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Corporate and Individual Taxation

Guidelines for Filing TDS Returns

TDS is short form for Tax Deducted at Source. According to the Income Tax Act, any company or person making a payment is required to deduct tax at source if the payment exceeds certain threshold limits. TDS is to be decided and deducted at the rates given by the tax department. This blog will enlighten you about the guidelines for filing TDS return and other related details like due date, Form 27Q, Certificate, consequences for late filing, etc.
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Table of Contents:

What is TDS return?

TDS return is a quarterly statement which is to be given to the IT department. It is mandatory for deductors to submit a TDS return. The information required to file TDS returns are:

  • PAN of the deductor and the deductee

  • Amount of tax paid to the government

  • TDS challan information

  • Others, if any

What is the procedure to file TDS return online?

Sometimes it is difficult for some of the taxpayers to navigate and upload a TDS return on the TRACES portal. Also, it is tedious to comply with the data procedure. Therefore, to make the process easy, the IT department has started the process online, where the return can be uploaded.

  1. Prerequisites for uploading TDS returns:

Before start uploading the return, kindly ensure the following -

  • You must have a valid TAN and it should be registered.

  • The TDS statements[1] should be made using Return Preparation Utility (RPU) and should be validated using File Validation Utility (FVU)

  • There should be a valid DSC registered by you for e-filing if you want to upload them using DSC.

  • The principal contact’s bank account or demat account details should be given or the principal contact’s PAN and Aadhar should be linked, if you wish to upload it using EVC.

  1. Way to upload TDS statements on IT portal

Below is the guide on uploading TDS statements on the website:

Step 1: Go to http://incometaxindiaefiling.gov.in/[2] and click on ‘Login Here’

Step 2: Fill your login credentials and click on ‘Login’. Your user ID will be your TAN

Step 3: Once you’ve logged in, click on the ‘Upload TDS’ option under the TDS tab

Step 4: You will be given a form where you will select the correct details. Once the details are selected, click on Validate 

Step 5: The returns can be validated through the following modes:

Step 5A: Validate using Digital Signature Certificate

  • The TDS statements can be uploaded using DSC. First upload the TDS zip file and then attach the digital signature file. Click on Upload) 

  • Once it is done, a success message will be shown on the screen and you will get a confirmation mail to your email ID

Step 5B: Validate using EVC or Electronic Verification Code

  • After the 4th step, if you haven’t generated a DSC, you will be able to validate the TDS statements using an electronic verification code (EVC). Upload the TDS zip file and click on ‘Click here to E-verify’ 

  • The next window will provide you the option to use an EVC already generated or generate a new EVC 

  • Select the relevant option, enter the EVC and click on ‘Submit’ 

What is Tax Deduction Account Number?

A Tax Deduction Account Number in India is a 10 digit alphanumeric number which is given to persons who are required to deduct tax on the payments which is done by them under the Income Tax Act, 1961. The TDS or withholding tax of India on payments made by the taxpayer is deposited under TAN to enable the taxpayer who has received the payment to claim the tax deducted at source in their total income for the purpose of their annual tax returns.

TAN is submitted via a form (Form 49B) of the Indian Income Tax Law. A form can be filled on the NSDL website or at the Tax Information Network Facilitation Center, which are set up by NSDL. Govt. of India has appointed intermediary like NSDL. Only the proof of Identification and address are required for the application process.

Mentioning TAN is mandatory in all Tax Deductions at source (TDS) including on All TDS challans and certificates. If the TAN is not mentioned, banks may not accept a TDS challan, certificate or the return.

Structure of the TAN - 

The structure of the TAN is as follows-

The first 4 letters are Alphabetic and the next 5 letters are numeric characters and the last is also an alphabet. Example – AABB12345Z. The first 3 characters give representation about the city/state. The 4th character represents the 1st character of the name of the deductor. The next 5 are numeric characters followed by an alphabetic character.

Non Resident & TAN - 

The TAN is very important when an NRI is selling his/her property to any Resident of India. The buyer has to make sure that the NRI has a PAN. If the NRI is not having a PAN, then he/she should apply for it.

According to recent change, any property sale above Rs. 5 million attracts a 1% TDS. The buyer has to deduct 1% of the value of property and make deposit with the Government of India. When you are depositing the TDS, it should be deposited by mentioning the buyer’s TAN. TAN is not required if the property is purchased from the resident of India. If the property is purchased from an NRI, then TAN is mandatory. After the property is sold, the buyer should issue a certificate of tax deduction to the seller in Form 16A[3].

An NRI can also buy a property from another NRI. In these cases, TAN is very important. The buying NRI deducts the TDS and deposits it to the Government of India. Transaction should be done only in Indian Rupees and can’t be done in any foreign currency. In such case, the buyer pays money from his Indian rupee account to another Indian Rupee account, thus TAN is required.

Consult: Best Corporate and Individual Taxation Lawyers

What is the due date for filing TDS return?

TDS Due Dates of FY 2019-20 for Return Filing are below -

Quarter

Period

Last Date of Filing

1st Quarter

1st April to 30th June

31st July 2019

2nd Quarter

1st July to 30th September

31st Oct 2019

3rd Quarter

1st October to 31st December

31st Jan 2020

4th Quarter

1st January to 31st March

31st May 2020

What is Form 27Q?

Form 27Q[4] is a TDS Return containing details of TDS deducted on payments apart from the salary made to NRI and the foreigners. Form 27Q is necessary to furnish on a quarterly basis. Form 27Q has information of payments made and TDS deducted on payments done to NRI by the deductor.

Payer and Payee: The payer is accountable for deducting the TDS if payment is done to a non-resident. The payee is a non-resident whose residential status is according to the Income Tax Act.

Payments Covered under Form 27Q: Every deductor who does payment of a specific nature to NRI is required to deduct TDS from the payment at the given rate. Below are the nature of payments covered in the Form 27Q:

  • Payments to non-resident sportsmen, sport associations

  • Other sums payable to non-residents

  • Income of foreign institutional investors from securities

  • Income in respect of units of non-residents

  • Income by way of interest on individual bonds and government securities

  • Payments in respect of units to an offshore fund

  • Income by way of interest from the infrastructure debt fund

  • Income from foreign currency bonds or shares of Indian company payable to non-resident

  • Income by way of interest from Indian company engaged in specific business

  • Payment of the accumulated balance of the provident fund, taxable in the hands of the employee

  • Investment fund paying an income to a unit holder

  • Income in respect of investment in the securitisation trust

In which form is the TDS Certificate issued to the Taxpayer?

Form 16 and Form 16A are the certificates for deduction of tax at source and they are issued on deduction of tax by the employer on behalf of the employees. These certificates provide details of TDS for various transactions between deductor and deductee. It is mandatory to issue these certificates to Taxpayers

FORM 16: Form 16 is the salary TDS certificate. If your income from salary is greater than the basic limit of Rs 2,50,000, your employer will deduct TDS and deposit it with the government 

FORM 16A: Form 16A is also a TDS Certificate. While Form 16 is for salary income only, Form 16A is applicable for TDS on Income Other than Salary

Suggested Read: How to Pay TDS Online

What is the consequence of late filing of TDS return?

Non-filing or late filing of TDS returns or statement will have 2 penal consequence -- 1. Fee for late filing U/s 234E and 2. Penalty for late filing or Non-filing of TDS statement U/s 271H.

  1. Late filing fees under section 234E

According to section 234E, if a person fails to file TDS return on or before the prescribed date, then a late fee of Rs. 200 for every day during which the failure continues will be levied. The late fees cannot exceed the amount of TDS. TDS return cannot be filed without payment of late filing fees. That is to say, the late filing fees should be deposited prior to filing the TDS return. Rs. 200 per day is a late filing fee and not penalty.

  1. Penalty under section 271H

According to section 271H, if a person fails to file the statement of TDS return on or before the prescribed due dates, then the assessing officer has the power to direct such person to pay the penalty. The penalty can be levied between Rs. 10,000 to Rs. 1,00,000. Penalty under section 271H is in addition to the late filing fee prescribed under section 234E.

Apart from delay in filing of TDS/TCS return, this section also talks about cases of filing incorrect TDS return. Penalty under this section can also be levied if the deductor files an incorrect TDS return. The penalty can be minimum of Rs. 10,000 and maximum of Rs. 1,00,000 for incorrect TDS return filing.

No penalty can be levied under section 271H for the TDS return failure, if the person is able to prove that after paying tax deducted by him, and the late-filing fee and interest, he had then filed the TDS return before the expiry of one year period from the due date of TDS return filing. That is to mean, no penalty under this section can be levied if following conditions are satisfied:

  • “The tax deducted/collected at source is paid to the credit of the Government

  • Late filing fees and interest (if any) is paid to the credit of the Government

  • The TDS return is filed before the expiry of a period of one year from the due date specified in this behalf”

The above exception is applicable only when penalty is levied under section 271H for late filing the TDS return and not in case where the TDS statement is incorrectly filed.

In the following two cases also, the taxpayer can get relief from penalty under section 271H:

  • Under section 273A (4) there is a power to waive or reduce the penalty levied under the Income-tax Act by the  Principal Commissioner of Income-tax or Commissioner of Income-tax. Penalty can be fully waived or reduced to some extent.

  • Apart from shelter of section 273A(4), section 273B also gives immunity from penalty in some genuine cases. As per section 273B, penalty under section 271H will not be levied if the taxpayer is able to prove that there was a reasonable cause for the failure.

What is the eligibility criteria for TDS Return?

TDS return can be filed by employers who avail a valid Tax Deduction Account Number (TAN). Any person making specified payments mentioned under the IT Act are required to deduct tax at source and needs to deposit within the stipulated time for the following payments:

  • Payment of Salary

  • Income by “Income on Securities”

  • Income by winning lottery, puzzles and others

  • Income by winning horse races

  • Insurance Commission

  • Payment in respect of National Saving Scheme and many others

 

External Links:

[1] TDS Statement: Pre-Requisites and procedure for Uploading TDS Statement

[2] e-Filing IT Portal: Income Tax Department, Government of India

[3] TDS Certificate: Certificate for Tax Deducted at Source in respect of income other than Salary.

[4] TDS Return: Quarterly statement of tax deduction in respect of payments other than Salary made to non-residents.

Written by: Pranjal Jain

Reviewed by:
Antim Amlan
Associate - Legal, MyAdvo Techserve Pvt. Ltd.
Published on 5th Jul, 2019
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Antim Amlan is an expert corporate lawyer for MyAdvo who has experience of working with many renowned companies and firms, including Orbit Law Services, Vodafone India Ltd, Dave & Girish & Co., Lex Protector, Mehta & Kapoors.

He finished his BA LLB(Hons.) from National Law University Odisha, Cuttack. He maintains a blog wherein he wrote on company law, securities law, banking, and finance.

LinkedIn: https://www.linkedin.com/in/antimamlan

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