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Smart & Easy TDS Software for Preparing TDS Returns

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

Budget 2017 – Changes in TCS Provisions

1.Restriction on cash transactions

It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees.

This amendment will take effect from 1st April, 2017.

2.Exemption from tax collection at source under sub-section (1F) of section 206C in case of certain specified buyers.

The existing provision of sub-section (1F) of section 206C of the Act, inter-alia provides that the seller who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from the buyer.

In order to reduce compliance burden in certain cases, it is proposed to amend section 206C, to exempt the following class of buyers such as the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; local authority as defined in explanation to clause (20) of Section 10; a public sector company which is engaged in the business of carrying passengers, from the applicability of the provision of subsection (1F) of section 206C of the Act.

This amendment will take effect from 1st April, 2017.

3.Strengthening of PAN quoting mechanism in the TCS regime

Statuary provisions for deduction of tax at source (TDS) at higher rate of 20% or the applicable rate whichever is higher) in case of non-quoting of Permanent Account Number (PAN) is provided under section 206AA of the Act and it exist since April, 2010.

PAN acts as a common thread for linking the information in the departmental data base. It may also be noted that the process of allotment of PAN is made simple and robust. PAN application can be made online and PAN gets allotted in less than a week.

In order to strengthen the PAN mechanism, it is proposed to insert new section 206CC to provide the following:

i. any person paying any sum or amount, on which tax is collectable at source under Chapter XVII BB (hereafter referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (hereafter referred to as collector), failing which tax shall be collected at the twice the rate mentioned in the relevant section under Chapter XVII BB or at the rate of five per cent. whichever is higher.

ii. that the declaration filed under sub section (1A) of section 206C shall not be valid unless the person filing the declaration furnishes his Permanent Account Number in such declaration.

iii. that in case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at source in accordance with the provisions of sub-section (1).

iv. no certificate under sub section (9) of section 206C shall be granted unless it contains the Permanent Account Number of the applicant.

v. the collector knows about the correct PAN of the collectee it is also proposed to provide for mandatory quoting of PAN of the collectee by both the collector and the collectee in all correspondence, bills and vouchers exchanged between them.

vi. that the collectee shall furnish his Permanent Account Number to the collector who shall indicate the same in all its correspondence, bills, vouchers and other documents which are sent to collectee.

vii. where the Permanent Account Number provided by the collectee is invalid or it does not belong to the collectee, then it shall be deemed that Permanent Account Number has not been furnished to the collector.

viii. to exempt the non-resident who does not have permanent establishment in India from the provisions of this proposed section 206CC of the Act.

This amendment will take effect from 1st April, 2017.

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Budget 2017 – Changes in TDS Provisions

1.Deduction of tax at source in the case of certain Individuals and Hindu undivided family

 The existing provisions of section 194-I of the Act, inter alia, provide for deduction of tax at source at the time of credit or payment of rent to the account of the payee beyond a threshold limit. It is further provide that an Individual or a Hindu undivided family who is liable for tax audit under section 44AB for any financial year immediately preceding the financial year in which such income by way of rent is credited or paid shall be required to deduction of tax at source under this section.

Therefore, under the existing provisions of the aforesaid section, an Individual and HUF, being a payer (other than those liable for tax audit) are out of the scope of section 194-I of the Act.

In order to widen the scope of tax deduction at source, it is proposed to insert a new section 194-IB in the Act to provide that Individuals or a HUF (other than those covered under 44AB of the Act), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of month during the previous year, shall deduct an amount equal to five per cent. of such income as income-tax thereon.

It is further proposed that tax shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

In order to reduce the compliance burden, it is further proposed that the deductor shall not be required to obtain tax deduction account number (TAN) as per section 203A of the Act. It is also proposed that the deductor shall be liable to deduct tax only once in a previous year.

It is also proposed to provide that where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

This amendment will take effect from 1st June, 2017.

2.Extension of eligible period of concessional tax rate on interest in case of External Commercial Borrowing and Extension of benefit to Rupee Denominated Bonds

The existing provisions of section 194LC of the Act provide that the interest payable to a non-resident by a specified company on borrowings made by it in foreign currency from sources outside India under a loan agreement or by way of issue of any long-term bond including long-term infrastructure bond shall be eligible for concessional TDS of five per cent.

It further provides that the borrowings shall be made, under a loan agreement at any time on or after the 1st July, 2012, but before the 1st July, 2017; or by way of any long-term bond including long-term infrastructure bond on or after the 1st October, 2014 but before the 1st July, 2017, respectively.

Representations have been received requesting for extension of concessional rate of TDS under sections 194LC of the Act to boost the economy by way of introduction of foreign capital.

Therefore, it is proposed to amend section 194LC to provide that the concessional rate of five per cent. TDS on interest payment under this section will now be available in respect of borrowings made before the 1st July, 2020.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

Further, consequent upon demand from various stakeholders for granting benefit of lower rate of TDS to rupee denominated bonds, a Press Release dated 29th October, 2015 was issued clarifying that TDS at the rate of 5 per cent would be applicable to these bonds in the same way as it is applicable for off-shore dollar denominated bonds.

In order to give effect to the above, it is further proposed to extend the benefit of section 194LC to rupee denominated bond issued outside India before the 1st July, 2020.

This amendment will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years.

3.Extension of eligible period of concessional tax rate under section 194LD

The existing provisions of section 194LD of the Act, provides for lower TDS at the rate of five per cent. in the case of interest payable at any time on or after 1st June, 2013 bue before the 1st July, 2017 to FIIs and QFIs on their investments in Government securities and rupee denominated corporate bonds provided that the rate of interest does not exceed the rate notified by the Central Government in this behalf.

Considering the representations received from stakeholders, it is proposed to amend section 194LD to provide that the concessional rate of five per cent. TDS on interest will now be available on interest payable before the 1st July, 2020.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years

4.Simplification of the provisions of tax deduction at source in case Fees for professional or technical services under section 194J

The existing provisions of sub-section (1) of section 194J of the Act, inter-alia provides that a specified person is required to deduct an amount equal to ten per cent. of any sum payable or paid ( whichever is earlier) to a resident by way of fees for professional services or fees for technical services provided such sum paid/payable or aggregate of sum paid/payable exceeds thirty thousand rupees to a person in a financial year.

In order to promote ease of doing business, it is proposed to amend section 194J to reduce the rate of deduction of tax at source to two per cent. from ten per cent. in case of payments received or credited to a payee, being a person engaged only in the business of operation of call center.

This amendment will take effect from the 1st day of June, 2017.

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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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