TDSMAN Blog

Smart & Easy TDS Software for Preparing TDS Returns

TDSMAN Blog - Smart & Easy TDS Software for Preparing TDS Returns

Tips to avoid defaults in TDS Returns

One can avoid defaults in the TDS returns, by way of adherence to the following basic principles:   

• Timely Payment of total taxes deducted/ collected

• Correct Reporting with regard to PANs, Tax Rate and Challans

• Complete Reporting for all Deductees

• Timely filing of TDS return   

Following are some important facts to be adhered to, while submitting TDS return, to avoid each type of Default:   

• Late Payment Defaults:

• Short Payment Defaults:

  • All the taxes deducted must be deposited with challan 281 quoting correct TAN, Assessment Year, Minor Head etc.
  • Challan details/BIN details quoted in the statement should be correct. Challans can be validated by using Challan Status Inquiry(CSI) file. Correct details can also be verified at TRACES in “Challan Status” menu under “Statement Status” after login.
  • There should not be any difference in the amounts quoted in “Deducted” and “Deposited” columns of the deductee rows.
  • Challans quoted in the statement must have balance available for consumption against specified deductee rows. Available balance can be verified at TRACES in “View Consumption Details” under “Statements/ Payments” menu after login.
  • Government Deductors need to report Book entry flag as “Y” in challan details.   

• Short Deduction Defaults:

  • Taxes must be deducted at correct rates specified in the Act. The Rate table can be accessed at TRACES for correct tax rates.
  • Correct flags (A, B, C, T and Y) must be raised for no deduction/ lower deduction/ higher deduction, as appropriate.
  • The PAN for deductees must be valid and correct. TAN-PAN Master can be downloaded from TRACES and be used to file statement to avoid quoting of incorrect and invalid PANs.
  • Correct and valid 197 Certificates must be specified. E-tutorial can be referred to for the purpose of validation.
  • For 24Q statements, correct flags should be raised for Woman/ Man/ Senior Citizen/ Super Senior Citizen deductees, as may be appropriate.
  • DTAA flag “B” must be raised under section 195 of the Act, at the time of filing 27Q  statements.

• Late Deduction Defaults:

  • Taxes must be deducted at the time of Payment or Credit, whichever is earlier.   

• Late Filing Defaults:   

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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.

Source: The Economic Times

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Think PAN is only for tax purposes? Find out

Are you planning to go on a shopping spree or buying a home theatre system that could set you back by a few lakhs? Before you step out of your home, remember to carry your Permanent Account Number (PAN) as the salesman may ask you for it if you’re buying above a specific limit.

Here are some more uses of the 10-digit alphanumeric number, which might come in handy to you:

  1. To avoid higher deduction of taxes at source: Not updating or providing PAN details in your savings bank account may attract Tax Deduction at Source (TDS) at the highest marginal rate. For accounts where the annual interest payment exceeds Rs 10,000 and PAN details are not provided, the bank can deduct TDS at the rate of 30 per cent.
  2. To avail House Rent Allowance (HRA) tax benefit: If you’re living on rent and paying over Rs 1 lakh per annum then it is mandatory to provide your landlord’s PAN to your employer to avail HRA tax benefit.
  3. For investing purposes: If you’re investing over Rs. 50,000 in mutual funds (MFs), bonds or debentures, you need to provide your PAN details. While investing, you have to undergo a one-time Know Your Customer (KYC) process, which requires a photograph, identity (ID) and address proof. PAN card serves as an ID proof and is mandatory for almost all investment products.
  4. To carry out business or profession: If you’re carrying out any business or profession where annual sales or receipts total exceeds Rs 5 lakh then you need a PAN.
  5. To receive a refund from Income-tax (I-T) Department: Well, you know that to pay your I-T dues, you need to file your returns. However, to receive the refund in excess of the tax deducted from your taxable income, you also need to file I-T returns for which PAN is required.
  6. Buying a car: Did you know that for buying or selling a car, it is mandatory for you to provide PAN? However, this rule is not applicable for two-wheelers.
  7. Opening a bank account: As per the I-T website, it is mandatory to quote your PAN while opening a bank account. However, a Basic Savings Bank Deposit Account (BSBDA) is exempted from this rule. BSBDA is a savings bank accounts in which the total credits must not exceed Rs 1 lakh per annum, subject to other conditions.
  8. Opening a demat account: For people trading in share markets, it is mandatory to have a dematerialised (demat) account. And without a PAN, you cannot open a demat account.
  9. Investing in fixed deposit (FDs): If you’re planning to invest over Rs 50,000 or aggregate of more than Rs 5 lakh in a financial year in a time deposit/FD of a bank, post office or a Non-baking Financial Company (NBFC) then you’re mandatorily required to quote your PAN.
  1. Purchase of foreign currency in cash: If you’re planning to travel abroad then you need to carry foreign currency with you. As per the I-T website, if you make a payment of over Rs 50,000 with respect to any foreign travel or for the purchase of any foreign currency at any one time then you must also provide your PAN while making these payments.
  2. Applying for credit/debit card: Remember when you applied for your favourite swipe card during demonetisation, you were required to provide your PAN details?
  3. Paying hotel/restaurant bill: As per I-T Rule 114B, it is required by you to quote your PAN for cash payment over Rs 50,000 for paying your hotel or restaurant bill, or bills at one time.
  4. Investing in Reserve Bank of India (RBI) bonds: While investing over Rs 50,000 in RBI bonds, you are required to provide your PAN, along with other details.
  5. Depositing cash in the bank: If you’re planning to visit the bank soon to deposit cash then don’t forget your PAN card at home. For depositing cash over Rs 50,000, you need to mention your PAN while filling the pay-in slip.
  6. For the purchase of bank drafts, pay order or banker’s cheque: At times you are required to make some payments either through bank drafts, pay orders or banker’s cheque. If you purchase these instruments in cash for an amount exceeding Rs 50,000 during any day, you’re required to quote your PAN.
  7. Buying a gift card or other prepaid instruments: Prepaid instruments are payment instruments that facilitate the purchase of goods and services, including funds transfer against the value stored in them. Any payment made via cash or any banking instruments like cheque or draft for the amount exceeding Rs 50,000 on aggregate for the financial year for one or more prepaid instruments requires the quoting of PAN, as per RBI guidelines.
  8. For making premium payments: Every individual makes some investments to save tax under Section 80C of the I-T Act. Some make investments in Equity Linked Savings Schemes (ELSS) funds, while others buy life insurance policies. Rule 114B states that every person is required to quote PAN details for making life insurance premium payments over Rs 50,000 in a financial year on an aggregate.
  9. Transaction of securities other than shares: Rule 114B states that the sale or purchase of any security other than shares such as scrips, bonds, debenture or any other marketable securities as listed under the Securities Contracts (Regulation) Act, 1956, over an amount of Rs 1 lakh per transaction requires PAN card as a mandatory document.
  10. Transaction of unlisted shares: Any sale or purchase of unlisted company shares exceeding Rs 1 lakh per transaction requires PAN card details to complete the required transaction.
  1. Immovable property transactions: Planning to buy or sell any immovable property such as a house? Rule 114B requires every person involved in the sale or purchase of any immovable property exceeding Rs 10 lakh to provide his PAN details.
  2. Sale/purchase of any goods & services: Rule 114B also states that any sale or purchase of good and services other than specified in the rule whose transaction value exceeds Rs 2 lakh per transaction mandatorily requires one’s PAN card.
  3. Investment in minor’s name: If you’re planning to make some investments in your children’s name then the guardian PAN number is required. However, the child must not have any income chargeable to tax.

Non-Resident Indians (NRIs) are exempted from providing their PAN in the following instances:

a) Applying for debit or credit card

b) Making cash payments for hotel and restaurant bills

c) Any payment made for foreign travel or foreign currency exchange

d) Payment made for acquiring RBI bonds

e) Payments made to purchase any drafts, pay order or banker’s cheque

f) Payment made for prepaid instruments

g) Sale or purchase of any good and services not mentioned in Rule 114B

If you don’t have a PAN, remember to make a declaration by submitting duly filled Form 60 while doing transactions which mandatorily require one.

Section 272B of the I-T Act deals with penalties related to non-compliance with PAN-related provisions. A Rs 10,000 penalty can be slapped on a taxpayer for not obtaining PAN when he is entitled to one, or knowingly quoting incorrect PAN in a prescribed document or initimating incorrect PAN to the person deducting or collecting the tax.

PAN has become an important document in our lives. You need to provide PAN details while investing for your retirement or buying jewellery, among other things.

It enables the government to track all your financial transactions and helps in checking whether your taxes and major financial expenses are consistent or not.

If you’re not planning to disappear from the financial world or don’t want the taxman to come knocking at your door, it is better to remember these rules and be careful with its misuse.

Source: The Economic Times

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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 www.tdscpc.gov. in or ‘Challan Status Enquiry’ at 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 www.tdscpc.gov. in or ‘BIN View’ at 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)
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