Posts Tagged ‘tax deducted at source’

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How to deduct correct eTDS

August 14th, 2009

The sections 192 to 196 of Income Tax Act, directs “Any person responsible for paying any income chargeable to tax” to deduct income-tax thereon at the rates specified respectively.

Salaries:
While making the payment of Salary, deductor should consider the following and deduct correct TDS from the payment being made.

  1. Calculate the annual Approximate/Actual Salary
    1. Calculate the Exact Taxable Salary amount Paid/Payable till current month for the financial year.
    2. Calculate the approximate salary that will be paid for rest of the FY, assuming the current month salary for rest of the year salary.
  2. Add any other income reported by the Assessee [Employee].
  3. Deduct if any Loss declared by the Employee, from the annual taxable salary. Note that, only House property loss (interest in case of Self Occupied House Property) should be considered.
  4. Deduct the allowed deductions declared by employee under Section 80C, 80D, 80G, etc.
  5. Calculate the Income Tax, Surcharge and cess on the net Income, as per the “Rates in Force”
  6. Deduct if any rebate U/s 88E or Relief U/s 89. (explain the heads)
  7. Keeping it as total tax, now deduct the TDS made till last month from it.
  8. Divide the net TDS by “Remaining number of months in the FY, including current month”.
  9. Deduct this amount from employees Salary

Non Salaries:
A deductor accordingly, should follow the below points while making/preparing each payment.

  1. Categorizing each payment to relevant “type of Payment” or “Section”.
  2. Check that the payment is not a payment is being done to Government, Reserve Bank, certain corporations established under Central Act, or Mutual Funds. [comes under Section 196]
  3. Refer the Threshold limit for such section or Type of Payment.
  4. Refer the Rate of Tax
    1. Check the Assessee [party] has not submitted his declaration under Section 197A for non-deduction of TDS. [Only for payment of Interest (Securities and Other than securities), Dividends and Interest on NSC, Viz: sections 194, 194A, 193, 194EE]
    2. Check the Assessee [party] has not submitted a certificate by Assessing Officer under Section 197 for non-deduction of TDS or deduction at a Lower Rate.
    3. Check the relevant rate of TDS under respective type of payment [sections 193 to 196]
  5. Get the effective rate TDS, including Surcharge and Cess [if any].
  6. Deduct the amount as per the effective rate of TDS from the amount being paid.

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Know Form 27A/B

July 22nd, 2009

Form No. 27A/B is a control chart of quarterly e-TDS/TCS statements to be filed in paper form by deductors/collectors alongwith quarterly statements. It is a summary of e-TDS/TCS returns which contains control totals of ‘amount paid’ and ‘income tax deducted at source’. The control totals of ‘amount paid’ and ‘income tax deducted at source’ mentioned on Form No. 27A/B should match with the corresponding control totals in e-TDS/TCS return. A separate Form No. 27A/B is to be filed for each e-TDS/TCS return.
In case of Annual Returns the relevant control charts are Form 27A for e-TDS and Form 27B for e-TCS.

While submitting Form No. 27A/B, one should ensure that:
a) There is no overwriting/striking on Form No. 27A/B. If there is any, then the same should be ratified (signed) by the authorised signatory.
b) Name and TAN of deductor and control totals of ‘amount paid’ and ‘income tax deducted at source’ mentioned on Form No. 27A/B should match with the respective totals in the e-TDS/TCS return.
c) All the fields of Form No. 27A/B are duly filled.

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Basics about eTDS / eTCS

July 17th, 2009

Annual e-TDS/TCS return is the TDS return under section 206 of the Income Tax Act (prepared in Form Nos. 24, 26 or 27) or TCS return under section 206C of the Income Tax Act (prepared in Form No. 27E), which is prepared in electronic media as per prescribed data structure. Such returns furnished in a CD/floppy should be accompanied by a signed verification in Form No. 27A in case of Annual TDS returns or Form No. 27B in case of Annual TCS return.

TDS/TCS returns filed in electronic form as per section 200(3)/206C, as amended by Finance Act, 2005, are quarterly TDS/TCS statements. As per the Income Tax Act, these quarterly statements are required to be furnished from FY 2005-06 onwards. The forms used for quarterly e-TDS statements are Form Nos. 24Q, 26Q and 27Q and for quarterly e-TCS statement is Form No. 27EQ. These statements filed in CD/floppy should be accompanied by a signed verification in Form No. 27A in case of both e-TDS/TCS statements.

As per Income Tax Act, 1961, all corporate and government deductors/collectors are compulsorily required to file their TDS/TCS returns on electronic media (i.e. e-TDS/TCS returns). However, deductors/collectors other than corporate/government can file either in physical or in electronic form.

An e-TDS return should be filed under Section 206 of the Income Tax Act in accordance with the scheme dated August 26, 2003 for electronic filing of TDS return notified by the Central Board of Direct Taxes (CBDT) for this purpose. CBDT Circular No. 8 dated September 19, 2003 may also be referred.
An e-TCS return should be filed under Section 206C of the Income Tax Act in accordance with the scheme dated March 30, 2005 for electronic filing of TCS return notified by the CBDT for this purpose.
As per section 200(3)/206C, as amended by Finance Act 2005, deductors/collectors are required to file quarterly TDS/TCS statements from FY 2005-06 onwards.

CBDT has appointed National Securities Depository Limited, (NSDL), Mumbai, as e-TDS/TCS Intermediary. NSDL has established TIN Facilitation Centres (TIN-FCs) across the country to facilitate deductors/collectors file their e-TDS/TCS returns.

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Know FVU – File Validation Utility

June 19th, 2009

FVU is a utility provided by NSDL to verify the e-Return (Text file) generated by the deductor, with the format prescribed. FVU takes an Input file and generates a report and *.FVU File.

If any errors found, *.FVU file will not be generated and Report file contains the List of errors in the Text file.

If File Validation is successful, FVU generates a Report file with the Statistics of the return and a *.FVU file with Text file converted to a compatible format (With addition of few more details) for the software in TIN FC (SAM [ Statement Acceptance Module].

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General points to remember for filing eTDS / eTCS returns

June 8th, 2009
1. Each e-TDS return file (Form 24, 26 or 27) should be in a separate CD/floppy. Also, each e-TDS return file should be in one CD/floppy. It should not span across multiple floppies.  In case the size of an e-TDS return file exceeds the capacity of one floppy, it should be furnished on a CD.
2. Each e-TDS return file should be accompanied by a duly filled and signed (by an authorized signatory) Form 27A in physical form.
3. Label should be affixed on each CD/floppy mentioning name of the deductor, his TAN, Form no. (24, 26 or 27) and period to which the return pertains.
4. There should not be any overwriting / striking on Form 27A. If there is any, then the same should be ratified by an authorized signatory.
5. No bank challan, copy of TDS certificate should be furnished along with e-TDS return file.
6. In case of Form 26 and 27, deductor need not furnish physical copies of certificates of no deduction or lower deduction of TDS received from deductees.
7. In case of Form 24 deductor should furnish physical copies of certificates of ‘no deduction or deduction of TDS at lower rate’, if any, received from deductees.
8. e-TDS return file should contain TAN of the deductor without which the return will not be accepted.
9. In case the e-TDS return file is in a compressed format, it should be compressed using WinZip 8.1 or ZipItFast 3.0 compression utility only to ensure quick and smooth acceptance of the file.

1. Each e-TDS return file (Form 24, 26 or 27) should be in a separate CD/floppy. Also, each e-TDS return file should be in one CD/floppy. It should not span across multiple floppies.  In case the size of an e-TDS return file exceeds the capacity of one floppy, it should be furnished on a CD.

2. Each e-TDS return file should be accompanied by a duly filled and signed (by an authorized signatory) Form 27A in physical form.

3. Label should be affixed on each CD/floppy mentioning name of the deductor, his TAN, Form no. (24, 26 or 27) and period to which the return pertains.

4. There should not be any overwriting / striking on Form 27A. If there is any, then the same should be ratified by an authorized signatory.

5. No bank challan, copy of TDS certificate should be furnished along with e-TDS return file.

6. In case of Form 26 and 27, deductor need not furnish physical copies of certificates of no deduction or lower deduction of TDS received from deductees.

7. In case of Form 24 deductor should furnish physical copies of certificates of ‘no deduction or deduction of TDS at lower rate’, if any, received from deductees.

8. e-TDS return file should contain TAN of the deductor without which the return will not be accepted.

9. In case the e-TDS return file is in a compressed format, it should be compressed using WinZip 8.1 or ZipItFast 3.0 compression utility only to ensure quick and smooth acceptance of the file.

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