REPORTING ON TDS IN FORM 3CD: - MORE COMPREHANSIVE NOW
(The above article was written when TDS reporting was amended in Form 3CD in 2006. It is an interesting article)
- CA SUDHIR HALAKHANDI
The central Board of direct taxes has introduced Income tax (9th Amendments) Rules 2006 through Notification No. 208/2006 dated 10-08-2006 making several changes in the Form 3CD. The major changes are made with respect to reporting and calculation of FBT, facts about conversion of capital asset into stock in trade, reporting about payment of expenditure with respect to income not taxable and further related to the provisions of payment of expenditure and taking and repaying the deposits and loans besides some minor procedural changes.
Further one more change has been effected with respect to the reporting about the compliance of the provisions related to “Tax deducted at source” and under this particular head the reporting requirement in Form 3CD has been made more comprehensive and in a sense more useful for the revenue. Here in this articles we are trying to see what is the existing requirement in this respect has been given in the Form No.3CD and now how it has been made more purposeful and comprehensive.
First let us see the existing requirement of Point No.27 and this is given in two parts: -
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27. (a) Whether the assessee has deducted tax at source and paid the amount so deducted to the credit of the Central Government in accordance with the provisions of Chapter XVII-B.
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Here see requirement is only related to the payment of tax, which has been deducted by the Assessee, and auditor has to report that the tax deducted by the assessee has been paid within time to the central Government. It is not expected from the auditor here to comment on the liability of the assessee to deduct the Tax.
The Institute of chartered Accountants of India in it’s Guidance Note on Tax Audit 44AB has also supported this view and while discussing the above item it was stated that the auditor in this respect is not expected to verify whether the tax has been deducted properly or not. Under this clause, the tax auditor is expected to verify from the records whether the tax deducted at source has been paid to the credit of the Central Government in accordance with the time stipulated under Chapter XVII-B of the Act.
The reporting requirement for this clause is also supporting the above view: -
(b) If the answer to (a) above is in negative, then give the following details:
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Serial Number
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Particulars of head
under which tax is
deducted at source
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Amount of tax
deducted at source
(In rupees)
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Due date for
remittance to
Government
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Details of payment:
Date/ Amount (in
rupees)
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Remarks
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THE NEW ITEM NO. 27
Now the CBDT has introduced a new and more comprehensive Item No. 27 in this respect, which is being reproduced as under: -
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Whether the assessee has complied with the provisions of Chapter XVII-B regarding deduction of tax at source and regarding the payment thereof to the credit of the Central Government. [Yes/No]
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Now the auditor has to verify the details of all the transaction of the assessee and has to ascertain whether on any one of them the provision of TDS are applicable and if applicable the assessee has complied with them as per the provisions of the chapter XVII-B regarding the deduction of tax at source and regarding the payment thereof to the to the credit of central Government.
Before reporting Yes or No the auditor has to go through various provisions of chapter XVII – B related to the deduction of tax at source and it’s payment to the central Government. Let us see the various provisions contained in different sections of chapter XVII-B: -
PROVISIONS RELATED TO DEDUCTION OF TAX AT SOURCE: -
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Section 192: - Tax deduction at source from salary including perquisites.
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Section 193: - Tax deduction at source from Interest on securities.
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Section 194: - Tax deduction at source from Dividends (wherever applicable).
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Section 194A: - Tax deduction at source from Interest other than “interest on securities”.
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Section 194B: - Deduction of tax at source from winning from lotteries or crossword puzzles.
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Section 194BB: - Tax deduction at source from Winning from horse races.
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Section 194C: - Tax deduction at source from Payment to contractors and sub-contractors
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Section 194D: - Tax deduction at source from Insurance commission.
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Section 194E: - Tax deduction at source from Payments to non – resident sportsmen or sports associations.
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Section 194EE: - Tax deduction at source from. Payments in respect of deposits under National Savings Schemes, etc.
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Section 194F: - Tax deduction at source from Payments on accounts of repurchase of units by Mutual Fund or Unit trust of India.
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Section 194G: - Tax deduction at source from Commission, etc., on the sale of lottery tickets.
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Section 194H: - Tax deduction at source from Commission or Brokerages.
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Section 194I: - Tax deduction at source from Rent.
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Section 194J: - Tax deduction at source from Fees for professional or technical services.
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Section 194LA: - Tax deduction at source from Payment of compensation on acquisition of certain immovable property.
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Section 195: - Other sums:- Payment of Interest and other sums (Not being the salary) to a Non – resident non corporate assessee or to a company other than a domestic company.
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Section 196B: - Tax deduction at source from Income from units referred in Section 115AB.
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Section 196C: - Tax deduction at source from Income (including capital gain) from foreign currency bonds/ Global depository scheme to a non-resident.
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Section 196D: - Tax deduction at source from Income of Foreign Institutional Investors from securities.
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PROVISIONS OF TDS AT NIL OR LOWER RATE
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1.Section 197: - Deduction of tax at lower rate if the recipient of the payments mentioned under section 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194I, 194J, 194K, 194LA, 195 produces a certificate from his assessing officer in this respect.
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2. Section 197A: - Deduction of tax at “NIL” rate. Such as on production of declaration in prescribed Form No. 15 H (Senior citizen) or 15 G (for any other person) wherever applicable.
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PROVISIONS RELATED TO PAYMENT OF TDS TO CENTRAL GOVERNMENT: -
The provisions of payment of TDS to central Government has been mentioned in Section 200 under the head Duty of person deducting the tax. Let us see the relevant portion of Section 200 in this respect: -
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Section 200. (1)] Any person deducting any sum in accordance with the foregoing provisions of this Chapter shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs.
(2) Any person being an employer, referred to in sub-section (1A) of section 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs.
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The relevant rule in this respect is given in Rule 30 of the Income tax rules, 1962 and before going for conclusion that the assessee has followed the provisions of chapter XVII-B with respect to deduction and payment of Tax deducted at source the auditor has to go for the provisions of Rule 30 in this respect.
The auditor has to keep in mind the various provisions regarding deduction and payment of tax deducted at source in the mind while verification of the fact that the assessee has complied all the provisions of chapter XVII-B.
Further a new item in the Name of 27(b) has also been added to form 3CD and in this item the auditor has to mention the following: -
(b) If the provisions of Chapter XVII-B have not been complied with, please give the following details*, namely: -
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Amount
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(i)
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Tax deductible and not deducted at all
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(ii)
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Shortfall on account of lesser deduction than required to be deducted
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(iii)
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Tax deducted late
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(iv)
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Tax deducted but not paid to the credit of the Central Government
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“Please give the details of cases covered in (i) to (iv) above.
Here see the requirement of the item No.27 (a) is very complex and auditor has to see that each and every provision of the chapter XVII-B regarding deduction and payment of TDS is adhered properly by the assessee but the reply required from the auditor is very short i.e. Yes or No. If the assessee is not complying even a single provision of the chapter XVII-B then the auditor has to make a note to specifying the deviation and in that case it will not be proper for the auditor to say “No” or “Yes” in reply of such a wide ranging requirement.
END
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