Regarding TDS deduction in discount we got from broker.

[Ashish]

Hi All,
My query here is related to TDS deduction what broker has done when they gave 1% (from total of 5% discount).
they have deducted 10% TDS on that money (1%).

Ideally the money which is coming from broker is from our tax paid amount only (what we have earned during this fiscal)  and coming back to us from broker (same money loopbacked to us).
do we really need to pay tax on that money?
if yes then we have to pay other 20% if we fall in 30% slab.

But i dont understand TDS on that money.
It is something like a situation when you go to buy some material from shop (of say 250 Rs) and shopkeeper give you 10 Rs discount on that and will treat this 10Rs as your income and deduct TDS on that money.

Please correct me.

--Regards,
Ashish Gupta

[Nitin]

My perspective on this is:
Can't treat this is commission and add this to the other income. The
broker is the one getting the commission for selling the flat to us.
When he returns part of it to us, that's not commission.

The broker has a simple logic to cut TDS. He says, since he is a
vendor of 3C, the company cuts TDS while paying commission to him. As
we all know, for any payment beyond Rs 20k to a vendor, a company has
to compulsorily cut TDS. So, since he is getting the commission minus
the TDS, he passes it further on to us minus the TDS. It is 3Cs who is
further depositing this TDS to the tax authorities and giving a TDS
certificate to the broker. The broker, while filing his IT return,
deducts this TDS from his total payable taxes.

Now, the amount the broker is passing back to us, I don't think he is
himself cutting the TDS on that amount and neither is he therefore
depositing the TDS to the tax authorities.

THEREFORE, the broker is not authorized to give us a TDS certificate.

The tax treatment of this amt is a bit more complex than it seems, and
someone needs to help by taking a Tax Experts opinion after explaining
him the aspect in detail.

Nitin Thakur

[DISHA SHARMA]

Hi Ashish,

I am with you on this. I raised this query to UNICON and have not received an answer till date.

According to me:-

First of all, the amount which we have received from broker is in no way can be treated as our income on which broker should deduct tax.

Secondly as per IT Act section 194H says-

'Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10 per cent

Explanation.For the purposes of this section,

           (i)  commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities'

The explanation to the section 194H makes it very clear that the person who is receiving payment is a person acting on behalf of another person.

In our case we have received payment from UNICON and we are not person acting on behalf of UNICON. 
 
Disha

[Akhilesh]

Hey,
Actually this is what I understand the logic behind the TDS.
The brokers are giving us a discount of any % say 5%. Now this 5% is
not what they are paying from their pockets, they are passing 5% of
the commission they are getting from 3C. Now as per rules, 3C would be
giving them the commission after deducting TDS as per income tax
rules. So now when they are passing 5% of this commission to us, they
are also deducting the TDS. I also did not like TDS to be deducted
from what I was explecting, but this is the explanation with I have
satisfied myself :-)
Not only this, your broker would be obligated to give you TDS
certificate and you can check that on the TIN-NSDL website, that the
TDS was actually paid to the government. Like in my case I can find
this entry online in the TIN-NSDL website which gives details of Tax
that you have paid (e.g. tax deducted by your employer and paid to the
governement).

UNICON REAL ESTATES PVT LTD DELU03425C 194H 31-03-2010 53863.00
5386.00 5386.00 F 17-06-201

If you have any questions regarding this, you can get back to me.

Akhilesh

On Jul 21, 11:38 am, Ashish <writetoashishgu...@gmail.com> wrote:

[Ashish]

fwding again to group so that to find out if there is any other way to save this tax.

i am posting here because most of person would have gone through same kind of deduction.

 

--Ashish

On Wed, Jul 21, 2010 at 10:09 PM, Ashish <writetoas...@gmail.com> wrote:

No, it seems that we have to give 20% more when we dealt with broker. if this discount would have been directly from builder then we need not to give TDS for that.

but this is how seems tax provisining is.

 

 

--Ashish

On Wed, Jul 21, 2010 at 9:07 PM, <anurag...@gmail.com> wrote:

Hi Ashish

thnx for the update. in this case I was under the wrong impression. mayb the way out is to speak to our CA and claim a refund of the same..

regards

On , Ashish <writetoas...@gmail.com> wrote:
> No Anurag,
>
>
> I received TDS certificate from broker and same i could see from nsdl site too that TDS deducted by broker is visible in tax submitted towards my pan  a/c no.
>
>
>  
>
>
> so my question is that lets us assume that flat is of 30L now those 30L is from our all white money for which we have also paid tax to gov.
>
>
> now out of this 30L we would receive 30Lx2% = 60K from broker (and rest 3% is adj by builder upfront, no issue there). now on this 60K broker will deduct 10% TDS means 6K and will deposite it to income tax dep. so now my question start that this 60K which we are receiving through channel is from our hard earn money (30L which i talked earlier) and shd not be liable to again taxed so why 6K is going as TDS.
>
>
>
>
> and eventually not only 6K is going. if you fall into 30% slab then it becomes 18K total tax which you have to pay to gov out of 60K which you recieved from broker. :( :(
>
>
>  
>
>
>  
>
>
> --Ashish Gupta
>
>
>
>
> On Wed, Jul 21, 2010 at 7:10 PM, anurag...@gmail.com> wrote:
>
>
> hi Ashish
>
> what is happening is that the dealer is getting his commission frm 3c where 3c has deducted the tds . the same commission is being passeed on to us. as I see it ,3c has deposited the tds , hence the dealer will receive the tds certificate frm 3c, whereas, since the dealer has not deposited any tds, he will not be able to provide a tds certificate to us. therefore, we are paying tds on an amount on which we are not supposed to pay any tax, on top of that we will not even get a tds certificate.
>
>
>
> regards
>
> Anurag

[Ashish]

Yes Disha,
Actually problem is part TDS is already submitted by broker to income tax so we cannt simply skip this mentioning in ITR filling.
and when we mention it we lible to pay addition tax on that :(

--Ashish

[Ashish]

Akhilesh, you are correct.

i also checked and its there on nsdl site for me so we simply cannt skip this and had to pay more tax on that.

but see now simple calculation 30L is flat price and then if builder giving 10% to broker (assumption only) then it became 3L to broker from builder. builder will deduct 90K as tax and pay to income tax and will give 210K to broker.
broker has to give you 1.5(5% of 30L) so he eventually get only 60K. is it so?
out of 1.5L which he will give to us, he will deduct 15K to income tax.

now you get 1.35L on which you will pay 20% more on 1.5L (if coming in 30% slab) so 30K to again gov.

so here is simple data comes after all cal.

You paid from your white money = 30L
builder get = 27L
broker got = 60K
You get return back = 1.05L
now Gov got = 90K (builder deducted) + 45K + and addi what builder show profit on 27L.

and this all 30L was tax paid money.

i am weak in tax calculation so might be doing some mistake. as people will deduct expenditure also from there earning and will libel to tax on profit.

--Ashish

[Ashish]

Hi Nitin,
broker gave me TDS certificate when i asked for same. and i have also paid addition tax because of last date was approaching (big dent to my pocket).


--Regards,
Ashish

[Munish Bansal]

Hi All,

I would not call myself a tax expert but in regard to my business requirements I get to talk to many tax experts on regular basis. Have also talk to Unicon's CFO regarding this. I know people in people in 20% or 30% tax bracket will suffer more as they will have to shell out 10.6% [20.6% - 10%] and 20.9% [30.9%-10%] extra tax (respectively) to the govt from the payment that we have recd from Unicon or any other 3C channel partner or for that matter any other any other builder's channel partner.

Ideally, If I buy an item of MRP 100 at a 5% discount to the MRP from a seller I have to pay Rs 95 from my pocket. All aspects of the transactions get completed and exercise ends then and there itself. In this also I presented the exact same logic to channel partners and their take is mentioned below (which from purely technical point of view is as per law and justified):

Any business entity (company or a firm) has to maintain the revenue and expense details to the resolution of Rupee 1 in their books (and hence balance sheet). For 3C the revenue is from end buyers like you and me. They got their sales from a 3rd party (Unicon in this case). Unicon has a contract with them that 3C will pay them brokerage/commission of say 7% for every flat that is sold through Unicon. The 3C has to deduct TDS on the brokerage that it will pay to the Unicon as per the income tax rules. What 3C has paid to Unicon PLUS the TDS they have deducted is Unicon's net income. Unicon in turn has a "contract" with end buyers (People like you and me) that they will pay x% (say 5%) once they receive their cut from the builder. This amount that you and I have recd from Unicon PLUS the TDS they have deducted is Unicon's expense. Under what heading can they put this expense. The only practical option is Commission. Because it can not be salary or professional fee or rent or payment for acquiring an asset. The reason Unicon has to deduct TDS is NOT because 3C has deducted TDS from their payment. IT IS because as per government guidelines a buisness entity has to deduct 10% TDS for any payment made in the form of commission to an individual or a business entity of more than Rs 5000. [Quick check: http://www.simpletaxindia.org/2010/02/new-tds-rate-after-budget-2010-cut-off.html]. I am sure all of us have received "commission" of more than Rs 5000. The only alternative (which is very unclean and messy) for unicon would have been to split the cash-back in 20 chunks of Rs 5000 each [assuming total cash back is Rs 1 Lac] and issued cheques in the name of our extended family members and friends :). 

The cleanest and hassle free solution is that any discount (or cash back as they say it) should be reflected in the BSP at the time of booking itself. If we had all pressed for 6.5% reduction in the BSP while negotiating the deal with Unicon we all would have been saved from paying tax and running after Unicon to get the "cash-back". I know a group who has done it and got 10% discount directly from 3C [I cannot divulge the details of that group]. 283 Rupees per Sq Ft were reduced from their basic selling price in allotment letter and flat buyer agreement. Guess what, they will also have to pay 10% less registration charges when they, you and I get the flat registered in our names after possession. I wish I had come to know about that group earlier. Moral of the story is if you are a group get the best offer from channel partner and then directly negotiate with builder.

So the bottom line is those people who are saying that the TDS has been deducted because 3C has deducted TDS from their payments are either un-knowledgeable or putting forth a seemingly easy to understand but wrong excuse or are simply lying.

Disha, you certainly have a very good point. if we can make a group and take this forward legally by maybe filing a PIL we probably can get back the Tax we have paid. Ofcourse the group size will have to be big enough so that the per person legal expense is close to Rs 1000. Those who do not mind paying tax on cash-back which supposedly is an income can sit back and relax :)

Best Regards,
Munish Bansal | Co-Founder, Mobicules Technologies | www.mobicules.com

On Thu, Jul 22, 2010 at 7:29 AM, DISHA SHARMA <tanu...@gmail.com> wrote:

[Bickram Gmail]

Dear All,

 

I should suggest that we should collectively take up this issue with 3C’s and instead of getting our dues from Unicon or any other broker (where we all keep hearing stories of delayed payments and non payments………the other day someone from California called up as he has issues with one broker not paying his dues) should ask 3C’s to reduce the BSP based on the Credit notes that we have from the Brokers. We as a customer have trusted 3C’s for their reputation, have invested our hard earned money with their property and it should be 3C’s who should help resolve this issue which can also help can save a little more in terms of registration money. I feel 3c’s here should be more understanding on this issue unless there is some hidden benefit from all this.

 

Regards

Bickram Tomar

Save Paper, Save Trees, Save Earth

[Vishal Ranjan]

Yeah but the problem is that when we have a meeting hardly any one terms up which only shows what a weak section of the soceity we are!!

 

Bickram before going I suggest we meet up once discuss the issues collectively make a valid agenda for the meating with probably answers to our questions and questions to those answers qand go as a group of atleast 20-30 people who look like a strong crowd else it will be a waste of time and only 3-4 people will attend coming back with diplomatic answers!

[Om]

Dear all 

Do you know any progress of tower 10 of 3c LB .

When is the next payment date ? 

Did anyone of you get 2% from Unicon ? They are not even picking up phone calls ? 

What to do guys? 

Thanks 

Om

Sent from my iPod