Where TDS is applicable and how to avoid it

Salary income: Employer deducts TDS on total income, including income other than salary after taking into account all deductions and exemptions. This saves the individual the hassle of paying tax himself.

TDS rate: As applicable to individual based on his income and deductions.

Interest income: TDS is deducted by banks on FDs and RDs if the interest exceeds Rs 10,000 a year. TDS does not end tax liability. Someone in a higher tax slab will need to pay additional tax. Those in lower income bracket can seek a tax refund.

TDS rate: If PAN has been provided, TDS is 10% of income. Otherwise it is 20% of income.

EPF withdrawals: Withdrawals from Employee Provident Fund are subject to TDS if you withdraw before five years of service. However, no TDS is deducted on withdrawals of less than Rs 30,000.

TDS rate: If PAN has been provided, TDS is 10% of the withdrawal. Otherwise it is 20% of the amount.

Property sale: TDS is applicable if the value of the property exceeds Rs 50 lakh. If instalments are being paid TDS is deducted on each instalment. The buyer must obtain a Tax Deduction Account Number to deduct TDS. TDS has to be de -posited along with Form 26QB within a week from the end of the month in which TDS was deducted. Buyer must give TDS certificate to the seller.

TDS rate: If PAN has been provided, TDS is 1% of sale value. Otherwise it is 20% of the sale value.

On NRIs: NRIs are not permitted to submit Form 15G/H for NRO deposits and TDS is mandatory on all incomes. In case of resident Indians, TDS kicks in only if interest exceeds Rs 10,000 a year. But there are no such threshold for NRO deposits. Easwar committee has recommended easing of TDS rules for NRIs.

TDS rate: 30% on interest income from bank deposits, 20% from corporate deposits, 15% on short-term capital gains if securities transaction tax (STT) has been paid and 10% on longterm capital gains. If no STT is paid on short-term gains, TDS is 30%. Flat rate of 20% on sale of property.

How to avoid it

TDS can be avoided by submitting Form 15G or 15H. Form 15H is for senior citizens. It can be submitted if there is no tax on total income. Form 15G is for everybody else, except NRIs. It can be filed if tax on total income is nil and total interest income is less than the basic exemption limit.

Different matching statuses in Form 16 / Form 16A

Following are different matching statuses in Form 16 / Form 16A:

U – Unmatched (Deductor has not deposited taxes or has furnished incorrect particulars of tax payment. Final credit will be reflected only when payment detail in bank matches with details of deposit in TDS/TCS statement)

P – Provisional (Provisional tax credit is effected only for TDS / TCS statement filed by Government deductor. ‘P’ status will be changed to Final (F) on verification of payment details submitted by Pay and Account Officer (PAO))

F – Final (In case of non-government deductors, payment details of TDS / TCS deposited in bank by deductor have matched with the payment details mentioned in the TDS / TCS statement filed by deductors. In case of government deductors, detail of TDS / TCS booked in Government accounts have been verified by Pay and Account Officer (PAO))

O – Overbooked (Payment details of TDS / TCS deposited in bank by deductor have matched with details mentioned in the TDS / TCS statement but the amount is over claimed in the statement. Final (F) credit will be reflected only when deductor reduces claimed amount in the statement or makes new payment for excess amount claimed in the statement)

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

Password to open consolidated FVU file downloaded from tdscpc.gov.in

As you know that to revised eTDS return consolidated FVU file is required and for that also now you have to go to the new website tdscpc.gov.in to download consolidated file.

After download the consolidated file from new website, we have to unzip it and to unzip this file, password is required.Correct password to open the Consolidated FVU file is now as under:

TAN NO_request number of  consolidated fvu file

means if you TAN is AMRA11492E and request number generated on tdscpc to download the file is84365 then password to open the file is:
  AMRA11492E_84365
Request number can be checked here. First login to tdscpc.gov.in and click on the requested download link as shown the picture.
Free download of tds software

Do as shown in the pictures. Select option 1  in picture given below or select date of request.
tds software
Request number will be shown as under:
To download consolidated file you have to register at new website. If you have not registered your TAN on TRACES then first register your TAN at Traces and then start the procedure of downloading Form 16A.

Analysis of File Validation Utility (FVU) Version 5.0

The Income Tax Department has released the new File Validation Utility (FVU) Ver. 5.0 on 13th April 2016 and is applicable for all TDS Returns & Correction Statements filed from the same date onwards.

Highlights and its analysis are summarized below:

Changes is Form 26Q (TDS Returns for Non-Salary)

  • The applicability of value ‘B’ in the ‘Remarks’ (No Deduction / Lower Deduction) has been extended to include Section Code 192A (Payment of accumulated balance due to an employee). This had been a past anomaly which has now been taken care of.
  • Section Code ‘194IA’ for ‘Payment on certain immovable property other than agricultural land’, which was earlier reported in Form 26QB through NSDL website, has now been included in Form 26Q as well.

Validation of Tax Account Number (TAN) and TAN Name

  • The FVU will now validate the TAN as per the Department’s records through the CSI file (Challan Status Inquiry) and that appearing on the TDS / TCS Return Statement. Mismatch in TAN is not acceptable and the FVU will reject it with appropriate message. Similarly, TAN Name will also be validated as in the CSI file with that provided on the TDS / TCS Return Statement. In case of mismatch, the message will be displayed accordingly. It is important to have the same name in TDS Statements as that on records with the Income Tax Department.

Other Changes

  • It is now mandatory to provide an Email ID for Deductor / Collector or the Responsible Person. The FVU will reject, if at least one Email ID is missing.
  • It is now mandatory to provide the Mobile No. of the Responsible Person.