Short Payment & Short deduction TDS defaults-Problems & solutions

CA Pratik Anand

These days TDS has become a nightmare both for the assessee as well as the tax professional with notices being issued by the CPC (TDS) immediately on filing of the Quarterly TDS Statements.

This is an attempt to give a comprehensive list of problems and their solutions relating to short TDS payment and short TDS deduction defaults issued in the intimation U/s 200A:

A) Short TDS Deduction Defaults

Short Deduction defaults arise due to many reasons, some of which are as follows:

1. Due to PAN Errors:

One of the prime reasons for short deduction defaults is quoting the wrong PAN:

Quoting of the correct PAN is very essential in the TDS Return. Quoting the wrong PAN give rise to TDS demand of 20% less the amount of TDS already deducted. It also results in no TDS Credit being given to the deductee whose TDS has been deducted.

It also results in defaults in furnishing TDS Certificates as these days the TDS Certificates are being issued from the TRACES website, therefore if the PAN is incorrect, it results in more than one default on the part of the deductor and unnecessary trouble for the deductee who does not get the credit of his taxes paid.

Another problem with quoting of the wrong PAN is that CPC (TDS) while processing the correction statement does not correct the errors in PAN where the mistake in quoting of PAN is more than two alphabets and two numeric characters even in cases of genuine typographical errors. There are two courses of action for correcting the PAN Errors of more than 2 alphabets and 2 numeric characters:

• To file the correction statement by making the entry with the wrong PAN at an amount equal to zero as the deductee entry cannot be deleted and then add a new deductee row for the amount paid and TDS deducted with the correct PAN.
• To appeal against the intimation U/s 200A with the CIT (TDS)

Requirements from the client:

• Copy of PAN card of the deductee.
• Deduct TDS@20% in absence of PAN of the deductee.

Points to remember:-

• Correction statement for rectifying any error in the PAN can be done by utilising the online correction facility at www.tdscpc.gov.in , this correction facility can be used by entering the correct details of the profile of the deductor with the TRACES website.
• Online Correction can be used with or without digital signature of the authorized person.

2. Due to wrong quotation of Lower Deduction Certificate U/s 197 of the Income Tax Act’1961:

Another reason for the short deduction default is wrong quotation of the particulars of the certificate of lower deduction of tax.

Following should be correctly quoted while filing the TDS Return.

• Certificate Number
• Period for which the certificate is valid
• Amount upto which lower deduction is applicable
• Rate specified in the certificate at which tax is to be deducted

Certificate Number: Certificate Number is a ten digit alpha numeric number mentioned alongside the TAN and the name of the deductee.

Please remember that the Reference No. mentioned at the top of the certificate is not the certificate number to be quoted while filing the TDS Return which is a common mistake done by the assessees while filing the returns.

Period: Every lower deduction certificate is valid for the specified period mentioned in the certificate. Care should be taken to deduct TDS at the lower rate only for the transactions entered between the period mentioned in the Certificate.

Transactions entered before and after the specified period have to suffer tax deduction at the normal rates as prescribed under the Act.

Amount: Every lower deduction certificate is valid for the amount mentioned in the certificate.

This means that when the total amount of the transactions exceed the limit specified in the certificate, tax at the normal rates as prescribed in the Act is to be deductee on the amount exceeding the limit.

Rate: TDS should be deducted at the rate prescribed in the certificate.

3. Due to mistake in deduction of Tax at Source:

Sometimes the assessee due to ignorance or otherwise deducts TDS for such an amount which turns out to be lower than the rates prescribed in the Act.

Care should be taken while filing the return that on every payment the amount of tax deducted is not short of the amount which should have been deducted if tax were to be deducted at the prescribed.

If such a case is found then the balance tax should immediately be deposited vide a new challan.

4. Due to wrong quotation of 15G and 15H Certificates:

Many people don’t know that non deduction of tax due to receipt of Forms 15G and 15H are also to be reported in the TDS Return, this is especially relevant in the case of banks filing their tds returns.

Incorrect reporting of forms 15G/H particulars can result I short deduction defaults.

B) Short TDS Payment Defaults

Short payment defaults arise due to the following reasons:

1. Due to Challan errors:

Short payment errors also arise due to wrong quoting of the particulars of the challan through which tax has been paid.

The necessary challan particulars to be correctly mentioned in the TDS Return are:

• Challan Number
• BSR Code of the bank in which tax is deposited.
• Tender date of deposit of the challan

In addition to this, the details of the payment bank and the mode by which tax is paid are also to be mentioned in the return.

Let us look at these particulars one by one.

1) Challan Number: The challan number is a five digit number which is provided in every challan by the receiving banker at the time of clearing the challan.

Whenever the challan number is not clear in the challan, the same should be reconfirmed from the bank.

The challan number can also be confirmed from the following the following link:

tin.tin.nsdl.com/oltas/index.html

After logging onto the following link there are two options:

• Challan based view
• TAN Based view

a) In the Challan based view the particulars of each challan can be verified by entering the following details:

• BSR Code
• Challan tender date
• Challan Serial Number i.e challan number
• Challan Amount

Note that these can be checked only if you have a rough idea of the above particulars and same are to be confirmed.

b) TAN Based view: In the TAN Based view the particulars of the challan for a particular period can be checked just by entering the TAN of the deductor and the period for which the challans are to be checked.

Note: The period to be entered here cannot exceed 24 months.

After you enter the desired period and the TAN, the list of all the challans paid during the selected time period will be visible. You will have to enter the amount of challan in order to match the particulars of the challan.

2) Challan tender date: Challan tender date is the date in which the challan is   presented with the bank for payment. This date is entered in the stamp of the bank inscribed on the challan at the time of clearing. This can also be checked from the abovementioned link.

3) BSR Code: BSR Code is a seven digit code for every branch of the bank i.e every branch has a separate BSR Code. You could check the BSR Code from the internet or by even calling the concerned branch of the bank.

4) Challan amount: The Challan amount entered should be including interest and other amounts like penalty or fee u/s 234E paid in the challan and should not merely include the amount of tax paid.

Nowadays a challan file is downloaded at the time of generating the TDS Return. This file is an indicator of whether the particulars of the challan have been correctly entered in the Return.

In case of inaccurate particulars being entered in the return, it shows/generates a warning file that the ‘Challan details are not present in the challan file downloaded.’

Another point to remember is that very often the TDS Return is to be filed or is filed on the day or a day after which the challan is deposited in the bank for clearing.

In this case since the challan is not cleared from the bank therefore it will not be present in the challan file downloaded at the time of generation which leads to a warning file as mentioned above.

In this case if there is still time left for the filing of the return, the concerned person should not file the return till the challan is cleared from the bank and is showing in the challan file downloaded. This is so because when we file the return, then the same is processed at CPC (TDS) and if at the time of processing the return the particulars of the challan are present in the challan file then CPC will raise demand for short payment of Tax which is actually not the case.

Point to remember:-

• Correction statement for rectifying any error in the Challan can be done by utilising the online correction facility at www.tdscpc.gov.in , this correction facility can be used by entering the correct details of the profile of the deductor with the TRACES website.
• Online Correction can be used with or without digital signature of the authorized person.

Sometimes, there is a case where the deductor mistakenly pays an amount in excess of the amount required to be paid as TDS and such amount is required to be set-off from the subsequent payments of tax.

In this case special care is to be taken while allocating the payments of TDS with the unconsumed amounts of the challan.

Other important points related to challans:

• From the financial year 2013-14 onwards, the section code under which the challan is paid and that entered in the return does not matter. As long as the amount of tax is paid, wrong entry of the section code will not result in the short payment default.
• The Financial year entered in the challan is also not relevant. There will not be any short payment default due to this.
• Mistake in quoting the TAN of the deductor in the challan can only be rectified by the jurisdictional A.O of the assesse and cannot be rectified by the CPC (TDS).

Very soon the CPC TDS is going to bring a notification where it will be mandatory to close all the short payment defaults before the necessary consolidated file can be downloaded for revision of other defaults.

Following are key information to be noted in this regard:

• CPC (TDS) mandates to close the above default by tagging unconsumed challans, if available in CPC (TDS) system, through online correction (without digital signature).
• In case there is no available challan for consumption, the deductor is required to first deposit the due tax in the bank and then the same challan will be available for tagging in CPC (TDS) system after around 3-4 days of deposit.
• CPC (TDS) mandates to close the above default by Matching or Payment of challans.
• The user will not be able to download Conso file for the relevant TDS statement until the above default is closed.
• The Online Correction facility of TRACES needs to be used for closure of the Short Payment default.
• User will subsequently be able to download the Conso file for relevant period only after the default is closed.

Hope you find the above information relevant and useful in your daily practice.

(The author is a CA in practice at Delhi and can be contacted at: E-mail: capratikanand@gmail.com, Mobile: +91-9953199493)

Also Read:

https://taxguru.in/income-tax/tds-rate-chart-provisions-penalty-compliance-due-date-tds-return-filing.html

(Republished With Amendments)

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