In India, understanding Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) is crucial for both businesses and individuals. These mechanisms help the government collect taxes effectively. In this article, we will delve into what TDS and TCS are, their significance, and related aspects.
WHAT IS TDS/TCS?
Tax Deducted at Source (TDS) is income tax reduced/deducted from the amount paid/payable at the time of making (or making provisions) of specified payments such as interest, commission, brokerage, rent, winning from lottery/ crossword puzzle/horse race, payments to contractors, insurance commission, technical services, professional services, purchase of goods, on benefits received by doctors and social media influencers, owners of e-commerce platforms, borrowers of education loans, cash withdrawals, perquisite in respect of business or profession & payment on transfer of virtual digital asset etc. The person making payment is required to deduct tax at source at the prescribed rate and the amount so deducted is deposited in Government Account as TDS. The Payer is known as deductor and the payee, who receives the net payment is called the deductee. The credit of such TDS made by payer shall be given to the payee in the TDS return.
TCS is Tax Collected at Source by seller from buyers at the time of selling some prescribed goods. Seller is called ‘collector’ and the buyer is called ‘collectee’.
The applicable sections for the TDS & TCS are mentioned in Chapter XVII of the Income Tax Act, 1961 u/s 192 to 206CCA of the Act.
What is TAN ?
Tax deduction Account Number (TAN) is a 10 digit alphanumeric number issued by the Income Tax Department and every person deducting/collecting tax at source is required to obtain and quote it in every correspondence/ communication related to TDS/TCS.
Note : Not mandatory in case of tax deduction on :
1) Purchase of immovable property u/s 194IA;
2) Payment of rent (paid by non-auditable Individual &HUF ) u/s 1941B;
3) Payment of Contractual/Commission/Brokerage/ Professional Services (paid by non-auditable Individual & HUF) u/s 194M.
INTERNET BASED FUNCTIONALITIES FOR TDS/TCS COMPLIANCE BY DEDUCTORS/COLLECTORS :
WHEN TO DEDUCT/COLLECT TAX?
At the time of making the specified payment or credit of the income/payment to the deductee, whichever is earlier.
In case of TCS, tax has to be collected by the seller at the time of debiting account of buyer or at the time of receipt of such amount from buyer in cash or issue of cheque/draft, or by any other mode, whichever is earlier.
In case of TDS on salary, tax is to be deducted at the time of actual payment.
In case of TDS on rent (u/s 194IB) paid by an individual & HUF (other than specified individual or HUF – not covered under the provisions of Section 44AB), at the time of payment or credit of rent to the account of the payee for the last month of the year, whether the tenancy subsists till the last month of the year, or is vacated during the year.
WHEN TO DEPUSI I Hit TAX DEDUCTED/ COLLECTED AT SOURCE TO THE CREDIT OF THE GOVERNMENT?
Table No. 1
Mode of TDS/TCS
|Due date of payment|
|Where tax is paid without an Income Tax Challan||On the same day (applicable in case of book adjustment).|
|TDS/TCS made during the month of March||On or before 30th April.|
|TDS/TCS made during the months other than March||On or before 7 days from the end of the month.|
|TDS on purchase of immovable property (194IA)*||On or before 30 days from the end of the month of deduction.|
|TDS on rent (194IB) *||On or before 30 days from the end of the month of deduction.|
|(*Challan cum statement in Form 26QB/26QC needs to be filed)|
Note: In certain cases, quarterly payment of TDS can be permitted with the prior approval of the Assessing Officer.
WHICH CHALLAN IS USED FOR PAYMENT OF TDS/TCS?
TDS/TCS is to be deposited to the credit of the Government by using Challan No. ITNS-281.
For making payment of tax deducted at source in the case of immovable property and in the case of rent of property, challan cum statement in Form 26QB and 26QC to be used, respectively.
WHAT IS CHALLAN IDENTIFICATION NO. (CIN)?
Every Income Tax Challan is identified by CIN which contains Bank BSR Code, Date of Payment and Challan Serial No.
HOW TO DEPOSIT TAX?
TDS/TCS is required to be deposited in cash/cheque in Bank through Challan manually or electronically. Electronic payment of TDS/TCS is mandatory for:
(a) All corporate assessees;
(b) Non-corporate assessees who are subject to audit under section 44AB.
Physical mode (i.e. payment by furnishing the hard copy of challan at designated bank) by furnishing the challan No. ITNS 281 in the authorized bank branch.
WHAT IS THE FORM OF TDS/TCS CERTIFICATE AND WHAT SHOULD BE THE FREQUENCY FOR ISSUANCE OF TDS/TCS CERTIFICATE?
Every deductor/collector has to issue a certificate to the deductee/collectee in respect of tax deducted/collected by him in following form:
Download TDS/TCS certificate (Form 16/16A/27D/ 16B/16C) (www.tdscpc.gov.in) bearing unique TDS certificate number and issue to the taxpayers within due date.
Part A of Form 16 shows PANs that are reported in Annexure II of 24Q statement for 4th Quarter. Salary details for whole or part of the year in Annexure II of Quarterly TDS Statement for 4th Quarter is mandatory.
Table No. 2
|No.||Frequency of certificate issuance|
|TDS certificate on salary||Form 16||Annually|
|TDS certificate on payments other than salary||Form 16A||Quarterly|
|TCS certificate||Form 27D||Quarterly|
|TDS certificate on purchase of immovable property||Form 16B||15 days of filing 26QB|
|TDS certificate on rent||Form 16C||15 days of filing 26QC|
Multiple payments can be clubbed in quarterly TDS/TCS certificate.
WHAT IS THE DUE DATE FOR ISSUANCE OF TDS/TCS CERTIFICATE?
Table No. 3
|Form No.||Frequency of certificate issuance||Due date for issuance of TDS/TCS certificate|
|TDS certificate on salary||Form 16||Annually||15′ June following the financial year.|
|TDS certificate on payments other than salary||Form 16A||Quarterly||Within 15 days from the due date of furnishing quarterly TDS return|
|TDS certificate on purchase of Immovable property||Form 16B||As and when the transaction takes place||15 days of filing
|TDS certificate on rent||Form
|As and when the transaction takes place||15 days of filing
|Quarterly||Within 15 days from the due date of furnishing quarterly TDS return.|
|TDS certificate u/s 194M||Form
|As and when the transaction takes place||Within 15 days of
filing Form 26QD
W.e.f. . 01/04/2012 it is mandatory for all deductors to issue TDS certificate in Form 16A generated through TIN Central System which is downloaded from TIN website with a unique TDS certificate number. The deductor shall download such certificate from TIN Central System, verify the correctness of contents & authenticate the correctness of contents before issue of said certificate by digital or manual signature. Then only, it will be treated as a valid certificate.
WHAT ARE THE CONTENTS OF A TDS/TCS CERTIFICATE?
The TDS/TCS certificate contains the following details:
(a) Amount of TDS/TCS;
(b) Valid PAN of the deductee;
(c) Valid TAN of the deductor/collector;
(d) Challan Identification Number (CIN), which is a number generated by a combination of BSR code of the bank where tax is deposited, date of deposit and the challan serial number allotted by the bank;
(e) Receipt number of the relevant quarterly statement of TDS/TCS (i.e., TDS/TCS return).
WHAT IS STATEMENT OF TDS/TCS AND IN WHICH FORM IT IS TO BE FURNISHFD?
TDS/TCS statement cannot be filed without quoting an valid challan and deductee row.
Table No. 4
Statement in respect of TDS/TCS
|TDS/TCS statement Form|
|TDS on salary||Form No. 24Q|
|TDS on payment other than salary to a non- resident or a foreign company or a resident but not ordinarily resident.||Form No. 27Q|
|TDS on payment other than salary to any person other than above.||Form No. 26Q|
|TCS||Form No. 27EQ|
|TDS on sale of immovable property||Form No. 260B|
|TDS on payment of rent by certain individual or HUF||Form No. 26QC|
|TDS u/s 194M||Form No 26 QD|
WHAT IS THE FREQUENCY & DUE DATE OF SUBMISSION OF TDS/TCS STATEMENT?
Due dates for filing of TDS/TCS statement :
Table No. 5
Quarter ending on
|Due date of TDS Statement||Due date for 16A||Due dates of TCS Statement||Due date for 27D|
|30th June||31th July||15th August||15thJuly||30thJuly|
|3Oth September||31thOctober||15th November||15th October||30th October|
|31th December||31th January||15th February||15th January||30th-January|
|31th March||31th May||15th June||15th May||30thMay|
NEW PROVISION OF SECTION 206AB
In case of non filers where tax is required to be deducted at source under the provisions of Chapter XVIIB, other than section 192, 192A, 194B, 194BB, 194-IB, 194LBC, 194M or 194N on any sum or income or amount paid, or payable or credited, by a person to a specified person, the tax shall be deducted at the higher of the following rates, namely:—
(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at twice the rate or rates in force; or
(iii) at the rate of five per cent.
Further, if the provisions of section 206AA is applicable due to non furnishing of PAN in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA. “Specified person” means a person who has not furnished the return of income for the IncoCZYZ Department assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year. Further, the specified person shall not include a non-resident who does not have a permanent establishment in India.
Income Tax Department has released a new functionality to facilitate tax deductors/collectors to verify if a person is a “specified person” as per above sections.
Registration: Tax deductors/collectors can register on the Reporting portal by logging in to e-filing portal (www.incometax.gov.in) by using e-filing login credentials of TAN and clicking on link “Reporting portal” which is available under “Pending Actions” tab of the e-filing portal. After being redirected to the Reporting portal, the tax deductor/collector needs to select Compliance check. The details of Principal officer also need to be provided. The principal officer is the authorised person of the tax deductor/collector to use the compliance check functionality on reporting portal. After submission of the registration request, email notification will be shared with the Principal officer along with login credentials.
Accessing the Compliance check functionality: Principal officer of the entities which are registered with the Reporting portal through TAN shall be able to use the functionality after login into the portal. Under the compliance check section “PAN Search” Tab may be selected to access the functionality in PAN search mode.
For any assistance in this matter tax deductors/collectors can refer to quick reference guide or FAQs available under ‘Resources’ section of Reporting portal or navigate to ‘Help’ section for any query.
WHAT ARE THE CONSEQUENCES OF TDS/TCS DEFAULTS AND NON-PAYMENT TO GOVERNMENT?
Delay in filing TDS/TCS quarterly statements attracts:
(i) Late fee of Rs. 200/- per day for each day of default, subject to certain limits, but not more than the TDS amount u/s 234E.
(ii) Minimum Penalty of Rs. 10,000/- (may be extended to Rs. 1 Lakh) u/s 271H.
Download the justification report to know the details of TDS/TCS defaults, if any, on processing of TDS/TCS statement from the TRACES website www.tdscpc.gov.in.
WHAT ARE THE CONSEQUENCES OF DEFAULT IN FURNISHING STATEMENT/FILING INCORRECT INFORMATION THEREIN?
(i) With effect from 1st July, 2012 failure to file TDS/TCS statement within the prescribed time shall make the deductor/collector liable to pay by way of fee u/s 234E of the Act, a sum of two hundred rupees for each day during which the default continues.
(ii) With effect from 1st July, 2012 for delay in filing the TDS/TCS quarterly statement or furnishing of incorrect TDS/TCS quarterly statement by the deductor/collector would make him liable to penalty u/s 271H of the Act, which shall not be less than Rs. 10,000/- but which may extend to Rs. 1,00,000/- .
(iii) No penalty u/s 271H will be levied for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him along with the late filing fee and interest, if any, to the credit of the Central Govt. he had filed the TDS/TCS return before the expiry of one year from the due date of filing the TDS/TCS return.
(iv) Failure to obtain the TAN or quote correct TAN by the deductor may result in levy of penalty of Rs. mow- u/s 272BB of the Act.
(v) La filing fee u/s 234E, being statutory i re, cannot be waived off. so._
AGGREGATED TDS COMPLIANCE :
WHAT IS THE FORM OF FILING STATEMENT OF TDS/TCS?
The statement of TDS/TCS can be filed either in:
(1) Paper form (for less than 20 deductees), now discontinued in all cases.
(2) Electronic form : Form No. 27A is also to be furnished along with return on electronic form.
Following deductors/collectors have to file the statement of TDS/TCS in the form specified in electronic form only.
(a) Deductor who is an office of the Government; or
(b) Deductor who is a company; or
(c) Deductor who is a person who is required to get his accounts audited under section 44AB in the immediately preceding financial year; or
(d) Deductor in whose case the number of deductee’s records in the quarterly statement for any quarter of the financial year is equal to or more than twenty.
Note: In case of any other deductor/collector, furnishing the quarterly statement in electronic form is optional.
WHAT IS THE DUTY OF DEDUCTOR/COLLECTOR, IF THE DEDUCTEE DOES NOT FURNISH HIS PAN?
If the deductee does not furnish PAN or furnishes incorrect PAN to the deductor/collector, the deductor/collector shall deduct tax at source at higher of the following rates:
(a) the rate prescribed in the Act; or
(b) at the rate in force, i.e., the rate mentioned in the Finance Act;
(c) at the rate of 20%.
What is Lower Deduction Certificate?
On receipt of the online application 13 filed by the deductee after verifying the details submitted thereon, the assessing officer issues a certificate for deduction of Tax at Lower/Nil Rates under section 197/197A of the Income Tax Act, 1961. The assessing officer can also issue certificate for— no deduction of tax to the deductor where the deductee is a non-resident.
CIRCUMSTANCES IN WHICH CERTIFICATE OF LOWER DEDUCTION OF TDS MAY BE OBTAINED :
INCOMES COVERED BY CERTIFICATE UNDER MI SECTION 197 :
Certificate for lower deduction of TDS can be obtained for incomes covered by following provisions:
Section 197 – PROCEDURE TO SUBMIT FORM 13 :
DOCUMENTS & OTHER DETAILS TO BE SUBMITTED ALONG WITH FORM 13 :
VALIDITY OF CERTIFICATE :
The certificate issued for nil/lower deduction of TDS pertains to that particular Financial Year for which application has been made by the assessee. It is valid from the date of issue and expires at the end of that year (unless it is cancelled by AO before its expiry).
Although Form 13 application can be submitted at any time during the year, it is recommended to furnish it at the commencement of the year itself.
OPTION OF SELF DECLARATION (FORM 15G/ 15H) IN CERTAIN CASES:
The declaration is required to be made ONLINE in the following Forms :‑
(a) Form 15H – for senior citizens.
(b) Form 15G – other than senior citizens.
a. Withdrawal of Provident fund (Sec 192A).
b. Interest from securities (Sec 193).
c. Dividend (Sec 194) – Only individual.
d. Interest other than from securities (Sec 194A).
e. Insurance commission (194D).
f. Payment in respect of insurance policy (Sec 194DA).
g. Payment in respect of deposit under National Savings Scheme (194EE) – Only individual.
h. Rental income (Sec 1941).
i. Income in respect of Units (Sec 194K).
Filing of Form No. 27C for non collection of TCS by the Seller:
Form 27C is a document that can help in getting tax exemption from the tax collected at the source. Both buyers and sellers can use this for all the goods specified in the Income Tax Act. When a tax collector files his quarterly TCS return i.e. Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods. Form 27D is the certificate issued for TCS returns filed. Tax collection at the source is exempted in the following cases:
Form 27C can be utilized by the buyer of goods only if the goods that are being purchased are intended for production, manufacturing or processing of further goods, articles or things. In case the goods are being purchased for the sake of trading, Form 27C cannot be used for tax exemption.
Refund Claim :
In case of excess payment of TDS/TCS, application has to be filed online in Form No. 26B – Acknowledgment receipt of refund request.
Thereafter, the Form 26B Acknowledgment is toe furnished to the concerned jurisdictional Assessing Officer ‘thin 14 days from the date of transmitting the data electronically. Failure to do so will lead to rejection of refund request.
The details of jurisdictional Assessing Officer will be available in Track Refund request within 2 days after submitting the refund request.
Further, the pending demand, if any, under PAN/TAN should be liquidated to enable the Assessing Officer to process the refund request.
While filling up the challans, the deductor must take care to fill the following details properly and correctly:
(a) Head of payment, i.e. Corporation Tax/Income Tax,
(b) Amount and mode of payment of tax,
(c) Type of payment,
(d) Assessment Year,
(e) PAN of the Deductor,
(f) TAN of the Deductor.
The deductor can correct the mistake occurred in physical challans through bank/through assessing officer, such as (i) PAN/TAN, (ii) A.Y. (iii) Major Head, (iv) Minor Head, (v) Nature of Payment, (vi) Total amount etc.
For correction of challan, i.e. credit of taxes paid, on account of TAN wrongly mentioned in the challan etc. after the window period available to banks for challan correction, the assessee can make an application to the assessing officer who is having the jurisdiction of the correct TAN who is authorized under the Departmental OLTAS application to make such correction in challan data in bonafide cases.
Purchase of Immovable Property :
While purchasing an immovable property wherein the sale consideration of the property is equal to or exceeds Rs. 50 lakhs, the buyer should keep in mind the following points :
(a) Collect/Deduct TDS @ 1% on the total consideration u/s 194IA of the Act.
(b) TDS is to be deducted on the whole amount of property and not from the amount exceeding the property value of Rs. 50 lakhs.
(c) Collect the PAN of the seller and verify the same with the Original PAN Card.
(d) PAN of the seller as well as purchaser/buyer should be mandatorily furnished in the online Form 26QB (statement cum challan form) for furnishing information regarding the sale transaction of valid PANs. Form 26QB is to be filed within a period of 30 days from the end of the month in which deduction is made and shall be accompanied by a challan-cumstatemen in Form No. 26QB.
(e) Verify tax deducte and deposited from Part F of Form AS – Annual Tax Statement.
(f) Note down 9 digits alphanumeric acknowledgement number generated on filing of 26QB which is required for placing request of Form 16B.
(g) Download Form 16B, certificate to be issued by the deductor (buyer/purchaser) to the deductee (seller of property) in respect of taxes deducted and deposited into Govt. Account, from TRACES portal and issue it to the seller of the property.
The amount deducted as TDS on immovable property transaction will be reflected in Part A2 of 26AS of the seller, and Part F of 26AS of the buyer, respectively.
PAN verification :
The deductor can verify the correctness of PAN details provided by the deductee at TRACES by the following :
(a) Click on the functionality named “PAN Verification- under statement/ payment Tab after login at the TRACES website.
(b) Either of the following two options can be used by the deductor :
The deductor needs to provide the PAN and Form type (any quarterly TDS statement) and click on go. PAN status as active or inactive and name of the PAN holder will be displayed.
Download the consolidated TAN-PAN file for a financial year and Form Type across quarters.
The TAN_PAN master is an excel file containing the list of valid PAN. The deductor before filing any statement can download this file for any previous financial year and quarter and check for the validity of PANs of deductees to avoid repeating the mistake. Deductor needs to place the request of consolidated TAN-PAN file and needs to download from request download option once available to download.
(Republished with amendments)