Arjuna (Fictional Character): Krishna, everyone from small businesses, banks to corporate seem to be quite busy during the last week of May. Which tax compliance or reporting matters are keeping the taxpayers busy?
Krishna (Fictional Character): Arjuna, May month is the peak of the summer season in our country and we use number of ways to protect ourselves from the scorching heat, on the same lines the taxpayers are busy in complying with the TDS and SFT reporting requirements to be completed before 31st May 2025 to save themselves from the tax heat.
Arjuna (Fictional Character): Krishna, what are the TDS-related reporting requirements and also describe the effects of non-compliance with them?
Krishna (Fictional Character): Arjuna, 31st May 2025 is the due date for filing of TDS return for the 4th Quarter of FY 24-25. Every taxpayer who have deducted TDS from the 1st Jan 2025 to 31st March 2025 on the payments made by him including salary, commission, interest etc. shall report the details of TDS deducted and paid by him through TDS returns in the form 24Q(salary), 27Q(non-salary-non resident) &26Q(others).
Non-compliance with the TDS requirements can expose taxpayers to the following issues
- Late Fee: Non-filing of TDS return within the due date attracts a late fee of Rs. 200 per day under section 234E of the Income Tax Act,1961, up to a maximum of the total TDS amount.
- Penalty: Failure to file TDS return could also attract a penalty under section 271H, ranging from Rs. 10,000/- to Rs. 1 Lakh. This would be levied in addition to the late fees charged.
- Interest: For taxpayers who have not made the payment of deducted TDS to the government yet for the FY 24-25, interest @ 1.5 percent per month is payable from the date of deduction of TDS to the date of payment.
4. Disallowance of Expense: If a taxpayer does not deduct TDS during the relevant year or fails to make payment of TDS upto the due date of filing of return then, 100 percent of the expense is disallowed for money payable to a non-resident and 30 percent of expense is disallowed for amount payable to the resident under section 40(a).
Arjuna (Fictional Character): Krishna, what is SFT and what are the important reporting requirements connected with it?
Krishna (Fictional Character): Arjuna, SFT stands for Statements of Financial Transactions, wherein the specified persons are required to report specified financial transactions which will then be reflected in the AIS of the other party, and thus would provide him with all the significant information for reporting under Income Tax and would also provide the department with the data.
Persons who are required to report SFT transactions include
- A Banking Company or Cooperative Banks.
- Persons subject to Tax Audit under section 44AB.
- Companies issuing Shares, Bonds & Debentures.
- NBFC and Credit Card Issuers
- Mutual Fund Trustees etc.
Specified transactions for reporting include
1. Cash payment for a Bank Draft of Rs. 10 Lakh or more in a Financial Year.
2. Cash Deposit or Withdrawal from the current account of Rs. 50 Lakh or more in a Financial Year.
3. Cash Receipt for Sale exceeding Rs. 2 Lakh.
4. Receipts from a person of Rs. 10 Lakh or more in a FY for acquiring shares, bonds or debentures.
5. Purchase or Sale of Immovable Property for consideration or having a Stamp duty value of Rs. 30 Lakh or more.
SFT returns are to be filed in forms 61A or 61B, based upon the transactions upto the 31st May of the next Financial Year. Thus, 31st May 2025 is the due date for SFT reporting for the FY 24-25.
Non-filing of SFT return within due date would attract a penalty of Rs. 500 per day and also a notice from the Income Tax Authorities, following which the taxpayer shall furnish the SFT return within 30 days from the notice, failing which penalty of Rs. 1000/- per day would be levied.
Arjuna (Fictional Character): Krishna, what should the taxpayer learn from this?
Krishna (Fictional Character): Arjuna, The Tax Season and the Summer Season, both are very critical from the taxpayers as well as the common man's perspective. Negligence in this period could bring severe repercussions for both of them. All in all, timely compliances is the key and thus the businesses should hurry and comply with their TDS and SFT reporting as early as possible in this month.
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