Surcharge and cess on tax deducted at sources has been removed on payment made to resident except salary by Finance act (2) 2009 from 01.04.2009.Further TDS rates on Interest paid to domestic company has also been reduced to 10% from earlier 20 % .These instruction has been amended one year back ,yet there are many queries on this blog ,like to whom surcharge is applicable ,on which payment cess is to be deducted ,where it is written that rate of tds on Interest paid to Companies has been reduced to 10 %.But now explanatory notes to Finance Act(2)2009 has clarified all this doubt .so I am sharing the relevant part with you .
In every case in which tax is to be deducted at the rates in force under the provisions of sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the Income-tax Act, the rates for deduction of income-tax at source during the financial year 2009-10 have been specified in Part II of the First Schedule to the Act. The rates for deduction of income-tax at source during the financial year 2009-10 will continue to be the same as those specified in Part II of the First Schedule to the Finance Act, 2008 except for the following changes:-
- In the case of a person resident in India, other than company, on any other income the rates have been changed to 10% from 20%.
- In the case of a domestic company on the income by way of interest other than interest on security, and on any other income the rates have been changed to 10% from 20%.
SURCHARGE - The tax deducted at source in each case shall be increased by a surcharge for purposes of the Union as follows:-
- (i) In the case of every individual, Hindu undivided family, association of persons and body of individuals, no surcharge shall be levied.
- (ii) In the case of every artificial juridical person, no surcharge shall be levied.
- (iii) No surcharge shall be levied on the amount of income-tax deducted in the case of a co-operative society and local authority
- (iv) In the case of every firm and domestic company, no surcharge shall be levied.
- (v) The surcharge on TDS shall be levied only on payments made to foreign companies.The rate of surcharge in such cases is 2.5 per cent.
EDUCATION CESS - The additional surcharge, called the Education Cess on income-tax shall continue to be levied for the purposes of the Union at the rate of two per cent of income-tax and surcharge, if any, in the case of salary payments to residents and in the case of all payments to non-residents.
For instance, if such tax is Rs. 1,00,000 and the surcharge is Rs. 10,000, then the education cess of two per cent is to be computed on Rs. 1,10,000 which works out to be Rs. 2,200.In addition, the amount of tax deducted and surcharge shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent in all such cases. Thus in the earlier illustration, where the amount of tax deducted is Rs. 1,00,000, the surcharge is Rs. 10,000, the Education Cess of two per cent is Rs. 2,200, the said Secondary and Higher Education Cess will be computed on Rs. 1,10,000 which works out to be Rs. 1,100. The total cess in this case will amount to Rs. 3,300 (i.e., Rs. 2,200 + Rs. 1,100).
Download TDS rates 2009-10 and Fy 2010-11 with new limits