TDSMAN Blog

smart & easy software for eTDS & eTCS returns

TDSMAN Blog - smart & easy software for eTDS & eTCS returns

Basic principles of TDS Compliance

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 Statements 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 and Short Payments, which can be corrected during the interim period of a week of filing TDS Statements, 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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Requirement for obtaining evidence/ particulars by employer for TDS – Section 192

Currently, the person responsible for paying salary has to depend upon the evidence/ particulars furnished by the employee in respect of deductions, exemptions and set-off of loss claimed. There is neither any guidance regarding the nature of evidence/particulars to be obtained nor any uniformity in this regard.

With a view to rationalise the collection of information and documents by employers, a new subSection (2C) is proposed to be introduced in Section 192 to provide that the person responsible for paying salary to an employee will be required to obtain evidence or proof or particulars of prescribed claims including claim for set-off of loss under the provisions of the Act in the prescribed form and manner.

This amendment is effective from 1st June 2015.

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Statutory provisions attracted on failure to deposit tax in government account after deduction

Where the employee has deducted the tax at source but failed to deposit wholly or partly, the tax so deducted in government account, the following statutory provisions are attracted:-

Interest u/s 201(1A)– The deductor is treated as an assessee in default and interest u/s 201(1A) is leviable @1.5% for every month or part of the nonth on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. Further, the tax along with the simple interest u/s 201(1A) becomes a charge upon all the assets of the deductor.

Penalty u/s 221– Penalty to the extent of tax not deposited is leviable by the A.O. 

Prosecution proceedings u/s 276 B– Where the deductor has failed to deposit tax deducted at source, in govt. a/c without a reasonable cause then he is punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

 

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Statutory provisions attracted on failure to deduct tax

Where the employer has failed to deduct tax or when short deduction of tax has been done, following statutory provisions are attracted:-

Charging of interest u/s 201(1A) – The deductor is treated to be ‘assessee in default’ in respect of the short deduction/non deduction of tax. Under Section 201(1A) he is liable to pay simple interest @ 1% for every month or part of a month on the amount of tax in arrear from the date on which such tax was deductible to the date on which such tax is actually deducted. Further such interest shall be paid before furnishing the quarterly statement of each quarter.  Charging of interest u/s 201(1A) is mandatory and there is no provision for its waiver.

Procedure for interest calculation

 The calculation of interest is to be done as per Rule 119A and is summarized below:

• Where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be full month and interest shall be so calculated.

• The amount of tax in respect of which interest is to be calculated is to be rounded off to nearest multiple of Rs. 100 ignoring any fraction of Rs. 100.

Penalty u/s 221 – The assessee in default is liable to imposition of penalty where the assessing officer is satisfied that the defaulter has failed to deduct tax as required without good and sufficient reason. The quantum of penalty is not to exceed the amount of tax in arrear. Besides, a reasonable opportunity of being heard is to be given to the assessee.

Penalty u/s 271C – A penalty equivalent to the amount of tax the deductor has failed to deduct, is leviable u/s 271C. Such penalty is however only leviable by a Joint Commissioner of Income Tax.

 

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