TDSMAN Blog

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Issue TDS certificates by 30/07/2014 to avoid penalties

Last date for issuance of TDS/TCS certificates for Q1 of FY: 2014-15 – 30th July, 2014

The above is applicable for deductors other than the Office of the Government

Delay in requesting certificates may involve a fine of Rs. 100 per day u/s 272(A)(g) subject to an upper limit of the tax deducted. Click here for more details

Please note:

It is now mandatory for all the deductors to issue the TDS certificates after generating and downloading the same from “TRACES”(www.tdscpc.gov.in). Refer to Circular no.3/2011 dated 13-5-2011, Circular No.1/ 2012 dated 9-4-2012 (in respect of 16A)

Click here to view the tutorial on how to download Form 16A from TRACES.

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Changes in Provisions related to TDS – Budget 2014

Under Chapter XVII-B of the Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. The person deducting tax (‘the deductor’) is required to file a quarterly statement of tax deduction at source (TDS) containing the prescribed details of deduction of tax made during the quarter by the prescribed due date.

Currently, a deductor is allowed to file correction statement for rectification/updation of the information furnished in the original TDS statement as per the Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013 notified vide Notification No.03/2013 dated 15th January, 2013. However, there does not exist any express provision in the Act for enabling a deductor to file correction statement.

In order to bring clarity in the matter relating to filing of correction statement, it is proposed to amend section 200 of the Act to allow the deductor to file correction statements. Consequently, it is also proposed to amend provisions of section 200A of the Act for enabling processing of correction statement filed.

The existing provisions of section 201(1) of the Act provide for passing of an order deeming a payer as assessee in default if he does not deduct or does not pay or after deduction fails to pay the whole or part of the tax as per the provisions of Chapter XVII-B of the Act. Section 201(3) of the Act provides for time limit for passing of order under section 201(1) of the Act for deeming a payer as assessee in default for failure to deduct tax from payments made to a resident. Clause (i) of section 201(3) of the Act provides that no order under section 201(1) of the Act shall be passed after expiry of two years from the end of the financial year in which the TDS statement has been filed. Currently, the processing of TDS statement is done in the computerised environment and mainly focuses on the transactions reported in the TDS statement filed by the deductor. Therefore, there is no rationale for not treating the deductor as assessee in default in respect of the TDS default after two years only on the basis that the deductor has filed TDS statement as TDS defaults are generally in respect of the transaction not reported in the TDS statement. It is, therefore, proposed to omit clause (i) of sub-section (3) of section 201of the Act which provides time limit of two years for passing order under section 201(1) of the Act for cases in which TDS statement have been filed.

Currently, clause (ii) of section 201(3) of the Act provides a time limit of six years from the end of the financial year in which payment/credit is made for passing of order under section 201(1) of the Act for cases in which TDS statement has not been filed. However, notice under section 148 of the Act may be issued for reassessment up to 6 years from the end of the assessment year for which the income has escaped assessment. Therefore, section 148 of the Act allows reopening of cases of one more preceding previous year than specified under section 201 (3)(ii) of the Act. Due to this, order under section 201(1) of the Act cannot be passed in respect of defaults relating to TDS which comes to the notice during search/reassessment proceeding in respect of previous year which is not covered under section 201 (3)(ii) of the Act but covered under section 148 of the Act. In order to align the time limit provided under section 201 (3)(ii) and section 148 of the Act, it is proposed that time limit provided under section 201 (3)(ii) of the Act for passing order under section 201(1) of the Act shall be extended by one more year.

The existing provisions of section 271 H of the Act provides for levy of penalty for failure to furnish TDS/TCS statements in certain cases or furnishing of incorrect information in TDS/TCS statements. The existing provisions of section 271 H of the Act do not specify the authority which would be competent to levy the penalty under the said section. Therefore, provisions of section 271H  are proposed to be amended to provide that the penalty under section 271 H of the Act shall be levied by the Assessing officer.

These amendments will take effect from 1st October, 2014.

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Amendments in Budget 2014 relating to TDS compliance u/s 40(a(ia)

The disallowance under section 40(a)(ia) of the Act shall be restricted to 30% of the amount of expenditure claimed.

Existing provisions: The existing provisions of section 40(a)(i) of the Act provide that certain payments such as interest, royalty and fee for technical services made to a residents shall not be allowed as deduction for computing business income if tax on such payments was not deducted, or after deduction, was not paid within the time prescribed under section 200(1) of the Act. As mentioned above, in case of non-deduction or non-payment of tax deducted at source (TDS) from certain payments made to residents, the entire amount of expenditure on which tax was deductible is disallowed under section 40(a)(ia) for the purposes of computing income under the head “Profits and gains of business or profession”.

The disallowance of whole of the amount of expenditure results into undue hardship.

Proposal: In order to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed.

Disallowance under section 40(a)(ia) of the Act shall extend to all expenditure on which tax is deductible under Chapter XVII-B of the Act.

Existing provisions: Existing provisions of section 40(a)(i) of the Act provides that certain payments such as interest, commission,brokerage, rent, royalty fee for technical services and contract payment made to a resident shall not be allowed as deduction for computing business income if tax on such payments was not deducted, or after deduction, was not paid within the time specified under the said section. Chapter XVII-B of the Act mandates deduction of tax from certain other payments such as salary, directors fee, which are currently not specified under section 40(a)(ia) of the Act. The payments on which tax is deductible under Chapter XVII-B but not specified under section 40(a)(ia) of the Act may also be claimed as expenditure for the purposes of computation of income under the head “Profits and gains from business or profession”.

Proposal: Section 40(a)(ia) has proved to be an effective tool for ensuring compliance of TDS provisions by the payers. Therefore, in order to improve the TDS compliance in respect of payments to residents which are currently not specified in section 40(a)(ia), it is proposed that the disallowance under section 40(a)(ia) of the Act shall extend to all expenditure on which tax is deductible under Chapter XVII-B of the Act.

These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.

Non-payment of tax from payments made to non-residents, extended time limit of payment up to the date of filing of return of income under section 139(1) allowed

Existing provision: The existing provisions of section 40(a)(i) of the Act provide that certain payments such as interest, royalty and fee for technical services made to a non-resident shall not be allowed as deduction for computing business income if tax on such payments was not deducted, or after deduction, was not paid within the time prescribed under section 200(1) of the Act. The Act contains similar provisions for disallowance of business expenditure in respect of certain payments made to the residents.

Under section 40(a)(ia) of the Act, in case of payments made to resident, the deductor is allowed to claim deduction for payments as expenditure in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return of income under section 139(1) of the Act. However, in case of disallowance for non-payment of tax from payments made to non-residents, this extended time limit of payment up to the date of filing of return of income under section 139(1) is not available.

Proposal: In order to provide similar extended time limit for payment of tax deducted from payments made to non-residents, it is proposed that the deductor shall be allowed to claim deduction for payments made to non-residents in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return under section 139(1) of the Act.

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TDS Returns – Important Compliance Dates

Last date of filing of TDS/TCS returns for Q1 of FY: 2014-15 – 15th July, 2014 

With the introduction of Section 234E, there is now a provision of stringent penalties for delayed filing of TDS returns. 

• Failure to submit e-TDS Statement on time will result in fees on the deductor. 

• If you delay or forget to file your e-TDS Statement, fees of Rs. 200 per day will be levied on the deductor, as long as TDS Statement is not filed. 

• The levied amount of fee is not supposed to exceed the TDS deductibles. 

• Prior to filing of TDS Statement such fee should be paid and it should be reflected in the TDS Statement.

Click here for more details

Last date for issuance of TDS/TCS certificates for Q1 of FY: 2014-15 – 30th July, 2014 

The above is applicable for deductors other than the Office of the Government 

Delay in requesting certificates may involve a fine of Rs. 100 per day u/s 272(A)(g) subject to an upper limit of the tax deducted. Click here for more details

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