According to media reports, the Income Tax Department (ITD) is planning a nationwide crackdown on individuals who have not deposited tax collected at source (TCS) and tax deducted at source (TCS).
To avoid receiving a notice from the ITD, taxpayers should do the needful.
What Taxpayers Should Do To Avoid A Notice
“To ensure compliance with TDS/TCS rules and avoid scrutiny from the ITD, taxpayers must deduct and collect tax at the correct rates, deposit TDS/TCS on time using Challan ITNS 281, and file quarterly returns (Forms 24Q, 26Q, 27Q, and 27EQ) within prescribed deadlines. They should issue TDS/ TCS certificates in Form 16, 16A, and 27D promptly, and rectify errors by filing revised returns if needed,” says Suresh Surana, a Mumbai-based chartered accountant.
If you adopt these practices, you could avoid penalties, interest liabilities, and compliance scrutiny while ensuring smooth tax operations.
When People Notice You
If you are notified of a TCS/TDS default, you must take corrective action immediately to ensure compliance and avoid further penalties. It is essential to receive and reply to tax notices as soon as possible. You must also maintain thorough records of all deductions, refunds, and payments.
That's exactly what you need to do:
First, read the notice attentively.
The taxpayers must first carefully review the information in the notice, including the default type, relevant financial period, and outstanding amounts. You must next check these details with the previously filed returns to identify any discrepancies.
To find any discrepancies, you must then compare these facts with the returns that were previously submitted.
Second, confirm the default's nature.
The taxpayers need to determine whether the default is due to non-deduction, short deduction, late deposit, or incorrect reporting. They also need to ensure that the default is not caused by clerical errors, incorrect challan details, or an unmatched payment.
Make Necessary Payments
“If the tax has been deducted or collected but not deposited, remit the outstanding amount immediately along with interest @ one per cent or 1.5 per cent per month for TDS delays u/s 201(1A)) and one per cent per month for TCS delays (under Section 206C(7)) Further, a late filing fee of Rs 200 per day per return for delayed filing under Section 234E would be applicable,” says Surana.
Make Changes To TDS/TCS Returns
To fix mistakes like erroneous PAN information, erroneous amounts, or overlooked deductions, submit updated TDS/TCS returns using the TRACES site if necessary.
Answer The Tax Department
Respond to the notice by using the Income Tax Compliance Portal and enclosing the required supporting documentation, such as updated filings and payment receipts.
If applicable, request a waiver of the penalty or correction.
Under Section 273A, the taxpayer may ask for a penalty waiver if the default was inadvertent or the result of honest mistakes. Additionally, he can seek rectification under section 154 to fix any clerical or computational errors, according to Surana.
Taxpayers can reduce fines, stay out of trouble with the law, and continue to comply with TDS/TCS laws by implementing best practices and taking swift corrective action.
