When it’s Time for Your Employees to Pay Taxes, A Hundred Questions Fill Their Minds. How, How Much, Why to What, When and Why, Again. And Who Answers These Million Queries And More? You – The Deductor. He Who Calculates Taxes on Their Income and Makes Their Lives Easier, Month After Month, Year on Year. But What If You Have Questions, Where Do You Go When You Have Doubts? Look No Further. Through The Pages Inside, I’ll take you through the A-Z of TDS. So the Next Time you’re In Doubt, Here’s something to Make Your Life Easier.

What is TDS

TDS stands for tax deducted at source. According to the income tax act, in case of certain prescribed payments (for e.G. Interest, com mission, brokerage, rent, etc.), the person making payment is required to deduct tax at source (tds) if payment exceeds certain threshold limits. TDS has to be deducted at the rates prescribed by the tax department.

The company or person that makes the payment after deducting tds is called a deductor and the company or person receiving the payment is called the deductee.

What is TAN and why do we need it?

The one who deducts tax at source is required to obtain  TAN  and quote it in every Correspondence related to TDS.

Note: The above is not mandatory in case of tax deduction on the purchase of immovable property and in case of TDS on rent (paid by non-auditable Individual and Hindu Unified Families)

  • Registering on TRACES Reconciliation Analysis and Correction Enabling System or TRACES (www.tdscpc.gov.in) is mandatory before use.

What is TRACES? How does it help deductors be TDS compliant?

  • The ‘Deductor Dashboard’ informs about TDS performance (statement status, challan status, default payable, deductor
    compliance profile).
  • The ‘TDS CPC Communications’ on TRACES homepage gives access to the communications sent CPC (TDS)
  • It is possible to make online and offline TDS statement corrections directly on TRACES. The TDS certificates, Transaction Based
    Report (TBR) for non-PAN deductees reported in Form 27Q, consolidated file, justification report, TAN-PAN consolidated file can also be downloaded on the site.
  • Aggregated TDS Compliance Report is a consolidated default summary of all TANs corresponding to a PAN in case of
    corporates/banks (available in taxpayer login on TRACES).
  • The site also has e-tutorials, FAQs, circulars and notifications and CPC (TDS) communications.
  • Deductor can also make Grievance Module Request for Resolutions on TRACES.

When is tax deducted?

Tax is deducted at the time of making the prescribed payment or credit of the income/payment to the deductee, whichever is earlier. In case of TDS on salary, the tax is deducted at the time of actual payment. In case of TDS on rent, tax is deducted at the time of credit of rent for the last month of the year.

When is the TDS deposited to the credit of the government?

Mode of TDS payment Due date of payment
When is the tax paid without an Income Tax Challan? On the same day (applicable in case of book adjustment.)
TDS made during the month of March On or before 30 April.
TDS made during months other than March On or before 7 days from the end of the month.
TDS on purchase of immovable property (1941A)* On or before 30 days from the end of the month of deduction.
(*challan cum statement in Form 26QB 26QC needs to be filed)
Note: In certain cases, quarterly payment of TDS can be permitted with the prior approval of the Assessing Officer.

What challan is used to pay TDS?

TDS is credited to the government by using Challan No. ITNS-281

What is a Challan Identification Number  or  CIN?

Every Income Tax Challan is identified by CIN which tcontains the Bank BSR code, date of deposit and challan serial no.

How to deposit tax?

TDS is deposited as cash or cheque in the bank through challan either manually or through electronic transfer. Electronic payment of TDS is mandatory for:

(a) All corporate assessees

(b) Non-corporate assessees who are subject to audit under section 44AB

What is the format of TDS certificate and the frequency for its issuance?

Every deductor has to issue a certificate to the deductee in respect of tax deducted by him in the following form:

Form No.16

  • Download TDS certificate (Form 16/16A/27D) (www.tdscpc.gov.in) bearing unique TDS certificate number and issue to the taxpayers within due date.
  • Part A of Form 16 shows PANs that are reported in Annexure I of 24Q statement for the fourth quarter. Salary details for whole or part of the year in Annexure Il of Quarterly TDS statement for the fourth quarter is mandatory.
Particulars Form No. The frequency of certificate issuance
TDS certificate on salary Form 16 Annually
TDS certificate on payments other than salary Form 16A Quarterly
TDS certificate on purchase of immovable property Form 16B 15 days of filing 26QB
TDS certificate on rent Form 16C 15 days of filing 26QC
TCS certificate Form 27D Quarterly

What is the due date for issuance of TDS certificate?

Table No. 3

Form No. Due date
Annual Form No. 16 15 June following the financial year.
Quarterly F 16A/F 27D See column 3 and 5 of the table no. 5

With effect from 01/04/2012, it mandatory to issue TDS certificate (only 16A which can be downloaded from www.tdscpc.gov.in). The deductor shall verify the accuracy of contents and authenticate it using a digital or manual signature. After authentication, it becomes a valid certificate.

What is the contents of a TDS certificate?

The TDS certificate contains the following details:

(a) Valid PAN of the deductee

( b) Valid TAN of the deductor

(c) Challan Identification Number (CIN), which is number generated by a combination of BSR code of the bank where tax is deposited, date of deposit and the challan serial number allotted by the bank

(d) BIN Number consists of recipt number of 24G, DDO Serial Number in 24G, date of transfer voucher

Form No.16

What is statement of TDS and in which form is it furnished?

  • Every person responsible for deducting tax at source must furnish TDS statement.
  • Cancellation of TDS statement and deductee row is no longer permissible. Accordingly, it is very important to report correct and valid particulars (PAN/TAN/category etc.) in the quarterly TDS statement.
  • Quote correct and valid lower rate TDS Certificate Number in TDS statement in case of lower deduction. The deductor can
    verify the lower TDS Certificate Number online on the TRACES website www.tdscpc.gov.in.
  • Last provisional receipt number has to be quoted in regular TDS statements. While filing new regular (original) TDS statement, it is mandatory to quote the last accepted provisional receipt number of the regular quarterly TDS statement of any form type.
  • TDS statement cannot be filed without quoting any valid challan and deductee row.
  • Download consolidated TAN-PAN file from the TRACES website, and use it and file a new statement to avoid quoting incorrect or invalid PAN.
  • Validate PAN and name of new deductees from TRACES website before quoting it in TDS statement.
  • File correction statements accurately promptly for incomplete and incorrect reporting. The TRACES website, www.tdscpc.gov.in, provides the facility for Online Correction of Statements.
  • Government deductors should obtain BIN (Book Identification Number) from their Accounts Officer (AIN holder) in time and quote the same correctly in TDS statement.
The statement in respect of TDS TDS statement form
TDS on salary Form No. 24Q
TDS on payment other than salary to a non-resident or a foreign company or a resident but not ordinarily resident. Form No. 27Q
TDS on payment other than salary to any person other than above. Form No. 26Q
TDS on sale of immovable property Form No. 26QB
TDS on payment of rent by certain individual or HUF Form No. 26QC
Quarterly statement of collection of (TCS) tax at source. Form No. 27EQ

What is the due date of submission of TDS of Statement?

Due dates for filing of TDS statement are as given in the table:

Table No. 6

Quarter ending on Due date for  TDS statement Due date for  Form 16A Due dates of TCS Statement Due date for 27D
30 June 31 July 15 Aug 15 July 30 July
30 Sept 31 October 15 Nov 15 October 30 Oct
31 Dec 31 January 15 Feb 15 January 30 Jan
31 March 31 May 15 Jun 15 May 30 May

What are the consequences of TDS defaults and non-payment to government?

  • Failure to deduct tax, deducting less tax, delay in payment of the deducted tax to the Government, makes the deductor an assessee liable to penalty, which is equal to the amount for which the assessee is a deemed defaulter.
  • In case of non-deduction or less  deduction or delay in deduction of tax, an interest of 1% is levied on the tax per month or part of the month. In case of delay in payment of tax after deducting, interest of 1.5% is levied per month or part of the month. The interest is applicable till the time the tax deducted is not credited to the Government.
  • In case of delay in payment of tax after collecting it, interest at 1% per month or part of the month shall be levied till the
    time the tax is not paid.
  • Failure on part of the deductor to pay the tax deducted at source, to the credit of Central Government makes him liable to rigorous imprisonment of a minimum period of three months but which may extend to seven years.
  • Delay in filing TDS quarterly statements attracts:

1. Late fee of Rs. 200/- per day for each day of default, subject to certain limits (u/s 234E).

2. Minimum penalty of Rs. 10, 000 (may be extended to Rs. 1 lakh).(u/s 271H)

  • Download the justification report to know the details of TDS defaults if any, on the processing of TDS statement, etc. from the TRACES website www.idscpc.gov.in

What are the consequences of furnishing wrong statements or filing incorrect information?

  • With effect from 1 July 2012, failure to file TDS statement within the prescribed time shall make the deductor liable to pay
    by way of fee u/s 234E, a sum of Rs. 200 for each day during which the default continues.
  • With effect from 1 July 2012, the furnishing of incorrect information in the statement by the deductor would make him liable to a penalty, which shall not be less than Rs. 10, 000 but which may extend to Rs. 1 lakh.
  • In case the delay in filing TDS statement is more than one year from the prescribed date, then the deductor shall be
    additionally liable to pay a minimum penalty of Rs. 10,000 which may extend to Rs. 1 lakh.
  • Failure to apply for TAN or quote correct TAN by the deductor may result in a penalty of Rs. 10, 000.
  • Late filing fee u/s 234E, being statutory in nature, cannot be waived off.

Aggregated TDS Compliance

  • The PAN of an entity (Central Office, Headquarter etc.), having more than one TAN for its branches, associated
    with the referenced PAN, can review the ‘Aggregated TDS Compliance’ report on a regular basis for a summary
    of TDS compliance at organizational level.
  • This feature provides a summary of TDS defaults of all respective TAN across all financial years, which assists
    in effective TDS administration, monitoring, control and compliance at organizational level.
  • The feature will be extremely useful for the purpose of complying with the provisions of Section 10(a)(ia) of the
    Income Tax Act, 1961 by the concerned entity, to ensure that correct information is disclosed in paragraph 21(b) and 34(b) of the Tax Audit Report (Form 3CD /s 44AB the Act)
  • To use this feature, the deductor needs to register on the TRACES website with its PAN

What is the format of the TDS filing statement?

The statement of TDS can be filed either in:

(1) Paper form (for less than 20 deductees).

(2) Electronic form: Form no. 27A is also to be furnished along with return on the electronic form.

Following deductors have to file the TDS statement in the form specified in electronic form only. Deductors can be:

(a) The office of the Government

(b) A company

(c) A person who is required to get his accounts audited under section 44AB in the immediately preceding financial year

(d) Where the number of deductee’s records in the quarterly statement for any quarter of the financial year is equal to or more than twenty

Note: In case of any other deductor, furnishing the quarterly statement in electronic form is optional.

What is the duty of deductor if the deductee does not furnish his PAN?

If the deductee does not furnish PAN or furnishes incorrect PAN to the deductor/collector, the deductor/collector shall deduct tax at source at higher of the following rates:

(a) the rate prescribed in the Act; or

(b) at the rate in force, i.e.. the rate mentioned in the Finance Act; or

(c) at the rate of 20%.

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