Person responsible for deducting tax and their duties: IT Circular 20/2015

4.1. As per section 204(i) of the Act, in the context of payments other than payments by the Central Government of the State Government the “persons responsible for paying” for the purpose of Section 192 means the employer himself or if the employer is a Company, the Company itself including the Principal Officer thereof. Further, as per Section 204(iv), in case the credit, or as the case may be, the payment is made by or on behalf of Central Government or State Government, the DDO or any other person by whatever name called, responsible for crediting, or as the case may be, paying such sum is the “persons responsible for paying” for the purpose of Section 192.

4.2. The tax determined as per para 9 should be deducted from the salary u/s 192 of the Act.

See also RATES OF INCOME-TAX AS PER FINANCE ACT, 2015

If the jurisdictional TDS officer of the Taxpayer issues a certificate of No Deduction or Lower Deduction of Tax under section 197 of the Act, in response to the application filed before him in Form No 13 by the Taxpayer; then the DDO should take into account such certificate and deduct tax on the salary payable at the rates mentioned therein.(see Rule 28AA). The Unique Identification Number of the certificate is required to be reported in Quarterly Statement of TDS (Form 24Q).

Rule 30 prescribes time and mode of payment of tax deducted at source to the account of Central Government.

4.4.1. Due dates for payment of TDS:

Prescribed time of payment/deposit of TDS to the credit of Central Government account is as under:

a) In case of an Office of Government:

However, if a DDO applies before the jurisdictional Additional/Joint Commissioner of Income Tax to permit quarterly payments of TDS under section 192, the Rule 30(3) allows for payments on quarterly basis and as per time given in Table below:

4.4.2.1 Compulsory filing of Statement by PAO, Treasury Officer, etc in case of payment of TDS by Book Entry u/ s 200 (2A) :

In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a challan [ Book Entry], the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by whatever name called to whom the deductor reports about the tax deducted and who is responsible for crediting such sum to the credit of the Central Government, shall‐

(a) submit a statement in Form No. 24G under section 200 (2A) within ten days from the end of the month to the agency authorized by the Director General of Income‐tax (Systems) [TIN Facilitation Centres currently managed by M/s National Securities Depository Ltd] in respect of tax deducted by the deductors and reported to him for that month; and

(b) intimate the number (hereinafter referred to as the Book Identification Number or BIN) generated by the agency to each of the deductors in respect of whom the sum deducted has been credited. BIN consist of receipt number of Form 24G, DDO sequence number in Form No. 24G and date on which tax is deposited.

If the PAO/CDDO/TO etc, as stated above, fails to deliver the statement as required u/s 200(2A), he will be liable to pay, by way of penalty, under section 272A(2)(m), a sum which shall be Rs.100/- for every day during which the failure continues. However, the amount of such penalty shall not exceed the amount of tax which is deductable at source.

The procedure of furnishing Form 24G is detailed in Annexure III. PAOs/DDOs should go through the FAQs in Annexure IV to understand the correct process to be followed. The ZAO / PAO of Central Government Ministries is responsible for filing of Form No. 24G on monthly basis. The person responsible for filing Form No. 24G in case of State Govt. Departments is shown at Annexure V.

see also SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM “SALARIES”

The procedure of furnishing Form 24G is detailed in Annexure IV. PAOs/DDOs should go through the FAQs therein to understand the correct process to be followed.

4.4.2.2 Payment by an Income Tax Challan:

(i) In case the payment is made by an income-tax challan, the amount of tax so deducted shall be deposited to the credit of the Central Government by remitting it, within the time specified in Table in para 4.4.1 above, into any office of the Reserve Bank of India or branches of the State Bank of India or of any authorized bank;

(ii) In case of a company and a person (other than a company), to whom provisions of section 44AB are applicable, the amount deducted shall beelectronically remitted into the Reserve Bank of India or the State Bank of India or any authorised bank accompanied by an electronic income-tax challan (Rule125).

The amount shall be construed as electronically remitted to the Reserve Bank of India or to the State Bank of India or to any authorized bank, if the amount is remitted by way of:

(a) internet banking facility of the Reserve Bank of India or of the State Bank of India or of any authorized bank; or

(b) debit card. {Notification No.41/2010 dated 31st May 2010}

4.5.1 If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201 and shall be deemed to be an assessee-in-default in respect of such tax and liable for penal action u/s 221 of the Act. Further Section 201(1A) provides that such person shall be liable to pay simple interest

(i) at the rate of 1% for every month or part of the month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and

(ii) at the rate of one and one-half percent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

Such interest, if chargeable, is mandatory in nature and has to be paid before furnishing of quarterly statement of TDS for respective quarter.

4.5.2 Section 271C inter alia lays down that if any person fails to deduct whole or any part of tax at source or fails to pay the whole or part of tax under the second proviso to section 194B, he shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted or paid by him.

4.5.3 Further, section 276B lays down that if a person fails to pay to the credit of the Central Government within the prescribed time, as above, the tax deducted at source by him or tax payable by him under the second proviso to Section 194B, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years, along with fine.

4.6.1 Section 203 requires the DDO to furnish to the employee a certificate in Form 16 detailing the amount of TDS and certain other particulars. Rule 31 prescribes that Form 16 should be furnished to the employee by 31st May after the end of the financial year in which the income was paid and tax deducted. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. Revised Form 16 annexed to Notification No 11 dated 19-02-2013 is enclosed. The certificate in Form 16 shall specify

(a) Valid permanent account number (PAN) of the deductee;

(b) Valid tax deduction and collection account number (TAN) of the deductor;

(c) (i) Book identification number or numbers (BIN) where deposit of tax deducted is without production of challan in case of an office of the Government;

(ii) Challan identification number or numbers (CIN*) in case of payment through bank.

(*Challan identification number (CIN) means the number comprising the Basic Statistical Returns (BSR) Code of the Bank branch where the tax has been deposited, the date on which the tax has been deposited and challan serial number given by the bank.)

(d) Receipt numbers of all the relevant quarterly statements of TDS (24Q). The receipt number of the quarterly statement is of 8 digit.

Further as per Circular 04/2013 dated 17-04-2013 all deductors (including Government deductors who deposit TDS in the Central Government Account through book entry) shall issue the Part A of Form No. 16, by generating and subsequently downloading it through TRACES Portal and after duly authenticating and verifying it, in respect of all sums deducted on or after the 1st day of April, 2012 under the provisions of section 192 of Chapter XVII-B. Part A of Form No 16 shall have a unique TDS certificate number. ‘Part B (Annexure)’ of Form No. 16 shall be prepared by the deductor manually and issued to the deductee after due authentication and verification alongwith the Part A of the Form No. 16.

It may be noted that under the new TDS procedure, TAN of deductee/ PAN of the deductee and receipt number of TDS statement filed by the deductor act as unique identifier for granting online credit of TDS to the decutee. Hence due care should be taken in filling these particulars. Due care should also be taken in indicating correct CIN/ BIN in TDS statement.

If the DDO fails to issue these certificates to the person concerned, as required by section 203, he will be liable to pay, by way of penalty, under section 272A(2)(g), a sum which shall be Rs.100/- for every day during which the failure continues.

It is, however, clarified that there is no obligation to issue the TDS certificate in case tax at source is not deductible/deducted by virtue of claims of exemptions and deductions .

[Note: TRACES is a web-based application of the Income – tax Department that provides an interface to all stakeholders associated with TDS administration. It enables viewing of challan status, downloading of NSDL Conso File, Justification Report and Form 16 / 16A as well as viewing of annual tax credit statements (Form 26AS). Each deductor is required to Register in the Traces portal. Form 16/16A issued to deductees should mandatorily be generated and downloaded from the TRACES portal ].

Certain essential points regarding the filing of the Statement and obtaining TDS certificates are mentioned below:

(a) TDS certificate (Form16) would be generated for the deductee only if Valid PAN is correctly mentioned in the Annexure II of Form 24Q in Quarter 4 filed by the deductor. Moreover, employers are advised to ensure in Form 16 that the status of “matching” with respect to “Form 24G/OLTAS” is ‘F’. If the status of matching other than ‘F’, kindly take necessary action promptly to rectify the same. It is pertinent to mention here that certain facilities have been provided to the deductors at website www.tdscpc.gov.in/ including online correction of statements (Form 24Q).

(b) The employer should quote the gross amount of salary (including any amount exempt under section 10 and the deductions under chapter VI A) in column 321 (Amount paid/credited) of Annexure I of Form 24Q as per NSDL RPU (hereafter Return Preparation Utility).

(c) The employer should quote the amount of salary excluding any amount exempt under section 10 in column 333 (Total amount of salary) of Annexure II of Form 24Q as per NSDL RPU.

(d) TDS on Income (including loss from House Property) under any Head other than the head ‘Salaries’ offered for TDS (shown in column 339) can be shown in column 350

(Reported amount of TDS by previous employer, as per NSDL RPU.

(e) Employer is advised to quote Total Taxable Income (Column 344) in Annexure II without rounding-off and TDS should be deducted and reported accordingly i.e. without rounding-off of TDS also.

4.6.2. If an assessee is employed by more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such assessee was employed with each of the employers and Part B may be issued by each of the employers or the last employer at the option of the assessee.

4.6.3. Authentication by Digital Signatures:

(i) Where a certificate is to be furnished in Form No. 16, the deductor may, at his option, use digital signatures to authenticate such certificates.

(ii) In case of certificates issued under clause (i), the deductor shall ensure that

(a) the conditions prescribed in para 4.6.1 above are complied with;

(b) once the certificate is digitally signed, the contents of the certificates are not amenable to change; and

(c) the certificates have a control number and a log of such certificates is maintained by the deductor.

v The digital signature is being used to authenticate most of the e-transactions on the internet as transmission of information using digital signature is failsafe. It saves time specially in organisations having large number of employees where issuance of certificate of deduction of tax with manual signature is time consuming (Circular no 2 of 2007 dated 21.05.2007)

4.6.4. Furnishing of particulars pertaining to perquisites, etc (Section 192(2C):

4.6.4.1 As per section 192(2C), the responsibility of providing correct and complete particulars of perquisites or profits in lieu of salary given to an employee is placed on the person responsible for paying such income i.e., the person responsible for deducting tax at source. The form and manner of such particulars are prescribed in Rule 26A, Form 12BA (Annexure II) and Form 16 of the Rules. Information relating to the nature and value of perquisites is to be provided by the employer in Form 12BA in case salary paid or payable is above Rs.1,50,000/-. In other cases, the information would have to be provided by the employer in Form 16 itself.

4.6.4.2 An employer, who has paid the tax on perquisites on behalf of the employee as per the provisions discussed in para 3.2 of this circular, shall furnish to the employee concerned, a certificate to the effect that tax has been paid to the Central Government and specify the amount so paid, the rate at which tax has been paid and certain other particulars in the amended Form 16.

4.6.4.3 The obligation cast on the employer under Section 192(2C) for furnishing a statement showing the value of perquisites provided to the employee is a crucial responsibility of the employer, which is expected to be discharged in accordance with law and rules of valuation framed there under. Any false information, fabricated documentation or suppression of requisite information will entail consequences thereof provided under the law. The certificates in Forms 16 and/or Form 12BA specified above, shall be furnished to the employee by 31st May of the financial year immediately following the financial year in which the income was paid and tax deducted. If he fails to issue these certificates to the person concerned, as required by section 192(2C), he will be liable to pay, by way of penalty, under section 272A(2)(i), a sum which shall be Rs.100/- for every day during which the failure continues.

As per Section 139C of the Act, the Assessing Officer can require the taxpayer to produce Form 12BA alongwith Form 16, as issued by the employer.

4.6.5 DDOs empowered to obtain evidence of proof or particulars of the prescribed claim (including claim for set-off of loss) under the section 192(2D):

DDOs have been authorized u/s 192 to allow certain deductions, exemptions or allowances or set-off of certain loss as per the provisions of the Act for the purpose of estimating the income of the assessee or computing the amount of tax deductible under the said section. The evidence /proof /particulars for some of the deductions/exemptions/allowances/set-off of loss claimed by the employee such as rent receipt for claiming deduction in HRA, evidence of interest payments for claiming loss from self-occupied house property, etc is not available to the DDO. To bring certainity and uniformity in this matter, Finance Act, 2015 inserted section 192(2D). Section 192(2D) provides that person responsible for paying (DDOs) shall obtain from the assessee evidence or proof or particular of the prescribed claim (including claim for set off of loss) in the form and manner as may be prescribed.

4.7.1 Section 203A of the Act makes it obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax deduction and collection Account No (TAN) in the challans, TDS-certificates, statements and other documents. Detailed instructions in this regard are available in this Department’s Circular No.497 [F.No.275/118/ 87-IT(B) dated 9.10.1987]. If a person fails to comply with the provisions of section 203A, he will be liable to pay, by way of penalty, under section 272BB, a sum of ten thousand rupees. Similarly, as per Section 139A(5B), it is obligatory for persons deducting tax at source to quote PAN of the persons from whose income tax has been deducted in the statement furnished u/s 192(2C), certificates furnished u/s 203 and all statements prepared and delivered as per the provisions of section 200(3) of the Act.

4.7.2 All tax deductors are required to file the TDS statements in Form No.24Q (for tax deducted from salaries). As the requirement of filing TDS certificates alongwith the return of income has been done away with, the lack of PAN of deductees is creating difficulties in giving credit for the tax deducted. Tax deductors are, therefore, advised to procure and quote correct PAN details of all deductees in the TDS statements for salaries in Form 24Q. Taxpayers are also liable to furnish their correct PAN to their deductors. Non-furnishing of PAN by the deductee (employee) to the deductor (employer) will result in deduction of TDS at higher rates u/s 206AA of the Act mentioned in para 4.8 below.

4.8.1 Section 206AA in the Act makes furnishing of PAN by the employee compulsory in case of receipt of any sum or income or amount, on which tax is deductible. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor has been made responsible to make TDS at higher of the following rates:

i) at the rate specified in the relevant provision of this Act; or

ii) at the rate or rates in force; or

iii) at the rate of twenty per cent.

The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS. However, where the income of the employee computed for TDS u/s 192 is below taxable limit, no tax will be deducted. But where the income of the employee computed for TDS u/s 192 is above taxable limit, the deductor will calculate the average rate of income-tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to be deducted at the average rate. Education cess @ 2% and Secondary and Higher Education Cess @ 1% is not to be deducted, in case the tax is deducted at 20% u/s 206AA of the Act.

4.9.1 The person deducting the tax (employer in case of salary income), is required to file duly verified Quarterly Statements of TDS in Form 24Q for the periods [details in Table below] of each financial year, to the TIN Facilitation Centres authorized by DGIT (System’s) which is currently managed by M/s National Securities Depository Ltd (NSDL). Particulars of e-TDS Intermediary at any of the TIN Facilitation Centres are available at http://www.incometaxindia.gov.in and http://tin-nsdl.com portals. The requirement of filing an annual return of TDS has been done away with w.e.f. 1.4.2006. The quarterly statement for the last quarter filed in Form 24Q (as amended by Notification No. S.O.704(E) dated 12.5.2006) shall be treated as the annual return of TDS. Due dates of filing this statement quarterwise is as in the Table below.

TABLE: Dates of filing Quarterly Statements E-TDS Return 24Q

4.9.2 The statements referred above may be furnished in paper form or electronically under digital signature or alongwith verification of the statement in Form 27A of verified through an electronic process in accordance with the procedures, formats and standards specified by the Director General of Income‐tax (Systems). The procedure for furnishing the e-TDS/TCS statement is detailed at Annexure VI.

4.9.3 All Returns in Form 24Q are required to be furnished in electronically except in case where the number of deductee records is less than 20 and deductor is not an office of Government, or a company or a person who is required to get his accounts audited under section 44AB of the Act. [Notification No. 11 dated 19.02.2013].

4.9.4 Fee for default in furnishing statements (Section 234E):

If a person fails to deliver or caused to be delivered a statement within the time prescribed in section 200(3) in respect of tax deducted at source on or after 1.07.2012 he shall be liable to pay, by way of fee a sum of Rs. 200 for every day during which the failure continues. However, the amount of such fee shall not exceed the amount of tax which was deductible at source. This fee is mandatory in nature and to be paid before furnishing of such statement.

4.9.5 Rectification of mistake in filing TDS Statement:

A DDO can also file a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered earlier.

4.9.6 Penalty for failure in furnishing statements or furnishing incorrect information (section 271H):

If a person fails to deliver or caused to be delivered a statement within the time prescribed in section 200(3) or furnishes an incorrect statement, in respect of tax deducted at source on or after 1.07.2012, he shall be liable to pay, by way of penalty a sum which shall not be less than Rs. 10,000/- but which may extend to Rs 1,00,000/-. However, the penalty shall not be levied if the person proves that after paying TDS with the fee and interest, if any, to the credit of Central Government, he had delivered such statement before the expiry of one year from the time prescribed for delivering the statement.

4.9.7 At the time of preparing statements of tax deducted, the deductor is required to:

(i) mandatory quote his tax deduction and collection account number (TAN) in the statement;

(ii) mandatory quote his permanent account number (PAN) in the statement except in the case where the deductor is an office of the Government( including State Government). In case of Government deductors “PANNOTREQD” to be quoted in the e-TDS statement;

(iii) mandatory quote of permanent account number PAN of all deductees;

(iv) furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be.

(v) furnish particular of amounts paid or credited on which tax was not deducted in view of the issue of certificate of no deduction of tax u/s 197 by the assessing officer of the payee.

In the case of pensioners who receive their pension (not being family pension paid to a spouse) from a nationalized bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income. The deductions from the amount of pension under section 80C on account of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioner furnishes the relevant details to the banks, may be allowed.

Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other nationalized Banks vide RBI’s Pension Circular(Central Series) No.7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No.60/GA.64 (11CVL)-/92) dated the 27th April 1992, and, these instructions should be followed by all the branches of the Banks, which have been entrusted with the task of payment of pensions. Further all branches of the banks are bound u/s 203 to issue certificate of tax deducted in Form 16 to the pensioners also vide CBDT circular no. 761 dated 13.1.98.

4.11.1 Where Non-Residents are deputed to work in India and taxes are borne by the employer, if any refund becomes due to the employee after he has already left India and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the tax has been borne by it [Circular No. 707 dated  11.07.1995].

4.11.2 In respect of non-residents, the salary paid for services rendered in India shall be regarded as income earned in India. It has been specifically provided in the Act that any salary payable for rest period or leave period which is both preceded or succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India.