Tds deductions: income limit

Your Query:May i know if the company must compulsorily deduct for an income as total income per annum exceeds the tax limit? 

Reply: No TDS is required to be made where the fees for professional or technical fees if the payment, or the total of such payments during the entire Finacial Year,  does not exceed Rs 30,000. even if the Total Income of the payee exceeds the taxable minimum, whereas if the payment is characetrised as salary, TDS is required if the total income from salary exceeds the taxable minimum.

The provisions of Dection 194J  reads as under:

Fees for professional or technical services.

194J.

(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of—

(a) fees for professional services, or

(b) fees for technical services[or]

[(ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company; or

[(c) royalty, or

(d) any sum referred to in clause (va) of section 28,]

shall, at the time of credit of such sum to the account of the payee 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 an amount equal to [ten] per cent of such sum as income-tax on income comprised therein :

Provided that no deduction shall be made under this section—

(A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or

(B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed— (i) [thirty thousand rupees], in the case of fees for professional services referred to in clause (a), or (ii) [thirty thousand rupees], in the case of fees for technical services referred to in [clause (b), or]

[(iii) [thirty thousand rupees], in the case of royalty referred to in clause (c), or

(iv) [thirty thousand rupees], in the case of sum referred to in clause (d) :]

[Provided further that an individual or a Hindu undivided family, ...............

(3) Explanation.—For the purposes of this section,—

(a) "professional services" means .........

(b) "fees for technical services" shall have the same meaning as ..............

[(ba) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;]

(c) where any sum referred to in sub-section (1) 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 sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.

I retired attaining 60 years on 31.08.2012 as Manager, Cauvery Kalpatharu Grameena Bank (sponsored by State Bank of Mysore).  Received Gratuity as per Gratuity act. But the TDS is deducted for encashment of leave at my credit. Is it alright?  The amount payable is Rs.432449/-. But paid is Rs.415948/-. On enquiry I understand Rs.16501/- is deducted as TDS. In spite of the note given by one Mr.Shailesh oberoi, Member since:june2010, which is reproduced as under:

"This is good news for all employess specially government employees. The Gratuity Limit has been raised from 3.5 lacs to 10.0 lacs. This will give advantage to both private and public sector employees.According to this new amendment the 10 lacs on gratuity is Tax free. I have given the details of ew Gratuity Act Amendment Indi 2010 and gratuity calculatio below:

Section 1010(AA) of IT Act covers this aspect.

According to Bombay High Court Judegement in case of DP Malhotra 142CTR 325,'retirement' includes resignation and hence, employee would be entitled to benefit even on resignation. Thus encshment on Resignation & Retiremnt will be non-taxble.

You can refer the said section for a better understanding of the provision

Regards.Shailesh Oberoi.  Attribution:https://www.citehr.com/287044-income-tax-encashment-retirement.html#ixzz23A1G90kH

I understood both Gratuity and encashment of leave on retirement are non taxable, Is it alright. Please clarify.

with regards

nataraja bs

You retired on superannuation from a non-governement institution on 31-08-2012. Your only grievance is that your employers effected TDS from the Leave Encashment benefits.

In the cases of non-governemental employees, Section  10(10AA) grants exemption for Leave Encashment benefits, but not full exemption- see Section 10(10AA) (ii):

(10AA) (i) any payment received by an employee of the Central Government or a State Government ...........................

           (ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether] on superannuation or otherwise,  subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit  applicable in this behalf to the employees of that Government] :

Provided that where any such payments are received by an employee from more than one employer......................................

Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or years, ....................................

Explanation.—For the purposes of sub-clause (ii),—

the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired ;

You may, on the above basis, compute the amount of Leave Enacshment benefits exempted in your case, and check whether there has beenany excess TDs in your case. 

You can claim the exemption , and the consequential refund (with interest) by  filing your return of income for the Assessment Year 2013-14.