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File Validation Utility (FVU) 4.1 and 2.137 – Applicable from 04th January 2014

NSDL came out with a new FVU late evening yesterday 02nd January 2014

FVU Applicability

Date Applicable from FVU Version
From 04th Jan 2014 4.1 & 2.137
Till  03rd Jan 2014 4.1 & 2.137 and 4.0 & 2.136

Points introduced in the new version are:

Deletion of Deductee Record

Applicable Forms – 24Q, 26Q, 27Q, 27EQ

  • Deletion of Deductee’s records (in Correction Return) is no longer permitted.
  • Till the prior FVU versions Deductee records could be deleted, while filing the Correction Return.
  • Henceforth a Deductor would be required to modify the particular Deductee  details in the Correction return and enter zero against the following fields:
    • Amount of payment
    • Amount of Deduction
    • Amount of Deposit
    • Rate of Deduction
    • Date of Deduction should be blank

Form 27A

  • Form 27A is used for providing summarized information with the Statement of Tax deduction/Tax Collection at source.
  • Now on, the Form 27A would be auto generated on creation of the .fvu file
  • The new Form27A also contains a barcode (refer file attached)

27A

Date of Tax Deduction and/or Tax Collection

Applicable Forms – 24Q, 26Q, 27Q, 27EQ

  • Going ahead transactions, on which tax is deducted prior to the filing period, cannot be included in the TDS return.
  • Ex – In the Dec 2013 quarter, a Deductor cannot include a TDS deduction entry prior to 01st October 2013
  • Earlier there were no restrictions and one could declare transaction related to previous quarter in the subsequent filing quarters
  • Now on, a Deductor is required to file a Correction return, if they have any (such) transaction relating to previous filing periods.

Challan/Transfer Voucher validation

Applicable Forms – 24Q, 26Q, 27Q, 27EQ

  • Challan amount should be more than or equal to total of Tax deducted, interest payments, late filing fees and other amounts.
  • i.e – No challan can be submitted with a short payment
  • Ex –  Assume a scenario as below:
TDS Amount 10,000
Interest  5,000
Other Amount  4,000
Fees  1,000
TOTAL 20,000
  •  In this case, the Challan amount has to be more than/equal to Rs. 20,000

* Points expressed here are the Author’s interpretation. This cannot substitute Expert advice

File Validation Utility (FVU) 4.0 and 2.136 – Applicable from 01st October 2013

NSDL came out with FVU version 4.0 and 2.136  on 25th September 2013.

FVU Applicability

Date Applicable from FVU Version
From 01st Oct 2013 4.0 & 2.136
Till 30th Sept 2013 4.0 & 2.136 and3.9 & 2.135

 

 

Points added/introduced in the new version are:

Nil Challan/ transfer vouchers

Applicable Forms – 24Q, 26Q,27Q, 27EQ

  • In case of Nil Challan/ transfer vouchers, it’s now mandatory to update reasons for such non deduction
  • Along with entering all the other transaction details one now needs to, also, update either of the following flags “A/B/S/T/Y/Z” in the ‘Reason for Non deduction/Lower deduction’ field
  • It needs to be seen how one treats a situation where there are no transactions in a quarter.

Section 194LD

Applicable Forms –27Q

  • As per Section 194LD, introduced in the Finance Bill 2013, TDS @ 5% needs to be deducted on interest payments for Rupee denominated bonds issued by the Government of India or any other Indian company.
  • TDS would be applicable on all such interest payments made from 01st June 2013 till 31st May 2015
  • These payments are made to Qualified Foreign Investors (QFI) and/or Foreign Institutional Investors (FII)

Section 194LC

Applicable Forms –27Q

  • Section 194LC covers following payments made to non residents
    • Interest (other than interest on securities) and
    • Other payments except for salary
  • Now onwards only an Indian Company or it’s Branch, may deduct TDS under this section
  • Earlier this Section was open to use by all Deductors. Ex – Company, AOP, BOI etc
  • It’s still not clear on how Deductors (apart from Company or Branch) deal with payments under this Section

Section 194LC (Correction Statement)

Applicable Forms –27Q

  • Pursuant to the change in this FVU, Correction Statement may be filed, only, if there are any changes in the existing Challan or Deductee or in case a new challan has been paid.
  • Under the ‘Correction Type’ field, Deductor may only use
    • C2 – Correction in Deductor and/or Challan details
    • C3 – Change in Deductor, challan, and/or Deductee details
    • C9 – Additional Challan payments
  • This change is applicable from 2012-2013 onwards

Provisional Receipt Number (PRN)

Applicable Forms –24Q,26Q,27Q,27EQ

  • It is now mandatory to mention the PRN for all Regular statements
  • PRN from the last filed Regular Statement (for the same Form) needs to be quoted
  • Ex – In case a Deductor is filing Form 24Q for quarter ending June 2013, he has to mention the PRN from previous period, would henceforth be required to mention their PRN

Date of Challan Deposit

Applicable Forms –24Q, 26Q, 27Q, 27EQ

  • Surplus challan payments, from the immediate previous financial year (FY), may now be adjusted against current year dues. Eg – While filing returns for FY 2013-2014, one can use the surplus from the previous FY 2012-2013
  • Surplus arising from any year prior to the previous FY cannot be entered
  • A Deductor would now be allowed to enter details of surplus payments made in the previous FY
  • Excess payments from previous FY occurring on account of Book entry adjustments, would not be allowed

Notification 11/2013 : Amendment in TDS Rules

CBDT has issued Notification No 11/2013 dated 19-2-2013 , which  is being explained and analysed in this blog.

Furnishing of TDS Statement under digital signature

  • Amendment in Rule 31A provides  for submission of TDS return electronically under digital signature. It also states furnishing of statement alongwith verification of statement in Form 27A  OR Verification through electronic process.
  • Currently a very large percentage of TDS statements are filed by visiting TIN facilitation centres and carrying TDS statement in a CD/Pen drive alongwith a signed Form 27A.
  • NSDL , has also provided for submission of return online under digital signature , but this requires prior registration.
  • We have to wait for new guidelines for online submission under digital signature or verification through electronic process.

Form 26A for Certificate from accountant under section 201

  • Under certain conditions, a deductor shall not be deemed to be assessee in default for non deduction of tax at source. One of the conditions is that such deductor will have to produce a certificate from accountant .
  • Form 26A has been prescribed for this purpose.
  • Director General of Income-tax (System) will specify the procedure , format and standards for furnishing of Form 26A
  • We have to wait for new guidelines for submission and verification of Form 26A

New Form 26B for Claim for refund

  • If any excess TDS is deposited, the claim for refund now can be filed by the deductor in newly inserted Form 26B.
  • This form will have to be submitted electronically under digital signatures.
  • Director General of Income-tax (System) will specify the procedure , format and standards for furnishing of Form 26B

Submission of certain details of amounts paid without deduction of tax at source

  • Notification 56/2012 dated 31-12-2012 had provided for no deduction of tax at source for certain payments made to banks.
  • The amended Rule provides for submission of details of such payments in TDS Statement.
  • We have to wait for changes in data structure to be notified by NSDL.

Change in Forms

Changes have been notified in

  • TDS/TCS Certificate :  Forms 16,16A,27D
  • TDS Statements : Forms 24Q,26Q,27Q and 27EQ
  • Declarations for payments without TDS/TCS : Form 15G, 15H, 27C 

We have to wait for changes in data structure to be notified by NSDL to give effect to this change. Detailed analysis of these changes will be discussed in a separate blog.

Budget 2012 and TDS Provisions

        Summary of provisions related to TDS/TCS

  • No tax deduction on interest on securities upto Rs. 5000
  • Payment to independent directors covered under section 194J and tax to be deducted @ 10%
  • Threshold limit increased from Rs. 1 Lac to 2 Lac for compensation towards compulsory acquisition of immovable property
  • New provision for deducting tax at source @ 1% on sale of immovable property
  • Senior citizens of age 60 or above can now file Form 15H and claim non deduction of tax at source
  • For non deduction, no default if deductee provides proof of taxes paid
  • Intimation issued after processing of TDS return will be deemed to be Notice of Demand
  • Penalty for non filing or incorrect filing of TDS  statements
  • Time limit for passing order for failure to deduct tax increased from 4 years to 6 years
  • Tax collection at source on sale of jewellery in cash in excess of Rs. 2 Lac

       Section wise details

Section 193 : Interest on securities : Effective  July 1 , 2012

  • Existing provisions provide for threshold limit of Rs. 2500 in respect of interest payable to resident individuals on listed debentures of a listed company and for unlisted debentures there is no threshold
  • Amended provision now prescribes a limit of Rs. 5000 in respect of interest payable to resident individuals or HUF for listed or unlisted debentures issued by a public company. For this purpose the payment of interest must be made by an account payee cheque

Section 194J : TDS on fees for professional or technical services : Effective  July 1 , 2012

  • The amendment has included payments made to independent directors ( whether by way of fees or professional services or whatever name ) @ 10% of gross payments.
  • If the remuneration to director is already subject to TDS under section 192 ( salaries ), then the above provision will not apply

Section 194LA : TDS on compensation on acquisition of immovable property : Effective  July 1 , 2012

  • Existing provision prescribe a threshold limit of 1 Lac
  • The amendment seeks to increase threshold limit to 2 Lac

194LAA : TDs on payment on transfer of immovable property : Effective Oct 1, 2012

  • This new proposed section covers consideration for transfer of immovable property , other than agricultural land
  • The deduction has to be made at the time of credit or payment , whichever is earlier
  • TDS is required @ 1% of consideration
  • Threshold limit for deduction is 50 Lacs for property situated in specified urban areas and 20 lacs in other areas
  • Consideration will be actual amount OR value assessed by stamp authorities
  • The property document will not be registered unless proof of TDS deposit is attached
  • This TDS deduction will not be subject to other provisions like quoting TAN,  submitting eTDS statement , issuing Form 16A. A separate one page form will be prescribed which needs to be submitted to registration authorities

Section 197A :  Non Deduction in certain cases

  • Form 15H for claiming of certain amount without deduction of tax at source can be now submitted by a person 60 or above years of age.

Sec. 201 – Consequences of Failure to Deduct or Pay

Increase in time limit  :Effective April 1, 2010

  • If a person required to deduct tax at source, does not deduct or after deducting does not deposit the amount, is deemed to be an assessee in default.
  • For this purpose an order is to be passed by the Assessing Officer under section 201
  • This time limit currently is 4 years from the end of financial year in which payment is made or credit given. The amendment now seeks to increase this period to 6 years and is effective April 1, 2010

Not assessee in default : Effective July 1, 2012

  • A person will not be deemed to be assesse in default for failing to deduct tax at source if deductee
    • has furnished income tax return
    • has considered such sum ( on which tax was not deducted at source ) in computing total income
    • has paid tax due on income shown in the return
    • furnishes a certificate to this effect from an accountant
  • The deductor however will be liable to pay interest from the date such amount was deductible to the date of furnishing of return by deductee

206C Collection of tax at source : Effective July 1, 2012

  • A new sub section (1D) is proposed. A seller who receives any amount in cash as consideration of sale of jewellery  or bullion , will be required to collect tax at source @ 1 % of sale consideration. The threshold for this provision is Rs. 2 Lac
  • Sale of minerals like coal, lignite or iron ore will also be subject to tax collection at source @ 1%

Sec  271H – Penalty for Default in Furnishing Statements

  • A new section 271H provides for penalty from Rs. 10,000 to Rs. 1 Lac where
    • Deductor fails to file eTDS statements in time
    • Furnishes incorrect information in eTDS statements

Sec 234 – Fee for Default in Furnishing Statements

 Failure to file eTDS statements in time will now entail a penalty of Rs. 200 per day ( instead of Rs. 100 per day )

  • No penalty will be levied for delay if TDS statements are filed within 1 year of prescribed due date after payment of tax and interest on delayed deposit

Intimation after processing of TDS Statements  :Effective July 1, 2012

  • ·         Intimation generated after processing of TDS statement will be treated a  Notice of Demand u/s 156 ,Rectifiable order u/s 154 and  Appealable order u/s 24A

 

Provisions pertaining to Non Resident Indians

Section 194E : TDS on payment to non-resident sportsmen or Sports Association : Effective  July 1 , 2012

  • Existing provisions provide for TDS @ 10% of gross receipts of non-resident sportsmen or sports association
  • Amended provisions not provide for TDS @ 20% of gross receipt of non-resident sportsmen , sports association OR entertainer

Sec. 194-LC – TDS on Interest from Specified Indian Companies : Effective July 1, 2012

  • This new section prescribes TDS @ 5% in respect of interest paid by specified companies to non-residents in respect of foreign currency loans
  • The borrowing must be made between July 1, 2012 to July 1, 2015 and approved by Central Govt
  • The specified companies are those which are engaged in:   Construction of dam ,Operation of aircraft ,  Manufacture or production of fertilizers ,Construction of Port including inland port ,Construction of road, tall road or bridges.Generation, distribution or transmission of power ,Construction of ships in shipyard ,Developing and building affordable housing projects referred to in Section 35AD (8)(c)(vii).

Sec. 195 – TDS on Payments to Non-Residents

  • The tds on interest payment covered under this section will not include interest covered under section 194LB and 194LC
  • The obligation to deduct tax under this section will apply to residents or non-residents. Even if a non-resident does not have a place of business or any other presence in India. This explanation is retrospective with effect fron 1st April 1962
  • The  Board can issue Notification to specify a class of persons or cases where person responsible for making payment to a non-resident can make application to Assessing Office to determine sum chargeable to tax. This amendment will be effective July 1, 2012

Not issued Form 16A in time ? You may get a reminder from DIT

TDS certificate in Form 16A are to be issued for all deductions other than salary on quarterly basis.  The due date of issuing Form 16A is within 15 days of the due date of filing eTDS statement.

Income-tax department has also mandated corporates and banks to issue such certificates only after downloading Form 16A  files from TIN web site.

Tracking Downloads

It has been observed that income-tax department is tracking all downloads of form 16A . Those who have not made request for Form 16A are being sent reminder letters by the “Directorate of Income-tax Systems” . The reminder letter states…

It is noticed that you have not downloaded Form No 16A for Quarter ended Sep 2011 from the TIN Central System till 31/10/2011. Since, issue of TDS certificate in Form No 16A by downloading from TIN web site has been made mandatory from 1.4.2011 for corporate and banks , and only these are valid certificates, you are advised to download the same from the TIN web site ….”

Erroneous Reminders ?

Several deductors who are neither corporate nor banks have also received such reminders. This is possible if their status is not updated in TAN database  , or erroneous generation of letters by income-tax department.

What should be the response

If deduductor is a bank or corporate, it must immediately submit request for downloading Form 16A thru TAN login and after downloading issue the same to deductees.

For other deductors,  though it is not mandatory to download Form 16A from TIN web site,  nevertheless they have to issue Form 16A within due date. They can also download Form 16A from TIN web site at their option and issue the same to deductees.

Also if the status of TAN on TIN web site is not correct, TAN rectification form must be submitted.

TDS on payment to non-residents : Supreme Court Judgement

GE India Technology Centre vs. CIT

The  Supreme Court in a recent judgment pronounced on 9th September, 2010 has disposed off a large number of cases including the Karnataka High Court judgment , in respect of tax deduction at source on payments to non-residents. 

Facts of the case 

  • The assessee, an Indian company, made remittance to a foreign company for purchase of software. The assessee took the view that the payment was not chargeable to tax in India and did not deduct tax at source u/s 195.
  • The Assessing Office  & CIT (Appeal) took the view that the payment constituted “royalty” and was chargeable to tax and that the assessee was liable u/s 201 for failure to deduct tax at source. This decision was reversed by the Tribunal.
  • On appeal by the department, the High Court reversed the Tribunal order by taking the view in CIT vs.Samsung Electronics (320 ITR 209) that the assessee was not entitled to consider whether the payment was chargeable to tax in the hands of the non-resident or not and had to deduct tax u/s 195 on all payments
  • In another decision of Van Oord ACZ India (P) Ltd. [323 ITR 130] Delhi High Court held that when the amount payable to non-resident is not taxable in India, there is no question of withholding tax at source. The Delhi High Court clearly dissented from the decision of the Karnataka High Court. 

Background

  • Under section 195, any person responsible for paying to a non-resident or foreign company  any sum chargeable under the Act , must deduct tax at source at the time of payment or credit.
  • Under Section 195(2)  ,a Payer or can approach ITO(TDS) and apply for determination of amount liable for deduction at source.
  • Under section 197 , a Payee can approach Assessing Officer for a certificate of lower/Nil rate.
  • A Payer can suo-moto determine applicability of tax deduction duly  supported by a Chartered Accountant’s certificate .

Decision

  • The Supreme Court reversed the decision of High Court and made the following observations
  • Section 195(1)  uses the expression “sum chargeable under the provisions of the Act”. This means that a person paying interest or any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax.
  • Section 195(1) uses the word ‘payer’ and not the word “assessee”. The payer is not an assessee. The payer becomes an assessee-in-default only when he fails to fulfill the statutory obligation u/s 195(1). If the payment does not contain the element of income , he cannot be declared to be an assessee-in-default
  • Section 195(2) applies where the payer is in no doubt that tax is payable in respect of some part of the remittance but is not sure as to what is the taxable portion. In that situation, he is required to make an application to the Assessing Officer for determining the amount.

On Karnataka High Court Decision

  • The Karnataka High Court in CIT vs. Samsung Electronics (320 ITR 209)  had held that unless the payer makes an application to the ITO (TDS) under Section 195(2) and has obtained a permission for non-deduction of the tax at source it was not permissible for the payer to contend that the payment made to the non-resident did not give rise to “income” taxable in India and that, therefore, there was no need to deduct any tax. The Karnataka High Court had relied on Supreme Courts decision in Transmission Corporation of AP case (239 ITR 387)
  • Supreme Court observed that the Karnataka High Court  misunderstood the observations in Transmission Corporation case. The only issue raised in that case was whether TDS was applicable only to pure income payments and not to composite payments which had an element of income embedded in them.
  • The controversy was different and the Court held that if some part of the payment was taxable, an application u/s 195(2) had to be made.
  • The High Court’s interpretation completely loses sight of the plain words of Section 195(1) which in clear terms lays down that tax at source is deductible only from “sums chargeable” under the Act  i.e. chargeable u/s 4, 5 and 9

On Departments apprehension about revenue leakage

  • The department’s apprehension that if tax is not deducted on all payments, there will be a seepage of revenue is ill founded because there are adequate safeguards in the Act to prevent the payer from wrongly not deducting tax at source such as Section. 40(a)(i) which disallows deduction for the expenditure.

Hence ,  the remittance to a non-resident has got to be of a trading receipt, the whole or part of which is liable to tax in India. The payer is bound to deduct tax at source only if the tax is assessable in India. If tax is not so assessable, there is no question of tax being deducted.

Revised Guidelines for filing eTDS Correction Statement

eTDS Correction statements are to be filed to rectify any error / omission in the original statement. The need to file eTDS  correction also arises because of 85%/ 95% valid PAN requirement for filing eTDS statement.

Recently NSDL has released revised guidelines for filing of correction statement. These guidelines can be viewed by typing the link http://www.tin-nsdl.com/RevisedReturns.asp

Why file eTDS Correction ?

  • In case of deficiencies in the accepted regular TDS/TCS statement such as incorrect challan details or PAN not provided or provided incorrectly, the tax credit will not reflect in the Form 26AS of the deductees in your statement.
  • “To facilitate correct credit in Form 26AS of the deductees you are required to remove deficiencies, if any, in the accepted regular TDS/TCS statement by filing a correction statement.”

What cannot be corrected ?

  • TAN, Form no., quarter, FY and A.Y quoted in a regular statement cannot be updated by furnishing a correction statement.
  • For this file a cancellation statement , followed by a new regular statement.

Before you file Correction Statement

  • Provisional receipt of the corresponding accepted regular statement should be available.
  • .fvu file of the corresponding accepted regular statement should be available
  • Check the status of the regular statement on the TIN website by entering the TAN and PRN. correction statement should be prepared only if the corresponding regular statement has been accepted at the TIN central system.

Correction in Challan Record

  • You can add a new Challan
  • Deletion of a Challan is NOT ALLOWED
  • Update of  a challan is based on the Status of Challan Online
Status of Challan Correction
Booked Correction cannot be done
Match Pending Correction in CIN can be done
Match Failed Correction in Challan Amount can be done

Correction in Deductee Records

  • You can add new deductee, update details of a deductee and delete a deductee
  • Updation of a valid PAN to another valid PAN can be done only once

Correction in Salary Record

  • You can add a salary record and delete a salary record

Online TAN Registration

NSDL has started facility of online TAN registration.

The benefit of online TAN registration is availability of

  • view of the status of all statements filed;
  • download of consolidated quarterly e-TDS / TCS statement for preparation of correction statement

The online simple registration process will ask for

  • TAN , PAN of deductor
  • Contact details of deductor
  • Acknowledgement No of any eTDS Statement filed after 01-04-2008

On submission Ackonwledgement Number will be generated


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