Rule 203: Credit for tax deducted or collected at source
Rule 203 decides who gets credit for tax deducted or collected at source, and for which tax year. Credit is given on the basis of the information the deductor or collector furnishes to the income-tax authority. It normally goes to the deductee or collectee, but it can be given to another person whose income it is, on a declaration. It is given for the tax year in which the income is assessable, with special rules for income assessable over several years and for certain transactions.
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Rule 203 - Credit for tax deducted or collected at source
(1) The credit for tax deducted at source or tax collected at source shall be given, on the basis of information relating to deduction or collection of tax furnished by the deductor or collector to the income-tax authority or the person authorised by such authority, in the following manner:–– (a) tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XIX of the Act, shall be given to the person to whom payment has been made or whose account has been credited (herein referred to as deductee); and (b) tax collected at source and paid to the Central Government in accordance with the provisions of Chapter XIX of the Act, shall be given to the person from whom tax has been collected or whose account has been debited (herein referred to as collectee).
(2) Where the deductee files a declaration with the deductor that 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 or where the collectee files a declaration with the collector that the income of the collectee is assessable in the hands of any person other than the collectee,— (a) the deductor or collector shall report the tax deduction or collection in the name of the other person in the information relating to deduction or collection of tax referred to in sub-rule (1); and (b) accordingly credit for such tax deducted or collected at source, as the case may be, shall be given to the other person and not to the deductee or collectee.
(3) The declaration filed by the deductee or collectee under sub-rule (2) shall contain the name, address, Permanent Account Number of the other person to whom credit is to be given, details of payment or credit in relation to which credit is to be given and reasons for giving credit to such person, and such declaration shall be kept in custody by the deductor or collector.
(4) The deductor or collector shall issue the certificate for deduction or collection of tax at source to the person in whose name credit is shown in the information relating to deduction or collection of tax referred to in sub-rule (1) and shall keep the certificate of deduction in his custody.
(5) The credit for tax deducted or collected at source and paid to the Central Government, shall be given for tax year for which the income is assessable to tax.
(6) (i) Where tax has been deducted at source and paid to the Central Government and the income corresponding to such tax 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. (ii) Where tax has been collected at source and paid to the Central Government and the lease or license is relatable to more than one year, credit for tax collected at source shall be allowed across those years to which the lease or license relates in the same proportion.
(7) Irrespective of anything contained in sub-rules (1) to (6), for the purposes of section 393 (3) [Table: Sl. No. 5] and section 394(1) [Table: Sl. Nos. 6, 7 and 8], credit for tax so deducted or collected at source shall be given to the person from whose account tax is deducted or collected, as the case may be and paid to the Central Government account for the tax year in which such tax deduction or collection is made.
(8) Credit for tax deducted or collected at source and paid to the account of the Central Government shall be granted on the basis of the information referred in sub-rule (1) and 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.
Rule breakdown
Who gets the credit — Rule 203(1)
Credit is given on the basis of the deduction or collection information furnished by the deductor or collector to the income-tax authority or the person authorised by it.
Tax deducted at source goes to the deductee, meaning the person to whom payment was made or whose account was credited. Tax collected at source goes to the collectee, meaning the person from whom tax was collected or whose account was debited.
Credit to another person — Rule 203(2) to (4)
If the deductee declares to the deductor that the whole or part of the income is assessable in another person's hands, or the collectee declares to the collector that the income is assessable in another person's hands, the deductor or collector reports the deduction or collection in that other person's name, and credit goes to that other person.
The declaration must contain the other person's name, address and Permanent Account Number, details of the payment or credit, and the reasons for giving credit to that person. The deductor or collector keeps the declaration in custody.
The certificate is issued to the person in whose name credit is shown in the information furnished, and the deductor keeps the certificate of deduction in custody.
Which tax year — Rule 203(5) to (7)
Credit is given for the tax year for which the income is assessable.
If the income on which tax was deducted is assessable over a number of years, credit is spread across those years in the same proportion as the income is assessed. If tax was collected on a lease or licence relatable to more than one year, credit is spread across those years in the same proportion.
Rule 203(7) overrides sub-rules (1) to (6) for section 393(3) [Table: Sl. No. 5] (sums paid in cash from accounts maintained with a banking company, a co-operative society engaged in banking, or a post office) and section 394(1) [Table: Sl. Nos. 6, 7 and 8] (sale of a motor vehicle or notified goods above ten lakh rupees, Liberalised Remittance Scheme remittances and overseas tour programme packages). For these, credit goes to the person from whose account tax was deducted or collected, for the tax year in which the deduction or collection is made.
Verification — Rule 203(8)
Credit is granted on the basis of the deductor's or collector's information and the claim in the return of income, subject to verification under the risk management strategy formulated by the Board from time to time.
Key takeaways
Statement data drives credit
Credit is given on the basis of the information furnished by the deductor or collector.
Declaration route
Credit can move to another person whose income it is, on a declaration with that person's PAN and reasons.
Year of assessability
Credit follows the tax year in which the income is assessable, with special rules in sub-rules (6) and (7).
Practical checklist
- Match the TDS and TCS in your return with the deductor's and collector's reported information.
- Where income belongs to another person, give the deductor or collector a declaration with that person's name, address, PAN, payment details and reasons.
- Claim credit for the tax year in which the income is assessable.
Avoid
- Do not claim credit that is reported in another person's name.
- Do not claim the full credit in one year where Rule 203(6) requires it to be spread.
FAQs
My TDS credit is missing. What does credit depend on?
Under Rule 203(1) and (8), credit is given on the basis of the information furnished by the deductor and the claim in your return, subject to verification. If the deductor has not reported the deduction correctly, the credit may not appear.
Can TDS credit be given to someone other than the deductee?
Yes, where the deductee declares to the deductor that the income is assessable in another person's hands. The declaration must include that person's name, address and PAN, payment details and reasons.
For which year is credit given when income is spread over years?
Rule 203(6)(i) spreads the credit across those years in the same proportion as the income is assessable.
Which cases fall under Rule 203(7)?
Section 393(3) [Table: Sl. No. 5] and section 394(1) [Table: Sl. Nos. 6, 7 and 8]. For these, credit goes to the person from whose account tax was deducted or collected, for the tax year in which it was deducted or collected.
Glossary
- Deductee
- The person to whom payment is made or whose account is credited.
- Collectee
- The person from whom tax is collected or whose account is debited.
- Risk management strategy
- The Board's strategy under which credit claims are verified (Rule 203(8)).