Guide: Potential Notices from incorrect TDS Return

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Hiral Vakil

TDS
TDS Compliance

What is an unclaimed challan?

Unclaimed challan is the situation where you have entered a valid challan but it is not consumed or partially consumed. This can easily go unnoticed and result into considerable amount of Unclaimed challans.

For eg. you added the following challan:

Challan BSR Code Challan Serial No. TDS Amount Date of Deposit
1234567 12345 Rs.5000 04/05/2016

Now you added the following deductions:

Deductee Name Deductee PAN Amount Paid TDS Deducted Date of Deduction
Priyal Shah ABCPS1234A Rs.20000/- Rs.2000/- 20/04/2016
Dhiraj Patel BCAPP1234B Rs.20000/- Rs.2000/- 25/04/2016

As you can see that total TDS amount in the challan is Rs. 5000 however you have claimed only Rs. 4000 out of the same. This results into unclaimed challan of Rs. 1000/-

This situation can very well be curtailed if a proper warning mechanism is at place which identifies potential unclaimed challans.

What is a short deduction?

Short deduction is the situation where you have deducted TDS at a rate, lower than the prescribed rate by the Income Tax Act. This is one of the most common reason for receiving a notice. Here is an example of short deduction

Deductee Name Deductee PAN Amount Paid TDS Deducted Section Code Short Deduction
Bhargav Rao ABCPR1234B Rs.5000 Rs. 4000 (8%) 194J (Fees for Professional / technical services) Prescribed rate is 10% Rs. 1000

What is late deduction?

Late deduction will arise when the date of TDS deduction is later than the date of payment/credit.

For eg:

Date of payment/credit Amount of payment Date of TDS deduction Amount of TDS deducted
01/04/2016 Rs. 1,00,000 05/05/2016 Rs. 10,000

As you can see, that although the payment was made on 01/04/2016, the deductor forgot to deduct the TDS on the same date and made the full payment. Then in the next month, he realises his mistake, deducted the TDS and deposited the same to the government.

Interest penalty @ 1% (per month or part thereof) will be applicable on the TDS deducted for late deduction.

So for the above situation, interest liability will be as follows

Rs. 10,000 x 1% x 2 months* = Rs. 200

* As per income tax act, rate of 1% is applicable for a month or a part thereof. Hence even if your delay exceeds by 1 day, you will have to pay interest for the whole month.

What is late deposit of TDS?

When you deposit TDS to the Government, later than the prescribed due date, it is called late deposit

Following are the due dates for TDS deposit:

Sr. No. Particulars Due Date for TDS Payments
1. For every month (Except March) 7th of the next month
2. For month of March (In case of govt. Deductor) 7th of the next month
For month of March (In case of other deductor) 30th April of the next year

Note: please keep in mind that the due date is from the month in which deduction is made and not the payment.

For better understanding, let’s take a few examples

Date of Payment Date of deduction Due date for Payment of TDS
04/04/2016 04/04/2016 07/05/2016
28/04/2016 11/05/2016 07/06/2016
12/03/2016 12/03/2016 30/04/2016
09/07/2016 15/07/2016 07/08/2016

Interest penalty @ 1.5% (per month or part thereof) will be applicable on the TDS deducted for late deposit.

So for eg. if TDS amount is Rs. 10,000, Date of deduction is 04/05/2016 (Due date for deposit will be 07/06/2016) and TDS is deposited on 10/06/2016 then interest liability will be as follows

Rs. 10,000 x 1.5% x 2 months* = Rs. 300

* As per income tax act, rate of 1.5% is applicable for a month or a part thereof. Hence even if your delay exceeds by just 1 day, you will have to pay interest for the whole month.

What is late filing fee in case of TDS Return?

When a deductor fails to file TDS return within due date, he is liable to pay late filing fee of Rs. 200 for every day until return is filed. However, the amount of late filing fee can not exceed the amount of TDS deducted.

Following are the due dates for TDS return filing:

Quarter Last day of Quarter Due Date for TDS Return (FY 2016-17)
Q1 30th June 31st July
Q2 30th September 31st October
Q3 31st December 31st January
Q4 31st March 31st May

Let’s take an example to understand:

Financial Year Quarter Due Date Filed On Date Late Filing Fees
2016-17 Q1 31/07/2016 07/10/2016 Rs. 7000

As you can see that the return is filed after the due date, and therefore a deductor attracts a levy of late filing fee.

Late Filing Fees = Rs. 200 x 68 days = Rs. 13,600 OR Rs. 7,000 whichever is less. i.e, Rs. 7,000

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FAQs

Can we carry forward excess TDS?

When tax has been deposited more than the required tax deducted at source for a particular Assessment Year, the excess amount of tax can be claimed in the following quarters of the relevant year. The balance amount if any, can be carried forward to the next year for the claim in the TDS statement.

What happens if TDS is not reflected in 26AS?

If the TDS is deducted but it does not reflect in your Form 26AS, you can not claim the tax credit. It usually means, TDS is deducted on your income, but the deductor has not deposited it with the government. Therefore the tax credit is not shown in your Form 26AS.

My employer did not deduct tax from my salary income. Whether in such case I am liable to pay tax on my salary income?

TDS is only a mode of an early collection of tax. The ultimate liability of paying taxes is on the person earning income and, hence, if the employer fails to deduct tax, then it is the liability of the employee to pay the tax on the same. Further, if the employer has deducted less tax, then it is the liability of the employee to pay the balance tax.

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