TDS

File Request for Refund of Excess TDS Deposited by Deductor: If an excess of tax, more than the actual amount, is deposited, a Deductor can make a request for a refund of the excess TDS that he has deposited through TRACES. (From 2007 to 2008). In addition, an online utility is accessible for various Form types of 24Q, 26Q, 27EQ, 26QB, 27Q and 27Q.

• The List for Filing a Raising Refund Request through TRCES for Form Type 26B.
• A Stepwise Guide to File a Request for Refund.

The List for Filing a Raising Refund Request through TRACES for Form Type 26B

1. A Digital Signature on TRACES should be registered for an authorised person.

1. Against the TAN or PAN of the Deductor, there should be no remaining outstanding balance.
2. As per TAN Master, the PAN of the Deductor and their TRACES profile should be the same.
3. Refunds can only be requested for the OLTAS challans where the amount unclaimed is larger than Rs.100.00 for each challan.
4. The maximum refund amount allowed will be considered the minimum challan amount in the challan receipt’s history.
5. You will not be able to claim the credit of any challan that is used in the refund requests of any statement except the available residual balance.
6. Before the appeal process for a refund of the challan, all statements in which it has been claimed are processed.
7. Against TAN and any TAN(s) associated with the PAN of the Deductor, no outstanding balance should remain.

A Stepwise Guide to File a Request for Refund

Step 1: Logging into Traces.

Step 2: Selecting the option “Request for Refund” under the Statements or Payments category.

Step 3: Clicking the “Proceed” button on the refund checklist.

Step 4: Selecting the type of challan that is meant for a refund.

1. The refund request for challan or challan(s) u/s of section 195
2. The refund request for challan or challan (s) u/s other than section195.
3. A separate request is needed for the challan u/s 195

Step 5: Selecting at least a single reason from the five given options in the section below to raise a refund request.

Step 6: Clicking on the option “View Challan Details” after entering the details of the challan against which the refund is requested.

Step 7: After reviewing all details of the challan and its consumption details (if any). Confirm all checkboxes and click “I Agree” to proceed with your request.

Step 8: The Challan will be added to the request list, and the Deductor can add a maximum of 5 challans per request. After that, click on “Proceed”, and all of the challans are added.

Step 9: Reviewing the name and the communication address of the Deductor (which should be the same as the TRACES profile). The Deductor should provide the following bank details:

1. The Bank Name
2. Number of the Bank Account
3. The IFSC Code
4. Account type

Note: – If the refund amount is more than 50,000, it will be transferred to the bank account mentioned by the Deductor at the time of submission of the refund request.

Step 10: The verification details will be displayed. Then, click on the “Proceed” button for final submission or on the “Back” button to cancel or make any changes.

Step 11: After reviewing the summary displayed on the screen, click on the “Submit Request Refund” option. Then, in case of any edits, click on “Edit” for the specified segment.

Step 12: Signing the application via digital signature is the next important step.

Step 13: Printing the acknowledgement that is generated for Form 26B.

Step 14: Delivering printed acknowledgement to your Jurisdictional Assessing Officer within 14 days, starting from the date of transmission of the data electronically, is the last step and failing this step will lead to the rejection of your refund request.

TDS on Purchase of Property from Non-Resident: Section 195 of the IT Act of 1961 is associated primarily with Tax Deducted at Source (TDS) for non-resident Indians.

Per Section 195 of the Act, an Indian tax citizen who acquires assets from a non-resident must deduct the amount of TDS and deposit the money with the Government Of India.

Whatever amount of fee is charged, the remittance documentation is legally mandatory.  Any sum owed to Tax is the expenditure incurred that has the element of income and gross amount, the entirety of which may or may not accurately reflect revenue or profits.

Table of Contents

• Who is liable for deducting Tax under Section 195?
• What is the TDS percentage that applies to this section?
• What Is the Payment Structure?
• Computation of the Sum From Which TDS Should Be Withheld
• When should TDS be collected under Section 195?
• Precautions and adherence while buying assets from an NRI
• What is the maximum bound?

Who is Liable for Deducting Tax under Section 195?

Any individual responsible for the payment of a non-resident who is neither a business nor a foreign business must essentially deduct income tax at the prevailing rates.

What is the TDS Percentage that Applies to this Section?

TDS rates fundamentally alter based on whether the asset is a long-term asset or a short-term asset.

• If the asset is possessed by the owner for longer than two years, the profit on selling counts as “Long term Capital Gains,” and TDS is levied at 20% along with the additional surcharges and cess.
• However, suppose the asset is possessed by the owner for a shorter than a period of two years. In that case, the profit on selling automatically falls under “short term capital gains”, and TDS is charged as per the Income Tax Rates bracket contingent on the total income of the seller. Generally, TDS is deducted at 30% plus appropriate surcharge and cess.

What Is the Payment Structure?

• Any interest incurred (not being the Interest indicated in section 194LB, 194LC, and 194LD).
• Some other amount taxable under this Act’s stipulations (but not revenue taxable under the section “Salaries”).

Computation of the Sum From Which TDS Should Be Withheld

Section 195  stipulates that TDS be levied exclusively on revenue earned by a non-resident. In simple terms, the buyer can only deduct TDS on just the quantity of capital gain realized by the non-resident, not on the gross proceeds from the sale.

According to Section 195(2), when the entire sum payable to the non-resident is not subject to taxation for non-residents, he may petition his Assessing Officer to evaluate the acceptable fraction of the total amount taxable. The Income Tax Officer must assess the taxable profit and issue certified documentation indicating the exact amount of the capital gain.

The seller cannot conduct the determination of taxable income and, therefore, must be necessarily undertaken by the Income Tax Officer.

If the documentation is not readily accessible, it is recommended to deduct TDS on the total amount of the sales profits applying the highest tax rate bracket (not neglecting the surcharge and cess).

When Should TDS be Collected under Section 195?

When such total revenue is transferred to the payee’s account or when the transaction is carried out, whichever happens before.

Credit to Interest, payable account, Suspense account, or any other term will be widely deemed to be a credit of such earnings to the payee’s account for this specific purpose.

Payment for this specific function can be made in cash, via cheque or drafts, or any other viable method.

If the Government, a public sector bank, or a public financial institution needs to pay Interest, the tax deduction is allowed only when the payments are made in cash, by cheque, drafts, or any other form.

Precautions and Adherence while Buying Assets from an NRI

• TDS is simply liable for the acquisition of assets from an NRI independent of the transaction size. TDS is applicable even when the asset is priced well below Rs. 50 lakhs.
• To deduct the cost TDS, a purchaser must essentially acquire a TAN (Tax Deduction Account Number). If the asset is bought from a Resident Indian, no TAN is obligatory. Alternatively, TAN is legally necessary if the property is obtained from a Non-Resident Indian.
• TDS must be necessarily deposited within seven days of completing the month for which it was computed. For illustration, if TDS is withdrawn on July 28th, the payment is payable on August 7th.
• The TDS deducted must be submitted initially using Challan No./ITNS 281.
• TDS returns must be filed within 31 days following the end of the quarters from which TDS was levied using TDS Form 27Q.
• TDS authorization documentation must be issued within 15 days of the TDS return’s due date.

What is the Maximum Bound?

Zero, which denotes that there is no maximum restriction.

However, the Tax must be subtracted from the total amount payable to taxation. Consequently, if no amount of money is liable to taxation in India, no tax must be deducted.

There is no TDS under Section 195 on amounts of income taxed under the header ‘Salaries’ or payments fully included under Sections 194LB, 194LC, or 194LD. TDS will be collected at the exact point of payment or credit, whichever happens, earliest.

Declaration Deposit Lower TDS: TRACES implying the TDS Reconciliation Analysis and Correction Enabling System. It is the online portal for the implementation and administration of the TDS (Tax Deducted at Source) and the TCS (Tax Collected at Source).

A Deductor deducts the TDS after making the payment to a Deductee. He/she deposits their TDS return with the Income Tax Department and files for the TDS Return.

However, sometimes there can be a reduction in TDS deducted in the current period compared to the TDS removed in the previous period.

In that case, the deductor can submit a declaration for lower deduction and lower TDS payment along with relevant reasons. He/she can then choose to file a TDS Return on deduction of TDS at a lower rate.

If, as a deductor, one has reasonable reasons for lowering deduction/payment of the TDS in the current period in comparison to the previous period, then the deductor could file a declaration to the deposit lower TDS through TRACES.

It is an advisory issued by the Centralised Processing Cell (TDS) for filing this declaration if there is a strong reduction (no specific guideline for this, in our view if the deduction is more than 35%-40%) in the amount of tax deposited in comparison with the previous period.

Steps for submitting Declaration on the TRACES website for depositing lower TDS

Steps for Submitting Declaration on the TRACES Website for Depositing Lower TDS

Step 1: Log in to TRACES

Log in to the TRACES website– Enter the User Id, Password, TAN or PAN and the captcha

Step 2: Navigate to Declaration to deposit lower TDS

Go to the Statements / Payments then go to Declaration to the Deposit Lower TDS

Step 3: Select financial year, quarter and form type

Select the Financial Year, Quarter as well as the Form Type, i.e. 24Q, 26Q, 27Q, 27EQ, for which you are willing to submit the declaration for deposition of lower TDS. Click on ‘Add Statement Details’

Step 4: Add nature of payment

Under the section of ‘Lower Deposit Statement Details’, select ‘Add Nature of Payment ‘. Select the section from the drop-down list.

Step 5: Add TDS lower by percent.

Click on ‘Add TDS Lower By % ‘. Enter the number by which you are willing to reduce the TDS Rate.

Step 6: Reason for lower TDS deposited.

Select the proper reason behind the lower TDS deposited for the previous year from the options given in the drop-down list.

Step 7: Select the checkbox

Select all the checkboxes and click on the ‘I Agree’ for submitting the declaration. If you click on ‘I Disagree ‘, you will be tracked back to the previous page.

Step 8: Authorised person

Details on the Authorised Person is going to appear on the screen. Verify the details and click on ‘Proceed’.

Step 9: Success message

A success message will showcase on the screen. You are going to receive the details of the statement for which you will have to make the declaration in your email.

Avoid Notice from Department for Non-filing of TDS Return: As per Income Tax Act under section 200(3), 1961, every individual shall file a quarterly TDS return if the person is responsible for deduction of tax. However, no TDS return is ordered to be filed if TDS is not obligated to be deducted during that quarter of the financial year.

Due to this reason, the Income Tax Department has been noticing it challenging to distinguish between below types of deductors: –

• Deductors who are obligated to file TDS return and have not filed.
• Deductors who are not obligated to file TDS return due to NIL TDS.

So, for filing a declaration of non-filing of TDS statement, Department has introduced new functionality in the TRACES, which began from Financial Year 2013-14 onward. This functionality has been originated way back in 2013. However, many assessees are still not informed of this and skip TDS return without filing any declaration, which leads them to show-cause or intimation notice from the Department for non-filing of TDS return.

• Step By Step Model to File Declaration of Non-Filing of TDS Statement
• One can select any one of the Following Reason
• Step By Step Model to Revert Declaration of Non-Filing of TDS Statement

Step By Step Model to File Declaration of Non-Filing of TDS Statement

• First, login into Traces
• Select the ‘Declaration for Non-filing of Statement’ option under the ‘Statements/Payments’ section.
• Click on ‘Add Statements’

The page will also show all the declaration that was before filed for Non-filing of statement.

Add all the necessary details for the ‘Non-filing of Statement’.

Select the financial year, form, quarter and appropriate reason for the declaration.

One can select any one of the Following Reason

• Not liable to deduct for the chosen statement period – When one is not obligated to deduct any TDS under India’s Income Tax Act 1961.
• Credited to Deductee/No payment made – When credited to the deductee or no payment has been made
• Temporarily closed business– When the business is momentarily sealed
• Permanently closed business – When the business is permanently sealed
• Payment beneath the threshold to Deductee – When the payment credited or made is beneath the threshold limit
• Branch shifted – If the branch is shifted
• Any other reason – One is needed to register the reason (apart from the reason which is not available above) if one preferred this option.

One can also register multiple declarations at the same time by clicking on the option of ‘Add Statement Details’.

5. Click on ‘Proceed’
6. Click on ‘I Agree’
7. Click on ‘Proceed’

A Message of Confirmation is Displayed for Non-filing of the Statement

Traces also implement functionality to revert the declaration of Non-filing of statements. This is needed if the user desires to file a TDS statement for which a declaration of Non-filing has already been made. Also, once the user reverts the status of declaration for that period statement, they cannot re-file declaration for Non-filing of Statement.

Step By Step Model to Revert Declaration of Non-Filing of TDS Statement

• Step 1 – Select the specific statement that you wish to change the Non-filing status.
• Step 2 – Click on the option ‘Change Filing Status’ and select ‘Proceed’.
• Step 3 – The subsequent screens show the change in status from Non-Filing to Filing.

Note: – One cannot revert the status of declaration if the person opts ‘Branch shifted’ or ‘Permanently business closed’ as the reason for Non-filing of statement.

TDS, Form 26AS and TRACE: TDS or Tax Deducted at Source is one of the leading tax collection modes in India. According to the department of Income-tax, any person or organisation that executes pay must subtract tax right at the source of the payment to cross a certain limit. The tax deduction under TDS is done at prescribed rates by the department of Income-tax.

The company or person that executes the payment after deducting TDS is known as the deductor, and the organisation or person accepting the payment is called the deductee. The tax deduction under TDS is the responsibility of the deductor before any payment is made to the deductee. TDS is deducted irrespective of the payment or cash mode, cheque or credit, and is linked to the PAN of the deductor and deductee. Every individual responsible for making payment of nature incorporated by TDS provisions of the Income Tax Act is accountable for deducting tax. This article will give you information about TDS via Form 26AS.

Tax Deducted at Source

TDS, or Tax Deducted at Source, is one of the tax collection modes by which a specific percentage is deducted at the time of payments, and the deducted amount is rerouted to the Government account. The Tax Information Network (TIN) by NSDL was used till 31st Oct 2012 to collect data about Tax Deducted at Source (TDS) on account of the Income Tax Department (ITD). Presently Income Tax Department (ITD) has initiated a Correction Enabling System and TDS Reconciliation Analysis or TRACES. This new portal has been designed to improve swift communication between the deductor, deductee, income tax, and CPC. It serves in discerning challan status, downloading the reports of justification, the NSDL Conso File, and Form 16 / 16A, and inspecting annual tax credit statements (Form 26AS).

Form 26AS

Income Tax Department expedites a PAN holder to inspect its Tax Credit Statement, i.e. Form 26AS online. Form 26AS has two parts Part A & A1 which contains the tax details deducted on the taxpayer’s account by deductors. Part B of Form 26AS holds the details of the tax collected on behalf of the taxpayer by the collectors. Part C of Form 26AS contains Advance tax/self-assessment tax/regular assessment tax, etc., deposited by the taxpayers. The Part D of Form 26AS incorporates the details of the paid refund collected during the financial year. The Part E of Form 26 AS includes the details of the High-value Transactions regarding shares, mutual fund etc. The Tax Credit Statement (Form 26AS) is produced wherein a valid PAN has been reported in the TDS statements. It is a form issued under Rule 31AB.

Accessing Tax Credit – Form 26AS

The statements of Tax Credits (Form 26AS)can be accessed in the following ways :

• Tax Credit can be viewed from the website – incometaxindiaefiling.gov.in. Taxpayers can enroll at the portal “incometaxindiaefiling.gov.in” in the “My Account” tab by clicking on ‘View Tax Credit Statement’ (Form 26AS). This process is free of cost.
• From the bank site by net banking facility Access, the Tax Credit (Form 26AS)- This facility is available to a PAN holder with a net banking account with any of the approved banks.

List of Banks Registered With NSDL

The List of banks registered with NSDL to provide a view of the Tax Credit Statement (Form 26AS) is given below.

Allahabad Bank Andhra Bank Axis Bank Limited Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Citibank N.A. City Union Bank Limited Corporation Bank Dena Bank HDFC Bank Limited ICICI Bank Limited IDBI Bank Limited Indian Overseas Bank Indian Bank

Karnataka Bank Limited Oriental Bank of Commerce Punjab National Bank State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of India State Bank of Mysore State Bank of Patiala State Bank of Travancore Syndicate Bank The Federal Bank Limited The Karur Vysya Bank Limited The Saraswat Co-operative Bank Limited UCO Bank Union Bank of India United Bank of India

NSDL

National Securities Depository Limited or NSDL based in Mumbai, under the jurisdiction of the Ministry of Finance, Government of India is an Indian central securities depository. NSDL was founded in 1996, in the month of August. It was a first of its kind national electronic securities depository. It is responsible for managing the majority of the securities of the Indian capital market, held and dematerialised. The Tax Information Network (TIN) founded by NSDL was a repository of tax-related information on account of the Income Tax Department (ITD).

Tax Information Network

The TIN or Tax Information Network system collects information about Tax Deducted at Source, i.e. TDS from the tax deductors; the banks assemble the TDS on behalf of the Income Tax Department and present information ITD and the people for whom the tax is deducted. TIN is designed to make tax administration more effective, furnishing returns convenient, reducing compliance costs, and bringing greater transparency. The Tax Information Network system joins the nationwide users through its combined service centres acknowledged as TIN Facilitation Centers (TIN FC) and the web-based central system. The various roles of TIN are:

• Receiving the TDS returns in electronic format (e-TDS).
• Collecting Tax Payment information.
• E-Return Intermediaries registration.
• Applications Processing for issuance of Tax Deduction Account Numbers (TAN).
• Processing of applications for allotment of PAN (Permanent Account Number)
• Assembling and processing Annual Information Return (AIR) from particularised persons for designated transactions on behalf of ITD.
• Assesses can observe the details of taxes paid and TDS deducted for them on the internet.

TRACES

The Income Tax Department (ITD) has initiated an effort to facilitate the easy filing of TDS / TCS correction statements by deductors or collectors, and similar functionalities named as the TDS ((Tax Deducted at Source)CPC (Centralised Processing Cell). TDS CPC strives to elevate the overall service levels for deductors and taxpayers. It has installed a new portal named TRACES or TDS Reconciliation Analysis and Correction Enabling System.

The portal will improve communication between the deductor, deductee, department of income tax and CPC. Deductors can register online correction records after enrolling on TRACES. Taxpayers can also register to download and view Form 26AS. TDS CPC rectifies errors to facilitate correct reporting of TDS / TCS by expediting timely filing and processing statements by looking into deductors or collectors. It gives an interface to all stakeholders connected with TDS management. The system has been created to bring clarity and effectiveness to the taxation process. The TDS-related services for ITD were arranged by TIN-NSDL.

TRACES Registration

TRACES registration is compulsory to file a Correction Statement. It helps to file online changes. Once you are registered, you can notice many facilities granted by trace TRACES. Applicants who had already enrolled at the NSDL TIN site doesn’t require to enlist again on TRACES. The registration done under NSDL TIN migrates to TRACES. The login can be done with the NSDL TIN login.

Here are the following steps to enroll in TRACES:

• Step 1: Click the tab “New Registration”, select the “user type”, and click on “Continue”.
• Step 2: Provide deductor TAN and enter the “Verification code”, and click on “Continue”.
• Step 3: Token number of the original (regular) statement needs to be entered, alongside the CIN/BIN and details of PAN for the financial year and quarter and the related form displayed.
• Step 4: The authentication code is formed after KYC information details validation. One continues with code, TAN, and the name of the deductor are prefilled; you will have to update PAN and the person’s details and address.
• Step 5: Confirm all the submitted details; the confirmation page will show all the details. Click on “Edit” to change the details and click on “Confirm” to register.
• Step 6: Lastly, the “Registration request successfully submitted” message will be received. This will be followed by the reception of an activation link and codes in the registered mobile and email address given at the time of registration.

Conclusion on TDS, Form 26AS and TRACE

TDS is one of the significant tax collection methods of the government of India. The process of deduction is essential know-how that each deductor and deductee need to understand and know. As there are many steps involved and many terminologies included, knowing the step-by-step guide and the different processes is very helpful. This article will help the reader understand the TDS process and its elements like Form 26AS. It will help both the deductor and deductee to streamline TDS.

TDS on Interest: The deduction of TDS on debt rather than interest on shares are covered by Section 194A. If the provisions are attracted, the Deductor must deduct TDS Rates @ 10%. The charge under Section 194A is in the form of interest (other than interest on securities). Interest charges such as fixed account interest, interest on any debt, and interest on revolving deposits are also included. The TDS mechanism also applies to payments given to non-residents.

TDS is Deducted From The Following Payments

Under this clause, TDS must be deducted from payments rendered to a resident individual for interest.

The rules of section 194A only apply as interest is paid to a resident; they do not apply to the amount of interest paid to a non-resident. The equivalent is covered inside the domain of section 195.

People Who Need To Deduct TDS Under Section 194A

Under section 194A, any person (i.e., the payer) who is responsible for paying interest (interest other than on securities) to a citizen, other than an entity or a Hindu undivided family (HUF) under audit under section 44AB, is at risk to deduct charge at the source.

Individuals or HUFs whose net revenue, gross receipts, or profits from their company or career exceed Rs. 1 crore in the case of a business and Rs. Fifty lakhs in the case of a profession promptly going before the monetary year in which the sum mentioned above is charged or charged are entitled to deduct tax under section 194A.

Time of Deduction of TDS

The Deductor responsible for deducting TDS according to arrangements of segment 194A is needed to deduct TDS inside prior to the accompanying dates –

• At the point when cash is credited to the payee’s record; or
• When making a payment by cash, check, draught, or some other method.

Rate of Deduction of TDS

In case the provisions of section 194A of the Income Tax Act are invoked, the Deductor is required to deduct TDS on interest on loan except for interest on securities at a rate of 10%.

In any case, if the Permanent Account Number isn’t outfitted, around there, the Deductor would be obligated to deduct TDS @20%, i.e., highest marginal rate.

The Deadline for Depositing the TDS That Has Been Deducted

The Deductor who has deducted TDS under Section 194A is expected to deposit it inside the accompanying due dates

Months	Due date
April to February	7th of the following month
March	On or before 30th April

In the Following Situations, TDS Is Not Expected To Be Deducted

Assume that an Indian resident furnishes to the payer a written declaration in Form 15G/15H, considering the circumstances, to the extent that his income is below the exemption cap. In that case, the Government shall make no tax deduction under this provision. The following are the laws in this regard:

• Statement (in copy) is to be made in Form No. 15H when the beneficiary is a senior resident and in Form No. 15G when the beneficiary is other than a senior resident.
• The assertion in Form No. 15G/15H can be made simply by an individual occupant in India.
• If the annual interest does not meet the exemption cap, an individual may file Form No. 15 G/15H. (i.e., Rs.2,50,000 or INR 3,00,000 or INR 5,00,000, as the case may be).In the case of a resident senior citizen, this requirement does not apply (i.e., a resident person of at least 60 years of age), i.e., a resident senior citizen can file a Form 15H declaration even though the annual interest likely to be paid to him reaches the exemption cap of INR 2,50,000 or INR 5,00,000, depending on the situation, provided the tax due on his net income after considering the remuneration under section 87A is nil.

The assessment payable on the full payment of the year ought to be “Nil.” The payer who collects a declaration in Form No. 15G/15H must upload information of such statements every quarter under his digital signature on the e-filing portal (www.incometaxindiaefiling.gov.in) within:

• 15 days from the finish of the primary, second, and second from last quarter
• 30 days from the finish of the final quarter.
• Section 194A would not allow the company to withhold any tax on interest credited or paid to its partners.
• At the point when the payee has acquired an authentication from the Assessing Officer for no derivation or lower charge allowance, the payee may document an online application in Form No. 13 for issuance of declaration for no funding of assessment or lower derivation of duty at the source.
• Premium paid to any bank, monetary enterprise, Life Insurance Corporation Unit Trust of India, any organization, or a co-usable society occupied with the protection business is absolved under segment 194A.
• There is no need to pay TDS if the total amount of interest paid by a bank does not exceed INR 40,000 [INR 50,000 in the case of a senior citizen].
• On account of any Co-operative Society, TDS isn’t to be deducted if a total measure of interest doesn’t surpass INR 40,000 [INR 50,000 if there should arise an occurrence of a senior citizen].
• TDS is not applied on interest charged or earned on deposits notified by the Central Government. The same rules apply to TDS on interest on a loan with a direct agricultural credit society, a primary credit society, a co-operative land mortgage bank, or a co-operative land development bank.
• Under Section 197, an assessee may request no TDS or a reduced rate of TDS from the assessing officer.

Is TDS Deductible On Interest On Late Payments On Purchase Bills?

According to section 201, if a person who is required to deduct tax at source fails to do so, or if an individual who is required to deduct tax at source fails to pay the whole tax or a portion of it to the benefit of the Government, at that point such individual will be responsible for paying a basic premium at following rates:

• From the date on which such tax becomes deductible until the date on which such tax is deducted, interest at the rate of one percent a month or half of a month shall be charged on the balance of such tax.
• The Government will collect a premium at 1.5% for consistently or part of a month on the measure of such expense from the date on which such duty was deducted to the date on which such assessment is paid to the Government’s credit.

To put it another way, interest will be charged at a rate of 1% for late deductions and 1.5 percent for late payments following deductions.

How To Deduct TDS On Contractor With Example: What is TDS? The full form of TDS is tax deducted source. Under the TDS system a person while paying in exchange for services such as brokerage, the commission is required to deduct a certain amount from the total amount. That amount is further deposited to the Government. This amount can further be claimed while filing Income Tax Return.

For example, XYZ Pvt Ltd has to make a payment of Rs. 1,00,000 to Mr. A as a professional fee under 10% TDS.

TDS deducted = 10% of 1,00,000 = 10,000

Net payment to Mr. A = Gross amount-TDS = Rs. 1,00,000- Rs, 10,000 = Rs. 90,000

TDS that ABC Pvt Ltd needs to pay the Government = Rs. 10,000

TDS Amount Deduction Under Section 194C

If you are making a payment to the contractor and the amount does not exceed Rs. 30,000, then no amount is deducted for TDS. But if the sum total of the payment to be made or already made during the same financial year exceeds Rs. 70,000 then TDS is deducted. It is explained below with the help of few examples:

Case	TDS to be deducted or not
Contract of Rs. 25000 in a year	NO
Two contracts of Rs. 25,000 in a year	NO
Contract of Rs. 69,999	YES
Contract of Rs. 69,999	NO
Contract of Rs. 69,999 in a year	YES
Two contracts of Rs. 30,000 in a year	NO
Two contracts of Rs. 70,000 in two years	YES
Two contracts of Rs.35,000 in a year	YES

Exceptions on Deduction on TDS

1. If the person does not fall under the category of paying taxes under section 44AB.
2. If the payment is used for personal use.
3. If payment is made for hiring resources, plying or leasing good carriage.
4. If payments are made to airlines or travel agencies for the purchase of air tickets.

Calculation of TDS Amount

Example 1

Service provided by an individual contractor ‘Mr. A’ to a partnership firm ‘XYZ’ and the following payment is being made to the contractor during the year:-

• First payment – Rs 40,000
• Second payment – Rs 20,000
• Third payment – 60,000

Solution

First payment – Rs 40,000

TDS is to be deducted @ 1% as the sum exceeds the limit of Rs 30,000 in a single payment. Therefore, the net payment to be made to A will be Rs 39,600 after deducting TDS of Rs 400 (32,000 * 1%).

Second payment – Rs 20,000

No TDS is deducted since the total single payment amounts less than the limit that is Rs. 30,000. Total payment made during the year will amount to Rs 60,,000 (40,000 + 20,000) which is also less than the threshold limit of RS 75,000.

Third payment – 60,000

Here, TDS is supposed to be deducted since it crosses the threshold of Rs. 30,000. Therefore an amount of 1% shall be deducted from the amount as TDS. Total TDS required to be deducted is Rs 800 (20,000 * 1% + 60,000 * 1%) at the time of making payment of Rs 60,000. Net payment to be made to Mr.  A will be Rs 52,000.

Example 2

In the above example if contractor A is a Partnership Firm in place of an individual.

Solution

First payment – Rs 31,000

It crosses the threshold of Rs. 30,000 so therefore 3% TDS is deducted. After deduction of TDS of Rs. 930, the total amount payable becomes Rs. 30,070.

Second payment – Rs 20,000

No TDS is deducted since the amount is less than Rs. 30,000 and also the total amount throughout the year is less than Rs. 75,000 (31,000+20,000=51,000).

Third payment – 61,000

2% TDS is deducted since total amount (20,000+61,000 = 81,000)

Total TDS to be deducted is Rs 16,20 (20,000 * 2% + 61,000 * 2%) at the time of making payment of Rs 61,000. Net payment to be made to A will be Rs 59,380.

Conclusion on How To Deduct TDS On Contractor With Example

TDS forms a very important and integral part of Income-tax law In India. You must always abide by the rules and regulations of the nation. You should never hide your income statements or lie about them. Pay your taxes regularly and do not forget to claim them at the end of each financial year. If you want to avoid serious complications, do get in touch with a well-known CA around your locality who will assist you and guide you on matters regarding taxes and accounting.

Section 194C TDS Contractors: Requirements To Deduct TDS Under This Section. Section 194C deals with the amount of any sum to the resident contractor (including the supply of labour) by any person to carry out any work based on a contract. The contract can be between the contractor and any one of the following:

• Any State Government or Central Government.
• Local Authority.
• Corporation established under Central, State or Provisional Act.
• Co-operative Society.
• Company.
• Firm.
• Any Deemed University or University.
• Societies registered under Society Registration Act, 1980.
• Authorities constituted in India under any law engaged in satisfying and dealing with housing accommodation, development and improvement of cities, towns, villages and planning.

Limitations for TDS Under Section 194C

• TDS shall not be deducted if payments under section 194C limit to ₹30,000 for a single contract.
• TDS shall be deducted if the aggregate payment of a contract exceeds ₹100,000.
• Payment made at any time during the previous year to any goods transporter who is in the business of hiring, plying or leasing goods and owns ten or more carriages. The contractor has to furnish PAN along with the declaration of the above.
• Personal purposes
• Section 194C limits TDS deduction if payments are made to any non-resident contractor or sub-contractor.
• Payments made to any bank listed in the Second Schedule of the RBI act excluding foreign bank for
• Cash management service charges
• Clearing charges (MICR charges)
• Bank guarantee commission
• Depository charges on maintenance of DEMAT accounts
• Underwriting service charges
• Charges for warehousing services for commodities
• Debit card or Credit card commission for transactions between the merchant establishment and acquirement bank – Notification no. 56/2012, dated 31st December 2012
• According to the payer’s specification, if payments are made for purchasing any products. TDS is to be deducted if the product is manufactured using material purchased by the payer.

Threshold Limit In Section 194C

• The threshold limit for a single payment or credit is 30,000.
• The threshold limit for the aggregate amount credited or paid or likely to be paid is ₹100,000.

Rate Of TDS Under Section 194C

Payment Made To	Contractor/Payee provides PAN	Contractor/Payee does not provide PAN
Hindu Undivided Families (HUFs)	1%	20%
Resident Individuals	1%	20%
Any party which is other than HUFs or resident individuals	2%	20%
Transporters, with not more than 10 vehicles	No TDS deduction	20%
Transporters, with more than 10 vehicles	Either 1% or 2% Depends on the recipent status	20%

Deduction Time

When the amount is credited to the payee’s account of such contract or sub-contractor by cash, draft, cheque or any other modes, tax is to be deducted. If the amount is credited in March, TDS will be deposited on or before 30th April. If the amount is credited in a month other than March, then TDS should be deducted within seven days from the end of the month.

What Is The Meaning Of Sub-contractor And Contractor?

Sub-contractor: It means a person who enters into a contract for:

• Supplying labour for all or part of work taken by the contractor.
• Performing all or part of work for which the contractor has agreed to complete.

Contractor: It means any person who enters into a contract with state/central government, corporation, local authority, company or a cooperative society to perform any form of work (including the supply of labour).

What Is The Meaning Of Work u/s 194C?

• Advertising
• Telecasting and broadcasting, including the production of programs too.
• Catering.
• Transport of passengers and goods using any mode of transport excluding railways.
• Supply or manufacturing product as per customer specification and by using materials purchased from him or her. It does not include the supply and manufacture of a product as per customer specification but materials purchased from other customers.

Other Points

• As per notification no. 01/2014, tax is deductible on the amount excluding GST if the GST amount is shown separately.
• Under section 194C, education cess, surcharge or secondary and higher education cess is not payable.
• Manufacturing or supplying product based on contract, TDS shall be deductible on the value of product excluding the value of material, if such value is separately mentioned in the invoice. TDS shall be debited on the whole amount of the invoice if not mentioned separately.

Calculation Of TDS In Case Of Composite Work Under Section 194C

Work includes supplying or manufacturing a product as per customer specification and by using the material purchased by the customer. Therefore, TDS will be deducted on:

TDS will be debited on the invoice value, excluding the material price.

When the material price is not indicated separately, TDS will be deducted from the total invoice value.

Under Section 194C, The Specified Persons Who Are Required To Deduct TDS

• Any person, being a HUF or an Individual or a body of individuals or an association of persons if such person—fails to fit into any of the preceding sub-clauses and
• Is liable to accounts audit under clause (a) or clause (b) of Section 44AB during the financial year immediately preceding the financial year in which such sum is credited to the contractor’s account. In other words, the only assessee is liable to audit due to receipts or turnover greater than ₹ 10 million or ₹ 2.5 lakh as the case may be.
• Any partnership firm
• Any company
• Local Jurisdiction
• Any corporation recognized by or under a Central, State or Provincial Act.
• The Central Government or any State Government
• Any cooperative society
• Authorities constituted in India under any law engaged in satisfying and dealing with housing accommodation, development, and improvement of cities, towns, villages, and the purpose of planning.
• Any university recognized or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956)
• Societies registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India
• Any Trust
• Any foreign enterprise or any association or Government of a foreign State or body established outside India.

SMS Alerts for TDS Deduction From Income Tax Department: SMS Alert for TDS is to resolve the issue of Income Tax Return (ITR) made by individuals due to a mismatch in the TDS deducted in the salary.  The Central Board of Direct Taxes (CBDT) launched the SMS Alert service to inform the salaried taxpayers about their TDS against the PAN.

What Is TDS?

TDS refers to Tax Deducted At Source. As per the Income Tax Act, any individual or company making structured payments must deduct the TDS amount of Tax at the source if the cost exceeds certain threshold limits.

Every individual or company deducts TDS at the rates prescribed by the tax department. A company or an individual making the structured payment upon deduction of TDS is referred to as a deductor. The individual or the company receiving the deducted amount is referred to as the deductee.

The deductor’s responsibility is to deduct TDS before cashing the payment and deposit the same with the Government. It is to be noted that TDS is deducted irrespective of the mode of payment- cheque, cash, or credit. TDS is linked to the PAN of the deductor, and then the amount is deducted.

TDS amount is subtracted on the multiple types of payments:

• Salaries
• Interest payments by banks
• Commission payments
• Rent payments
• Consultation fees
• Professional fees

What Is TDS Return?

A deductor has to deposit the deducted TDS amount to the Government, and the details regarding the  TDS amount have to be filed in the form of a TDS return. A TDS return has to be completed quarterly, and the different types of TDS amount deductions have to be filed using various TDS return forms. While preparing a TDS return, the process can be done quickly using the ClearTDS software.

Features of Quarterly SMS Alert for TDS Deduction

The CBDT board stated that all employees would receive quarterly SMS alert Service for salaries regarding TDS. Through the SMS alerts, deductees can check the TDS amount through the message received. If any mismatch or errors are flagged, then immediate issues can arise with their employers or the deductors.

Simultaneously, SMS Alerts for TDS will also be sent to the deductor who have either failed to deposit taxes deducted or to e-file their TDS returns by the due date.

The SMS Alert initiative is aimed to benefit around 2.5 Crore salaried taxpayers. The Income Tax Department wishes to expand the SMS Alerts frequency to 4.4 crores for non-salaried taxpayers. The SMS Alerts frequency will be increased once the TDS returns filing process is streamlined to receive any critical information on a real-time basis.

To receive an SMS alert, deductees must update the respective mobile number in the E-filing account. Upon receiving the quarterly SMS Alert for salaried taxpayers on the TDS amount, the deductees will have to cross-check the details with the Form 26AS on priority.

What Is Form 26AS?

The Income Tax Department issues the annual consolidated statement known as Form 26AS. Form 26AS comprises the details of refund,  TDS, or TCS facility related to a particular PAN number. The Form will reflect the Government’s Tax on various income sources like Pension income, Salary, or Deposits. Form 26AS is generated on an annual basis, that is, for every Financial year. The Form will be generated whenever the TAx related transactions like Advance tax paid or TDS occurs with the salaried taxpayer.

Where To Access Form 26AS?

The primary source of Form 26AS is the e-Filing portal of the Income Tax Department. To access Form 26AS, log in
with the credentials and invoke the “My Account” tab. From the drop-down menu, select the 26AS option.

The page will be directed to the TDS Reconciliation Analysis and Correction Enabling System (TRACES) website. Upon reaching, input the relevant AY and the format of the report. This allows the deductee to view and download Form 26AS.

The process is straightforward, and the individual will receive Form 26AS in the registered mail ID seamlessly. However, the source is TRACES.

Reasons for TDS Mismatch

There are several reasons for a TDS mismatch to occur, but the most significant reason is the employer’s negligence or deductor. A few other reasons are:

• If the employer or deductor has failed to file a TDS return.
• Mention of a wrong PAN number of the employee or deductee.
• Recognition of a wrong PAN and TAN number of employers or deductors.
• Missing out the inclusion of details of TDS payment while filing TDS return.
• Mention of a wrong challan identification number.
• Error in the amount entered.
• Statement of the wrong assessment year.

The Advantages Of SMS Alerts

• Mismatches in the TDS amount deducted and details updated in Form 26AS can create errors or problems while filing Income Tax Returns. A mismatch can result in the payment of additional taxes or restriction in the refund of excess Tax for taxpayers.
• SMS Alerts helps employees or deductees remain aware of the TDS amount deducted and deposited against their PAN. This facility allows deductees to take immediate and necessary actions to rectify and correct the flagged error or mismatch.
• In case of a mismatch or an error, salaried taxpayers should consult the employer or deductor and report the error or mismatch to rectify the necessary corrections.
• As per the CBDT press release, the SMS Alert service for direct tax payment has been activated for about 2.5 million salaried employees or deductees in both the private and Government sector. The CBDT department plans to expand this facility to about 44 million non-salaried taxpayers, including professionals like doctors and lawyers and business people.
• Similar SMS Alerts will be sent to the deductors who have collected the TDS amount.
• The SMS Alerts aims to inform and remind the deductors to file the Tax if left undone and to fill the file necessary for TDS returns by the due date.
• According to Income-tax Rules, the TDS deducted needs to be deposited by the seventh day of the corresponding month in which the TDS amount was deducted.
• The Income-tax department aims to increase SMS Alerts’ frequency upon which the process for filing TDS return is streamlined, making the alerts go out on a real-time basis.
• To receive an update regarding SMS Alerts, the deductees must enter the applicable mobile number in the e-filing account.

TDS Challan Correction: If one has selected the wrong assessment year, or furnished incorrect PAN/TAN details, or entered an incorrect amount in the TDS challan, one can lose tax credit benefits or even be charged a hefty fine.

However, if one realise their error in time, they can initiate a TDS challan correction to rectify the mistakes and resubmit it with the tax authorities. This process, also known as OLTAS (Online Tax Accounting System) challan correction, provides a simple method of rectification for those filing TDS returns. Challan correction can be carried out either by the online or offline process.

TDS Challan Correction Offline Physical Challan

A new challan correction mechanism for the correction of physical challans has been prescribed for payments made on or after 1st September 2011. We have provided below a list of challan corrections that can be carried out and who is authorised for such modification:

Serial Number	Field In Which Correction Has To Be Made	Authority To Make Correction	Time Limit For Correction By Bank
1.	PAN/TAN	Collecting bank* / assessing officer in case of offline challan. The concerned assessing officer in case of online challans.	Within seven days after the challan deposit date
2.	Assessment Year		Within seven days after the challan deposit date
3.	Major Head Code		Within three months after the challan deposit date
4.	Minor Head Code		Within three months after the challan deposit date
5.	Nature Of Payment		Within three months after the challan deposit date
6.	Total Amount		Within seven days after the challan deposit date
7.	Name	The concerned assessing officer in case of both online and offline challans.	N/A

Challan Correction by the Bank

Challan correction by the bank is subjected to the following conditions:

• The bank cannot carry out name correction.
• Any combination of correction of the Minor Head and Assessment Year together is not permitted.
• PAN/TAN correction will only be allowed when the name in the challan matches with the name in the new PAN/TAN
• Change of amount is allowed only when the amount so corrected is not different from the bank’s amount and credited to Government Account.
• Correction is permitted only once for a single challan for a particular field. E.g., Where 1st correction request is made only for the amount, a 2nd correction request will be allowed for correction in other areas.
• There will be no such partial acceptance of the change correction request. Either all the requested changes will be permitted if they pass the validation, or no change will be permitted if any one of the changes fails the validation test.

Fields needed to be filled out during the TDS Challan Correction Form.

OLTAS Correction Request Form

The following are the main fields to be filled out in an OLTAS challan correction request form:

• Taxpayer details – Name, Address and PAN/TAN details
• Address of the bank branch where the form is being submitted
• Authorised signatory name (if the taxpayer is a non-individual)
• Choose the Challan number which requires correction (Challan 280/Challan 281/Challan 282/ Challan 283)
• Details of TDS challan requiring modification – Challan Tender date, Serial number and BSR Code.
• Details of correction needed for challan – choose which challan detail needs correction and provide original (incorrect) entry and correct entry.
• Signature of taxpayer/authorised signatory

Procedure for Approaching The Bank for Challan Correction

• The taxpayer needs to submit the request form for correction (duplicate) to the concerned branch of the bank.
• The taxpayer is needed to attach a copy of the original challan counterfoil.
• In the case of modification desired for challans in Form 280, 282, 283, a copy of the PAN card must be attached.
• In the case of non-individual taxpayers, the original authorization with a seal of the non-individual taxpayer is needed to be attached with the request form.
• A separate request form needs to be submitted for each challan.

Procedure for Approaching Assessing Officer for Challan Correction

Once the time limit to approach the bank for challan correction expires, a taxpayer can request a modification.

The request has to be made to the concerned assessing officer who is authorized under the OLTAS application to make any such correction in challan data in genuine cases enabling credit of the taxes paid to the concerned taxpayer. The other steps are similar to approaching a bank as mentioned above.

TDS Challan Correction Online

Online correction of TDS challan must be carried out on the website ‘TRACES’ (TDS Reconciliation Analysis and Correction Enabling System). It is mandatory to have a digital signature to register on TRACES in order to request online challan correction.

Steps for online correction on TRACES are as follows

• Login to the TRACES website with the user ID, passwords and TAN.
• Under defaults, choose ‘Request for correction.’
• Enter relevant Form Type, Financial Year, Quarter, whether Latest Accepted Token number. The correction category should be “Online”, and click on ‘Submit.’
• A request number will be generated.
• Next, click on ‘Go To Track Correction Request’ under Defaults again. Now enter Request number or Request period and click on ‘View Request’ or click on ‘View All Requests’
• When request status** shows ‘Available’, click on Available / In progress status to proceed with the correction
• Provide information on valid KYC.
• Select type of correction category from the drop-down as ‘Challan Correction.’
• Make the needed corrections in the selected file.
• Click on ‘Submit for Processing’ to submit your correction.
• A 15 digits token number will be generated and mailed to the registered e-mail ID.

Status of Correction Request

Request	The user has submitted a request for correction.
Initiated	TDS CPC is processing the request
Available	Request for modification is accepted, and the statement is made available for modification. The user can start correcting the statement. By clicking on this hyperlink, the user will be directed to the validation screen. Once the user clicks on the request with ‘Available’ status, the status of the request/statement will change to ‘In Progress.’
Failed	Request cannot be made available because of a technical error. Users can re-submit the request for the exact details.
In Progress	The user is working on a statement. Clicking on the hyperlink will direct the user to the validation screen.
Submitted to Admin User</strong	Sub-user / Admin User has submitted the correction statement to the Admin User.
Submitted to ITD	The admin user has submitted the correction statement to ITD for processing.
Processed	The statement has been processed by TDS CPC (either for Form 26AS or for defaults).
Rejected

The statement has been rejected by TDS CPC after processing. Rejection reasons will be displayed in the ‘Remarks’ column.