Quick Fix: Short TDS Payment & Short Deduction Defaults
As notices have been issued by the CPC (TDS) on the filing of the Quarterly TDS Statements, TDS has become a torment not only for the assessee but also for the tax professionals.
We are attempting to make you well-acquainted with some of the common problems related to short TDS payment and short TDS deduction and their solutions by listing them in a precise way along with their quick fix.
Short Deduction defaults may hoist because of various reasons, some of them are as follows:
- Pan Errors
- Wrong quotation of Lower Deduction Certificate
- Mistake in TDS
- Incorrect reporting of 15G and 15H Certificates
Short payment defaults may occur due to the Challan errors which mean wrong quoting of the below-mentioned particulars of the challan:
- Challan Number
- BSR Code of the bank in which tax is deposited.
- Tender date of deposit of the challan
A) Short TDS Deduction Defaults
Now we will take a deeper dive into the circumstances which consequence short TDS deduction.
- PAN Errors
This is one of the primary reasons for short deduction defaults
Furnishing the correct details about PAN is very important in the TDS Return. The consequences of Quoting the wrong PAN are as follows:
- It brings out the TDS demand of 20% less the amount of TDS already deducted.
- No TDS Credit is given to the deductee whose TDS has been deducted.
- Defaults in furnishing TDS Certificates (because now TDS Certificates are issued from the TRACES website)
- CPC (TDS) during the time of dealing with correction statement, does not correct the errors in PAN (when the mistake is of more than two alphabets and two numeric characters)
- When the PAN Errors is of more than 2 alphabets and 2 numeric characters, two ways for correcting it are as follows:
- To file the correction statement by making the entry with an incorrect PAN with an amount proportional to zero as the deductee entry cannot be removed and then affix a fresh row of deductee for the TDS deducted and the amount paid with the right PAN.
- To approach against the intimation under section 200A with the CIT (TDS)
- For the rectification, a client needs to have a Copy of PAN card of the deductee and a client needs to deduct TDS@20% when the PAN of the deductee is not present.
Error in the PAN can be rectified via Correction statement by using the correction facility available online at www.tdscpc.gov.in. One can use this facility by entering the right details of the deductor’s profile on the TRACES website while the digital signature of the authorized person may or may not be needed for using this facility.
- When the particulars of Lower Deduction Certificate U/s 197 is wrongly quoted
Incorrect quotation of the particulars of the certificate of lower deduction of tax is another reason for the short deduction default. While filing the TDS return, we should focus on the correct quotation of Certificate Number, Validity Period of the certificate, Amount limit up to which lower deduction is applicable, Tax deduction rate specified in the certificate.
Certificate Number: It is the ten digits alphanumeric number specified along with the TAN and the deductee’s name.
Note: Reference No. written at the top side of the certificate is not the number which has to be quoted as certificate number while filing the TDS Return. This is a common mistake which assesses do while filing the returns.
Validity Period: Validity period is the specified period for which a lower deduction certificate is valid. We must take care to deduct TDS at the lower rate solely for the transactions which took place in the validity period specified in the Certificate.
Note: Standard TDS rates (prescribed under law) are applicable on transactions which took place before and after a specified period or the validity period.
Valid Amount: This is the amount specified in the certificate, for which lower deduction certificate is valid.
Note: Standard Tax rates (prescribed under law) are applicable on transactions when the total amount of the transactions surpasses the limit mentioned in the certificate.
Rate: This is the rate at which TDS should be deducted. This rate is also mentioned in the certificate.
- Mistake in TDS
Sometimes the assessee makes a mistake to deducts TDS on a lesser amount than prescribed by the Act. In such a case the remaining amount of tax which has to be paid should be calculated and deposited immediately through a fresh challan.
Incorrect reporting of 15G and 15H Certificates:
Many people are not aware of the fact that no deduction of tax (because of receipt of Forms 15G and 15H), also needs to be reported in the TDS Return, particularly when banks are filing their TDS returns.
Incorrect reporting of forms 15G/H particulars can lead to short deduction defaults.
B) Short TDS Payment Defaults
Now we will dig deeper into the reasons because of which short payment defaults sprouts out:
- Challan errors:
Short payment errors also arise when the particulars of the challan through which tax has been paid are wrongly quoted.
Challan Number, Tender date of deposit of the challan and BSR Code of the bank in which tax is deposited are the important particulars of the challan which needs to be correctly quoted in the TDS Return along with the details of the payment bank and the mode by which tax is paid.
Let's know more about these particulars:
1.Challan Number: It is a five digit number which a banker provides in every challan while clearing the challan.
The challan number should be reconfirmed from the bank in case of non-clarity or confusion. The same cane confirmed via link → tin.tin.nsdl.com/oltas/index.html
You will get two options when you log in to the link. The two options are Challan based view and TAN Based view.
- Challan based view
If you opt for Challan based view, you can verify the particulars of each challan by entering the below-mentioned details:
- BSR Code
- Challan tender date
- Challan Serial Number/Challan number
- Challan Amount
Note: Challan based view is useful when you have an idea the particulars and you just need to confirm them.
b) TAN Based view:
If you opt for TAN based view, you can verify the particulars of each challan by entering the TAN (Tax Deduction and Collection Account Number) of the deductor and the period for which you want to check the challans. Here the period cannot be more than 24 months.
After entering a period and the TAN, the list of all the challans paid across the time which you have opted will appear. Now the particulars of the challan can be confirmed by entering the amount of challan.
2. Challan tender date: It is the date on which the challan is presented for clearing to the bank. The challan tender date is imprinted on the challan by the bank at the time of payment. The date can also be verified using the above-mentioned link.
3. BSR Code: Every branch of the bank has a separate seven-digit code which is known as BSR code. BSR Code of any bank can be checked by contacting the respective branch or through the internet.
4. Challan amount: The Challan amount is the total amount of tax paid summed up with amount like interest, penalty and fee under section 234E, paid in the challan.
These days a challan file is downloaded while generating the TDS Return as this file verifies that the particulars of the challan have been rightly entered in the Return. When the particulars entered in the return are incorrect, a warning → ‘Challan details are not present in the challan file downloaded.’ gets displayed. In general, the TDS Return is filed on the day or a day later, the challan is deposited in the bank for payment. In such cases also a warning file may appear because of non-clearance of the challan till that time.
So a person should file the return only after the clearance of challan from the bank because when we file the return, it is processed at CPC (TDS) and if during the processing time, the particulars of the challan are available in the challan file, then CPC will raise demand for less payment of Tax which is not the case in reality.
- CPC (TDS) mandates the closure of above-mentioned defaults by tagging unused challans, if present in CPC (TDS) system, via online correction facility (with/without digital signature).
- When the challan for consumption is unavailable, the deductor first needs to deposit the pending tax in the bank and then only after 3 to 4 days, the challan will become available in CPC (TDS) system.
- CPC (TDS) mandates the closure above mentioned default by Matching/Payment of challans.
- The user will not be able to download Conso file for the relevant TDS statement before the closure above mentioned default.
- The closure of the default will let users download the Conso file for an appropriate period of time.
- The Short Payment default can be terminated only by using online Correction facility of TRACES
Note: TDS software automates the return filing, calculates TDS and thus leaves no chances for errors i.e. The Gen TDS free online filing software helps you in the following compliance as per the government norms & regulation. As developed by decade-old SAG Infotech Pvt Ltd already known for Gen IT software.