E-filing of TDS Returns

CA Sanjay Gogate

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STATUTORY BACKGROUND :

Finance Act, 2003 amended section 206 of Income Tax Act, 1961 to make it mandatory for corporate deductors to furnish their TDS returns in electronic form (e-TDS returns). The scheme for furnishing TDS return in electronic form was notified by the Central Board of Direct Taxes (CBDT) vide Notification No. 205/2003 dated August 26, 2003.

Finance Act, 2004, further amended section 206 of the Income Tax Act, 1961, making it mandatory for government deductors also to furnish e-TDS returns from F.Y. 2004-05. E-TDS returns are to be prepared in accordance with the data structure (file format) specified by Income Tax Department (ITD).

Income Tax Department vide its notification no. 238/2007 dated August, 2007 amended Rules 31A of the Income Tax Rules, 1962 to provide mandatory electronic filing of TDS return in respect of following cases :

� Deductors required to get accounts audited u.s. 44AB in the immediately preceding financial year.

� Deductors having number of deductee records in a quarterly return for any quarter of the immediately preceding financial year more than or equal to 50.

FORMS & PERIODICITY

Following are returns for TDS and TCS which are to be filed quarterly.

Form No. Particulars Due Date of Furnishing Statement

Form 24Q Statement of TDS from Salaries. For first three quarters: within 15 days from end of quarter. For last quarter: up to 15th June in the succeeding F.Y.

Form 26Q Statement of TDS in respect of all payments other than Salaries

Form 27Q #

Statement of TDS in respect of payments to Non Residents

Form 27EQ

Statement of TCS For first three quarters: within 15 days from end of quarter. For last quarter: up to 30th April in the succeeding F.Y.

# The due dates for filing Form 27Q has been amended vide CBDT Notification S.O. 220(E) [Notification no.11/2009. F. No. 142/01/2009-TPL, dated January 21, 2009].

CBDT has designated Director General of Income Tax ( Systems ) as ‘e-filing administrator’ for the purpose of administration of scheme of E-filing of TDS. CBDT has authorised National Security Depository Ltd. ( NSDL ) to be ‘e-TDS Intermediary’. NSDL has established TIN Facilitation Centres (TIN-FCs) across the country to facilitate deductors furnish their e-TDS returns. PREPARATION OF E TDS RETURN

e-TDS return has to be prepared in accordance with the file format prescribed by the Income Tax Department. NSDL has provided free downloadable utility at http://tin.nsdl.com for the purpose of preparation of e-TDS return. Alternatively, various softwares are available for preparation of TDS returns. Following points should be noted while preparing E-TDS return :

1. Payment of TDS / TCS in Bank and Verification thereof

(i) Challan no. 281 should be used for deposit of TDS/TCS.

(ii) Correct 10-digit Tax Deduction Account Number (TAN), name and address of the deductor/collector should be quoted on each challan used for depositing tax. TAN details should be verified from the Income Tax Department web-site.

(iii) Separate challans should be used to deposit tax deducted under different sections. Correct code for nature of payment should be indicated in the relevant column in the challan. (For example, 94C for payment to contractors and sub-contractors, 94I for rent).

(iv) Separate challans should be used to deposit tax deducted for different types of deductees, i.e. Corporate or Non Corporate.

(v) It is mandatory for the following types of assessees to pay tax online with effect from April 1,2008. a) All the corporate assessees. b) All assessees (other than company) to whom provisions of section

44AB of the Income Tax Act, 1961 are applicable.

(vi) Challan Identification Number ( CIN ) : After the taxes are paid, the collecting bank branch will give a counter foil as acknowledgement for the taxes paid. Ensure that the bank has mentioned the Challan Identification Number (CIN) on the counter foil. CIN has three parts : 7 digit BSR code of the bank branch where tax is deposited, Date of Deposit of tax and Serial Number of Challan.

(vii) The status of the challan deposited can be viewed on the NSDL-TIN website (www.tin-nsdl.com) under the link “Challan Status Enquiry”.

(viii) Challan Amount

a) Actual challan amount should be mentioned in the TDS Return. This will enable matching the challan details provided by the deductor in the TDS return with the challan details uploaded by banks.

b) If TDS for two months (June and July) was paid using one challan, the same challan details should be repeated for both Q1 and Q2. However, it should be ensured that the total TDS deposited for the corresponding deductees given in returns for both quarters should be less than or equal to the challan amount.

3. Permanent Account Number of Deductee In case valid PAN of a deductee is not available, the deductor should mention the details as under : PANAPPLIED - in case deductee does not have a PAN but has applied and provided proof of application of PAN. PANNOTAVBL - where deductee has not given any PAN or proof of PAN application. This means PAN is not available. PANINVALID - where deductee has provided PAN but it is structurally invalid. The Deductee PAN field should contain a structurally valid PAN or PANAPPLIED or PANNOTAVBL or PANINVALID only. If any other value is mentioned in this field then the FVU will give an error during validation of the TDS return.

4. Deductee Type ( Company / Non Company )

Deductee Type should be properly indicated.

5. Payment by Book Entry or Otherwise

If tax is deducted on the basis of provision made on the last day of the accounting year then the option ‘Paid by Book Entry’ has to be selected. This is necessary to ascertain the correct due date of payment for such tax deduction.

6. Rate of TDS & Reason Code for non deduction or lower deduction :

The rate of tds should be correctly mentioned in the e-TDS return. If lower deduction / no deduction is on account of a certificate under section 197, then this should be indicated by writing ‘A’ in the appropriate column. If lower deduction / no deduction is on account of declaration under section 197A, then this should be indicated by writing ‘B’ in the appropriate column.

VALIDATION OF E TDS RETURN

File Validation Utility (FVU) has been developed by NSDL to help deductors ensure that the e-TDS returns prepared by them conform to the prescribed file format. After preparing e-TDS return in accordance with the file formats notified by ITD, a text file is generated with ‘txt’ as filename extension. This *.txt file should be validated using the latest FVU to ascertain whether the return contains any format level error(s). In case the errors are found, these errors should be rectified and the file should be validated once again. This procedure should be repeated till an error free return is prepared. It should

be noted that the FVU validates only the format level accuracy of the e-TDS return.

After successful validation of input file, three files are generated : TDS Statement Statistics Report, PAN statistics report and upload file. Eg. In case of valid file for Form 26Q, the FVU will generate three files as follows

i. Form26Q.html : ‘TDS Return Statistics Report’

This report is a summary of the e-TDS return successfully validated by the FVU. It should be ensured that the control totals along with the TAN, assessment year and other details as reflected in this report match with the actual information.

ii. Form26Q_PAN_Statistics.html

This is a PAN Statistics Report which contain list of deductee PAN deficiencies like invalid PAN, PAN not available and PAN applied. If there are no PAN deficiencies, then this file will not be generated.

iii. Form26Q.fvu

This is an upload file generated with the same file name as the ‘input file’ but with an extension .fvu. This .fvu file should be copied on floppy or CD for the purpose of furnishing the same at TIN FC.

FILING OF e-TDS RETURNS

After preparing and validating the e-TDS returns as abovementioned, the deductor will have to file the same at any TIN-FC managed by NSDL or through an online web based facility provided by NSDL. File *.fvu which is generated after successful validation is the upload file which has to be submitted to TIN FC for filing of e-TDS return. Before filing, it should be ensured that : i) Each quarterly / annual e-TDS statement / return is in a separate

CD/floppy and is accompanied by a duly filled and signed (by an authorised signatory) Form 27A in physical form.

ii) Each return is in one CD/floppy. It should not span across multiple floppies.

iii) Return should be compressed, if required, only by using Winzip 8.1 or ZipItFast 3.0 (or higher version) compression utility to ensure quick and smooth acceptance of the file.

iv) Label mentioning TAN, name of deductor/collector, period to which return pertains (quarter and F.Y.) and Form no. (24Q, 26Q, 27Q or 27EQ) is affixed on each CD/floppy for the purpose of identification.

v) There is no overwriting/striking on Form 27A. If there is any, then the same should be ratified by an authorised signatory.

vi) TAN details (name, address, etc.,) of the deductor as provided in the quarterly e-TDS return should be same as in the TAN database maintained by ITD (these details can be verified on web-site www.incometaxindia.gov.in). If they are different, the deductor will

have to submit a TAN change request application to update the ITD TAN database or a copy of the acknowledgment of TAN change request already submitted.

vii) The e-TDS return has been successfully passed through the latest version of the FVU.

viii) Control totals, TAN and name mentioned in the e-TDS return match with those mentioned on Form 27A.

ix) CD/floppy is virus free. In case any of these requirements are not met, the e-TDS return will not be accepted at TIN- FCs or NSDL website. In that case, Non Acceptance Memo will be issued by the TIN-FC.

ACCEPTANCE OF E-TDS RETURN

After deductor furnishes the e-TDS return to TIN-FC in the prescribed manner, TIN-FC will carry out format level validations (these validations are same as performed by latest FVU) and other checks to validate the e-TDS return. In case e-TDS return is valid, TIN-FC will accept the return and issue a Provisional Receipt to the deductor. The Provisional Receipt issued by TIN-FC to deductor is deemed to be the proof of e-TDS returns furnished by the deductor. Deductor will have to pay upload fees by demand draft or cash to the TIN-FC for every accepted e-TDS return.

Following are the charges for furnishing e-TDS return :

Category of e-TDS return Upload charges

Returns having up to 100 deductee records Rs.30/-

Returns having 101 to 1000 deductee records Rs.182/-

Returns having more than 1000 deductee records Rs.606/-

No charges are payable if the return is not accepted by TIN-FC

STEPS TO BE TAKEN AFTER FILING OF E-TDS RETURN :

1. Back up of Files

Deductor should take back-up of all the files generated after successful filing of E TDS return, more importantly back up of *.fvu file ( upload file ). *.fvu is the file which eventually is filed with the ITD through TIN FC. If the tds return is required to be revised at a later date, *.fvu file is required for making the necessary corrections.

2 Status Verification Of E-Tds Return Furnished To Tin

a. This enquiry can be made by going to ‘TAX PAYERS VIEW’ on website of NSDL.

b. Enter TAN and Provisional Receipt Number (PRN) of the return for which the status needs to be verified.

c. These views are available only for e-TDS/TCS return for F.Y. 2005-06 and onwards.

d. You can verify the information without any other authentication. In this case no financial information will be displayed.

Following enquiries can be made at this site. i. Whether quarterly returns have been uploaded to TIN central system

by TIN-FC. ii. Whether quarterly returns have been accepted by TIN central system. iii. Whether challans in returns have been matched with challans

uploaded by banks. iv. Number of deductees whose PAN accounts have been booked. v. Line no. of deductees in returns whose PAN accounts could not be

booked. vi. Confirm whether a specific PAN account has been booked.

TDS RETURN : INCONSISTENCIES

Last year, Directorate of Income Tax (Systems) has sent letters to deductors giving the details of inconsistencies in the TDS/TCS return filed.

What is inconsistency ? The inconsistency is between the details furnished in the etds return and the details submitted by the bank.

How are the inconsistencies identified? The inconsistencies are identified by comparison of Challan Identification Number ( CIN ), TAN and TDS amounts furnished by the deductor with the data given by banks.

Once these are matched, the PAN ledger of each deductee is credited with the TDS as provided in the etds return, provided the PANs of the deductees have been given by the deductor in the return.

What are the kinds of inconsistency status provided in the inconsistency letter?

• Matched : If all the CIN details in the TDS return match with the corresponding details provided by the banks, the challan is shown as matched as the payment claimed to have been made by deductor is also validated by the bank.

• Match Failed : In this case CIN given in TDS/ TCS return is found in the bank data. But the TAN and / or amount as given in the return against this CIN do not match with the TAN and / or amount given against this challan by the bank.

• Match Pending : In this case, the CIN as given in the return is not available in the CIN details provided by the banks.

• Count of Missing deductee PAN : If PAN details are not provided for some of the deductees, the count of such cases is provided.

• Count if deductee PANs not present in ITD database : If some of the deductee PANs provided in the return are not present in Income Tax Department (ITD) database, the count of such cases is provided.

What could be the possible impact of these inconsistencies ?

• In case of inconsistency, there would be no posting in the PAN ledger of the deductee with the amount of tax deducted/tax collected on his behalf. He may, therefore, have difficulty in proving the TDS claimed by him in his income tax return.

• If challans claimed in the TDS returns could not be matched completely with the data given by the banks, you may have difficulty in proving to your TDS assessing officer that you have actually deposited the TDS deducted by you.

How to rectify these inconsistencies?

The latest file validation utility gives opportunity to the deductor to check the challan details which are mentioned in the TDS return at the time of preparation of TDS return with the challan details uploaded by the bank. If there is mismatch in challan details, a warning is given to indicate this mismatch. The deductor should not ignore this warning. At that stage itself, the deductor should correct the mismatch between the challans.

Further, on account of stringent requirement of mentioning of PAN in the TDS return, the discrepancies related to the PAN will be minimized. However, in respect of the TDS returns already filed, following steps should be taken to rectify the inconsistencies :

• If deductor has made any mistakes in TDS returns, then this mistake should be rectified by filing a correction statement.

• If bank has made any mistake in the amount or name or major head code given by them against the CIN, then banks can rectify them

• If bank has made any mistake in TAN or CIN, the deductor will have to contact his TDS Assessing Officer.

• If bank has not uploaded the challan, then bank should be requested to upload the same.

• One can access http://tin-nsdl.com . Click on the link “Quarterly Statement Status” to get more details about the ETDS return filed.

CORRECTION OF E-TDS RETURN

If any errors or omissions are noticed in the e-TDS return filed, then correction statement is required to be filed. In case of corrections in quarterly statements, only those records that require corrections will have to be furnished by using separate file formats notified by the income tax department. This is required for amendment of the PAN ledgers (Form 26AS ) that will be generated by the TIN central system after matching the TDS statements with challan details uploaded by banks.

There are six different types of correction statements that can be furnished by the deductors for various types of corrections. These are listed below :

Type of Correction

Details

C 1 Correction in Deductor / Collector details ( excluding TAN )

C 2 Correction in Deductor / Collector details ( excluding TAN ) and / or Correction in Challan Details

C3 Correction in Deductor / Collector details ( excluding TAN ) and / or Correction in Challan Details and / or Correction in Deductee Details

C4 Correction in Salary Detail Records

C5

Updation of Deductee PAN and / or salary detail records. It should be noted that deductor can update a valid deductee PAN with another valid PAN only once. A valid PAN that has been updated once cannot be updated again

C9 Addition of Challan(s) and the underlying deductee records

Y Cancellation of statement to be made for rectification of TAN.

Preparation of Correction Statement

Correction Statement can be prepared with the assistance of available software that are developed taking into account the data structure prescribed by the ITD. Normally the software for preparation of quarterly TDS statements has the feature of preparation of correction statement. NSDL has provided one free downloadable utility at their website for Correction of Quarterly e-TDS Return. It should be noted that normally the software takes care of categorization of the type of Correction Statement to be furnished and the deductor need not have to mention the Type of Correction Statement.

Statement Verification Keys

As correction statements will be furnished only for those records where corrections are made and not the entire statements, it is necessary that these correction records are properly identified from the corresponding original statements before updates are applied. Therefore, in each correction statement

( irrespective of the type of correction ) it is mandatory to mention details of certain fields that will act as verification keys. These fields are :

a. Receipt Number of Original Return b. Receipt Number of Previous Return c. Last TAN of the Employer / Deductor / Collector d. TAN of the Employer / Deductor / Collector e. Assessment Year f. Financial Year g. Period

Correction Statement cannot update Financial Year, Assessment Year and Period. Values in these fields have to be same as specified in corresponding regular returns.

Similarly there are verification keys for each type of record (BH, FH, etc.) depending on the correction to be made in the return.

If the verification keys do not match, the correction statement will get rejected at the TIN central system. Hence, it should be ensured that correct values with respect to these verification keys are mentioned in the correction statement.

Previous RRR No. (Provisional Receipt Number) to be provided in correction statement

In a correction statement it is mandatory to quote provisional receipt number of regular and previous correction statement. In case of a first correction the provisional receipt number of the original return will be mentioned for Original RRR No. and the Previous RRR No.

In case of a second correction, the original RRR no. will be that of regular statement and RRR no. of first correction statement to be stated in previous RRR no. field.

If the second correction statement furnished is a multiple batch correction statement with three batches, there would be three separate provisional receipts for each batch. If there is a third correction subsequent to this multiple batch correction the previous RRR no. (Provisional receipt number) provided in this third correction can be any one of three provisional receipt numbers issued for three batches in multiple batch correction statement.

Quoting of PAN in the correction returns

With effect from April 01, 2008, ITD has increased the percentage of structurally valid PAN to be quoted in TDS/TCS statements and has mandated that the returns with less than specified percentage of structurally valid PAN will not be accepted. In case of multi-batch correction, computation of 95% / 85% of valid PAN will be done for each batch in the correction statement in Form 24Q / 26Q as the case may be. This percentage will be applied on deductee records added ( except for deductee records added whose TDS is Nil on the basis of declaration u.s. 197A).

Procedure for filing TDS returns with insufficient deductee PAN

As per instructions issued by the Central Board of Direct Taxes (CBDT), it is mandatory for deductors to file TDS/TCS returns with a threshold limit of Permanent Account Number (PAN) of deductees. To facilitate deductors who face problem in filing TDS returns because of insufficiency of PAN of the deductees and also to accommodate the deductees who have intimated their PAN, the Income Tax Department (ITD) has specified the following procedure for filing TDS/TCS returns:

� Deductors can file a return containing deductee records which meets the specified threshold limit of PAN quoting, i.e., a deductor can file a return containing deductee details who have provided valid PAN. It can subsequently file a correction return with details of remaining deductees. E.g. as below:

� Suppose a challan payment of Rs.1,00,000/- has been made for non-salary TDS against 100 deductees each with TDS of Rs.1,000/-. Under the existing procedure the deductor will have to quote at least 85 PAN, failing which his return will be rejected.

� If there are only 50 deductees whose PAN is available and the deductor attempts to file a return with details of 100 deductees with PAN of only 50 deductees, the return will automatically be rejected at present.

� However, if he files a return with challan amount of Rs. 1,00,000/- and with details of 50 deductees with PAN, with deductee total of Rs.50,000/-, the return will be accepted. It means the deductor can furnish the details relating to such deductees whose PANs are available.

� The deductor can later file correction returns with other details of remaining deductees with the same challan details, i.e., the challan amount should be the amount deposited (in this case Rs. 1,00,000/-).

The return will be accepted so long as the TDS total of incremental deductees is less than or equal to the balance of Rs.50,000/-.

Generation of Text File and Validation of the same

The procedure of generation and validation of text file for Correction Statement is similar to that of original return

Submission of Correction Statement

The CD / floppy containing correction statement should be accompanied with the following documents:

1. Statement Statistics Report generated by FVU. In case of multiple batch correction statement, a separate ‘Statistics Report’ for each kind of batch within the multiple batch correction statement will be generated by the FVU. In such cases, deductor shall submit all ‘Statistics Reports’.

2. Form No. 27A 3. Copy of the provisional receipt of regular return.

Upload fees:

• For correction statements – C1, C2, C3, C4, C5 and C9

For above type of correction statements, charges will be based on the number of records in the statement / multiple batch correction statement. Provisional Receipt of correction statement shall contain one new field ‘No. of Records for Billing’. In case of provisional receipts generated for multiple batch correction statements, only the last provisional receipt will contain a value in the field ‘No. of Records for Billing’. In all other provisional receipts in this field ‘NA’ will be displayed. Upload fees will be based on the no. of records for billing displayed.

• For correction statements – Y

In case of correction type ‘Y’ i.e. cancellation of statement, deductor will be charged on the basis of the number of records in the original statement.

FORM NO. 26AS – ANNUAL TAX STATEMENT u.s. 203AA Form 26AS is a consolidated tax statement issued by / on behalf of Income Tax Department to the PAN holders which will show the total amount of tax received by the Govt. in respect of an assessee for the concerned assessment year. It will show details of TDS and other taxes on the basis of data submitted by deductor / seller and confirmations from banks that the taxes have been received.

The Form 26AS (Annual Tax Statement) is divided into three parts, namely; Part A, B and C as under: Part A displays details of tax which has been deducted at source (TDS) by each person (deductor) who made a specified kind of payment to assessee. Details of the deductor (name & TAN) along with details of tax deducted like section under which deduction was made (e.g. section 192 for salary), date on which payment was effected, amount paid/credited, tax deducted from payments and deposited in the bank are included in this part. Part B displays details of tax collected at source (TCS) by the seller of specified goods at time these goods have been sold to you. Part C displays details of income tax directly paid by you (like advance tax, self assessment tax) and details of the challan through which assessee has deposited this tax in the bank.

Compilation of information for the purpose of Form 26AS :

Every non-government entity that has deducted or collected tax at source is required to deposit the tax to the government account through bank. Banks will upload this payment-related information to the TIN central system. As per the Income Tax Act, the deductors/collectors are required to file their TDS statements every quarter. As and when TDS returns furnished by the deductors are uploaded to TIN central system, The TIN central system will match the tax payment-related information in the return with the tax receipt information from the banks. If both of these match, TIN will create a

comprehensive ledger for each PAN holder giving details of the tax deducted on its income by every deductor who has filed the return. This is a daily activity. This means that within about 15 days of the deductors filing quarterly e-TDS return, the TDS entries will be posted in the tax return which is available in the TIN website.

Importance of Form 26AS

The credits available in the tax statement confirm that : a) the tax deducted/collected by the deductor/collector has been

deposited to the account of the government; b) the deductor/collector has accurately filed the TDS return giving

details of the tax deducted/collected on your behalf; c) bank has properly furnished the details of the tax deposited by you.

ONLINE TAN REGISTRATION

The Income Tax Department has offered the facility to register their TANs online. Authenticated access (through user ID and password) will be provided to registered deductors. On login, the following will be available to the deductors -

i. view of the status of all statements filed; ii. download of quarterly e-TDS / TCS statement for preparation of

correction statement; and iii. other functionalities related to quarterly TDS /TCS statement. _______________________________*______________________________ References : For complete information on E Filing of TDS returns , please refer to the following documents available at http://tin.nsdl.com/ at Downloads – e TDS –Quarterly Statements – Regular / Correction 1. Deductors’ Manual for Quarterly e-TDS /TCS Statements. 2. Deductors’ Manual for Quarterly e-TDS /TCS Correction Statements.