Note on Tax Deduction at Source

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www.legale-services.com Note on Tax Deduction at Source What is Tax Deduction at Source (TDS)? TDS is a way by which a certain percentage of amounts are deducted by a person at the time of making/crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government account. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. It ensures regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion as well as expands the tax net. Who shall deduct tax at source in case of the Company? Principal Officer or Director of a company for TDS purpose including the employer in case of private employment or an employee making payment on behalf of the employer. Such person is called Deductor while the person from whom the tax is deducted is called Deductee. Tax must be deducted at the time of payment in cash or cheque or credit to the payee's account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee's account and TDS must be made at the time of such credit.

What a deductor must do? www.legale-services.com 1. Principal Officer or Director of a company should deduct the tax at correct rate. 2. The tax deducted has to be deposited in the designated banks within specified time. 3. Use challan no. 92B for depositing TDS amount. 4. File statements of tax deduction in the prescribed time. The due dates for filing of TDS statement are: 15 th of July for Quarter 1, 15 th of October for Quarter 2, 15 th of January for Quarter 3 and 15 th May of the financial year immediately following the financial year in which tax is deducted/ collected for last Quarter 5. Use correct form to file TDS/TCS Returns. Form 24Q for salaries It may be noted that the following persons have to compulsorily file e- TDS /e-tcs statements All government offices/departments All companies /corporations All persons whose cases are auditable All persons whose TDS statements contain more than 50 deductees

Dos & Don ts for filing TDS Returns Dos www.legale-services.com Ensure that TDS return is filed with same TAN against which TDS payment has been made & TDS certificate is issued. Ensure that correct challan particulars including CIN and amount is mentioned. Correct PAN of the deductee is mentioned. Correct section is quoted against each deductee record. Correct rate is quoted against each deductee record. File correction statement as soon as discrepancy is noticed Retain the original FVU file to enable future corrections Make use of free of charge RPU provided through TIN-NSDL.com Download details of challan from challan status enquiry (TAN based view) from TIN-NSDL.com Registration for TAN enables you to avail additional facilities from Tax Information System. Always verify status of TDS returns from Tin NSDL to ascertain the discrepancy, if any, and/or whether your TDS return stands accepted or rejected by the system. Don ts Don't file late returns as it affects deductee tax credit Don't quote incorrect TAN vis-à-vis TDS payments 6. Issue TDS certificates as per existing procedure and within the time prescribed as stated below:

www.legale-services.com The certificate should be issued within one month from the end of the month in which the income is credited however for credit entries made on 31 st March, due date is 7 th June, except in the case of salary where the certificate has to be issued by 30 th of April of the following financial year in which the income was credited. TDS defaults Failure to deduct the whole or part of the Tax at source (non-deduction, short deduction or delay in deduction) 1. Failure to deposit whole or part of the TDS (non-deposit, short deposit or late deposit) 2. Failure to apply for TAN within the prescribed time limit or failure to quote TAN on allotment as required under section 203A. 3. Failure to furnish, in due time, TDS returns or TDS certificates or to deliver or cause to be delivered a copy of declaration in form no. 15H/15G/27C/copy of quarterly statement. 4. Failure to mention the PAN of the deductee in all quarterly statements as well as in all certificates furnished. Consequences of Defaults The following chart indicates the nature of default and its consequences which range from penal interest, penalty to prosecution.

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www.legale-services.com In addition to the above, there are other consequences in certain cases, as enumerated below; Disallowance of specified expenditure (while computing the income of the deductor) if TDS is not deducted from the payment. (Section 40a (ia)). where the tax has not been paid after its deduction it shall be charge on the asset of the defaulter to recover the amount of TDS. (Section 201(2)).