/TCS implications in case of following transactions, briefly explaining
provisions involved assuming that all the payees are residents; state the rate and
amount to be deducted, in case TDS/TCS is required to be deducted/collected.
(1) On 1.5.2023, Mr. Brijesh made three fixed deposits of nine months each of ₹3 lakh
each, carrying interest @ 9% with Mumbai Branch, Delhi Branch and Chandigarh
Branch of CBZ Bank, a bank which had adopted CBS. These Fixed Deposits mature on
31.01.2024.
(2) Mr. Marwah, aged 80 years, holds 8% Saving (taxable) Bonds, 2003 of ₹2,00,000 and
7.75% saving (taxable) Bonds 2018 of ₹3,00,000. He received yearly interest on these
bonds on 28.02.2024.
(3) M/s AG Pvt. Ltd. took a loan of ₹50,00,000 from Mr. Haridas. It credited interest of
₹79,000 payable to Mr. Haridas during the previous year 2023-24. M/s AG Pvt. Ltd. is
not liable for tax audit during previous years 2021-22 and 2022-23.
(4) Mr. Prabhakar is due to receive ₹6 lakh on 31.3.2024 towards maturity proceeds of
LIC policy taken on 1.4.2020, for which the sum assured is ₹5 lakhs and the annual
premium is ₹1,40,000. (Jan. 2021)
Ans. (1) CBZ Bank has to deduct tax at source @ 10% under section 194A, since the aggregate
interest on fixed deposit with the three branches of the bank is ₹60,750 [₹3,00,000
× 9% × 3 × 9/12], which exceeds the threshold limit of ₹40,000. Since CBZ Bank has
adopted core banking solution (CBS), the aggregate interest credited/paid by all
branches has to be considered.
Tax to be deducted at source = ₹60,750 × 10% = ₹6,075
(2) Tax @ 10% under section 193 is to be deducted on interest of 8% Saving (taxable)
Bonds, 2003, and 7.75% Saving (Taxable) Bonds 2018, since the total Value of Interest
on bonds held by Mr. Marwah is ₹39,250 exceed the limit of ₹10,000.
Interest on 8% Saving (Taxable) Bonds, 2003 = ₹2,00,000 × 8 % = ₹16,000
Interest on 7.75% Saving (Taxable) Bonds, 2018 = ₹3,00,000 × 7.75% = ₹23,250
Tax to be deducted at source = (₹16,000 + ₹23,250) × 10% = ₹39,250 × 10% = ₹3,925
(3) M/s AG Pvt. Ltd. has to deduct tax at source @ 10% under section 194A, since the
interest on loan payable is ₹79,000 which exceeds the threshold limit of ₹5,000. M/s
AG Pvt. Ltd., being a company, has to deduct tax at source irrespective of the fact that

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it is not liable to tax audit during P.Y. 2021-22 and 2022-23.

Tax to be deducted at source = ₹79,000 × 10% = ₹7,900
(4) Since the annual premium exceeds 10% of sum assured in respect of a policy taken
after 31.3.2012, the maturity proceeds of ₹6 lakhs due on 31.3.2024 are not exempt
under section 10(10D) in the hands of Mr. Prabhakar.
Therefore, tax is required to be deducted @5% under section 194DA on the amount
of income comprised therein i.e., on ₹40,000 [₹6,00,000, being maturity proceeds -
₹5,60,000, being the amount of insurance premium paid.
Tax to be deducted at source = ₹40,000 × 5% = ₹2,000
38. Examine the applicability and the amount of TDS to be deducted in the following
cases for F.Y. 2023-24:
(i) S & Co. Ltd. paid ₹25,000 to one of its directors as sitting fees on 02-02-2024.
(ii) ₹2,20,000 paid to Mr. Mohan, a resident individual, on 28-02-2024 by the State of
Haryana on compulsory acquisition of his urban land.
(iii) Mr. Purushotham, a resident Indian, dealing in hardware goods has a turnover of ₹12
crores in the previous year 2022-23. He purchased goods from Mr. Aggarwal a
resident seller, regularly in the course of his business.
The aggregate purchase made during the previous year 2023-24 on various
dates is 80 lakhs which are as under:
10-06-2023 ₹25,00,000
20-08-2023 ₹27,00,000
12-10-2023 ₹28,00,000
He credited Mr. Aggarwal’s account in the books of accounts on the same date and
made the payment on the 28-02-2024 ₹80 lakh. Mr. Aggarwal’s turnover for the
financial year 2022-23 is ₹20 crores. (Nov. 2022)

Ans. (i) Tax @ 10% has to be deducted by S and Co. Ltd. under section 194J on directors
sitting fees of ₹25,000. The threshold limit of ₹30,000 is not applicable in respect of
sum paid to a director.
The amount of tax to be deducted at source = ₹25,000 × 10% = ₹2,500
(ii) There is no liability to deduct tax at source under section 194LA, since the payment
to Mr. Mohan, a resident, by State of Haryana on compulsory acquisition of his urban
land does not exceed ₹2,50,000.
(iii) Since Mr. Purushottam’s turnover for F.Y. 2022-23 exceeds ₹10 crores, and value of
goods purchased from Mr. Agarwal, a resident seller, exceeds ₹50 lakhs in the
P.Y.2023-24, he is liable to deduct tax @ 0.1% on ₹30 lakhs (being the sum exceeding
₹50 lakhs), at the time of credit or payment, whichever is earlier.
On 10.6.23 = Nil (No tax is to be deducted u/s 194Q on the purchases made on
10.6.2023 since the purchases made till that date has not exceeded the threshold of
₹50 lakhs and TDS provisions u/s 194Q was effective from 1.7.2023)
On 20.8.2023 = 0.1% of ₹2 lakhs (amount exceeding ₹50 lakhs) = ₹200
On 12.10.2023 = 0.1% of ₹28 lakhs = ₹2,800
39. Mr. A, the employer, pays gross salary including allowances and monetary
perquisites amounting to ₹7,30,000 to his General Manager. Besides, the employer
provides non-monetary perquisites to him whose value is estimated at ₹1,20,000.
The General Manager is exercising the option to shift out of the default tax regime
and pay tax under the optional tax regime as per the normal provisions of the Act.
What is the tax implication in the hands of Mr. A, the employer and General Manager,
the employee? (ICAI SM)
Ans. Particulars (₹)
Gross salary, allowances and monetary perquisites 7,30,000
Add: Non-Monetary perquisites 1,20,000
8,50,000
Less: Standard deduction under section 16(ia): (50,000)

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8,00,000
Tax Liability 75,400
Average rate of tax (₹75,400/₹8,00,000 × 100) 9.425%
Mr. A can deduct ₹75,400 at source from the salary of the General Manager at the time of
payment. Alternatively, Mr. A can pay tax on non-monetary perquisites as under:
Tax on non-monetary perquisites = 9.425% of ₹1,20,000 = ₹11,310
Balance to be deducted from salary = ₹75,400 – ₹11,310 = ₹64,090
If Mr. A pays tax of ₹11,310 on non-monetary perquisites, the same is not a deductible
expenditure as per section 40(a). The amount of tax paid towards non-monetary
perquisite by the employer, however, is not chargeable to tax in the hands of the employee
as per section 10(10CC).
40. XYZ Ltd. pays ₹50,000 per month as rent to the Mr. Kishore for a building in which
one of its branches is situated. Discuss whether TDS provisions under section 194-I
are attracted. (ICAI SM)
Ans. Section 194-I, which governs the deduction of tax at source on payment of rent, exceeding
₹2,40,000 p.a., is applicable to all taxable entities except individuals and HUFs, whose total
sales, gross receipts or turnover from the business or profession carried on by him d oes
not exceed ₹1 crore in case of business and ₹50 lakhs in case of profession during the
financial year immediately preceding financial year in which such rent was credited or
paid, is liable to deduct tax at source.
Since the rent paid by XYZ Ltd. to Mr. Kishore exceeds ₹2,40,000, the provisions of section
194-I for deduction of tax at source attracted.
The rate applicable for deduction at source under section 194-I on rent paid is 10%,
assuming that Mr. Kishore had furnished his PAN to XYZ Ltd.
Therefore, the amount of tax to be deducted at source = ₹6,00,000 × 10% = ₹60,000
41. Mr. Sharma, a resident Indian aged 77 years, gets pension of ₹52,000 per month from
the UP-State Government. The same is credited to his Savings Account in SBI,
Lucknow Branch. In addition, he gets interest @ 8% p.a. on fixed deposit of ₹20 lakh
with the said bank. Out of the deposit of ₹20 lakh, ₹2 lakh represents five-year term
deposit made by him on 1.4.2023. Interest on savings bank credited to his SBI savings
account for the P.Y. 2023-24 is ₹9,500.
(1) From the above facts, compute the total income and tax liability of Mr. Sharma
for the A.Y. 2024-25, assuming that he has exercised the option of shifting out of the
default tax regime provided under section 115BAC(1A).
(2) What would be the amount of tax deductible at source by SBI, assuming that the same
is a specified bank? Is Mr. Sharma required to file his return of income for A.Y.2024 -25,
if tax deductible at source has been fully deducted? Examine.
(3) Is Mr. Sharma required to file his return of income for A.Y. 2024-25, if the fixed deposit
of ₹20 lakh was with Canara Bank instead of SBI, other facts remaining the same?
(ICAI SM)
Ans. (1) Computation of total income of Mr. Sharma for A.Y.2024-25:
Particulars (₹) (₹)
(I) Salaries
Pension (₹52,000 × 12) 6,24,000
Less: Standard deduction u/s 16(ia) (50,000)
5,74,000
(II) Income from Other Sources
Interest on fixed deposit (₹20 lakh × 8%) 1,60,000
Interest on savings account 9,500 1,69,500
Gross Total Income 7,43,500
Less: Deductions under Chapter VI-A:
Under Section 80C

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Five year term deposit (₹2 lakh, restricted to 1,50,000

₹1.5 lakh)
Under section 80TTB
Interest on fixed deposit and savings account,
restricted to ₹50,000, since Mr. Sharma is a
resident Indian of the age of 77 years. 50,000 (2,00,000)
Total Income 5,43,500

Computation of tax liability for A.Y.2024-25

Particulars (₹)
Tax payable [₹43,500 × 20% + ₹10,000] 18,700
Add: Health and Education Cess @ 4% 748
Tax liability 19,448
Tax liability (rounded off) 19,450

(2) SBI, being a specified bank, is required to deduct tax at source u/s 194P and remit the
same to the Central Government. In such a case, Mr. Sharma would not be required to
file his return of income u/s 139.
(3) If the fixed deposit of ₹20 lakh is with a bank other than SBI, which is the bank where
his pension is credited, then, Mr. Sharma would not qualify as a “specified senior
citizen”. In this case, Mr. Sharma would have to file his return of income u/s 139, since
his total income (without giving effect to deduction under Chapter VI -A) exceeds the
basic exemption limit.
42. Mr. Gupta, a resident Indian, is in retail business and his turnover for F.Y. 2022 -23 was
₹12 crores. He regularly purchases goods from another resident, Mr. Agarwal, a
wholesaler, and the aggregate payments during the F.Y. 2023 -24 was ₹95 lakh (₹20 lakh
on 1.6.2023, ₹25 lakh on 12.8.2023, ₹22 lakh on 23.11.2023 and ₹28 lakh on 25.3.2024).
Assume that the said amounts were credited to Mr. Agarwal’s account in the books of Mr.
Gupta on the same date. Mr. Agarwal’s turnover for F.Y. 2022-23 was ₹15 crores.
(i) Based on the above facts, examine the TDS/TCS implications, if any, under the
Income-tax Act, 1961.
(ii) Would your answer be different if Mr. Gupta’s turnover for F.Y. 2022 -23 was ₹8
crores, all other facts remaining the same?
(iii) Would your answer to (i) and (ii) change, if PAN has not been furnished by the buyer
or seller, as required? (ICAI SM)
Ans (i) Since Mr. Gupta’s turnover for F.Y. 2022-23 exceeds ₹10 crores, and payments made
by him to Mr. Agarwal, a resident seller exceed ₹50 lakhs in the P.Y. 2023 -24, he is
liable to deduct tax @ 0.1% of ₹45 lakhs (being the sum exceeding ₹50 lakhs) in the
following manner –
No tax is to be deducted u/s 194Q on the payments made on 1.6.2023 and 12.8.2023,
since the aggregate payments till that date i.e., 45 lakhs, has not exceeded the
threshold of ₹50 lakhs.
Tax of ₹1,700 (i.e., 0.1% of ₹17 lakhs) has to be deducted u/s 194Q from the
payment/ credit of ₹22 lakh on 23.11.2023 [₹22 lakh – ₹5 lakhs, being the balance
unexhausted threshold limit].
Tax of ₹2,800 (i.e., 0.1% of ₹28 lakhs) has to be deducted u/s 194Q from the
payment/ credit of ₹28 lakhs on 25.3.2024.
Note: In this case, since both section 194Q and 206C(1H) applies, tax has to be deducted
u/s 194Q.
(ii) If Mr. Gupta’s turnover for the F.Y.2022-23 was only ₹8 crores, TDS provisions under
section 194Q would not be attracted. However, TCS provisions under section
206C(1H) would be attracted in the hands of Mr. Agarwal, since his turnover

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exceeds ₹10 crores in the F.Y.2022-23 and his receipts from Mr. Gupta exceed ₹50
lakhs.
No tax is to be collected u/s 206C(1H) on 1.6.2023 and 12.8.2023, since the
aggregate receipts till that date, i.e., 45 lakhs, has not exceeded the threshold of ₹50
lakhs.
Tax of ₹1,700 (i.e., 0.1% of ₹17 lakhs) has to be collected u/s 206C(1H) on
23.11.2023 (₹22 lakh – ₹5 lakhs, being the balance unexhausted threshold limit).
Tax of ₹2,800 (i.e., 0.1% of ₹28 lakhs) has to be collected u/s 206C(1H) on 25.3.2024.
(iii) In case (i), if PAN is not furnished by Mr. Agarwal to Mr. Gupta, then, Mr. Gupta has
to deduct tax @ 5%, instead of 0.1%. Accordingly, tax of ₹85,000 (i.e., 5% of ₹17
lakhs) and ₹1,40,000 (5% of ₹28 lakhs) has to be deducted by Mr. Gupta u/s 194Q
on 23.11.2023 and 25.3.2024, respectively.
In case (ii), if PAN is not furnished by Mr. Gupta to Mr. Agarwal, then, Mr. Agarwal
has to collect tax @ 1% instead of 0.1%. Accordingly, tax of ₹17,000 (i.e., 1% of ₹17
lakhs) and ₹28,000 (1% of ₹28 lakhs) has to be collected by Mr. Agarwal u/s
206C(1H) on 23.11.2023 and 25.3.2024, respectively.
43. (a) Discuss the liability of tax deduction at source under the Income-tax Act, 1961
in respect of the following cases with reference to A.Y. 2024- 25. (State
applicable provision and give brief reasons for your answer, wherever
applicable):
(i) XYZ, a resident partnership firm is in retail business buying fabric material
regularly from ABC, a resident proprietorship firm.
Details of transactions during P.Y. 2023-24 are as given:
Particulars Date of Payment Amt. (₹)
Advance payment 1.4.2023 40,00,000
Payment for supplies 2.7.2023 20,00,000
Advance payment 4.8.2023 12,00,000

XYZ achieved gross turnover of ₹12 crore from the business during the financial year
2022-23 and the gross business turnover for financial year 2023-24 turns out to be₹9
crores. Gross business turnover of ABC for the financial year 2022 -23 was ₹6 crores.
Will your answer be same, if the gross turnover of XVZ during the financial year 2022-
23 includes ₹4 crore towards supply of material for charitable purposes?
(ii) MJ, a part time director of ABZ Pvt. Ltd. was paid an amount of ₹2,49,000 as
commission on sales (which was not in the nature of Salary) for the period
01.04.2023 to 31.03.2024.
(iii) Mr. Kumar, a resident senior citizen, aged 86 years, is a retired State Govt.
Employee. He gets pension of ₹72,000 p.m. He has his saving account with Bank
of Baroda, a bank notified by the Central Govt. u/s 194P, has received the
interest on saving account ₹15,000 during the P.Y. 2023-24. His pension is also
credited in this account. In the same bank he has deposited ₹10 Lakh in a Term
Deposit @ 7% simple interest on 01.07.2023. He has no other income. He has
not opted for section 115BAC. Discuss requirement of filing of income tax
return also.
(iv) State Bank of India pays ₹70,000 per month and ₹60,000 per month as rent
to the Central Government and Mr. Kunal, respectively for building in which
its branches are situated.
(b) Explain the provisions of tax collection at source for overseas remittance by an
authorized dealer. Also, enumerate the rate of tax to be collected and the amount on
which no tax is to be collected. [NOV. 2023]
Ans. (a)
(i) Tax is required to be deducted at source under section 194Q by XYZ, being a buyer,
since its turnover in the immediately preceding financial year i.e., F.Y. 2022-23
exceeds ₹10 crores and it has purchased goods exceeding ₹50 lakhs in the F.Y.

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2023-24. TDS u/s 194Q would be 0.1% of the sum exceeding ₹50 lakhs and the
same has to be deducted at the time of payment or credit of such sum to the account
of the resident seller, whichever is earlier.
Therefore, in the present case, XYZ, a resident partnership, is required to deduct tax
at source – On 2.7.2023 of ₹1,000, being @ 0.1% on ₹10 lakhs exceeding ₹50 lakhs
(₹40,00,000 on 1.4.2023 + ₹20,00,000 on 2.7.2023).
On 4.8.2023 of ₹1,200, being @ 0.1% ₹12 lakhs.
No, in such case, the amount of turnover of XYZ would not exceed ₹10 crores in F.Y.
2022-23, since ₹4 crores towards supply of material for charitable purposes, being
a non-business activity, would not be considered for the purpose of turnover.
Accordingly, XYZ is not required to deduct tax at source under section 194Q.
(ii) ABZ Pvt. Ltd. is required to deduct tax at source u/s 194J @ 10% on ₹2,49,000 paid
to MJ, a part-time director, as commission, which is not in the nature of salary on
which tax is deductible under section 192. Therefore, ₹24,900 (₹2,49,000 × 10%)
is required to be deducted at source.
(iii) Bank of Baroda, being a specified bank notified by the Central Government u/s
194P is required to deduct tax at source at the rates in force on the total income of
Mr. Kumar, being a specified senior citizen (75 years or more) computed as follows:
Computation of total income of Mr. Kumar not opting for Section 115BAC & tax
liability for A.Y. 2024-25
Particulars (₹) (₹)
I. Salaries
Pension (₹72,000 × 12) 8,64,000
Less: Standard deduction u/s 16(ia) (50,000) 8,14,000
II. Income from Other Sources
Interest on savings account 15,000
Interest on fixed deposit (₹10 lakh × 7% × 9/12) 52,500 67,500
Gross total income 8,81,500
Less: Deductions under Chapter VI-A
Under section 80TTB
Interest on fixed deposit and savings account,
restricted to ₹50,000, since Mr. Kumar is a
resident Indian of the age of 60 years or more (50,000)
Total Income 8,31,500
Computation of tax liability for A.Y. 2024-25
Tax on ₹8,31,500 [20% on income exceeding 66,300
₹5 lakhs, being the basic exemption limit, since
Mr. Kumar is of the age of 80 years or more]
Add: Health and Education Cess @ 4% 2,652
Tax liability 68,952
Tax liability (Rounded off) 68,950
Accordingly, Bank of Baroda is required to deduct tax at source of ₹68,950 for the
P.Y. 2023 -24. In such case, Mr. Kumar is not required to file his return of income
for A.Y. 2024-25.
Note: The question mentions that Mr. Kumar has deposited ₹10 lakhs in a Term Deposit
in the same bank but does not specify the duration of the term deposit. The above
solution is given assuming that term deposit is not for 5 years. However, alternate
assumption that such term deposit is for 5 years is also possible. In such a case, Mr.
Kumar would be eligible for deduction under section 80C of ₹1,50,000 for deposit in 5
years term deposit. In that case, deduction under Chapter VI-A would be ₹2,00,000,
total income would be ₹6,81,500 and tax liability (rounded off) would be ₹37,750
(iv) Section 194-I, which governs the deduction of tax at source @ 10% on payment of
rent, exceeding ₹2,40,000 p.a., is applicable to all persons except individuals and

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HUF, whose turnover/gross receipts do not exceed ₹1 crore in case of business or

₹50 lakhs in case of profession during the financial year immediately preceding the
financial year in which such rent is credited or paid. In the present case, State Bank
of India has to deduct at source @ 10% on rental payment to Mr. Kunal.
Tax deducted at source = ₹72,000 (₹7,20,000 × 10%)
Section 196, however, provides exemption in respect of payments made to
Government from application of the provisions of tax deduction at source.
Therefore, no tax is required to be deducted at source by State Bank of India from
rental payments to the Government.
(b) An authorized dealer, who receives amount, under the Liberalized Remittance
Scheme of the RBI, for overseas remittance from a buyer, being a person remitting
such amount out of India is required to collect tax at source at the time of debiting
the amount or at the time of receipt of such amount, whichever is earlier.
Rate of TCS in case of collection by an authorized dealer:
S. No. Purpose of remittance Rate of TCS
Before On or after
1.10.2023 1.10.2023
(i) Remittances for the purpose of No TCS upto ₹7 lakhs
education [other than (ii) below] or 5% of the amount or aggregate of
medical treatment; amount in excess of ₹7 lakh
(ii) Remittances out of loan obtained from No TCS upto ₹7 lakhs
any financial institution as referred 0.5% of the amount or aggregate of
under section 80E, for the purpose of amounts in excess of ₹7 lakh
pursuing any education
(iii) Remittances for purposes other than No TCS upto ₹7 No TCS upto ₹7
mentioned in (i) to (ii) lakhs 5% on the lakhs 20% on the
amount or amount or
aggregate of aggregate of
amounts in excess amounts in excess
of ₹7 lakhs of ₹7 lakhs
44. Briefly discuss the provisions of tax deduction/collection at source under the
Income-tax Act, 1961 and determine the amount, if any, of TDS and TCS in respect
of the following payments:
(i) Mr. Harish bought an overseas tour programme package for Switzerland for
himself and his family of ₹10 lakhs on 01-11-2023 from an agent who is engaged
in organising foreign tours in course of his business. He made the payment by an
account payee cheque and provided the permanent account number to the seller.
(ii) Mr. Aditya pays ₹55,00,000 during F.Y. 2023-24 to Mr. Naresh, for supply of labour,
for carrying out the construction work of his factory. During the P.Y. 2022 -23, Mr.
Aditya’s turnover was ₹95 lakhs. [MTP May 2024 (Series II)]
Ans. TDS implications:
(i) Since overseas tour package is taken on or after 1.10.2023, tax @ 5% till ` 7 lakhs
and 20% thereafter, is required to be collected u/s 206C(1G) by the seller of an
overseas tour programme package, from Mr. Harish, being the buyer of an overseas
tour package, even if payment is made by account payee cheque.
Accordingly, tax has to be collected@5% on ₹7 lakh and 20% on₹3 lakhs.TCS =
₹95,000
(ii) Mr. Aditya has to deduct tax at source@5% u/s 194M, although his turnover for the
P.Y. 2022-23 does not exceed ₹1 crore and he is not liable to deduct tax at source
under section 194C, since the payment to contractor, Mr. Naresh, exceeds ₹ 50 lakhs.
Accordingly, tax has to be deducted @5% on ₹55 lakhs. TDS = ₹ 2,75,000.

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