Income Tax Startegy-action plan for TDS compliances for FY 2017-18 as per Income Tax Central Action Plan FY 2017-18

Income Tax Startegy-action plan for TDS compliances for FY 2017-18 as per Income Tax Central Action Plan FY 2017-18

Income Tax Central Action Plan FY 2017-18

Income Tax Central Action Plan FY 2017-18


(a). TDS workshops and awareness programs can be conducted for all categories of deductors including government deductors. The programs can be targeted for those deductors who were not exposed to such programs earlier or those categories of deductors where there is less compliance. In corporate connect programs for companies, banks etc., it should be ensured that the senior functionaries attend the meetings to understand compliance requirements and the serious consequences of TDS violations for the entity as well as the principal officers.

(b). Huge demands are pending in the system (TRACES) since long, related to short deductions, short payments, non-payment of interest, late filing fee etc. In some cases, mere correction / revision in the statements by the deductors can reduce the infructuous demands.

Therefore, TDS AOs should take initiatives to educate the listed defaulters in this regard. If the demands are found to be genuine, the same have to be collected immediately.

(c). Meetings should also be conducted with the Chartered Accountants and TDS Consultants regarding the preparation, submission and correction of TDS statements and payments. Auditors should be reminded of notifying the TDS violations clearly in the audit reports.

(d). TDS officers should be in regular touch not only with other Officers and wings in the department, but also with the TDS officers in other jurisdictions and regions to gather information related to TDS violations from the information in tax returns, search and seizure actions, survey actions, and other proceedings.

(e). CPC (TDS) conducts regular workshops, tutorials and troubleshooting guidance through video conferencing, conference calls and other online facilities. TDS officers should make use of these avenues to clarify their doubts so that they can be more efficient and also provide better services to deductors and taxpayers. One Nodal Officer may be nominated by each CIT (TDS) to interact with CPC (TDS) on a regular basis.


(a). There are huge demands pending in the System related to statements filed since FY 2007- 08. With the facility to file corrections available to the deductors and the technological capacity to process the correction statements within 4-5 days of their receipt by CPC (TDS), it is possible to resolve the demand expeditiously. The field AOs should generate the list of defaulters from TRACES and issue letters to the defaulters detailing the method to resolve the issues online. The system generated demands related to short payment, late payment interest, late deduction interest, late filing fees (for statements filed after 01/06/2015) are to be compulsorily collected. The ‘Unconsumed challans’ report on the portal would give a 360 degree view of cases where short payment default is identified and informs whether any challan is available for matching.

(b). All demands raised should be entered on the AOs portal of the CPC (TDS) and efforts should be made to collect the demands within the financial year itself.

(c). In order to ensure correct and prompt reporting and collection of TDS by state governments, the Range heads should closely interact with the State Accountant General and treasuries, and provide necessary guidance to minimize errors and delays


(a). Circulars and instructions issued by the CBDT shall be followed while issuing certificates under section 197. The data in the system indicate that certificates are issued in cases where huge demands are pending, PAN holder is a non-filer of returns, and tax-foregone is substantial.

(b). The CPC (TDS) has introduced a new feature in Form 26 AS (Part-G) showing various TDS demands of the concerned PAN (including demands in respect of TANs mapped with that PAN). Also, ‘Aggregated TDS Compliance’ view is available to field TDS Officers on the AOs Portal of the CPC (TDS) for this purpose. In addition, IT demand outstanding against PAN of the applicant is also available on the system. These features will help the AOs in visualizing the demands against the tax payer, which may be used for recovery and also while considering issuance of certificate u/s 197 of the Income Tax Act.


(1) Surveys:

(i) Surveys are the most effective tools for detection of non-compliance in TDS/TCS and identifying defaults u/s 40(a)(i)/(ia)/(iii) of the Act – information that can be passed on to the A.O. of the deductor.

(ii) CPC (TDS) would regularly provide useful reports/ inputs to field officers that may be used for identifying survey cases. The following indices may be useful for selecting a case for survey:-

i. Cases in prosecution list (Cases where TDS/TCS not deposited after deduction);

ii. Trend of TDS payment in stark contrast to other deductors in similar business;

iii. Cases showing negative trend in payment (under a particular Section as compared to preceding FY);

iv. Tax evasion petitions (regarding non deduction of TDS);

v. Cases reported by the Assessing Officer with huge disallowance u/s 40(a) (ia) of the Act;

vi. Habitual late filers/non-filers of TDS Statement (late filing/non filing is closely linked to late payment or non/short deduction);

vii. Negative growth in TDS payment as against healthy growth in Advance tax payment;

viii. Cases of sick units or units with negative operating margins (as indicated in Audit report u/s 44AB of the Act);

ix. Grievance petition filed by the deductee;

x. Analysis of newspaper reports/information available through internet;

xi. Analysis of case laws decided in favour of Revenue.

(2) Initiation of Prosecutions & Disposal of Compounding Applications:

There are a number of cases where the deductors have failed to pay the TDS/ TCS or have kept the amount with them & paid such amount after substantial time into the credit of the Central Government as required in Chapter XVII-B. Initiating prosecution in these cases is an effective deterrence to non-compliance of TDS/TCS provisions. Standard Operating Procedures including compliance rating module approved/issued by CBDT may be followed while processing cases. Adequate publicity in local newspapers could be given to the action taken on Prosecution & also acceptance of compounding proposals, as this would prompt other defaulters to come forward with compounding proposals. Timelines have been given in the Action Plan Table given earlier.

(3) Penalty u/s 271C for failure to deduct whole or any part of TDS:

Surveys and other enforcement actions reveal in many cases that either the deductor has not been deducting the tax at all or has been deducting at low rates. In appropriate cases, initiation of penalty proceeding u/s 271C is warranted to dissuade the deductor from indulging in such exercise that has a direct bearing on tax revenue. The CPC (TDS) gives a detailed list of deductors in whose case short deduction demand has been raised. The TDS officers are advised to look into such cases for initiation of penalty proceedings and following up with reasoned penalty orders in appropriate cases.

(4) Equalization Levy:

The ‘Equalization Levy’ introduced by Finance Act, 2016 mandates that a person making payment to a nonresident, not having a permanent establishment in India, exceeding an aggregate amount of Rs. 1 lakh in a year, as consideration for specified services, will withhold tax at 6% of gross amount paid, as Equalization Levy and pay the same to the Government, in the same manner as tax deducted at source. This is a new and unique tax that is not on the same footing as personal income tax or corporation tax. It represents the Government’s decision to enact legal mechanisms that can ensure that multinational companies providing services in digital format in India and utilizing Indian resources do pay tax in India, even though they may not have a permanent establishment in India in terms of the relevant Double Taxation Avoidance Agreement. It is a tax that must be enforced due to its significance and future potential. The Board may devise appropriate procedures for enforcement of the levy. Meanwhile, TDS formations, particularly in International Taxation charges, shall take appropriate action in this regard.

(5) Tax Default Reports (TDRs):

The CPC (TDS) shall compile information about the compliance of the deductor in terms of filing of TDS statements, payment of taxes, reporting of inconsistent data and default patterns. On the basis of this compilation ‘Tax Default Report’ for a TAN (deductor) would be made available to the field TDS Officer for examination and further follow up, as deemed fit. The reports can also be of assistance to pick up cases for surveys/prosecutions.

(6) Reporting transactions with “High Value” under ‘PAN NOT AVAILABLE’:

A large number of instances have been noticed where the deductors are making PAN errors in the deductee rows in the TDS statements by way of either mentioning ‘Invalid PANs’ or ‘PAN not available’ in the corresponding column. Accordingly, CsIT (TDS) may advise the deductors to insist upon furnishing of valid PAN by the taxpayers in case of high value transactions. Deductor-wise list of transactions is available as MIS on the AOs portal of the CPC (TDS) -[please see ‘PAN error‘ report & ‘Deductors with highest no of PAN errors‘ report.] Pursuance of these cases could result in minimizing TDS mismatch cases on the one hand while helping in identification of new assessees on the other, thus augmenting revenue.

(7) Action on information of Defaulters available in 3CD Reports :

In online 3CD Reports, the information is available on non-deduction, short deduction, failure to deduct, failure to deposit, short deposit and delay in deposit. Moreover, the information of failure to deduct and lower deduction under wrong section is not available in TDS statements. Therefore, the data of 3CD reports is very useful. Action can be taken in this regard by the AOs to boost revenue and improve compliance.

(8) Action on defaults in immovable properties transactions based on AIR Information:

Data of sale of immovable properties over threshold limit from AIR returns can be matched with transactions on which TDS has been deducted u/s 194IA of the Income Tax Act to generate list of defaulters, on which action can be taken by TDS AOs.


Non-filing of TDS statements results in consequential mismatch of TDS in the case of deductee taxpayers and consequent avoidable grievances. The CPC (TDS) shall provide a window to the taxpayers to flag non-compliance on the part of the deductor. This feedback shall be made available to the relevant field TDS officer for further action. List of non-filers of TDS statements would also be available to the field TDS Officers on the MIS section of the AOs portal.


i. Monitoring of TDS statements of top 100 deductors vis-a-vis the deduction made by them in the corresponding period of the previous FY by each AO TDS in their respective charges.

ii. Monitoring compliance in filing of Form 24G by the PAO / Treasury Officers (the AIN holders) would also sensitize them towards dissemination of BIN to the Govt. deductors. The 24G Statements filed by the AIN holders could be utilized to issue notices to Government deductors to file their TDS statements in time.

iii. Monitoring of Monthly TDS remittance from salaries is required, both from the private sector as well as Government Departments.

iv. To collect information from the State Government about the Plan Outlay of all major contracts in the various departments and monitor TDS payments from the same and also the sub-contracts involved therein.

v. It is settled law that State Government undertakings are separate legal entities and are therefore, liable to Income-tax. It has been observed that the Banks have been defaulters in non-deduction of TDS on interest to these State Governments PSUs, Corporations, Autonomous Bodies and Development Authorities. This area needs sensitization and education of deductors.

vi. E-commerce has emerged as a huge business in the past few years. This involves advertisement on the websites/portal of various organized and unorganized agencies, payments for job work – building website, translation of pages, data entry of text, research etc. This area promises to yield significant revenue.

vii. Large scale non compliance of TDS Provisions by local bodies (especially Panchayats) has been noticed in some regions. A special drive to ensure compliance by the local bodies can be helpful in boosting revenue. Such drive can have three-pronged strategy to ensure (i) that all local bodies having liability to deduct TDS obtain TAN (ii) coordination with their administrative department and special drive for their education and (iii) surveys.

viii. Collection of tax at source is an area to augment considerable revenue as more areas have been included under this provision. TDS officers may conduct random surveys to ensure compliance.

ix. Lastly, Standard Operating Procedure (SOPs) for administering TDS incorporating the reengineered processes circulated by the CPC-TDS should be adhered to.

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