07-08-2011, 12:02 AM
It would have been better if you had mentioned the head of income of Rs.120,000. Withholding tax on contract (s.153(1)(c)) and on services (s.153(1)(b)] is 6%. Major difference is that withholding tax on services is minimum tax while in the case of contract it is final tax.
Further, 6% of 120,000 is Rs.7200, mistakenly you have written it 72000
Anyway, we discuss both scenarios one by one
Suppose it is tax on services.
As the salary income is more than other income hence the individual will be called salaried individual and will be taxed at the rates mentioned in para 1A of the Div I of Part I of first schedule.
Total income is 720,000 + 120,000 = 840,000
According to para 1A of First Schedule, tax on 840,000 is 7.5%.
7.5% of 840,000 = 63,000
63000 - Tax already paid
63000 - (43,200 + 72,00)= 12600
Tax payable with return is 12,600
Suppose Rs.120,000 is income on contract
Then tax deducted therefrom that is Rs.7200 would be final.
You wil only take salary of of Rs.720,000 and according to First Schedule tax rate thereon is 6%. Thus tax paid as 6% of 720,0000 i.e. Rs.43,200 will be final discharge of tax liability on salary income. While Rs.7200 (already deducted at source) will be final discharge on other income from contract.
