Year End TDS Compliance- Points to Keep in Mind

CA Manish Agarwal

You kind attention is invited to the amendment made vide Notification No. 41/2010 dated 31 May 2010 and the notable features of the amended TDS Rules which are applicable to the month of March and to the Quartered ended 31^st March 2011 are as under:

(a) Time limit for deposit of TDS for the entire month of March will be 30th April instead of two separate time limits viz. 7th April for TDS up to 30th March and 31st May for TDS as of 31st March.

(b) Non-salary TDS certificates will need to be issued on quarterly basis (instead of monthly or annual basis)

(c) Time limit for filing quarterly TDS statement for last quarter of FY is advanced to 15th May instead of 15th June.

As can be seen from the above that the time limit for deposit of TDS deducted during the month March 2011 (i.e. on payment basis OR on provision entries made at the yearend) shall be April 30^th 2011 as against the due date of April 7^th and May 31^st.

Please note that failure to deduct TDS attract (i) disallowance of expenditure u/s. 40(a)(ia) on which TDS not made while computing income under normal provisions; (ii) Levy of interest under section 201 (IA) at the rate of One and Half Percent or part of the month for the period of delay in deduction and/or deposit of TDS (iii) levy of Penalty under section 271C for failure to deduct TDS.

Further, please note that the expenditure relating to work/services availed during the period from April 1^st 2010 to Mach 31^st 2011 should only be accounted in FY 2010-11 and in the event any of such expenditure are accounted in the accounts of the immediately succeeding year then the same will qualify as “prior period expenses” requiring reporting in annual accounts as well as in the Tax Audit Report. The amount of prior period expenses  will not be allowed as deduction under Income tax Act in the succeeding year(s).

In view of the above, Finance and Accounts team of each sector/company is advised to instruct each and every department in their respective company to obtain bills for the work/services rendered during the period from April 1^st 2010 to March 31^st 2011 from the vendor before April 20^th and also to provide a complete details of the expenditure under the respective expenses heads based on the service/work order and the work done by the party and for which invoice/bill is not yet raised so that necessary provision with party name and amount can be made in the accounts and TDS thereon can be discharged before the due date of April 30th. Please make sure that to the extent possible, no ad-hoc provision for expenses is to be made at the yearend since it will be difficult to make compliance of TDS provisions with respect o such ad-hoc provision as the amount is not ascertain/accurate, party may not be known, etc. etc.

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