What is TDS? basics of TDS

TDS (Tax Collected at Source) is one of the modes of collecting taxes from the assesses in India. It is governed under Indian Income Tax Act, 1961.the central board of direct taxes which is a part of department of revenue will look after the TDS matters.in simple words TDS mean deducting the tax by the payer from the amout that he pays to the payee. For the purpose of this TDS we need to know two terms.

1.       Deductor

2.       Deductee

Deductor:

Deductor is the person that who deducts the tax at applicable rate from the payment that he pays to other party .Deductor is popularly known as employer is the person payee is a salaried employee.

Deductee

Deductee is the person that from whose payment deductor deducts the tax .generally deductee are classified into 3 types .

·         Salaried : who are working for salary then he is termed as employee .in this case all the details of tax deduction and payments will be submit in Form  24Q to the government. Then government will issue Form 16.

·         Non-salaried –resident: here the payee is not a salaried person but he is resident in india.in this case all the details of dedications of tax and payment will be submit  in form 26Q to the govt.

·         Non-salaried –Non resident: in this case the (deductee) is not a salaried person and he is also nonresident of India at the time of payment. In this case all the details of dedications of tax and payment will submit in form 27Q to the govt.

TDS certificates:

There are two types of TDS certificates 1) Form 16 and 2) Form 16 A

FORM 16 is applicable to salaried employees. This is nothing but detailed summery of Dedication of TDS and payment of remaining amount .this will issued to the employers after the current Financial yesr and employee can get their Form 16 Certificate from their employers.

FORM 16A is applicable to non salaried persons for both residents and non resident. TDS Certificates Form 16A for Financial Year 2011-12 For the following categories of deductors, it is mandatory to download Form 16A from TIN Web Site and issue such downloaded certificates to deductees

1.    Companies

2.    Banks

3.    Co-operative society engaged in banking business

For other deductors, it is optional to download Form 16A from TIN Web site. Such downloaded TDS certificate will have a unique TDS Certificate Number This procedure is applicable for all deductions made on or after 01-04-2011

What is The Negative List of Service Tax as per the New Budget 2012-13?

After 14 years of introducing service tax in India, for every financial budget new services are brought under service tax nest .in India major contribution for GDP is coming from service sector .service contribute 60% of GDP. But a few services are exempted from levying of this services tax. This list of services is called as negative list of services. the Central Board of Excise and Customs released a revised negative list concept paper in November last year.

In the union budget 2012-13 the rate of service tax is increase from 10%  to 12% and the government if expected to rise Rs.95,000 cores from the service sector in the form of service .Please check the following circular for more details

Government of India 
Ministry of Finance 
Department of Revenue

Notification No.12/2012-Service Tax

New Delhi, the 17^th March 2012

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services from the whole of the service tax leviable thereon under section 66 B of the said Finance Act, namely:-

1. Services provided to the United Nations or a specified international organization;
2. Health care services by a clinical establishment, an authorized medical practitioner or para-medics;
3. Services by a veterinary clinic in relation to health care of animals or birds;
4. Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities;
5. Services by a person by way of-

1. renting of precincts of a religious place meant for general public; or
2. conduct of any religious ceremony;

6. Services provided to any person other than a business entity by -

1. an individual as an advocate; or
2. a person represented on and as arbitral tribunals;

7. Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organisation approved to conduct clinical trials by the Drug Controller General of India;
8. Services by way of training or coaching in recreational activities relating to arts, culture or sports;
9. Services provided-

1. to an educational institution by way of catering under any centrally assisted mid – day meals scheme sponsored by Government;
2. to or by an institution in relation to educational services, where the educational services are exempt from the levy of service tax, by way of transportation of students or staff;
3. to or by an institution in relation to educational services, where the educational services are exempt from the levy of service tax, by way of services in relation to admission to such education;

What are Preliminary expenses and Accounting for preliminary expenses?

Before incorporation and commencement of business, company and the promoters of the company may incurred so many types of expenses like statuary fees and company logo designing, in some cases rent for the office premises during the time of incorporation not after incorporation etc... These are all comes under preliminary expenses .in simple words preliminary expenses are the expenses that spent by the promoters before the incorporation of company.

Examples:

• Expenses paid for CA for incorporation of company
• Expenses paid for name approve of the company
• Expenses for printing of statutory documents like MOA, AOA
• Stamp duties paid
• Any other expenses paid to take the company into existence
• Expenses for raising initial share capital

Accounting for preliminary Expenses:

The benefit of the preliminary expenses is long-term so it is treated as intangible asset and shown in Balance sheet under Missilinous assets. These expenses will be written off in 5 equal year installment in profit and loss A/c. you can also transfer whole amount in single year but for income tax purpose 1/5 of the amount will consider.

Accounting Entries:

1. Preliminary Expense - Dr (Current Asset)

                             To Cash\Bank

                             

2. Preliminary Expenses Written Off - Dr (Indirect Expenses)

                                        To Preliminary Expenses

3. Profit & Loss A\c. - Dr

                To Preliminary Expenses

Pre commencement expenses:

These are the expenses that are incurred by the company after incorporation and before commencement of business. For example a private company and a public ltd company without share capital can commence business after getting certificate of incorporation from ROC. But a public company having share capital is not allowed to commencement of business until it get certificate if commencement of business. In this mean time they can inure some expenses like recruiting employees etc… these expenses are called as pre commencement expense. The company will written off this expenses in that year only

What Is Form16 and Form16A? and Uses of Form16

Form16 :

For every salaried employee the employer will deduct the TDS at the time of salary payment. Form 16 is nothing but TDS, salary pay details of an employee i.e. how much salary is paid to him and what amount of TDS Deducted by the employer from each and every month’s salary payment. Employee can use this for filing income tax returns. Form 16 will be issued after the current financial year. If there are any issues with income tax Dept. Form 16 will useful for you. So it is safe to kept all your forms 16 along with you.

Important points to remember:

• ·         Form16 will be issued to only salaried employee
• ·         Only employers holding valid TAN Can deduct the TDS And provide Form 16.other wise they will not provide the Form 16
• ·         For16 is the detailed summary of Income and Tax deductable at source
• ·         Self Employed person will not get form 16 any way .in that case such person need to file income return and submit proof of your income to IT dept.
• ·         This is the responsibility of the employer to issue form16 .if there are any mistake in  form 16 then it is your responsibility to correct and wait for refund if your are beneficiary .but it will take long time.
• ·         Consultants are different from employees. The fee received by consultants is not come under salary. It is like professional fee .

Uses of Form16:

• ·         In these days form 16 is compulsory to get housing loan from banks. Employees are required to submit form16 as supporting document to process your loan purpose.
• ·         As said above it will be useful if there are any issues with Income tax Dept

Form 16A: The main difference between  form 16 and 16A is source of income .if the one person  income is  salary then he/she will get Form16 from his/her employeer.if the income is other than salary then he/she will get Form16A.For Example consultants will get Form 16A because fee received by consultants is not come under salary. It is like professional fee as said above