Income-tax deduction from salaries under section 192 during the financial year 2012-13

Circular no. 8/2012 [F.NO. 275/192/2012-IT(B)], DATED 5-10-2012

Reference is invited to Circular No. 05/2011, dated 16-8-2011 whereby therates of deduction of income-tax from the payment of income under the head “Salaries” under Section 192 of the Income-tax Act, 1961 (hereinafter the Act), during the financial year 2011-12, were intimated. The present Circular contains the  rates of deduction of income-tax from the payment of income chargeable under the head “Salaries” during the  financial year  2012-13 and explains certain related provisions of the Income-tax Act, 1961 (hereinafter the Act) and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms and Notifications are available at the website of the  Income Tax Department.


As per the Finance Act, 2012, income-tax is required to be deducted under Sculaection 192 of the Income-tax Act 1961 from income chargeable under the head  “Salaries” for the  financial year  2012-13 (i.e. Assessment Year 2013-14) at the following rates:…… read more


TDS rates for financial year 2012 -13

      1 Comment on TDS rates for financial year 2012 -13

 TDS (tax deducted at source) Rate Chart for Financial year 2012-13 is given below.

Sl. No.

Section Of Act

Nature of Payment in brief Cut Off Amount Rate %
01.04.2012 01.07.2012 HUF/IND Others
1 193 Interest on debentures 2500 5000 10 10
2 194 Deemed dividend 10 10
3 194A Interest other than Int. on securities (by Bank) 10000 10000 10 10
3A 194A Interest other than Int. on securities (By others) 5000 5000 10 10
4 194B Lottery / Cross Word Puzzle 10000 10000 30 30
5 194BB Winnings from Horse Race 5000 5000 30 30
6 194C(1) Contracts 30000 30000 1 2
7 194C(2) Sub-contracts/ Advertisements 30000 30000 1 2
8 194D Insurance Commission 20000 20000 10 10
9 194EE Payments out of deposits under NSS 2500 2500 20
10 194F Repurchase of units by MF/UTI 1000 1000 20 20
11 194G Commission on sale of lottery tickets 1000 1000 10 10
12 194H Commission or Brokerage 5000 5000 10 10
13 194I Rent (Land & building) furniture & fittings) 180000 180000 10 10
Rent (P & M , Equipment 180000 180000 2 2
14 194J Professional/Technical charges/Royalty & Non-compete fees 30000 30000 10 10
15 194J(1)(ba) Any remuneration or commission paid to director of the company(Effective from 1 July 2012) NA NIL 10 10
16 194LA Compensation on acquisition of immovable property 100000 200000 10 10
17 194LLA Payment on transfer of certain immovable property other than agricultural land (Finance Minister has withdraw TDS on such transaction on 07/05/2012)

 (a) INR 50 lakhs in case such property is situated in a specified urban agglomeration; or(b) INR 20 lakhs in case such property is situated in any other area

withdrawn by Finance Minister on 07/05/2012no tds on such transactions withdrawn by Finance Minister no no tds on transfer of immovable property

To view the TDS rates of FY: 2013-14, Click here
To view the TDS rates of FY: 2014-15, Click here
To view the TDS rates of FY: 2015-16, Click here
To view the TDS rates of FY: 2016-17, Click here


Service tax Payable on TDS as it is part of Consideration

Section 67 of the Act has made provision for valuation of taxable service for charging service tax. According to Section 67(1)(a) of the Act where there is a monetary consideration paid to provide taxable service, the assessable value for levy of service tax is gross amount charged by the Service provider for the taxable service provided. Sub-section (2) of the said section has made provision to include the amount of service tax to the gross value of consideration where taxable service provided is inclusive of service tax. The term consideration for the valuation of taxable service is defined by explanation appearing under Section 67 meaning that consideration includes any amount that is payable for the taxable service provided or to be provided.

The liability of the appellant arose under the Act in terms of Section 66A of the Act as recipient of service of Engineering Consultancy from the Consultant abroad. Rule 7 (1) of the Service tax(determination of value) Rules, 2006 which came into force with effect from 19.4.2006 has made provision in respect of services covered by Section 66A of the Act. According to this Rule, measure of value for taxation of service covered by that Section shall be such amount as is equal to the actual consideration charged for the services provided or to be provided…. read more


International Tax TDS on Overseas Commission

      No Comments on International Tax TDS on Overseas Commission

After withdrawal of circular No. 786 of 2000, vide CBDT circular 7/2009 there is a lot of confusion in mind of exporters relating to deduction tax at source on commission paid to non-resident agents who operates outside India. Further recent ruling by Authority of Advance Rulings (AAR) against the Applicant in case of SKF Boilers and Driers Pvt Ltd [AAR No 983 -984 of 2010] holding that Export commission paid to a non-resident agent is income deemed to accrue or arise in India and liable for deduction of tax has worsened the problem.

To understand the subject, let first analyze the modus operandi of the transaction. Generally the agents render their services abroad for which they are entitled to receive commission abroad for the services rendered by way of searching prospective foreign buyers / clients. Also, the payment is also received by the foreign agents directly outside India in their country.

Section 195 of the Income tax Act requiring to deduct tax on foreign payments i.e. sum paid by Resident to Non Resident, comes in to force only when the payment made to the Nonresident is his income chargeable under Indian Income tax Law. Therefore TDS liability on such commission is an offshoot from its chargeability to Income tax under Section 5(2) of the Act. See GE India Technology (327 ITR 456)(SC)

Section 5(2), the charging section for taxing nonresident income provides for two conditions. First condition of receipt of income in India is ruled out since payment of commission is made directly outside India. However the second condition viz., income accrues or arises or deemed to accrue or arise requires considered elaboration.

AAR in the ruling in case of SKF Boiliers has stated that the words accrue or arise occurring in Section 5 of the Act have more or less a synonymous sense and income is said to accrue or arise when the right to receive it comes into existence. It also stated that it is undisputed that agents have rendered services abroad and have solicited orders, but observed that the right to receive commission arises in India when the order is executed by the applicant in India. The AAR concluded that the fact that the agents have rendered services abroad in the form of soliciting the orders and the commission is remitted to them abroad are wholly irrelevant for the purpose of determining the situs of their income and accordingly held such commission income of non resident agents as taxable under Section 5(2)(b) read with Section 9(1)(i) of the Act.

On a careful perusal it appears that AAR has applied Section 9(1)(i) without examining the existence concept of business connection before arriving at its decision. It may be noted that for invoking Section 9(1)(i), existence of business connection (Permanent Establishment) is asine qua non and inevitable. Hon’ble Delhi High Court has recently in case of Eon Technology (203 Taxman 266) has rightly held that overseas commission income of foreign agent is not taxable in India in absence of business connection.

In the above context, the term business connection as defined in Explanation 2 to S.9(1) would mean:

“any business activity carried out through a person who, acting on behalf of the non-resident”,

(a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or

(b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or

(c) habitually secures orders in India, mainly or wholly for the non-resident or for that non-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident:

Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business

Section 9(1)(i)  provides that income arising out of business connection is chargeable to tax in India only to the extent of income reasonably attributable to the operations carried out in India. As noted earlier, a commission agent working outside India for obtaining export orders does not carry out any business operation in India and therefore no income is stated to accrue or rise in India. in respect of your commission agent. No doubt, the CBDT circulars clarifying this position have been withdrawn. However, it does not change the fundamental principles.

Incidentally, the decision of Supreme Court in the case of CIT vs. Toshoku Limited (125 ITR 525) is worth noting where it was held that the commission agent who does not carry out anybusiness operation  in India and acts as a selling agent outside India is not chargeable to tax in India and that the receipt in India of the sale proceeds remitted by the purchasers from abroad   did not amount to an operation carried out by the non-resident commission agent in India as contemplated by clause (a) of the  Explanation  to Section 9(1)(i)   of the Act. The Supreme Court has categorically held that the commission amounts which were earned by the non-resident for services rendered outside India could not be deemed to be income which had either accrued or arisen in India.

In light of above discussion, it is clear that in absence of any fixed establishment of the foreign agent, his income may not be taxable  in India and accordingly the question to deduct doe not arise. It is possible that department may litigate based on withdrawal of CBDT Circular and the AAR ruling, however it may be confronted by arguing that such ruling is  per incuriam  (not a binding precedent) as it has not considerd the crucial aspect of  business connection . Needless to add findings of ITAT decision in case of  Green Emirates (99 TTJ 988)(Mum.)where it is stated that since AAR is not part of the judiciary hierarchy, it cannot lay down a binding precedent for anyone be it the Revenue, the assessee or the appellate authorities and by no stretch of logic, a ruling given by AAR has any precedent value in general.

I hope this article may prove useful to all members in  practice  and industry at large.