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    Oct 20, 2011

    TDS CIRCULAR NO 8/2011 ABOUT PAYMENT DEPOSIT IN BANKS

    CBDT issued a circular aboout the payment of TDS to be deposited in Banks. Central board of direct taxes issued this circular no. 8/2011 dated 14-10-2011. Full circular is as under.

    CIRCULAR NO     08/2011 
    F.No. 275/30/2011- IT (B) 
    Government of India 
    Ministry of Finance 
    Department of Revenue 
    [Central Board of Direct Taxes] 
    New Delhi, the   14th October, 2011 
    Subject: Tax deduction at source on the deposits in banks in the name of the Registrar/ 
    Prothonotary and Senior Master attached to the Supreme Court/ High Court etc 
    during the pendency of litigation of claim/compensation-reg. 

     Section 194A of Income Tax Act, 1961 (“the Act”) stipulates deduction of tax at source (TDS) 
    on interest other than interest on securities if the aggregate of amount of such interest credited or paid 
    to the account of the payee during the financial year exceeds the specified amount. 

    2. The Board has received references expressing difficulties in implementation of provisions of 
    Section 194A of the Act in a situation where in the course of the proceedings before Supreme Court/ 
    High Court/ any other court or tribunal (hereinafter “the court”), one or more than one litigant 
    (hereinafter ‘the depositor’) is directed by the court that a specified amount (hereinafter “deposit”) be 
    deposited in the bank either directly or through the court in order to protect the interest of litigants.   
    Such deposits (usually time deposits) are kept in the bank in the names of Registrar/ Prothonotary and
    Senior Master or any other name as per the order of the court.  Difficulties are faced in making TDS on 
    the interest periodically accruing on such deposits/ time deposits and about the person(s) as deductee
    who is entitled to TDS certificate in Form 16A. 

    3.1 The matter has been examined in the Board and it has been decided that, subject to para 4 
    below, this circular shall be applicable to cases where one or more than one litigant is directed by the 
    court that a specified amount be deposited in the bank directly or through the court. The bank shall in 
    accordance with the provisions of the Act, deduct tax at source on the interest accruing on the above 
    mentioned deposit(s) as per existing procedure and at the rates in force. The certificate of deduction of 
    tax shall be issued by the bank in the name of ‘the depositor’.  If more than one person has been 
    directed to deposit any specified amount, the amount of TDS shall be corresponding to each such 
    depositor for the portion of interest accrued in its respective share in the total amount deposited and 
    TDS certificates shall be accordingly issued by the bank.  
     
    3.2 At the time of making deposit of the amount ordered by the court, the depositor(s) shall submit 
    a prescribed declaration with the court for record purpose and to facilitate the administration of TDS. 
    The Registrar/ Prothonotary and Senior Master or any person authorized by the court will pass the 
    information furnished therein to the bank concerned for TDS properly in the name of the depositor(s) 
    in accordance with the provisions of the Act. 

    3.3 Some of the instances covered by this circular are:  
    a. In the course of appellate proceedings, the court directs an insurance company (the 
    depositor) to deposit a part of compensation awarded by Motor Accident Claims Tribunal. 
    This amount is deposited as Time Deposit in a bank in such name as per the directions of 
    the court, the credit of TDS on interest accruing on such deposit will be allowed to the 
    Insurance company which has made the said deposit. 

    b. The Court while deciding the cases of land compensation directs the authority concerned 
    (liable for making payment of compensation) to deposit any sum in time deposit in any 
    bank, the TDS on time deposit shall be in the name of the authority making deposit, if such 
    authority is an entity liable for charge to Income Tax on its income. In case the deposit in 
    the bank is by Central or State Government no tax will be deducted.
     
    c. The court adjudicating upon financial dispute during pendency of proceedings direct any 
    party(ies) to deposit any amount as security in time deposit, the TDS on interest accruing on 
    such deposit will be in name of the depositor irrespective of the fact that at the directions of 
    the court such time deposit has been drawn in the name of the officer of the court or joint 
    name or any other name.  

       4. The above procedure shall not apply to: 
    (a) any deposit in the bank held or dealt by the court or any other person appointed by the 
    court in the capacity of being an administrator or receiver or any authority of similar nature; 
    or 
    (b) any deposit which has not been made by any specific depositor but has arisen due to 
    attachment made by the Court; or  
    (c) the cases of “representative assessee” within the meaning of section 160 of the Act. 
    (Tajbir Singh) 
    Under Secretary to the Govt of India  
    Copy to 
    (i) The Chairman, CBDT and All members, CBDT 
    (ii) All CCsIT (CCA) for circulation among all officers 
    (iii) The DGIT(Admn)/The DIT(TDS) 
    (iv) All CsIT(TDS) for information 
    (v) All Divisions of the CBDT

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