#AD In this note, on the TDS eco-system, a few smaller issues are being covered that has a lot of relevance, but most tax deductors are either ignorant or not aware about it.
TDS Threshold Limits
Most TDS sections have a defined amount within which tax may not be deducted. This is called the ‘Threshold Limit’. However, if the cumulative amount during the year, exceeds the threshold, TDS would be applicable on the total amount. Example: Section 194H, the threshold is Rs. 15,000. Say, a payment was made for Rs. 10,000/- without TDS as it was within threshold. Another payment of Rs. 7,500/- was made to the same person, now TDS will apply on cumulative amount of Rs. 17,500/-.
Interest Allocation
The TDS Challan Form (ITNS 281) has a provision for ‘Interest’ payment. However, even if one pays interest through ITNS 281, this does not get adjusted with the Interest liability. In the Returns, against the Challan, the interest amount needs to be allocated from the total value of the Challan. This allocated amount is used by the Department to offset any interest liability. Important point – the ‘Interest’ payment is determined by the Return and not the Challan.
Calculation of Interest
Typically interest is to be paid in case there is a delay in deposit of TDS. This is calculated based on ‘each month of delay or part thereof’. Say, tax was deducted on 27th April, and was deposited on 9th May (instead by 7th May), this will result in 2 months of interest as the deducted amount was used partly in April and also in May. However, if tax was deducted on 30th April, the interest would be for one month only.
Nature of Payment – ITNS 281 (TDS Challan)
While filling up the ITNS 281, one needs to specify the ‘Nature of Payment’ (by selecting the Section from list). This is currently of no relevance as each TDS line record contains the ‘Nature of Payment’. There is no need to make separate Challan for each ‘Section’. Select any Section (as this will be ignored by the Department) and use it for all deductions.
Dealing with Excess TDS Deposit
In the event of excess TDS deposited, this may be handled in the following ways:
- Use the excess value in any old Challan against future tax deductions within the same financial year and also in the immediate next financial year.
- A refund may be initiated through the TRACES portal or by approaching the concerned officer of the department. This is a lengthy process and should be exercised only if absolutely necessary.
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