Basic principles of TDS Compliance

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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, Challan Mismatch 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.
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Last date for filing of TDS returns for Q4 of FY: 2017-18 – 31st May

31st May – last date of filing TDS Returns for FY: 2017-18, Quarter 4 (Jan – Mar)

30th May – last date for TCS Certificates for FY: 2017-18, Quarter 4 (Jan – Mar)

Basic provisions relating to due date for payment of TDS

Sections under which interest for various delays/ defaults need to be paid

Filing of TDS Returns for the quarter ended March 2018 (FY:2017-18 Quarter 4) is already under way since 1st April.

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Interest on Late Payment of TCS

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In case the assessee deposits the TCS (Tax Collection at Source) Payment after the due date of payment of the tax deducted at source, he shall be liable to pay interest @1% for every month or every part of the month during which the amount is not deposited with the government.

Interest @ 1% is liable to be paid from the date on which the TCS amount was collected and not from the date the TCS payment was due.

For example: TCS amount was collected on 25th June and the due date for TCS Payment was 7th July. The assessee fails to deposit the TCS amount 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: 

Example:

Tax Collected on 26th June, TCS amount 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 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 2%. Sounds odd, but it is true –  for a delay of 2 days, one has to pay interest for two months.

Note: In the above example, if tax was collected 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 applicable i.e. only for July.

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 collection till date of deposit of the TCS amount. Each month is treated based on the Calendar Month or part thereof, instead of counting the number of days. However, if tax is collected on the last day of the month, that month is not counted for calculation of interest.

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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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