December 06, 2013

CA-CS-ICWA-TAX PROFESSIONALS PORTAL - TDS on salary – full concept – with example - Part Four : - PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES

TDS on salary – full concept – with example


Part 4: - PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES

1)     Who will deduct TDS

As per section 204(i) of Income Tax Act, In the case of payments of income chargeable under the head "Salaries", other than payments by the Central Government or the Government of a State, the employer himself or, if the employer is a company, the company itself, including the principal officer thereof

In simple words:-

Every person responsible for making payment of nature covered by TDS provisions of Income Tax Act shall be responsible to deduct tax.

These persons are mainly:

a.    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.

b.    DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such.

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.

2)     How to deduct TDS

a.    Compute Total Salary Income of employee
b.    Add/deduct any other income/ loss declared by employee
c.     Deduct deduction under Chapter VI A of income tax act
d.    Calculate income tax including cess and surcharge
e.    Provide 89(1) relief, if any
f.      Calculate tax after relief; consider such tax annual tax distribute it monthly

For more clarification please refer Part 1 and Part 2 of this article by following link, as provided above.


3)     What Deductor do?

a.    Obtain TAN
b.    Employer should obtain PAN of the deductee
c.     Employer should deduct the tax at correct rate
d.    The tax deducted has to be deposited in specified time
e.    File statements of tax deduction in the prescribed time.
f.      Use correct form to file TDS/TCS Returns
g.    Issue TDS certificates


4)     What is TAN (Tax Deduction Account Number)?

As per Section 203A(1) Every person, deducting tax or collecting tax in accordance with the provisions of this Chapter, who has not been allotted a tax deduction account number or, as the case may be, a tax collection account number, shall, within such time as may be prescribed, apply to the Assessing Officer for the allotment of a "tax deduction and collection account number".

In simple meaning: -

Every deductor is required to obtain a unique identification number called TAN which is a ten digit alpha numeric number. This number has to be quoted by the deductor in every correspondence related to TDS.

TAN has 10 numbers

a.    1st four figures are Alphabets
b.    Next 5 are numbers
c.     Last 1 is also alphabet

For example: -                   NGPO 02911 G

It can be obtained by making an application to NSDL Tin Centre or UTI centre in appropriate form (Form 49B) and paying appropriate fees (Rs 62 including service tax with cess)

It can also be applied online


6)     What is PAN(Permanent Account Number)?

PAN is a ten-digit alphanumeric number issued by the Income Tax Department

PAN has 10 numbers

a.    1st five values are Alphabets
b.    Next 4 are numbers
c.     Last 1 is also alphabet

For example: -                   AFZPK0001A

It can be obtained by making an application to NSDL Tin Centre or UTI centre in appropriate form (Form 49A) and paying appropriate fees (Rs 105 including service tax with cess)

It can also be applied online


7)     Rates of TDS

(Please refer part 1 of this article by following link as provided above)

8)     Time of depositing TDS

Prescribed time of payment/deposit of TDS to the credit of Central Government account is as under:

a) In case of an Office of Government

S. No
Description
Time up to which to be deposited
1
Tax deposited without Challan (Book Entry)
Same day
2
Tax deposited with Challan
7th day of next month
3
Tax opted to be deposited by the employer
7th day of next month


b) In any case other than an Office of Government

S. No
Description
Time up to which to be deposited
1
Tax deducted in March
30th April of next financial year
2
Tax deposited in any other month
7th day of next month
3
Tax opted to be deposited by the employer
7th day of next month


9)     Mode of Payment of TDS

Through Income Tax Challan (Challan No 281)

a.    Depositing in Authorized Bank
b.    Internet Banking
c.    Book Entry


10)   How to pay TDS

a.    By Depositing into the Bank

o       Fill all the particulars of  Challan Form 281

o       Submit the Challan along with the amount of TDS into any office of Reserve Bank of India (RBI) or branches of State Bank of India (SBI) or any other authorized bank.

b.    Requirement of depositing Online TDS

o       All Corporate Employers

o     All other Employers who are covered by Tax Audit under section 44 AB

c.     How to pay online TDS

o       Click ““CHALLAN NO./ITNS 281””

o       Fill the all relevant details and proceed and pay the tax

d.    Online Can be paid by following mode:

o       Internet Banking
o       Debit Card ( SBI Bank )


e.    Payment By Book Entry – In Case of Government Employers

o       Book Entry: In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a Challan [Book Entry]

o       Compulsory filling of Statement by PAO, Treasury Officer in case of payment of TDS by book entry: The Pay and Acconts Officer (PAO) or the Cheque Drawing and Disbursing Officer or any othe person by whatever name called to whom the deductor reports about the tax deducted and who is responsible for crediting such sum to credit of the Central Government shall –

·        submit a statement in Form No. 24G within ten days from the end of the month to the agency authorized by the Director General of Incometax (Systems) [TIN Facilitation Centres currently managed by M/s National Securities Depository Ltd] in respect of tax deducted by the deductors and reported to him for that month; and

·        intimate the number  hereinafter referred to as the Book Identification Number or BIN) generated by the agency to each of the deductors in respect of whom the sum deducted has been credited. BIN consist of receipt number of Form 24G, DDO sequence number in Form No. 24G and date on which tax is deposited.


11)   Penalty in case of failure of deduction

Section
Penalty/Interest
221(1) When an assessee is in default or is deemed to be in default in making a payment of tax,
Penalty in addition to arrear and interest as directed by Income tax authorities
201(1A) Does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act
Interest
(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,
271 C  fails to  deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act
Penalty
Only imposed by Joint Commissioner, to the amount equal to amount of tax
276 B  fails to  deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act
Imprisonment
Imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine

12)   Furnishing of Certificate for tax deduction

Section 203 of Income Tax Act, every person responsible for deducting TDS is required to issue tax deduction certificate in prescribed format (Form 16) and prescribed time.

Form 16: - Form 16 is a certificate or a document that is issued to salaried personnel by their respective employers. The certificate carries necessary details that assist in the process of filing Tax Returns with the Income Tax Department of India.

Due date of Issue: - The due date for April 2014, either it will be describe by Circular (if any issued by Income Tax Department) or as per Rule 31 it will be 31st May.

Contents of Form 16: - As per Rule 31

a.    Valid permanent account number (PAN) of the deductee

b.    Valid tax deduction and collection account number (TAN) of the deductor

c.     i) book identification number or numbers where deposit of tax deducted is without production of challan in case of an office of the Government

ii) challan identification number or numbers in case of payment through bank

d.    i) receipt number of the relevant quarterly statement of tax deducted at source which is furnished in accordance with the provisions of rule 31A
ii) Receipt numbers of all the relevant quarterly statements in case the statement referred






By CA Ashish Barthwal

For any query: - Contact ca_ashishbarthwal@yahoo.com
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