We are quite aware of the fact that each of us have been receiving quite a lot of communications from TRACES [ the TDS Processing Cell ] on Justification reports, Intimations, Demands, etc. Many of us have also been receiving Hard-Copy Letters to this effect from TRACES. One may sometimes wonder why such a huge amount of flow of Information ! It does make us a lot uncomfortable & we would want it to be sorted out as soon as possible. One such email TRACES sent out on 21st of February talks about imposition of Penal Interest u/s 220(2) if actions are not taken by the Deductors ( Employers / Companies / We ). This PPT is a recording of the webinar conducted by Relativity Management Solutions to talk in detail about the various issues deductors are facing & solutions to it.

1. CONSULTING | OUTSOURCING
RECENT COMMUNICATION FROM TRACES
28/02/2014
A Relativity Management Solutions India Pvt Ltd Initiative
WELCOME
PLEASE CALL 1800-1033-829 IF YOU WANT TO JOIN USING
CONFERENCE ALL – USE PIN 195-1-1234

2. CONSULTING | OUTSOURCING
DISCLAIMER
This presentation is a property of Relativity Management Solutions India
Pvt. Ltd. Please do not use this presentation for public viewing or
distribute it without prior acceptance from the Authors.
All Data & Facts available in this presentation are stated true with careful
research, but we do not accept liability for any loss due to the same.
For personal reference & educational purposes only.

3. CONSULTING | OUTSOURCING
Who are we ?

4. CONSULTING | OUTSOURCING
What is Section 220(2)
•
•
•
Interest on Interest.
– For Eg. Interest on Late Payment, Interest on Late Deduction, Interest
on Late Filing
1% Per Calender month
Many times we do not calculate the Interest u/s 220(2) before payments
(or) we do not file within the Calendar month. Hence again a Notice u/s
154 is served to recover Interest u/s 220(2)

5. CONSULTING | OUTSOURCING
Timeline for Reply to Demands
•
Depending on the type of Issue, it is either Calendar Month (or) 30 Days
from the date of intimation.
•
Examples for Calendar Month – Short Payments, Short Deduction, Interest
on Short Payment, Interest on Short Deduction
•
Examples for 30 days – Interest on Late Payment, Interest on Late
Deduction, Late Filing Fee

6. CONSULTING | OUTSOURCING
Should we always Pay the demands ?
•
NO
•
Demands should be analyzed before payments. If Found genuine, only
then to be paid. Very Important – Correction Returns have to be filed
within the time period ( CM or 30 Days, as applicable )
• Examples for Incorrect Demand –
• Lower Deduction Certificate Limit available but demand raised
• Valid PAN marked as Invalid PAN
• Surcharge for employees calculated

7. CONSULTING | OUTSOURCING
Interest Calculation
Interest Calculation for all Late Payments, Short Payments, Short Deductions
& Late Deductions
As per the section 201, Interest will be calculated on a monthly basis,
whereas previously it was on a daily basis
Late Payment & Short Payment Interest – 1.5% PM
Short Deduction & Late Deductions Interest – 1% PM
•
Eg: If the Tax Deducted on 10/06/2013 and Tax Paid on 08/07/2013 then
the interest will be calculated for two months

8. CONSULTING | OUTSOURCING
Reprocessing the Filing & Interest for Previous
Years
For all the previous years, TRACES is reprocessing the filing and interests
on monthly basis even the demands nullified by NSDL.

9. CONSULTING | OUTSOURCING
Interest Amount
How to mention the Interest Paid amount in Q-ETDS filings
TRACES have changed the format of TDS file where we need mention the
Interest amount in dual places while filing the Q-ETDS returns.
For this reason TRACES have started sending the demands for the previous
years as well

10. CONSULTING | OUTSOURCING
Challan Adjustment
We can adjust the excess amount paid in immediate previous year and
Immediate Next year challan with the current Financial Year
• The challan paid with a specific section code can be utilised for
consumption with any other section code in the Deductee rows
For example, a challan with Section Code 192 can be used for any other
sections 193, 194, 194A etc. in the challan detail row.
•

11. CONSULTING | OUTSOURCING
Lower Deduction Certificate under section 197
Quote the correct and valid Lower Deduction Certificate while making the
payments to vendors
1.
2.
3.
4.
5.
1.
2.
Checking Points
PAN Number
Section
Tax Rate
Validity Period
Threshold Limit
Filing
Correct Certificate Number
Raise the Flag A

12. CONSULTING | OUTSOURCING
Deletion of Deduction Entries
Deduction entries cannot be deleted in the correction filing even for the
Previous Years
1.
2.
We need to file the correct Information in the Original filing
We need to nullify the amount paid & TDS and need to add the correct
line entry

13. CONSULTING | OUTSOURCING
Filing of TDS Statements
•
•
TDS Statements cannot be filed without quoting the valid challan and
Deductee row
NIL Returns are not possible now

14. CONSULTING | OUTSOURCING
Technical Issues @ TRACES
•
•
•
•
•
•
Correction Filings for 24Q is pending from TRACES because of their
technical issues.
TRACES is rejecting the correction filing without a valid reasons
Justification Report is not available for some of the defaults
Not able to download the TDS file
For Employees, if we do a PAN update for Q4, it gets updated in Annexure I
but not in Annexure II
Sometimes correction filings are processed but it has not been updated in
Form 26AS.

15. CONSULTING | OUTSOURCING
Miscalculation
Q -TRACES is calculating surcharge for employees in 24Q for Financial Year
2012 – 2013, where there is no surcharge at all.
• We might have quoted the correct Lower Deduction Certificate but we will
receive the demand for the same
• Raising short deduction demand for a Valid PAN
Solution
• Need to follow up with TRACES to close the issue
•

16. CONSULTING | OUTSOURCING
TDS @ 20%
For all PANNOTAVBL, 20% of TDS is mandatory. Even if an employee does
not comes under TAX Slab they need to deduct TDS @ 20%
• If foreign vendors come under DTAA ACT, and they do not have PAN then
we need to deduct @20% as per IT ACT
•

17. CONSULTING | OUTSOURCING
Other Remarks

18. CONSULTING | OUTSOURCING
Q & A Session

19. CONSULTING | OUTSOURCING
Q1
•
Under which section we have to deduct 20% plus Education cess for
PANNOTAVBL line entries?
Under sec 195, it is mandatory to deduct 20% TDS plus Education cess 3%
on the whole, hence effective tax rates will be 20.60% for PANNOTAVBL
line entries to be reported on Sec.195 ( 27Q, Foreign Vendors )
For 24Q & 26Q, There is no education cess to be deducted.

20. CONSULTING | OUTSOURCING
Q2
•
Short deduction interest of Re 1 or Rs 1.5 for 50 or more line entries, is it
necessary to make payment for these small amounts and do the
correction filings?
•
Yes, even though it is for small amount, we should pay & do the necessary
correction filings.

21. CONSULTING | OUTSOURCING
Q3
•
The Demand for late payment of Rs 400, for these kinds of small amount
only payment of interest is necessary or I need to do correction filing? If I
need to do correction filing, how can I do?
•
Yes, we have to do both – Pay the amounts under necessary sections &
also do correction filing. One can do correction filing with the help of
various software by updating the Challans.

22. CONSULTING | OUTSOURCING
Q4
•
Not able to download TDS conso file, how to download TDS file in
TRACES and what is the password to open the file?
•
By giving the request in TRACES we can download TDS file, one of the
reason for not downloading TDS file is incase the latest correction filing
not being processed.
Once the latest correction filing is processed we can download TDS file
Password to open the file the password is TAN NO_REQUEST NO
•
•

23. CONSULTING | OUTSOURCING
Q5
•
For PANNOTAVBL Employees is it mandatory to deduct 20% TDS?
•
Yes, if you are reporting them in Q-ETDS filing, it is mandatory to deduct
20% TDS if not TRACES will raise short deduction defaults.
•
This is even if the employee does not fall under the tax bracket.

24. CONSULTING | OUTSOURCING
Q6
•
We got Demand Notice for PANNOTAVBL line entry, and did correction
filing also, still the Demand is not nullified, PAN Number not updated in
Conso file also. What to do ?
•
May be the correction is still pending, TRACES will usually take 10-15
working days to process correction filing, if sometimes they may take few
more days also due to technical issues, so we have to wait till the
correction filing gets processed. Incase you have waited for a month, pls
contact TRACES.

25. CONSULTING | OUTSOURCING
Q7
•
Under section 195, for PANNOTAVBL line entries not deducted 20%, not
yet received any demand also, so how to follow in future?
•
The rule is to deduct 20% + Education cess of 3% ( Effective 20.60%), in
future they may rise demand for previous year too !!

26. CONSULTING | OUTSOURCING
Q8
•
How can we know that our correction filing was processed or not?
•
After you log in to your TRACES Account, the statement status option will
be available, with the help of that we can check the status of our filing.

27. CONSULTING | OUTSOURCING
Q9
•
Under section 195, for PANNOTAVBL line entries we have to deduct 20%
tax, do we have to deduct any surcharges?
•
No, surcharges are not mandatory at present, only Education cess has to
be deducted.

28. CONSULTING | OUTSOURCING
Q 10
•
How the late payment interest is levied by department?
•
Formula is = Amount of late payment x Rate of late payment interest 1.5%
x number of months delayed from the Amount Paid date.
•
E.g. for months delay is the amount paid date is 31/07/2013 tax deposited
date is 9/08/2013 we have to consider this as 2 months delay. With this
we can calculate late payment interest.

29. CONSULTING | OUTSOURCING
Q 11
•
For the FY 2008-09 I have short payment and short deduction defaults,
and not able to download justification report, by approaching assessing
officer we got only short deduction data, what can we do for short
payment?
First we can do the correction filing for short deduction then the TRACES
will analyze the data and raise the balance default or
• by doing a Q-ETDS Audit [ Proprietary Process of Relativity to identify
mistakes ] we can find the issues and we can do correction filing by
nullifying the default.
•

30. CONSULTING | OUTSOURCING
Q 12
•
For section 195, TDS is based on country?
•
Yes, the Income tax department issued separate matrix, with the help of
that we can deduct TDS for Sec 195.

31. CONSULTING | OUTSOURCING
Q 13
•
We need to deduct 20% for employees who are not having PAN No, even
if they comes under low slab rate?
•
Yes, for PANNOTAVBL line entries, it is mandatory to deduct 20% irrespective of their Tax Slabs.

32. CONSULTING | OUTSOURCING
Q 14
•
For Sec 195 we have the problem of Challan mismatch, and are not able
to change anything in that line entry, what can I do for this?
•
We cannot do many changes in Challan. There are certain columns which
are non updateable and few are updateable. If you are not able to do
correction in updateable columns, you need to approach software
providers for solution or use the NSDL’s RPU.

33. CONSULTING | OUTSOURCING
Q 15
•
Date of deduction is not available in justification report, where shall I
find that?
•
In justification report date of deduction is not available, we can find that in
TDS conso file.

34. CONSULTING | OUTSOURCING
Q 16
•
For PANNOTAVBL line entry 20% was not deducted for FY 2007-2008,
now I am having default for that, and that employee is not working at
present, what can we do for this?
•
For the FY 2007-08, it is not mandatory to deduct 20% TDS for
PANNOTAVBL employees, so that default is just an intimation, we don’t
need to pay any amount for that intimation.

35. CONSULTING | OUTSOURCING
Q 17
•
The demand raised for the FY 2010-11 for PANNOTAVBL line entry, not
deducted 20% TDS and the employee not working at present do we have
to pay for this?
•
Yes, from 2010-11 it is mandatory to deduct 20% TDS for PANNOTAVBL line
entry. Either we need to do PAN updation or have to pay the demand.

36. CONSULTING | OUTSOURCING
Q 18
•
Can we convert FVU file in some other format?
•
No, as the FVU file is encrypted, we cannot convert the FVU file in any
other format.

37. CONSULTING | OUTSOURCING
Q 19
•
Everything is correct in Lower Deduction certificate, but still we are
getting demand?
We have certain check points like
• Vendor PAN NO
• Certificate No
• Section
• Amount Limit
• Certificate date
If the said things are correct , we can approach TRACES to nullify the demand.

38. CONSULTING | OUTSOURCING
Q 20
•
If we delay the payment of interest what consequence do we face?
•
Under section 220(2) interest on interest will be levied. About section
220(2) are as follow.
It is interest on interest, if we get first intimation u/s 200A from traces,
within the time limit we have to pay the interest and should do correction
filing, if we missed to pay such interest or to do correction filing, Traces
will send second intimation u/s 154 in that they will calculate Interest u/s
220(2) - interest on interest amount shown in first intimation, being 1%
pm.
•

39. CONSULTING | OUTSOURCING
Q 21
•
Please provide more information about section 234E & is there some
way to avoid the penalty levied in the past ?
Section 234E says late filing, that is if we missed to do Q ETDS filing
(Original) on or before due date that is 15th of every quarter, sec 234E will
be levied, in that we have to pay penalty of Rs 200 per day till the date of
doing original filing.
•
There is no way to avoid penalty. We have to pay the amount.
•

40. CONSULTING | OUTSOURCING
THANK YOU.
If you need assistance for Q-ETDS Compliance, please
write to radha@relativity.co.in or Call 0-93611-41435