TDS provision when income is subject to clubbing Provisions: In whose name TDS is to be done?

 

There are lot many cases where the FDR is done in the name of the minor by the parents or in the name of the wife by the husband. 

Income in such case is subject to the clubbing provision and the person giving the amount is liable for taxation.  The person is whose name FDR is done is not liable for taxation. 

However, TDS in such case may be an issue as the banker or payer may be doing TDS in the name of the person whose name is mentioned in the FDR.

Here is an Income Tax Rule No. 37BA which deals with the situation. The same is produced here-under:

 Credit for tax deducted at source for the purposes of section 199.37BA.

(1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority.

(2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee:

Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).

(ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.

(iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody.

(3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable.

(ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax.

(3A) Notwithstanding anything contained in sub-rule (1), sub-rule (2) or sub-rule (3), for the purposes of section 194N, credit for tax deducted at source shall be given to the person from whose account tax is deducted and paid to the Central Government account for the assessment year relevant to the previous year in which such tax deduction is made.

(4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of—

(i)		the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority; and
(ii)		the information in the return of income in respect of the claim for the credit,

Subject to verification in accordance with the risk management strategy formulated by the Board from time to time.

In short, the PAN of the person in whose hands clubbing is to be done is required to be given to the payer by the payer in the form of declaration.

This will result in reflection of TDS credit in the PAN of the person in whose hands clubbing provision is attracted.