1.1 Tax Deducted at Source (TDS) is:
- a preliminary estimate of tax liability payable on a Pay As You Earn (PAYE) basis.
- deducted at source from the payments made to a taxpayer by a withholding agent and deposited to the nearest RRCO.
- adjusted against the final tax liability.
- not a separate or new form of tax, but a mode of collection on a current income basis.
- intended to ease the taxpayers from the burden of having to pay tax at one time during the time of filing.
- an important source of information for ascertaining income and expenditure of a taxpayer during assessments.
- All incomes falling within the purview of BIT, CIT, and PIT under the Income Tax Act of the Kingdom of Bhutan 2001, are subject to TDS.
- In principle, all corporate and business entities falling under full tax liability are liable to income tax on worldwide income.
- Companies and business entities under limited tax liability are liable to income tax on incomes sourced from or within Bhutan.
- To ease the burden of tax payment by paying taxes as it is earned;
- To ensure effective collection of taxes;
- For timely mobilization of internal revenues.
- a. Chapter 3, Section 10, 11, 12, 13, 14, 15, 16, 17 and 18, General Provisions of the
Income Tax Act, 2001, mentions about the applicability of TDS on various sources of income.
- b. Rule No. 3.2.1, 3.2.2, 3.2.2(a), 3.2.2(b), 3.2.2(c), 3.2.2(d), 3.2.2(e), 3.2.2(f), 3.2.2(g),
and 3.2.3 of the Rules on the Income Tax Act, 2001 mentions about the procedures to withhold taxes.
- All government, semi-government, corporate bodies, and private agencies/businesses, as specified in Table I below, are liable to deduct TDS.
- The authority and responsibility to deduct TDS is provided by Chapter 3, Section 11 and 19 of the Income Tax Act, 2001 and the Rules thereto.
- The withholding agency shall be responsible for the following (Section 19, Chapter 3, General Provisions of the Income Tax Act, 2001):
- Inform the tax authorities if the withholding agency has not deducted TDS or the deduction is lower than the rate prescribed.
- Inform the tax authorities of the income earned and the amount of tax deducted at source, if any. (Section 20, Chapter 3, General Provisions of the Income Tax Act, 2001).
- Inform the tax authorities within 3 months from the date of receipt of net payment of the bill amount if the TDS certificate is not issued or has issued an incomplete certificate.
- Furnish the following details to the tax authority in order to take timely measures:
1.2 Types of income is subject to TDS:
1.3 Objectives of TDS are:
1.4 Legal Authority
The legal authority to deduct TDS is provided by the following sections of the Income Tax Act of the Kingdom of Bhutan, 2001 and the Rules Thereto.
1.5 Who shall deduct tax at Source?
1.6 Responsibilities of a withholding Agency are:
a. Deduct tax at source;
b. Deposit the tax deducted on the due date;
c. Submit information as per the requirement of the department and;
d. Issue TDS certificate as per Annexure V of this booklet.
1.7 Responsibilities of a taxpayer are:
• Name of the withholding agency
• Name and designation of the dealing official
• Contact number
• Bill number and bill date
• Net payment cheque no. and cheque date.