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TDS on Big Transporters proposed to be levied wef 01.06.2015

Under the existing provisions of section 194C of the Act payment to contractors is subject to tax deduction at source (TDS) at the rate of 1% in case the payee is an individual or Hindu undivided family and at the rate of 2% in case of other payees if such payment exceeds Rs. 30,000 or aggregate of such payment in a financial year exceeds Rs. 75,000. Prior to 1.10.2009, section 194C of the Act provided for exemption from TDS to an individual transporter who did not own more than two goods carriage at any time during the previous year. Subsequently, Finance (No.2) Act, 2009 substituted section 194C of the Act with effect from 1.10.2009, which inter alia provided for non- deduction of tax from payments made to the contractor during the course of plying, hiring and leasing goods carriage if the contractor furnishes his Permanent Account Number (PAN) to the payer.

The memorandum explaining the provisions of Finance (No.2) Bill, 2009 indicates that the intention was to exempt only small transport operators (as defined in section 44AE of the Act) from the purview of TDS on furnishing of Permanent Account Number (PAN). Thus, the intention was to reduce the compliance burden on the small transporters. However, the current language of sub-section (6) of section 194C of the Act does not convey the desired intention and as a result all transporters, irrespective of their size, are claiming exemption from TDS under the existing provisions of sub-section (6) of section 194C of the Act on furnishing of PAN.

As there is no rationale for exempting payment to all transporters, irrespective of their size, from the purview of TDS, it is proposed to amend the provisions of section 194C of the Act to expressly provide that the relaxation under sub-section (6 ) of section 194C of the Act from non-deduction of tax shall only be applicable to the payment in the nature of transport charges (whether paid by a person engaged in the business of transport or otherwise) made to an contractor who is engaged in the business of transport i.e. plying, hiring or leasing goods carriage and who is eligible to compute income as per the provisions of section 44AE of the Act (i.e a person who is not owning more than 10 goods carriage at any time during the previous year) and who has also furnished a declaration to this effect along with his PAN.

This amendment will take effect from 1st June, 2015.

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TDS on Pre-mature EPF withdrawals Proposed @ 10% wef 01.06.2015

Under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act, 1952), certain specified employers are required to comply with the Employees Provident Fund Scheme, 1952 (EPFS). However, these employers are also permitted to establish and manage their own private provident fund (PF) scheme subject to fulfillment of certain conditions.

The provident funds established under a scheme framed under EPF & MP Act, 1952 or Provident Fund exempted under section 17 of the said Act and recognised under the Income-tax Act are termed as Recognised Provident fund (RPF) under the Act. The provisions relating to RPF are contained in Part A of the Fourth Schedule (Schedule IV-A) of the Act. Under the existing provisions of rule 8 of Schedule IV-A of the Act, the withdrawal of accumulated balance by an employee from the RPF is exempt from taxation.

However, in order to discourage pre-mature withdrawal and to promote long term savings, it has been provided that such withdrawal shall be taxable if the employee makes withdrawal before continuous service of five years (other than the cases of termination due to ill health, closure of business, etc.) and does not opt for transfer of accumulated balance to new employer.

Rule 9 of the said Schedule further provides computation mechanism for determining tax liability of the employee in respect of such pre-mature withdrawal. For ensuring collection of tax in respect of these withdrawals, rule 10 of Schedule IV-A provides that the trustees of the RPF, at the time of payment, shall deduct tax as computed in rule 9 of Schedule IV-A.

Rule 9 of Schedule IV-A of the Act provides that the tax on withdrawn amount is required to be calculated by re-computing the tax liability of the years for which the contribution to RPF has been made by treating the same as contribution to unrecognized provident fund. The trustees of private PF schemes, being generally part of the employer group, have access to or can easily obtain the information regarding taxability of the employee making pre-mature withdrawal for the purposes of computation of the amount of tax liability under rule 9 of the Schedule-IV-A of the Act. However, at times, it is not possible for the trustees of EPFS to get the information regarding taxability of the employee such as year-wise amount of taxable income and tax payable for the purposes of computation of the amount of tax liability under rule 9 of the Schedule-IV-A of the Act.

It is, therefore, proposed to insert a new provision in Act for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from EPFS.

However, to reduce the compliance burden of the employees having taxable income below the taxable limit, it is also proposed to provide a threshold of payment of Rs.30,000/- for applicability of this proposed provision. In spite of providing this threshold for applicability of deduction of tax, there may be cases where the tax payable on the total income of the employees may be nil even after including the amount of pre-mature withdrawal. For reducing the compliance burden of these employees, it is further proposed that the facility of filing self-declaration for non-deduction of tax under section 197A of the Act shall be extended to the employees receiving pre-mature withdrawal i.e. an employee can give a declaration in Form No. 15G to the effect that his total income including taxable pre-mature withdrawal from EPFS does not exceed the maximum amount not chargeable to tax and on furnishing of such declaration, no tax will be deducted by the trustee of EPFS while making the payment to such employee.

Similar facility of filing self-declaration in Form No. 15H for non-deduction of tax under section 197A of the Act shall also be extended to the senior citizen employees receiving pre-mature withdrawal.

However, some employees making pre-mature withdrawal may be paying tax at higher slab rates (20% or 30%). Therefore, the shortfall in the actual tax liability vis-à-vis TDS is required to be paid by these employees either by requesting their new employer to deduct balance tax or through payment of advance tax / self-assessment tax. For ensuring the payment of balance tax by these employees, furnishing of valid Permanent Account Number (PAN) by them to the EPFS is a prerequisite.

The existing provisions of section 206AA of the Act provide for deduction of tax @ 20% in case of non-furnishing of PAN where the rate of deduction of tax at source is specified. As mentioned earlier, there may be employees who are liable to pay tax at the highest slab rate. In order to ensure the collection of balance tax by these employees, it is also proposed that non-furnishing of PAN to the EPFS for receiving these payments would attract deduction of tax at the maximum marginal rate.

These amendments will take effect from 1st June, 2015.

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CPC (TDS) follow-up for payment of outstanding Late Filing Fee u/s 234E

CPC (TDS) has issued a follow up communication for the payment of outstanding late filling fees u/s 234E. In the communiation, CPC (TDS) has also mentioned about the action to be taken by the TANs associated with your PAN, in case of levy intimated u/s 234E.

The issued communication has been given below:

Dear PAN Name,
PAN (XXXXXXXXX),

As per the records of CPC (TDS), there is an outstanding default of Rs. 0.00 on account of Late filing fee Levy u/s 234E, for the TANs associated with your PAN. The TAN-wise summary of the default is attached for your reference.

Section 234E of the Income-tax Act, 1961 inserted by the Finance Act, 2012 provides for levy of a fee of Rs. 200/- for each day’s delay in filing the statement of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). The provision for Levy of Late filing fee was introduced to improve Filing Compliance and to avoid subsequent inconvenience to the taxpayers due to inordinate delays in availability of tax credits in their 26AS Statements.

This assumes further significance in view of the decision of the Hon’ble High Court of Bombay, dated February 6 2015, upholding the validity of the Levy for Late Filing u/s 234E. The court has observed the following in its decision in the case of Rashmikant Kundalia vs. UOI:

Immediate Attention:

  • The late filing of TDS returns by the deductor causes inconvenience to everyone and s. 234E levies a fee to regularize the said late filing.
  • The fee is not in the guise of a tax nor is it onerous.
  • The levy is constitutionally valid.

CPC (TDS), in its endeavor to strengthen TDS Compliance, is reaching out to you to reiterate the essence of timely filing of Quarterly TDS Statements. Section 200(3) of the Income Tax Act, 1961 read with Rule 31A of the Income Tax Rules, 1962, prescribes the following due dates for filing of TDS Statements:

Where the TDS Statements are not filed within the due date, CPC (TDS) sends Intimations u/s 200A of the Act that includes Levy under section 234E. Your attention is hereby drawn towards the provisions of section 234E of the Act (Levy for Late filing of TDS Statement), which reads as follows:

  • Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C, he shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues.
  • The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible, as the case may be.
  • The amount of fee referred to in sub-section (1) shall be paid before delivering or causing to be delivered a statement in accordance with sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C.
  • The provisions of this section shall apply to a statement referred to in sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 2012.

Action to be taken by the TANs associated with your PAN, in case of levy intimated u/s 234E:

  • Please download the Justification Report from our portal TRACES to view your latest outstanding demand. Please click here for assistance on downloading the Justification Report.
  • Use Challan ITNS 281 to pay the Levy with your relevant Banker, if there are no challans available for consumption.
  • Please use the Online Corrections facility on TRACES to submit corrections, to payoff the demand. To avail the facility, please Login to TRACES and navigate to Defaults tab to locate Request for Correction from the drop-down list. You can refer to our e-tutorials for necessary help.
  • Alternatively, you may also download the Conso File from our portal provided there are no Short Payment Defaults.
    • Prepare a Correction Statement using the latest Return Preparation Utility (RPU) and File Validation Utility (FVU).
    • Submit the Correction Statement at TIN Facilitation Centre.

For any assistance, you can write to ContactUs@tdscpc.gov.in or call our toll-free number 1800 103 0344.

CPC (TDS) is committed to provide best possible services to you.

CPC (TDS) TEAM

 Source: TRACES

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Important notifications displayed on TRACES website

The following important notifications have been displayed on TRACES website:

  • If you have received intermediate communication for statement on hold due to Short Payment and PAN error; please wait for 48 hours to submit Online Correction on TRACES.
  • Considering peak statement filing time, processing of statements might take 7 to 10 working days from date of filing. 99% of the statements filed till 25th Jan 2015 have been processed for 26AS. Please wait for 24 hours after receiving a communication to submit Online Corrections at TRACES.
  • Offline correction facility is enabled on Traces to do and submit correction statement using utility from Financial Year 2013-14 onwards. This facilities is available only to the deductors having consolidated Deductee rows less than 5 Lakhs both in Annexure – 1 and Annexure – 2.
  • TDS-CPC has been awarded the National e-Governance Gold award under category of Excellence in Government Process Re-engineering.
  • CPC (TDS) prompts you to first close the Short payment defaults before submission of request for download of TDS Certificates.
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