There are instances where deductor fail to deduct or short-deduct the TDS on certain payments. Non-Deduction or short deducted results in the deductor being labelled as “Assessee in Default” under section 201(1) of the Income Tax Act, 1961. Deductor with “Assessee in Default” have to face the consequences such as interest payment on short deduction/Non-Deduction, prosecution under section 276B, penalty under section 271C and 30% disallowance of expenditure under section 40(a)(ia).
To overcome the title of “Assessee in Default”, Income tax provides relief under the proviso of Section 201(1).
Proviso to section 201(1) read with rule 31ACB
- Any person who fails to deduct or pay TDS under the provisions of the Act on the amount paid or credit to the resident payee shall not be deemed to an assessee in default in respect of such tax if such resident payee (Deductee)-
- Has furnished his return of income under section 139;
- Has taken into account such sum for computing income in such return of income;
- And has paid the tax due on the income declared by him in such return of income and the person furnish a certificate to this effect from the chartered accountant in prescribed form.
- Person pays simple interest on the sum not deducted or pay from the date which such tax was deductible to the date of furnishing of return of Income
- As per the sub-rule (1) of the Rule 31ACB of the Income Tax Rule 1962, the certificate from the chartered accountant under the proviso to section 201(1) shall be furnished in Form 26A electronically.
Procedure for Electronic Application of Form 26A
1.TRACES:
After Login at TRACES deductor/collector needs to submit request to get details of short deduction/collection and enter non deduction/collection transactions at TRACES and submit request for Form 26A.
2.Select Financial year, Form type(26Q, 24Q and 27EQ) and transaction type (Non-Deduction/collection).
3.To submit the transaction details, a .nzip file must be uploaded.
(Procedure for generating .nzip file)
Go to Downloads > Requested Downloads Enter the captcha and scroll down, locate TRACES Sample – 26A – 27BA. Download Utility and sample 26A non-deduction file. In the sample .CSV file, fill the requisite details: PAN of Payee, Date of Payment, Amount paid or credited, section, Amount of TDS, Short/non deducted amount and non-deduction section e., 201(1) Save the file in .CSV format
Open the downloaded Utility and fill in the details:
TAN of the deductor, Financial Year, form type, transaction type, location of .CSV file, and location for .nzip file. After generating the .nzip file, upload it to the TRACES with the DSC of the authorized signatory.
The status of form 26A will be submitted after filing. Once the status is “Sent to E-Filing” Deductor can proceed further to the E-filing portal.
4.On submitting request at TRACES
A unique DIN for Short deduction transactions and unique Alpha numeric strings for Non deduction transactions is generated by TRACES. These DINs and Alpha numeric strings will be communicated electronically to E-Filing Portal for further action by Deductor.
5.Locate DIN at E-filing on which Form 26A/27BA effect is to be given-E-filing
Deductor/Collector Locate and select relevant DIN in menu driven option for which request for Form 26A/27BA is to be submitted.
Locate ALPHA Numeric Strings at on which Form 26A /27BA effect is to be given – E-filing: Deductor/Collector Locate and select relevant Alpha Numeric Strings in menu driven option for which request for Form 26A/27BA is to be submitted
6.Authorize Membership Number of Accountant -E-filing Portal
Deductor/collector, after ascertaining the membership number of the accountant who is to certify Annexure A of Form 26A/27BA. Needs to authorize such accountant by entering his membership number in respect of each of the Short-Deduction/collection and Non-Deduction/collection transactions. (in one or more sessions) and submit these authorizations.
7.Certification from Authorized Accountant -E-filing
On successful authorization by Deductor/Collector, the Accountant so authorized on E-Filing Portal may fill in the relevant details in Annexure A to Form 26A/27BA. With respect to the Deductee/Collectee in question and certify by digitally signing Annexure A. The details of unique DINs and Alpha-Numeric Strings will become visible to the authorized accountant. (when he logs into his own account as a registered accountant on E-Filing Portal) only when Deductor/Collector has authorized. Such an accountant with respect to any Short-Deduction/Collection and/or Non-Deduction/Collection transaction.
8.Submit Digitally signed Form 26A/27BA – E-filing
Once registered Accountant/Accountants certify DINs and/or Alpha-Numeric Strings, deductor/collector needs to digitally sign the form and submit its final request.
9.View Modified Status of default-TRACES
Once request has been processed, short deduction/collection will be re-calculated and Late Deduction Interest will be generated accordingly. Which can be viewed by Deductor/collector and Non deduction/collection is modified accordingly through Add/ Modify demand functionality at AO Portal.
10.Make payment for Modified Late Deduction Interest
TRACES/NSDL: Deductor needs to pay Late deduction Interest amount, according to the modified computation.
