TDS Deduction & TDS Credit Procedures in India

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) and remit the same with the Government. Hence, the person receiving the payment, known ad deductee, receives the payment net of tax.  In this article, we look at the rules relating to TDS deduction in India.

Failure to Furnish PAN

Any person receiving payment for which tax has been deducted at source is required to obtain a valid PAN (if not obtained) and furnish the correct PAN 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 20% rate and levy of penalty of ten thousand rupees.

Hence, before furnishing PAN for TDS, the deductee must check the PAN status (Must be active) and number. PAN status and number can be checked through the Know Your PAN website of the Income Tax Department. Before furnishing the PAN ensure that it is in active state. If PAN status is inactive, then the deducted must contact the jurisdictional Assessing Officer to change PAN status to active.

TDS Certificate

On deducting TDS, the deductor would furnish to the deductee a TDS certificate. The deductee can cross check the tax credit by viewing Valid TDS certificate is the TDS certificate downloaded from TRACES (http://www.tdscpc.gov.in) bearing a 7 digit unique certificate number and TRACES watermark.

All TDS certificates must be preserved by the Deductee. TDS certificates on payments other than salary is issued on quarterly basis and TDS certificate for salary is provided on annual basis. If the TDS certificate is lost, the deductee can request for duplicate TDS certificate.

Verifying TDS Certificate

A deductee can verify the TDS certificate Online on the TRACES website. The deductee needs to login and go to “View TDS/TCS Credit” screen and click on “Varify 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 TDS certificate available in his account by viewing the tax credit status online from Form 26AS, which is the Annual Tax Statement. Form 26AS contains the details of tax deducted/collected by various deductors including income tax refund details, high value transactions and transactions pertaining to TDS on sale on immovable property during the financial year. Hence, Form 26AS enables a tax payer to cross check the TDS details provided to him by the deductor with the TDS details available with the Government.

In case of discrepancies in Form 26AS, i.e., 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 due 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 same can cause problem in processing the return of income.