Importance of TDS
TDS can be considered a withholding tax as it is the most prominent tax collection mechanism for the government. Additionally, it serves as an information source for the IT Department to monitor income generation and fix any revenue leakages that might arise.
The Indian Income Tax Act lists all the relevant regulations and comprehensively describes all the aspects related to TDS such as its applicability, tax slabs, compliances, and penalties for non-compliance.
The government has made several amendments over the years, to widen the scope of TDS and simplify the filing process. It also strives to implement better compliances by penalising non-compliant recipients with higher TDS charges and also during cases of non-providence of Permanent Account Number (PAN) card details.
TDS: Provisions and Conditions
The payer is authorised to deduct tax at the time of payment or credit to the account of the recipient whichever happens earlier. This is subject to the prescribed limits for such payments and depends on the nature of the transaction taking place.
The tax deduction rate varies from 0.1% to 10%, barring payroll payments. However, in case the recipient is unable to provide PAN details, a higher TDS rate of 20% is charged.
Any non-withholding or short withholding of taxes would attract interest in the range of 1% to 1.5% per month. It may also lead to disallowance of the payer’s expenses for a specified period or perpetually.
The various forms prescribed for tax deductors to file TDS returns smoothly are as follows:
- Form 24Q for payroll TDS returns.
- Form 26Q form other than payroll transactions.
- Form 27Q for non-resident payments (apart from salary).
Other forms prescribed for individual tax deductors are in the form of challan.
The TRACES Platform
The Income Tax Department centrally manages the TDS compliances through a dedicated platform for the taxation personnel. It is referred to as the TDS Reconciliation Analysis and Correction Enabling System (TRACES). The TRACES platform contains a host of references that a tax deductor can refer to and understand the stipulations better.
The advantages of TRACES are as follows:
- It provides an automated applications monitoring system for precision and compliance.
- The platform simplifies the TDS filing process through guides and tools.
- Users can download this platform from the TRACES website, follow the steps, and file returns.
Filing TDS Returns: Points to Remember
The onus of submitting TDS returns on time falls on the deductors. Once the deductor has submitted the TDS returns online, the details will be shared on the payee’s Form 26AS. The various details required when filing TDS returns are as follows:
- The PAN details of the deductee and deductor
- Information on the TDS challan
- The amount of tax paid to the government
- Any other relevant information as required
How to file TDS Returns Online
The following steps must be followed to file TDS returns online:
- Fill out Form 27A containing multiple columns. While filling the hard copy, verify it along with the electronically-filed e-TDS return.
- Fill in the tax deducted at the source and the total amount paid. Crosscheck these amounts in their respective forms.
- Mention the TAN of the organisation filing the TDS returns on Form 27A.
- The TDS returns must contain the correct challan number, the mode of payment, and the tax details. Incorrect details mentioned in the date of payments or challan numbers will cause a mismatch and the TDS returns might have to be re-filed.
- Use the basic form used for filing e-TDS as it ensures consistency. Enter the 7-digit BSR to ease out tallying.
- Submit physical TDS returns at the TIN-FC. In case returns are filed online, submit the returns on the official website of the NSDL TIN. Use a level-2 digital signature in case TDS returns are filed online.
- In case all the information provided is correct, a token number or provisional receipt will be generated. This acknowledges that the TDS Returns have been filed.
- In case the TDS returns are rejected, a non-acceptance memo along with the reasons for the rejection will be issued. This requires re-filing the TDS returns.
- Check the status of the TDS return on the TRACES Portal using the login credentials. The portal shows details of whether the return has been filed successfully or whether there are any errors to be resolved.
