Briefly discuss the provisions of tax deduction at source under the Income-tax Act, 1961 and determine the amount, if any, of TDS in respect of the…

CA Intermediate · Taxation · MTP · September 2024
Briefly discuss the provisions of tax deduction at source under the Income-tax Act, 1961 and determine the amount, if any, of TDS in respect of the following payments: (i) Mr. Vikas received a sum of 10,20,000 on 28.02.2024 as pre-mature withdrawal from Employees Provident Fund Scheme before continuous service of 5 years on account of termination of employment due to ill-health. (ii) Indian Bank sanctioned and disbursed a loan of 12 crores to B Ltd. on 31-12-2023. B Ltd. paid a sum of 1,20,000 as service fee to Indian Bank for processing the loan application.

Suggested Answer and Working Notes:

TDS implications (i) On pre-mature withdrawal from EPF No tax is deductible under section 192A even though the employee, Mr. Vikas, has not completed 5 years of continuous service, since termination of employment is on account of his ill-health. Hence, Rule 8 of Part A of the Fourth Schedule is applicable in this case. (ii) On payment of service fee to bank Even though service fee is included in the definition of “interest" under section 2(28A), no tax is deductible at source under section 194A, since the service fee is paid to a banking company, i.e., Indian Bank.

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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