Types of Corrections in TDS Returns

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There are 6 types of corrections namely C1, C2, C3, C4, C5, C9. The following table briefly talks about each correction type:

TypeCorrections in:
C1Deductor details: All details of deductor except the TAN No. can be modified.
C2Challan details: All details of the challan can be modified. C2 can include C1 type correction
C3Deductee details: All details except the PAN number of the  Deductee can be modified. One may add/delete/modify a deductee in the existing challan.
C4Salary Details: This type of correction is only applicable to correction of 4th Quarter statement of Form 24Q. All the details of the salary can be modified here except the PAN number of the employee. Here there is no provision of updating the record, a record has to be deleted and a new record has to be added with updated details.
C5PAN: In this type of correction deductee PAN is updated. When Pan is updated for Salary record the same will also get updated in the deduction record. PAN has to be updated quarterwise i.e a separate correction return needs to be filed for each quarter where the PAN number is mentioned incorrectly.
C9Addition of new Challans and/or Deductions: Any new addition of Challan and/or deductions forms Correction type C9. When a deduction is added with Tax amount zero then automatically a NIL challan is generated
It may be noted the C1,C2, C3,C4,C5 and C9 type of correction may be made in the same single correction.

Steps for Preparing Correction Returns

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TDS Under Section 194J(a) & 194J(b)

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The existing section code 194J (i.e. Fees for Professional or Technical Services) has been sub-divided now into two sections, 194J(a) and 194J(b), effective from August 7 2020. u/s 194J(a) of the Income Tax Act, is related to TDS deduction on fees for Technical Services, and u/s 194J(b) of the Income Tax Act is related to TDS deduction on fees for Professional Services. Every person excluding an individual or a HUF, making payment to a resident for notified services, will be covered u/s 194J(a) & 194J(b) in the Income Tax Act.

  • Payments that are being covered u/s 194J(a)

– Fees for Technical Services
– Call center
– Royalty for sale
– Distribution or exhibition of cinematographic films etc..

  • Payments that are being covered u/s 194J(b)

– Professional services
– Royalty etc…

  • Tax Deduction Rate

– Tax deduction rate for u/s 194J(a) is 2% and for 194J(b) is 10%
– In case of payee fails to furnish PAN, he will be liable to pay TDS at the rate of 20%

  • Threshold Exemption Limit

In case of payment does not exceed the directed Threshold exemption limits, TDS will not be deductible.
TDS is required to be deducted if the amount of payment in a year exceeds Rs. 30,000.
However, Threshold exemption limit is not available only in the case of Fees / Commission / Remuneration paid to director of the company, other than Salary.

Procedure of preparing e-Returns for TDS / TCS

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Tips to avoid Defaults in TDS Returns

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  • Make sure taxes are deducted on time and at correct deduction rates /amount. The applicable section under which the deduction falls should be correctly applied.
  • Tax needs to be deducted either when payment is made or when the amount is credited, whichever is earlier. It implies that the tax needs to be deducted on the same day when advance payments are made. The late deduction is a default and will attract interest.
  • Taxes deducted during the course of the month should be deposited on time. Typically it is by 7th of the following month. The only exception is that for deductions in March, it needs to be deposited by 30th April.
  • TDS Returns needs to be filed on completion of each quarter. Returns for Salary & Non-Salary TDS is to be filed separately in Form 24Q & Form 26Q respectively.
  • Use a proper TDS Return preparing software/tool that helps in predicting possible errors/defaults. This would prevent unnecessary hassles later.
  • Make sure TDS Returns are filed on time to avoid penalty on the delayed filing. Typically, TDS Returns are to be filed by the end of the month following the quarter.

  Use TDSMAN. one of the leading software for preparing error-free TDS Returns

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Challan ITNS 281- Important Points

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Important points to note related to ITNS-281 are as follows:

1. Company Deductee/Non-Company Deductee – Although this appears in the Challan format, however it has lost its relevance as now one can include Company / Non-Company Deductee in the same Challan. It does not matter whatever one may select.

2. Assessment Year – The Assessment Year as mentioned in the Challan is important as the TDS deposited through the Challan, can only be used for deductions made in the mentioned assessment year, the immediate next year and all earlier years.

3. TAN (Tax Account No.) – This determines the identification of the Tax Deductor / Collector. Any error in the TAN is as good as not making payment of TDS/TCS dues. As such its correctness is of prime importance.

4. Type of Payment – Although it still appears in the Challan format, it has lost its relevance ever since the ‘type of payment’ is linked to each Deductee instead of all dedicates of the same ‘type of payment’ was clubbed under one Challan. One still needs to specify the ‘type of payment’, which in any case will be ignored by the IT Department, while processing the Challan. Also it is important to note the same Challan can be used for multiple ‘types of payments’.

5. Details of Payment
– Tax, Surcharge & Cess: The sum total of the Tax, Surcharge & Cess may be clubbed together and placed under Tax for convenience.
– Fee under Section, 234E: This is the fee for delay in submitting the TDS/TCS Returns.
– Interest: This amount includes:
Interest on delay of deposit of TDS/TCS.
Interest on late Deduction of Taxes.

6. BSR Code & Challan Identification No. (CIN)
After Challan is paid, the receiving bank acknowledges the receipt by providing the following information:

– BSR Code – This is a 7-digit code number that identifies the receiving bank
– CIN – This is a unique transaction serial number provided by the bank.
– Date of Payment – The date of receipt of payment by the bank

The above information is very important and needs to be specified correctly while preparing the TDS / TCS Returns. Make sure it is properly readable (especially for Challans used for Cheque / Cash payments across the counter)

Online payment using Challan ITNS 281

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