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What are the duties of the person deducting tax at source?

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posted Apr 2, 2016 by Rupali Thakur

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1. Deduct Tax at Correct Rate and deposit in Government Account –Every person responsible for deducting tax at source shall at the time of payment or credit of income, whichever is earlier, verify whether the payment being made is to be subject to deduction of tax at source. If it is so, he must deduct such tax as per the prescribed rates. Further he is required to deposit such tax deducted in the Central Government Account within the prescribed time as specified in Rule 30.

Electronic payment of taxes

i. An optional scheme of electronic payment of taxes for income-tax was introduced in 2004. However with a view to expand the scope of electronic payment of taxes, the scheme of electronic payment of taxes has been made mandatory for the following categories of tax-payers(vide notification No. 34/2008 dt. 13.3.2008 of CBDT).

(i) All corporate assessees;

(ii) All assessees(other than company) to whom provisions of section 44AB of the Income Tax Act are applicable.

ii. The scheme of mandatory electronic payment of taxes for income-tax payers is to be made applicable from 1st April, 2008and shall also be applicable to payment of taxes to Government account where tax has been deducted at source.

iii. Tax-payers can make electronic payment of taxes through the internet banking facility offered by the authorized banks. They will also be provided with an option to make electronic payment of taxes through internet by way of credit or debit cards.

2. Issue a TDS certificate

Further, such person is required to issue a certificate of tax deduction at source to the person from whose income the TDS has been done, in the prescribed proforma i.e. Form No.16A, within one month from the end of the month during which the credit has been given or the sums have been paid or a cheque/warrant for payment of any dividend has been issued to a shareholder.

3. File Return/Quarterly Statement

Finally, Sec.206 prescribes that every person, e.g. Principal Officer in the case of a company, prescribed person in case of Government Office and local authority or public body, and every other person responsible for deducting tax at source, within a prescribed time after the end of Financial Year, shall prepare and deliver or cause to be delivered, a prescribed return in prescribed form, verified and containing prescribed particulars. This return is commonly referred as the annual return of TDS. However the Finance Act 2006 provides that annual return of TDS is to be furnished only for deductions made before 1st of April 2005.

The law also provides for filing of annual return in computer readable media, referred as e-filing of annual return.The provisions of e-filing of annual return of TDS are being given below.

4. Filing of Annual Return on Computer Readable Media

Section 206(2) permits the deductor to file the annual return of TDS on computer readable media including a floppy, diskette, magnetic cartridge tape or CD ROM. However, the Finance Act 2003 has provided that w.e.f. 01.06.2003, a return in computer readable media is to be filed only in accordance with such scheme and subject to such conditions and manner, as may be specified by the Board by notification in official gazette.

Further where the assessing officer considers a return filed u/s 206(2) to be defective, then he may intimate the defect to the deductor/employer filing the return, giving him an opportunity to rectify the defect. This must be rectified within a period of 15 days from the date of intimation or within such further period which the assessing officer allows, on an application made by the employer/ deductor. However, on failure to rectify the defect within the period specified above, the return shall be treated to be invalid and the provisions of the Act shall apply as if the person had failed to deliver the return.

As per proviso to section 206(2) , w.e.f. 1.4.2005,the prescribed person in the case of every office of the government and the principal officer in the case of every company, responsible for deducting tax , is mandatorily required to deliver such returns on the computer readable media, after the end of each financial year and within the prescribed time.

The scheme of electronic filing of return of the Tax Deducted at Source (e-TDS) has been notified vide notification no. S.O. 974(e)dt. 26.08.03. Now the Government and the Corporate deductors are required to file the annual TDS return in electronic form only with the e-TDS intermediary at any of the TIN Facilitation Centres (particulars available at the websites, www.incometaxindia.gov.in and http://www.tin-nsdl.com.

Vide Notification No.238/2007, dated 30.08.2007 of CBDT the scope of mandatory filing of e-TDS returns has been expanded. This notification comes into force w.e.f. 1 .9.2007. Hence it is applicable from the second quarter of the F.Y. 2007-08 and for all subsequent quarters. As per this notification the following classes of deductors are required to furnish quarterly statements in computer readable media(e-tds) where the deductor is;

(a) An office of the Government

(b) A company

(c) A person required to get its accounts audited u/s. 44AB in the immediately preceding financial year.

(d) Where the number of deductees records in quarterly statement for any quarter during the immediately preceding financial year is equal to or more than fifty.

5. Quarterly statement of TDS

The provisions of quarterly statements of TDS have been introduced in the statute vide section 200(3) w.e.f. 01/04/2005. Every person responsible for deducting tax is required to file quarterly statements of TDS for the quarters ending on 30th June, 30th September, 31st December and 31st March in each Financial Year. This statement is to be prepared in Form No.26 Q for TDS other than salaries,Form No.27 EQ ( for Tax collection at source) and 24Q( for salaries) (relevant rule 31A and 31AA) and is to be delivered with prescribed income-tax authority or the person authorized by such authority on or before the 15th July, the 15th October and the 15th January in respect of the first 3 quarters of the Financial Year and on or before the 15th June following the last quarter of the Financial Year. However the statement of last quarter in form 27EQ is to be furnished by 30th April.

With respect to the quarterly statements of TDS, the following points are noteworthy : –

• Every deductor is required to file the quarterly statement of TDS in prescribed form for each quarter as per the dates specified above.

• In case of every Government and Corporate deductor, the quarterly statements are to be delivered on computer readable media (3.5”, 1.44 MB floppy diskette or CD-Rom of 650 MB capacity). The statement in computer readable media is to be prepared as per data structure provided by the e-filing Administrator(DGIT Systems) designated by the Board for purposes of e-TDS Scheme : 2003. Further, a declaration in Form 27A or 27B is also to be submitted in paper format. This scheme has been extended to apply to categories of entities! persons mentioned earlier at para 4.

• A person other than a corporate or government deductor or that specified in para 8.4 may at his option deliver the quarterly statements in computer readable media as specified above. However, it is not mandatory for him to do so.

• The quarterly statements are to be furnished in accordance with the provisions of rule 31A and rule 31AA.

• The persons referred to in Rule 37A (who are making payment to a non-resident or a foreign company) are required to file quarterly statements in accordance with provisions of rule 37A and rule 37B.

• It is mandatory for the deductor to quote TAN and PAN in the quarterly statements. However, where the deduction has been made by or on behalf of the Government, PAN shall not be required to be quoted in the quarterly statement.

• In the quarterly statements, the deductor is also required to quote the Permanent Account Number (PAN) of all persons in respect of whom Income-tax has been deducted. However, PAN of those persons is not required to be quoted who are specified under second proviso to sub section (5B) to section 1 39A. These persons include those who are not required to obtain PAN under any provisions of this Act or those whose total income is not chargeable to Income-tax.

• The deductor is also required to furnish the particulars of tax paid to the Central Government in the quarterly statements.

Quarterly statement of collection of tax under sub-section( 3) of section 206C

• Every person, being a person responsible for collecting tax under section 206C shall, in accordance with the proviso to sub-section(3) of Section 206C, deliver or cause to be delivered to [the Director General of Income-tax(Systems) or the person authorized by the Director General of Income-tax(Systems)], quarterly statement in Form No. 27EQ on or before the 15th July, the 1 5th October, the 1 5th January in respect of the first three quarters of the financial year and on or before the 30th April following the last quarter of the financial year :

• The person responsible for collecting tax at source on behalf of Government and the principal officer in the case of every company responsible for collecting tax at source shall deliver or cause to be delivered such quarterly statements on computer media(3.5” 1.44 MB floppy diskette or CD-ROM of 650 MB capacity):

It is pertinent to note that for quarter ending 30.9.2007 and thereafter form No. 26Q and 27Q with less than 70% of correct PAN data will not be accepted and penal consequences under the I.T. Act will follow(circular No. 8!2007 dt. 1 5!1 2!2007). This limit has been further increased to 85%(from 70%) for and from quarter ending 31.3.2008.

• A person other than a person referred to in the first proviso, responsible for collecting tax at source, may at his option, deliver or cause to be delivered the quarterly statements on computer media(3.5” 1.44 MB floppy diskette or CD-ROM of 650 MB capacity).

• The person responsible for collecting tax at source and preparing quarterly statements shall, –

(i) quote his tax deduction and collection account number(TAN) and permanent account number(PAN) in the quarterly statement.

(ii) provided that the permanent account number shall not be required to be quoted where tax has been collected by or on behalf of the Government ;

(iii) furnish particulars of the tax paid to the Central Government;

• The person responsible for collecting tax at source and preparing quarterly statements on computer media shall, in addition to the provisions in sub-rule(2), – prepare the quarterly statement as per the data structure provided by the e-filing administrator designated by the Board for the purposes of administration of Electronic Filing of Returns of Tax collected at Source Scheme, 2005 supported by a declaration in Form No. 27A in paper format; Provided that in case any compression software has been used for preparing the quarterly statement on computer media, such compression software shall be furnished on the same computer media.

answer Jul 11 by Sumeet Vyas
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