e-TDS returns: the ordeal of tax deductors

You have highlighted the ordeal of tax deductors in having to deduct tax at the increased rate of 20 per cent from April 1, 2010, for those who do not give the Permanent Account Number (PAN).

There is a greater ordeal for the deductor as per the Press Release No. 402/92/2006-MC (10 of 2008) dated February 12, 2008, by the Central Board of Direct Taxes (CBDT) in requiring the deductor, while filing his quarterly e-TDS returns to quote PAN data for 95 per cent of employees and 85 per cent of other deductees, failing which the returns in Form 24Q and 26Q respectively will not be accepted.

When the returns were filed manually, they were not accepted. When the returns are filed with lesser number of PAN holders, the electronic system does not accept the returns.

Where the deductor is unable to get the minimum prescribed PAN holding deductees, delayed filing attracts Sec. 272A(2)( c) providing for penalty of Rs. 100 per day for delay in filing the returns.

What should the deductor do?

It is a practical problem which does not appear to have been brought to the notice of the tax administration for a solution. It is understood that some of the deductors omit those deductees without PAN where such number of deductees exceed the limit so that the system accepts the return. Fresh returns are filed as and when PAN is received. Such a solution is not strictly consistent with the requirement that e-TDS returns which should match tax deducted and deposited with the particulars of deductees. But then, the law cannot expect the impossible.

Neither the section nor the rule provide for the requirement of prescribed number of deductees with PAN as a percentage of total number of deductees. TDS returns without the prescribed number of PAN holders could not, therefore, be refused.

Such refusal would also tantamount to denying credit to others who have offered PAN but about whose deductions the system has no information because of the difficulty of the deductor in complying with this requirement.

Sec. 139A itself provides for acceptance of declaration in Form 60 to substitute PAN, even in respect of statutory transactions with persons not having the prescribed turnover or income or is not otherwise notified. Neither the legal aspect nor the practical difficulties have been considered in the press release in the anxiety to have as many PAN holders in the system as possible.

A review of the PAN-mania is certainly called for since it is equally necessary for revenue not to overload the system with the numbers of those persons who are not likely to have taxable income.

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Printable version | Apr 7, 2020 4:03:14 AM |

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