Tax Deducted at Source (TDS)

The topic you've described comprehensively covers the various provisions of the Income Tax Act, 1961, related to Tax Deducted at Source (TDS) in India. TDS is a mechanism for collecting income tax on certain incomes at the source itself, i.e., when the income is earned or payment is made for goods and services. The government has mandated TDS deduction on various specified payments to ensure compliance with tax laws and to streamline tax collection.

Here's a structured overview of the sections you've mentioned:

1. Section 194K: Applies to payments other than salary, wages, or remuneration, made during the previous year to a resident not engaged in the business or profession, and payment of profits in certain cases.

2. Non-Applicability of TDS under Section 194K: It doesn't apply if the payments are for personal services or if they are subject to TDS under any other provision.

   • Example: Payments made to a contractor for constructing a house for the dedctor, where the contractor is not a business entity.

3. Section 194LA: Applies to payment of compensation on acquisition of certain immovable property, subject to conditions.

   • Rate of TDS: 2% if the amount exceeds INR 50 lakhs.

   • Time of Deduction: At the time of payment of the consideration.

   • Threshold Limit: Only applicable if the value of consideration exceeds INR 50 lakhs.

   • Non-Applicability: Not applicable on transactions not meeting the threshold limit or on payment to a local authority.

   • Example: Payment made to an individual for acquiring his agricultural land.

4. Section 194LB: Applies to income by way of interest from infrastructure debt funds.

   • Rate of TDS: 5%.

   • Time of Deduction: At the time of payment of interest.

5. Section 194LC: Applies to income by way of interest on government securities or rupee-denominated bonds of an Indian company, payable to a foreign institutional investor or a qualified foreign investor.

   • Rate of TDS: NIL if the interest is less than INR 50 lakhs; otherwise, 20%.

   • Time of Deduction: At the time of credit of such income to the books of account.

   • Threshold Limit: Not applicable if the interest is below INR 50 lakhs.

   • Example: Interest earned by a foreign investor on government securities.

6. Section 194M: Applies to certain payments to a non-resident not exceeding INR 50,000 in a financial year.

   • Rate of TDS: 10% unless the lower rate is specified in the agreement for the avoidance of double taxation.

   • Time of Deduction: At the time of payment.

   • Non-Applicability: Not applicable if the payments are for personal services or if they fall under section 195 or 196, etc.

   • Example: Payment made to a non-resident for technical know-how or consultancy services.

7. Section 195: Applies to any income by way of fees for technical services or royalty payments to a non-resident.

   • Rate of TDS: Generally, 10%, which can be lower or higher based on the DTAA rates.

   • Time of Deduction: At the time of payment.

   • Example: Payment made to a foreign company for technical services rendered.

8. Section 196: Applies to dividends paid to non-residents or their branches in India.

   • Rate of TDS: 15%, which can be lower or higher based on the DTAA rates.

   • Time of Deduction: At the time of payment of dividend.

   • Example: Payment of dividends to a foreign shareholder.

9. Section 197: Applies to payments made to directors of a company in respect of their office.

   • Rate of TDS: 30% unless a lower rate is agreed upon.

   • Time of Deduction: At the time of payment of remuneration.

   • Example: Salary paid to directors of the company.

10. Section 198: Applies to payments to non-residents for rendering any services in India.

    • Rate of TDS: Generally, 7.5%, which can be lower or higher based on the DTAA rates.

    • Time of Deduction: At the time of payment.

    • Example: Payment made to a non-resident for services rendered in India.

11. Section 199A: Applies to certain payments to foreign Governments or their entities and international organizations.

    • Rate of TDS: Exempted in most cases.

    • Time of Deduction: N/A.

    • Example: Payment made to a foreign government for procurement of arms and ammunition.

For each of these sections, the rates, conditions, and procedures for TDS deduction are clearly defined in the Income Tax Act and associated rules. The deductor must ensure compliance with these provisions and file the TDS returns accordingly. The deductee can then claim this amount in their annual tax return.

TDS is a crucial aspect of tax planning and compliance, and it's important for both deductors and deductees to understand their responsibilities under these provisions. Non-compliance with TDS rules can result in penalties and interest charges.