TDS Rule Amendments

By Kapil Nayyar and Neha Srivastava

Nayyar Maniar & Associates

AMENDMENT IN TDS RULES

The Central Board of Direct Taxes (CBDT) has amended the rules relating to Tax Deducted At Source (TDS) vide Notification No. 41/2010, SO No. 1261 (E) dated May 31, 2010. The amendments mainly relate to the date and mode of payment of TDS, TDS Certificates and filing of TDS return.. The amended rules shall apply only to the tax deducted at source on or after 1^st April 2010.

Salient features of the Notification are enumerated below. We have also tried to capture the difference between the regulations as it was and as it will be after the issue of this notification:

I.          TDS Certificate FORMS

Prior to Issuance of Notification

The provisions stated that the TDS Certificate should include the Tax deduction Account Number (TAN) of the deductor, Permanent Account Number (PAN) of the deductee. These two details would form Unique Identification Number for allowing credit claimed by the tax payer in his income tax return.

Post Issuance of Notification

The Notification has now amended the rule and further introduced the introduction of the receipt number of the TDS return filed by the Deductor. Now Tax deduction Account Number (TAN), permanent Account Number (PAN) and receipt number of the TDS return will form Unique Number for claiming credit by the tax payer.

NMA Insights

The Notification mandates the receipt number of the TDS return to be quoted in the income tax return by the tax payer to claim the credit. Since TDS certificates are not attached along with the Income Tax returns submitted by the assessee, inclusion of receipt number in the return would make the return  more consistent.

II.         Mode of Payment

Prior to Issuance of Notification

The Authorities were responsible for crediting tax deducted at the source to the credit of Central Government through book entry.

Post Issuance of Notification

The authorities are now required to electronically file a monthly statement in a new form no. 24G containing details of credit of TDS to the agency authorized by the Director general of Income tax.

NMA Insights

The new notification has provided a systematic approach for the credit of tax deducted at source to the credit of central government. This will be less tedious as compared to previous mode of payment.

III         Due Date for furnishing TDS Return

Prior to Issuance of Notification

The provisions stated that the due date for filing TDS return for the last quarter of the financial year shall be 15^th of June 

Post Issuance of Notification

The new notification has modified the due date for filing TDS return for the last quarter of the financial year to 15^th of May.

NMA Insights

Since the last date of issuing Form 16A was fixed at 31^st May and the due date of filing the return was 15^th June, thus either incomplete certificates used to be issued (without the acknowledgement number for last quarter) or there was a delay in issuing the certificates by the Companies. This provision would help bridge that gap.

IV         Due Date for furnishing TDS Certificate 

Prior to Issuance of Notification

Post Issuance of Notification

NMA Insights

Since under the earlier provisions, the TDS certificate was to be issued by 30^th April, thus a number of Companies were issuing TDS certificates without filling the details of the acknowledgement number of quarter 4. With this amendment the Income Tax department would be able to reconcile the data internally and not await the original Form 16A’s before completing the assessments.

Also the earlier clause of issuing monthly Form 16A was becoming too tedious for the Companies, thus quarterly issue of certificate is a welcome amendment.

Conclusion

These amendments come in as a step forward towards the achieving the objective of paperless filing of Income tax returns by the assessee. CBDT is further strengthening its control over the details filed in the Income Tax Return by the assessee and their authenticity. These details should reduce the number of notices by the department seeking clarification on the authenticity of the details filed in the Income Tax returns with respect to the TDS certificates. However the CBDT should have considered revising the last date of depositing TDS from 31^st May to an earlier date as that may create further complication.

(Kapil Nayyar is a Fellow member of the Institute and a Partner with Nayyar Maniar & Associates. He has more than 8 years of post qualification experience in Direct Taxes and International Taxation. Kapil is also a Lead Advisor to Promaynov (www.promaynov.com), a firm engaged in providing exclusive practical training programmes to CAs and Lawyers in Direct Tax, Indirect Tax, Audit, M&A and Soft skills.)