TDS Assessment - Time Limits, Deductions and Statutory Provisions

Table of Contents:

1. What statutory provisions are applicable on TDS Assessment?

2. Section 191 - relevance and assessment in default

3. What is form 26AS and how to check TDS credit?

4. How to check TDS Credit using Form 26AS?

5. How is TDS calculated on Income Tax portal?

6. Can there be any miscalculation? If yes, what are the remedies?

7. What is the time limit for completing assessment?

What statutory provisions are applicable on TDS Assessment?

According to the Income Tax Act, 1961, policies and regulations related to tax deducted at source (TDS) is managed by CBDT (Central Board of Direct Taxes). Section 192 defines, “TDS deduction on salary”. TDS is deducted if the estimated income of the employee is taxable.  Employer must not deduct tax on non-taxable allowances like conveyance allowance, rent allowance, medical allowance and deductible investments under the following sections, — “Section 80C, Section 80CCC, Section 80CCD, Section 80D, Section 80DD, Section 80DDB, Section 80E, Section 80G, Section 80GGA, Section 80TTA”; whereas no tax is required to be deducted at source if the estimated total income of the employee is less than the minimum taxable income (Rs.2,50,000/-) in the case of Individual, HUF, AOP, BOD, and AJP. Also many other sections from 193-194 LD of Income Tax Act, 1961, explain about TDS deductions.

As per Income Tax, Surcharge and Education Cess rates is applicable on the estimated income of employee for the year.

Section 192 to 194L of Income Tax Act, 1961 can be referred for a complete list of expenses and sources of income under TDS. If an individual does not fall under income tax slab, he or she can furnish Form 15G or Form 15H to the deductor as a declaration in advance for non-deduction of tax at source. Form 15H is for senior citizens. Form 15G is for all other individuals. Certain payments as mentioned above are subjected to TDS. TDS is applicable to each type of income, beyond a certain limit. TDS on professional is deducted as per the income tax slab rate for salaried individuals. For other deductees, TDS is deducted at the specified percentage for each income type

Section 191 - relevance and assessment in default

In lieu of TDS payment, section 191 explains about Direct Payment. It provides that in the following cases, tax is payable by the assessee directly –

(1) in the case of income in respect of which tax is not required to be deducted at source; and

(2) income in respect of which tax is liable to be deducted but is not actually deducted. In view of these provisions of section 191, the proceedings for recovery of tax necessarily had to be taken against the assessee whose tax was liable to be deducted, but not deducted.

In order to overcome this difficulty, the explanation to this section provides that if –

(1) any person, including the principal officer of the company is required to deduct tax at source, or

(2) an employer paying tax on non-monetary perquisites under section 192(1A) does not deduct the whole or part of the tax, or after deducting fails to pay such tax deducted, then such person shall be deemed to be an assessee in default.

However, if the assessee himself has paid the tax, this provision will not apply.

TDS or Tax Deducted at Source is income tax deducted from the cash paid at the time of making specified instalments; for instance, lease, commission, proficient charges, compensation, premium, etc. by the people making such instalments. Generally, the individuals accepting pay is subject to pay salary regulatory obligation (i.e. income tax). However, the government with the assistance of Tax Deducted at Source arrangements ensures that income tax is deducted before the time from the instalments being made by you.

It includes Details of tax collected by collectors. It also includes information on tax deducted on your income by deductors; whereas, Advance taxes are paid by the taxpayers. It also do the Self-assessment of the tax payments which are to be made.

Tax deducted or collected at source shall be deposited to the credit of the Central Government by following modes:

1) Electronic mode:

E-Payment is mandatory for

a) All corporate assesses; and

b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.

2) Physical Mode:

By furnishing the Challan 281 in the authorized bank branch

Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payment but no TDS has to be deducted if the person making the payment is an individual or HUF whose books are not required to be audited. However, in the case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, they are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN. Any individual making indicated installments referenced under the Income Tax Act are required to deduct TDS at the season of making such determined installment. Be that as it may, no TDS needs to be deducted if the individual making the installment is an individual or HUF whose books are not required to be inspected.

In any case, if there should arise an occurrence of lease installments made by people and HUF surpassing Rs50,000 every month, they are required to deduct TDS @ 5% regardless of whether the individual or HUF isn't subject for an expense review. Additionally, such Individuals and HUF subject to deduct TDS @ 5% need not make a difference for TAN.

What is form 26AS and how to check TDS credit?

Form 26AS is an annual consolidated tax statement issued under Section 203AA of the Income-tax Act, 1961. It contains details of various taxes deducted on your income by deductors: be it your employer, bank, or even a tenant. It can be accessed from the income-tax website by all taxpayers using their Permanent Account Number.

Parts of Form 26AS:-

Part A: Details of Tax Deducted at Source

Part A1: Details of Tax Deducted at Source for Form 15G/Form 15H

Part A2: Details of Tax Deducted at Source on Sale of Immovable Property u/s194(IA) (For the seller of Property)

Part B: Details of Tax Collected at Source

Part C: Details of Tax Paid (Other than TDS or TCS)

Part D: Details of Paid Refund

Part E: Details of AIR Transaction

Part F: Details of Tax Deducted on sale of immovable property u/s194IA (For Buyer of property)

Part G: TDS Defaults* (processing of defaults)

How to check TDS Credit using Form 26AS?

1. Go to www.incometaxindiaefiling.gov.in/home

2. Register yourself. If you're already registered, log in using your credentials

3. Next, go to 'My Account'

4. Click 'View Form 26AS'

5. Select 'Year' and 'PDF Format'

6. Download the file

7. Open the password-protected file by using your Date of Birth (as per the PAN card) as the password.

Apart from knowing TDS status through PAN and Form 26AS, one can also view their TDS online by using the net banking portal. However, for that, the PAN has to be linked to the net banking portal.

Related Read: Types of TDS Return Forms

How is TDS calculated on Income Tax portal?

You can check whether your TDS — as appeared in the TDS certificate which you got from the deductor —   has been received by the govt. or not by contrasting with your Form 26AS. It is the obligation of a citizen to confirm whether the deductor has deducted charge on every transaction on which it should be deducted. He should likewise watch that the TDS referenced in structure 16/16A is reflecting in Form 26AS.

1. The Board has been thinking about the way of discounting the sum paid in abundance of the duty deducted as well as deductible (whichever is progressive) under segments 192 to 194D of the Income-charge Act, 1961. The Board is exhorted that such an abundance instalment can be discounted, autonomously on the Income-charge Act, to the individual in charge of making such instalment subject to vital managerial protections.

2. In supersession of the prior guidance regarding the matter, the accompanying strategy is set down to manage the discount of such abundance instalments.

3. The abundance instalment would be the contrast between the genuine instalment made by the deductor and the expense deducted at source or that deductible, whichever is more. This sum ought to be balanced against the current assessment obligation under any of the Direct Tax Acts. In the wake of gathering such risk, the equalization sum, assuming any, ought to be discounted to the assessee.

4. Where the duty is deducted at source and paid by the branch office of the assessee and the quarterly explanation/yearly return (in the event of compensation) of expense reasoning at source is recorded by the branch, such branch office would be treated as a different unit autonomous of the head office. Subsequent to meeting any current duty obligation of such a branch, which would ordinarily be in connection to the finding of assessment at source, the equalization sum might be discounted to the said branch office. The Income-charge Officer, who will discount the sum, would be the person who gets the quarterly articulation/yearly return (if there should arise an occurrence of pay rates) of duty derivation at source from that branch office and tracks the instalments of TDS made by that branch.

5. The change of discount against the current duty risk ought to be made as per the present strategy regarding the matter. A different discount voucher to the present system regarding the matter is required. A different discount voucher to the degree of such obligation under every one of the direct assessments ought to be set up by the Income-charge Officer for the "personal expense office" and sent to the bank alongside the challan of the suitable sort. The sum balanced and the parity, assuming any, discounted would be debatable under the sub-head "Different discounts" underneath the minor head "Annual expense on organizations"- significant head "020-Corporation charge" or beneath the minor head "Personal duty other than association payments"- real head "021-Taxes on Incomes other than Corporation-Tax" to the extent that the installment has initially credited to the real head "020-Corporation Tax" or the real head "021-Taxes on Incomes other than Corporation Tax".

6. Since the change/discount of the sum paid in abundance would emerge in connection to the conclusion of assessment at source, the account of the specifics of alteration/discount ought to be done in the quarterly articulation of TDS/yearly return (if there should be an occurrence of pay rates) under the marks of the ITO toward the finish of the announcement, for example underneath the mark of the individual outfitting the announcement.

Form 16, Form 16A, Form 16 B and Form 16 C are all TDS certificates. TDS certificates have to be issued by a person deducting TDS to the assessee from whose income TDS was deducted while making payment. For instance, banks issue Form 16A to the depositor when TDS is deducted on interest from fixed deposits. Form 16 is issued by the employer to the employee.

Can there be any miscalculation? If yes, what are the remedies?

An incorrect entry especially with regards to PAN or an amount, may lead to unnecessary delays in filing the ITR. One needs to get them rectified before filing to avoid future hassles. "Practically, the remedy for rectifying the mismatch lies in requesting the deductor to reconcile the same. You will have to request the deductor to revise the TDS return. The deductee has no power under the Act, to enforce the deductor to the revision of the returns so wrongly filed. In case there is a discrepancy in the TDS certificate issued by your bank where you have a fixed deposit, ask the banker to rectify it." TDS certificates should be accurate as they may be required to be shown as proof of TDS claimed, in case your return gets picked up for scrutiny.

What is the time limit for completing assessment?

It is suggested to fix a particular time limit for starting and finishing TDS proceedings under section 201 of the Act in regard of instalments made to non-residents which should not be over 4 years from the applicable money related year (i.e. financial year). Deductee can see the TDS certificate (just non-salary TDS certificate for example Structure 16A) online by signing into Form 26AS. From the financial year 2018-19, it is required for organizations and banks to issue Form 16A downloaded from TIN Website and issue just such downloaded Form 16A to deductees. Different classifications of deductors may likewise practice this alternative for issuing Form 16A to its deductees.

Following are the steps to obtain TDS certificate:-

a) Log on to Form 26AS with the user ID and password

b) Click on 'View Form 26AS'

c) Go to the alternative 'TDS Certificate' given at the top of the menu bar.

d) Provide six characters TDS Certificate number present on the TDS certificate issued by deductor.

The TDS certificate issued by the deductor is more likely to be created through the TIN central system.

e) Verify details present in the TDS certificate appeared in Form 26AS with the TDS certificate issued by the deductor.

The Department is more and more depending upon TCS and TDS to collect the taxes in advance from the deductors, payers of income.  This step will reduce tax avoidance by the income earners. Also this step is acting as safety against loss of revenue. TDS, TCS constitutes more than 40% of total tax collections of the department.

In this regard, the department has notified various rules, procedural obligations to be followed by the payers, deductor for the purpose of collection, deduction and payment to the department on behalf of the income earner, filing TDS returns with the department and issue of certificates to the deductee, payees who can claim credit for the tax deducted, collected from the payments to be made to him.

Now it is mandatory for every business organization to deduct the taxes and deposit the same to claim some of the expenditures incurred to carry on the business operations. In other words, unless TDS is made, the expenditure like interest, royalty, rent, technical fees etc. [u/s. 40(A)(Ia)]. However, the tax deducted in March, 2011 can be deposited before the due date for filing the return of income.

Written by: Harshita Poonia