In the earlier article, I have mentioned that ‘TDS is not Tedious’. Theoretically, that is completely right. But practically, it has not been proved so. Practically, TDS has actually become very tedious. This is not because of the provisions of the law, but because of lack of the efficiency of people to follow the procedural aspects properly. I have given the coverage to the procedural aspects of TDS from deduction to claiming of the same by the deductees in their own Income Tax Return.
Following points explain the same in step by step manner.
Obtaining of TAN:
First of all the person who is liable for deduction of tax has to obtain a Tax-deduction Account Number (Also called as Tax-collection Account Number). TAN is a unique number. However, one deductor may have multiple TAN for its different locations. For example, Banks have different TAN for each of its branches. But it does not matter. In this case, each branch is considered as separate deductor.
Identification of Transaction for TDS:
Next step is identification of transactions which are eligible for TDS. This is not a onetime process, but an ongoing process. These should be identified keeping in mind the provisions given under the Income Tax Act with respect to various expenditures.
Deduction of Tax:
Once an eligible expenditure is identified and the rate is determined, tax has to be deducted and paid to the credit of Central Government within the due date.
Payment of TDS – Aspects related to Challan:
The challan has to be paid thorough ITNS 281. There are various aspects as regards to the payment. These are as below:
a. The challan should be preferably paid online to avoid the data entry mistakes that happen by the bank employees.
b. Please ensure that you mention the accurate Assessment Year on the challan. In case of wrong A.Y., the deductee will not get the credit.
c. Separate challan has to be used for corporate and non corporate deductees.
d. Make sure to mention the accurate TAN in the challan.
e. Separate challan has to be used for each Section in the Income Tax Act.
In case of a mistake in any of the above mentioned points, then there will be a mismatch and the deductee will not get credit for the TDS.
Obtaining of Deductee Details:
The deductor shall obtain the details from the deductees whose tax has been deducted. The details required are Name, Address and PAN. It is advised that rather than obtaining just details, if the copy of PAN is also obtained it will be helpful in case of any disputes in future.
Filing of Quarterly Returns:
After the deduction and payment of tax and obtaining of details from the deductees, quarterly statements as regards to tax deducted in the respective quarter should be filed with NSDL which in turn shall report it to Government. These statements are to be filed electronically. Care has to be taken that the following details are mentioned accurately in the statements.
a. Name and Address of the Deductee.
b. PAN of the Deductee.
c. Amount credited or paid.
d. Nature of payment.
e. Section of deduction.
f. Rate of deduction.
g. Details of challan for tax paid.
Again, please make sure that there is no mistake in any of the above details. In case of any mistake, the deductee will not get credit of the TDS.
Issue of Quarterly Certificates:
After the filing of returns, the deductor shall issue Certificate of Deduction to the deductee in the proper form i.e. 16 / 16A as applicable.
Responsibility of the Deductee:
Till now this was the role of the deductor. However, the story does not end here. The deductee also has got his own responsibilities. These are discussed in following points:
a. The deductee should provide accurate details about his PAN so that there is no problem in claiming of the credit.
b. Even if it is the requirement by law to the deductor to issue a Certificate, it is the responsibility of the deductee to claim for the TDS certificate if the deductor fails to issue.
c. At the time of filing his own Income Tax Return, it is the responsibility of the deductee to make sure that he has included and reported the income in respect of the TDS certificates.
d. Further, while filling the details as to TDS in the ITR, the details of the deductor and the deduction should be mentioned accurately. The details required are TAN of the deductor, Name and address of the deductor, Section of Deduction, Date of deduction, Rate of Deduction, Gross Amount, TDS amount and TDS claimed in the return.
This was regarding the procedure of TDS from the point of deduction to the point of claim. However, there are numerous mistakes taking place in TDS, the major reasons of which are summarised below –
a. Wrong details in challan.
b. Deduction of Tax and non-payment thereof.
c. Wrong furnishing of PAN by the deductee. I had faced a problem in case of one of my clients where he submitted the HUF PAN instead of Individual PAN.
d. Data entry errors while filing the TDS return. There may be mistakes as regards to section code, challan details, PAN of deductee, etc.
e. Non filing of TDS return despite of proper deduction of tax and payment thereof to the Government.
f. Data entry errors while filing the ITR by the deductee as regards to TAN of Deductor, Section code, etc.
[I have tried to cover all possible points in the article. Again, like the previous article, this article also does not include any information on any section of the Income Tax Act. This article is also regarding the practical understanding and procedural aspects of TDS. I will try to write more articles on each section of TDS provisions separately including therein the technical details.]
CA Amol Gopal Kabra
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