TDS credit should be allowed solely on the basis of Form 26AS and procedural requirements for issuance of TDS certificates (Form 16 / 16A) should be dispensed with

Issue/Justification

Regulation in force

Section 203 of the Act requires the deductor of TDS to issue the TDS certificate to the deductee to the effect that tax has been deducted and specifying the amount so deducted. The deductor has to log in to the TDS CPC website and download the certificate of the deductee and then send such certificate to the deductee.

The procedural compliance apparently looks easy and very convenient. However in  reality, the deductors and deductees face numerous difficulties in practically complying with the same. These difficulties are explained as follows:

Practical difficulties faced by deductor

Every quarter the deductor is required to login into the TDS Reconciliation Analysis and Correction Enabling System (TRACES) website and download TDS certificate for all the deductees and forward the same to each deductee. In case deductor is a big organization which has deducted TDS for thousands of parties, it is required to send the TDS certificate through mail or post separately to each deductee. Issuing TDS certificate to thousands of parties every quarter poses challenges and also consumes lot of time which can otherwise be used for operations of the deductor. This sometimes leads to incomplete or non-compliance with issue of TDS certificates.

Though there are penal provisions provided under the Act for non-issuance of TDS certificate by the deductor, in practice the AO do not enforce those provisions.

Practical difficulties faced by the deductee

It is the deductee who actually suffers by way of denial of TDS credit in absence of TDS certificate and therefore it is a must for the deductee to continuously chase each deductor for issue of TDS certificate. It may be relevant to mention here that the AO’s do not always give TDS credit, especially for years in the past, on basis of Form 26AS appearing in the system but require hard copies of the TDS certificates.

Section 199 of the Act and Rule 37BA of Income-tax Rules in relation to grant of TDS credit

Conjoint reading of the Section 199 of the Act and Rule 37BA of the Rules framed there under suggests that credit for the tax deduction should be given/granted on the basis of information relating to deduction furnished by the deductor (i.e. Form 26AS) and the information in the return of income of the claimant. The requisite details in respect of the tax deducted at source are available in the Form 26AS. The taxpayer may furnish the information relating to tax deducted at source in the return of income based on the details available in Form 26AS leading to inference that both the information furnished by deductor and information in the return of income are as per Form 26AS.

CBDT Circulars on issuing of TDS certificate

The CBDT vide Circular No 3/2011 dated 13 May 2011 and Circular No 1/2012 dated 9 April 2012 has mandated for all deductors to issue Form 16A which is generated from TIN (Tax Information Network) website.

“3. The Department has already enabled the online viewing of Form No. 26AS by deductees which contains TDS details of the deductee based on the TDS statement (e-TDS statement) filed electronically by the deductor. Ideally, there should not be any mismatch between the figures reported in TDS certificate in Form No. 16A issued by the deductor and figures contained in Form No. 26AS which has been generated on the basis of e-TDS statement filed by the deductor. However, it has been found that in some cases the figures contained in Form No. 26AS are different from the figures reported in Form No. 16A. The gaps in Form No. 26AS and TDS certificate in Form No. 16A arise mainly on account of wrong data entry by the deductor or non-filing of e-TDS statement by the deductor. As at present, the activity of issuance of Form No.16A is distinct and independent of filing of e-TDS statement, the chances of mismatch between TDS certificate in Form No. 16A and Form No. 26AS cannot be completely ruled out. To overcome the challenge of mismatch a common link has now been created between the TDS certificate in Form No. 16A and Form No. 26AS through a facility in the Tax Information Network website (TIN Website) which will enable a deductor to download TDS certificate in Form No. 16A from the TIN Website based on the figures reported in e-TDS statement filed by him. As both Form No. 16A and No. 26AS will be generated on the basis of figures reported by the deductor in the eTDS statement filed, the likelihood of mismatch between Form No. 16A and Form No. 26AS will be completely eliminated”.

  • CBDT Instruction No. 4/2012 [F. No. 225/34/2011-ITA.II] dated 25 May 2012 states that “where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs Five thousands, the TDS claim may be accepted without verification.” CBDT Instruction 1/2012 dated 2 February 2012 and Instruction 2 / 2011 dated 9 February 2011 provides similarly.
  • CBDT Instruction No. 4/2014 [F. No. 225/151/2014/ITA.II] dated 7 April 2014 at para (5.2.a) reads “AO should verify whether TDS credits claimed by the taxpayer are available in the 26AS. If the credits are available in 26AS, a suitable rectification order……should be passed”.
  • CBDT’S Action Plan for the First Quarter of FY 2015-16 dated 24 March 2015  refers to “….(b) Giving credit for prepaid taxes, reflected in Form 26AS post processing….

The above clearly demonstrates that there would not be any variation between TDS credit reflecting in the Form 26AS and TDS credit as per Form 16A. Further, in addition to these circulars, the CBDT in Central Actions plan of 2015 has also directed to give TDS credit on the basis of Form 26AS. Thus, reducing the relevance of Form 16A for the purpose of claiming TDS credit.

It is requested that CBDT may call for details of cases in which TDS credit has been denied on the basis that credit was available on the basis of 26AS but not on basis of data in department’s system. This would demonstrate that the CBDT instructions are not clear at the ground level. We also request that once again clear instructions may be reiterated to the field officers.

Suggestion

TDS credit should be allowed purely on the basis of Form 26AS (irrespective of the fact whether the same has been claimed in the return or not) and the procedural requirement for issue or obtaining of TDS certificate in the Form 16A should be dispensed with. CBDT must ensure that this is implemented at ground level and AO grant TDS credit as per 26AS and do not insist for production of Form 16A.

Source- ICAI Pre- Budget Memorandum–2018 (Direct Taxes and International Tax)

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