10 Things about SMS alerts on Salary TDS Deduction

Here are 10 things to know about sms alerts on Salary TDS Deduction:

1) As many as 2.5 crore salaried taxpayers will now receive SMS alerts from the Income Tax Department regarding their quarterly TDS deductions. The tax department plans to offer this facility on a monthly basis and extend the service to 4.4 crore non-salaried tax payers.

2) The tax department has asked taxpayers to update their mobile numbers in their tax e-filing accounts so that they can receive this service.

3) Tax experts have welcomed this initiative, saying that it will help increase transparency. “A common case is when TDS is deducted from your salary but deposited with an incorrect PAN. Or employer fails to deposit TDS and hence the employee cannot take credit of it. Many a times when people switch jobs, TDS deducted by two employers falls short of their actual tax liability,” said Preeti Khurana, chief editor of portal ClearTax.

4) TDS mismatch is one of the most common reasons for incorrect tax returns being filed, say tax experts.

5) “The new service will benefit the employees as any such inconsistency can be traced well in advance and the employee can approach the employer to rectify those. Earlier, the employee would have to wait till the year end to get the Form 16 and check if all the TDS credits are duly recorded particularly when the employees are not aware that they could view the Form 26AS on a real time basis,” said Sandeep Sehgal, director tax and regulatory at Ashok Maheshwary & Associates LLP.

6) TDS deducted on your salary as well as other payments can also be viewed by downloading Form 26AS from the tax department’s website.

7) Under TDS, tax is deducted at the origin of income. For the salaried class, the tax is deducted by the employer and is remitted to the government on behalf of the employee.

8) The provisions of deduction of tax at source are applicable to several payments such as salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc.

9) The employer is required to compute at the beginning of the financial year, the total salary income payable to an employee during the financial year. After considering the exempted incomes, deductions and relief, the tax liability of the employee is determined on the basis of tax rates in force for the financial year. Every month, 1/12th of this net tax liability as computed above is required to be deducted as part of TDS.

10) The responsibility to deduct tax from salaries arises only at the time of payment. Thus, when advance salary and arrears of salary are paid, the employer has to take the same into account while computing the tax deductible. Similarly, if the employee makes certain investments which qualify for deduction or rebate and furnishes the required proof which reduces the tax liability, the employer can accordingly reduce the quantum of TDS. From this year, the tax department has introduced a new form – Form 12BB – which will be used by employees to declare their investments and claim tax deductions.

Avail the Benefit of CPC(TDS) Analytics for Correction of PANs in your TDS Statements

Date of Communication: 23/09/2016

Dear Deductor, TAN (XXXXXXXXXX)

Centralized Processing Cell (TDS) has observed from its records that you have reported “Structurally Correct, however Invalid PANs” in your TDS Statement filed for Quarter 3 and 4 of Financial Year 2015-16. To correct such errors, CPC (TDS) Analytics provides facility of correct PAN suggestions for the Deductees, while submitting Online PAN Corrections based on your statement filing history.

Action to be taken:

  • “Online Correction” facility of TRACES can be used with Digital Signatures for correction of PANs. To avail the facility, you are requested to “Login to TRACES” and navigate to “Defaults” tab to locate “Request for Correction” from the drop-down menu. For assistance, please refer to the e-tutorial available on TRACES.
  • While submitting PAN Corrections, CPC (TDS) Analytics identifies the above referred errors for you and provides suggestions for Valid PANs. This will reflect as follows while submitting corrections:

Implications, if Errors are not corrected:

Deductor would not have been able to generate TDS Certificates for deductees with such incorrect PANs. In case, you have issued TDS Certificates outside TRACES, they will not be valid. In view of CBDT circulars 04/2013 dated 17.04.2013, No. 03/2011 dated 13.05.2011 and No. 01/2012 dated 09.04.2012, TDS Certificates downloaded only from TRACES Portal will be valid. Certificates issued in any other form or manner will not comply to the requirements referred in the Income-tax Act 1961 read with relevant Rules and Circulars issued in this behalf from time to time.

  • Correct TDS Credits in 26AS statements to such taxpayers will not be available and they will not be able to avail the same, while filing their Income Tax Returns.
  • As per section 206AA of the Income Tax Act, tax is to be deducted at a higher rate, in case of “Not Available/ Invalid PANs”. Therefore, default of Short Deduction, including Interest is charged on the deductor, if the tax has not been deducted at higher rate, as per the provisions of section 206AA.

Therefore, to avoid generation of defaults against you and to avoid any inconvenience to your deductees, please make full use of the above referred facility.

For any further assistance, you can also write to ContactUs@tdscpc.gov.in or call our toll-free number 1800 103 0344.

CPC (TDS) is committed to provide best possible services to you.

CPC (TDS) TEAM

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)

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

Duties of TDS Deductors

Deduct Tax at Correct Rate and deposit in Government Account – Sec 200

Every person responsible for deducting tax at source shall at the time of payment or credit of income, whichever is earlier, verify whether the payment being made is to be subject to deduction of tax at source. If it is so, he must deduct such tax as per the prescribed rates. Further he is required to deposit such tax deducted in the Central Government Account within the prescribed time as specified in Rule 30.

Issue a TDS certificate

Further, such person is required to issue a certificate of tax deduction at source u/s 203 to the person from whose income the TDS has been done, in the prescribed proforma i.e. Form No.16A within prescribed time(as discussed earlier).

File Prescribed Return/Quarterly Statement

A return of TDS is a comprehensive statement containing details of payments made and taxes deducted thereon along with other prescribed details. For deductions made prior to 01.04.2005 earlier every deductor was required as per the provisions of Section 206 (read with Rule 36A and 37) to prepare and deliver an annual return, of tax deducted at source. However w.e.f. 01.04.2005 there is no requirement to file annual returns and instead Quarterly statements of TDS are to be submitted in form 26Q by the deductors.

Procedure for submission of declaration by person claiming receipt of certain incomes without deduction of tax in Form 15G/15H

Government of India

Ministry of Finance

Central Board of Direct Taxes

Directorate of Income Tax (Systems)

Notification No 7/2016

New Delhi, 4th May, 2016

Procedure for submission of declaration by person claiming receipt of certain incomes without deduction of tax in Form 15G/15H under sub-section (1) or under sub-section (1A) of section 197A of the Income-tax Act, 1961 read with Rule 29C of Income-tax Rules, 1962.

As per sub-rule (1) of rule 29C (Declaration by person claiming receipt of certain incomes without deduction of tax) of the Income-tax Rules, 1962 (hereunder referred as the Rules) a declaration under sub-section (1) or under sub-section (1A) of section 197A shall be in Form No. 15G and declaration under sub-section (1C) of section 197A shall be in Form No. 15H.

2. As per sub-rule (3) of rule 29C, the person responsible for paying any income of the nature referred to in sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A, shall allot a unique identification number to each declaration received by him in Form No.15G and Form No.15H respectively during every quarter of the financial year in accordance with the procedures, formats and standards specified by the Principal Director General of Income-tax (Systems) under sub-rule (7) of rule 29C.

3. As per sub-rule (4) of rule 29C, the person referred to in sub-rule (3) herein shall furnish the particulars of declaration received by him during any quarter of the financial year along with the unique identification number allotted by him under sub-rule (3) in the statement of deduction of tax of the said quarter in accordance with the provisions of clause (vii) of sub-rule (4) of rule 31A. As per sub-rule (7) of rule 29C, the Principal Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the declaration, allotment of unique identification number and furnishing or making available the declaration to the income tax authority and shall be responsible for the day-to-day administration in relation to the furnishing of the particulars of declaration in accordance with the provisions of sub-rule (4) of rule 29C.

4. In exercise of the powers delegated by Central Board of Direct Taxes (‘Board’) under sub-rule (7) of rule 29C of the Income-tax Rules, 1962, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures:

a. Registration: The deductor/collector is required to register by logging in to the e-filing website (https://incometaxindiaefiling.gov.in/) of the Income Tax Department. To file the “Statement of Form 15G/15H”, deductor should hold a valid TAN. Following path is to be used for the registration process:

Register yourself → Tax Deductor & Collector

b. Preparation: The prescribed schema for Form 15G/15H and utility to prepare XML file can be downloaded from the e-filing website home page under forms (other than ITR) tab. The Form 15G/15H utility can be used to prepare the xml zip file. The declaration is required to be submitted using a Digital Signature Certificate. The signature file for the zipped file can be generated using the DSC Management Utility (available under Downloads in the e-Filing website https://incometaxindiaefiling.gov.in/)

c. Submission: The designated person is required to login to the e-filing website using TAN and go to e-File → Upload Form 15G/15H. The designated person is required to upload the “Zip” file along with the signature file (generated as explained in para (b) above). Once uploaded, the status of the statement shall be shown as “Uploaded”. The uploaded file shall be processed and validated at the e-filing portal (list of validations are given in the user manual). Upon validation, the status shall be either “Accepted” or “Rejected which will reflect within 24 hours from the time of upload. The status of uploaded file will be visible at My account → View Form 15G/15H. In case the submitted file is “Rejected”, the reason for rejection shall be displayed and the corrected statement can be uploaded again.

(Gopal Mukherjee)

Pr. DGIT (System), CBDT

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.