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Challenges in TCS and TDS Payments and ways to resolve it

TDS and TCS payment is a monthly routine task, let us discuss


If you are liable to deduct TDS of your suppliers or collect TCS from your customers, you are required to compute your TDS and TCS Liability monthly and deposit the same to the Government account by 7th of the next month. For Example, for the month of February, you need to deposit the TDS and TCS by 7th of March. However, for the month of March TDS liability can be paid up to 30th April. This relaxation is only for TDS payments and TCS liability for the month of March has to be paid by 7th of April. Under Section 201(1A), for the late deposit of TDS after deduction, you have to pay interest. Interest is at the rate of 1.5% per month from the date at which TDS was deducted to the actual date of deposit. Note, that this is to be calculated on a monthly basis and not based on the number of days i.e. part of a month is considered as a full month.

It means that every month you must have your accounts ready and bank statements updated so that you may calculate your TDS and TCS Liability accurately. TDS and TCS is not only on bills due but on advance paid and received respectively. You must go through expenses and income during the month and also credit side of your debtors statement as well as debit side of your creditors statement to accurately assess your TDS and TCS liability.

With advanced software in hand these compliances have become easier as these configurations of TDS and TCS is already done in the vendor masters, customer masters as well as income and expense masters. However, for a novice it is very important to know how to calculate the TDS or TCS liability so that no penal interest is levied.

With several changes in the Budgets every year TDS and TCS provisions are being made complex year on year. In the Budget for the year 2020, the Finance Minister introduced new provisions of collecting TCS on sale of goods by suppliers whose turnover in the last year was exceeding Rs. 10 Crores on supplies to customers with whom transactions are exceeding Rs. 50 lakhs during the financial year at the rate of 0.10 % of the payment received. This has brought a huge compliance burden on all the tax payers. The provisions are still not clear to many.

Other practical challenges are to meet the deadlines when the last date is a bank holiday or a weekend. In those cases one needs to compute the liability before hand and deposit the taxes. Sometimes bank websites are not working while making payments and at other times it might be possible that the person responsible in your organization for TDS payments is absent due to some urgent work. Since it's an every month task, these challenges are obvious.

Talking about practical solutions for above problems and difficulties, I would suggest that plan before hand. Adopt the concept of T-1. Set your personal due date one day before the actual date. Distribute the task of TDS and TCS among more than one employee so that in the absence of any of your employee, you don't get red faced. Have a checklist for your organization so that you do not miss any TDS deduction or TCS collection. Also have a standard working format of payments ready for your organization in the spreadsheet so that you may refer it later. Have your internet banking passwords before hand so that you may make the payments or you may also make payments by cheque at bank.

With the above discussion, I hope you will have a good time making payments of TDS and TCS every month. For any query you may contact us and we will be ready to assist you.

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