Volume 2, Issue 10
26th May, 2009 |
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Clarifications issued by the CBDT on TDS amendments |
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As you are aware, the CBDT had
issued Notification No. 31/2009 on
25th March 2009 with a view to
amend the rules affecting the mode
of payment of TDS/TCS and the
Forms, Certificates and Returns
used for the purposes TDS/TCS.
(Please see SKP Tax Alert – Vol. 2,
Issue 6 dated 10th April, 2009).
Thereafter, the implementation of
the said amendments was
postponed to 1st July vide a Press
Release dated 11th May, 2009
(please refer to our e‐mail dated
14th May, 2009). However, on
account of the defective drafting of
Notification No. 31, a number of
issues had arisen leaving tax
deductors confused.
With a view to addressing these
issues and doing away with the
confusion created by the
anomalous Notification No. 31, the
CBDT has now come out with
Circular No. 2/2009 dated 21st May
2009.
The CBDT has, through this Circular,
also given a justification for
bringing in the amendment to the
TDS Rules which is going to have far
‐reaching effects. As per the
Circular, one of the fundamental
principles of financial accounting is
that if the tax deductee claims
credit from the Government for tax
deducted and paid to the
Government by the tax deductor,
the credit should be allowed by the
Government only if the payment
and the information relating to the
transaction have been received by
it from the tax deductor. This
principle was applied by the Income
Tax Department when giving credit
for TDS/TCS. However, since the
process of granting of credit for
TDS in the Income Tax Department
was manually organised and the
volume of TDS related information
was large; it was not feasible to
undertake 100% matching of TDS
claims with information furnished
by the deductors. Consequently,
since 2004, the CBDT has been
coming out with a series of
modifications to the TDS/TCS
procedures, with Notification No.
31 being the latest to join the club.
Though many of the issues arising
from Notification No. 31 are
addressed by Circular No. 2/2009,
it has also resulted in raising a few
new issues. In this alert, we have
highlighted the salient points
clarified by the aforementioned
Circular:
- The payment of TCS/TDS for the
financial year 2009‐10 shall be
made as under:
Month |
Tax Payment
Form |
Tax deducted in the
months of
April and
May 2009 |
ITNS 281 |
Tax deducted during
the period
June
2009 to March 2010 |
Form 17
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- Form 17 is to be uploaded on
the Taxpayer Information
Network (TIN) system maintained by Nat ional
Securities Depository Limited
(NSDL) along with three basic
information relating to the
deduction, i.e. PAN, name of the
deductee and amount of TDS/
TCS
- Once the remittance to the Central Government
is made successfully, every deduction record
will be assigned a Unique Transaction Number
(UTN). The UTN file shall be
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provided to the
deductorby NSDL through e‐mail along with a
facility to download the UTN file. NSDL will also
create a facility to allow independent viewing
of the UTNs by the deductee.
- The UTN will be required to be quoted by the
deductor on the TDS/TCS certificate issued by
him to the deductee.
- In addition to the above, where the payment of
TDS or TCS is effected during April or May 2009,
the tax deductor is required to fill up Form No.
17 between 1st and 15th July 2009 in addition to
the payment made through ITNS 281.
The deductors/collectors are advised to
prepare the schedule relating to details of
TDS/TCS from deductees in Form No.17 in
advance (in an excel sheet) so as to be ready
to file the same at the earliest possible date.
The UTNs relating to TDS/TCS transactions
carried out in the month of April and May
2009 generated/obtained thereafter should be
then conveyed to the deductee. |
- The Circular clarifies that the credit for any TDS
or TCS claim will be allowed, amongst others,
only if the assessee quotes the relevant UTN for
every TDS and TCS claim and the said UTN
matches with the UTN in the database of the
Income Tax Department. Thus, it has now
become imperative to quote the UTN in one’s
ITR form for claiming the credit for TDS/TCS.
- The Circular further states that NSDL shall assign
an UTN for every TDS and TCS transaction for
Financial Years 2007‐08 and 2008‐09 reported in
the quarterly returns received by it. The UTN file
for these years shall be then provided to the tax
deductor for onward submission to the
deductees. This is a very important amendment
as this would imply that the credit for TDS for
A.Y. 2008‐09 and 2009‐10 would be given only
on furnishing of UTN. Hence the assesses would
now have to follow up with the deductors and
obtain UTN in respect of tax deducted for A.Y.
2008‐09 and 2009‐10.
- The deductor is required to mention the UTN in
TDS Certificates (new Form 16 and 16A) and TCS
Certificates (new Form 27A) for payments made
after 1st April 2009. For payments made before
1st April 2009, there are 2 options available:
- The deductor/collector may issue
certificate of deduction or collection in the
Form 16, Form 16A or Form 27D, as the case may be, as it existed prior to 1st
April, 2009 and send a consolidated
statement of UTNs to the deductee/
buyer/lessee etc., as soon as the same
is received by him; or
- The deductor/collector may issue
certificate of deduction or collection in
the new Form 16, Form 16A or Form
27D, as the case may be.
- If the deductor/collector chooses to adopt
the course specified in item (b) of the
above para, the TDS/TCS certificate may be
issued beyond the stipulated period of one
month but not later than 30th June 2009.
Thus, the due date for issuing Form 16 or Form
16A for TDS/TCS prior to 1st April 2009, shall
effectively be 30th June 2009 if the UTNs are
provided in the Form 16 or Form 16A. We
suggest that you issue the Form 16 or Form 16A
by 30th June, 2009 after incorporating the UTN
instead of duplicating the work by first issuing
the Form without UTN and subsequently
sending the UTNs to the deductees. However,
the final decision may also depend on whether
your tax deductees are agreeable to waiting till
June for the TDS certificates.
We believe that providing the UTN to the
deductee is primarily the responsibility
of the tax deductor. In case of failure of
the tax deductor to discharge this
responsibility, for payments effected
before 1s t April 2009, the deductee may
view the UTN through the facility
provided by NSDL. However, for payments
effected on or after 1s t April 2009, even
though the UTN viewing facility is still
available to the deductee, the deductor
must quote the UTN in Form 16 or Form
16A furnished to the deductee. |
- The Circular has illustrated the manner in
which the columns in Form 24C are to be
filled by the tax deductor.
- The Circular has also clarified that Form
24C is required to be furnished by all TAN
holders irrespective of whether a TDS/TCS
transaction has been effected during the
quarter or not. If during a quarter, the
column (3) of Form 24C is zero for all
nature of payments, the deductor/collector should specify in the section on
filing status in Form 24C that it is a case
of Nil Return and it would not be
necessary to fill in the Schedules.
An important matter that needs to be
taken note of is the fact that now, for any
remittance made to a Non Resident or a
foreign party where tax has been withheld
by the remitter, for the remitter (tax
deductor) to be able to make payment of
the TDS to the Govt., he would require the
PAN of that Non Resident or the foreign
party, as the case may be. At present, it is
not mandatory for all Non Residents or
Foreign companies to obtain a PAN.
However, now, merely because the tax
deductor would require the other party’s
PAN, i t wil l become mandatory for such
persons or companies to obtain a PAN from
the Indian tax department. This is an
important development and all tax
deductors need to inform all the Non
Residents and foreign companies (to whom
they make payments after deduction of tax
at source) to immediately apply for and
obtain PAN from the Indian tax
department. |
OPEN ISSUES
The issue which has now arisen from the
framework of the Circular is with regard to the
quoting of UTN for claiming TDS/TCS credit for
Assessment Years 2008‐09 and 2009‐10.
The circular states that UTNs wil l be requiredto be provided by the deductee assessee in
order to claim credit of the TDS/TCS.
Further, from the text of the Circular, it
appears that the UTNs will be required to be
quoted for claiming of TDS/TCS credit even
for A.Y. 2008‐09 and A.Y. 2009‐10.
Questions that arise are:
- For A.Y. 2008‐09, are the assessees
required to revise the Returns of Income
already filed by them to incorporate the
UTNs that will be provided subsequently
or file the UTN details separately with the
assessing officer on or before scrutiny
assessment only in case when the TDS
credit is not granted?
- For A.Y. 2009‐10, on a plain reading of the
Circular it appears that the UTNs would be
provided by the NSDL by 30th June, 2009.
However, no specific date is clearly spelt
out in the Circular. In such a scenario, are
the assessees expected to hold back the
filing of their Returns of Income till the
receipt of the UTN, in spite of having
readied all the other details for filing the
Return of Income? If not, is the assessee
required to file a return without the UTN
only to revise it subsequently upon receipt
of the UTN?
The SKP stand on the above open issues
shall be taken after due deliberations and
shall be communicated to you once we have
more clarity on the issue. |
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