Demat of TDS certificates may be deferred again
Dematerialisation of tax deducted at
source (TDS) certificates is likely to be deferred by a year from the proposed
date of April 1, 2008.
The scheme was originally scheduled to come into effect from April 2005, but was deferred twice.
“Demat of TDS certificates is likely to be
deferred by a year or at least six months,” a finance ministry official said.
An announcement is expected in the Budget.
The delay will be a result of many central
and state government departments not yet obtaining the Permanent Account Number
(PAN) and the Tax Deduction Account Number (TAN), both pre-requisites for
moving to the proposed paper-less certificate system.
For dematerialisation to become a reality,
all tax deductors need to file TDS returns electronically and mention taxes
paid against each PAN. A tax deductor like a company, a firm or contractor,
also has to mention the TAN.
Due to the delay, tax payers will have to
continue holding on to their paper TDS or tax collected at source (TCS)
certificates as proof to avail of credit for the tax paid. Under the
dematerialisation system, a tax payer will not be required to possess a
physical certificate to claim credits.
Based on the TDS paid, an annual statement
of taxes will be prepared in the e-format by every government department for
The tax payer’s annual return of income
will then be compared with the TDS data available electronically. Refunds for
excess tax paid will happen automatically and quickly, without manual
Official sources pointed out that not only
have many government departments not applied for the TAN number, they do not
even file their TDS returns and deposit tax collections in time. Similarly,
other tax deductors like transport operators and race course organisations are
also not providing the PAN of tax payers.
“Unless all tax deductors provide PAN and
TAN correctly, it will not be possible to move towards dematerialisation and
faster tax credit. As a result of providing incorrect numbers, taxes are
getting deducted or paid to wrong accounts,” officials added.
Until all taxes deducted, collected or
paid are matched in the Online Tax Accounting System and complete information
is entered in the deductees’ account, dematerialisation cannot fully substitute
the existing paper-based system, sources added.
E-filing of TDS returns, which has been
made mandatory for companies and government departments, has been further
extended for all TDS deductors from September 1, 2007.