AO should accept rectification application related to difference in Form No. 26AS and Amount claimed in ITR

Section 154- Mistake apparent from record
Even after due efforts taken by the Government to ensure compliance relating to filing of TDS returns by the deductors, the defaults on behalf of deductors continue for one or the other reason. This deprives the deductee from claiming the Tax so deducted in his return of income filed before due date of filing return. However, situations do arise where the returns are belatedly filed or a correction statement has been filed at a later date by the deductor resulting into a credit in Form No. 26AS of the deductee at a later date say after the time limit of filing a revised return has also expired. Considering the fact that such an omission in the return of income, duly supported by the entries of Form No. 26AS, is a mistake apparent from record, it is suggested that the Assessing Officers may be intimated to accept the rectification application under section 154 in such cases. This will surely be helpful in removing the administrative hindrances being
faced by the assessees as well as the Government.

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Posted in TDS

Interest for default of non-deduction by payer cannot be recovered from payee

Question:
I am an income-tax assessee. On the income-tax remitted for the salary received during 2001-02, Income-tax Officer, …… has charged interest under Sec. 201(1A) in his letter No…… dated ……, as the tax has been deducted in one lump sum instead of monthly instalments. Based on this, a sum of Rs. 4018 has been deducted from my current pay as penalty/interest and the same has been remitted by my employer, whose appeal was negatived Similarly twenty two of my colleagues have been charged interest to the tune of about Rs. 40,000. I understand Sec. 201(1A) which provides for interest from the date on which tax was deductible to the date of payment, would have application only to the tax that was deductible as at the end of the financial year in respect of tax deduction from salaries. Please advise.

Answer:
The employer in reader’s case was not correct in deducting tax from salaries in one lump sum instead of doing it on monthly basis. However, as opined in these columns, Sec. 201(1A) provides for interest from the date on which such tax was deductible to the date on which such tax is actually paid. Sec. 192(3) relating to tax deduction at source from salaries provides for increase or reduction of the amount deducted for the purpose of adjusting any excess or deficiency.

Short or excess deductions from month to month occur for various reasons. Proportionate monthly deduction does not occur even in respect of payments by the Government and no interest is charged on such payments only because they are not chargeable, since law itself provides for adjustment in later months, the last such adjustment being the pay bill for the last month of the year drawn during the year. Interest cannot be levied for short deduction for earlier months.

No interest is also payable by the Government for excess deduction in earlier months. In respect of other items of payments liable for tax deduction, the due date is fixed by the statute and no adjustment is permitted. In the case of salary, the question of short deduction can arise only at the end of the year.
Be that as it may, if any interest is payable for short or nil deduction, such interest is payable by the person responsible for tax deduction at source.
The omission to deduct tax is not the fault of the payee, that is, employee in this case. It is neither fair nor proper in law to pass on the interest liability for a tax default of the employer to the employee.
Unfortunately even banks merely debit the tax and the interest for such non-deduction to the account of the depositor-account-holder, where they are charged with interest for the default for non-deduction of tax from interest on deposits.

In all such cases, it is a matter between the person responsible for tax deduction and the Income-tax Department. They can only recover tax, which should have been deducted, if the payee had not meanwhile paid the tax, even as made clear in the amendment made to Sec. 191 by Finance Act, 2003.
Since the Income-tax Department is not in the picture in the reader’s case, it is for the employees to point out that the amount of interest charged on them is not justified either under general law or the income-tax law. It is for the employer to avail all the remedies under the laws to have the wrong levy of interest cancelled. Whether they are successful or not in getting it cancelled, there is no right of recovery of such amount of interest or penalty from employees.

Posted in TDS

Persons responsible to deduct TDS and the responsibilities of the deductor

The persons responsible to deduct TDS are mainly:

• Principal Officer of a company for TDS purpose including the employer in
• case of private employment or an employee making payment on behalf of the employer.
• DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such.
• In the case of “interest on securities” other than payments made by or on behalf of the Central govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof.
Such person is called Deductor while the person from whom the tax is deducted is called Deductee.
Tax must be deducted at the time of payment in cash or cheque or credit to the payee’s account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee’s account and TDS must be made at the time of such credit.

Responsibilities of the Deductor:

• A Deductor is required to a obtain TAN in order to deduct taxes.
• He should obtain PAN of the deductee and deduct tax at the correct rate
• The taxes do deducted has to be deposited to the designated banks within specified time limit in the following manner:
• By or on behalf of the Govt.-on the same day.
• By or on behalf of any other person-before 7th of the following month.
However, if the amount is credited in the books on 31st March then the tax should be remitted by 30th April and the TDS return needs to be filed by 15th May

Posted in TDS

Paying Rent Over Rs 50,000? Here Are The Rules For Deducting Tax

This article explains a recent Notification dated June 8, 2017, issued by the central government notifying the rules for withholding tax on rent payment exceeding Rs 50,000 to a resident by an individual or Hindu Undivided Family (HUF).

Prior to the amendment by the Finance Act 2017, the Indian tax laws required any person liable to pay rent to residents for use of any land/building exceeding an annual amount of Rs 1,80,000 to withhold tax at the rate of 10 percent. However, individuals and HUF not liable to tax audit under the tax laws, were excluded from the obligation of withholding tax.

In order to widen the scope of withholding tax, Finance Act 2017 has introduced a new provision in the tax laws to provide that individuals or HUF (other than those liable for tax audit under the tax laws) responsible for paying to a resident, on or after June 1, 2017, any income by way of rent exceeding Rs 50,000 for a month or part of month during the tax year, shall deduct an amount equal to 5 percent of such income as income tax thereon.

In order to reduce the compliance burden, Finance Act 2017 provides that the deductor is not required to obtain a Tax Deduction Account Number (TAN) and is liable to deduct tax only once in a tax year. The tax should be deducted at the time of credit or payment (whichever is earlier) of rent for the last month of the tax year or last month of the tenancy if the property is vacated during the year, as applicable.

Additionally, where the tax is required to be deducted at a higher rate in the absence of the Permanent Account Number (PAN) of the payee, such deduction is not to exceed the amount of rent payable for the last month of the tax year or the last month of the tenancy, as the case may be.

In order to harmonise the new provision with the existing rules, the Central Board of Direct Taxes (CBDT) has amended the existing rules to provide for the time and mode of payment of tax deducted at source to the central government account as well as the manner in which the certificate of tax deducted at source and the statement of deduction of tax are to be furnished by the payer.

The new provision which cast a tax deduction obligation on individual and HUF who are not liable for a tax audit, under the provisions of the tax laws, has come with effect from June 1, 2017. Such payers will need to ensure withholding tax compliance on payment of rent to residents in excess of Rs 50,000 per month within the timelines and in the form prescribed under the new rules to avoid any adverse consequences by way of additional fees, interest, penalty or prosecution.

Posted in TDS

How to rectify the excess TDS done while buying a property

The purchase and sale of immovable property in India is subject to Tax Deduction at Source (popularly known as TDS) provisions under Income Tax Act.

The buyer of the property is required to deduct tax (TDS) from the consideration payable to the seller.

How much TDS is to be done?
It depends upon the Residential status of the seller.
In case the seller is a Resident Indian – Deduct tax at the rate of 1% from the sale value, if the sale value exceeds Rs.50 lakhs. For example,
• for a property of Rs.40,00,000 – No need to deduct tax (TDS)
• for a property of Rs.50,00,000 – deduct at 1% i.e., Rs.50,000
• The buyer of the property, has to pay the taxes online using Form 26QB quoting the PAN of both buyer and seller.
• Issue a certificate in Form 16B to the seller as a proof of TDS (this form to be downloaded from the Income Tax website)
In case seller is Non Resident Indian (NRI) – Deduct tax at a higher rate. The basic exemption of Rs.50 lakhs is not applicable in case of NRI sellers. For example,
• For a property of Rs.1,00,00,000 or less – deduct tax at 20.60%
• For a property of Rs.1 Cr and above – deduct tax at 23.69%
• Pay the taxes online using Challan 281 quoting the TAN of the buyer and the PAN of the seller. (Note: The buyer of the property has to obtain Tax Deduction at Source Number (TAN))
• File quarterly eTDS return (Form 27Q) and issue Form 16A to the seller as a proof of TDS

What happens if the buyer erroneously deducts 10% (or any higher rate) instead of 1% in case of Resident sellers?

The buyer has to deduct 1% of the sale value. Suppose, on a sale value of Rs.70 Lakhs, Rs.70000 is to be deducted as tax (TDS); instead the buyer deducts and deposits Rs.90000. So, the question is how will the buyer get back this excess amount of Rs.20000? The income Tax department has worked out a mechanism to solve this problem. Though the buyer has deducted excess TDS, the credit will not go to the seller of the property. The seller of the property will get the credit for 1% and the excess amount will reflect in Part A2 of 26AS of buyer. The credit is available for claim in ITR of the buyer while filing his annual Income Tax Return.

What happens if the buyer deducts the correct amount, but uses a wrong procedure to pay the taxes in case of Non Resident sellers?

Instead of filing 27Q Form, the buyer has wrongly filed 26QB Form. In case of 26QB statement cum Challan processing, the system by default passes on the credit to the seller to the extent of 1% only. However, to obviate the difficulty of getting tax credit for NRI seller, the department will pass on the full credit of TDS to the seller by carrying out necessary changes in the System. (Note – this is done by the department as a onetime measure per assessee and the process of crediting the money will take some time; it won’t happen instantly)

In order to make this correction, the buyer has to raise a request for passing on the whole credit of the TDS to seller through sending a mail on email id “contactus@tdscpc.gov.in ” with Acknowledgement number.
Therefore, the procedure of deducting and depositing TDS is different for Resident and Non Resident Sellers. One has to correctly follow the rules to avoid unnecessary delay in TDS credits.

Source : Simplifiedlaws

Posted in TDS

Excess TDS done while buying a property

The purchase and sale of immovable property in India is subject to Tax deduction at Source as per provisions of Income Tax Act. The buyer of the property is required to deduct tax (TDS) from the consideration payable to the seller.

How much TDS is to be done?
It depends upon the Residential status of the seller.
In case the seller is a Resident Indian – Deduct tax at the rate of 1% from the sale value, if the sale value exceeds Rs.50 lakhs. For example,
• for a property of Rs.40,00,000 – No need to deduct tax (TDS)
• for a property of Rs.50,00,000 – deduct at 1% i.e., Rs.50,000
• The buyer of the property, has to pay the taxes online using Form 26QB quoting the PAN of both buyer and seller.
• Issue a certificate in Form 16B to the seller as a proof of TDS (this form to be downloaded from the Income Tax website)

In case seller is Non Resident Indian (NRI) – Deduct tax at a higher rate. The basic exemption of Rs.50 lakhs is not applicable in case of NRI sellers. For example,
• For a property of Rs.1,00,00,000 or less – deduct tax at 20.60%
• For a property of Rs.1 Cr and above – deduct tax at 23.69%
• Pay the taxes online using Challan 281 quoting the TAN of the buyer and the PAN of the seller. (Note: The buyer of the property has to obtain Tax Deduction at Source Number (TAN))
• File quarterly eTDS return (Form 27Q) and issue Form 16A to the seller as a proof of TDS

What happens if the buyer erroneously deducts 10% (or any higher rate) instead of 1% in case of Resident sellers?
The buyer has to deduct 1% of the sale value. Suppose, on a sale value of Rs.70 Lakhs, Rs.70000 is to be deducted as tax (TDS); instead the buyer deducts and deposits Rs.90000. So, the question is how will the buyer get back this excess amount of Rs.20000? The income Tax department has worked out a mechanism to solve this problem. Though the buyer has deducted excess TDS, the credit will not go to the seller of the property. The seller of the property will get the credit for 1% and the excess amount will reflect in Part A2 of 26AS of buyer. The credit is available for claim in ITR of the buyer while filing his annual Income Tax Return.
What happens if the buyer deducts the correct amount, but uses a wrong procedure to pay the taxes in case of Non Resident sellers?

Instead of filing 27Q Form, the buyer has wrongly filed 26QB Form. In case of 26QB statement cum Challan processing, the system by default passes on the credit to the seller to the extent of 1% only. However, to obviate the difficulty of getting tax credit for NRI seller, the department will pass on the full credit of TDS to the seller by carrying out necessary changes in the System. (Note – this is done by the department as a onetime measure per assessee and the process of crediting the money will take some time; it won’t happen instantly)

In order to make this correction, the buyer has to raise a request for passing on the whole credit of the TDS to seller through sending a mail on email id “contactus@tdscpc.gov.in ” with Acknowledgement number.

Therefore, the procedure of deducting and depositing TDS is different for Resident and Non Resident Sellers. One has to correctly follow the rules to avoid unnecessary delay in TDS credits.

Posted in TDS

Salaried tax payers to receive SMS alerts from Income tax dept.

As many as 2.5 crore salaried tax payers will now receive SMS alerts from the income tax department regarding their quarterly TDS deductions.

Finance minister Arun Jaitley launched the SMS alert service for tax deducted at source (TDS) for salaried class and the Central Bureau of Direct Taxes (CBDT) will soon offer this facility on a monthly basis as salaried class cannot afford to pay tax twice or indulge in litigations and hence they should be kept updated about their TDS deductions.

“Hence tax payers will benefit if they receive information through use of technology. So they can match the office salary slip and the SMS and at the end of the fiscal he will be clear about any possible tax dues,” Jaitley said.
He asked the CBDT to work towards making the grievance redressal system for TDS mismatch online so that there is no interface between the tax payer and the tax department.

Jaitley said e-Nivaran is working well for tax payers and the CBDT is taking several tax payer friendly initiave. The CBDT will soon extend this SMS facility to another 4.4 crore non-salaried tax payers.

“The frequency of SMS alerts will be increased, once the process for filing TDS returns is stremlined to receive such information on a real time basis,” the CBDT said.

CBDT chairperson said the tax department is encouraging people to register their mobile number on the e-filing website. Tax payer will initially receive a welcome message from the CBDT informing him about the facility and after that each assessee would be sent messages informing them about their respective TDS deductions.

The new step is an effort by the I-T department to directly communicate deposit of tax deducted through SMS alerts to salaried tax payers. In case of a mismatch, they can contact their deductor for necessary correction. Besides, SMS alerts will also be sent to deductors who have either failed to deposit taxes deducted ot to e-file their TDS returns by the due date.

Posted in TDS