DSRV India: Understanding TDS Provisions Under ITA

MCQ SELF CHALLENGE # 0056 ON TDS PROVISIONS UNDER ITA

TDS Provisions under ITA

Dear Professional Seniors & Friends,

Warm Greetings!

Here is the Next post of #MCQ on concept-based practical professional knowledge on TDS u/s 194) of the Income Tax Act in a unique manner to be self-answered by participants. The detailed answers to these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 56.1: ABC Pvt. Ltd. has paid a fee to XYZ firm for technical services and professional services, Rs. 40,000 and Rs 25,000 respectively. Which of the following statements is correct?

A) ABC is required to deduct TD5 on Rs. 65,000 and pay the net amount.

B) ABC is required to deduct TDS only on Rs. 40,000.

C) ABC is not required to deduct any TDS.

D) None of the above.

MCQ 56.2: Mr. A has paid fees for professional services to a lawyer for settling his personal family case and paid Rs. 25,000 in advance and Rs. 40,000 after settlement of the case. Which of the following statements is correct?

A) A is required to deduct TDS on Rs. 65,000 and pay the net amount.

B) A is required to deduct TDS only on Rs. 40,000.

C) A is not required to deduct any TDS.

D) A is required to deduct TDS at the time of payment of Rs 25,000 and 40.000 respectively.

Answer MCQ Self Challenge # 0056

This post of MCQ is on provisions relating to TDS u/s 194] of the Income Tax Act.

Answer to MCQ 56,1: B) ABC is required to deduct TDS only on Rs. 40,000.

Answer to MCQ 56.2: C) A is not required to deduct any TDS.

Practical Analysis for MCQ 56.1 & 56.2:-

1. Section 194J requires every person (Individual & HUF is liable to tax audits to deduct TDS @ 10% on the sum payable to the resident by way of fees for professional services, technical services, royalty, or any other sum of a professional nature

2. It also provides that a deduction shall not be made if consideration for the below-mentioned services is not more than:

• 30,000 for fees for professional services, or
• 30.000 for fees for technical services, or
• 30,000 for royalty, or
  Rs. 30,000 for other sums

3. The point to note here is that the limits mentioned above will be applicable individually for services mentioned above and are not to be read in totality.

4. It also provides that Individual or HUF shall not be liable to deduct TDS if such sum is paid exclusively for personal purposes.

Based on the above analysis, the correct answer MCQ 1 is B) ABC is only required to deduct TDS on Rs 40,000 as the limit of Rs. 30,000 is separately for professional service or technical services and the Correct answer of MCQ 2 is C Mr. A is not required to deduct any TDS as fees paid to lawyer is personal.

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as a professional opinion: you can have your own opinion.)

You can also get help from the best chartered accountant firm in India with a detailed understanding of the TDS provisions under ITA.

Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9610116321