Points to remember regarding TDS statement

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Given below are the points one should remember regarding TDS statement:

  • 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 TDS 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 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
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Tips to avoid Defaults in TDS Returns

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  • Make sure taxes are deducted on time and at correct deduction rates /amount. The applicable section under which the deduction falls should be correctly applied.
  • Tax needs to be deducted either when payment is made or when the amount is credited, whichever is earlier. It implies that the tax needs to be deducted on the same day when advance payments are made. The late deduction is a default and will attract interest.
  • Taxes deducted during the course of the month should be deposited on time. Typically it is by 7th of the following month. The only exception is that for deductions in March, it needs to be deposited by 30th April.
  • TDS Returns needs to be filed on completion of each quarter. Returns for Salary & Non-Salary TDS is to be filed separately in Form 24Q & Form 26Q respectively.
  • Use a proper TDS Return preparing software/tool that helps in predicting possible errors/defaults. This would prevent unnecessary hassles later.
  • Make sure TDS Returns are filed on time to avoid penalty on the delayed filing. Typically, TDS Returns are to be filed by the end of the month following the quarter. Returns for 1st quarter is to be filed by 31st July.
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Interest on Late Deduction of TDS

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The due date for deduction is either at the time of giving credit or payment of the dues, whichever is earlier. Late deduction happens in the event the tax is not deducted when the deduction is due and is deducted at a later date. The interest for the delay in deduction is charged at the rate of 1% per month or part of a month of the delay. For Example if the due date for a deduction is 2nd of June and it is deducted on 8th of July in the same year, then the interest is charged at the rate of 1% for each month i.e. (June & July) aggregating to 2% interest.

Important: there is a difference between late deduction and late payment. Learn more

Interest on Late Payment of TDS

Difference between Late Payment & Late Deduction

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Interest on Late Payment of TDS

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In case the assessee deposits the TDS Payment after the due date of payment of the tax deducted at source, he shall be liable to pay interest @1.5% for every month or every part of the month during which the amount is not deposited with the government.

Interest @ 1.5% is liable to be paid from the date on which the TDS amount was deducted and not from the date the TDS payment was due. 

For example: TDS was deducted on 25th June and the due date for TDS Payment was 7th July. The assessee fails to deposit the TDS by 7th July. In such a case, the Interest would be calculated from 25th June and not from 7th July.

The interest is to be calculated as per illustrations below: 

Case 1:

Tax Deducted on 26th June, TDS deposited on 9th July (due date was 7th July)

The period of 26th June to 30th June will be calculated as one month (being part of a month month i.e. 30 – 26 = 4 days) & from 1st July to 9th July will also be treated as one month. As such in this case, the interest payable is for two months. Total interest would be 3%. Sounds odd, but it is true –  for a delay of 2 days, one has to pay interest for two months. 

Note: In the above case, if tax was deducted on 30th June instead of 26th June, the number of days in June is calculated as 30 – 30 = 0 days. As such interest for one month will be charged i.e. only for July.

Case 2:

Tax Deducted on 20th March, TDS deposited on 5th May  (due date was 30th April)

The period of 20th March to 31st March will be calculated as one month, 1st April to 30th April will be another month & from 1st May to 5th May will be treated as another one month. As such in this case, the interest payable is for three months. Total interest would be 4.5%. For a 5 day delay, the interest payable is for 3 months. 

Logic behind this calculation is that, if dues are not paid on time, the interest for each month (or part thereof) is to be paid right from the date of deduction till date of deposit of the TDS amount. Each month is treated based on the Calendar Month or part thereof, instead of counting the number of days. However, if tax is deducted on the last day of the month, in that case, that month is not counted for calculation of interest.

Important: there is a difference between late deduction and late payment. Learn more

Difference between Late Payment & Late Deduction

Interest on Late Deduction of TDS

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