INTRODUCTION: A Deductor/payer is responsible for tax deduction at source on specified types of payments as prescribed under Income Tax Act 1961. The tax so deducted has to be deposited in the government account. Deductor also has to report the tax deducted in a statement within the prescribed time. TDS (Tax deducted at source) return filing is already a demanding task since every year there are lot of changes introduced in Income Tax Act which encompass changes in existing TDS provisions and also newly inserted sections which requires a taxpayer to be updated with these changes.

This article shall highlight common mistakes that are made while filing TDS returns which result in receiving intimation from TRACES. 

NON-UPDATION OF TAN: TAN (Tax deduction and Collection account number) is issued to persons who are required to deduct and collect tax on payments as prescribed under Income tax Act, 1961. TAN needs to be valid and updated as per TDS CPC. Thus in case TAN is incorrectly mentioned or not updated in the system any payment made shall not be reflected and the return shall not be validated by the department.

Common Mistakes

INCORRECT CHALLAN DETAILS: TDS Challan requires the following important details like date of payment, amount of tax paid, section under which tax is deposited and BSR code of the bank through which payment is made. The payer needs to properly enter these fields to avoid mismatch of data and invalid return and intimation from TRACES. 

QUOTING INCORRECT PAN: The PAN of the deductee should be verified before quoting it in TDS return.  Quoting the wrong PAN gives rise to TDS demand of 20% less the amount of TDS already deducted. This will result in deductee not getting TDS credit in 26AS.

SHORT PAYMENT OR SHORT DEDUCTION OF TDS: If the deductor has mentioned the wrong Challan details or has made short payment (Including interest on late deduction if any) or has claimed more amount than the available balance of Challan amount.  It might also be due to clerical errors like mentioning different amounts in both columns of TDS deducted and TDS deposited.

INCORRECT REPORTING OF 197 CERTIFICATES: Section 197 provides facility of NIL deduction or lower deduction of TDS. The deductor before filing of TDS return needs to verify that the certificate provided by the deductee is not expired, it is valid during the period for which it is quoted, it is mentioned in return in correct format, threshold amount of the certificate has not exceeded and it should be ensured that TDS certificate should be for same PAN, section rate and section code mentioned in the TDS return.

INCORRECT FINANCIAL/ASSESSMENT YEAR: Financial year is the year in which TDS is paid and Assessment year is the year in which tax is processed and filed. These details should be properly furnished otherwise it will result in error 2034 and an intimation from TRACES.

SELECTION OF WRONG DEDUCTOR: The deductor details must be properly filled as to status of the deductor i.e. whether government or others (Companies, persons required to get their accounts audited u/s 44AB of the Income Tax Act, 1961) otherwise it will result in error code 2076 and intimation from TRACES.

INCORRECT RESPONSIBLE PERSON DETAILS: TDS return requires all details for a representative of the entity like Name address and contact information. These details should be accurately furnished to avoid errors in return.

INCORRECT INCOME DETAILS:  In TDS return, the TDS actual deposited and paid must match TDS to be deducted on specified income under respective section and respective rates. The return is rejected due to mismatch in details which requires revising the respective return with correct details and file again.

CONCLUSION: The payer/deductor needs to be updated with the TDS sections and related provisions regarding payment due dates in order to avoid interest and late filing fees under section-234E of Rs 200 per day. The deductor should ensure that he uses the latest FVU and JRE versions to effortlessly file TDS returns taking into due consideration the above signals.


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One Comment

  1. Mohammed Basheer says:

    How can I file revised return for wrong collection code entered during TCS filing?
    Is the slab for collection code M and R are same or different?

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April 2021