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CPC Communication - Form 15G 15H and TDS where income exceeds exemption limit

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Form 15G, 15H is a self-declaration,  which is provided by a person resident in India (not being a Company or Firm) to their deductor that the tax on his estimated total income of the previous year, in which such income is to be included in computing his total income, will be NIL. On the basis of such declarations in either Form 15G or 15H payments can be received without TDS.

Central Processing Unit (CPC) Bangalore in its recent communication dated 17-05-2014 has warned deductor for non deduction of income tax at source on the basis of Form 15G or 15H (by raising Flag-B) in quarterly TDS Statements.

As per CPC, If the deductor raises Flag "B" for non-deduction of tax, despite thetotal payments made by him exceeding the taxable amount, this results into incorrect reporting in the TDS Statements.

It is to be noted that as per section197A(1B) benefit of Form 15G can not be given for non deduction of tax at  source if the amount of any income as referred exceeds the maximum amount which is not chargeable to income-tax. However, as per section 197A(1C) benefit of Form 15H can be given even in such cases if the estimated tax at the total income is declared as NIL.

The area of concern for CPC appearsto be cases covered under section 197(1B) where deductor has not deducted tax at source on the basis of Form 15G even where the payments exceeded the maximumamount which is not chargeable to income-tax in the year.

However CPC in its communication seems to have completely overlooked the provisions of section 197(1C)

Download Excel Automatic Form 15G >>
Download Excel Automatic Form 15H >>

                                                                  CPC Communication dated 17-05-2014

Dear Deductor ( TAN XXXXXXXXXX),

CPC(TDS) feels glad to provideyou with the new feature of downloading   Form27D,   the   Tax Collection Certificate   for Deductees forming part of TCS Statements, filed in the form of 27EQ.

Centralized Processing Cell(TDS) has observed from its records that   Flag"B"   (for 15G/H Forms) has been   wronglyraised in the quarterly TDS Statements as per the provisions of section197A(1B)   of the Income Tax Act, 1961. Following are the provisions of section197A(1B) for your ready reference:

"The provisions of thissection   shall not apply   where the   amountof any income   of the nature referred to in sub-section (1) or sub-section (1A),as the case may be,   or the aggregate of the amounts   of suchincomes credited or paid or likely to be credited or paid during the previousyear in which such income is to be included   exceedsthe maximum amount which is not chargeable to income-tax".

What is Form 15G/ H and itsrelevance :

Under section 197A of theIncome Tax Act 1961,   Form 15G / H is a self-declaration,   which isprovided by a person resident in India (not being a Company or Firm) to theirdeductor that the tax on his   estimated total income   of theprevious year, in which such income is to be included in computing his totalincome, will be   NIL.

The Declaration is made in thefollowing Forms :

Form 15H - For Senior Citizens

Form 15G - For other thanSenior Citizens

Consequences, if deductorwrongly raises Flag "B" for Forms 15G/H :

-       If thedeductor raises   Flag "B" for non-deduction of tax, despite the totalpayments made by him exceeding the taxable amount,   thisresults into   incorrect reporting   in theTDS Statements.

-       Yourattention is invited to provisions of section 201 of the Act, which reads asfollows :
Where any person who is required to deduct any sum,   does notdeduct or does not Pay   or after deduction, fails to pay,
the whole or any part of the tax, then
  suchperson shall be deemed to be an assessee in default in respect of such tax.

-       Undersection 277 of the Act, if a person makes a statement in any   verificationunder this Act   or under any rule made thereunder, or   deliversan account or statement which is false,   andwhich he either knows or believes to be false, or does not believe to be trueis punishable.

This may be noted that   obligationto report each transaction correctly in the TDS Statements,   falls   on thedeductor   and non-compliance amounts to incorrect verification ofcorrectness of TDS statement.

 

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