As per the provision of the Income Tax Act, there is a concept of TDS. As per this concept, if there is a person (deductor) who is making the payment of any specified income to another person, he will deduct the amount of TDS and the balance amount will pay to the person (deductee) and the amount of TDS will pay to the account of Central Government. The deductee will be eligible to take the credit of such amount of TDS on the basis of Form 26AS or TDS Certificate. The deductor will furnish the following information in the TDS return–
- Details of deductees
- Details of challans
- Detail of deposit of tax to Income Tax Department.
We can file the return of TDS by using RUP (Return Preparation Utility) and such utility is available on the NSDL website or we can also use ERP software for filing TDS returns. If the person is using RUP, first you will download the latest file for preparation of TDS return or if you are generating the file from ERP software, you will validate the file by using FVU (File Validation Utility) to check the accuracy of such file.
In this article, we will discuss some common mistakes that are done by the person while filing the TDS return.
- Non updated information of TAN (Tax Deduction & Collection Account Number)-
It is a 10 digit alphanumeric number, which is issued by the Income Tax Department to the person who is required to deduct and collect the amount of TDS on the specified payments which are specified under the Income Tax Act 1961. When you are filing the TDS return TAN must be correct, valid, and updated. If the TAN is not correct, the payment which is made by the person to the ITD shall not be reflected and such return will not be accepted or validated by the Income – tax department.
- Incorrect PAN- When you will mention the PAN (Permanent Account Number) of the deductee, it should be correct and verified. If the PAN is incorrect, the amount of TDS will not reflect in Form 26AS of the deductee.
- Incorrect details of Challans– When you are entering the details of Challans, you should confirm that all the details of challan should be correct because the details of Challan are very important and it will contain-
- Amount of TDS payment
- Date of payment
- BSR code of such bank
- Section under which TDS is deposited
- Incorrect selection of Financial year or Assessment year- When you will prepare or file the detail of the TDS return, you will properly select the financial year as well as the assessment year.
- Short deduction of TDS- As per the Income Tax Act, there are prescribed rates of TDS , and the deductor will deduct the TDS as per the prescribed rate i.e. there should not be the short deduction of TDS.
- Short payment of TDS- While filing the TDS return the amount of payment should not be less than the amount of TDS which is deducted means there should not be short payment of TDS.
- Detail of tax paid and deducted- In the TDS return the amount of TDS payment and deducted should be properly classified in tax amount, surcharge, interest , and penalty, etc.
- Incorrect selection of section code– As per the provision of the Income Tax Act, there are prescribed sections to deduct the amount of TDS. When the preparer will file the TDS return, he will select the correct section code. For the example- TDS is deducted by the person under section 94C @ 2% but he wrongly select section code 92J for which the tax rate is 10% and he files the TDS return. But after the processing of such TDS return, the demand will be raised for the differential rate of 8% along with the amount of interest for short and late payment.
- Incorrect date of deduction and date of payment– In the TDS return the date of deduction and the date of payment should be disclosed correctly and separately. If there is any mismatch, the demand can be raised by the department with the amount of interest.
- Incorrect selection of deductor– While fling the TDS return, the deductor must be property select the status of the deductor. If there is any mistake in the selection of the status of the deductor, it will result as an error.
- Incorrect detail of responsible person– In the TDS return the details of the responsible person should be correct I.e. name of the person, address, contact information, etc. should be correct.
- Incorrect details of 197 certificate– Before filing the TDS return, the deductor will verify that the certificate which is provided by the deductee is valid or not for such period and it should be mentioned in the return in the valid format and all the details related to such certificate should be correct.