Duties of Person Deducting Tax at Source (TDS)

Article explains Duties of Person Deducting Tax at Source (TDS) includes Deduct Tax at Correct Rate of TDS and deposit in Central Government Account, Timely Issue of TDS certificate (Form 16 and Form 16A) to all deductees  and File TDS Return/Quarterly Statement (Form No. 26Q and Form No. 24Q).

1. Deduct Tax at Correct Rate and deposit in Government Account –

Every person responsible for deducting tax at source shall at the time of payment or credit of income, whichever is earlier, verify whether the payment being made is to be subject to deduction of tax at source. If it is so, he must deduct such tax as per the prescribed rates. Further he is required to deposit such tax deducted in the Central Government Account within the prescribed time as specified in Rule 30.

Electronic payment of taxes

i. An optional scheme of electronic payment of taxes for income-tax was introduced in 2004. However with a view to expand the scope of electronic payment of taxes, the scheme of electronic payment of taxes has been made mandatory for the following categories of tax-payers(vide notification No. 34/2008 dt. 13.3.2008 of CBDT).

(i) All corporate assessees;

(ii) All assessees(other than company) to whom provisions of section 44AB of the Income Tax Act are applicable.

ii. The scheme of mandatory electronic payment of taxes for income-tax payers is to be made applicable from 1st April, 2008and shall also be applicable to payment of taxes to Government account where tax has been deducted at source.

iii. Tax-payers can make electronic payment of taxes through the internet banking facility offered by the authorized banks. They will also be provided with an option to make electronic payment of taxes through internet by way of credit or debit cards.

2.  Issue a TDS certificate

Further, such person is required to issue a certificate of tax deduction at source to the person from whose income the TDS has been done, in the prescribed proforma i.e. Form No.16A, within one month from the end of the month during which the credit has been given or the sums have been paid or a cheque/warrant for payment of any dividend has been issued to a shareholder.

3.  File TDS Return/Quarterly Statement

Finally, Sec.206 prescribes that every person, e.g. Principal Officer in the case of a company, prescribed person in case of Government Office and local authority or public body, and every other person responsible for deducting tax at source, within a prescribed time after the end of Financial Year, shall prepare and deliver or cause to be delivered, a prescribed return in prescribed form, verified and containing prescribed particulars. This return is commonly referred as the annual return of TDS.

4.  Quarterly statement of TDS

The provisions of quarterly statements of TDS have been introduced in the statute vide section 200(3) w.e.f. 01/04/2005. Every person responsible for deducting tax is required to file quarterly statements of TDS for the quarters ending on 30th June, 30th September, 31st December and 31st March in each Financial Year. This statement is to be prepared in Form No. 26Q for TDS other than salaries,Form No.27 EQ (for Tax collection at source) and 24Q (for salaries) (relevant rule 31A and 31AA) and is to be delivered with prescribed income-tax authority or the person authorized by such authority on or before the 15th July, the 15th October and the 15th January in respect of the first 3 quarters of the Financial Year and on or before the 15th June following the last quarter of the Financial Year. However the statement of last quarter in form 27EQ is to be furnished by 30th April.

Points to be noted related to quarterly statements of TDS-

• Every deductor is required to file the quarterly statement of TDS in prescribed form for each quarter as per the dates specified above.

• A person other than a corporate or government deductor or that specified in para 8.4 may at his option deliver the quarterly statements in computer readable media as specified above. However, it is not mandatory for him to do so.

• The quarterly statements are to be furnished in accordance with the provisions of rule 31A and rule 31AA.

• The persons referred to in Rule 37A (who are making payment to a non-resident or a foreign company) are required to file quarterly statements in accordance with provisions of rule 37A and rule 37B.

• It is mandatory for the deductor to quote TAN and PAN in the quarterly statements. However, where the deduction has been made by or on behalf of the Government, PAN shall not be required to be quoted in the quarterly statement.

• In the quarterly statements, the deductor is also required to quote the Permanent Account Number (PAN) of all persons in respect of whom Income-tax has been deducted. However, PAN of those persons is not required to be quoted who are specified under second proviso to sub section (5B) to section 1 39A. These persons include those who are not required to obtain PAN under any provisions of this Act or those whose total income is not chargeable to Income-tax.

• The deductor is also required to furnish the particulars of tax paid to the Central Government in the quarterly statements.

Republished with Amendments