ANALYSIS OF NEW SCHEME FOR TDS / TCS

(as on 5-Jun-2009)

Background

Income Tax Department has introduced a new scheme for centralized processing of annual income-tax returns which envisages no interface with the tax payer and processing of returns to be done in an automated jurisdiction-less manner. Implementation of such scheme requires having a robust system for information relating to payment of TDS and TCS so that the credit for TDS and TCS can be granted accurately and the risk of financial fraud is minimized.

In this regard, the Central Board of Direct Taxes (CBDT) issued Notification No. 858(E) dated 25th March 2009 introducing new rules in relation to remittance of TDS, issue of certificate of TDS, etc., effective 1st April 2009. As per the new scheme, CBDT has prescribed that TDS and TCS shall be paid electronically by furnishing an income-tax challan in newly introduced Form No.17 (replacing Challan No.281). Subsequently, a press release was issued clarifying that the new challan No. 17 will be applicable only for the payment of TDS/TCS on or after 1st April 2009. Thereafter, another press release was issued by the CBDT deferring the implementation of the above scheme to 1^st July 2009 from 1^st April 2009. The CBDT had also clarified that the tax deductors/collectors may continue to deposit TDS/TCS and file TDS/TCS returns as per the pre-amended provisions in the interim period.

The CBDT then issued a circular no. 2/2009 dated May 21, 2009 providing detailed clarification with regard to the new scheme. Some of the salient features of this new scheme are discussed in the subsequent paragraphs. The aforesaid circular specifies that henceforth the claim for TDS and TCS shall be allowed only if the following conditions are complied:

• The amount of TDS / TCS has been deposited by the deductor / collector;
• Deductor / collector has furnished information relating to the deductee;
• The TDS/TCS claim matches the information furnished by the deductor /collector.

This new scheme has been harmonized with a view to make TDS payment and information reporting system uniform across all deductors (including Central and State Government).

Brief Overview of New Scheme:

• Mandatory E-Payment of TDS/TCS for all types of deductors
• Introduction of New Challan No.17 for payment of TDS/TCS
• New Concept of Unique Transaction Number (UTN) introduced
• For all assesses having TAN: Quarterly statement to be filed in Form 24C irrespective whether any tax is deducted/ collected during the respective quarter
• Returns of TDS and TCS will continue to be filed in Form No. 24Q, Form No. 26Q, Form No. 27Q and Form No. 27EQ but on Annual Basis – Due Date is 15-Jun from end of the relevant Financial Year
• Certificates for TDS/TCS in Form 16 /16A/ 27D to be issued by the deductor/ collector are suitably revised to incorporate UTN
• Deductees will be able to claim credit for the TDS / TCS by quoting the UTN for each claim in their annual income-tax return. The Income Tax Returns (ITR-1 to ITR-8) have been suitably revised for quoting UTN to support the claim.

Payment of TDS / TCS – effective dates for use of Old & New Challans

Note 1: E-Payment of TDS/TCS is mandatory for all types of deductors

Note 2: Where the payment of TDS or TCS effected on or after the 1^st April, 2009 but not later than 31^st May, 2009 is paid by using the old challan form, the deductor / collector shall, nevertheless, be required to fill up Form No.17 in respect of such payments by 15^th July, 2009.  Therefore, the deductors/collectors are advised to prepare the schedule relating to details of TDS/TCS in advance (in an excel sheet) and be in a state of preparedness to file the same by 15^th July, 2009 so that the UTNs relating to TDS / TCS transactions carried out in the month of April and May can be generated / obtained for onward transmission to the deductees.

Features of New Challan No. 17

• Earlier separate challans (No.281) were to be prepared for deduction made under different sections. As per the New Challan No.17, all TDS for a period can be paid through a single challan irrespective whether the tax has been deducted on salary, 194C, 194J, etc.
• TDS and TCS both can be deposited in a single challan at a time.
• No need to differentiate between corporate deductee or otherwise.
• No need to give break up of basic tax, surcharge or cess. Total figure is only required to be mentioned.
• Information of each deductee is also to be given in challan i.e PAN, Name, and amount of TDS/TCS.
• If number of deductees is more than 10, then detail of deductees has to be uploaded in a file alongwith the challan.
• Challan can be deposited only through e-payment and credit/debit card option will also be allowed .

Concept of Unique Transaction Number (UTN)

• Upon successful uploading & payment of TDS / TCS in the New Challan No.17, every TDS/TCS record mentioned in the Challan will be assigned a unique transaction number (UTN). Also, PAN of the deductee will be verified and a status of PAN verified (yes /no) will be given so that in case of incorrect PAN or not verified PAN, deductor have time to correct them before filing the TDS/ TCS return.
• The deductor will receive UTNs for all deductions by e-mail or by downloading the UTN file.
• Upon receipt of the UTN, the deductor will inform the UTN to the respective deductees.
• The deductor will be required to quote such UTN on the TDS/TCS certificate issued to the deductee.
• NSDL will also create a facility to allow independent viewing of the UTNs by the deductee.
• The deductees will be able to claim credit for the TDS / TCS by quoting the UTN in their annual income-tax return.
• The deductee will be allowed the TDS/TCS claims only if the claim made in the Income Tax Return filed, matches with the information furnished by the deductor /collector

Quarterly statement of TDS to be filed in Form 24C

Every person (including Central Government and State Governments) who has obtained a Tax Deduction or Collection Account Number (TAN) will be required to electronically furnish a quarterly statement of compliance with TDS provisions in Form No. 24C as per following time limits:

It is mandatory for all TAN holders to furnish this statement irrespective of whether any payment liable to TDS has been made or not. This will apply from the quarter ending on 30^th June 2009.

Filing of TDS / TCS returns

The quarterly returns of TDS and TCS will continue to be filed in Form No. 24Q, Form No. 26Q, Form No. 27Q and Form No. 27EQ. However, there is a revision in the time limits for such filing. All the aforesaid quarterly returns will now be required to be filed for all quarters on or before the 15^th June following the end of the financial year. Effectively, the quarterly returns have now been replaced by an annual return. This will apply from the financial year 2009-10.

Issuing certificates for TDS/TCS in Form 16 /16A/ 27D

TDS certificates were hitherto required to be issued in Form 16 or Form 16A as the case may be.  Similarly, TCS certificates were issued in Form 27D. Now, Form Nos.16/16A /27D have been suitably revised with effect from 1^st April 2009 to incorporate the mandatory requirement of quoting UTN.

For TDS/TCS made before 1^st April 2009, the deductor / collector has 2 options:

Option 1: Deductor/ Collector issues Form 16/16A/27D in old format AND also send a consolidated statement of UTNs to the deductees as soon as the same are received by him from NSDL.

Option 2: Alternatively, the deductor/collector may opt to issue certificates for TDS/TCS in new Form 16/16A/27D.

For TDS/TCS made after 1^st April 2009, it is mandatory to use new Form 16/16A /27D.

There is no revision in the time-limits for issuing Form 16/16A /27D which is within one month from the end of the month in which the deduction / collection is made. However, if the deductor/collector opts to issue new Form 16/16A/27D, then the new Forms may be issued beyond the stipulated period of one month but not later than 30^th June 2009.

Claiming credit for TDS/TCS through annual income-tax returns

The deductees will be able to claim credit for the TDS / TCS by quoting the UTN in their annual income-tax return. The return of income in Form no. ITR-1 to ITR-8 for A.Y. 2009-10 (F.Y. 2008-09) have been suitably altered requiring to quote the relevant UTN for every TDS/TCS claim.

Hence, for successfully claiming TDS / TCS credit, the deductee should correctly quote the UTN which should match with the UTN available in the Income Tax Department database.

Since this new scheme is applicable from 1-Apr-09, for processing of annual income-tax returns for A.Y. 2008-09 (F.Y. 2007-08) and A.Y. 2009-10 (F.Y. 2008-09), the following procedure will be followed:

• NSDL shall assign a UTN for every TDS/TCS transaction records for F.Y. 2007-08 and 2008-09 reported in the quarterly TDS/TCS returns received by it.
• NSDL will communicate the UTN by e-mail or by creating a facility for the deductor to download the UTN file.
• Upon receipt of UTN, the deductor will be required to inform the UTN to the deductees.
• The deductees will be able to quote the UTN on the basis of TDS/TCS certificates received OR the Consolidated Statement of UTNs received from the deductors.
• 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 database and quoted while making claims of TDS and TCS in the return of income.

[Compiled by: Shaleen Shah (Partner), VNCA]