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TMI BlogNew TDS and TCS payment and information reporting system- Notification No. 858(E), dated 25th March, 2009 published in Official Gazette-regarding.X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax deduction at source, advance tax and self assessment tax. 2. One of the fundamental principles of financial accounting is that if a person claims credit for payment of money to a third person, the credit should be allowed only if the payment and the information relating to the transaction have been received from the third person. The advance tax and self assessment tax is paid directly by the assessee by filling a challan which bears a unique Challan Identification Number (CIN) and the PAN of the assessee. These two number systems are used to cross verify the claim of tax payment made by the assessee and allow appropriate credit. 3. In the context of TDS, the first best principle is that no claim for TDS/ TCS should be admissible unless the deductor/ payer has paid the amount so deducted/ collected to the credit of the Central Government and the information relating to the transaction is received. Since the business process of the Income Tax Department was manually organised and the volume of TDS related information was large, it was not feasible to undertake 100 per cent matching of TDS claims with information furnished by the deductor. Consequently, the Income Tax De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount in the banks. Similarly, the Central Government Ministries, departments and their sub-ordinate and attached offices are large scale defaulters in complying with the TDS information reporting requirements. Even the certificates issued by these organisations are often illegible and of poor quality. Hence, these are unreliable. This has been a constant source of public grievance. It also creates an opportunity for interface with the taxpayer. This process also does not assure the department of the legitimate revenues and enforce compliance. Hence, the mechanism of payment of tax so deducted and compliance with the reporting requirements is not satisfactory. 7. Unlike the Central Government, the State Government is required to make a consolidated payment of the TDS amount in respect of all its deductors and deductions directly into the Reserve Bank of India. This is done by the Accountant General of the State. As a result, there is no correlation between the deduction, payment and reporting. Further, compliance by State Governments with the TDS information reporting requirement is no better than in the case of the Central Government. 8. In the light of the above, the Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e centralised return processing system. It is imperative to move to the first best solution to also minimize the risk of financial fraud. This is in the interest of all stakeholders - Government, Income-tax Department and taxpayers. Therefore, the Board have decided that, henceforth, claim for TDS and TCS shall be allowed only if the- (i) amount has been deposited by the deductor / collector; (ii) information relating to the deductee has been furnished by the deductor / collector; and (iii) claim matches the information furnished by the deductor / collector. 12. With a view to enabling the implementation of the aforesaid decision, the TDS and TCS payment and information reporting system has been redesigned vide notification No. 858(E) dated 25th March, 2009 published in Official Gazette. The salient features of the new TDS and TCS payment and information reporting system are the following: - (i) The new system has been harmonized for all deductors (including Central and State Governments). Therefore, like non-governmental tax deductors, every deductor in the Central and State Government have also been made responsible for making direct payment of TDS in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained a Tax Deduction or Collection Account Number (TAN) shall electronically furnish a quarterly statement of compliance with TDS provisions in Form No. 24C. It is mandatory for all TAN holders to furnish this form irrespective of whether any payment liable to TDS has been made or not. This form shall be furnished on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year, respectively, and on or before the 15th June following the last quarter of the financial year. This e-form No. 24C has to be furnished at http://incometaxindiaefiling.gov.in. The first quarter in respect of which Form 24C is required to be furnished is the quarter ending on 30th June, 2009. (ix) In order to enable the deductor to furnish the UTN to the deductee, the existing Form 16 and Form 16A have been appropriately modified. (x) The quarterly returns of TDS and TCS hitherto required to be filed in Form No. 24Q , Form No. 26Q , Form No. 27Q and Form No. 27EQ shall now be required to be filed for all quarters on or before the 15th June following the Financial Year. Effectively, the quarterly returns have now been replaced by an annu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (relevant for Assessment Year 2009-10), the following procedure shall be followed: - (a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction records in Financial Years 2007-08 and 2008-09, reported in the quarterly returns received by it. (b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file. (c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs. (d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant quarter would have to be reported in Schedule COM-2 and Schedule COM-3 respectively. In this Schedule in column (3), for example, against section 194A in column (1), the TAN holder is required to furnish the total amount of interest paid during the month. Let us assume that this total amount is Rs. 1 crore. In column (4) of the corresponding entry, the deductor is required to furnish the total amount on which TDS was liable or eligible to be deducted out of Rs. 1 crore. As is well known, no TDS is required to be deducted if the interest payment is less than Rs. 10,000. If the total of the amounts of interest payment/credit less than Rs. 10,000 is Rs. 30 lakhs, then the deductor must report in column (4) an amount of Rs. 70 lakhs (Rs. 1 crore - Rs. 30 lakhs). In column (5), the deductor has to report that the total amount on which tax was deducted at prescribed rate out of the amount reported in column (4). In the instant case the rate of tax to be deducted at source is 11.33 percent (including surcharge and education cess). However, in many instances the recipients of interest exceeding the threshold limit of Rs. 10,000/- would either furnish certificate for non deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ductor/collector is required to indicate the details of the payment of the TDS/TCS to the credit of the Central Government. 23. The new TDS and TCS payment and reporting system will enable faster payment, accurate accounting and uniformity across deductors. It will facilitate accurate, quicker and full credit for taxes paid enabling faster refunds to taxpayers. It will also minimize interface of tax administration with taxpayers and intermediaries, thereby eliminating any opportunity for rent seeking behaviour. (Munesh Kumar) Secretary Central Board of Direct Taxes F.No. 142/22/2008-TPL Copy to:- i. PS to FM / OSD to FM / OSD to MOS(R). ii. PS to Secretary (Revenue). iii. The Chairman, Members and all other Officers in the CBDT. iv. All Chambers of Commerce/Industry/Trade Associations. v. All Chief Commissioners/Directors General of Income-tax with a request to circulate amongst all officers in their regions/ charges. vi. Director General, National Academy of Direct Taxes, Nagpur. vii. Directors, Regional Training Institutes, Ahmedabad/ Bangalore/ Chandigarh/ Chennai/ Kolkata/ Lucknow/ Mumbai. viii. Comptroller and Auditor General of India (40 co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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