Taxeon

Frequently Asked Questions

What does TDS stand for?
TDS stands for Tax Deducted at Source. It refers to the tax deducted by the person making specified payments if the payment exceeds certain limits, as mandated by the Income Tax Act. Common examples include salary, rent, commission, professional fees, and dividends.
What is TCS?
TCS stands for Tax Collection at Source.
Who is a Deductor?
A Deductor is a company or individual who makes the payment after deducting TDS.
Who is a Deductee?
A Deductee is the company or person receiving the payment from which TDS has been deducted.
What is a TAN (Tax Deduction or Collection Account Number)?
A TAN is required for anyone who deducts or collects tax at source. TAN must be quoted in all TDS-related correspondence. It follows the format: ABCD12345E.
When is TDS deducted?
TDS is deducted either at the time of payment or at the time of crediting the payment to the deductee’s account, whichever occurs first. For TDS on salary, it’s deducted during actual payment, while for TDS on rent, it’s deducted when rent is credited.
How is TDS deposited?
TDS collected must be deposited to the central government’s account using one of the following methods:
  • Net Banking
  • Debit Card
  • Over the Counter
  • NEFT/RTGS

The challan used for depositing TDS is Challan No. ITNS-281, which contains a unique Challan Identification Number (CIN).

What are the payment due dates for depositing TDS?
For tax deducted in March: On or before April 30th.
For tax deducted in other months: On or before the 7th of the following month.
TDS on the purchase of immovable property (u/s 194IA): Within 30 days of deduction.
What forms are used for TDS statements?
What are the due dates for submitting TDS statements?
TDS (Q1-Q4): 31st July, 31st October, 31st January, and 31st May.
Form 16/16A: 15th August, 15th November, 15th February, and 15th June.
TCS: 15th July, 15th October, 15th January, and 15th May.
How are TDS statements filed?
TDS statements must be filed electronically and submitted through the Income Tax E-filing portal or via TIN-FC managed by NSDL.
What are the consequences of TDS defaults?
Failure to deduct tax, deducting less tax, or delayed payment can result in penalties, including:
  • Interest penalties: 1% per month for late deductions, 1.5% for delayed payments.
  • Imprisonment: For failure to pay deducted TDS, imprisonment can range from 3 months to 7 years.
  • Late filing fee (u/s 234E): ₹200 per day until the default continues.
What happens if the deductee fails to furnish a PAN?
If the deductee fails to provide a PAN, or provides an incorrect PAN, the tax will be deducted at the higher of:
  • The rate prescribed in the act
  • The rate in force (Finance Act)
  • 20%
What is TAN?
TAN stands for Tax Deduction and Collection Account Number. It is a 10-digit alphanumeric number issued by the Income Tax Department to persons who are required to deduct or collect tax at source under the Income Tax Act, as per Section 203A.
What is the structure of TAN?
TAN follows the format: ABCD 12345 E . It includes a combination of alphabets and numbers.
How can I apply for TAN?
You can apply for TAN by submitting Form 49B, either online or offline, through the TIN-Facilitation Centers managed by NSDL.
Can I correct errors in my TAN?
Yes, any errors in an allotted TAN can be corrected by filing an application through the correction form at the TIN-Facilitation Center managed by NSDL.
Where do I need to quote my TAN?
TAN must be quoted on all TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) related documents, including:
  • TDS and TCS Statements or Returns
  • Challans for payment of TDS/TCS
  • Statement of financial transactions
  • TDS and TCS Certificates
  • Other prescribed documents.
What is the penalty for not obtaining or quoting TAN?
If a person fails to obtain a TAN or quotes an incorrect TAN in TDS-related documents, the assessing officer can impose a penalty of up to ₹10,000.
Is TAN required for all types of tax deductions?
No, TAN is not required for tax deductions related to payments specified under Sections 194IA, 194IB, and 194M.
Can one TAN be used for both TDS and TCS?
Yes, a single TAN can be used for both Tax Deducted at Source (TDS) and Tax Collected at Source (TCS).
Can an organization have more than one TAN?
It is illegal to obtain more than one TAN. However, organizations with multiple branches or divisions can have separate TANs for each branch or division.
What should I do if I have more than one TAN?
If you have been allotted more than one TAN inadvertently, you must surrender the additional TAN(s) for cancellation immediately.
What happens if I fail to deduct TDS?
If you fail to deduct TDS in full or in part, you will be classified as a "deductor in default" under Section 201(1) of the Income Tax Act. You will be liable to pay simple interest on the amount of tax that was not deducted.
What is the interest rate for failing to deduct TDS?
The interest rate is 1% for every month or part of a month from the date the tax was deductible until the date it is actually deducted.
For example, if you were supposed to deduct ₹3,500 in July and failed to do so until November, you would owe 1% interest for five months, totaling ₹175.
What happens if I deduct TDS but fail to deposit it?
If you deduct TDS but fail to deposit it with the government within the stipulated time, you will be liable to pay interest at 1.5% for every month or part of a month until the tax is deposited.
What is the due date for depositing TDS?
  • For TDS deducted in March: The due date is April 30th.
  • For TDS deducted in other months: The due date is the 7th of the next month.
How is the interest calculated for late deposit of TDS?
The interest is calculated at 1.5% per month on the amount of TDS that was deducted but not deposited. It is charged from the date the tax was deducted until the date the tax is deposited.
For example, if ₹3,500 was deducted in July but not deposited until November, interest of 1.5% for four months would be charged, amounting to ₹210.
What are the consequences of failing to deduct the correct TDS amount?
Failing to deduct the full TDS amount leads to the same consequences as not deducting any tax. You will be charged interest on the amount that was under-deducted until it is corrected and deposited.
Is there a penalty for failing to deduct or deposit TDS?
Yes, in addition to interest, there may be further penalties or consequences as per the Income Tax Act, including disallowance of expenses for tax computation purposes.
How can I avoid interest or penalties related to TDS?
To avoid interest or penalties, ensure that you:
  • Deduct TDS at the correct rate.
  • Deposit the TDS with the central government within the due dates (7th of the next month or 30th April for March).
  • Regularly review your TDS compliance to avoid delays.
What is the late filing fee for delayed TDS/TCS returns?
As per Section 234E of the Income Tax Act, the late filing fee is ₹200 per day of default until the TDS/TCS return is filed. The late filing fee, however, cannot exceed the total amount of tax deducted or collected.
When are TDS returns due?
TDS returns are due by the following dates:
  • Q1 (April – June): 31st July
  • Q2 (July – September): 31st October
  • Q3 (October – December): 31st January
  • Q4 (January – March): 31st May
When are TCS returns due?
TCS returns are due by the following dates:
  • Q1 (April – June): 15th July
  • Q2 (July – September): 15th October
  • Q3 (October – December): 15th January
  • Q4 (January – March): 15th May
How is the late filing fee calculated?
The late filing fee is calculated at ₹200 per day for every day the return is late. The fee is calculated from the day after the due date to the day the return is filed.
For example, if the Q1 TDS return is due on 31st July but filed on 8th August (8 days late), the late fee will be:
8 days × ₹200 = ₹1,600.
Is there a limit on the late filing fee?
Yes, the late filing fee cannot exceed the total amount of tax deducted or collected for the period to which the statement relates.
For example, if the total TDS deducted is ₹1,000 and the return is 8 days late, the late filing fee would normally be ₹1,600. However, since the TDS amount is only ₹1,000, the fee is limited to ₹1,000.
When should the late filing fee be paid?
The late filing fee must be paid before filing the TDS or TCS return. For instance, if the return is filed late, the fee must be paid on the day of filing, before submitting the return.
Can the late filing fee be waived?
No, the late filing fee is statutory in nature and cannot be waived under any circumstances.
From when is the late filing fee applicable?
The late filing fee is applicable for all TDS/TCS returns filed on or after 1st July 2012.
What happens if I don’t pay the late filing fee?
If the late filing fee is not paid, the return cannot be filed, and the default period will continue, leading to further accrual of late fees.
What is the importance of quoting the TAN in TDS documents?
Always quote the Tax Deduction and Collection Account Number (TAN) in all TDS-related documents. Ensure that the correct TAN is quoted while depositing challans to avoid issues with the tax authorities.
Why should I double-check the assessment year when depositing TDS?
It is essential to double-check the assessment year while depositing TDS through challan to ensure that the payment is allocated to the correct financial year, thus avoiding discrepancies.
What is the consequence of deducting tax at an incorrect rate?
If a deductor fails to deduct tax at the correct rate, they will be liable to pay interest on the default amount. It is crucial to ensure compliance with the applicable rates.
When should TDS be deposited?
Every person liable to deduct TDS should deposit the tax within the stipulated time to avoid incurring late payment interest.
What is the deadline for filing TDS returns?
TDS returns must be filed within the stipulated time to avoid late filing fees. Ensure adherence to the deadlines set by the income tax department.
How important is it to quote the correct PAN of the deductee?
Quoting the correct PAN of the deductee is vital. An incorrect PAN may lead to a short deduction notice from tax authorities.
What happens if the Challan Identification Number (CIN) is incorrect?
Quoting an incorrect Challan Identification Number (CIN) in TDS returns may lead to a short payment default notice.
Why is it important to verify book identification numbers?
Quoting the correct Book Identification Numbers in TDS returns is essential as incorrect entries may also lead to a short payment default notice.
What should be done if returns were filed in previous quarters?
If returns were filed in any quarter prior to the current one, ensure to enter the correct Receipt Number from those previous returns to maintain accuracy.
How can I avoid short deduction defaults?
Deductors should ensure they deduct tax at the rate specified in the applicable section and enter the correct deduction details in the TDS return.
When should TDS certificates in Form 16 or 16A be distributed?
Every deductor is responsible for downloading and distributing TDS certificates in Form 16 or 16A within the stipulated time. These forms can be downloaded from the TRACES portal.
Why should I use the latest File Validation Utility (FVU)?
NSDL releases File Validation Utilities (FVU) at regular intervals. Always use the latest FVU downloaded from the NSDL/Protean portal to ensure compliance.
How can I verify challan and book entry details?
It is important to cross-check and verify challans from the Income Tax e-filing portal and book entry details from the NSDL portal before filing TDS returns to avoid short payment demands.
Why should I check the status of PAN and Aadhaar linking?
Verifying the status of PAN before entering the details can help avoid short deduction defaults. Ensure that PAN is linked to Aadhaar as required by the tax authorities.
Where should I file my TDS returns?
File TDS returns only through the Income Tax e-filing portal or TIN-FC managed by NSDL. Using unauthorized facilitators may lead to complications.
Is it necessary to obtain proof before reporting PAN or deductions?
Yes, do not report a PAN in the TDS return without obtaining a copy, and do not report savings and deductions without obtaining proof to avoid potential discrepancies.
What should I avoid sharing to maintain security?