Taxes are collected from taxpayers in the form of TDS, Advance Tax and Self-Assessment Tax. How would you report these in your ITR?
Extraordinary people always have an urge to achieve something. These people are required in every civilized society and by the Income-Tax Departments because the more income they earn, the more taxes they would pay. Taxes on income are paid to the Central government through the Income-Tax Department. Taxes are paid to the government during the process of earning income and this mechanism is called ‘Pay-As-You-Earn’.
Taxes are collected from the taxpayers in the form of TDS, Advance Tax and Self-Assessment Tax. Have you ever wondered what are these three concepts?
Tax Deducted at Source
The first concept is Tax Deducted at Source or TDS which you might have already experienced in early years. This concept requires the payer (i.e., employers, banks, tenants, etc.) to withhold a portion from the sum payable to the taxpayer and deposit it with the Central government. The credit of such taxes deducted and deposited with the government is allowed to the payee (taxpayer) against his total tax liability. As a proof of such withholding of tax, the payers issue a TDS certificate to the payee, i.e., Form 16, Form 16A, etc.
The next concept is ‘Advance Tax’. If the estimated tax liability of a taxpayer is Rs 10,000 or more, he is supposed to pay advance tax in four installments during the financial year itself, i.e. 15%, 45%, 75% and 100% of advance tax liability have to be paid on or before 15th June, 15th September, 15th December and 15th March, respectively. However, a resident senior citizen not having income from business or profession is not liable to pay advance tax even if his estimated tax liability is more than Rs 10,000. Taxpayers opting for presumptive taxation scheme under Section 44AD/44ADA can pay 100% of the advance tax in a single installment up to 15th March. Any amount paid by way of advance tax on or before the 31st day of March is also treated as advance tax paid during the financial year ending on that day.
If there still remains any tax liability payable after taking into account the amount of TDS and advance tax, it has to be paid by way of Self-Assessment Tax. Self-assessment tax can be paid from April 1 of the Assessment Year, i.e. after the end of the financial year.
Form 26AS is a tax passbook wherein a taxpayer can verify whether the taxes paid by him or on his behalf are actually available in his tax passbook so as to claim a credit of the same at the time of filing of the return. In case of any mismatch, the taxpayer should ensure that his details are correctly mentioned by the deductor in TDS returns or he has correctly filed his details in Tax Challan used for payment of advance tax or self-assessment tax.
All income-tax return forms (Form ITR 1 to ITR 7) contain Schedule IT, Schedule TDS and Schedule TCS which require the taxpayer to fill the details of advance tax, self-assessment tax, TDS and TCS.
Details of the advance tax and self-assessment tax payments are to be shown in Schedule IT with information about the BSR Code of Bank, date of deposit, Serial Number of Challan and Amount of Tax paid. BSR Code is a 7-digit code allotted to the banks by the RBI. This code is unique for each individual branch of a bank. This code can be found in the Challan used to deposit the tax with the government.
The tables pertaining to TDS are to be filled up in Schedule TDS with the information available in Form 16, Form 16A, Form 16B and Form 16C. Generally, there is no difference between these forms and form 26AS because these TDS certificates are also downloaded from Traces. However, there may be cases where after issuance of the TDS certificate, Deductor/Payer has revised his TDS returns which might result in the difference between TDS certificates and Form 26AS.
Thus, it is advisable for the taxpayer to compare Form 26AS with TDS certificates before filing of the ITR to avoid any mismatch. Form 16 is issued by the employer to employee showing the tax deducted from salary. Form 16A is issued by the payer for the tax deducted from any payment other than salary. In case of purchase of an immovable property, the buyer is liable to deduct tax at the rate of 1% of the gross sum paid if the total sales consideration of the property is Rs 50 lakh or more. The TDS certificate for such withholding of tax is issued in Form 16B. Form 16C is issued by the tenant if the tax has been deducted by him from payment of rent. A tenant may deduct tax under Section 194-I or Section 194-IB. If TDS certificate is in Form 16A, it shall be reported in Table 2 and if Form 16C has been issued, it shall be reported in Table 3. There is no need to fill multiple entries for a single deductor. It can be shown as a consolidated figure.
The table to report the details of TCS in Schedule TCS is generally applicable in case of business entities. However, this table becomes applicable when a taxpayer buys any motor vehicle (old or new) of value exceeding Rs 10 lakh. In this case, the seller has to collect the TCS at the rate of 1% of the sales consideration and deposit it with the Central Govt. Such TCS details have to be shown in this schedule.
The TDS Schedule in ITR 2 and ITR 3 allows the taxpayer to carry forward the TDS amount if the corresponding income is not taxable in the current year. Banks follow accrual method of accounting which requires the banks to deduct tax from the amount of interest accrued on FDs till March 31. Such interest may not have been paid to the taxpayer during the year, but taxes have been deducted and deposited by the bank with the government. If that is the case, then the taxpayer can carry forward the TDS amount to next year if he offers to pay tax on his income on the cash basis. This means he will pay tax when he actually receives the income. This option is not available for salary income and rental income.
These schedules can be filed manually or by downloading the pre-filed XML from the e-filing account after log-in. Such pre-filled XML when uploaded in Excel or Java Return preparation utility, the Schedule IT, Schedule TDS and Schedule TCS shall be filed automatically. Various Third-Party software (like Taxmann.com/Onesolution/) allow auto synching of these schedules with Form 26AS. It is advisable not to fill these schedules manually to avoid any errors in reporting. Taxpayers should resort to pre-filed XML to fill these schedules.
(By CA Naveen Wadhwa, DGM, and CA Tarun Kumar, Assistant Manager, Taxmann.com)