Tax Deduction at Source (TDS)

Tax Deduction at Source (TDS)

-Dr. Lalit Kumar Setia*

During the discussions with the Drawing and Disbursing Officers (DDOs), it is observed that the DDOs are always ready to learn new skills to cope up with the advanced tools of computing an accurate amount of TDS and submission of the same. They continuously work for containing corruption by enforcing the financial rules at their workplaces. It is rightly said, "If you think you are too small an entity to play any role in the fight against corruption, think of the potential of an atom". 

The DDOs are usually not cooperative with the people doing bad things in their life and ask to have favored in wrong works including financial irregularities. Sh. Mahatama Gandhi rightly pointed out, "Non-cooperation with evil is as much a duty as is co-operation with good". 

Tax Deductions at Source:

Every year, the tax deductors face problems in deducting an accurate amount of tax from the income of employees. The employees are expected to submit the documents of income tax savings (deductions or exemptions) to the Drawing and Disbursing Officers (DDOs). There are employees who are fairly computing and deposit the income tax not only on Salaries but also on other incomes, it is expected that all employees report the accurate amounts of other incomes and deductions, they are entitled as per the income tax act. Every employee should be aware of the provisions of the income tax act and its consequences for the concealment of income.

Why deduct the TDS of employees on an average basis?

Most of the deductors face practical issues while deducting the TDS of the employees on an average basis. The employees insist to deduct the TDS less than the average amount. As per provisions of the Income Tax Act, it is mandatory to deduct the accurate amount of tax in the proper way on an average basis i.e. equal installment in each month of the year by the employer as Tax Deduction at Source (TDS) under section 192 of Income Tax Act and the same is required to be deposited in each month to the Income Tax Department. 

Is it required to have proof of savings to allow deduction of section 80C?

This is the duty of an employee to communicate timely to the Drawing and Disbursing Officer (DDO) about the deductions, he wishes to claim during the annual financial year. He can submit in writing the amount he will definitely deposit for claiming deduction of section 80C, saving income tax on it. Each employee should submit proofs of savings, payment of rent (if any), payment of NPS (if any), and other documentary evidence. In case, the proof is not provided and he also has not submitted it in writing, then the Drawing and Disbursing Officer should not entertain deduction under section 80C except for the amount he deducted from the salaries of the employees which are also covered in section 80C such as GPF, GIS, NPS, etc. 

Claim for Tax Deductions:

In case, such declarations are not made with desired proofs, the employers may deduct the Tax Deduction at Source (TDS) keeping into mind, the incomes of the employees as per accounting records, and the same is shown in Form 16 or Annual Information Statement (AIS). Thereafter, if excess payments in form of TDS are deducted then the employee can claim the deductions or exemptions at his or her level while filing Income Tax Return (ITR) and the refund is processed from Income Tax Department.

What proofs are desired from an employee?

The Drawing and Disbursing Officer (DDO) works on behalf of the Income Tax Department and collects the proof for each deduction claimed by the employee.

Documents to claim Deduction of Section 80C:

In the case of Equity Linked Saving Schemes of Mutual Funds, LIC Premiums, PPF Contribution, NPS contributions, an employee can submit the receipts of such investments or entries of such payments in the bank’s passbook. 

In the case of Tuition Fees, it is required to submit the receipts of schools.

Documents to claim Deduction of Section 24:

If the loan has been taken to buy a home; then hard copies of all relevant documents will have to be submitted to claim a deduction of Rs. 50000 p.a. (Interest on Loan) till the loan is repaid u/s 24 of Income Tax Act.

Documents to claim Exemption on HRA:

To claim relief from Tax on HRA, an employee has to submit PAN of Landlord, however, if the annual rent payment is less than or equal to 1 Lac (i.e. 8333 per month) then it is not required to submit PAN of Landlord. But a copy of the rent agreement or declaration by the landlord along with ownership proof of landlord of rented premises (i.e. house tax receipt or latest electricity bill) has to be provided to the employer.

Documents to claim Deduction of Section 80D:

In case of claiming deduction u/s 80D, it will be required to provide a receipt or digital transaction details to the employer.

The employees should prepare the details and provide documentary proofs so that excess tax cannot be deducted from the salaries.

Are you interested in an Online Course related to Income Tax?:

1. https://smartinstituterls.blogspot.com/2022/12/income-tax-matters-in-government.html 

2. https://smartinstituterls.blogspot.com/2022/12/computation-of-income-tax-liability.html

*Copyright © 2018 Dr. Lalit Kumar. All rights reserved. 

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was firstly published in 2018 and last updated on 19th October 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

More Articles:

https://leavesofprogress.blogspot.com/2021/10/shameless-life-feel-guilty.html (Why to live shameless life?)

and

https://leavesofprogress.blogspot.com/2021/09/parking-of-funds-and-personal-ledger.html (Parking of funds is irregularity)

Compliance of 206AB for DDOs

Compliance of 206AB for DDOs

-Dr. Lalit Kumar Setia

In the Union Budget 2021, a new rule was introduced to deduct Tax Deduction at Source (TDS) at higher rates on cases with certain nature of income and from the persons who have not filed Income Tax Return (ITR) in the last two years and total amount TDS exceeds Rs. 50,000 in each year. How to know, whether the person whose TDS is being deducted is the person with requirement to deduct TDS rates at higher rate or not? What will be the rate of TDS if it is required to deduct at higher rate? How to ensure compliance of Section 206AB which is having this rule?

How much TDS be deducted if person lies in certain category to deduct TDS on Higher Rate?

As per provisions, the TDS will be either “twice the rate of TDS normally deducted as specified in a particular relevant section” or 5% whichever is higher. It means the TDS rate will be at least 5% for such persons and higher than 5% if twice rate of TDS is more than 5%.

How to know that the person whose TDS to be deducted, has not filed ITR during last two years and total TDS amount exceeds Rs. 50,000 in each year?

The Deductors (DDOs in Government) required to ensure compliance of 206AB & 206CCA which states to deduct TDS at higher rates for certain category of persons. How to know whether the person whose TDS is being deducted falls in such category or not.

The Income Tax Department web-portal has a functionality to check such persons by inserting their PAN number or PAN Numbers in bulk. The deductors (if required) can feed PAN number of the person and get the response from the web-portal, download the response in .pdf file, and thereafter keep the same or show the same to the person and deduct TDS at higher rates. For the Financial year 2021-22, from 1^st July 2021, it is enforced to implement section 206AB and 206CCA.

The persons who did not file Income Tax Returns (ITRs) of FY 2018-19 and FY 2019-20 and have aggregate of TDS amount Rs. 50,000 or more in each of the previous years; will be listed in that functionality. The Income Tax Department will list such persons every year and according to the list, the Deductors will have to deduct TDS at higher rate for such persons whose name is listed in the functionality.

As per notification no. 1 of 2021-Income Tax dated 22.06.2021:

Compliance Check Functionality for Section 206AB & 206CCA of Income-tax Act 1961

Section 206AB and 206CCA inserted in the Income-tax Act,1961 (effective from 1st July 2021), imposed higher TDS/TCS rate on the “Specified Persons’ defined as under,

“For the purposes of this section ‘ specified person” means a person who has not filed the retums of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing retum of income under sub-section (1) of section 139 has expired; and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years.

Provided that the specified person shall not include a non-resident who does not have a permanent establishment in India.

Explanation.-For the purposes of this sub-section, the expression ‘permanent establishment” includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.”

2. To facilitate Tax Deductors and Collectors in identification of Specified Persons as defined in sections 206AB and 206CCA, the Central Board of Direct Taxes (“CBDT”), in exercise of powers conferred under section 138(1 )(a)(i) of Income-tax Act, 1961 (Act), has issued Order via F.No. 225/67/2021/ITA.II dated 21.06.2021 , directing that Director General of Income-tax (Systems), New Delhi shall be the specified income-tax authority for furnishing information to the “Tax Deductor/Tax Collector”, having registered in the reporting portal of the Project Insight through valid TAN, to identify the ‘Specified Persons’ for the purposes of section 206AB and 206CCA of the Act through the functionality “Compliance Check for Section 206AB& 206CCA”.

3. Income Tax Department has released a new functionality ·Compliance Check for Section 206AB & 206CCA to facilitate tax deductors/collectors to verify if a person is a “Specified Person” as per section 206AB & 206CCA. This functionality is made available through (https://report.insight.gov.in) of Income-tax Department. Kindly refer to CBDT Circular No. 11 of 2021 dated 21.06.2021 regarding use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961 .

4. The following procedure is laid down for sharing of information with tax deductors/collectors:

a) Registration: Tax Deductors and Collectors can register on the Reporting Portal by logging in to e-filing portal (http://www.incometax.gov.in/) using e-filing login credential of TAN and clicking on the link “Reporting Portal” which is available under “Pending Actions” Tab of the e-filing Portal. After being redirected to the Reporting Portal, the tax deductor/collector needs to select Compliance Check (Tax Deductor & Collector) under Form Type. The details of the principal officer also need to be provided by clicking on “Add Principal Officer” button. The principal officer is the authorized person of the tax deductor/collector to use the Compliance Check functionality on reporting portal. After submission of registration request, email notification will be shared with the Principal Officer along with ITDREIN details and login credentials.

b) Accessing the Compliance Check functionality: 

Principal Officers of the entities (Tax Deductors & Collectors) which are registered with the Reporting Portal through TAN shall be able to use the functionality after login into the Reporting Portal using their credentials. After successfully logging in, link to the functionality “Compliance Check for Section 206AB & 206CCA” will appear on the home page of the Reporting Portal.

c) Using “PAN Search” mode: 

Under the “Compliance Check for Section 206AB & 206CCA” page, “PAN Search” tab may be selected to access the functionality in PAN Search mode. In this mode single valid PAN along with captcha can be entered at a time and output will be available with following fields,

o    Financial Year: Current Financial Year

o    PAN: As provided in the input.

o    Name: Masked name of the Person (as per PAN).

o    PAN Allotment date: Date of allotment of PAN.

o    PAN-Aadhaar Link Status: Status of PAN-Aadhaar linking for individual PAN holders as on date. The response options are Linked (PAN and Aadhaar are linked), Not Linked (PAN & Aadhaar are not linked), Exempt (PAN is exempted from PAN-Aadhaar linking requirements as per Department of Revenue Notification No. 37/2017 dated 11th May 2017) or Not-Applicable (PAN belongs to non-individual person).

o    Specified Person u/s 206AB & 206CCA: The response options are Yes (PAN is a specified person as per section 206AB/206CCA as on date) or No (PAN is not a specified person as per section 206AB/206CCA as on date).

Output will also provide the date on which the “Specified Person” status as per section 206AB and 206CCA is determined.

d) Using “Bulk Search” mode: 

Under the “Compliance Check for Section 206AB & 206CCA” functionality page, “Bulk Search” tab may be access to access the functionality in Bulk Search mode. This mode involves following steps:

i. Preparing request (Input) file containing PANs: Under the “Bulk Search” page, CSV Template to enter PANs details may be downloaded by clicking on “Download CSV template” button. PANs for which “Specified Person” status is required may be entered in the downloaded CSV template. The current limit in the number of PANs in a single file is 10,000.

ii. Uploading the input CSV file: Input CSV file may be uploaded by clicking on Upload CSV button. Uploaded file will start reflecting with Uploaded status.

iii. Downloading the output CSV file: After processing, CSV file containing “Specified Person” status as per section 20SAB & 206CCA of the entered PANs will be available for download and “Status’ will change to Available. Output CSV file will contain PAN, Masked Name, Specified Person Status as per section 20SAS & 206CCA, PAN-Aadhar Link status and other details as mentioned in paragraph c) above. After downloading of the file, the status will change to Downloaded. The download link will expire and status will change to Expired after specified time (presently 24 hours of availability of the file).

5. For any further assistance, Tax Deductors & Collectors can refer to Quick Reference Guide on Compliance Check for Section 206AS & 206CCA and Frequently Asked Questions (FAQ) available under “Resources’ section of Reporting Portal. They can also navigate to the “Help” section of Reporting Portal for submitting query or to get a call back from Customer Care Team of Income-tax Department. Customer Care Team of Income-tax Department can also be reached by calling on its Toll Free number 1800 1034215 for any assistance.

6. This issues with the approval of CBDT. (Sanjeev  Singh), ADG(Systems)-2 CBDT. 

On which categories of income, Section 206AB is not applicable?

The Drawing and Disbursing Officers (DDOs) in Government organizations and employers in Private Sector Organizations; generally deduct TDS on Salaries of the employees u/s 192 of Income Tax Act. The new section 206AB is not applicable on such TDS deduction. Further, it is also not applicable on TDS deducted on withdrawl from Provident Funds u/s 192A, Winnings from Lotteries / races on which TDS is deducted u/s 194B & 194BB, Payment of certain amount on which TDS is deducted u/s 194N, and Income in respect of investment in securitisation trust on which TDS is deducted u/s 194LBC.

Section 206AB and Section 206CCA will be applicable on the persons whose time limit for filing ITR under section 139(1) has expired and the person has not filed ITR during last 2 previous years and also whose aggregate TDS in each of these previous years is Rs. 50,000 or more.

Are you interested in an Online Course related to Income Tax?:

1. https://smartinstituterls.blogspot.com/2022/12/income-tax-matters-in-government.html 

2. https://smartinstituterls.blogspot.com/2022/12/computation-of-income-tax-liability.html

Previous Article

Next Article

Attention Deductors - Deposit of TDS

Attention Deductors - Deposit of TDS

-Dr. Lalit Kumar*

The TAN holders or deductors are required to deposit the amount deducted from the payments and issue a TDS certificate to the recipients of the payment. There are two ways to pay the TDS in the Income Tax Department; firstly without generating the Income Tax Challan and Secondly with generating the Income Tax Challan. In the case of TDS deposited without generating Income Tax Challan, the due date for the deposit of TDS is the same day when the payment is made and tax is deducted. In the case of TDS deposited by Income Tax Challan, the due date for the deposit of TDS is the 7^th of the coming month in which the deduction is made from the payment.

There are a few exceptions, in case the sum is deducted under section 194-IA or 194-IB or 194M then it is required to generate challan in Form no. 26QB or 26QC or 26QD; the due date is 30 days from the end of the month in which the deduction is made.

How to pay or deposit the amount of TDS:

Generally, the TDS is processed through electronic fund transfer at the time of making payments on which TDS is required to be deducted. For example, the Government Department or organizations remit the TDS without generating Income Tax Challan, by making book adjustments or book transfers and furnishing 24G or 26G to NSDL every month. However, if it is not possible, then the deductor can also furnish Challan No. 281 in an authorized bank for processing the amount of TDS to the Income Tax Department.

What will happen if TDS is not deducted or deposited by the Deductors?

It is the duty of the deductor to deduct the TDS before making payments and remit the same by adopting the above-said procedure. In case, the deductor failed to deduct TDS from the payment and not deposit the same to the Income Tax Department, it means the deductor is in default.

In such circumstances, (a) in case the deductor fails to deduct TDS, it is required to pay simple interest @1% per month or part of a month, on the amount of TDS for the period of delay (months or part of a month between “Date of tax deducted and date on which tax was deductible). (b) in case the deductor deducted the TDS but not deposited, it is required to pay simple interest @1.5% per month or part of a month, on the amount of TDS for the period of delay (months or part of a month between “Date of tax actually paid and date of TDS deducted).

Further, under section 271C, there is a penalty provision equal to the amount of TDS not deducted by the Deductor. Such penalty can be up to the amount of tax in arrears as per the provisions of section 221. Apart from the penalty, the deductor shall be punishable with rigorous imprisonment for a term not less than 3 months but which may extend to 7 years.

Are you interested in an Online Course related to Income Tax?:

1. https://smartinstituterls.blogspot.com/2022/12/income-tax-matters-in-government.html 

2. https://smartinstituterls.blogspot.com/2022/12/computation-of-income-tax-liability.html

Previous Article

Next Article

Income Tax Changes from FY 2021-22

Income Tax Changes from FY 2021-22

In last article, we learned how Fuel Taxation is being used to increase the collection of tax to meet the fiscal deficit. In the Financial Budget 2021, the income tax rates are not increased and the Government projects to have collection from disinvestment, GST, and Fuel Taxation. 

No Change in Income Tax Slabs:

The rates of income tax are same as earlier in both old tax regime and new tax regime. No changes are made.

Relaxation for filing of ITR for senior citizens above age of 75:

The senior citizens who are above the age of 75 and receiving income only from pension and interest as a source of income, will not require to file income tax return. However, for such relaxation it is the condition that their interest income should be from the same bank in which the amount of pension is deposited. It is worth to mention here that in such circumstances; the bank will deduct the tax deduction at source (TDS) as per the taxable liability of the senior citizen after keeping in mind the deductions u/s 80C to 80U and rebate of 87A. It means the filing of ITR will not be required because the tax liability already be deducted at TDS by the bank.

Pre-filling of ITR forms:

Like earlier, the 26AS tax credit statement data automatically pre-filled by the web-portal of income tax india efiling dot gov dot in. From April 1, 2021; the details of dividend, interest, and capital gains will be pre-filled so that the same cannot be concealed by the taxpayers. Similarly, the details of salary incomes, tax payments, TDS etc. will also be pre-filled on the basis of the information available with the income tax department. It is worth to mention here that the deductors including employers, banks, financial institutions etc. normally communicated the amount of TDS to the income tax department on monthly and quarterly basis; the same will be considered to pre-fill the information.

Interest on part of PF contributions which are exceeding Rs. 2.5 Lacs in a year; will be taxable:

From 1^st April, 2021 if there is interest income earned on the portion of PF contributions which are exceeding Rs. 2.5 Lacs in a year; will be taxable in the hands of recipients. This provision is applicable on all the three PF contributions including GPF, EPF, and PPF. Due to this provision, the high income citizens would like to make investments in NPS instead of PF after the amount be invested up to Rs. 2.5 Lacs in their PF accounts. (How Money Grows in NPS)

No TDS on dividend payments to Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvITs):

From the year 2020-21, the dividend distribution tax was abolished and the dividend income was made taxable in the hands of shareholders. From the year 2021-22, the dividend payments to REIT and InvITs will be exempt from TDS.

Incorporating Section 206AB for charging TDS on higher rate from the Non-filers of ITR:

The citizens who are still not filing income tax return (ITR), are required to pay more TDS on their incomes. The higher rate of TDS will be either 5% or twice the rate specified in the relevant provision of the Act. This is done to encourage citizens to file the income tax return (ITR).

Capital Gains Tax on returns of Unit Linked Insurance Plans (ULIPs):

The ULIPs issued on or after 01.02.2021 in which an individual is paying annual premium above Rs. 2.5 Lacs will be subject on Capital Gain Tax at the time of redemption.

Reduction in Last date for filing delayed ITR:

Up to 31st March, 2021; the last date for filing delayed ITR was 31^st March, on voluntarily basis; means the return of the FY 2019-20 can be filed up to 31^st March 2021 if delayed. But from FY 2021-22, the last date of filing delayed ITR will be 31^st December, on voluntary basis; means the return of FY 2020-21 can be filed up to 31^st December 2021 instead of 31^st March 2022. It is worth to mention here that u/s 234F, if an individual is filing ITR after the due date but before 31^st December; then maximum penalty is Rs. 5000 (Five Thousands). In case, anyone wants to revise the filed ITR, then it can be revised up to the end of Assessment Year.

How to know Income Tax Refund Status:

Now, it is very easy to view the income tax refund status, just login with your PAN Number and password on the website of incometax dot gov dot in and go to "My Account". Click the command "Refund/Demand Status". The portal will display the status with mode of payment by which it has been credited in your account. 

It is worth to mention here that the income tax refund comes within 20 - 45 days after processing of the income tax return (ITR) by Centralized Processing Centre (CPC), however, it is delayed in few circumstances:

If any query is raised by the Income Tax Department and the reply to that query took times from your side. In such cases, the refund is withheld by Income Tax Department for assessment and to clarify any mismatch between the details submitted by taxpayer and the details already available with the Income Tax Department. 

What can be done for getting delayed Income Tax Refund?

First of all, check your registered email whether there is any query pending from the Income Tax Department or not. If there is any query, then respond as per the directions provided in the email. 

In case, no such email is available, then check dashboard after logging into the account on incometax dot gov dot in. 

In case, the bank account details submitted by the taxpayer during filing ITR are wrong, then also the income tax refund is delayed. In such case, the taxpayer can update the banking details, to get the refund at the earliest. 

The income tax refund status can also be checked upon the website of NSDL. 

*Copyright © 2021 Dr. Lalit Kumar. 

Previous Article

Next Article

Income Tax Changes from FY 2020-21

 Income Tax Changes from FY 2020-21

It is well known that the income tax is levied on income, more the income, more the tax payable. There are different slabs on which basis, the income tax liability is computed in the hands of individuals of India. The budget of the year 2020 revised the tax rates which will be applicable from FY 2020-21. 

The new slabs are:

(i) Up to 2.5 Lacs – NIL (as earlier, no change);

(ii) From 2.5 Lacs to 5 Lacs – 5% (as earlier, the rebate of 87A will make it NIL if the income is up to 5 Lacs).

(iii) From 5 Lacs to 7.5 Lacs – 10% (earlier it was 20%, however if someone opts for 10% then he/she has to give up the exemptions and deductions mentioned below).

(iv) From 7.5 Lacs to 10 Lacs – 15% (earlier it was 20%, however if someone opts for 10% then he/she has to give up the exemptions and deductions mentioned below).

(v) From 10 Lacs to 12.5 Lacs – 20% (earlier it was 30%, however if someone opts for 10% then he/she has to give up the exemptions and deductions mentioned below).

(vi) From 12.5 Lacs to 15 Lacs – 25% (earlier it was 20%, however if someone opts for 10% then he/she has to give up the exemptions and deductions mentioned below).

(vii) Above 15 Lacs – 30% (as earlier).

Health and Education Cess:

After applying these slabs and computing tax liability, it will be required to levy 4% Health and Education Cess (as earlier, no change).

Which exemptions and deductions will have to be give up, if someone decides to opt new slab rates?

(a) Exemption on House Rent Allowance (HRA): 

Most of the employees claim exemption on HRA. In case, new tax slab rates are opted, the exemption of HRA will not be provided.

(b) Exemption on Leave Travel Allowance: 

It will not be available and it will be fully taxable for the individuals opting new slab rates.

(c) Exemption in Children Education Allowance: 

It will not be available. Those who are taking Children Education Allowance if decides to compute tax in new tax slab rates, their exemption on Children Education Allowance will not be provided.

(d) Standard Deductions on Salary, House Property etc.: 

It will not be provided to the individuals who want to compute their tax liability with new tax slab rates.

(e) No Exemption on ‘Interest on House Loan’: 

The individuals taking house loan for building or purchasing self occupied property are eligible to get deduction on up to Rs. 2 Lacs of amount paid for Interest on House Property and in case, the house is let out, the deduction has no limit while computing income from House Property. But if an individual takes the new slab rates in consideration, then there will be no deduction available for ‘Interest on House Loan’.

(f) Deduction of Section 16: 

The deduction under section 16 which is for entertainment allowance and employment / professional tax will not be available for the individuals opting new tax regime.

(g) Deduction on Family Pension: 

It is presently allowed under section 57 (iia) up to Rs. 15000 which will not be allowed if an individual opts the new tax regime.

(h) Deductions for disability under section 80DD and 80DDB: 

These are available now but the individuals who decides to pay tax as per new tax regime, will not allowed to claim these deductions.

(i) Deduction for Donations under section 80G : 

It will also not be available for those who opt for new tax regime.

(f) Deduction under section 80C, 80 CCD (1B), 80D, 80E etc.: 

The 80C investments and savings will not provide any deduction however these investments are still lucrative keeping in mind the state of economy and the returns from the banking and post office instruments. Further, the medical insurance premium paid and claimed under section 80D will also not be available. However, the contribution by an employer in the account of EPF or NPS up to Rs. 7.5 Lacs in a Financial Year will not be taxable in the hands of employee.

However, deduction under section 80 CCD (1B) can be claimed on 10% of (Basic Pay + Dearness Allowance) if contributed on behalf of employee in Tier – I account of NPS. If contribution is made more than 10% then it will be taxable in the hands of employee and no deduction will be provided on that part of contribution in Tier-I account of NPS. To know how money grows in NPS account, kindly go through "How Money Grows in NPS"

The section 80CCD (2) will also remain available even if the new tax regime is opted by the employee. It is deduction for employer’s contribution in pension funds including NPS.

The deductions provided in Chapter VIA of the Income Tax Act i.e. like section 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc; will not be available for the individuals opting for new tax regime.

*Copyright © 2020 Dr. Lalit Kumar. All rights reserved.

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. The article was published on 1^st September, 2021 and last updated on 4^th September, 2021. The writer can be contacted on lalitkumarsetia@gmail.com

Previous Article

Next Article

Human Resource Management System and Tax Deduction at Source (TDS)

Human Resource Management System (HRMS)

In Government, during 2020-21, the year of Good Governance most of the functions are being done through transparency, and modules are being implemented in all Departments, Boards, Corporations, Autonomous Bodies to facilitate the organization for fixing responsibilities, stoppage of pay of an employee whenever required, effective use of e-Servicebook, and regulating employees' leaves properly. Apart from it, the promotions, pay fixation, and disciplinary proceedings are also being made part of the HRMS module in Government. To facilitate organizations, a module is designed. 

Purpose of Training Module:

The main objective of the above course is to build and enhance the capacities of officers in maintaining service records using Human Resource Management System and also enhance their capacities to compute accurate TDS and to submit quarterly return of e-TDS using the portal of Haryana Treasuries Department as per the latest instructions of the Haryana Government.

Target Group

This course is intended for Administrative and Finance Officers/Officials including Head of Offices, Class II Officers supporting Head of Offices, Finance Officers working in coordination with Head of Offices, and Class III Officials supporting Head of Offices and Finance Officers to perform the duties. 

By the end of this course, participants will be able to:

•     Describe and Perform Various Functions relating to maintaining Service Records on Human Resource Management System (HRMS).

•     Describe and Compute the Income Tax Liabilities of the employees and deduct the accurate amount of TDS from their salaries.

•     Process 24Q and 26Q i.e. Quarterly e-TDS Return as per the provisions of Income Tax Act and as per the latest orders of Finance Department using Haryana Treasuries Portal.

How to get Training organized:

As per the Haryana State Training Policy 2020, the Training Coordinators will identify the Officers/Officials requiring any training like above on "HRMS and TDS" and write a letter to the concerned Course Director through email to organize the course. The above module is developed by Dr. Lalit Kumar, Faculty of Financial Management, HIPA, Gurugram. He may be contacted at lalits.hipa@nic.in for organizing this training for the Officers/officials of the Haryana Government.

Payment of Tax Deduction of Source (TDS)

Tax Deduction at Source (TDS) is one type of advance tax required to be deducted by the person who made the payment and thereafter declared the same and submit to the Income Tax Department in the desired form meant for the deposit of the TDS. After deposit of the TDS amount in the Income Tax Department, it is required to file TDS Return for mentioning the Permanent Account Number (PAN) of the payee; only then the TDS is reflected in the Tax Credit Statement (26 AS) of the payee.
From the Financial year 2020-21, the employees have to declare their option to adopt either old regime tax rates (with deductions and exemptions) or new regime tax rates (without deductions and exemptions), and the Drawing and Disbursing Officers (DDOs) will deduct the TDS accordingly.

I. Why to deduct Tax Deduction at Source (TDS):

The TDS is deducted before making payments and its purpose is to prevent tax evasion and timely collection of due tax on certain taxable financial transactions. The TDS maybe required to be deducted by a person known as deductor including Individual, Hindu Undivided Family (HUF), Limited Liability Companies (LLP), Partnership Firm, Body of Individuals (BoI), Association of Individuals (AoI), and Local Authority. The tax is deducted on various types of payments including salaries, commission, professional fees, interest earned, rent, etc. The person who deducts the TDS is known as Deductor and the person whose TDS is deducted is known as Deductee. Section 206 states mandatory filing of e-TDS by the following:

(i) Government and Corporate Deductors or Collectors

(ii) The Deductors / Collectors whose accounts are audited under section 44AB

(iii) Deductors wherever number of deductees becomes more than or equal to 20.

In case, an assessee is not covered in the above three cases, then the TDS may be furnished either in physical or electronic format.

II. Types of Forms used for filing TDS Return:

There are various types of forms filled to declare and submit the Tax Deduction at Source (TDS), and filing of return of the TDS. Which type of form should be filed by whom, depends upon the nature of the financial transaction for which the TDS has been deducted by the deductor.

(i) Form 24Q:

It is provided under section 192 of the Income Tax Act that an employer will have to deduct TDS on payment of salaries paid to the employees. The TDS will be an amount based on the expected taxable income of the concerned employee. Form 24Q is a statement by which TDS on Salaries is declared by the Deductors and this form contains details of salaries paid and TDS deducted.

There are two annexures in this form; annexure-1 comprises the details of the deductor, deductees and challans and annexure-2 comprises the details relating to the amount of salaries of the deductees. Annexure-1 is required to be submitted at the end of each quarter of the financial year while annexure-2 is required to be submitted only at the end of the financial year providing details of salaries paid during the entire year.

(ii) Form 26Q:

It is provided in TDS is deducted on payments other than salaries under section 193, 194, and 200 (3) of the Income Tax Act, 1961. The TDS on payments other than salaries includes the payments like interest on securities, dividend securities, professional fees, director’s remuneration, etc. It is required to deduct TDS on the rates specified in Income Tax Act. Form 26Q contains only one Annexure. It is a statement by which TDS is declared on all payments except salaries:

• 193 – Interest on securities
• 194 – Dividend 
• 194A – Interest other than Interest on Securities
• 194B – Winnings from lotteries and crossword puzzles
• 194BB – Winnings from horse race
• 194C – Payment of contractor and subcontractor
• 194D – Insurance commission
• 194EE – Payment in respect of deposit under national savings scheme
• 194F – Payments on account of repurchase of units by Mutual Funds or UTI 94F
• 194G – Commission, prize, etc., on sale of lottery tickets
• 194H – Commission or Brokerage
• 194I(a) – Rent
•  194I(b) – Rent
•  194J – Fees for Professional or Technical Services
• 194LA – Payment of Compensation on acquisition of certain immovable property
• 194LBA – Certain income from units of a business trust
• 194DA – Payment in respect of life insurance policy
• 194LBB – Income in respect of units of investment fund
• 194IA – Payment on transfer of certain immovable property other than agricultural land 9IA
• 194LBC – Income in respect of investment in securitization trust

(iii) Form 27Q:

In case, payments are made to the Non-Resident Indians and Foreigners other than salaries; then it is required to deduct TDS and furnish in Form 27Q. The payments may include interest, dividend, bonus, or any additional sum which is an income for the Non-Resident.

(iv) Form 27EQ:

It is provided under section 206C of the Income Tax Act, 1961 that a seller will collect the tax from the payments made by the buyers of certain goods or commodities. Since the tax is collected on the payment received from the buyer, the seller, it is the tax collected at source (TCS) and Form 27EQ is used in case of collection of tax at source.

(v) Form 26QB:

The TDS on Property is furnished in Form 26QB since it is a challan-cum-return form; there is no need to submit a TDS return separately in the case of Form 26QB.

III. Due dates of filing TDS Returns:

The due dates of filing 24Q, 26Q, and 27Q for first, second, third, and fourth quarters are 31^st July, 31^st October, 31^st January, and 31^st May respectively. However, in the case of filing 27EQ the due date for the first, second, third, and fourth quarters are 15^th July, 15^th October, 15^th January, and 15^th May respectively.

IV. Procedure of filling TDS Forms:

First of all, go to the website of TIN NSDL i.e. https://www.tin-nsdl.com/. Then choose the desired TDS Form in the Downloads Tab. After that click upon ‘Quarterly Returns’ and choose ‘Regular’. It will redirect you to a new page containing desired TDS Return Form.

(i) Downloading Utility or Software for e-filing TDS:

A deductor is required to download software or utility known as Return Preparation Utility (RPU) for filling TDS form. The RPU software or utility can be downloaded from https://www.tin-nsdl.com/etds-etcs/eTDS-RPU.php as it is provided free of cost by NSDL e-Governance Infrastructure Limited to facilitate the deductors. Apart from RPU, there are many other various paid software which can be used to file TDS Return. The paid software is provided by the software companies such as BUSY, ClearTDS, TDSMAN, Tally.ERP 9 etc. The list of such software is available at https://www.tin-nsdl.com/services/etds-etcs/etds-swproviders-etds.html.

(ii) Filling Desired Information and Generating 27A and FVU File:

The software demands the desired information and creates form 27A and also generates a few files including the TDS.fvu file. Form 27A is a verification form to be signed by the deductor who is filing the TDS Return and the files including TDS.fvu file are required to be uploaded through TIN Facilitation Centre.

For each TDS return, it is mandatory to submit Form 27A summarizing the totals of amount paid in the transactions and ‘TDS Deducted in Transactions’ so that the same can be used to fix the liability of the deductees by the Income Tax Department in case income tax return (ITR) is not filed by them.

(iii) Submission of TDS Return:

The NSDL operates TIN Website where the TDS return can be furnished online. However, for submission of TDS online, the deductor should have Digital Signatures to digitally sign the TDS return. Secondly, the NSDL also set up TIN Facilitation Centres for submission of the TDS return.

After submission of TDS return either online or through TIN Facilitation center, a token number known as provisional receipt number is issued to the deductor as acknowledgment. The submitted TDS return may be accepted or rejected; in case of rejection, the reasons are also stated for rejection of the TDS return on the non-acceptance memo issued by the NSDL.

(iv) Charges for submission of TDS Return:

In case, the TDS return is submitted online using TIN Website with Digital Signatures; no charges are taken by the NSDL from the deductors. But in case, the TDS return is uploaded through TIN Facilitation Centres, the charges are imposed based on the number of deductee records in TDS Return i.e. (a) up to 100 records à Rs. 31.15, (b) 101 to 1000 records à Rs. 178, (c) More than 1000 records à Rs. 578.5. These charges are excluding service tax, which means the service tax is also charged on these uploading charges.

(v) Checking the status of submitted TDS Return:

After furnishing the TDS return, the status of the same can be checked by providing PAN number of Assessee along with the Token Number or Provisional Receipt Number of submitted TDS Return on the following link of the NSDL website:

https://onlineservices.tin.egov-nsdl.com/TIN/JSP/tds/linktoUnAuthorizedInput.jsp

V. Rate of Interest in case TDS is not deducted or not deposited:

In case, TDS is not deducted under sections 193, 194, and 200(3) of the Income Tax Act, 1961 then interest @1% per month is charged for the period from the due date of deduction to the actual date of deduction. In case, the TDS is deducted but not deposited, then interest @1.5% per month is charged for the period from actual date of deduction to actual date of payment.

VI. Penalty for non-filing or delay in filing of TDS Return:

The TDS Return should be furnished by its due date and in case of delay in filing of TDS Return, a penalty of Rs. 200 per day is imposed on the assessee under section 234E of the Income Tax Act. However, the penalty cannot exceed the total amount of tax deducted. In case, the TDS Return is not filed within 1 year from the due date of filing TDS Return, then under section 271H, in addition to the fees to be paid under section 234E; a penalty for non-filing of TDS Return is also imposed amounting to Rs. 10,000 to Rs. 1,00,000.

However, penalty under section 271H is not imposed in the case, the return is filed before the expiry of 1 year, with late filing fees and interest (if any).

VII. Revising or Correcting the TDS Return:

After submission of the TDS Return, if there are any errors noticed after submission; the deductor can file a revised TDS Return by incorporating the changes. However, charges for filing Revised or Corrected TDS Return are required to be paid separately as paid while submitting the original TDS Return.

VIII. Issue of TDS Certificates:

In case of TDS other than Salaries, it is required to issue the TDS Certificate to the deductees from whom incomes, TDS has been deducted. TDS Certificate in Form No. 16A is required to be generated from the website of the Income Tax Department within one month and 15 days after the quarter i.e. 15^th August for First Quarter, 15^th November for Second Quarter, 15^th February for Third Quarter, and 15^th May for Fourth Quarter. In case, the TDS certificate is not issued on time, then it will result in a penalty of Rs. 100 per day of default up to a maximum of tax-deductible or collectible.

Note: The Deductors can use PAN-TAN master facility available at TRACES portal to verify the correctness of PAN of the deductees. In case, there is no transaction liable to TDS/TCS is done during the quarter, the declaration in this regard should be intimated by using ‘Declaration for non-filing to avoid notice for non-filing of TDS Statement.

*Copyright © 2019 Dr. Lalit Kumar. All rights reserved.

Previous Article

Next Article