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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

Budget 2014/2015 – Personal Tax Rates & TDS

The Finance Minister (FM) presented the Interim Budget and introduced Finance Bill 2014 on 17th February 2014.

He has not proposed any changes in the existing Personal Tax (PT) or Tax Deducted at Source (TDS) rates

The PT rates for Financial Year 2014-2015 are going to be as below:

1. Tax Slab for an Individual (resident & below 60 years) or HUF/AOP/BOI/AJP

Income Slabs

Tax Rates

Total income up to Rs. 2 Lac 0% Tax
Total income above Rs. 2 Lac and below Rs.5 Lac 10% on amount exceeding Rs. 2 Lac
Total income above Rs. 5 Lac and below Rs.10 Lac 20% on Income exceeding Rs. 5 Lac + Rs. 30,000
Total income more than Rs. 10 Lac 30% on Income exceeding Rs. 10 Lac + Rs. 1,30,000

* u/s 87A the Individual having taxable income up to Rs. 5 Lac , can claim rebate, on the Actual Tax amount subject to a maximum of Rs.2,000

Where the Taxable Income exceeds Rs. 1 crore, Surcharge @ 10% of Income tax is applicable

2. Tax Slab for an Individual (resident & above 60 years but below 80 years)

Income Slabs

Tax Rates

Total income up to Rs. 2.50 Lac 0% Tax
Total income above Rs. 2.50 Lac and below Rs.5 Lac 10% on amount exceeding Rs. 2.50 Lac
Total income above Rs. 5 Lac and below Rs.10 Lac 20% on Income exceeding Rs. 5 Lac + Rs. 25,000
Total income more than Rs. 10 Lac 30% on Income exceeding Rs. 10 Lac + Rs. 1,25,000

Where the Taxable Income exceeds Rs. 1 crore, Surcharge @ 10% of Income tax is applicable

3. Tax Slab for an Individual (resident & above 80 years)

Income Slabs

Tax Rates

Total income up to Rs. 5 Lac 0% Tax
Total income above Rs. 5 Lac and below Rs.10 Lac 20% on Income exceeding Rs. 5 Lac
Total income more than Rs. 10 Lac 30% on Income exceeding Rs. 10 Lac + Rs. 1 Lac

Where the Taxable Income exceeds Rs. 1 crore, Surcharge @ 10% of Income tax is applicable

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

Form 16 : Erroneous reference to Form 12BB

For tax deducted on salaries , the employer has to issue Form 16 to the employees. The form was modified vide Notification 41/2010  dated 31.05.2010

In this form there is a reference to Form 12BB

Gross Salary  Rs.

(a)  Salary as per provisions contained in sec.17(1)  Rs.

(b)  Value of perquisites u/s 17(2) (as per Form No.12BB, wherever  applicable)  Rs.

(c)  Profits in lieu of salary under section 17(3) (as per Form No.12BB ,wherever applicable

However there is no Form 12BB notified. It certainly is a typo error and it should read Form 12BA

Reference may also be made to Circular 8/2010 :  Section 192 of the Income-tax Act, 1961 – Deduction of tax at source – Salaries – Income-tax deduction from salaries during the financial year 2010-11

 In this circular , detailed guidelines for compliance with TDS on salary are given for the FY 2010-11

Paragraph 4.6.5 of above circular clearly states that

“…..information related to nature and value of perquisite is to be provided by employer in Form No 12BA……..”

Hence deductors may treat this as type error and replace 12BB with 12BA.

Perquisite Valuation :Interest free concessional loan

Rule 3(7)(i): Interest free / concessional loan

Any loan given free of interest or concessional interest shall be a taxable perquisite and calculated as follows:
• Interest calculated at the rate charged by State Bank of India as on 1st day of previous year on loan
for the same purpose. This is to be calculated on maximum outstanding monthly balance.
• Less actual interest paid by employee.
Exceptions

• Loan upto Rs. 20,000.
• Loan for medical purposes for prescribed diseases
Steps to calculate value of Perquisite
Step  1 : Calculate maximum outstanding monthly balance at the end of every month
Step 2 : Find out rate of interest charged by SBI as on 1st April of previous year in case of similar loan
Step 3 : Calculate interest on amount as per Step 1 @ Rate as per Step 2 for each month
Step 4 : Total of interest for the year as per Step 3
Step 5 : Less : Interest charged from employee
Step 6 : Balance amount is the value of perquisite in respect of interest free / concessional loan

TDS calculation for employees without PAN u/s 206AA

Section 206AA requires TDS deduction at prescribed rates or @ 20% , if deductee does not submit valid PAN. The example below shows how to calculate TDS in such cases

Amount
Taxable Salary for the year 270000
Less : Interest on home loan -20,000
Less : Deductions under chapter VIA -70000
A Taxable Income 180000
B Tax at Normal Rate 2000
Add : Education cess @ 3% 60
Total tax at normal rate 2060
C Tax @ 20% u/s 206AA  on [A] 36000
D TDS to be deducted 36000
Higher of [B] or [C]

It is apparnet from the above example that

  • Total taxable income is to be calculated after allowing deductions under chapter VIA and home loan interest
  • Tax is to be calculated at prescribed rate and education cess is to be applied
  • Tax u/s 206AA is to be calculated on taxable income . No need to add education cess.
  • Tax at normal rate or u/s 206AA, whichever is higher will be considered for TDS purposes

Will penal rate be applied even if taxable income is below Rs. 1.60 Lacs

  • If taxable income of employee does not exceed the exemption limit but he has not submitted PAN, should TDS be deducted @ 20% u/s 206AA. ?
  • In response to a query, eminent author Dr. V. K. Singhania has opined that, in such a case TDS has to be deducted @ 20%,  In case PAN is furnished, the rate will be 0%.  Ref – [2010] 18 CPT 117
  • A contrary view is that the in such case there is no need to deduct TDS.
  • However, CBDT may clarify this issue in the annual circular about TDS  on salaries. ( Last such circular is Circular 01 /2010 ) .Deducting TDS in such cases will cause undue hardship to employees