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File Validation Utility (FVU) 4.2 and 2.138 – Applicable from 26th April 2014

It’s the start of Tax compliance Season  and as with the last 3 quarters, there is a new FVU. NSDL came out with the latest  utility on 25th April 2014 late evening

FVU Applicability

Date Applicable from FVU Version
From 26th April 2014 4.2 & 2.138
Till  25th April 2014 4.1 & 2.137

Through the new FVU  the following changes/validations have been brought in place:

NIL Returns

Applicable Forms – 24Q

  • A Deductor would now be able to file NIL returns for all years
  • Since FVU 4.0, there was a lot of confusion on the filing on NIL returns
  • It’s still not clear whether NIL returns need to submitted for other Forms

Unique Acknowledgement Number (UAN)

Applicable Forms – 27Q

  • UAN refers to the acknowledgement received on successful filing of Form 15CA
  • The new utility now allows a User to key in alphanumeric values from 12 to 15 characters

Validation in the absence of Deductee’s PAN

Applicable Forms – 24Q

  • It’s well understood that, in case a Deductee doesn’t have a PAN, TDS needs to be deducted at higher of 20% or applicable rate.
  • This point was not being checked till the previous FVU filings.
  • Henceforth, the new Utility would now be validating this feature (i.e – If a Deductee does not have a PAN, and if the TDS deducted amount is less than 20%, the FVU would show an error

* 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

TDS Default Notices : How to avoid Interest Defaults

Each e-TDS statement is processed by TIN and defaults are put on web site for deductors to rectify.

In this article, we will examine what is default on account of interest and how it can be avoided

When is interest payable ?

As per income-tax , interest is payable under the following two circumstances

  1. Tax is not deducted , when it was deductible
  2. Tax once deducted, is not paid on or before  due date

When tax is to be deducted

At the time of credit or payment, whichever is earlier
193- Interest on securities
194A- Interest Other than “Interest on securities”
194C- Payment to contractors / sub contractors
194D – Insurance commission
194H – Commission or Brokerage
194G- Commission on sale of lottery tickets
194I- Rent
194J- Professional or technical fees
Before making payment or distribution
194- Dividend
At the time of payment
192- Salaries
194B- Winning from lotteries / crossword puzzles
194BB Winnings from horse races
194EE – Payment from National Saving Scheme
194F Payment for repurchase of units by UTI / mutual funds
194LA: Payment of compensation on acquisition of certain immovable property

What is the Due date of deposit of TDS ?

  • All the TDS deductions made during a month are to be paid on or before7th of the next month. Example : All deductions made during April ,must be paid on or before May 7th, 2010.In case 7th of the month happens to be a Sunday or a bank holiday, then the payment can be made on the next business day.
  • Beginning FY 2010-11 ,for deductions made during the month of March, payment must be made on or before 30th April.

What is the rate of interest ?

W.e.f 01-07-2010

  • From the date when TDS was deductible till date of actual deduction,rate of interest is 1% p.m.
  • For delayed deposit, from date of deduction till actual date of payment, rate of interest is 1.5% p.m

Prior to 01-07-2010

  • From FY 2006-07 onwards for delayed deposit, from date of deduction till actual date of payment, rate of interest is 1.0% p.m

What is the due date of payment  of interest ?

Interest must be calculated and paid before filing of eTDS statement of the quarter.

Quarter 1 Jul-15
Quarter 2 Oct-15
Quarter 3 Jan-15
Quarter 4 May-15

How is interest to be calculated ?

  • Interest is to be calculated for every month or part of a month comprised
    in a period, any fraction of a month shall be deemed to be a full month
  • The amount of tax, penalty or other sum in respect of which such interest
    is to be calculated shall be rounded off to the nearest multiple of one
    hundred rupees and for this purpose any fraction of one hundred rupees
    shall be ignored and the amount so rounded off shall be deemed to be the
    amount in respect of which the interest is to be calculated.

Of course, those using TdsPac software from Fast Facts need not worry. Automatic and accurate calculation of interest is available in single click.

Example of Interest Calculation

Date Of Payment Date of Deduction Due Date Date of Deposit Delayed Deposit Delayed Deduction
Months Rate Months Rate
05/04/2010 05/04/2010 07/05/2010 09/05/2010 2 1%
10/04/2010 10/04/2010 07/05/2010 09/05/2010 1 1%
02/07/2010 04/08/2010 07/09/2010 07/09/2010 2 1%
02/07/2010 04/08/2010 07/09/2010 15/09/2010 2 1.50% 2 1%

Avoiding Interest Default

To avoid interest default

  • Deduct tax at source in time
  • Deposit TDS by due date
  • In case of delayed deduction / deposit ,calculate interest and deposit the same
  • Show such interest properly in eTDS statement

Rectifying Interest Default

  • You may download default notices after logging into your TAN account.
  • Default Notice is a plain excel sheet without any password protection
  • If there is any default on account of non-payment or short  payment of interest, you need to pay up the same
  • After paying , you have to  file correction statement by including the interest payment challan.

Processing of eTDS Statement Begins

Income tax department has started processing of each and every eTDS statement in terms of section 200A. If there is any default, the same is available in the TIN web site.

How to view the defaults

  • Visit www.tin-nsdl.com
  • Login->TAN
  • Click “Default”
  • You will be able to view a table containing Financial Year, Form No, Quarter and a link to download file containing defaults

File format

  • If the number of records is small, the file is in Excel format and without any password
  • If the number of records is very large, the file is ^ delimited text file and a format is given.

Various defaults

  • The file contains three type of defaults
  • Short Deduction
  • Short Payment
  • Late Payments
  • Each of the above is discussed in details

Analysis done by Fast Facts

Fast Facts team has done detailed analysis of several notices and the findings are given below for the benefit of our readers.

Late Payment Cases

  • For each deductee record, date of deduction is displayed
  • Due Date  is  worked out based on Provision and Non-Provision transactions
  • Late Payment interest amount is calculated as per provisions of income-tax Act and Rules
  • There is a column “Interest on Late Payment of Interest” , which is not filled. Possibly in future , this will also be calculated and shown
  • If any amount of Interest is paid thru challans, the same is deducted from total interest and remaining amount is shown

Short Deduction Cases

  • Short deduction = Amount deductible as per Tax Rate Flag Less Amount deducted
  • For a deduction record “Tax Rate Flag” is shown as follows

“P” – Tax deducted at prescribed rate as per Income Tax Act

“L” – Tax deducted at lower rate as specified in the return.  For sections having sub-sections, tax rate basis is assumed to be “L”

“H” – Higher Rate

  • Based on “Tax Rate Flag”, amount deductible as  calculated is shown
  • Amount deducted is subtracted from amount deductible to show “Short Deduction Amount”
Date of payment PAN of the deductee Section code Tax rate flag ** Amount paid Amount deductible (A) Amount deducted (B) Short deduction amount (C)
28-Jul-08 194J P 19950.00 2054.85 2009.00 45.85
10-JUL-10 BDDPS2497R 194J H 6000.00 1200.00 600.00 600.00

Above two cases are explained in detail

  • In the first case, Amount deductible is worked out by applying applicable rate of 10.3% on Rs. 19950 = 2054.85. Actual amount deducted is Rs. 2009. Hence there is a short deduction of  Rs. 45.85.
  • In the second case, everything appears to be correct. But the PAN given is not found in the income-tax database. This is reflected in “Tax Rate Flag” – H. Hence a penal rate of 20% is applied to Amount paid to arrive at amount deductible.
  • Fast Facts  team also found that such cases where PAN is not found in income-tax database,  Form 16A is also not issued by the TIN system.

Short Payment

  • These are simple cases, where amount deposited is less than amount deducted

In a separate article , Fast Facts Bulletin will explain what corrective actions are to be taken in response to the defaults and what precautions to be taken to avoid generation of such default notices.