Bailabel Type : bailable

Description

Section 203 of the Income Tax Act, 1961 requires the person who has deducted tax at source (TDS) to issue a certificate to the person from whose income the tax has been deducted (the deductee). This certificate is known as the TDS certificate and serves as proof that the tax has been deducted and paid to the government on the deductee's behalf.

Key Points of Section 203:

1. Issuance of TDS Certificate:

• A person who deducts TDS is required to issue a TDS certificate to the deductee. This certificate acknowledges that the TDS has been deducted from the deductee's income and remitted to the government.

2. Form of TDS Certificate:

• The TDS certificate is issued in the prescribed form and manner.
  • Form 16 is issued for TDS on salary income.
  • Form 16A is issued for TDS on non-salary income (e.g., interest, rent, commission, etc.).
  • These forms are used to provide detailed information about the amount of tax deducted, payment made to the government, TDS rates, and other necessary details.

3. Contents of the TDS Certificate:

• The TDS certificate must contain the following details:
  • Name and PAN of the deductor.
  • Name and PAN of the deductee.
  • Amount of payment (or credit) on which TDS was deducted.
  • Rate at which TDS was deducted.
  • Amount of TDS deducted.
  • Date of TDS deduction.
  • Challan details showing the payment of TDS to the government.
  • Assessment Year for which the TDS has been deducted.

4. Issuance Timeline:

• The TDS certificate must be issued to the deductee within a certain period after the end of the financial year:
  • Form 16 (for salary) should be issued by 31st May of the following financial year.
  • Form 16A (for non-salary) should be issued by 15th June of the following financial year.

5. Role of TDS Certificate for the Deductee:

• The TDS certificate serves as proof of the tax paid on behalf of the deductee and can be used to:
  • Claim credit of TDS while filing the income tax return (ITR).
  • Reconcile the TDS deducted and the actual payment made to the government.
  • Avoid double taxation if the same income is subject to tax in both India and another country (through double tax treaties).

6. Online Accessibility:

• The deductee can also verify the TDS certificate online through the TRACES portal (TDS Reconciliation Analysis and Correction Enabling System). The details provided by the deductor in the TDS certificate are uploaded to this portal, and the deductee can access their TDS details from there.

7. Penalty for Non-Issuance of TDS Certificate:

• If the deductor fails to issue the TDS certificate within the prescribed time limits or issues an incorrect certificate, they may face penalties under Section 272A of the Income Tax Act.
  • The penalty for not issuing the TDS certificate can be up to ?100 per day for each day of default, until the certificate is issued.

8. Adjustment of TDS in the Income Tax Return (ITR):

• The deductee can claim a credit for the TDS deducted against their total tax liability while filing their income tax return.
  • If the TDS certificate is not issued or incorrect details are mentioned, the deductee's tax credit may not be processed correctly, leading to mismatches during ITR filing or during tax assessments.

Punishment

Failure to Issue TDS Certificate:

• Under Section 272A, if a deductor fails to issue the TDS certificate within the prescribed time limit, they could face a penalty of ?100 per day of delay.
• The penalty continues until the TDS certificate is issued.

Incorrect or False TDS Certificate:

• If the deductor issues an incorrect or false TDS certificate, they may be subject to penalties or legal action under the provisions of the Income Tax Act, including penalties under Section 271C for failure to comply with TDS provisions.