TDS Deduction & TDS Credit Procedures

TDS deduction refers to withholding tax on an income which is payable. The person who is responsible for paying the income should make the

TDS deduction. As per the Income-tax Act, when certain payments like interest, commission, brokerage, rent are made, the person making the payment is required to deduct tax at source (TDS). On or before the due date, the amount of TDS withheld should be remitted to the Government. Hence, the person receiving the payment, known as the deductee, receives the payment net of tax. In this article, we look at the provisions governing TDS deduction in India. Refer to our article - Guide to TDS Return Filing in India

Requirement for Active Status of PAN

A person may be receiving payment for which tax has been deducted at source. All such persons are required to obtain a valid PAN and mention it to the deductor. Care must be taken to furnish the correct

PAN so that the tax deducted can be credited to correct account. Further, non-furnishing of PAN or furnishing of incorrect PAN would result in the deductor incurring higher TDS at a rate of twenty per cent. Also, a penalty of ten thousand rupees shall be leviable. Hence, before furnishing PAN for TDS, the deductee must check the PAN number and status. The status of the PAN must be active. PAN status and number can be checked through the Know Your PAN website of the Income Tax Department. Before furnishing the PAN to the deductor, the assessee should ensure that it is in an active state. If PAN status is inactive, then the deductee must contact the jurisdictional Assessing Officer to change PAN status to the active mode.

TDS Certificate

After deducting TDS, the deductor should furnish to the deductee a TDS certificate. The deductee can cross-check the tax credit available in the account by viewing the relevant TDS certificate. The relevant TDS certificate can be downloaded from the TRACES website. The assessee should note down separately the seven-digit unique certificate number mentioned in the TRACES certificate. The unique certificate number is used to claim credit of tax in the Income Tax Returns filed by the assessee. In the absence of the serial number available in the TRACES certificate, the assessee would not be in a position to claim credit for the deductions made on his account. All TDS certificates must be preserved by the deductee. TDS certificates on payments other than salary are issued on a quarterly basis, and TDS certificates for salary are provided on an annual basis. If the TDS certificate is lost, the deductee can request for a duplicate TDS certificate.

Verifying TDS Certificate

A deductee can verify the TDS certificate Online on the

TRACES website. The deductee needs to log in and go to "View TDS/TCS Credit" screen and click on "Verify TDS Certificate" to verify the TDS certificate (Form 16/16A) after filling the required details.

Verifying Form 26AS

A deductee must also cross-check the TDS credit, as reflected in the TDS certificate available in his account. The total amount of TDS credit available can be ascertained by viewing the tax credit status online from Form 26AS. Form 26AS represents the Annual Tax Statement of the assessee. Form 26AS contains the details of tax deducted/collected by various deductors. It also includes income tax refund details, high-value transactions and transactions pertaining to TDS on sale of immovable property during the financial year. Hence, Form 26AS enables a taxpayer to cross-check the TDS details provided by the deductor with the TDS details available with the electronic database maintained by the Income Tax department. In case of discrepancies in Form 26AS, i.e., if there is any inconsistency between the TDS details as provided by the deductor and TDS details available with the Government records, then the deductee should intimate the same to the deductor.

Claiming TDS

TDS credit can be claimed by the deductor. To claim the credit of TDS, the deductee has to mention the details of TDS in his return of income. Deductee should take care to quote the correct TDS certificate number and TDS details while filing the return of income. If any incorrect detail is provided by the deductee, then tax credit discrepancy will arise at the time of processing the return of income, and this can cause problems in the processing of the

return of income.

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Frequently Asked Questions

Common questions about TDS Deduction & Credit Procedures in India for FY 2023.

TDS deduction refers to the withholding of tax on certain types of income payments, such as interest, commission, brokerage, or rent. The person or entity making the payment is responsible for deducting the tax at source before paying the recipient.

An active PAN (Permanent Account Number) status is crucial for TDS deduction because it ensures that the tax deducted can be credited to the correct account. If the PAN status is inactive or an incorrect PAN is provided, the deductor may be required to deduct TDS at a higher rate and face penalties.

A TDS certificate is a document issued by the deductor to the deductee, providing details of the tax deducted at source. It is important for the deductee to preserve the TDS certificate as it serves as proof of tax deduction and is required for claiming credit for the deducted tax in their income tax returns.

A deductee can verify the TDS certificate online through the TRACES (TDS Reconciliation Analysis and Correction Enabling System) website by logging in and accessing the "Verify TDS Certificate" option. This allows them to cross-check the details of the TDS deduction.

Form 26AS is the Annual Tax Statement of an assessee, which contains details of tax deducted or collected, income tax refunds, and high-value transactions during the financial year. It is important for deductees to cross-check the TDS details in Form 26AS with the information provided by the deductor to ensure consistency.

To claim TDS credit, the deductee must mention the correct TDS certificate number and TDS details while filing their return of income. Providing incorrect details may lead to discrepancies and problems in processing the return of income.

If there are discrepancies between the TDS details provided by the deductor and the TDS details available in the government's records (as reflected in Form 26AS), the deductee should inform the deductor about the inconsistency to rectify the issue.

Yes, if a deductee loses their TDS certificate, they can request a duplicate TDS certificate from the deductor.

TDS certificates for payments other than salary are issued on a quarterly basis, while TDS certificates for salary payments are provided annually.

If a deductee does not furnish their PAN or furnishes an incorrect PAN, the deductor is required to deduct TDS at a higher rate of 20%. Additionally, the deductee may face a penalty of Rs. 10,000 for non-compliance.