Basic principles of TDS Compliance

The following are the basic principles of TDS compliance:

  1. Deduction/ Collection of Tax at Correct Rates
  2. Timely Deposit of Tax Deducted at Source
  3. Accurate Reporting of data related to tax deductions/ collections made
  4. Submission of TDS return within the due dates
  5. Verification and Issuance of TDS Certificates within time
  6. CPC (TDS) is now sending “Intermediate Default Communication” for PAN Errors and Short Payments, which can be corrected during the interim period of a week of etds filing, before CPC (TDS) proceeds with computing Defaults for the relevant statement.
  7. User-friendly Online Correction facility can be used for Correction of Deductees, Tagging Unmatched Challans and Payment of Fees/ Interest. (Please navigate to Defaults tab to locate Request for Correction from the drop-down menu. For any assistance, please refer to the e-tutorial available on TRACES).
  8. Aggregated TDS Compliance Report assists the PAN of the Deductor to administer TDS Defaults for associated TANs and to take appropriate action
  9. The Deductor’s Dashboard provides you all necessary information to assist you in “Compliance Self-Assessment” and to take appropriate action.
  10. Non-filing Self-declaration can be made by navigating to Statements / Payments menu and submit details under Declaration for Non-Filing of Statements.
  11. PAN Verification and Consolidated TAN – PAN File facility on TRACES can be used for verifying the deductees.
  12. The Conso Files and Justification Reports downloaded from TRACES help you to identify errors in submission of revised Quarterly TDS Statements.

Useful guidelines to avoid common mistakes while submitting TDS Statements

Following are some useful guidelines to avoid common mistakes, while submitting TDS Statements and you are requested to go through the following in detail.

Incorrect reporting of 197 Certificates:

Please refer to the following guidelines for correct reporting of 197 Certificates:

  • The Certificate Number should be of 10 digits with Alpha-numeric structure. Please refer to the following examples:
      • Correct Format 1111AA111A;
      • Incorrect Format: 1111AA111A/194C
    • Certificate Number should be valid during the period for which it is quoted.
    • The Certificate Number should be for the same PAN, Section Code and Section Rate for which it has been mentioned in the statement
    • Threshold limit Amount of the Certificate should not be exceeded.
    • Please ensure that the Certificate is not expired. Please refer to the following illustration:
      • Lower deduction Certificate under section 197, issued in April 2013 (e.g. Certificate Number – 1) stands cancelled by Assessing Officer on 10/11/2013.
      • A fresh certificate Under Section 197 (e.g. Certificate Number – 2) is issued with effect from 11/11/2013.
      • Deductor quotes Certificate Number – 2 against the transactions recorded during the period from 01/11/2013 to 10/11/2013 in Q3 TDS statement.
      • Deductor should have quoted Certificate Number – 1 for the transactions conducted till 10/11/2013.

Common errors resulting into Short Payment Defaults:

  • Typographical errors committed by deductor, in reporting the date ‘20032014’    in the “Tax Deducted” column.
  • Total of “Amount Paid / Credited” reported in the “Tax Deducted” column of the statement. This results into short payment and Deductors need to ensure that the TDS/TCS Deducted/Collected amount should be equal to TDS/TCS Deposited Amount.

The above mistakes are illustrated below:

Amount Paid/ Credited

TDS Deducted

TDS Deposited

Remarks

1,55,000.00 1,55,000.00 15,500.00 Wrong TDS Deducted Amount
2,20,420.00 20032014.00 22042.00 Date mentioned in the TDS Deducted Column

Actions to be taken:

  • CIN Particulars (BSR Code, Date of Deposit and Challan Serial Number) mentioned in the TDS statement should exactly match with the CIN Particulars as available on ‘Challan Status’ at http://www.tdscpc.gov. in or ‘Challan Status Enquiry’ at http://www.tin-nsdl.com
  • For BIN (Book Identification Number), the particulars (24G receipt number, Date of transfer voucher and DDO Serial Number) mentioned in the TDS statement by the Govt. Deductors should exactly match with the BIN Particulars as available on ‘Challan Status’ at http://www.tdscpc.gov. in or ‘BIN View’ at http://www.tin-nsdl.com
  • Amount of Tax deposited pertaining to different BIN’s/ CIN’s should not be clubbed together while reporting in the TDS statements.
  • Few other common mistakes in reporting dates are as follows:

Actual Date of Deposit 
(As per Challan)

Date of Deposit mentioned in TDS Statement

Observations

07/01/2014 (07th Jan, 2014) 07/01/2013 (07th Jan, 2013) Wrong Year (2013 instead of 2014)
07/01/2014 (07th Jan, 2014) 01/07/2014 (01st July,2014) Wrong Date Format (MM/DD/YYYY)

Points to remember before filing the quarterly TDS statement

Given below are the points one should remember before quarterly etds filing:

  • Correct Reporting: Cancellation of TDS return and deductee row is no longer permissible. Accordingly, it is very important to report correct and valid particulars (TAN of the deductor, Category (Government / Non-Government) of the deductor, PAN of the deductees and other particulars of deduction of tax) in the quarterly TDS return
  • Quote correct and valid lower rate TDS certificate in TDS return wherever the TDS has been deducted at lower / zero rate on the basis of certificate issued by the Assessing Officer
  • Last provisional receipt number to be quoted in regular TDS / TCS returns: While filing new regular (original) TDS return, it is mandatory to quote the last accepted provisional receipt number of the regular quarterly TDS / TCS return of any form type
  • TDS return cannot be filed without quoting any valid challan and deductee row
  • Late etds filing fee, being statutory in nature, cannot be waived
  • Download PAN Master from TRACES and use the same to file new statement to avoid quoting of incorrect and invalid PAN
  • Validate PAN and name of fresh deductees from TRACES before quoting it in TDS statement
  • Download TDS certificate (Form 16A) from TRACES (http://www.tdscpc.gov.in) bearing unique TDS certificate number and issue to the taxpayers within due date
  • File correction statements promptly in case of incomplete and incorrect reporting
  • Download the justification report to know the details of TDS defaults, if any, on processing of TDS return
  • Do view your Dashboard regularly to know about your TDS performance
  • Government deductors should obtain BIN (Book Identification Number) from their Accounts Officer (AIN holder) in time and quote the same correctly in TDS statement

When and How to claim TDS Refund

In case of excess deduction of tax at source, claim of refund of such excess TDS can be made by the deductor. The excess amount is refundable as per procedure laid down for refund of TDS.

The difference between the actual payment made by the deductor and the tax deducted at source or deductible, whichever is more will be treated as the excess payment made. This amount is to be first adjusted against any existing tax liability under any of the Direct Tax Acts. After meeting such liability, the balance amount is to be refunded.

When TDS refund can be claimed:

  1. When the amount you are supposed to pay as tax in a year is lower than the amount already deducted as TDS, you are eligible to claim a TDS refund.
  2. When you fall below the minimum taxable limit and yet TDS has been deducted.

How TDS refund can be claimed:

There is no specific refund process or form to claim TDS refunds. You must file your income tax returns in the normal manner. The excess of TDS over what you are supposed to pay as tax in the year will be the refund amount due, and this needs to be shown in the returns filed. The TDS refund is processed by the Income Tax department within a few months of filing returns. Usually, it takes about 6 months time.

The Income Tax department processes the refund amount along with an interest of 6% per annum in some cases. The refund is usually given in the form of a cheque. However, with effect from AY 2015-16, all refunds will be made in electronic form, directly to the bank account of the assessee, which is required to be mentioned while filing the returns.

FAQ on TDS/TCS Credit

What is view TDS / TCS credit?

This is a facility which can be availed by deductor in order to verify whether the PANs for which user is deducting TDS are getting the credit for the same or not. This feature is available for only those PANs for which TDS return / TCS return has been previously filed by the deductor.

For which period can I view the TDS / TCS credit?

In order to view TDS / TCS credit, deductor has to specify the Financial Year, Quarter and Form Type for the PAN. The period is restricted to the relevant quarter for which statement has been filed. This facility is available for statements filed since FY 2007-08.

What is the process of viewing TDS / TCS Credit?

Deductor must enter PAN, FY, Quarter and Form Type to see information for a particular PAN. ‘Statement Details’ table will be populated irrespective of whether PAN is present in the statement or not. This table provides information related to the statement pertaining to the input criteria selected by user. ‘Deductee Details’ table will be populated only if the PAN entered by user is present in the latest accepted statement for the input criteria selected. This table shows the status of booking for a PAN.

How to unmask data in ‘Deduction Details’ table?

Deductor can view masked data by clicking on ‘View Details’ and providing ‘TDS Certificate Number’ for that PAN. Token Number will not be unmasked.

Guidelines for an employer to deduct TDS and issue Form 16

Following are the guidelines for an employer to deduct TDS and issue Form 16:

  • Make mandatory for all the employees to declare previous salary, investment proofs and TDS details, if any.
  • Employer has to consider the declaration before deducting TDS from salary.
  • Fill Annexure II for all employees who work or worked for any period of time during the current financial year.
  • Issue Form 16 to all the employees whose TDS was deducted.
  • It is the duty of an employee to provide valid PAN. If employee has worked with more than one employer in a financial year, employee should declare previous salary and TDS detail, if any, with the current employer.

Payment of taxes – Do’s & Don’t’s

Taxpayers, deductors or collectors can pay direct taxes through Authorised Bank branches either physically, through ATM or through internet.

Type of Challans to be used for tax payments

Challan : ITNS 280
Description : For depositing Advance tax, Self Assessment tax, Tax on Regular Assessment, Surtax, Tax on Distributed Profits of Domestic Company and Tax on Distributed income to unit holders.

Challan : ITNS 281
Description : For depositing TDS/TCS by company or non company deductee.

Challan : ITNS 282
Description : For depositing Securities transaction tax, Estate duty, Wealth-tax, Gift-tax, Interest-tax, Expenditure/other tax and Hotel Receipt tax.

Challan : ITNS 283
Description : For depositing banking cash Transaction Tax and FBT.

Challan : Form 26QB
Description : Payment of TDS on Sale of Property.

Challan : Demand Payment
Description : Payment against CPC (TDS) raised demand (only for TDS on Sale of Property.

Do’s
1. Mandatory details required to be filled in challan
a) PAN/ TAN

b) Name and address of the taxpayer (for physical challans)
c) Assessment Year
d) Major Head, Minor Head
e) Type of payment 

2.  Use challan type 281 for deposit of TDS/TCS payments.
a) Quote the correct TAN, name & address of the deductor on each challan
b) Verify your TAN details from Income Tax Department web-site (www.incometaxindia.gov.in) prior to depositing TDS/TCS.
c)  Use separate challans to deposit tax deducted under each section and indicate the correct nature of payment code in the relevant column in the challan.
d) Use separate challans to deposit tax deducted for different types of deductees. 

3. For Non TDS/TCS payments use challan types 280/282/283 as applicable.
a) Quote the correct PAN, name & address on each challan used for depositing the tax.

4. Mention/verify the correct Financial Year and Assessment Year in the challan before tax payment.

5. Payment confirmation: – Ensure that the Challan Identification Number (CIN) has been provided on the counterfoil issued after successful payment of tax. Challan Identification Number (CIN) comprises of the following
a) Seven digit BSR code of the bank branch where tax is deposited
b) Date of Deposit (DD/MM/YY) of tax
c) Serial Number of Challan 

6. Verify the tax payment information submitted to the bank.
a) Details available on the TIN website http://www.tin-nsdl.com under the link “Challan Status Inquiry”
b) In case the details are not available then you may contact the bank branch where the tax has been deposited. 

7. In case the counterfoil issued by the bank has been misplaced, kindly contact the respective bank/branch for details regarding the same.

8. Rectification/Correction in the Challan:- For rectifying errors in a physical challan, taxpayer may approach the Bank. Prescribed timelines for the same are as per table below

Sr. No.
Type of correction on challan
Period for correction request (in days)
1
PAN/TAN
Within 7 days from challan deposit day
2
Assessment Year
Within 7 days from challan deposit day
3
Total Amount
Within 7 days from challan deposit day
4
Major Head
Within 3 months from challan deposit day
5
Minor Head
Within 3 months from challan deposit day
6
Nature of payment
Within 3 months from challan deposit day
 Click here for more details.

9. Please visit TIN website www.tin-nsdl.com for details on preparation and furnishing TDS/TCS statements.

Don’t
1. Do not use incorrect type of challan for payment of taxes.
2. Do not make mistake in quoting PAN / TAN.
3. Do not give PAN in place of TAN or vice versa.
4. Do not use a single challan to deposit tax deducted for corporate and non corporate deductees.
5. Do not use same challan for depositing various types of tax like advance tax, self-assessment tax etc.
6. Do not make mistake in the F.Y. and A.Y. to be indicated in the challan.
7. If you have multiple TANs for the same division filing TDS statements, do not use different TANs in different challans. Use one TAN consistently and surrender the others.