https://taxguru.

in/income-tax/notes-income-
sources.html#Tax_treatment_of_amount_received_from_life_insurance_policy

Brief notes on Income from other sources

Incomes which are charged to tax under the head ‘Income from other sources’

there are certain incomes which are always taxed under this head. These
incomes are as follows:

 As per section 56(2)(i), dividends are always taxed under this head.
However, dividends from domestic company other than those covered by
section 2(22)(e) are chargeable to tax in accordance with the provisions
of section 115BBDA. As per Section 115BBDA, Dividend received from
Domestic Companies upto Rs 10 Lacs will be exempt from Tax and then
any amount received above 10 lacs will be tax at 10%.
 Winnings from lotteries, crossword puzzles, races including horse races,
card game and other game of any sort, gambling or betting of any form
whatsoever, are always taxed under this head.
 Income by way of interest received on compensation or on enhanced
compensation shall be chargeable to tax under the head “Income from
other sources”, and such income shall be deemed to be the income of
the year in which it is received, irrespective of the method of accounting
followed by the However, a deduction of a sum equal to 50% of such
income shall be allowed from such income. Apart from this, no other
deduction shall be allowed from such an income.
 Gifts received by an individual or HUF (which are chargeable to tax) are
also taxed under this head.
 In addition to above, following incomes are charged to tax under this
head, if not taxed under the head “Profits and gains of business or
profession”.
o Any contribution to a fund for welfare of employees received by
the [Section 56(2)(ic)].
o Income by way of interest on securities. [Section 56(2)(id)].
o Income from letting out or hiring of plant, machinery or furniture.
[Section 56(2)(ii)].
o Income from letting out of plant, machinery or furniture along
with building; both the lettings are inseparable. [Section 56(2)
(iii)].
o Any sum received under a Keyman Insurance Policy including
bonus. [Section 56(2) (iv)]

Relevance of method of accounting

Income chargeable to tax under the head “Income from other sources” is to be
computed in accordance with the method of accounting regularly employed by
the assessee. Hence, if the assessee follows mercantile system, then income
will be computed on accrual basis. If assessee follows cash system, then
income will be computed on cash basis. However, method of accounting does
not affect the basis of charge in case of dividend income and income by way of
interest received on compensation or on enhanced compensation.

Illustration

Ascertain the head of taxability of the incomes given below:

Nature of income Head of taxability

Dividend of Rs. 10,84,000 received by Dividend is always charged to tax
Mr. Kapoor from an Indian company. under the head “Income from other
sources”. However, dividends from
domestic company are exempt from
tax upto Rs 10 Lacs only. Any amount
received more than 10 lacs tax at
10%.
Hence Rs 84,000 will be tax at 10%.
Dividend of Rs. 1,84,000 received by Dividend is always charged to tax
Mr. Sunil from a foreign company. under the head “Income from other
sources”. Dividends from foreign
company do not qualify for exemption
under section 10(34) and, hence, will
be fully charged to tax.

Rs. 25,200 won by Mr. Soham from a Income by way of winnings from
game show. lotteries, crossword puzzles, races
including horse races, card game and
other game of any sort, gambling or
betting of any form whatsoever, are
always charged to tax under the head
“Income from other sources”. Hence,
Rs. 25,200 won from a game show will
be charged to tax under the head
“Income from other sources”.
Rs. 84,000 received by Mr. Kumar Gifts received by an individual or HUF
from his friend on his birthday. (which are charged to tax) are taxed
under the head “Income from other
sources”. In this case, gift is received
from a friend and it exceeds Rs.
50,000. Hence, entire amount will be
charged to tax under the head
“Income from other sources”.
Rent of a plot of land of Rs. 20,000 Rent from plot of land will be charged
received by Mr. Jagdish. to tax under the head “Income from
other sources”. Rent of plot of land is
not charged to tax under the head
“Income from house property”
Rent of a shop amounting to Rs. Rent of shop (being building) is
1,00,000 per month received by Mr. charged to tax under the head
Sohil. “Income from house property”.

Interest of Rs. 50,000 from bank fixed Interest on bank fixed deposits
deposits received by a salaried is charged to tax under the head
employee. “Income from other sources”.
Taxation of Gift under head Income from Other Sources:

Gifts received by Individual & HUF

56(2)(x) is applicable only when gifts are received by Individual and HUF.
Donor or Donee may be Resident or non Resident.

1. Cash:
If aggregate value is less than Rs.50000 than nothing will be taxable. If value
exceeds Rs. 50,000, the whole amount will be taxable.

Illustration

During the year 2019-20, Mr. Kumar received following gifts. Ascertain the
total amount of gift charged to tax.

Gift of Rs. 84,000 from his father.

Gift of Rs. 25,200 received from his friend on his birthday.
2,52,000 received on account of will of his grandfather.
30,000 received from his friends on the occasion of marriage anniversary

Answer:

Considering above, the tax treatment of various items in the hands of Mr.
Kumar will be as follows :

Gift received from father will not he charged to tax (since father is covered in
the definition of relative), hence, Rs. 84,000 will not be charged to tax.
Gift received from the friends is not covered in any of the above discussed
exemptions and, hence, Rs. 25,200 received from his friend on his birthday will
be charged to tax.
Money received on account of Will is covered in the above discussed
exemptions and, hence, nothing will be charged to tax on account of Rs.
2,52,000 received on account of Will of his grandfather.
Money received on account of marriage of an individual in covered in above
discussed exemptions. However, the benefit is not available in respect of
money received on marriage anniversary. Hence, Rs. 30,000 received from his
friends on account of marriage anniversary will be charged to tax.
Considering above discussion, the total amount of gift not covered in any of the
specified exemptions will come to Rs. 55,200 (i.e., Rs. 25,200 + Rs. 30,000).
If the gift not covered in specified exemptions exceeds Rs. 50,000 then the
entire amount of such gift is charged to tax. Hence, taxable amount of gift will
come to Rs. 55,200.

2. Movable Property as Gift:

a) Without consideration:
Where any person receives, in any previous year, from any person or persons
any property other than immovable property without consideration, the
aggregate fair market value of which exceeds fifty thousand rupees, the whole
of the aggregate fair market value of such property will be taxable in the hands
of receiver.

Illustration
From the following information provided by Mr. Kapoor, ascertain the tax
treatment of various items.

Gift of gold received from his mother. The value of gold amounted to Rs.
1,84,000.
Shares valuing Rs. 40,000 received by way of gift from his brother.
Gift of diamond jewellery amounting to Rs. 2,50,000 received from his friends
on the occasion of his marriage.
Gift of diamond jewellery amounting to Rs. 30,000 received from his friends on
the occasion of his friend’s marriage.

Answer:

Considering the above provisions, the tax treatment of various items in the
hands of Mr. Kapoor will be as follows :

 Gift received from mother will not be charged to tax (since mother is
covered in the definition of relatives). Hence, gift of gold amounting to
Rs. 1,84,000 received from his mother will not be charged to tax.
 Gift received from brother will not be charged to tax (since brother is
covered in the definition of relatives). Hence, gift of shares amounting to
Rs. 40,000 received from his brother will not be charged to tax.
 Gift received on account of marriage of an individual is covered in above
discussed exemptions. Hence gift of diamond jewellery amounting to Rs.
2,50,000 received from his friends on the occasion of his marriage will
not be charged to tax.
 Gift received on account of marriage of an individual is not charged to
tax. In this case the gift is received on the occasion of marriage of the
friend (not the marriage of Mr. Kapoor). Hence, gift of diamond jewellery
amounting to Rs. 30,000 received from his friends on the occasion of his
friend’s marriage will not be covered in the exemptions prescribed
above.

Considering above discussion, the total amount of gift not covered in any of the
specified exemptions will come to Rs. 30,000. If the gift not covered in
specified exemptions does not exceed Rs. 50,000 then nothing is charged to
tax. In this case, the amount of gift not covered in the exemptions comes to
Rs. 30,000 (which is less than Rs. 50,000), hence, nothing will be charged to
tax.

b) For Inadequate Consideration:

Where any person receives, in any previous year, from any person or persons
any property other than immovable property for a consideration which is less
than the aggregate fair market value of the property by an amount exceeding
fifty thousand rupees, the aggregate fair market value of such property as
exceeds such consideration.

The excess differential amount will be taxable in the hands of receiver.

Illustration
During the year 2019-20, Mr. Kamal a salaried employee purchased the
following items:

 Gold jewellery purchased for Rs. 84,000; the fair market value of gold
jewellery is Rs. 1,84,000.
 Bullion purchased for Rs. 6,00,000; the fair market value of the bullion is
Rs. 5,50,000.
 A car television purchased for Rs. 25,000, the fair market value of
television is Rs. 1,00,000.

Answer:

Considering above provisions, the tax treatment of various items received by

Mr. Kamal will be as follows:
 he fair market value of gold jewellery is Rs. 1,84,000 and the purchase
price is Rs. 84,000. The excess of fair market value over the purchase
price will amount to Rs. 1,00,000 (i.e., Rs. 1,84,000 – Rs. 84,000).
Hence, Rs. 1,00,000 will be charged to tax in respect of purchase of gold
jewellery.
 The fair market value of bullion is Rs. 5,50,000. However, the same is
purchased for Rs. 6,00,000 which is more than the fair market value. In
other words, in this case the purchase price is more than the fair market
value and, hence, nothing will be charged to tax.
 Television does not come under the definition of specified movable
property, hence, nothing will be taxed in respect of purchase of
television.

3. Immovable Property as Gift:

a) Without Consideration:
Where any person receives, in any previous year, from any person or persons
any immovable property without consideration and the stamp duty value of
which exceeds fifty thousand rupees then in such case, the stamp duty value of
such property will be taxable in the hands of receiver.

Illustration :

On 25-2-2020, Mr. Kaushal gifted his personal building to his friend Mr. Lala.
The market value of the building was Rs. 18,40,000 and the value of the
building adopted by the Stamp Valuation Authority for charging stamp duty
was Rs. 19,00,000. What will be the tax implications of the above items in the
hands of Mr. Kaushal?

Answer:

There is no question of taxing the value of building in the hands of Mr. Kaushal
since he has gifted the same to his friend. In other words, the question of
taxability of gift arises when gift is received by an individual/HUF and not when
the gift is given by the individual/HUF. However, in this case the taxability will
arise in the hands of the receiver, i.e., his friend and Rs. 19,00,000 (i.e., the
value adopted to charge stamp duty) will be taxed in the hands of his friend
since he has received the building without any consideration.
b) For Inadequate Consideration:
Where any person receives, in any previous year, from any person or persons
any immovable property for a consideration, the stamp duty value of such
property as exceeds such consideration, if the amount of such excess is more
than the higher of the following amounts:

(i) the amount of fifty thousand rupees; and

(ii) the amount equal to five per cent of the consideration

The excess differential amount will be taxable in the hands of receiver.

Illustration :

On 25-2-2020, Mr. Kaushal purchased a building from his friend for Rs.
8,40,000. The value of the building adopted by the Stamp Valuation Authority
for charging stamp duty is Rs. 18,40,000. What will be the tax implications of
the above transition in the hands of Mr. Kaushal?

Answer:

Difference between stamp value and consideration is Rs 10,00,000 which

exceeds higher of below (i.e., Rs 50,000):

a. The exemption threshold of Rs 50,000; and

b. 5 percent of 8,40,000 i.e., Rs 42,000.

Hence the taxable value would be Rs 10,00,000.

4. Some Exempt gifts

If any gifts are received in following situations or from below mentioned people
then those gifts will be fully exempt under Income Tax.

Any sum of money or any property received:

 from any relative; or
 on the occasion of the marriage of the individual; or
 under a will or by way of inheritance; or
 in contemplation of death of the payer or donor or
 from any local authority or
 from any fund or foundation or university or other educational institution
or hospital or other medical institution or any trust or institution referred
to in clause (23C) of section 10; or
 from or by any trust or institution registered under section 12A or
section 12AA; or
 by any fund or trust or institution or any university or other educational
institution or any hospital or other medical institution or
 by way of transaction not regarded as transfer under clause (i) or clause
(iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause
(vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vid) or
clause (vii) of section 47; or
 from an individual by a trust created or established solely for the benefit
of relative of the individual.
 any compensation or other payment, due to or received by any person,
 by whatever name called, in connection with the termination of his
employment or the modification of the terms and conditions relating
thereto
Note: In the above-mentioned points the term Relatives means

– Spouse of Individual

– Brother & Sister of Individual

– Brother & Sister of Spouse of Individual

– Brother & Sister of either of the parents of Individual

– Any Lineal ascendants or descendants of the individual

-Any Lineal ascendants or descendants of the spouse of the individual.

Tax treatment of amount received from life insurance policy

Any amount received under a life insurance policy, including bonus is exempt
from tax under section 10(10D). However, following points should be noted in
this regard:
 Exemption is available only in respect of amount received from life
insurance policy.
 Exemption under section 10(10D) is unconditionally available in respect
of sum received for a policy which is issued on or before March 31st,
2003, however, in respect of policies issued on or after April 1st, 2003,
the exemption is available only if the amount of premium paid on such
policy in any financial year does not exceed 20% (10% in respect of
policy taken on or after April 1st, 2012) of the actual capital sum
assured. It should be noted that amount received on death of the person
will continue to be exempt without any
 Value of premium agreed to be returned or of any benefit by way of
bonus (or otherwise), over and above the sum actually assured, which is
received under the policy by any person, shall not be taken into account
while calculating the actual capital sum assured.

Illustration

Mr. Kumar had taken following life insurance policies.

 Policy 1 : It was taken on 2-10-1984; sum assured is Rs. 1,00,000 and
annual premium is Rs. 18,400. The policy will mature in 2014. Maturity
value will be 90,000.
 Policy 2: It was taken on 2-3-2004, sum assured is Rs. 10,00,000 and
annual premium is Rs. 35,000. The policy will mature in 2015. Maturity
value will be 8,00,000.
 Policy 3: It was taken on 10-12-2013, sum assured is Rs. 50,00,000 and
annual premium was Rs. 84,000. The policy will mature in 2025.
Maturity value will be Rs. 10,00,000.

Advice him regarding the tax treatment of amount to be received from above
policies.
  Policy 1 was taken before 1-4-2003 and, hence, no conditions/limitations
will apply in respect of this policy. The amount received from such policy
in any case, i.e., on account of death of Mr. Kumar or on account of pre-
maturity of the policy or on account of maturity will be exempt from tax.
 Policy 2 was taken after 1-4-2003 and, hence, tax treatment will be as
follows :
 Nothing will be charged to tax in respect of amount received on death of
Kumar.
 In any other case, the amount received from policy will be exempt, if the
annual premium of any financial year does not exceed 20% of the capital
sum assured. The capital sum assured in case of policy 2 is Rs.
10,00,000. 20% of Rs 10,00,000 works out to be Rs. 2,00,000. The
annual premium of the policy is only Rs. 35,000, hence, nothing will be
taxed on account of amount received otherwise than on death.
 Policy 3 is taken after 1-4-2012 and, hence, tax treatment will be as
follows :
 Nothing will be charged to tax in respect of amount received on death of
Kumar.
 In any other case, the amount received from policy will be exempt, if the
annual premium of any financial year does not exceed 10% of the capital
sum assured. The capital sum assured in case of policy 3 is Rs.
50,00,000. 10% of 50,00,000 works out to be Rs. 5,00,000. The annual
premium of the policy is only Rs. 84,000, hence, nothing will be taxed on
account of amount received otherwise than on death.

Expenses allowed as deductions while computing income chargeable to tax

under the head “Income from other sources
Following major deductions are available from income chargeable to tax under
the head “Income from other sources” :

(a) Commission or remuneration for realising dividends (if not covered under
section 115-O which is exempt) or interest on securities [Section 57(i)].

(b) Any sum received by an employer from employees as contribution towards

any welfare fund of such employees is first included as income of the
employee, and if the employer credits such sum to the employee’s account
under the relevant fund on or before the due date (of such fund), then such
amount (i.e., employee’s contribution) is deductible from the income of the
employer [Section 57(ia)].

(c) Current (not capital) repairs, insurance premium and depreciation in

respect of plant, machinery, furniture and buildings are deductible from rent
income earned by letting out of plant, machinery, furniture and building, which
are chargeable to tax under section 56(2)(ii)/(iii).

(d) A deduction of lower of Rs. 15,000 or 33 1/3% of such income is available

in case of income in the nature of family pension (i.e., regular monthly amount
payable by the employer to the family members of the deceased employee)
[Section 57(iia)].

(e) Under section 57(iii), deduction is available in respect of any other

expenditure (not being in the nature of capital expenditure) laid out or
expended wholly and exclusively for the purpose of making or earning such
income during the relevant previous year.

Expenses not allowed as deductions while computing income chargeable to tax

under the head “Income from other sources”
Under section 58, following expenditures are not deductible while computing
income chargeable to tax under the head “Income from other sources” :

 Personal expenditure [Section 58(1)(a)(i)].

 Any interest chargeable under the Act which is payable outside India on
which tax has not been paid or deducted at source [Section 58(1)(a)(ii)].
 Any amount paid which is taxable under the head “Salaries” and payable
outside India on which tax has not been paid or deducted at source
[Section 58(1) (a) (iii)].
 Sum paid on account of wealth-tax is not deductible under section
58(1A).
 Amount specified under section 40A is not deductible [Section 58(2)].
https://taxguru.in/income-tax/tds-sale-property.html

Article explains Provisions of Section 194I related to TDS on Sale of Property

with value exceeding or equal to Rs. 50 Lakhs. It explains When your are liable
to deduct TDS on Sale of Property, When to deposit the TDS to Government
after deduction, How to make payment of TDS to Government, Details
required for filing the Form 26QB and how to Request for Form 16B [TDS
Certificate for Sale of Property]

1. When your are liable to deduct TDS on Sale of Property?

As per provisions contain in sec 194-IA of Income Tax Act, if any buyer
responsible for paying to a resident seller any amount exceeding or equal to
Rs. 50 Lakhs for sale of immovable property other than agricultural land, then
the buyer is required to deduct TDS @ 1% of consideration for transfer of
immovable property.

As per Finance Act 2019, Consideration for transfer of immovable property

shall include all charges of the nature of club membership fee, car parking fee,
electricity or water facility fee, maintenance fee, advance fee or any other
charges of similar nature, which are incidental to transfer of the immovable
property.

Even when the amount is paid in installments, then even you are liable to
deduct TDS @ 1% on the amount paid if the total amount paid is equal to or
exceeds Rs. 50 Lakhs.

TDS is required to deduct irrespective of type of property whether it is land or

building or vacant plot, residential or commercial or industrial property.

If GST is levied on transaction value for purchase of property, then TDS would
be deducted on the amount excluding GST amount.

2. When to deposit the TDS to Government after deduction?

After deduction of TDS on the amount, it is to be deposited to Central
Government within a period of 30 days from the end of the month in which
deduction is made and it should be accompanied by a statement in Form 26QB.
[Rule 30(2A)]

Also Form 26QB is to be filed within a period of 30 days from the end of the
month in which deduction is made. [Rule 31A(4A)]

3. How to make payment of TDS to Government?

Following steps are involved while making the payment of TDS :-

 First go to the website tin-nsdl.com.

 Click on the tab Services and then click e-payment : Pay taxes Online.
 After that a new window will be open, that contains different challans for
payment of TDS under different sections.
 Click on proceed on TDS on Property (Form 26QB) tab (in third row first
 column).

4. Details required for filing the Form 26QB

In the First Tab (Taxpayer Info) following details are required to be filled:

 Tax Applicable
o (0020) Corporation Tax (Companies)
o (0021) Income Tax (Other than Companies)

Select code 0020 if you are a company (person deducting TDS), otherwise
select 0021 for persons other than company.

 Financial Year– It will be auto populated on the basis of Date of Payment

/ Credit filled in the form.
 Assessment Year– It will be auto populated on the basis of Date of
Payment / Credit filled in the form.
 Type of Payment– It is auto selected as (800) TDS on Sale of Property.
 Status of Payee / Seller / Transferor– Select Resident or Non-Resident .
 Permanent Account No. (PAN) of Transferee (Payer/Buyer)– Enter the
PAN of Buyer which is compulsory required to fill the form. After filling
the PAN, it will automatically confirm the category of PAN of Transferee
whether it is company, individual etc.
 Permanent Account No. (PAN) of Transferor (Payee/Seller)– Enter the
PAN of Seller which is required so that it is reflected in Form 26AS of
 Seller and he/she can claim TDS on sale of property while filing Return
of Income.

In the Second Tab (Address) following details are required to be filled:

 Complete Address of the Transferee (Buyer) – It also require whether

there are more than one transferee / buyer.
 Complete Address of the Transferor (Seller) – It also require whether
there are more than one transferor / seller.
In the Third Tab (Property Details) following details are required to be filled:

 Complete Address of the Property Transferred – It includes details like

type of property whether it is land or building, Date of Agreement /
booking, Total Value of Consideration, Payment Type (Lump sum or
Installment).
 Amount paid / credited– Enter amount in figures and words.
 Tax Deposit Details– Provide details like Total Amount paid / credited,
Basic Tax , Interest , Fee (if any)
In the Fourth Tab (Payment Info) following details are required to be filled:
 Mode of Payment– Select e-payment immediately or on subsequent
date.
 Date of Payment / Credit
 Date of Tax Deduction
 Captcha Code

Date of Payment / Credit and Date of Tax Deduction is required to calculate the
interest, fee if any which is required to be paid in case of late payment.

After payment of taxes, Challan is generated which is the proof of payment of

TDS.

5. Request for Form 16B [TDS Certificate for Sale of Property]

 Request can be made at tdscpc.gov.in after creating New ID as Tax
payer.
 Generally after payment of challan, it takes 4-5 working days for
processing of challans, only after that you can request for Form 16B.
 Form 16B is itself an evidence that TDS deducted on payment to seller
has been deposited to government.
https://taxguru.in/income-tax/tds-salary-fy-2020-21-format-opt-tax-
regime.html

TDS on Salary for FY: 2020-21 & Format to Opt Tax Regime

Finance Act, 2020 has introduced optional based filing for individual and HUF
whereby these type of assesses have to choose option amongst new and old
tax slab rates at the time of filing of ITR. This type of filing is unique in case of
Indian Taxation System till date.

This type of filing has created doubt in the mind of both employees and tax
deductors (employers). Employees are confused regarding- which method
would be beneficial to them? Employers are worried about compliance. In this
article we shall try to solve the problem of both employees as assesses and
employer as tax deductors.

New Vs Old Tax Slab Rate

Before making any conclusion we should know and compare New and old tax
slab rate applicable for non-senior individual as under:-

NEW TAX SLAB RATE (NON-SENIOR CITIZENS)

Income Range Tax Rate

Upto Rs. 2,50,000.00 NIL

Rs. 2,50,001 to Rs. 5,00,000.00 5% (Tax rebate of Rs. 12,500.00 U/s. 87A is
allowed)

Rs. 5,00,001.00 to Rs.7,50,000.00 10%

Rs.7,50,0001.00 to  Rs.10,00,000.00 15%

Rs. 10,00,001.00 to Rs. 12,50,000.00 20%

Rs. 12,50,000.00 to Rs. 15,00,000.00 25%

Rs. 15,00,000.00 and above 30%

OLD TAX SLAB RATE (NON-SENIOR CITIZENS)

Income Range Tax Rate

UptoRs. 2,50,000.00 NIL

Rs.2,50,001 to Rs. 5,00,000.00 5% (Tax rebate of Rs. 12,500.00 U/s. 87A is

allowed)

Rs. 5,00,001.00 to Rs. 10,00,000.00 20%

Rs.10,00,000.00 and above 30%

Note: Add Health and education cess @4% on tax amount. Surcharge as
applicable.
Exemptions and deductions not allowed under new tax slab rate
A. Leave Travel Allowance (LTA)
B. House Rent Allowance (HRA)
C. Conveyance Allowance
D. Daily expenses allowance in employment
E. Relocation allowance
F. Children education allowance
G. Helper Allowance
H. Other Allowance
I. Standard Deduction
J. Profession Tax
K. Housing Loan EMI- Interest part
L. Chapter VIA deductions such as LIC, PPF, Mediclaim etc.

Steps for computation of TDS by Employers

Following steps are to be followed by employer (Tax deductor) or Tax department

of employer or Accounts department of employer or Tax Consultants for employer:-
a) Receive a simple application from employees liable for TDS as a
confirmation about new or old tax slab rate. (Application format is given as
Anneuxre-A). If any employee provides application and choose old tax rate,
ask him to provide form no. 12BB (Declaration for investment) along with
application. It is to be noted that if no application is received from an
employee regarding old or new tax slab rate then employer should deduct
TDS as per old tax slab rate. It is to be further noted that if TDS is deducted
as per old tax slab rate and employee wants to file ITR as per new tax slab
rate or vice versa, there is no problem at all. Difference if any should be
adjusted. It means if there is less TDS then employees should deposit the
difference tax and if there is excess TDS, claim as refund. No interest is
payable if ITR is filed within statutory or extended due date.
b) Compute estimated total income and tax thereon for full Financial Year or
during the tenor of employment as per available information, on the basis of
options of new or old tax rate as applied by the employees.
c) Divide the amount of tax as arrived in step (b) above by 12 months to get
monthly TDS amount. Deduct this monthly TDS amount upto February-
2021.
d) In the month of March-2021, re-compute actual total income and tax thereon
as per option exercised by the employees (i.e. new or old tax rate slab).
e) Compare actual tax deductible as arrived in step (d) with estimated tax
deducted as arrived in step (b).
f) If there is short TDS, deduct the balance amount of TDS from the salary for
the month of March-2021. If there is excess TDS then deduct very nominal
amount say Rs.100.00, it will be helpful at the time of filing of TDS return
(24Q) for the Quarter ending on 31-03-2021.
https://taxguru.in/income-tax/tds-payment-contractors-section-194c.html

As per Section 194C, deduction of TDS is required to be made from payments

of any amount to resident contractors or sub-contractors.

Deduction of TDS from payment to resident contractors:

Sec 194C(1) provides that any person responsible for paying any sum to
resident contractor for carrying out any work (including supply of labor) in
pursuance of a contract between the contractor and the following:

a) The Central Government or any State Government;

b) Any local authority;
c) Any corporation established by or under a Central, State or Provisional
Act;
d) Any company;
e) Any co-operative society;
f) Any authority constituted in India by or under any law, engaged either
for the purpose of dealing with and satisfying the needs for housing
accommodation or for the purpose of planning, development or
improvement of cities, towns and villages or for both;
g) Any society registered under the Society Registration Act, 1980 or under
any such corresponding law to the Act in any Part of India;
h) Any trust;
i) Any university or deemed university;
j) Any Government of a foreign State or a foreign enterprise or any
association or body established outside India;
k) Any firm;
l) any person, being an individual or a Hindu undivided family or an
association of persons or a body of individuals, if such person,-
 does not fall under any of the preceding sub-clauses; and
 has total sales, gross receipts or turnover from business or
profession carried on by him exceeding one crore rupees in case
of business or fifty lakh rupees in case of profession during the
financial year immediately preceding the financial year in which
such sum is credited or paid to the account of the contractor;

Note:

1) A “Contractor” for the purpose of the provisions of this section would be

any person who enters into a contract with the Central Government or
any State Government, any local authority, any corporation established
by or under a Central, State or Provincial Act, any company or any co-
operative society for carrying out any work including the supply of labor
for carrying out any work.
2) A “sub-contractor” would mean any person who enters into a contract
with the contractor for carrying out, or for the supply of labor for
carrying out the whole or part of the work undertaken by the contractor
under a contract with any of the authorities or for supply of, whether
wholly or partly, any labor which the contractor has undertaken to
supply in terms of his contract with any of the authorities mentioned
 under this section.

Applicability of this section:

Provisions of Section 194C are applicable only in relation to “works contracts”

and “labor contracts” but do not cover “contract for sale or mere supply of
goods”.

Neither Income Tax Act nor Income Tax Rules specifies the difference between
the contract for sale and works contract; so there is no standard criteria to
determine whether a contract is of contract for sale or a contract for work and
labor.

One of the criteria to differentiate between “contract for sale” and “works
contract” is to determine the ownership regarding goods in question. In case of
works contract, even though a part or whole of the materials used belongs to
the contractor, yet the property in the thing produced will be the performance
whereas in the case of contract for sale the things produced generally are the
sole property of the party who has performed the work before its delivery and
such person and the property therein passes only under the contract relating
thereto to other party for price. Mere transfer of property in goods used in the
performance of a contract is not sufficient. To constitute a sale there must be
an agreement expressed or implied relating to sale of goods and completion of
the agreement by passing of title in the very goods constructed to be sold.

The following conditions must be satisfied for applicability of this Section:

1) The payee, i.e., contractor must be resident in India within meaning of

Sec. 6 of the Income Tax Act.
2) Payment should be made by any person specified above.
3) Payment should be made for carrying out any work including supply of
labor for carrying out any work.
4) The payment should be made pursuant to a contract whether oral or
written between payer and payee.
5) The consideration of a contract in respect of which payment is made
should exceed Rs. 30,000 at a time.
6) If aggregate of the amount of such sums credited or paid or likely to be
credited or paid in the financial year exceeds Rs.1,00,000/- TDS is
required to be deducted.
7) Where advance payments are made, tax will have to be deducted if the
total payment is likely to exceed Rs. 30,000.
8) Where it was expected that the total consideration would not exceed Rs.
30,000 but later on, it was found that consideration would exceed Rs.
30,000, tax will have to be deducted in respect of earlier payments also.

Deduction of tax at source from payment to sub-contractors:

Any person (being a contractor and not being an individual or a Hindu

Undivided Family) responsible for paying any sum to any resident in pursuance
of a contract with the sub-contractor for carrying out, or for the supply of labor
for carrying out, the whole or any part of the work undertaken by the
contractor or for supplying whether wholly or partly any labor which the
contractor has undertaken to supply shall, at the time of credit of such sum to
the account of the sub-contractor or at the time of payment thereof in cash or
by issue of a cheque or draft or by any other mode, whichever is earlier,
deduct amount equal to 1 % of sum as income-tax on income comprised
therein.

Where the payment is made to sub-contractors, the following conditions must

be satisfied :-

1) Payment is made to a sub-contractor who is resident within the meaning

of Section 6 of the Income Tax Act, 1961.
2) Payment is made by a resident contractor, not being an individual or an
HUF.
3) Payment is made to carry out any work, including supply of labor.
4) The amount of consideration of the contract in respect to which payment
is made should not be less than Rs. 30,000.
5) The sum should be credited or paid by the contractor in respect of a
contract undertaken by him with the specified bodies.

Note: A contractor who is an individual or HUF is exempt from the obligation of

TDS while making payment to subcontractors.

Exemption from deduction of tax at source in certain cases:

No tax is required to be deducted in the following cases:

1) Where the sum is credited or paid in pursuance of any contract, the

consideration for which does not exceed Rs. 30,000, or where the
aggregate of the amounts of such sums credited or paid or likely to be
credited or paid during the financial year does not exceeds Rs. 1,00,000,
the person responsible for paying such sums will not deduct TDS under
this section.
2) Where the sum is credited or paid before 1st June 1973 in pursuance of
a contract between the contractor and the co-operative society or in
pursuance of a contract between such contractor and the sub-contractor
in relation to any work (including supply of labor) undertaken by the
contractor for the co-operative society.
3) Individual or HUF not to deduct tax if the payment or amount credited to
contractor is for personal use. No individual or HUF shall be liable to
deduct income-tax on the sum credited or paid to the account of the
contractor where such sum is credited or paid exclusively for personal
purpose of such individual or any member of HUF.

Provisions for payments and TDS to transporters:

No deduction shall be made from any sum credited or paid or likely to be

credited or paid during previous year to the account of a contractor during the
course of business of plying, hiring or leasing goods carriages, on furnishing of
his PAN, to the person paying or crediting such amount.

Person responsible for deduction of TDS:

The payer is the person responsible for TDS.

When tax to be deducted:

The person responsible for making payment to resident contractor/sub-

contractor should deduct TDS either at the time of crediting such sum to the
account to the payee or at the time of payment thereof in cash or by issue of a
cheque or by any other mode, whichever is earlier.

Amount credited to suspense account:

Where any sum is credited to any account, whether called “Suspense account”
or by any other name, in the books of account of the person liable to pay such
amount, such crediting shall be deemed to be credit of such income to the
account of the payee and the provisions of this section shall apply accordingly.
Thus, tax has to be deducted even if amount payable to resident
contractor/subcontractor is transferred to suspense account by the payer in his
books.

No deduction of tax or deduction at lower rate:

According to Section 194C where the AO is satisfied that the total income of
contractor or sub-contractor justifies the deduction of income-tax at any lower
rate or non deduction of income-tax, as the case may be, the AO shall, on
application made by the contractor or sub-contractor in this behalf give to him
such certificate as may be appropriate.

Rates of tax deduction:

Rates of TDS from payment to contractors and sub-contractors are as under:

S. No. Nature of Payment TDS Rate if TDS Rate if PAN

PAN available not available

1. Payment / Credit to resident individual or HUF 1% 20 %

2. Payment/Credit to any resident person other 2% 20 %

than individual / HUF

3. Payment/ credit to Transporters NIL 20 %

Note:- No Surcharge, Education Cess and SHEC shall be added. Hence, TDS
shall be deductible at basic rates.
Deduction of tax at source in case of composite contract:
1) Where materials are supplied by the government:

The question is whether deduction will be made with reference to gross

payment to the contractor or the net payment, i.e., gross payment minus
deductions, if any, on account of materials supplied by the government, will
have to be decided in the light of the terms of the particular contract and the
conduct of parties thereto. Where the contractor has undertaken to construct a
building or a dam, and the government or other specified person has
undertaken to supply all or any of the materials necessary for the work at the
stipulated prices, the deduction will be related to the gross payment without
excluding any adjustments on account of cost of materials. Where, however,
the contractor has undertaken only to provide the labor for the work, the
ownership of the materials supplied remaining at all times with the government
or other specified person, the sum payable to the contractor in respect of the
contract will only be the amount paid for such labor or services and will, thus,
not include the price of the materials supplied by the government or other
specified persons.

Thus, the rate of TDS from payments made by the government or other
specified persons to any contractor will be 2% or 1% of the gross payment or,
as the case may be, the net payment, depending on the terms of the contract.

2) Deduction when party supplies materials to the contractor:

When materials are supplied no deduction is possible. Consequently, no TDS is

required to be made. However, when payment is made either in cash or in kind
to contractor/sub-contractor tax is required to be deducted.

Deposit of tax to credit of Central Government:

The tax deducted is required to be deposited with the Central Government

through a challan within the prescribed time by the person making the
deduction.

TDS is to be deposited by remitting the same to any of the following banks:

 Any branch of the RBI;

 Any branch of the SBI;
 Any branch of selected PSBs where Income-Tax Offices are situated.

Time Limit within which tax is to be deposited:

S. Particulars Due date for payment

No
.

1.) Where the payment is made by or on behalf On the same day (Without using any
of the Government Challan form)

2.) Where the payment is made in any other

case than the government

a) If the amount is credited in the month of On or before April 30th.

March

b) In Other months. Within 7 days from the end of the month in

which the deduction is made.

Issue of TDS certificate:

In case of payments other than salary, TDS certificates are to be issued on

quarterly basis in Form No.16A. As per rule 31, every person responsible for
deduction of tax from payments other than salary has to issue a quarterly TDS
certificate in Form No. 16A. The certificate is to be issued by following dates :

Quarter Due date for Non- Due date for

Government deductor Government deductor

April to June 30th July 15th August

July to September 30th October 1 5th November

October to December 30th January 1 5th February

January to March 30th May 15th June

As per CBDT Circular No. 1/2012, dated 9-4-2012, it is mandatory for all the
deductors to issue TDS certificate in Form No. 16A by generating the certificate
through TIN central system by downloading the certificate from the TIN
website with a unique TDS certificate number. These provisions are applicable
in respect of all sums deducted on or after 1-4-2012. The certificate so issued
can be authenticated either by using digital signature or manual signature.

Other aspect:

Contract U/Sec. 194C Vs. professional and Technical Fees U/Sec. 194J

Sec. 194C of the Act deals with tax deduction at source on payments to
contractors and sub-contractors, whereas Sec. 194J of the Act deals with TDS
on fees for professional or technical services. Sec. 194C is on statute book
since 1972 while as Sec. 194J was introduced with effect from a July, 1995.
Sec. 194J is in a sense an off-shoot of Sec. 194C. Hence, there are a few
common points between the two, although there are quite a few points of
distinction.

Sec. 194C deals with payment in respect of ‗contract of work‘, however, earlier
the CBDT vide Circular no. 681, dated 8th March, 1994 sough to invoke these
provisions even for contracts of professional work like audits. There was a
great resistance and litigation by the professional community, which compelled
the CBDT to withdraw the circular. However, the same was achieved through
the introduction of new Sec. 194J to specifically cover professional fees and the
rate of deduction was made as 10% as against 2% under section 194C.
https://taxguru.in/income-tax/tds-rent-section-194i-income-tax-act-1961.html

TDS on Rent under section 194I of Income Tax Act, 1961

Any person who is not an Individual or HUF, who is paying any income to
resident by way of rent is liable to deduct tax at source or tds on rent only in
case the aggregate of the amount of such rent credited or paid or likely to
credited or paid during the financial year by the aforesaid person to the
account of, or to payee exceeds Rs. 2,40,000/-. Individuals and /or HUFs who
are subject to tax audit are also under this obligation to deduct TDS.

In this, ‘Rent’ means any payment, by whatever name called, under any lease,
sub-lease, tenancy or any other agreement or arrangement for the use of
either separately or together) any:-

a) land; or

b) Building (including factory building); or

c) Land appurtenant to a building (including factory building); or

d) Machinery; or

e) Plant; or

f) Equipment; or

g) Furniture; or

h) Fittings whether or not any or all of the above are owned by the payee

Sub-letting is also covered.

In case the landlord collects security or advance payment at the time of letting
out a building to a tenant on the condition that the deposit will be refunded at
the time of vacating the building, such a receipt is not in the nature of income
and, therefore, no tax is to be deducted at source u/s 194-I. However, advance
rent (not in the nature of refundable security deposit) paid is, subject to tax
deduction. Moreover, where any such rent is credited to ‘suspense account’ or
to any other account shall also be liable to deduct tax at source.

Why TDS u/s 194-I is introduced?

The Finance Act, 1994 inserted the Sec. 194-I, regarding deduction of tax from
payment of rent. The Government felt that an item of income which needs to
be covered within the scope of deduction of income-tax at source is the income
by way of rent. In a number of countries also such income is subject to
deduction of income-tax at source.
Which cases are liable to TDS on Rent?

Any person, not being an individual or a H.U.F., who is responsible for paying
to a resident any income by way of rent is liable to deduct tax at source as and
when aggregate of the amount of such income credited or paid or likely to be
credited or paid during financial year exceeds Rs. 2,40,000/-. Individuals or
H.U.F.s who were subject to tax audit under Sec. 44AB during the financial
year immediately preceding the financial year in which such rent was paid or
credited are also liable to deduct tax at source.

Income from letting out of factory building:- Where a factory building is

let out, the rent received generally is income from business in the hands of the
lessor or the owner of the factory. Only in a few cases it is income from
property in the lessor’s hands. But such payment also, which is business
income in the hands of the lessor and for which he will necessarily be paying
advance tax and finally be returning the rental income, will be subject to tax
deduction at source. This is an unnecessary burden on both taxpayer and the
tax administrator, because collection of tax will take place as TDS from the
lessor without much delay.

Rent includes service charges:– Service charges payable to business

centres are covered under the definition of rent, as they cover payments by
whatever named called.

TDS requirement where building and furniture, etc., let out by separate
persons:- In case where building is let out by one person, and furniture,
fixtures, etc., are let out by another person, then the payee is required to
deduct tax under Sec. 194-I only from the rent paid/credited for the hire of
building.

TDS requirement where rent not payable on monthly basis:- Sec. 194-I
does not mandate that the tax deduction should be made on month-to-month
basis. Therefore, if the crediting of the rent is done on quarterly basis then
deduction at source will have to be made on the quarterly basis only. Where
the rent is paid on yearly basis deduction also will have to be made once a year
on the basis of actual payment or crediting.

Charges regarding cold storage facility:– In the case of cold storage where
milk, ice cream, vegetables, etc., are stored, the payment may be styled as
charges for use of plant and not for use of building. Cold storage is a plant.

Hall rent paid by an association for use of it:- Since the association is
assessed as an association of persons and not as an individual or HUF, the
obligation of tax deduction will be there, provided payment for the use of hall
exceeds Rs. 1,80,000.

Payments to hotels for holding seminars including lunch:- Where hotels

do not charge for use of premises but charge for catering/meal only, then
provisions of Sec.194I would not apply. However, Sec.194C would apply for
catering part.

Cases where there is no deduction of TDS on Rent.

  Amount payable/paid not exceeding Rs. 2,40,000 during the financial
year:- No tax from the amount payable in respect of rent is deductible
where the amount of such rent credited or paid or likely to be credited or
paid during the financial year to the payee landlord or lessee does not
exceed Rs. 2,40,000.
 Where tenant is individual or Hindu Undivided Family:- Deduction is not
required under Sec. 194I if the amount is paid or payable by an
individual or Hindu Undivided Family. If : (a) the individual/HUF is not to
carrying on any business/profession or (b) individual/HUF not liable to
tax audit in preceding year
 Sharing or proceeds of film exhibition between a film distributor and a
film exhibitor owning a cinema theatre:- Representations have been
received from various quarters regarding applicability of the provisions
of Sec. 194-I of the Income Tax Act to the sharing of the proceeds of
film exhibition between film distributor and film exhibitor owning a
cinema theatre. The matter has been examined by the Board and the
Board is of the view that the provisions of Sec.194-I would not be
attracted to such payment because: the exhibitor does not let out the
cinema hall to the distributor. Generally, the share of the exhibitor is on
account of composite services; and The distributor does not take cinema
building on lease or sub-lease or tenancy or under an agreement of
similar nature.
 Where the payee is the Government at agency:– Under the provisions of
Sec. 196, no tax is required to be deducted at source from any sums
payable to the government. The matter with regard to the statutory
authorities and the local authorities referred to, has been examined by
the Board. Sec. 190 provides for deduction of income-tax at source as
one of the modes of collection of income-tax in respect of an income,
notwithstanding that the regular assessment in respect of such an
income is to be made in a later assessment year. The income of an
authority constituted in India by or under any law enacted either for the
purpose of dealing with and satisfying the need for housing
accommodation or for the purpose of planning, development or
improvement of cities, towns and villages, is exempt from income-tax
under Sec. 10(20A). Similarly, the income of a local authority which is
chargeable under the head ‘Income from house property’ or ‘Income
from other sources’, is exempt from Income-tax under Sec.10(20).
There is no other condition specified in these two clauses of Sec.10
which is necessarily to be satisfied to avail of the income-tax exemption.
There is no requirement to deduct income-tax at source on income by
way of ‘rent’ if the payee is the governmental agency. In the case of the
local authorities and the statutory authorities, there will be no
requirement to deduct income-tax at source from income by way of rent
if the person responsible for paying it is satisfied about his tax-exempt
status under clause (20) or (20A) of Sec.10 on the basis of certificate to
this effect given by the said authorities.

When tax needs to be deducted at source:– Tax is required to be deducted

at source at the time of credit of ‘income by way of rent’ to the account of the
payee or at the time of payment thereof in cash or by the issue of a cheque or
draft or by any other mode, whichever is earlier.

Credit of rental income in ‘suspense account’: he incidence of tax

deduction under Sec. 194-I will arise at mere incidence of crediting to the
rental income in the lessee’s books of account, be it even a suspense account.
The Explanation (ii) to sec. 194-I deemed such crediting to be credit of such
income to the account of the payee.

Rates of tax deduction on rent

Sr. Nature of Payment TDS %

No.

1. Rent of Plant, Machinery or Equipment 2%

2. Rent of land, building or furniture or fitting to individual or HUF 10 %

3. Rent of land, building or furniture or fitting to other than individual or HUF 10 %

No deduction or deduction at lower rate under Sec. 197:– On application by

payee in Form no. 13, if the Assessing Officer is satisfied that this total income
justifies no deduction of tax or deduction at lower rate, he may issue a
certificate in Form No. 15AA to that effect directly to the payer.

Time limit within which tax is to be deposited:

Due date for payment

Where the payment is made by or on behalf of On the same day (without using
the Government any challan form).
 Through Challan, For April to
February – On or before 7 days from
end of month in which deduction is
made, For March On or before 7th April.

Where the payment is made in any other case (a)  On or before April 30th.
than the Government:- (b) On or before 7 days from end of month in
a) If the amount is credited or paid in the which deduction is made where tax is paid
month of March. accompanied by an Income-tax challan.
b) In any other case.

Issue of TDS certificate to the payee:- In case of payments other than salary,
TDS certificates are to be issued on quarterly basis in Form No.16A. As per rule
31, every person responsible for deduction of tax from payments other than
salary has to issue a quarterly TDS certificate in Form No. 16A. The certificate
is to be issued by following dates :

Quarter Due Date for non- Due Date for Government

Government Deductors Deductors

April to June 15th August 15th August

July to September 15th November 15th November

October to December 15th February 15th February

January to March 15th June 15th June

As per CBDT Circular No. 1/2012, dated 9-4-2012, it is mandatory for all the
deductors to issue TDS certificate in Form No. 16A by generating the certificate
through TIN central system by downloading the certificate from the TIN
website with a unique TDS certificate number. These provisions are applicable
in respect of all sums deducted on or after 1-4-2012. The certificate so issued
can be authenticated either by using digital signature or manual signature.

FAQs

1. What are the provisions relating to TDS on rent ? From which date same are
applicable?

As per the Finance Act, 1994 the provisions of TDS on rent have been
introduced w.e.f. 1.6.1994. The salient feature of Sec. 194-I are as under:-

1. The provisions are applicable only in cases where the person making the
payment of rent is an individual or HUF who is required to get his accounts
audited u/s 44AB in the immediately preceding financial year (w.e.f. 1.6.2002)
or any other person responsible for paying to a resident any income by way of
rent. Prior to 1.6.2002 no individual or HUF was liable to deduct TDS from rent.

2. The TDS is required to be deducted in case the rent paid or payable to a

particular person during a financial year exceeds Rs. 2,40,000.

3. A facility has also been provided to obtain a certificate from the Assessing
Officer for deduction of income-tax at a lower rate or for no deduction of
income-tax in appropriate cases by making application in From No.13.

4. For the purpose of this section rent means any payment by whatever name
called, under any lease, sub-lease, tenancy or any other agreement or
arrangement for the use of any land or building or factory building together
with furniture, fixture, fittings and land appurtenant thereto. It will not be
relevant whether the payee is the owner of the building or not?

W.e.f. asst. year 2007-08, the Taxation Laws (Amendment) Act, 2006 have
enlarged the scope of rent for the purpose of Sec. 194I, so as to include
machinery, plant and equipment, whether rented together with building or
separately, irrespective of the fact whether they are owned by the payee or
not?

5. The rates of TDS on rent are as under:

Particulars Rate upto 30.09.09 Rate w.e.f. 01.10.09

a)           Use     of    any     15% (when payee is 10% for all assessees
land, building,         individual or HUF) 20% in
furniture       or other cases.
fittings
 b)      Use of plant, machinery 10% (from 1.6.07 to 30.9.09) 2% for all assessees
or equipment prior to 1.6.07 the rate was
same as rent of land and
building

W.e.f. Financial Year 2009-10, education cess or higher education cess is not
required to be deducted at source in case of payment to domestic companies
or any person who is resident in India. However, education cess is to be
deducted in case the payment is made for salary.

6. W.e.f. 1.4.2010, where the deductee fails to furnish its PAN or furnishes an
incorrect PAN to the deductor, the deductor will be required to deduct tax at
higher of the following rates:

a) At the rate specified under the Income Tax Act; or

b) At the rates in force; or
c) At the rate of 20%.

2. Will tax be deducted from service tax included in rent?

Service tax paid by the tenant does not partake the nature of income of
landlord. The landlord only acts as a collecting agency for Government for
collection of service tax. Therefore tax deduction at source (TDS) under Sec.
194-I of the Income-tax Act would be required to be made on the amount of
rent paid/payable without including service tax.

3. What does the “rent” mean for the purpose of Sec. 194-I?

‘Rent‘ means any payment, by whatever named called, under any lease, sub-
lease, tenancy or any other agreement or arrangement for the use of (either
separately or together)any,-

a. Land; or

b. Building (including factory building); or

c. Land appurtenant to a building (including factory building); or

d. Machinery; or

e. Plant; or

f. Equipment; or

g. Furniture; or

h. Fittings,

whether or not any or all of the above are owned by the payee.

In other words, besides tax on land and building, tax shall now also be
deductible for leasing out or hiring of machinery, plant, equipment, furniture
and fittings whether given separately or together. Further, it shall be
deductible whether or not any or all of the above are owned by the payee?

4. What are the circumstances under which no tax is to be deducted at source

on rent as defined under Sec. 194-I ?

No tax is required to be deducted at source under this section if the following

conditions are satisfied:

a) Where aggregate amount of rent does not exceed Rs. 2,40,000:- No tax is
to be deducted if the aggregate amount of rent in the previous year does not
exceed Rs. 2,40,000.

b) Rent paid to the Government and certain entities:– No tax at source needs
to be deducted from payments by way of rent made to Government and
entities whose income is exempt from income-tax under clauses (20) and
(20A) of Sec.10 of the Income tax Act.

c) Certain entities required to file return under Sec. 139(4A) or 139(4C):- As

per rule 28AB certain entities who are required to file return of income under
Sec. 139(4A) or 139(4C) may apply in Form No. 13 for no deduction of tax at
source provided certain conditions are satisfied.

d) Certain entities whose income is unconditionally exempt under Sec. 10:- In

case of certain entities whose income is unconditionally exempt under Sec. 10
and who are statutorily not required to file return under Sec. 139 there will be
no requirement for TDS, since their income is any way exempt.

5. Where is the limit of Rs. 2,40,000 for non-deduction of tax at source

applicable in case of each co-owner?

Where the share of each co-owner in the property is definite and ascertainable,
the limit of Rs. 2,40,000 will be applicable to each co-owner separately.

6. What are the provisions regarding low deduction or no deduction of tax on

rent under Sec. 194-I ?

Any person to whom rent is payable may make an application in Form No.13 to
the Assessing Officer and obtain such certificate from him, as may be
appropriate, authorizing the payer not to deduct tax or to deduct tax at lower
rate.

As per Sec. 206AA(4), w.e.f. 1-4-2010, no certificate under Sec. 197 for
deduction of tax at Nil rate or lower rate shall be granted, unless the
application made under that section contains the Permanent Account Number
of the applicant.

7. What is method of taking credit of TDS on advance rent ?

On advance rent pertaining to more than one financial year, the tax is
deducted at source in the year of receipt of advance rent. The credit for TDS
shall be allowed to the assessee in the same proportion in which such income
from rent is offered for taxation for different assessment years, based on the
single TDS certificate furnished for the entire advance rent.
However, if the rent agreement gets terminated in a subsequent year or rented
property is transferred and the balance advance is refunded to the transferee
or the tenant, as the case may be, the credit for entire balance of TDS which
has not been given credit, shall be allowed in the year of termination.