Monday, October 14, 2013

Whether Nil Return of TDS is mandatory ?How to file Nil return after 01.10.2013 ?

on Monday, October 14, 2013

Whether Nil etds return is mandatory or not ?

The answer to this question remain controversial since beginning of  ETDS return system in year 2005.

Our answer to this question is No, Big No .

Nil etds return is not required to be filed as per Income Tax Act/Rules  and we have listed out Five reason to support our answer which has been listed out in post below.

However we have strongly recommends to the deductors that they should file NIL ETDS return not due to the reason that we have slight doubt in our mind that it may be mandatory to file etds return but due to benefit attached to filing NIL etds return ( we have given reason here ,why should you should file Nil TDS return and 5 tricks to save late fee for late filing of etds returns)

Reason-1 : Nil E tds return is not mandatory See Sub section (3)Section 200 of the income tax act. 

Provisions regarding filing of E tds statement is provided under under section 200(3) of the Income Tax Act ,which has been reproduced here under

200. (1) .........(2) ...............
(3) Any person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed.
As clearly mentioned in section "any person deducting any sum " is required to file etds statement . Means deducting of sum is compulsory to cover a person under above section .Further  If CBDT intentions are to make compulsory to file Nil etds return then wording of section should be like "every person holding  TAN must prepare and file etds return "which has not been placed in present case. Hence , Nil e tds return is not mandatory.

Reason -2 :Nil E tds return is not mandatory see sub rule(1) to rule 31A of Income Tax Rules
After Act ,Rule 31A(1) prescribe the format for returns and other particulars for filing etds return which has been reproduced here under.
Statement of deduction of tax under sub-section (3) of section 200.
31A. (1) Every person responsible for deduction of tax under Chapter XVII-B, shall, in accordance with the provisions of sub-section (3) of section 200, deliver, or cause to be delivered, the following quarterly statements to the Director General of Income-tax (Systems) or the person authorised by the Director General of Income-tax (Systems), namely:—
(a) Statement of deduction of tax under section 192 in Form No. 24Q;
(b) Statement of deduction of tax under sections 193 to 196D in—
  • (i) Form No. 27Q in respect of the deductee who is a non-resident not being a company or a foreign company or resident but not ordinarily resident; and
  • (ii) Form No. 26Q in respect of all other deductees.

Again under rules  also same words has been used  "Every person responsible for deduction of tax " which clearly states that etds return is required to field only if person is responsible for deduction of tax.So rules also confirm our answer that Nil etds return is not mandatory.

Third reason : Nil E tds return is not mandatory see section 234E late fee of late filing of etds return .

As you may aware that late fee of Rs 200 per day applicable for late filing of etds returns ,under section 234E ,which is required to be deposited before filing of late return .The section reproduced here under.

Late Fee u/s 234E for Late Filing of TDS Statement
“234E. (1) Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in subsection (3) of section 200 or the proviso to sub-section (3) of section 206C, he shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues.
(2) The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible, as the case may be.”
As per sub section (2) to section 234E ,the amount of fee shall not exceed the amount of tax deductible or collectible  " virtually it means that no penalty/fee applicable on late filing /no filing of Nil etds return .

So if the intentions of CBDT are to make the filing of NIL tds return mandatory , CBDT might have also provided penal provision for non-filers and late filers of Nil etds return also.

Reason 4 :Nil return not mandatory New FVU 4.00 applicable from 01.10.2013.

You have recently Noticed that TIN-NSDL has released a New FVU 4.00 applicable wef 01.10.2013 under which it has been specified that etds  return having Nil challan without deductee details can not be filed.Which clearly supports our answer that a pure nil etds return can not be filed.

Reason 5:Nil return no mandatory ,TIN-NSDL website also said so .

In FAQ answered by TIN-NSDL regarding Form 24Q forth quarter ,Tin-nsdl has clearly mentioned that Nil etds return not mandatory ,Q/A reproduced hereunder.
Question If there is no deduction in a particular quarter, should I file the NIL statement?
Answer :The filing of a NIL statement is not mandatory.
so from the above 5 reasons we can easily conclude that Nil-Etds return is not mandatory at all.  

How To  file Nil return after 01.10.2013

Now ,the question in  every bodies mind  is that when we have already established that Nil  return is not mandatory then why to learn "How Nil etds return can be filed "??

wait ........we have reasons for that also .In few situations Nil etds return filing may be beneficial for you ,so you should learn & file nil return as well(read 5 Tricks to save Late fee under section 234E)

But as mentioned above(reason-4) pure Nil etds return filing after 01.10.2013 not possible.Then how the question of filing Nil etds return arises ? 

wait...........a Minute ........To clear the dust over the issue, we have divided the Nil return in to two categories .
  1. Nil etds return which have only Nil amount challan and no deductee details (We have refered it as a Pure Nil e tds return )
  2. Nil tds return having Nil amount challan and having deductee details also with remarks tag "A " , "B" ,"T" ,"Z","Y"
First type of return i.e pure Nil etds returns has been dispensed with and can not be filed on or after 01.10.2013 but second type return still can be filed even after 01.10.2013 with FVU 4.00.

The Codes shown above have specific purposes  which has been described as under

  • Write "A" if "lower deduction" or "no deduction" is on account of a certificate under section 197. 
  • Write "B" if no deduction is on account of declaration under section 197A. 
  • Write "T" if no deduction is on account of deductee being transporter. PAN of deductee is mandatory.[section 194C(6)] 
  • Write "Z" if no deduction is on account of payment being notified under section 197A(1F). 
  • Write "Y" if no deduction is on account of payment below threshold limit specified in the Income-tax Act, 1961. 
The all of above entries have backing of rules also except code "Y" ."Y" code has not been mentioned any where in the rules.Relevant Rules reproduced here under

Rule 31A (4) The deductor at the time of preparing statements of tax deducted shall,—
(i) quote his tax deduction and collection account number (TAN) in the statement; 
(ii) quote his permanent account number (PAN) in the statement except in the case where the deductor is an office of the Government;
(iii) quote the permanent account number of all deductees;
(iv) furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be;
(v) furnish particulars of amount paid or credited on which tax was not deducted in view of the issue of certificate of no deduction of tax under section 197 by the Assessing Officer of the payee;(about Code A)
(vi) furnish particulars of amount paid or credited on which tax was not deducted in view of the compliance of provisions of sub-section (6) of section 194C by the payee;(about code-T)
(vii) furnish particulars of amount paid or credited on which tax was not deducted in view of the furnishing of declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A by the payee.(Code-B)
(viii) furnish particulars of amount paid or credited on which tax was not deducted in view of the notification issued under sub-section (1F) of section 197A.(Code-Z)
So to create a Nil tds return after 01.10.2013 have two steps 
  1. Step :1:Enter challan details  
    • create a Nil amount challan (Check How to create Nil amount challan  here) as you have done previously or
    • Enter a any challan with amount deposited start date of financial year one year before the current financial year .You can enter challan deposited on or after 01.04.2012 for financial year 2013-14 (as per FVU 4.00 after 01.10.2013)
  2. Step-2 Enter at least one deductee details 
    • with any one tags code  A B T Z or Y  as describe above
    • A ,B & Z need certificate number also ,so that can be entered only if you have certificate number  issued by ITO tds 
    • Code-T is to be mentioned for payment made to transporter without deduction of tds under section 194C(6) 
    • More important is Code Y ,which is not mandatory ,but can help us in creating Nil etds return . With Y TAG you can enter payment under any tds section where cut off amount has been defined and you have paid/credited amount less than cut off amount and no tds has been deducted on it .
Note : Please note that while creating the etds return for a Given quarter you can enter deductee details from start of the financial year to end date of the given quarter.The same rule applies on deductee entries with above tags also. So in quarter -2 for fy 2013-14 ,you can enter any entries dated 01.04.13 to 30.09.2013.

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