Section 201(1) of the Income Tax Act establishes that a person responsible for deducting TDS (Tax Deducted at Source) on distributed income is deemed an "assessee in default" if they fail to deduct or pay the TDS. However, exceptions exist, and an assessee will not be considered in default if certain conditions are met, including filing a return of income under Section 139, considering the TDS amount in the return, paying the due tax, and submitting a prescribed form (Rule 31ACB) from a chartered accountant.
Section 201(1) Overview
- Imposes "assessee in default" status for failure to deduct or pay TDS on distributed income.
- Penalty under Section 221 of the Income Tax Act is applicable.
Exceptions to Assessee in Default Status
Assessee not deemed in default if:
- Filed a return of income under Section 139.
- Included the TDS amount in the income computation.
- Paid the tax due on the declared income.
- Submitted a prescribed form (Rule 31ACB) from a chartered accountant.
Impact of Non-Deduction or Non-Payment of TDS
- Section 40(a)(ia) disallows the entire expenditure amount on which TDS should have been deducted.
- Disallowance limited to 30% of the expenditure if TDS not deducted on certain payments to residents.
Role of Form 26A
- Furnishing Form 26A, as per the proviso of Section 201(1), prevents the assessee from being considered in default.
- Disallowed expenditure can be claimed in the year of furnishing Form 26A.
Procedure Of Filing Form 26A
TRACES (Deductor) - Request for Form 26A/27BA
- Go to 'Statement/Payments' menu on TRACES.
- Select 'Request for 26A/27BA.'
- Choose financial year, form type, and transaction type.
- Click 'Proceed.'
Download Request
- A request number is generated; go to 'Track Request for 26A/27BA.'
- View all requests in the table.
- Click on 'Requested Download' under 'Download.'
- Download the utility by clicking "Click here."
- Enter the 'Verification Code' and submit.
- Download the utility and TRACES – Sample – 26A – Non Deduction (.csv file).
- Enter details, save the file, open the utility, and input details.
Generate .nzip File
- Click 'Proceed,' common error may appear; click 'OK.'
- .nzip file is generated.
- Upload on TRACES, check status in 'Track Request for 26A/27BA.'
E-filing Portal (Deductor)
- Login as deductor on Income Tax Portal.
- Click 'Submit and View Form 26A/27BA' under 'e-File.'
- Select request type, form name, and financial year.
- Click on 'assign CA'.
E-filing Portal (CA)
- CA logs in, goes to Worklist> For your Action> Annexure A.
- Dialog box appears; find Deductor and Payee names.
- Click 'Submit,' download utility for xml.
- Fill information, import two .csv files, generate xml.
- Upload xml, check status (Accepted).
TRACES Portal (Deductor) - Track Request
- Login to TRACES.
- Click 'Track Request of Form 26A/27BA.'
- Check status.
Post-Processing
- After processing, a demand may arise.
- Deductor's role ends; may pay interest demand if applicable.
- Form 26A helps reduce unnecessary penalties, providing relief to the assessee.
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