Short Payment and
Short deduction TDS defaults-Problems and solutions
By
C.A Pratik Anand, ACA
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These days TDS has become a
nightmare both for the assessee as well as the tax professional with notices
being issued by the CPC (TDS) immediately on filing of the Quarterly TDS
Statements.
This is an attempt to give a comprehensive list
of problems and their solutions relating to short payment and short deduction
defaults issued in the intimation U/s 200A:
A) Short Deduction Defaults
Short Deduction defaults arise due to many
reasons, some of which are as follows:
1. Due to PAN Errors:
One of the prime reasons for short deduction
defaults is quoting the wrong PAN:
Quoting of the correct PAN is very essential in
the TDS Return. Quoting the wrong PAN give rise to TDS demand of 20% less the
amount of TDS already deducted. It
also results in no TDS Credit being given to the deductee whose TDS has been
deducted.
It also results in defaults in furnishing TDS
Certificates as these days the TDS Certificates are being issued from the
TRACES website, therefore if the PAN is incorrect, it results in more than one
default on the part of the deductor and unnecessary trouble for the deductee
who does not get the credit of his taxes paid.
Another problem with quoting of the wrong PAN is
that CPC (TDS) while processing the correction statement does not correct the
errors in PAN where the mistake in quoting of PAN is more than two alphabets
and two numeric characters even in cases of genuine typographical errors. There
are two courses of action for correcting the PAN Errors of more than 2
alphabets and 2 numeric characters:
·
To file the correction statement by making the entry with
the wrong PAN at an amount equal to zero as the deductee entry cannot be
deleted and then add a new deductee row for the amount paid and TDS deducted
with the correct PAN.
·
To appeal against the intimation U/s 200A with the CIT
(TDS)
Requirements from the client:
·
Copy of PAN card of the deductee.
·
Deduct TDS@20% in absence of PAN of the deductee.
Points to
remember:-
·
Correction statement for rectifying any error in the PAN
can be done by utilising the online correction facility at www.tdscpc.gov.in , this correction facility can be used by entering the
correct details of the profile of the deductor with the TRACES website.
·
Online Correction can be used with or without digital
signature of the authorized person.
2. Due to wrong quotation
of Lower Deduction Certificate U/s 197 of the Income Tax Act’1961:
Another reason for the short deduction default
is wrong quotation of the particulars of the certificate of lower deduction of
tax.
Following should be correctly quoted while
filing the TDS Return.
·
Certificate Number
·
Period for which the certificate is valid
·
Amount upto which lower deduction is applicable
·
Rate specified in the certificate at which tax is to be
deducted
Certificate Number: Certificate Number is a ten digit alpha numeric number
mentioned alongside the TAN and the name of the deductee.
Please remember that the Reference No. mentioned
at the top of the certificate is not the certificate number to be quoted while
filing the TDS Return which is a common mistake done by the assessees while
filing the returns.
Period: Every lower deduction certificate is valid for the
specified period mentioned in the certificate. Care should be taken to deduct
TDS at the lower rate only for the transactions entered between the period
mentioned in the Certificate.
Transactions entered before and after the
specified period have to suffer tax deduction at the normal rates as prescribed
under the Act.
Amount: Every lower deduction certificate is valid for the amount
mentioned in the certificate.
This means that when the total amount of the
transactions exceed the limit specified in the certificate, tax at the normal
rates as prescribed in the Act is to be dedctee on the amount exceeding the
limit.
Rate: TDS should be deducted at the rate prescribed in the certificate.
3. Due to mistake in
deduction of Tax at Source:
Sometimes the assessee due to ignorance or
otherwise deducts TDS for such an amount which turns out to be lower than the
rates prescribed in the Act.
Care should be taken while filing the return
that on every payment the amount of tax deducted is not short of the amount
which should have been deducted if tax were to be deducted at the prescribed.
If such a case is found then the balance tax
should immediately be deposited vide a new challan.
4. Due to wrong quotation
of 15G and 15H Certificates:
Many people don’t know that non deduction of tax
due to receipt of Forms 15G and 15H are also to be reported in the TDS Return,
this is especially relevant in the case of banks filing their tds returns.
Incorrect reporting of forms 15G/H particulars
can result I short deduction defaults.
Short Payment Defaults
Short payment defaults arise due to the
following reasons:
1.
Due to Challan errors:
Short payment errors also arise due to wrong
quoting of the particulars of the challan through which tax has been paid.
The necessary challan particulars to be
correctly mentioned in the TDS Return are:
·
Challan Number
·
BSR Code of the bank in which tax is deposited.
·
Tender date of deposit of the challan
In addition to this, the details of the payment
bank and the mode by which tax is paid are also to be mentioned in the return.
Let us look at these particulars one by one.
1) Challan Number: The challan
number is a five digit number which is provided in every challan by the
receiving banker at the time of clearing the challan.
Whenever
the challan number is not clear in the challan, the same should be reconfirmed
from the bank.
The
challan number can also be confirmed from the following the following link:
tin.tin.nsdl.com/oltas/index.html
After
logging onto the following link there are two options:
·
Challan based view
·
TAN Based view
a) In the Challan based view
the particulars of each challan can be verified by entering the following
details:
BSR Code
Challan tender date
Challan Serial Number i.e challan number
Challan Amount
Note
that these can be checked only if you have a rough idea of the above
particulars and same are to be confirmed.
b) TAN Based view: In the TAN
Based view the particulars of the challan for a particular period can be
checked just by entering the TAN of the deductor and the period for which the
challans are to be checked.
Note: The period to be entered here cannot
exceed 24 months.
After you enter the desired period and the TAN,
the list of all the challans paid during the selected time period will be
visible. You will have to enter the amount of challan in order to match the
particulars of the challan.
2) Challan tender date:
Challan tender date is the date in which the challan is
presented with the bank for payment. This date is entered in the stamp
of the bank inscribed on the challan at the time of clearing. This can also be
checked from the abovementioned link.
3) BSR Code: BSR Code is a
seven digit code for every branch of the bank i.e every branch has a separate
BSR Code. You could check the BSR Code from the internet or by even calling the
concerned branch of the bank.
4) Challan amount: The Challan
amount entered should be including interest and other amounts like penalty or
fee u/s 234E paid in the challan and should not merely include the amount of
tax paid.
Nowadays
a challan file is downloaded at the time of generating the TDS Return. This
file is an indicator of whether the particulars of the challan have been
correctly entered in the Return.
In
case of inaccurate particulars being entered in the return, it shows/generates
a warning file that the ‘Challan details are not present in the challan file
downloaded.’
Another
point to remember is that very often the TDS Return is to be filed or is filed
on the day or a day after which the challan is deposited in the bank for
clearing.
In
this case since the challan is not cleared from the bank therefore it will not
be present in the challan file downloaded at the time of generation which leads
to a warning file as mentioned above.
In this case if there is still time left for the
filing of the return, the concerned person should not file the return till the
challan is cleared from the bank and is showing in the challan file downloaded.
This is so because when we file the return, then the same is processed at CPC
(TDS) and if at the time of processing the return the particulars of the
challan are present in the challan file then CPC will raise demand for short
payment of Tax which is actually not the case.
Point to
remember:-
·
Correction statement for rectifying any error in the
Challan can be done by utilising the online correction facility at www.tdscpc.gov.in , this correction facility can be used by entering the
correct details of the profile of the deductor with the TRACES website.
·
Online Correction can be used with or without digital
signature of the authorized person.
Sometimes, there is a case where the deductor mistakenly pays an
amount in excess of the amount required to be paid as TDS and such amount is
required to be set-off from the subsequent payments of tax.
In this case special care is to be taken while allocating the
payments of TDS with the unconsumed amounts of the challan.
Other important points related to challans:
·
From the
financial year 2013-14 onwards, the section code under which the challan is
paid and that entered in the return does not matter. As long as the amount of
tax is paid, wrong entry of the section code will not result in the short
payment default.
·
The
Financial year entered in the challan is also not relevant. There will not be
any short payment default due to this.
·
Mistake in
quoting the TAN of the deductor in the challan can only be rectified by the
jurisdictional A.O of the assesse and cannot be rectified by the CPC (TDS).
Very soon the CPC TDS is going to bring a notification where it will
be mandatory to close all the short payment defaults before the necessary
consolidated file can be downloaded for revision of other defaults.
Following are key information to be noted in this regard:
§ CPC (TDS) mandates to close the
above default by tagging unconsumed challans, if available in CPC (TDS) system,
through online correction (without digital signature).
§ In case there is no available
challan for consumption, the deductor is required to first deposit the due tax
in the bank and then the same challan will be available for tagging in CPC (TDS)
system after around 3-4 days of deposit.
§ CPC (TDS) mandates to close the
above default by Matching or Payment of challans.
§ The user will not be able to
download Conso file for the relevant TDS statement until the above default is
closed.
§ The Online Correction facility
of TRACES needs to be used for closure of the Short Payment default.
§ User will subsequently be able
to download the Conso file for relevant period only after the default is
closed.
Hope you find the above information relevant and useful in your
daily practice
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The
author is a CA in practice at Delhi and can be contacted at:
Mobile:
+91-9953199493
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