New TDS Procedures

Study Circle Meeting

Bangalore Branch of SIRC of ICAI18th June 2009

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Introduction:

Parliament has the power to make laws with respect to income tax. This power extends making of laws with respect to collection of income tax. Parliament has delegated the rule making power to CBDT. Power to make rules also extends to power to amend the rules or to make new rules. Accordingly, CBDT has amended rules dealing with deduction and collection of tax at source.

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Broadly, the amendments carried out relate to;

1. Rule 30 dealing with time and mode of payment of TDS to Government account.

2. Rule 31 dealing with certificate of TDS.3. Rule 31A dealing with Quarterly Statements of deduction

of tax.4. Rule 37BA dealing with credit for tax deducted at source.5. Rule 37BB dealing with TDS under section 195.6. Rule 37CA dealing with time and mode of payment of

TCS.7. Rule 37D dealing with certificate of TCS.Let us try to understand these rules by way of a question and answer

session.

Introduction..

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Q .What is the reason for bringing about the amendments regarding TDS and TCS ?

A.The Act has been amended to provide for a scheme of centralized processing of the Returns. (143(1A). This is intended to expeditiously determine the tax payable or the amount refundable under Section 143(1).

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Q . What is centralized processing of return?

A. Income tax returns, wherever filed, will be processed in one centre, irrespective of the place where it is filed and the jurisdiction AO. In other words, it is a location neutral and jurisdiction-neutral processing.

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Q . What is meant by “processing of return”?

A. Processing of return means ;

a) Computation of total income or loss after making adjustments for arithmetical errors and incorrect claims apparent in the return;

b) Determination of tax and interest;

c) Determination of sum payable or the amount refundable to the assessee;after adjusting the TDS, TCS, advance tax, self assessment tax, etc. (pre-paid taxes).

d) Preparation of an intimation specifying the sum payable or refundable.

e) Granting of refund due to the assessee. (section 143(1).

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Q . Where is the Central Processing Centre (or CPC) situated?

A. It is situated in Electronic City, Bangalore.

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Q . What is the essential requirement of a Centralized Processing Scheme?

A. The essential requirement of Centralized Processing Scheme is the integrity of database; integrity refers to correctness, completeness and wholeness. Database refers to the information relating to the assessee, tax deducted at source, tax collected at source, advance tax and self assessment tax.

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Q . What are the essential features of a CPC?

A. No interface with the tax payer and automated jurisdiction-less processing.

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Q . What are the safeguards (security measures) adopted by the department to give credit for TDS / TCS?

A. Credit will be given to the deductee only if all the following 3 conditions are satisfied;

a) amount has been deposited by the deductor / collector through internet banking facility.

b) information relating to the deductee has been furnished by the deductor / collector in form No. 17 (remittance challan and

c) claim of the deductee / collectee in the income tax return matches with the information furnished by the deductor / collector.

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Q. How does the department verify the advance tax and self assessment tax?

A. By cross verifying the claim made by the assessee with the Challan Identification (BSR + date + sl. No.) number and the PAN.

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Q. Is there any change in the procedure for remitting advance tax and self assessment tax?

A. No.

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Q. Is there any change in the challan used for remitting advance tax and self assessment tax?

A. No. The existing challan no. 280 will continue.

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Q. What were the pitfalls in the existing system of giving credit for TDS and TCS?

A. The existing system is manually operated. Volume of TDS and TCS transactions are large. Therefore, 100% verification was not possible.

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Q. How the drawbacks of the existing system are sought to be addressed?

A. By adopting an information technology driven risk management system. Under this process, department verifies 100% of the transactions relating to tax payments, TDS and TCS.

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Q. Why the present system of quoting PAN for giving credits for TDS and TCS is considered inadequate?

A. Quoting of PAN is deficient or inadequate. Numerous mistakes are made in quoting PAN. Therefore, it is not possible to match the claim made by the deductee asseee with TDS information furnished by the deductor.

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Q. How this is sought to be set right?

A. By allotting a Unique Transaction Identification number (UTN).

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Q. What is UTN?

A. It is a number assigned by NSDL for each TDS file.

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Q. What are the peculiarities when the Central Government is the deductor?

A. They do not make payment of TDS amount to banks. They do it through book transfer.

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Q. What are the pecularities when the State Government is the deductor?

A. In the case of State governments, the Accountant General makes the consolidated TDS payment to RBI.

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Q. What are the changes brought about in the new system in relation to the government departments?

A. In the new system, even the Central and State Governments are required to deposit the TDS and TCS amount with the bank. Also, they are required to file the statements and returns (TDS/TCS) like other deductors.

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Q. Under the new system what are the due dates for paying the TDS/TCS?

A. In general, it is one week from the end of the month in which deduction or collection is made.

If the crediting is done on the last day of the accounting period, it is within two months from the end of the month in which the amount is so credited (Rule 30 and 37CA)

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Q. How the payment of TDS / TCS is to be made?

A. TDS/TCS amounts are required to be remitted only by electronic remittance irrespective of the deductor.

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Q. Which are the banks which will accept electronic remittance of TDS?

A. RBI, SBI, Associates of SBI, Allahabad Bank, Axis Bank, etc.

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Q. How does one remit the TDS /TCS amount electronically?

A. 1. Open a net banking account in any of the following banks.i. Allahabad Bank

ii. Axis Bank

iii. Bank of Baroda

iv. Bank of India

v. Bank of Maharashtra

vi. Canara Bank additional bank list in next slide

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22….list of banks

vii. Corporation Bankviii. Dena Bankix. HDFC Bankx. ICICI Bankxi. IDBI Bankxii. Indian Bankxiii. Indian Overseas Bankxiv. Oriental Bank of

Commercexv. Punjab National Bankxvi. State Bank of Bikaner &

Jaipur

xvii. State Bank of Hyderabadxviii.State Bank of Indiaxix. State Bank of Indorexx. State Bank of Mysorexxi. State Bank of Patialaxxii. State Bank of Saurashtraxxiii.State Bank of Travancorexxiv.Syndicate Bankxxv.Union Bank of Indiaxxvi.Vijaya Bank

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2. Go to website http://incometaxindia.gov.in, click on ‘pay’ taxes on-line’.

3. Select the relevant challan (i.e., Challan No. 17).

4. Enter PAN / TAN as applicable. There will be an online check on the validity of the PAN / TAN entered.

5. Give deductee wise details (name of deductee / collectee, PAN of deductee / collectee and amount of TDS / TCS).

6. On submission of data entered, a confirmation screen will be displayed. After confirmation, it will be directed to the net-banking site of the bank. ……contd

22…..electronic remittance process..

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7. The taxpayer will login to the net-banking site with the user id / password provided by the bank for net-banking purpose and enter payment details at the bank site.

8. On successful payment, a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made. The Challan Identification Number (CIN) on this counterfoil should be quoted in the Return/statement of TDS/TCS.

9. Print the counterfoil and also save it in the computer if required.

22…..electronic remittance process..

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Q. How does Form 17 look like?

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A. No. One can make consolidated payment under one form No. 17. The system has been changed from being section centric to deductee centric.

Q. Is it necessary to use different challans for TDS made under different sections?

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A. The TIN system will assign a unique transaction number (UTN) to every deduction record.

Q. What happens when the TDS / TCS amount is successfully remitted and the PAN, Name and TDS amount information is uploaded?

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A. The record containing the PAN and name of the deductee and the amount of TDS / TCS remitted in his name.

Q. What is a deduction record?

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A. NSDL will e-mail the UTN file to the deductor’s e-mail address.

Q. How will the deductor know the UTNs?

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A. Yes, NSDL will create a facility for the deductor to download the UTN file.

Q. Can the deductor download the UTN file from NSDL?

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A. The deductor is required to mention the UTN in the TDS / TCS certificates.

Q. Why does the deductor require UTN?

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A. Yes, NSDL will create a facility to view the UTN by the deductee.

Q. Can the deductee find out the UTN?

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A. Deductee is required to mention the UTN in his return of income.

Q. Why does deductee need UTN?

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A. The deductee will not be given credit for the TDS / TCS while processing his return.

Q. What happens if the deductee does not mention the UTN in his return of income?

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A. It is a statement in form 24C prepared in accordance with rule 31A(1)(a).

Q. What is TDS and TCS compliance statement?

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Q. How does form 24C look like?

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A. Every person (including Central Government and State Government) who has obtained Tax deduction account number or Tax Collection account number is required to furnish form 24C.

Q. Who has to furnish Form 24C?

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Q. Is a person having TAN, but not deducting any tax at source or collecting tax at source required to furnish 24C?

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A. Yes, Even if such person has not made any payment liable to TDS, he has to furnish 24C.

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A. From 24C is required to be furnished every quarter.

Q. What is the frequency of furnishing form 24C?

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A.

i. 24C for April to June by 15th July.

ii. 24C for July to September by 15th October.

iii. 24C for October to December by 15th January.

iv. 24C for January to March by 15th June.

Q. What are the due dates for furnishing form 24C?

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A. No. 24C can be furnished only in electronic form that too by uploading it to TIN.

Q. Whether 24C can be filed in paper form?

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A. at http:// www.incometaxindiaefiling.gov.in

Q. Where does one upload form 24C?

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A. Penalty prescribed under section 272 A (Rs. 100/day) can be levied.

Q. What are the consequences of not filing form 24C?

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A. Yes. Both form Nos. 16 and form 16A have been modified.

Q. Is there any change in the TDS certificate format?

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A. TDS certificates have been modified to include details of UTNs.

Q. What are the modification in the TDS certificates?

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Q. How does the new form 16 look like?

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Q. How does the new form 16A look like?

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A. Yes. These quarterly statements have been modified to include the UTNs.

Q. Is there any changes made in the quarterly statements in form 24Q, 26Q, 27Q and 27EQ?

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Q. Is there any change in the due dates for furnishing of the above quarterly statement?

A. Yes. Earlier, they were required to be furnished on quarterly basis. Now, it is sufficient if such statements are furnished before 15th June following the financial year. Thus, these quarterly returns have become annual returns.

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A. No. They have to be given quarter-wise.

Q. Can the information relating to the full year be given in one return?

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A. Changes are made through amending rules 30, 31, 31A and 31AA. These will come into force from 1st July, 2009.

Q. When do the changes made to TDS and TCS provisions become applicable?

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A. One can adopt the screen based uploading or alternatively the file based uploading.

Screen based uploading means uploading electronically filled in challan without any attachment.

File based uploading means uploading the electronic challan in form no. 17 with an attachment of a file containing the basic information. As per form 17, where number of records exceed 10 then, there is a requirement to give the information in a separate file and attach it to form no. 17.

Q. What method of uploading is to be adopted for uploading the basic information about the deductee i.e., name, PAN and the amount of TDS/TCS in form No. 17?

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Q. The new system is stated to be effective from 1st April, 2009, whereas, the details of the new system is made available only now. What happens to the TDS already remitted?

A. The scheme provides that TDS made up to 31st May shall be paid using the old challan in form 281. However, the scheme also provides that in respect of such payments, the deductor shall fill up form no. 17 and upload the same between 1st July, 2009 to 15th July, 2009.

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A. The unique transaction number can be generated for a TDS only if form no. 17 is filed. Therefore, in order to enable the deductee to claim credit of the TDS / TCS, it is necessary that form 17 is uploaded in respect of TDS made up to 31st May, 2009.

Q. What is the purpose of filing form no. 17 all over again?

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A. Since uploading of form no. 17 is mandatory even if form 281 is filled it would make sense to remit the amount only by using form no. 17.

Q. What happens if the TDS is made before 31st May, 2009 but, it is still pending remittance? Should the deductor pay the amount using the old form 281 or new form no. 17?

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Q. Is it required to file form no. 17 separately in respect of each payment of TDS made prior to 31st May, 2009 or can one form no. 17 be uploaded using an attachment file containing the basic information?

A. It is sufficient if one electronic form no. 17 is filed for all the TDS / TCS made during the period from 1st April, 2009 till 31st May, 2009.

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A.Yes. This facility is available and the deductor is entitled to do the same. However, in such cases, there will be 4 different UTNs that will be generated and which are required to be mentioned in the TDS certificates by the deductor and in the return of income by the deductee.

Q. Whether the amount of TDS / TCS can be split into smaller amounts and deposited at different points of time; for eg; if the TDS is Rs. 1 lakh can it be split into 4 payments of Rs. 25,000 each and deposited through separate challans in form no. 17 at 4 different times?

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A. Based on the quarterly returns like form no. 24Q, form no. 26Q, form no. 27Q, etc., NSDL will assign UTN for every TDS and TCS transaction records in the financial years 2007-08 and 2008-09. Thereafter, NSDL will mail the UTN file to the deductor. The deductor is expected to forward the UTN details to the deductee. In addition, the deductor can also download the UTN file from the NSDL website and thereafter, he can forward the UTN to the deductee. However, if the deductor has not yet issued TDS certificates, he can incorporate the UTN in the TDS / TCS certificates and forward it to the deductee. There will also be a facility where under the deductee can independently view the UTNs relating to him. The deductee i.e., the assessee claiming credit for the TDS / TCS can utilize any of the above facilities and obtain the UTNs and quote the same in his return of income.

Q. It is mandatory to mention the UTN in the return of income to get credit for TDS / TCS. The deductor has already remitted the TDS / TCS during the regime when UTN was not there. Under these circumstances, how does the assessee quote UTNs in his returns of income?

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Q. What happens if TDS certificates have already been issued before the announcement of the new scheme in the old form no. 16 and form no. 16A?

A. In such cases, the deductor is expected to obtain the UTN from NSDL either by mail or by downloading and forward the same to the deductee.

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A. If the deductor chooses to issue TDS/TCS certificates in the new form i.e., form no. 16, form no. 16A and form no. 27D, he can issue it before 30th June, 2009.

Q. Is there any extension of time given for issuing TDS certificates for 2008-09 in new form?

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A. Yes. Now there is a new scheme under which TDS payment can be made once in a quarter instead of paying it before 7th of the month following the month in which TDS is made. The details of the scheme is provided in rule 30(2). It is applicable in respect of TDS from salaries, TDS from interest, TDS from insurance commission and TDS from commissioner brokerage. One can pay the amount quarterly as above after obtaining permission from the AO, who can grant the permission only after obtaining prior approval of Joint Commissioner.

Q. Are there any changes with regard to time of payment of TDS?

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A. No. The above scheme is available only for TDS.

Q. Is similar facility available for tax collection at source?

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A. Yes. The earlier procedure of obtaining a certificate from the Chartered Accountant in the form prescribed in Circular No. 10/2002 and also the format of the undertaking mentioned in the same circular have been replaced with form no. 15CB and 15CA.

Q. Are there any changes made in the procedure for deducting tax at source in respect of payments made to non-residents?

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Q. How does 15CA look like?

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Q. How does 15CB look like?

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A. The remitter should first obtain the certificate from a Chartered Accountant in form 15CB and on that basis, deduct the tax at source and furnish form 15CA electronically to the website designated by the income tax department. A signed print out of such uploaded form 15CA should be submitted to the authorized dealer prior to making the foreign remittance.

Q. What is the procedure to be followed before remitting the amount to the non-residents?

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A. The person receiving the income should file a declaration with the person responsible for paying the income giving the name, PAN number, etc., of the person in whose name the income will be assessed. On that basis, the person responsible for paying the income shall mention the name of the other person in form no. 17 (challan uploaded to the TIN) and accordingly, credit for the amount of TDS will be given to the other person in whose hands the income will be assessed.

Q. What is the procedure to be adopted in case income is received by one person but, it is assessable in the hands of another person?

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A. Rule 37BA(3) provides for proportionate credit for the TDS amount proportionate to the income assessed for each assessment year.

Q. What is the mechanism for claiming credit for the TDS which is made in respect of an income which is assessable over a number of years?

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and Now

LET US MOVE TO

NEW INCOME TAX RETURNS