Volume 2, Issue 10

26th May, 2009

Tax Alert
Clarifications issued by the CBDT on TDS amendments

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:
    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
  • 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
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:
  1. 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
  2. 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.


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:

  1. 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?
  2. 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.