Mandatory Quoting of PAN and TAN on TDS Certificate for Asstt. Year 2014-15.

Section 203A of the Act makes it obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax deduction and collection Account No (TAN) in the challans, TDS-certificates, statements and other documents. Detailed instructions in this regard are available in this Department’s Circular No.497 [F.No.275/118/ 87-IT(B) dated 9.10.1987]. If a person fails to comply with the provisions of section 203A, he will be liable to pay, by way of penalty, under section 272BB, a sum of ten thousand rupees. Similarly, as per Section 139A(5B), it is obligatory for persons deducting tax at source to quote PAN of the persons from whose income tax has been deducted in the statement furnished u/s 192(2C), certificates furnished u/s 203 and all statements prepared and delivered as per the provisions of section 200(3) of the Act.
 
All tax deductors are required to file the TDS statements in Form No.24Q (for tax deducted from salaries). As the requirement of filing TDS certificates alongwith the return of income has been done away with, the lack of PAN of deductees is creating difficulties in giving credit for the tax deducted. Tax deductors are, therefore, advised to procure and quote correct PAN details of all deductees in the TDS statements for salaries in Form 24Q. Taxpayers are also liable to furnish their correct PAN to their deductors. Non-furnishing of PAN by the deductee (employee) to the deductor (employer) will result in deduction of TDS at higher rates u/s 206AA of the Act mentioned in para 4.8 below. 
 
Compulsory Requirement to furnish PAN by employee (Section 206AA):
 
Section 206AA in the Act makes furnishing of PAN by the employee compulsory in case of receipt of any sum or income or amount, on which tax is deductible. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor has been made responsible to make TDS at higher of the following rates:

 

  1. at the rate specified in the relevant provision of this Act; or
  2. at the rate or rates in force; or
  3. at the rate of twenty per cent.

 

The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS. However, where the  ncome of the employee computed for TDS u/s 192 is below taxable limit, no tax will be deducted. But where the income of the employee computed for TDS u/s 192 is above taxable limit, the deductor will calculate the average rate of income-tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to deducted at the average rate. Education cess @ 2% and Secondary and Higher Education Cess @ 1% is not to be deducted, in case the tax is deducted at 20% u/s 206AA of the Act.

Income Tax Deductions from Salary For Fin. Year 2013-14 u/s. 192.

Reference is invited to Circular No.08/2012 dated 05.10.2012 whereby the rates of deduction of income-tax from the payment of income under the head “Salaries” under Section 192 of the Income-tax Act, 1961(hereinafter ‘the Act’), during the financial year 2012-2013, were intimated. The present Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head “Salaries” during the financial year 2013-2014 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department- http://www.incometaxindia.gov.in.
 
RATES OF INCOME-TAX AS PER FINANCE ACT, 2013
 
As per the Finance Act, 2013, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head “Salaries” for the financial year 2013-14 (i.e. Assessment Year 2014-15) at the following rates:
 
2.1 Rates of tax
 
A. Normal Rates of tax:
 
S. No
Total Income
Rate of tax
1 Where the total income does not exceed Rs. 2,00,000/-. Nil
2 Where the total income exceeds Rs. 2,00,000 but does not exceed Rs. 5,00,000/- 10 per cent of the amount by which the total income exceeds Rs. 2,00,000/-
3 Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. Rs. 30,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.
4 Where the total income exceeds Rs. 10,00,000/-. Rs. 1,30,000/- plus 30 Per cent of the amount by which the total income exceeds Rs. 10,00,000/-
 
B. Rates of tax for every individual, resident in India, who is of the age of sixty years or
more but less than eighty years at any time during the financial year:
 
S. No
Total Income
Rate of tax
1 Where the total income does not exceed Rs. 2,50,000/- Nil
2 Where the total income exceeds
Rs. 2,50,000 but does not exceed Rs. 5,00,000/-
10 per cent of the amount by which the total income exceeds Rs. 2,50,000/-
3 Where the total income exceeds
Rs. 5,00,000/- but does not exceed
Rs. 10,00,000/-
Rs. 25,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.
4 Where the total income exceeds
Rs. 10,00,000/-
Rs. 1,25,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-
 
C. In case of every individual being a resident in India, who is of the age of eighty years or
more at any time during the financial year:
 
S. No
Total Income
Rate of tax
1 Where the total income does not exceed Rs. 5,00,000/- Nil
2 Where the total income exceeds
Rs. 5,00,000 but does not exceed Rs. 10,00,000/-
20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-
4 Where the total income exceeds
Rs. 10,00,000/-
Rs. 1,00,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-
 
2.2 Surcharge on Income tax:

The amount of income-tax shall be increased by a surcharge @10% of the Income-tax on payments to an individual taxpayer, if the total income of the individual exceeds Rs 1 crore during FY 2013-14 (AY 2014-15). However the amount of Surcharge shall not exceed the amount by which the individual’s total income exceeds Rs 1 crore and if surcharge so arrived at, exceeds such amount (assessee’s total income minus one crore) then it will be restricted to the amount of total income minus Rupees one crore.

2.3.1 Education Cess on Income tax: The amount of income-tax including the surcharge if any, shall be increased by Education Cess on Income Tax at the rate of two percent of the income-tax.

2.3.2 Secondary and Higher Education Cess on Income-tax: An additional cess is chargeable at the rate of one percent of income-tax including the surcharge if any, but not including the Education Cess on income tax as in 2.3.1. 

How to file Nil TDS Return

Nil return can be divided into two categories:

1.  Nil eTDS return which have only Nil amount challan and no deductee details (We will refer it as a pure Nil eTDS return)

2.  Nil TDS return having Nil amount challan and having deductee details also with remarks tag “A ” , “B” ,”T” ,”Z”,”Y”

First type of return i.e. pure Nil eTDS returns has been dispensed with and cannot be filed on or after 01.10.2013 but second type return still can be filed even after 01.10.2013 with FVU 4.0.

The Codes shown above have specific purposes which has been described as under:

  • Write “A” if “lower deduction” or “no deduction” is on account of a certificate under section 197.
  • Write “B” if no deduction is on account of declaration under section 197A.
  • Write “T” if no deduction is on account of deductee being transporter. PAN of deductee is mandatory.[section 194C(6)]
  • Write “Z” if no deduction is on account of payment being notified under section 197A(1F).
  • Write “Y” if no deduction is on account of payment below threshold limit specified in the Income-tax Act, 1961.

So to create a Nil tds return after 01.10.2013 have two steps:

Step -1: Enter challan details 

  • create a Nil amount challan (Check How to create Nil amount challan here) as you have done previously or
  • Enter  any challan with amount deposited start date of financial year one year before the current financial year .You can enter challan deposited on or after 01.04.2012 for financial year 2013-14 (as per FVU 4.00 after 01.10.2013)

Step-2: Enter at least one deductee details

  • With any one tags code  A B T Z or Y  as describe above
  • A ,B & Z need certificate number also ,so that can be entered only if you have certificate number  issued by ITO TDS
  • Code-T is to be mentioned for payment made to transporter without deduction of tds under section 194C(6)
  • More important is Code Y ,which is not mandatory ,but can help us in creating Nil eTDS return. With Y TAG you can enter payment under any tds section where cut off amount has been defined and you have paid/credited amount less than cut off amount and no TDS has been deducted on it.

Note: Please note that while creating the eTDS return for a Given quarter you can enter deductee details from start of the financial year to end date of the given quarter. The same rule applies on deductee entries with above tags also. So in quarter -2 for FY: 2013-14, you can enter any entries dated 01.04.13 to 30.09.2013.

Preparation, Validation and e-Filing of e-TDS Return

e-TDS return has to be prepared in accordance with the file format prescribed by the Income Tax Department. NSDL has provided free downloadable utility at http://tin.nsdl.com for the purpose of preparation of e-TDS return. Alternatively, various softwares are available for preparation of TDS returns.

Following points should be noted while preparing E-TDS return :
 
1. Payment of TDS / TCS in Bank and Verification thereof
  1. Challan no. 281 should be used for deposit of TDS/TCS.
  2. Correct 10-digit Tax Deduction Account Number (TAN), name and address of the deductor/collector should be quoted on each challan used for depositing tax. TAN details should be verified from the Income Tax Department web-site.
  3. Separate challans should be used to deposit tax deducted under different sections. Correct code for nature of payment should be indicated in the relevant column in the challan. (For example, 94C for payment to contractors and sub-contractors, 94I for rent).
  4. Separate challans should be used to deposit tax deducted for different types of deductees, i.e. Corporate or Non Corporate.
  5. It is mandatory for the following types of assessees to pay tax online with effect from April 1,2008.
    1. All the corporate assessees.
    2. All assessees (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
    6.    Challan Identification Number ( CIN ) :
After the taxes are paid, the collecting bank branch will give a counter foil as acknowledgement for the taxes paid. Ensure that the bank has mentioned the Challan Identification Number (CIN) on the counter foil.
CIN has three parts : 7 digit BSR code of the bank branch where tax is deposited, Date of Deposit of tax and Serial Number of Challan
    7.    The status of the challan deposited can be viewed on the NSDL-TIN website (www.tin-nsdl.com) under the link “Challan Status Enquiry”.
    8.    Challan Amount
  1. Actual challan amount should be mentioned in the TDS Return. This will enable matching the challan details provided by the deductor in the TDS return with the challan details uploaded by banks.
  2. If TDS for two months (June and July) was paid using one challan, the same challan details should be repeated for both Q1 and Q2. However, it should be ensured that the total TDS deposited for the corresponding deductees given in returns for both quarters should be less than or equal to the challan amount.
Permanent Account Number of Deductee
In case valid PAN of a deductee is not available, the deductor should mention the details as under :
PANAPPLIED – in case deductee does not have a PAN but has applied and provided proof of application of PAN.
PANNOTAVBL – where deductee has not given any PAN or proof of PAN application. This means PAN is not available.
PANINVALID – where deductee has provided PAN but it is structurally invalid. The Deductee PAN field should contain a structurally valid PAN or PANAPPLIED or PANNOTAVBL or PANINVALID only. If any other value is mentioned in this field then the FVU will give an error during validation of the TDS return.

Deductee Type ( Company / Non Company )
Deductee Type should be properly indicated.

Payment by Book Entry or Otherwise
If tax is deducted on the basis of provision made on the last day of the accounting year then the option ‘Paid by Book Entry’ has to be selected.
This is necessary to ascertain the correct due date of payment for such tax deduction.

Rate of TDS & Reason Code for non deduction or lower deduction :
The rate of tds should be correctly mentioned in the e-TDS return. If lower deduction / no deduction is on account of a certificate under section 197, then this should be indicated by writing ‘A’ in the appropriate column. If lower deduction / no deduction is on account of declaration under section 197A, then this should be indicated by writing ‘B’ in the appropriate column.

VALIDATION OF E TDS RETURN
File Validation Utility (FVU) has been developed by NSDL to help deductors ensure that the e-TDS returns prepared by them conform to the prescribed file format. After preparing e-TDS return in accordance with the file formats notified by ITD, a text file is generated with ‘txt’ as filename extension. This *.txt file should be validated using the latest FVU to ascertain whether the return contains any format level error(s). In case the errors are found, these errors should be rectified and the file should be validated once again. This procedure should be repeated till an error free return is prepared. It should be noted that the FVU validates only the format level accuracy of the e-TDS return.

After successful validation of input file, three files are generated : TDS  Statement Statistics Report, PAN statistics report and upload file. Eg. In case of valid file for Form 26Q, the FVU will generate three files as follows:
i. Form26Q.html : ‘TDS Return Statistics Report’ This report is a summary of the e-TDS return successfully validated by the FVU. It should be ensured that the control totals along with the TAN, assessment year and other details as reflected in this report match with the actual information.
ii. Form26Q_PAN_Statistics.html This is a PAN Statistics Report which contain list of deductee PAN deficiencies like invalid PAN, PAN not available and PAN applied. If there are no PAN deficiencies, then this file will not be generated.
iii. Form26Q.fvu This is an upload file generated with the same file name as the ‘input file’ but with an extension .fvu. This .fvu file should be copied on floppy or CD for the purpose of furnishing the same at TIN FC.

FILING OF e-TDS RETURNS
After preparing and validating the e-TDS returns as abovementioned, the deductor will have to file the same at any TIN-FC managed by NSDL or through an online web based facility provided by NSDL. File *.fvu which is generated after successful validation is the upload file which has to be submitted to TIN FC for filing of e-TDS return. Before filing, it should be ensured that :

i)  Each quarterly / annual e-TDS statement / return is in a separate CD/floppy and is accompanied by a duly filled and signed (by an authorised signatory) Form 27A in physical form.
ii)    Each return is in one CD/floppy. It should not span across multiple floppies.
iii)    Return should be compressed, if required, only by using Winzip 8.1 or ZipItFast 3.0 (or higher version) compression utility to ensure quick and smooth acceptance of the file.
iv)    Label mentioning TAN, name of deductor/collector, period to which return pertains (quarter and F.Y.) and Form no. (24Q, 26Q, 27Q or 27EQ) is affixed on each CD/floppy for the purpose of identification.
v)    There is no overwriting/striking on Form 27A. If there is any, then the same should be ratified by an authorised signatory.
vi)    TAN details (name, address, etc.,) of the deductor as provided in the quarterly e-TDS return should be same as in the TAN database maintained by ITD (these details can be verified on web-site http://www.incometaxindia.gov.in). If they are different, the deductor will have to submit a TAN change request application to update the ITD TAN database or a copy of the acknowledgment of TAN change request already submitted.
vii)    The e-TDS return has been successfully passed through the latest version of the FVU.
viii)    Control totals, TAN and name mentioned in the e-TDS return match with those mentioned on Form 27A.
ix)    CD/floppy is virus free.
In case any of these requirements are not met, the e-TDS return will not be accepted at TIN- FCs or NSDL website. In that case, Non Acceptance Memo will be issued by the TIN-FC.

Failure to deduct or remit TDS /TCS.

Interest: Interest at the rates in force (12% p.a.) from the date on which tax was deductible /collectible to the date of payment to Government Account is chargeable. The Finance Act 2010 amended interest rate wef 01.07.2010 and created a separate class of default in respect of tax deducted but not paid to levy interest at a higher rate of 1.5 per cent per month, i.e. 18 per cent p.a. as against 1 per cent p.m., i.e. 12 per cent p.a., applicable in case the tax is deducted late after the due date. The rationale behind this amendment is that the tax once deducted belongs to the government and the person withholding the same needs to be penalized by charging higher rate of interest Penalty equal to the tax that was failed to be deducted/collected or remitted is leviable.

 

In case of failure to remit the tax deducted/collected, rigorous imprisonment ranging from 3 months to 7 years and fine can be levied.

 

Failure to apply for TAN in time or Failure to quote allotted TAN or Wrong quoting of TAN :Penalty of Rs.10,000 is leviable u/s.272BB(for each failure)

 

Failure to issue TDS/TCS certificate in time or Failure to submit form 15H/15G in time or Failure to furnish statement of perquisites in time or Failure to file Quarterly Statements in time: For each type of failure, penalty of Rs.100/- per day for the period of default is leviable. Maximum penalty for each failure can be up to the amount of TDS/TCS. New Section for Penalty for non submission of ETDS /ETDS return (section 271H)(applicable from 01.07.2012)

Failure to deliver statement within time prescribed u/s 200 (3) or to the proviso to sub-section (3) of section 206C may liable to penalty which shall not be less than Rs. 10,000/- but which may extend to Rs. 1,00,000/-. No penalty if payment of tax deducted or collected along with fee or interest and delivering the statement aforesaid before the expiry of 1 year from the time prescribed for delivering the such statement. However No penalty shall be imposed u/s 271H if the person proves that there was reasonable cause for the failure.(section 273B).

Procedure for filing TDS returns with insufficient deductee PAN.

As per instructions issued by the Central Board of Direct Taxes (CBDT), it is mandatory for deductors to file TDS/TCS returns with a threshold limit of Permanent Account Number (PAN) of deductees. To facilitate deductors who face problem in filing TDS returns because of insufficiency of PAN of the deductees and also to accommodate the deductees who have intimated their PAN, the Income Tax Department (ITD) has specified the following procedure for filing TDS/TCS returns:
  • Deductors can file a return containing deductee records which meets the specified threshold limit of PAN quoting, i.e., a deductor can file a return containing deductee details who have provided valid PAN. It can subsequently file a correction return with details of remaining deductees. E.g. as below:
  • Suppose a challan payment of Rs.1,00,000/- has been made for non-salary TDS against 100 deductees each with TDS of Rs.1,000/-. Under the existing procedure the deductor will have to quote at least 85 PAN, failing which his return will be rejected.
  • If there are only 50 deductees whose PAN is available and the deductor attempts to file a return with details of 100 deductees with PAN of only 50 deductees, the return will automatically be rejected at present.
  • However, if he files a return with challan amount of Rs. 1,00,000/- and with details of 50 deductees with PAN, with deductee total of Rs.50,000/-, the return will be accepted. It means the deductor can furnish the details relating to such deductees whose PANs are available.
  • The deductor can later file correction returns with other details of remaining deductees with the same challan details, i.e., the challan amount should be the amount deposited (in this case Rs. 1,00,000/-).
  • The return will be accepted so long as the TDS total of incremental deductees is less than or equal to the balance of Rs.50,000/-.
 
Generation of Text File and Validation of the same 
          The procedure of generation and validation of text file for Correction Statement is similar to that of original return
 
Submission of Correction Statement
          The CD / floppy containing correction statement should be accompanied with the following documents:
  1. Statement Statistics Report generated by FVU. In case of multiple batch correction statement, a separate ‘Statistics Report’ for each kind of batch within the multiple batch correction statement will be generated by the FVU. In such cases, deductor shall submit all ‘Statistics Reports’.
  2. Form No. 27A
  3. Copy of the provisional receipt of regular return.

What should you do after filing of Q1 & Q2?

Back up of Files
          Deductor should take back-up of all the files generated after successful filing of E TDS return, more importantly back up of *.fvu file ( upload file ). *.fvu is the file which eventually is filed with the ITD through TIN FC. If the tds return is required to be revised at a later date, *.fvu file is required for making the necessary corrections.

Status Verification Of E-Tds Return Furnished To Tin

  • This enquiry can be made by going to ‘TAX PAYERS VIEW’ on website of NSDL.
  • Enter TAN and Provisional Receipt Number (PRN) of the return for which the status needs to be verified.
  • These views are available only for e-TDS/TCS return for F.Y. 2005-06 and onwards.
  • You can verify the information without any other authentication. In this case no financial information will be displayed.
Following enquiries can be made at this site.
  1. Whether quarterly returns have been uploaded to TIN central system by TIN-FC.
  2. Whether quarterly returns have been accepted by TIN central system.
  3. Whether challans in returns have been matched with challans uploaded by banks.
  4. Number of deductees whose PAN accounts have been booked.
  5. Line no. of deductees in returns whose PAN accounts could not be booked.
  6. Confirm whether a specific PAN account has been booked.