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.

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Details for e-filing Income Tax Return

Details for e-filing Income Tax Return

The Income Tax Return (ITR) is mandatory to be e-filed by every person whose Gross Total Income is more than his Basic Exemption Limit i.e. Rs. 2,50,000 for Individuals who are not senior citizens, Rs. 3,00,000 for senior citizens, and Rs. 5,00,000 for super senior citizens. The individuals before e-filing the Income Tax Return should prepare details and keep in hand so that no problem appears while filling the desired Income Tax Return Form. What documents should be realized for preparing the details of incomes. Why to provide complete details and how to be assured that every financial earning has been detailed as required by Income Tax Department:

(i) Form 16 from Employers:

The salaried individuals should receive Form 16 from their respective employers as it is a proof of the Tax Deducted at Source by the employer and the details provided in Form 16 should be kept in hand so that the same details are filled in Income Tax Return Form under the head ‘Salaries’.

(ii) Form 16A from Deductors other than Employers:

In case, the tax is deducted by others than the employer/s then Form 16A should be realized from them. Generally, banks and post office deduct tax at source on ‘Interest on Deposits’; in such cases, Form 16A should be taken from them and kept in hand while e-filing Income Tax Return.

(iii) Form 16B from the Buyers:

Sometimes, properties are sold during the financial year and buyers deduct Tax Deduction at Source from the amount to be paid by them. In such case, the buyer deposits such TDS to Income Tax Department and generate Form 16B. Therefore, in such cases, Form 16B should be taken from the Buyers (if any).

(iv) Form 16C from Tenants:

In case, an individual is getting rent form the tenants and it is more than Rs. 50000 per month; in such cases, the tenants are directed to deduct Tax Deduction at Source from the payment of rent to the individual (landlord). Then the tenants deposit the TDS in Income Tax Department and realized Form 16C to be provided to the landlord. Such Form 16C should also be realized and kept in hand while e-filing Income Tax Return.

(v) Tax Credit Statement 26AS / Annual Information Statement - AIS from website of Income Tax:

Apart from Form 16, 16A,16B, and 16C from the Deductors, an individual should also download Tax Credit Statement 26AS / Annual Information System - AIS, from the website of Income Tax Department and match the details of deductions at source with the Tax Credit Statement before e-filing Income Tax Return. In case of mis-match, it should be decided which details are accurate and accordingly the return should be filed. In case, there is any mismatch, the individual should ask the deductor to rectify the mistake and e-file rectified TDS statement so that accurate amount be reflected in Tax Credit Statement / Annual Information Statement. In case, the mismatch is not corrected, then the individual will receive a notice from the Income Tax Department for clarification of mismatch.

(vi) Statement of interest on Deposits:

The amount of interest earned on deposits in Post Office, Banks, and other Financial Institutions should be prepared from the Statement of Interest taken from them.

(vii) Collection of proofs to claim Deductions:

There are a lot of deductions available to be claimed under section 80C to 80U for the individuals and there are a lot of exemption available under section 10 which may be taken into consideration while quantifying the taxable portion of incomes earned during the financial year. An individual should keep all the records relating to claimed exemptions, deductions in separate file as the proofs may be asked by the Income Tax Officers at any time in future.

Generally, tax savings are claimed for investments under section 80C, 80CCC, 80CCD (1) limited upto an amount of Rs. 1,50,000 and additional benefit for NPS investment of Rs. 50000 in 80CCD(1B); and for expenditures under other sections i.e. 80D to 80U. In 80D, the proof of receipt for payment of Health Insurance Premium for self, spouse and/or children and in 80E, proof for payment of interest on education loan should be maintained. 

How to claim 80G deduction for contribution in Haryana Chief Minister Relief Fund:

For deduction in 80G, the details of organization come under 80G with name, PAN number, location etc; should be prepared and kept in hand.

(viii) Home Loan Statement with Interest Charged:

In case of home loan taken from Bank or Non-Banking Financial Companies; the statement of home loan principal amount as well as interest amount charged during the year should be taken. The amount of principal amount is counted in 80C for deduction purposes and ‘interest on home loan’ is claimed under the head ‘income from house properties’ under section 24. The maximum amount for self-occupied property for interest is Rs. 2,00,000.

(ix) Income on sale of Capital Asset:

The individuals who sold any capital asset during the financial year, should compute income or loss on the sale of Capital Asset. The details of buyer with PAN number should also be available at the time of e-filing Income Tax Return. In case of sale of mutual funds, equity shares, such details can be taken from the broker.

(x) Details of Bank Accounts:

Before e-filing Income Tax Return, an individual should prepare the list of active bank accounts and it is also required to pre-validate the bank accounts so that the refund (if any) can easily come in the pre-validated bank account. For pre-validation, it is necessary to link the bank account with PAN which is usually linked. For each bank account, the details i.e. Bank Name, Account Number, IFSC Code and type of Bank Account should be ready.

(xi) Aadhaar Details:

An individual should keep the Aadhaar details ready while e-filing Income Tax Return. It is mandatory now to quote Aadhaar number in Income Tax Return; even for e-verification, a message come on Aadhaar linked mobile number for verification of the Income Tax Return at the end of e-filing Income Tax Return.

New portal for e-filing Income Tax Return:

The old portal of incometaxindiaefiling.gov.in has been replaced with new portal incometax.gov.in from FY 2020-21. The ITR forms have also been changed. The process is also changed. What are the major changes, let’s understand in simple words. Firstly, JSON utility is introduced for offline filing of Income Tax Return (ITR) for the convenience of the taxpayers. Secondly, the old return preparation software is replaced with more interactive return preparation software in new online tax payment system, integrated for immediate processing of ITR.

What happens if a taxpayer withdraws amount exceeding a specified limit:

From FY 2020-21, as per the Budget 2020 speech, a new section was introduced i.e. 194N. The taxpayers who have not filed ITR for last three years and withdraw cash in excess of Rs. 20 Lacs, have to pay 2% TDS. For normal taxpayers the limit is Rs. 1 Crore from FY 2019-20, from one bank / post office account. In case, the amount is withdrawn above the limit, 2% TDS is deducted.

Such persons under Income Tax Act, will not be eligible to file ITR-1 and such TDS will also not be carried forward to next year if it is not claimed as refund during the current year.

Tax on Dividend Income in the hands of Recipient:

The Dividend Distribution Tax (DDT) has been abolished from FY 2020-21. If a taxpayer received Dividend from company, it will be taxable in the hands of taxpayers.

Tax Deducted at Source for the payments to Resident Contractors and Professionals:

The contractors with turnover / receipts exceeding Rs. 1 crore and the professionals with turnover / receipts exceeding Rs. 50 Lacs require to get their books audited. The deductors for the taxpayers with audited books, are required to deduct TDS under section 194C and 194J respectively.

In case, the TDS is not deducted u/s 194C and 194J then the TDS at the rate of 5% will be deducted u/s 194M.

In case TDS is deducted u/s 194M, the deductors have to issue Form 16D to the payees / deductees within 15 days of the due date of furnishing the challan-cum-statement in Form 26QD.

Conclusion:

It is mandatory to file the return on time with correct particulars. Suppose a person is working in an organisation and his source of income is Salary. Similarly a person is working in private sector as a professional. The major source of income will be Salary in first case and Business or profession in second case. For Salaried persons, TDS is deducted by employers and on the basis of TDS a certificate is issued known as Form 16. For other source of income, the Deductors other than employers, issue a certificate known as Form 16A. After getting such certificates, download the 26AS or Annual Information Statement from login of income tax. How much money was received from the employers, how much TDS deducted, and how much taxes already paid either by person or on behalf of person, each information is gathered and written on plain paper. All these things are filled in the return.  Keep in mind that the information usually provided by a person in ITR should match with Form-16 / Form 16A. Otherwise the notice comes from the income tax department. 

Last updated - July 29, 2021

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

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