TDS compliance reporting in new tax audit report (3CD)

TDS compliance reporting in new tax audit report

DK Bholusaria | [email protected]

New v/s old clause – Clause 21

Brief description of clause New Clause # Old

Clause #

Changes

Amounts inadmissible under

section 40(a)

(TDS portion)

21(b)(i)

and 21(b)(ii)

17(f)

&

27 (b)(i)

&

27 (b)(iv)

Various scattered

clauses clubbed under

one clause

23/09/2014 DK BHOLUSARIA

New v/s old clause – Clause 34

Brief description of clause New

Clause #

Old

Clause #

Changes

Whether the assessee is required* to

deduct or collect tax as per the

provisions of Chapter XVII-B or XVII-

BB. If yes, Tax auditor to provide kind

of TDS compliance statement in a

specified table format

34 (a) 27(a)

&

27

(b)(ii)

TCS also added

Back door entry of form

24C after 5 years*.

If the assessee has not furnished the

TDS/TCS return within the due date,

provide complete list of all such

returns

34 (b) - New clause*

Stringent requirements

of reporting

If assessee is liable to pay interest u/s

201(1A) or section 206C(7), tax

auditor to furnish details of interest

and its payment

34 (c) 27

(b)(iii)

New clause*


Icons for reference in succeeding slides

Icon Represents

What clause says?

What to look for?

What to collect / documentation?

What / how to report?

This is a new requirement


TDS compliance reporting

TDS compliance tree and tax audit reporting

Default

reporting Clause 34(a)

TDS not deducted

Clause 21 (b)(i)(A) or 21(b)(ii)(A)

TDS deducted

TDS Deducted / Deposited late

Clause 34(c)

Not paid before

due date u/s 139(1) / 200(1)

Clause 21(b)(i)(B) or 21(b)(ii)(B)

TDS return reporting

All returns filed on time

Nothing to report

Any return filed late or not

filed? Clause 34(b)

Not

Applicable

Nothing to report

Deduction part reporting

TDS / TCS

Provisions applicable

TD

S/T

CS

co

mp

lian

ce

tre

e


Case study on applicability of TDS

provisions

Case study # 1 on applicability of TDS/TCS provisions

Individual assessee

Business start date: 15-06-2013

Nature of business: Manufacturing of spare parts

Turnover of FY 2013-2014: ₹ 60 Lakhs

Total income: ₹ 4.5 Lakhs

Expenses include:

Salary & wages: ₹ 15 Lakhs (all below threshold limit)

Audit Fees: ₹ 30,500

Fees to consulting engineers: ₹ 3 lakhs (above threshold limit)


Individual assessee


Nature of business: Consultancy / Outsourcing


Total income: ₹ 6 Lakhs

Major expenses:

Salary & wages: Nil, Computer rentals: ₹ 3 Lakhs, Office Rent: ₹ 12 Lakhs

Payment to outsourced manpower supplier: ₹ 40 Lakhs (above threshold limit)


Payment to CA for service tax / other legal compliances: ₹ 1.5 lakhs (above threshold limit)


Individual assessee


Nature of business: Consultancy / Outsourcing


Total income: ₹ 6 Lakhs

Major expenses:

Salary & wages: Nil, Computer rentals: ₹ 3 Lakhs, Office Rent: ₹ 12 Lakhs

Payment to outsourced manpower supplier: ₹ 40 Lakhs (above threshold limit)


Payment to CA for service tax / other legal compliances: ₹ 1.5 lakhs (above threshold limit)

Clause 21(b)(i)/(ii) Disallowance under section 40(a)

Clause 21 (b)(i)(A) / 21(b)(ii)(A) – TDS not deducted

(b) Amounts inadmissible under section 40(a):-

(i) as payment to non-resident referred to in sub-clause (i)

(A)Details of payment on which tax is not deducted:

i. date of payment

ii. amount of payment

iii. nature of payment

iv. name and address of the payee

…

…

(ii) as payment referred to in sub-clause (ia)

(A)Details of payment on which tax is not deducted

i. date of payment





Clause 21 (b)(i)(B) / 21(b)(ii)(B) – TDS deducted but not deposited

(b) Amounts inadmissible under section 40(a):-

(i) as payment to non-resident referred to in sub-clause (i)

(A) Details of payment on which tax has been deducted but has not been

paid during the previous year or in the subsequent year before the

expiry of time prescribed under section 200(1):

i. date of payment




v. amount of tax deducted

…

(ii) as payment referred to in sub-clause (ia)

(A) Details of payment on which tax has been deducted but has not been

paid on or before the due date specified in sub- section (1) of

Section 139

i. date of payment




v. Amount of tax deducted

vi. Amount out of (v) deposited, if any


Clause 34(b) TDS returns compliance

Clause 34(b) – TDS returns compliance

whether the assessee has furnished the statement of tax deducted or

tax collected within the prescribed time. If not, please furnish the

details:

(1) Tax deduction and collection Account Number (TAN)

(2) Type of Form

(3) Due date for furnishing

(4) Date of furnishing, if furnished

(5) Whether the statement of tax deducted or collected contains

information about all transactions which are required to be reported

a. Make a list of all TANs assessee has.

b. Make a list of all returns (for each TAN and quarter), assessee is

required to file, with due date and actual date of filing. NIL returns are

not required to be filed!

c. Do not forget to take copy of all PRs from assessee as audit evidence.

d. Wherever returns are filed late, report in clause 34(b)


Clause 34(b) – TDS returns compliance

SL # TAN Type of Form Due date

for

furnishing

Date of

furnishing, if

furnished

Whether the statement of

tax deducted or collected

contains information

about all transactions

which are required to be

reported

1 DELD01234F 24Q 15/12/2013 17/12/2013 Yes

2 DELD01234F 26Q 15/12/2013 17/12/2013

No. Transporter details on

which TDS was not

deducted u/s 194C (6) were

not reported

3 RTKD9765X 27Q 15/05/2014 - NA

4 MUMD9211F 27EQ 15/05/2014 18/05/2014 Yes

Sample reporting


Clause 34(c) Interest payable u/s 201(1A)/206C(7)

Clause 34(c) – Interest payable u/s 201(1A)/206C(7)

Whether the assessee is liable to pay interest under section 201(1A) or

section 206C(7). If yes, please furnish:

(1) Tax deduction and collection Account Number (TAN)

(2) Amount of interest under section 201(1A) / 206C(7) is payable

(3) Amount paid out of column (2) along with date of payment.

a. All cases of late deduction as well late payments (and even non-

deduction) are covered by reporting under this clause.

b. Irrespective of payment of interest, reporting has to be made.

c. You may download Aggregated TDS Compliance report from TRACE.

Aggregated TDS Compliance report will list down all the TAN's with

defaults mapped to a deductor's PAN.

d. Special emphasis should be given to incorrect date of

payments/deduction reported in TDS returns


Clause 34(c) – Interest payable u/s 201(1A)/206C(7)

SL # TAN Amount of interest

under section

201(1A) / 206C(7) is

payable

Amount paid

out of column

(2) along with

date of

payment.

Remarks

1 DELD01234F ₹ 15750

₹ 15750

dated

15/12/2013

For 26Q

2 DELD01234F ₹ 7000

₹ 7000

dated

15/12/2013

For 27Q

3 DELD01234F ₹ 2345 Not paid For 27Q

4 MUMD9211F ₹ 1435

₹ 1000

Dated

14/11/2013

For 27EQ

Sample reporting


Clause 34(a)

Clause 34(a) – TDS/TCS compliance statement

(a) Whether the assessee is required to deduct or collect tax as per the

provisions of Chapter XVII-B or Chapter XVII-BB, if yes please furnish:

(1) Tax deduction and collection Account No. (TAN)

(2) Section

(3) Nature of payment

(4) Total amount of payment or receipt of the nature specified in column (3)

(5) Total amount on which tax required to be deducted or collected out of

(4)

(6) Total amount on which tax was deducted or collected at specified rate

out of (5)

(7) Amount of tax deducted or collected out of (6)

(8) Total amount on which tax was deducted or collected at less than

specified rate out of (7)

(9) Amount of Tax deducted or collected on (8)

(10)Amount of Tax deducted or collected not deposited to the credit of the

Central Government out of (6) and (8)


Clause 34(a) – TDS/TCS compliance statement

In 2009 Government had made unsuccessful attempt to bring in form 24C – TDS compliance statement through notification no. 31/2009 dated 25th March 2009 read with circular no. 02/2009.

This statement is exact copy of form 24C (except 1 field)

This is the very statement which all TDS AO invariably demands during proceedings u/s 201 {TDS Survey}

It’s a more or less reconciliation of your PL* with your TDS/TCS returns.

If assessee is not covered by TDS/TCS provisions at all – No need to jump into this clause.

* Scope of 34(a) travel beyond PL


Various scenarios for clause 34(a)

Scenario # 1 : Interest expense u/s 194A

Particulars Amount (₹)

Interest as per PL A 1.10 cr

Interest capitalised as per AS-16 B 0.15 cr

Sub total (A+B) C 1.25 cr

Total amount paid below threshold limit D 0.30 cr

Total amount for which valid 15G/15H recd. E 0.20 cr

Total amount paid to banks F 0.25 cr

Balance (C) - (D+E+F) G 0.50 cr

Total amount covered by sec. 197 @ 1% H 0.20 cr

Balance (G-H) I 0.30 cr

TDS not deducted J 0.01 Cr

Balance (I-J) K 0.29 Cr

TDS on I … 20 Lakhs @ 10% L 2.90 Lakhs

TDS on F … 20 Lakhs @ 1% M 0.20 Lakhs


Scenario # 1 : Disclosure

TAN (1) DELD09763X

Section (2) 194A

Nature of payment (3) Interest other than

interest on securities

Total amount of payment or receipt of the nature

specified in column (3) (4) 1.25 cr A

Total amount on which tax was required to be

deducted or collected out of (4) (5) 0.50 cr G

Total amount on which tax was deducted or

collected at specified rate out of (5) (6) 0.49 cr H+K

Amount of tax deducted or collected out of (6) (7) 3.10 Lakhs L+M


collected at less than specified rate out of (5) (8) Nil

Amount of tax deducted or collected on (8) (9) Nil

Amount of tax deducted or collected not deposited

to the credit of the Central Govt. out of (6) and (8) (10) Nil


Scenario # 2 : Salary

Particulars Amount (₹)

Gross salary and benefits as per PL A 50 Lakhs

Perk value of car included in car rental expense (under

administrative expenses of PL)

B 2 lakhs

Perk value of furnished accommodation included in

Salary and benefit already (actual rental paid: 10 lakhs)

C 3 Lakhs

Employer Contribution towards EPF (included in Gross

salary above)

D 1.2 Lakhs

Entire salary of directors for FY 2013-2014 which is still

payable as on 12-09-2014 and no TDS deducted due

to non-payment. Board planning to pay salary on 15-

03-2015

E 5 Lakhs

Total amount of salary paid below threshold limit due to

various provisions of act

F 20 Lakhs

Tax deducted and paid on salary during the year G 1.2 lakhs


Scenario # 2 : Computation of Values for 34(a)(4) /(5)

Particulars Amount

(₹ lakhs)

Gross salary and benefits as per PL 50.00

Add: Perk value of car included in car rental expense + 2.00

Gross Value for the purpose of Clause 34(a)(4) 52.00

Less: (Actual rental paid for furnished accommodation included in

salary and benefits – Perk Value of furnished accommodation)

- (7.00)

Less: Entire salary of directors for FY 2013-2014 which is still

payable as on 12-09-2014 and no TDS deducted due to non-

payment.

- (5.00)

Less: Employer Contribution towards EPF (only employer

contribution more than 12% of salary is taxable)

- (1.20)

Less: Total amount of salary paid below threshold limit due to

various provisions of act

- (20.00)

Gross Value for the purpose of Clause 34(a)(5) 18.80


Scenario # 2 : Disclosure

TAN (1) DELD09763X

Section (2) 192

Nature of payment (3) Salaries

Total amount of payment or receipt of the nature

specified in column (3) (4) 47 lakhs

Total amount on which tax was required to be

deducted or collected out of (4) (5) 17 Lakhs


collected at specified rate out of (5) (6) 18.80 lakhs

Amount of tax deducted or collected out of (6) (7) 1.2 Lakhs


collected at less than specified rate out of (7) (8) Nil

Amount of tax deducted or collected on (8) (9) Nil

Amount of tax deducted or collected not deposited

to the credit of the Central Govt. out of (6) and (8) (10) Nil


Suggested disclaimer on clause 34(a)

In column (4) of Clause 34(a) of Form No. 3CD "total

amount of payments of the nature specified in column (3)"

has been mentioned to the extent it was possible; out of

which the aggregate "amount on which tax was not required

to be deducted" in view of any exemption / deduction

allowable under the respective section or the payment being

below the threshold provided or the assessee has obtained

Permanent Account Numbers (PAN) of the payee u/s

194C(6) etc., as the case may be, has been reduced to

derive the amount on which tax was required to be deducted

for reporting in column (5) of Clause 34(a) of the Form No.

3CD.

Clause 34(a) – Suggested disclaimer # 1


Though the assessee has made available the books of account,

necessary records and relevant documents for the purpose of our

examination for reporting the particulars in Clause 34(a) of Form

No. 3CD, however, keeping in view the scope of section 194C of

the Income Tax Act,1961 and considering the volume of payments

covered in section194C it is not possible to prepare and compile

the "total amount of payment of the nature specified in column (3)".

It is not out of place to mention that on most of the payments made

for carrying out "work' in pursuance of "a contract" no tax is

required to be deducted in view of the threshold provided in sub-

section (5) and the provisions of sub-section (6) of section 194C.

Therefore, in column (4) of Form No. 3CD the aggregate amount

as declared in the quarterly statements of tax deducted at source

furnished in Form No. 26Q has been reported.

Clause 34(a) – Suggested disclaimer # 2


Thanks !

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TDS compliance reporting in new tax audit report (3CD)