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Introduction: For quick and efficient collection of taxes, the Income-tax Act has incorporated a system of deduction of tax at the point of generation of income. This system is called “Tax Deducted at Source” commonly known as TDS. Under this system, tax is deducted at the point of origination of income. Tax is deducted by the payer and the same is directly remitted to the Government by the payer on behalf of the payee.
The provisions of tax deducted at source presently apply to several payments like salary, interest, commission, brokerage, professional fees, royalty, etc.
TAN & its meaning
Tax Deduction Account Number is a 10-digit alphanumeric number issued by the Income-tax Department (herein after referred to as ‘TAN’). TAN is required to be obtained by all persons who are responsible to deduct tax at source (‘TDS’) except in case of a person who is responsible to deduct tax at source under Section 194-IA.
Given below is an illustrative TAN:
DELM12345L
First 3 alphabets of TAN represent the jurisdiction code, 4th alphabet is the initial of the name of the TAN holder. The next 5 digits of the TAN are system generated numbers between 00001 to 99999 and last character, i.e., the tenth character is an alphabetic check digit.
Persons liable to apply for TAN
Every person who is liable to deduct tax at source is required to obtain TAN. However, a person who is required to deduct tax under Section 194-IA can use PAN in place of TAN as he is not required to obtain TAN.
Relevance of TAN
It is mandatory to quote TAN in following documents:
Penalty: If a person fails to apply for TAN or failed to quote or quotes incorrect TAN in the above specified documents, a penalty of Rs. 10,000 shall be levied.
Procedure to obtain TAN
An application for allotment of TAN shall be made in duplicate in Form No. 49B at any TIN Facilitation Centers (TIN-FC). Addresses of TIN-FCs are available at NSDL-TIN website. Alternatively, one can apply for TAN online at the NSDL-TIN website.
Charges for obtaining a TAN
A fee of Rs. 65 (Rs. 55 application charge + 18% GST) should be paid as processing fee while submitting application for TAN.
Due date for deposit of TDS to the credit of Central Government:
Tax deducted at source shall be deposited to the credit of Central Government in accordance with the following provisions:
1. In case deductor is an office of the Government
Particulars Due Date
a. Where tax is paid without production of an income-tax challan On the same day when tax is deducted
b. Where tax is paid accompanied by an income-tax challan. On or before 7 days from the end of the month in which the deduction is made or income-tax is due under Section 192(1A)
2. In case of any other deductor
Particulars Due Date
a. Where the amount is credited or paid in the month of March On or before 30th day of April
b. In any other case on or before 7 days from the end of the month in which the deduction is made or income-tax is due under sub-section (1A) of Section 192 Any sum deducted under section 194-IA shall be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB.
Similarly, any sum deducted under section 194-IB shall be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QC.
Taxes deducted at source shall be deposited to the credit of the Central Government in following modes:
1. E-Payment: E-Payment is mandatory for :
a. All the corporate assesses.
b. All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
Physical Mode: By furnishing the Challan No. 281 in the authorized bank branch
Note: When tax is deducted/collected by government office, it can remit the amount to the Central Government without production of an Income-tax challan and by making only book adjustment. In such a case, it has to furnish Form No. 24G to NSDL with in prescribed time-limit.
A deductor would face the following consequences if he fails to deduct TDS or after deducting the same fails to deposit it to the credit of Central Government’s account:
a. Disallowance of expenditure: As per section 40(a)(i) of the Income-tax Act, any sum (other than salary) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.
However, if tax is deducted or deposited in the subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.
Similarly, as per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.
However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.
b. Levy of interest: As per section 201 of the Income-tax Act, if a deductor fails to deduct tax at source or after the deducting the same fails to deposit it to the account of Central Government then he shall be deemed to be an assessee-in-default and liable to pay simple interest as follows:
I. At one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
II. At one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.
c. Levy of Penalty: Penalty of an amount equal to tax not deducted could be imposed under section 271C. Penalty shall be charged under section 221 if deductor fails to deduct and pay tax to the credit of Central Government. The penalty shall be levied to the extent the Assessing Officer directs, however, the total amount of penalty shall not exceed the amount of tax in arrears.
d. Prosecution: If a person fails to pay to the credit of the Central Government the tax deducted at source by him he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.
Person liable to furnish TDS statement
Every person responsible for deduction of tax shall furnish quarterly statements in respect thereof.
Form for filing TDS statements
Quarterly TDS statements shall be furnished in following forms:-
However in case tax is deducted under section 194-IA, the deductor shall furnish a challan-cum-statement in Form 26QB within a period of seven days from the end of the month in which the deduction is made. In this case, no statement shall be filed separately.
Similarly, in case tax is deducted under section 194-IB, the deductor shall furnish a challan-cum-statement in Form 26QC within a period of seven days from the end of the month in which the deduction is made. In this case, no statement shall be filed separately.
Quarter ending of the financial year
Due date for filing of TDS return (Both for Government and other Deductor)
Particulars Due Date:
The quarterly TDS statement shall be furnished electronically in any of the following mode:
TDS Rates:
https://www.incometaxindia.gov.in/Pages/i-am/tax-deductor.aspx?k=Tax%20Deduction