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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

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

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