TDS collections to be transparent

Last updated: 23 May 2007

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Income Tax (IT) department is all set to make collections through Tax Deduction at Source (TDS) more transparent. After making it mandatory for government and corporate organisations to file TDS returns online, the department has now decided to extend same facility to others as well.

"Online system would do away with intermediaries and the whole procedure would be fair now. All one has to do is to fill the prescribed form and submit it online with no involvement of any paper work. The form can be downloaded from NSDL website," said IT commissioner DC Pant.

No documents are required to be attached as the form itself is exhaustive. Pant said that the deductor will only have to quote the PAN of the person on whose income he/she is deducting the tax.

In TDS mechanism, payer of the income has a role to play. Like a tenant who pays a rent to the tune of Rs 1.20 lakh and above would deduct the tax and then pay the rent. He/she would deposit the amount deducted as tax with the government and hand over the necessary documents (form 16/16A) to the landlord who would in turn present it as a proof of tax paid on the income earned through rent.

Another important thing regarding TDS is that tax deductor must have Tax Deduction Account Number (TAN). It is a ten-character number unique and identifiable to a particular deductor. Application for TAN in prescribed form (49B) can be made to National Security Depositary Limited (NSDL) through its franchisees in different cities. Pant said, "A deductor can have different TANs for different cities."

Some of the payments that attract TDS are salary, rent, interest other than interest on security, payment under a contract of work, payment of insurance commission and payment for professional or technical services.

Apart from being convenient and economical, TDS safeguards against possible avoidance or concealment of taxable income. "In America, 97 per cent of tax collection is through TDS, whereas in India it is as low as 30 per cent," said Pant, adding, "It is likely to increase in future."

The commissioner said in Lucknow, the tax payers not only comply with norms but are also eager to know about it. "We conducted a seminar on TDS in February which saw a gathering of more than 200 people," he said.

Every deductor is statutorily required to deduct tax at prescribed rates on specified payments and deposit the deducted amount within the prescribed time to credit of government account, failing which penal action can be taken under various provisions of IT Act, 1961.

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