Briefly discuss the provisions of tax deducted at source under the Income-tax Act, 1961 in respect of the following payments: (i) Mr. Shamsher (a…

CA Intermediate · Taxation · MTP · January 2025
Briefly discuss the provisions of tax deducted at source under the Income-tax Act, 1961 in respect of the following payments: (i) Mr. Shamsher (a resident individual aged 65 years) has maintained two fixed deposits in two different branches of HFC Bank of India (working on core banking solution). During the year 2023-24, the bank paid - 32,000 and - 17,000 as interest on these fixed deposits. (ii) Mr. Chetan, a pensioner, pays - 55,00,000 during F.Y. 2023-24 to Mr. Gopi, for contract payment for reconstruction of his residential house.

Suggested Answer and Working Notes:

(i) HFC Bank is not required to deduct tax at source under section 194A, since the aggregate interest on fixed deposit with the two branches of the bank - 49,000 does not exceed the threshold limit of 50,000, applicable in case of senior citizen. Since HFC Bank has adopted core banking solution (CBS), the aggregate interest paid by both branches has to be considered. (ii) TDS provisions under section 194C are not attracted in this case, since Mr. Chetan is a pensioner. However, Mr. Chetan has to deduct tax at source@5% u/s 194M, since the payment to contractor, Mr. Gopi, exceeds 50lakhs.

Topics: Paper 3A: Income Tax Laws

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