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Guidelines to avoid different types of TDS defaults

Following are some important facts to be adhered to, while submitting TDS statements, 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:   


PAN allotment by Income Tax Department will remain suspended between 05.10.2015 to 09.10.2015

The income tax department is in the process of upgrading software applications. It is for information of PAN applicants that PAN allotment by Income Tax Department will remain suspended between 05.10.2015 to 09.10.2015 due to PAN data migration activity. However, PAN applications, through on- line and off-line modes, will continue to be received by PAN service centers of M/S NSDL and M/s UTIITSL. The back log of PAN application will be cleared within three days.

Source: TIN-NSDL


Guidelines for correct reporting of 197 Certificates while submitting TDS Statements

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.

Putting TDS provisions for recurring deposits to work

TDS on recurring deposits makes investors either submit the exemption forms if there is no taxable income. In case of TDS on RD, they may have to revisit their tax calculations and accordingly pay tax.

The provisions for the applicability of the tax deduction at source (TDS) for recurring deposits are now into the implementation phase. This means that there is one additional area where the tax payer has to focus their attention. Since there was no tax deduction at source earlier there was no tax implication for any investment made into this area at this initial stage but this will now change. There are several steps that need to be taken so that the individual is in tune with the changed circumstances. Here is a closer look at what needs to be done and the manner in which this can be accomplished.


The change that the union budget 2015 has brought about is that there would be the coverage of recurring deposits in the list of instruments that would be subject to the tax deduction at source. This would mean that if an investor has an income in excess of Rs 10,000 from recurring deposits then this would suffer the same kind of TDS that they would experience when they have fixed deposits. This would mean that at the time of redemption of the investment there would be a lower amount that would come to the investor because the TDS would reduce the amount as compared to earlier when the entire figure would be received by the investor. The main point to remember here is to give the PAN to the bank otherwise the rate of the deduction will be higher.

This does not change the overall nature of taxation for the interest on fixed deposit as these remain taxable which was also the case earlier. So for investors this move will actually ensure that a part of their payment is actually made through the TDS route and hence they would have a reduced liability in terms of payment of advance or self assessment tax.

Form 15G/15H

Investors who do not have any taxable income and hence would not want any tax to be deducted from the amount that they earn on the recurring deposits would have to ensure that they submit the required forms to the bank. This would have to be done immediately otherwise the deduction would start as the income is earned. This is significant as there is a time element for the submission of the forms and the investor should focus attention to this area if they need to ensure that there is no deduction that they actually face. Senior citizens would need to be especially alert because they are most likely to be covered under these kind of conditions.

Annual update

For a long period of time many investors actually did not pay much attention to the recurring deposit investments that they actually made. This was because they thought that there is not much to do in terms of the tax impact. This often led to a situation wherein the income that was earned from the recurring deposits never made it to the income tax returns at the end of the financial year. This is something that needs to be avoided as it shows that some of the income that is actually taxable is not being shown properly.

Now this would need special attention as there is likely to be both income as well as tax deduction that would present. Not claiming the tax deduction would lead to a loss of benefit while the non inclusion of the income would mean that the right picture is not being shows in the tax returns. Interest on recurring deposits is taxable and hence has to be included in the calculations as such. Both these aspects would need the attention of the investors and hence this would have to be the focus area and it would need work at the end of every financial year which in a way is a good thing as it ensures that nothing is missed out.

Source: MoneyControl

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