Over the past few months, tax deduction at source in India has become a major pain point for most tax deductors. The complexities in the various provisions have given rise to various headaches for the tax deductors. Not only on the issue of which section to apply and what rate to apply, the issue of filing of the quarterly TDS statements has also become a serious problem. There are a number of problems that are encountered while preparing and filing the statements. This presentation highlights some of the important issues on e-filing of TDS statements.

1. CA AMEET PATEL
Partner, Sudit K Parekh & Co.
Bombay Chartered Accountants’ Society
21st March, 2014
Practical Issues in
E-filing of TDS Returns and Statements

2. • Who is supposed to mandatorily file TDS return through electronic media?
- Corporate and government deductors /collectors
- Deductor who is required to get his accounts audited under section 44AB of the
Act
- Where the number of deductee records in a statement are 20 or more
• Government utility / private software can be used.
• Validation of return is to be done through file validation utility (.fvu)
• The following files are to be submitted to TIN facilitation centres through electronic
media (pen drive / CD) alongwith signed Form 27A (physical) and filing fees (Cash):
- .fvu
- .txt
- .html
• Acknowledgement needs to be kept in safe custody as you may need it in future
Introduction

3. • The acknowledgement is the most important
document for carrying out any function on TRACES
• The following important information from the
acknowledgement is to be recorded:
- Provisional Receipt Number (PRN)
- Date of filing the return
Introduction

4. Introduction

5. Filling of TDS Statement to
make it ready for filing
Filing it with NSDL
Facilitation Centres
The statement is then processed by
NSDL and transferred to TRACES for
further processing
TRACES then processes the data
and data is available for
generation of TDS certificates
Filing online
(www.tin-nsdl.com)
Filing of e-TDS statements – sequence of events

6. In case of errors,
Intimation will be
received from TRACES
The correction statement can be
filed online for details relating to
PAN or challan details on
www.tds-cpc.gov.in
(registration of digital signature
mandatory)
TRACES processes the
correction statement
The correction statement
can be filed with NSDL
Facilitation Centres
The correction statement
is then processed by
NSDL and transferred to
TRACES
Filing of e-TDS statements – sequence of events

7. Payment Issues

8. • It is mandatory for the following types of deductors to pay tax online:
a) All the corporate deductors
b) Any non corporate deductor to whom provisions of section 44AB of the
Income Tax Act, 1961 are applicable
• ITNS 281 has to be used to deposit TDS
• Tax is to be deposited by 7th of the next month and in case of deductions during
March, by 30th April.
• If the due date is a public holiday, tax can be paid on the next day following such
a date. However, the system does not recognize such a clause and notices for
interest on delay in payment may be received.
- Rectification application will then have to be filed with the jurisdictional TDS
officer
Payment Issues - Introduction

9. • Points to be taken care of while depositing TDS:
- Make the payment a day prior as instances of interest being levied due to late
clearing by bank have arisen in the past
- Round off the tax amount to the higher side (eg. round off Rs. 65,000.02p to
Rs. 65,001) – (this is not in line with section 288BB)
- Quote the correct TAN
- Bifurcate tax and interest correctly and carefully
- Section number to be carefully mentioned
 What if payment pertaining to a particular section is fully deposited in the other
section?
 What if payment pertaining to two different sections is deposited through one
single challan?
Payment Issues – ITNS 281

10. • As per the section, a fee of Rs. 200 per day of delay in filing the return is levied
• However, the fee is restricted to the amount of tax deductible
• Constitutional validity of this section has been challenged
- Aditya Bizorp Solutions Pvt. Ltd v/s. Union of India (Karnataka HC)
- Narath Mapila LP School v/s Union of India (Kerala HC)
- - In both cases, the courts have granted a stay on the recovery of fees charged
u/s. 234E
• No appeal lies against the levy of the fees
Payment Issues – Fees u/s 234E

11. • Under which code should the fee be paid?
Payment Issues – Fees u/s 234E

12. • In case of online payment of challan, request for rectification can be made with the
jurisdictional TDS A.O.
• In case of physical challan, request for rectification can be made to the bank within
the specified time-frame as given below:
- After the specified number of days as mentioned in the above table, rectification
application can be filed with the jurisdictional TDS A.O.
Payment Issues – Mistakes in the challan - Remedy
Correction required in Field name Period of Correction Request (from
Challan Deposit Date)
TAN 7 days
Assessment Year 7 days
Amount 7 days
Other fields (Major head, Minor
head, Nature of payment)
Within 3 months

13. Payment Issues – Mistake in the challan - Remedy
The changes can be made by banks, subject to following conditions:
- Correction in Name is not permitted.
- Combination of correction of Minor Head and Assessment Year together is not
allowed.
- TAN correction will be allowed only when the name in the challan matches with the
name as per the new TAN.
- The change of amount will be permitted only on the condition that the amount so
corrected is not different from the amount actually received by the bank and
credited to Govt. Account.
- For a single challan, correction is allowed only once. However, where 1st correction
request is made only for amount, a 2nd correction request will be allowed for
correction in other fields.
- There will be no partial acceptance of change correction request, i.e. either all the
requested changes will be allowed, if they pass the validation, or no change will be
allowed, if any one of the requested changes fails the validation test.

14. PA(i)N Issues
PAN Valid or Invalid...!!!

15. • 206AA(6) says “Where the Permanent Account Number provided to the deductor
is invalid or does not belong to the deductee, it shall be deemed that the deductee
has not furnished his Permanent Account Number to the deductor and the
provisions of sub-section (1) shall apply accordingly.”
• Hence deductor would be liable for short deduction in case of invalid PAN
• Therefore, verification of the PAN provided by all deductees advisable (online
verification facility available – see next slide)
• Rectification of more than 4 characters in the PAN not permissible (2 digits & 2
letters) (whether valid to valid or invalid to valid)
• Penalty u/s. 272B may be levied for not quoting correct PAN
PAN Verification

16. Online PAN Verification on TRACES

17. Online PAN Verification on TRACES

18. Online PAN Verification on NSDL (paid facility)

19. Issues while processing and filing

20. • The government utility is not user-friendly
• Private software saves effort in case of returns with huge line items
• Errors shown in the error statement generated cannot be read easily
Issues while processing and filing

21. Issues while processing and filing
• Challan – quarterly adjustment and yearly adjustment
– If challan pertaining to the past quarter adjusted against an entry in
the current quarter – such an adjustment is allowed.
– If challan pertaining to last financial year adjusted against an entry in
the current quarter – such an adjustment is allowed.
• Interest calculation is not prompted. In case of massive data,
checking each entry for delay in payment becomes
cumbersome.

22. Issues while processing and filing
• Refund of Tax deposited would be the course of action when:
- Excess is paid in a challan pertaining to the previous financial year
- No further transaction liable for TDS are expected in the current financial year
- The business of the deductor is closing
• Refund can be requested online. However the process requires a Digital Signature
Certificate (DSC)

23. • Some excel based software provide the option of filtering the data. Ensure that
the filter is removed before the processing of the return
• Ensure that the readable media is duly scanned and non corrupt
• While processing the returns, ensure that no error file is generated. These error
files are in html format and over & above the main html generated
• Ensure that the 3 files (.fvu, .txt and .html) are duly saved on the CD / pen drive
• Verify the acknowledgement received
• Do not keep the filing pending for the last minute
• If the due date of filing TDS is a holiday, the General Clauses Act shall apply and
the next working day is to be considered. However the system does not consider
the above fact and hence fees for late filing are payable
Points to be considered while filing the return

24. • Generation of Form 16 and 16A is to be done within 15 days from the due date of
filing the return.
• Else liable to penalty u/s 272A(2)(g)
• Earlier, the TDS certificates could be physically prepared by the deductee and duly
signed. Hence manipulation of the date of issue of the certificate was a common
practice. Now, mandatorily to be done online and through TRACES alone
• Recently calls are received from the department to generate Form 16 and 16A for
past quarters
• The online generation of TDS certificates through TRACES requires the TDS
statement filed to be duly processed. In case of revision, the revised return needs
to be processed for issue of fresh certificate to the relevant vendors
• The processing of the return (especially revised return) is delayed by several days,
either by NSDL or CPC
• Post processing of return, processing the request for a file to generate Form 16
and 16A is delayed
Issues in TDS certificates

25. Phew..!! Return
filed
TDS DEFAULTS

26. • Similar to Intimation u/s. 143(1) issued in case of Income-tax returns
• Intimation can be in respect of arithmetical errors and incorrect claim apparent
from information in the statement
• Currently these statements are received from TRACES and are computer generated
• Intimation u/s. 200A is to be treated as a notice of demand as per the deeming
provision u/s. 156
• The Intimation u/s. 200A does not contain much details and information about the
calculations of the amount of demand raised except for basic classification
Default Notices under section 200A

27. What to do when I receive intimation u/s. 200A?
Demand of Rs. 10,00,000 u/s. 200A
This is what generally happens to an Aam Aadmi

28. 1. Demand the “Justification Report” from TRACES
2. Analyse the default
3. Revise the TDS statement if the errors intimated in the notice are valid and
intimate the officer in this regard. Intimation to the officer is advisable but
not mandatory as per the Act
4. File an application for rectification if errors shown are invalid
Steps to follow

29. • Justification Report is the detailed calculation in respect of the demand raised in
the intimation u/s 200A which is available at the TRACES website
• The file can be requested from TRACES by punching in details of the TDS
statement filed – PRN No. is compulsory
• The file is then shown as “available” at the website after sometime. However,
sometimes long delays in getting the file have been noted
• Sometimes there is an error in opening the downloaded report
• However, the calculations explained for arriving at the demand are clearly
explained
Step 1 – Demand the Justification Report from TRACES

30. • Though the Justification Report provides detailed calculation, instances of the
same being wrong, inaccurate, not as per the legal position, etc are many
• Demands raised on calculations, the legal position of which is arguable
• Demands raised on calculations based on procedural and processing errors at
the department
Step 2: Analyse the default

31. • The option of lower deduction certificate (‘A’) not recognised in the Justification
Report
Step 2: Analyse the default
In such cases, what should the deductor do?
• File a rectification with AO?
• File a rectification with Traces?
• File an appeal?

32. • Education Cess and surcharge not to be levied in case of tax deducted as per DTAA
or u/s. 206AA. However in almost all such cases, cess and surcharge are levied in
the Justification Report
Step 2: Analyse the default

33. Step 2: Analyse the default
• Instance of a portion of interest paid is unrecognized in spite of the challan shown
as unutilized. Demand for entire amount of interest raised without adjusting
interest already paid
(See next slide for example)

36. • In case when tax was deducted on 12/02/2014 and tax is paid on 10/03/2014,
for how many months should the interest be paid – 1 or 2?
• What if you have obtained the TAN but no deduction of tax is required under a
particular quarter and hence you have not filed the return and an entry is
subsequently passed?
• If, according to me, the section in the NIL/lower deduction certificate is not the
correct legal position for deduction, then:
- Will I be liable for default in adopting the wrong legal position in spite of the 197 certificate
adopting that position?
- My jurisdictional officer not concerned with the view by the deductee’s TDS officer
- If I deduct under a different section and file the return, how do I provide the deductee with the
benefit of lower deduction under a different section?
Step 2: Analyse the default

37. • TDS Statements can be revised suo moto or in response to notice u/s 200A
• Unlike ROI , there is no time limit for revision of a TDS Statement
Step 3 - Revision of TDS Statement

38. • The interface of the Govt utility is not user-friendly:
- Drop downs at most places
- “Easy to use” paste option not available
- No easy option to transfer data from excel or tally to the interface
- Manual punching of data
- At times several clicks are required in a particular cell to change
the data
- Becomes extremely time consuming when too many line items
are to be revised
Step 3 - Revision of TDS Statement

39. • The revision cannot be done simply as various fields entered in the original
Statement cannot be changed, deleted or modified. In the challan sheet, only the
interest amount, challan amount and section can be modified
• Example-
Deductee Mr A’s tax of Rs 6,000 was deducted and paid u/s 194J via challan No 2.
However, I inadvertently mentioned 194I in the deductee sheet and linked it to
194I challan numbered 3. So there is short fall of Rs 6,000 in 194I challan and an
excess unutilized balance Rs 6,000 in 194J challan
• Remedy 1: Can I not change the mapping to the correct position from challan 3 to
challan 2?
- The Govt utility does not permit this. Private software permit this (see next
slide)
• Remedy 2 : Can I not delete the deductee row, and re-enter Mr A’s information in
the deductee row again?
- The Govt utility does not permit this. Private software permit this (see next
slide)
Step 3 - Revision of TDS Statement

40. Step 3 - Revision of Return
• Remedy 1 cannot be applied as per Govt utility

41. • Remedy 2 cannot be applied
Step 3 - Revision of Return
• Available remedy : Make the amount Rs 0 in the deductee row and then enter a
fresh row and re-enter Mr A’s details, now linking it to 194J challan (Challan No 2)

42. • Having rectified the deductee related mistake, the deductor tries to open the
saved file in which he has worked
• And what does he get?
Step 3 - Revision of Return

43. Step 3 - Revision of Return
• The consolidated file that is downloaded from TRACES needs
to be “latest”
• It is unclear how many days or months old file can / cannot
be be used for filing
• However if such a message pops up:
- Download a fresh consolidated file
- Re-do the changes made for revision

44. • Post requesting a new Consolidated File on TRACES and
after redoing the changes,
– Processing of the return is completed
– The files are then sent to Tin Facilitation Center for filing
– The files came back as the version of the RPU software has changed –
for e.g. - it had changed from Version 3.7 to version 3.8
– The versions of RPU change very quickly.
– Post the change, Tin Facilitation Centers will not accept a return
processed in the old version
• The consolidated file gets corrupted at times if the path
of the file is changed
– According to NSDL, this problem can be resolved by copying the folder
instead of only the file
Step 3 - Revision of Return

45. • After analyzing the default, if there is an apparent error in the same (some
examples are given below):
- Interest calculation
- E-Cess in case of DTAA benefit and 206AA application
- Effect of certificate u/s 197 not given
- Any other apparent mistake
• Then the only mechanism for filing an application u/s 154 of the Act is to write to
the jurisdictional A.O. and no recourse is available online
• Jurisdictional officers, at times, refuse to accept the rectification application on
grounds that CPC has the jurisdiction and not them
Step 4 : Rectification

46. NSDL
AO
CPC
NSDL, CPC, AO -
WHERE DO I GO?

47. • There are 3 authorities currently in the picture handling TDS related matters for
the department :
- Assessing Officer - TDS (who is different from the Income-tax officer)
- CPC
- TIN – NSDL
• For most clarifications, rectifications and processing errors, practically, deductors
have to run from one authority to another. Some common problems faced by
deductors are :
- Jurisdictional Officers refuse rectification applications on the ground that it should be filed with CPC
- CPC blames delay in processing returns on NSDL
- NSDL blames the delay on CPC
- Rectification accepted by A.O is not communicated to CPC and reminder of the demand is received
after some time – often with interest u/s 220(2)
Conflicts

48. Consequences of TDS defaults
Default/Failure Consequences
Failure to apply for TAN Penalty of Rs. 10,000
Failure to deduct tax at source Tax + Interest @ 1% p.m. of tax deductible +
Penalty equal to the amount of tax deductible
Failure to deposit tax at source Tax + Interest @ 1.5% p.m. of tax + Imprisonment
for 3 months – 7 years with fine
Failure to furnish prescribed
statements u/s 200(3)
-Fees of Rs. 200/day during which the default
continues subject to maximum of TDS amount
-Penalty of Rs. 100/day during which the default
continues subject to maximum of TDS amount
-Penalty ranging between Rs. 10,000 – Rs. 100,000
Failure to issue TDS certificates Penalty of Rs. 100/day during which the default
continues (subject to maximum of TDS amount)
Failure to mention PAN of the
deductee in the TDS statements
and certificates
Penalty of Rs. 10,000
(CIT vs. DHTC Logistics Ltd (Delhi HC))
Furnishing of incorrect
information
Penalty ranging between Rs. 10,000 – Rs. 100,000

49. Miscellaneous Issues
• In case of change of registered office – new TAN to be applied for
– What happens to tax already deducted using old TAN?
– Can a new TAN be used mid way in a quarter? Any problems in doing so?
– Ensure that old TAN is surrendered and AO is informed

50. TRACES – Some statistics

51. TRACES – Some facts

52. Conclusion
• In a transitionary phase, chaos in bound to remain
• However, gradually entire process is being shifted to CPC (TRACES)
• The difficulties will hopefully mitigate
Until then CAs will have to find a way out…….

53. Thank You!
patelameet@hotmail.com