TDS Compliance In Tax Audit Report

This article is covering TDS compliance in Tax Audit Report i.e. 3D Report. Applicability of Tax Audit, TDS clauses under Form 3CD and its in depth analysis alongwith rate chart of TDS are covered in this article.

Applicability of Tax Audit

Every person carrying on-

> Business whose Gross Turnover, Receipts Or Total Sales exceed Rs. 2 Crore

OR

Profession whose Gross Receipts exceed Rs. 50 Lakhs.

> Where profits & gains of person from business are taxable on estimated basis u/ss. 44AD, 44AE, 44BB or 44BBB & such person claims his income to be lower than profits & gains so estimated.

> 44AD: option to be assessed on presumptive basis, so long as the sales, turnover or gross receipts from an eligible business do not exceed Rs. 2 Crores.

> 44AE: Business of plying, hiring or leasing goods carriages.

> 44BB: Business of exploration etc. of mineral oil.

> 44BBB: Business of civil construction etc. in certain turnkey projects.)

TDS Compliance In Tax Audit Report 

Particulars in Form No. 3CD

Clause 21(b) of Form 3CD – Amount Inadmissible under section 40(a)

(i) As payment to non- resident referred to in sub clause (i)

(ii) As payment referred to in sub clause (ia)

(iii) As payment referred to in sub clause (ib)

A in depth details are as under:

(i) As payment to non- resident referred to in sub clause (i)

(A) Details of payment on which tax is not deducted

(B) Details of payment on which tax has been deducted but has not been paid during the previous year or in the subsequent year before the expiry of time

(ii) As payment referred to in sub clause (ia)

(A) Details of payment on which tax is not deducted

(B) Details of payment on which tax has been deducted but has not been paid on or before the due date specified in sub-section (1) of Section 139

 (iii) As payment referred to in sub clause (ib)

(A) Details of payment on which levy is not deducted

(B) Details of payment on which levy has been deducted but has not been paid on or before the due date specified in sub-section (1) of Section 139

Explanation Clause 21:

Section 40(a) in The Income- Tax Act, 1961

(a) in the case of any assessee-

(i)  Any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938 ), royalty, fees for technical services or other sum chargeable under this Act, which is payable outside India, on which tax has not been paid or deducted under Chapter XVII- B: Provided that where in respect of any such sum, tax has been paid or deducted under Chapter XVII- B in any subsequent year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid or deducted.

Section 40(a)(ia) in The Income- Tax Act, 1961

If it is noticed at the time of tax audit that the assessee has failed to deduct tax at source on payments on which tax is deductible, then Section 40(a)(ia) comes into the picture and such payments/expenses are not deductible at 30% from the income of the assessee.

However, the payer/assessee can claim the said expenses under second proviso to Section 40(a)(ia) by complying first Proviso to Section 201(1) & Section 201(1A).

Section 201 of the Income-tax Act,1961

(A)  with effect from the 1st day of July, 2012,—

(i)  in sub-section (1),—

(a)  before the proviso, the following proviso shall be inserted, namely:—

“Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to Payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such resident—

(i) has furnished his return of income under section 139;

(ii) has taken into account such sum for computing income in such return of income; and

(iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:”;

Particulars of Form 3CD

Clause 34 of Form 3CD

(a) Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB, if yes please furnish:

(b) Whether the assessee is required to furnish the statement of tax deducted or tax collected. If yes, please furnish the details:

(c) whether the assessee is liable to pay interest under section 201(1A) or section 206C(7). If yes, please furnish:

Interest Proviso to subsection (1A) of Section 201

According to Proviso to section 201(1A) any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of chapter XVII-B, .on the sum paid to a resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default under the first proviso of section 201(1), as the conditions mentioned therein have been satisfied & the deductor has furnished form no. 26A certified by a chartered accountant, then the interest @ 1% for every month or part of the month shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident.

(Republished with Amendments)